Institutional investors are not yet satisfied with Rio Tinto’s response to a shareholder resolution passed last year that asked the mining company to provide more information about its approach to climate change risk.
The resolution was co-filed by the Aiming for A investor coalition, an initiative of UK charity fund manager CCLA, along with a wider group of institutional investors with over $4trn (€3.8trn) of assets. Similar resolutions were filed at Anglo American and Glencore.
Commenting ahead of the Rio Tinto AGM yesterday, Bruce Duguid, stewardship director at Hermes Equity Ownership Services (Hermes EOS), said the report that Rio Tinto has produced included details of its greenhouse gas reduction targets up to 2020, and described the low carbon scenarios that the company was considering and the low carbon technologies it has invested in.
However, he told IPE that, although the report is a good start, “significantly greater information and disclosure will be required to meet investor expectations”.
In a statement, Duguid said investors wanted more “tangible” disclosure of financial risk, including how much value the company estimated to be at risk in the different low carbon scenarios, and its strategic response to this.
He told IPE that Hermes asked Rio Tinto about value-at-risk reporting at the AGM yesterday, and that they have committed to exploring it.
“They are cautious in their approach and this is going to be a topic we want to discuss with them over the next year,” said Duguid. “Other companies have done this so it’s neither technically impossible nor commercially prejudicial.”
He also noted that the resolutions “are an enduring obligation”.
“So it’s not that in one year you can complete the task and that’s job done,” he continued. “For as long as we think there is more information that investors would like beyond what we get in the statutory disclosure manner then we’re going to be pressing for more.”
The disclosure does not yet meet the draft recommendations of the Financial Stability Board’s taskforce on climate-related financial disclosures (FSB TCFD), according to Duguid.
Hermes is co-ordinating Institutional Investor Group on Climate Change (IIGCC) member responses to the three mining companies’ follow-ups from the 2016 shareholder resolutions. The work of the Aiming for A coalition has been absorbed by a sub-group of the IIGCC.
Anglo American’s AGM is on 24 April, and Glencore’s on 24 May.
Hermes separately recommended voting against the re-election of the chair of Rio Tinto’s nomination committee because the company did not have enough women on the board, and did not have a credible plan to achieve a 33% representation by 2020. The chair of the nomination committee is Jan du Plessis, who is also the chair of the company. He is leaving Rio Tinto to become chairman of BT.
Climate change reporting – a job for investors, too
Australasian investor groups have teamed up to produce a guide to help investors with climate change reporting, in particular those wanting to align disclosure with the draft recommendations of the FSB TCFD.
“Building the right tools to measure and report on the financial impacts of climate change is just as important for investors as it is for all companies,” said Emma Herd, chief executive officer of the Investor Group on Climate Change for Australia and New Zealand. “We believe this guide can help investors navigate available reporting options and translate them into practical application.”
The guide provides advice related to narrative reporting and metrics. It also sets out general principles for good disclosure. These include that it should be “as full and frank as possible, while recognising that climate change disclosures are imperfect and evolving” and that disclosure “must be accessible, clear, concise, avoid vague statements, boilerplate disclosures, and ‘green washing’”.
The guide can be found here.
Switzerland’s BVK, the CHF30.6bn (€28.5bn) pension fund for the canton of Zurich, has excluded 15 arms companies from its investment portfolios and is selling various holdings in these companies. This follows recommendations from the Swiss pension fund responsible investment association (SVVK-ASIR).
It also said that it performed “a CO2 risk analysis” on its investment portfolio and decided to exclude coal producers from its global equity portfolios.