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C of E Pensions Board leads Rio Tinto shareholder revolt over climate change

08 May 2018


The chief executive of Rio Tinto, Jean-Sebastien Jacques, during the Rio Tinto AGM in Melbourne, Australia, on Wednesday

The chief executive of Rio Tinto, Jean-Sebastien Jacques, during the Rio Tinto AGM in Melbourne, Australia, on Wednesday

THE Australian-British mining company Rio Tinto is under pressure to cut ties with coal-mining lobby groups after 18 per cent of its shareholders voted in favour of a climate-change resolution co-filed by the Church of England Pensions Board.

The resolution was tabled at the Rio Tinto AGM in Melbourne, Australia, last week. It demands that the company reviews its membership of the Minerals Council of Australia (MCA) and other lobby groups in the industry, as well as ensures proper governance on the issue.

Other co-filers were the Australasian Centre for Corporate Responsibility (ACCR), the Australian pension fund Local Government Super, and the Seventh Swedish National Pension Fund (AP7).

Abstentions pushed the volume of shareholders who did not vote with the Rio Tinto board and main proxy advisors on the issue to 20 per cent: the equivalent of about £3 billion in assets.

The head of engagement for the C of E Pensions Board, Adam Matthews, described the vote as the largest shareholder revolt against a management on the issue of climate change in Australian corporate history.

“It’s a highly significant vote on an important issue [in the light] of Rio’s support of trade associations and their negative lobbying to prevent action to address climate change. This was a very reasonable resolution that has gathered the support of many shareholders with trillions in assets under management.

“It justified a better response from Rio’s board, and I would encourage the chairman to now take the opportunity to commit to undertake the called for review as well as to publish Rio’s funding of trade associations. It is clear a large element of Rio shareholders would welcome such a step.”

It comes after Rio Tinto completed its divestment from coal mining in March, when it sold its Kestrel mine in Queensland for about £1.6 billion.

Mr Matthews continued: “We will continue to engage with Rio’s board and will work together with the funds that have supported our resolution. I would also like to pay tribute to the partnership we have developed with the co-filers LGS, ACCR, AP7, as well as the support we have had from Client Earth and ShareAction.”

The Pensions Board has also backed a climate-change resolution due to be filed at the forthcoming AGM of the oil and gas company Royal Dutch Shell. The “Follow This” resolution requests that Shell becomes the first major oil company to comply with the greenhouse-gas intensity targets set by the Paris Climate Agreement (News, 18 December 2015).

In a letter to the chair of Shell, Charles Holliday, last Friday, the chair of the C of E Pensions Board, Jonathan Spencer; the First Estates Commissioner, Loretta Minghella; and the chair of the Environment Agency Pension Fund, Emma Howard Boyd, wrote of their intention to vote in favour of the shareholder resolution.

“We do so as we believe that targets are more meaningful than ambitions. We acknowledge that you have indicated the importance of your ambition; however the language is important, and targets are something that are firmer, creating the necessary internal and external accountabilities, providing a clear impetus for action. . .

“We recognise that companies have been reluctant to set targets, expressing concern that targets may constrain their ability to act and to take advantage of opportunities as they emerge. We do not agree with this argument. . .

“The position we take in supporting the Follow This resolution at Shell is not one that is targeted at Shell nor is it intended to imply that we see you as a laggard on this issue. Rather, it is based on our belief that we need targets across the whole oil and gas sector and not just at Shell.”

The Church in Wales is among the other UK investors — representing more than £28 billion in assets — expected to vote in favour of the resolution at the AGM on 22 May, as well as Sarasin & Partners, and Ealing, Islington, and Lewisham pension funds, and ShareAction.

The senior campaigns officer at ShareAction, Jeanne Martin, said: “Shell’s net zero ambition lacks a convincing accountability framework. Clear targets are needed and will help the company navigate a challenging and uncertain energy future. We sincerely hope that [this] investor announcement will encourage other fiduciary investors to support this important resolution.”

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