Yesterday (7/2/2020), Rio Tinto (RIO) issued an announcement which said that resolutions had been requisitioned by shareholders for the Annual General Meeting in May of Rio Tinto Ltd. Note that Rio Tinto has a rather peculiar corporate structure. Rio Tinto plc and Rio Tinto Limited established a dual listed companies (DLC) structure in 1995. As a result, the two companies are managed as a single economic unit, even though both companies continue to be separate legal entities with separate share listings and share registers. We may see similar resolutions for the UK Plc company in due course as the resolutions might require a “Joint Decision”.
The first resolution is a Special one that seeks to amend the Constitution to give shareholders the right to pass ordinary resolutions that give the directors an opinion on how they should exercise their powers. But it is only an “advisory” resolution and appears to be more aimed at supporting or enabling the second resolution.
The second resolution is an Ordinary one and is worded as follows: “Shareholders request that the company, in subsequent annual reporting, disclose short, medium and long-term targets for its scope 3 greenhouse gas emissions (Targets) and performance against the Targets, consistent with the guidance of the Task Force on Climate-related Financial Disclosures. Targets should reflect decarbonisation pathways for the company’s products in line with the climate goals of the Paris Agreement”.
Readers might not know what Scope 3 emissions are, but as this issue recently came up at a local council meeting which I attended, I do know something about them. Scope 3 emissions are all indirect emissions that occur in the value chain of the reporting company, including both upstream and downstream. That’s as opposed to Scope 1 emissions which are direct emissions from owned or controlled sources and Scope 2 emissions which are indirect emissions from the generation of purchased energy.
Reporting of Scope 3 emissions would require a company to identify all the emissions made by suppliers and customers and even include such emissions as from staff travel to work. A company will in practice have no control over most of those emissions and obtaining the required information might be very difficult.
It’s basically a pointless and expensive exercise to impose such an obligation on any organisation whether it’s a major international company such as Rio Tinto or my local council, but there are many people who would like it done.
This is surely a demonstration of the extreme paranoia that is gripping the world at present over CO2 emissions with the concern that such emissions are contributing to global warming. Even it that is the case, and that argument is far from proven beyond doubt as there are other credible explanations, there is no financial justification for imposing such reporting obligations on companies. It will simply have no impact on CO2 emissions. It’s bad enough that companies such as Rio now have to report Scope 1 and 2 emissions, which incidentally are falling but not very rapidly. Note: please don’t start an argument with this writer about the reality of global warming and its threat to destroy the world. I do not have the time to explain the science of the matter to you. There are plenty of good internet resources on the subject.
As a shareholder in Rio I advise other shareholders to vote against these proposed resolutions at the company.
It seems likely though that the coronavirus outbreak in China might have a significant impact on CO2 emissions. Businesses are shutting down there and imports of oil/gas and other commodities are falling. China consumes half the world’s metals and prices have been falling as a result. It’s hardly surprising that the share price of Rio has been falling of late also.
The coronavirus threat and other similar plagues are probably more a threat to humanity on a global scale than any slight rise in the temperature.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
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