Rio Tinto鈥檚 (ASX, LON, NYSE: RIO) top investors are set to face off at the company鈥檚 upcoming annual meeting, with only some of them in favour of pushing the miner to extend the range of its targets to reduce greenhouse gas emissions.
The world鈥檚 second-largest mining company recently committed聽to spend $1 billion over the next five years to reduce its carbon footprint and have 鈥渘et zero鈥� emissions by 2050.
Rio Tinto also said at the time that its total Scope 1 and Scope 2 emissions (indirect聽emissions聽from the generation of purchased energy consumed by a company, such as electricity) would be 15% lower by 2030 than 2018 levels.
Some investors want Rio Tinto to set a target to reduce so-called 鈥淪cope 3鈥� emissions 鈥� those 聽produced when customers burn or process a company鈥檚 raw materials
The announcement triggered heated criticism from some investors and environment advocates, with a group led by a Friends of the Earth鈥檚 subsidiary tabling a shareholder motion to improve what it calls 鈥渨eak鈥� climate goals.
With three days to Rio Tinto鈥檚 annual meeting, proxy investor Institutional Shareholder Services (ISS) is recommending shareholders support the resolution that asks the miner to also tackle Scope 3 emissions 鈥� those generated by customers through the use of its products.
Shareholders 鈥渉ave a long-term interest in assessing whether Rio Tinto is adequately assessing and acting on its climate risk and opportunities,鈥� including through 鈥渢argets to work with its customers to achieve reductions in its scope 3 emissions,鈥� ISS said in an April 30 note to clients.
Glass Lewis, instead, wants shareholders to reject the plan at the meeting on Thursday, Bloomberg reports.
鈥淣ot feasible鈥�
While Rio Tinto should continue to reduce its own emissions, it鈥檚 probably not 鈥渇easible for the company to set goals based on how its customers determine to utilize its products,鈥� the adviser said in a note to clients last month.
Market Forces, a subsidiary of activist investor Friends of the Earth,聽has said that Rio鈥檚 current plans are a 鈥渟imply a reflection of business-as-usual,鈥� energy cost savings and efficiency measures.
鈥淩io Tinto is essentially telling its shareholders it is aware of a massive financial liability sitting on its books, but isn鈥檛 planning to manage that risk down,鈥� executive director Julien Vincent聽said in March.
He noted that Rio鈥檚 absolute emissions would have to decline 30% in the next decade to hit the 鈥渨ell below鈥� 2掳C global pre-industrial levels outlined in the 2015 Paris Agreement on climate change.
UBS analyst Glyn Lawcock said the group could almost instantly achieve the 2030 target if it sold or closed its coal-fired alumina refineries and aluminum smelters in Australia.
鈥淲e couldn鈥檛 help but notice that the closure of Pacific Aluminium alone would reduce emissions by (about) 25%,鈥濃�� he said in a note.
鈥淢aybe this is the elegant solution to Rio鈥檚 desire to reduce carbon dioxide as well as lifting margins within the aluminium business unit,鈥� Lawcock said.
For Julian Kettle, Wood Mackenzie鈥檚 vice chairman of metals and mining, Rio鈥檚 plans to decarbonize its globe-spanning operations are a 鈥渟mall but significant鈥� step in the right direction.
鈥淪etting Rio Tinto鈥檚 $1bn in context, this represents just 16% of the dividend it distributed in 2019, or just under 5% of its reported EBITDA of $21.2bn for the same year,鈥� Kettle said.
The miner鈥檚 bulk of earnings come from iron ore, its main commodity and a key ingredient for steelmaking. The highly polluting industry process involves adding coking coal to make carbon steel and is responsible for up to 9% of global greenhouse emissions.
Oyu Tolgoi troubles
Rio鈥檚 management will also have to face criticism over its giant Oyu Tolgoi copper project聽in Mongolia at the annual meeting.
US hedge fund Pentwater Capital is demanding a shakeup at the mine to stop what it calls 鈥渁 massive devaluation鈥� of the asset. The investor has a 9% interest in Turquoise Hill, the Rio-controlled company that operates Oyu Tolgoi.
Rio Tinto is not the only company criticized for its current plans to cut emissions. A report released Monday by a UK-based investor initiative showed that eight of the world鈥檚 top ten largest mining companies are not doing enough to help聽meet international climate goals,聽