Global investors worth AU$84 billion line up against coal lobbying: Rio resolution

In a watershed moment for investor action on climate change, a Rio Tinto shareholder resolution has been co-filed by major global funds with over AU$84 billion (US$66 billion, GB₤47 billion) in assets under management (AUM).

The resolution calls on Rio Tinto to review and fully disclose its relationships with industry bodies including the Minerals Council of Australia that block progress on Australian and global climate and energy frameworks.

The action has been coordinated by the Australasian Centre for Corporate Responsibility (ACCR), an activist shareholder organisation based in Australia.

View ASX announcement here.

The resolution has been co-filed by:

(Australia) Local Government Super (AUM: AU$10billion, GB£5.6 billion, US$7.9 billion)

(UK) Church of England Pensions Board (AUM: AU$4.1 billion, GB£2.3 billion, UD$3.2 billion)

(Sweden) The Seventh Swedish National Pension Fund (AP7) (AUM: SEK 440 billion, AU$69 billion, GB£39 billion, US$54 billion).

The resolution, which is expected to be heard at Rio Tinto’s UK AGM (11 April) and Australian AGM (2 May), calls on Rio Tinto’s board to:

● Disclose industry memberships and amounts paid since 2012;

● Evaluate whether industry association advocacy positions are consistent with the company’s policy and financial interests; and

● Disclose to shareholders the triggers for exit of industry associations where the company’s interests are not served.

Brynn O’Brien, Executive Director of ACCR said: “The drumbeat of opposition to coal lobbyists like the Minerals Council of Australia is only growing louder. The interest by European funds in this resolution reflects the fact that Australia’s inaction on climate and energy has impacts beyond our borders. It is also a strong signal to Australian investors about the urgency of reigning in company spending on anti-climate lobbying. LGS, the only local fund to put their name to this resolution, should be commended for its leadership.”

Contact: Brynn O’Brien | +61 423 951 316 | brynn@accr.org.au

Bill Hartnett, Head of Sustainability at Local Government Super (LGS) said: "As a long-term shareholder in Rio Tinto, Local Government Super (LGS) would like to better understand the shareholder value we receive from Rio funding third party industry groups whose energy and climate change policy stance seems entirely contrary to Rio's stated formal commitment to the Paris Climate Change Agreement.

The resultant prolonged energy and climate policy stalemate in Australia has resulted in the recent large rises in electricity prices here. This has been a significant financial burden for Australian companies and industry as well as for our members.

As for Rio Tinto, we estimate that these high electricity prices are adding tens to hundreds of millions of dollars to Rio Tinto's overall costs. The shareholder value in supporting industry groups with contrary energy and climate positions is not clear to LGS, particularly as Rio has exited the thermal coal business in Australia."

Contact: Jasmine Chen | +61 2 9018 8611 | Jasmine@bluechipcommunication.com.au

Adam Matthews, Head of engagement for the Church of England Pensions Board said: “It is a matter of public record that Rio Tinto has supported the Paris Agreement and limiting climate change to 2 degrees. However, that position is undermined when industry associations and lobbying groups, financially supported by Rio Tinto, take contrary lobbying positions. For Rio Tinto to be part of the solution to climate change requires consistency in all the company’s activities and from the organisations it supports to lobby on its behalf.”

Contact: Mark Arena | +44 794 993 3714 | Mark.arena@churchofengland.org Richard

Gröttheim, CEO, AP7 said: “As long-term global investors we recognize that climate change will have detrimental impacts on the global economy. Therefore, AP7 has engaged in the effective implementation of the Paris agreement. I find it unacceptable that companies directly or through their industry associations, are lobbying against effective climate policy and thereby jeopardizing the long-term value growth of our pension portfolios. We see global investor collaboration as key in reaching better transparency on companies’ political engagement.”

Contact: Johan Florén | +46 70 555 80 58 | johan.floren@ap7.se

Simon O’Connor, CEO, Responsible Investment Association Australasia said: "Australian investors are paying the price for climate and energy policy uncertainty in this country, still having to invest within a policy vacuum that makes it harder to allocate capital to support the low carbon transition that is underway globally. Responsible investors are playing a pivotal role in influencing companies to act on climate change and have long articulated investor expectations on corporate climate change lobbying, including the lobbying of representative bodies. As we enter an urgent phase for climate change action, responsible investors across the globe are becoming increasingly active to ensure that companies are planning for a low-carbon economy and are held to account for their policy positions."

Contact: Simon O’Connor | +61 401 360 500 | simonoc@responsibleinvestment.org

Sophie Marjanac, Lawyer, ClientEarth said: “Smart investors are recognising that the uncertainty in climate and energy policy caused by industry lobbyists could hurt them financially. Being associated with coal lobbyists in particular is not only a reputational risk but it could indirectly impact their investments. These same smart investors are also recognising the fast mounting legal risks for companies with misaligned positions on climate change policy. It is also great to see that overseas investors are concerned about the limited rights afforded to Australian shareholders. Shareholder resolutions on governance matters are an effective way for investors to raise legitimate concerns directly and publicly – it encourages democratic participation and enhances accountability from corporate leaders.”

Contact: Jon Bennett | +44 303 050 5935 | JBennett@clientearth.org

Dylan Tanner, Executive Director, InfluenceMap said: “We have been tracking climate lobbying and trade groups for several years and working with investors on the corporations of concern to them. We have detected a genuine uptick in concern recently and I personally feel 2018 will be the year shareholders get tough on companies who maintain links to egregious lobbyists holding back critical policy progress on a key existential threat to our common future. Our current report assessing Rio Tinto and other companies under investor scrutiny confirms this trend.”

Contact: Dylan Tanner |+44 7910765485 | dylan.tanner@influencemap.org

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MEDIA BACKGROUND

The global fossil fuel lobby is to a large extent coordinated through trade associations, which use their influence with governments to obstruct national and international progress on climate change. These trade associations are funded by their members, which are, primarily, large companies, many of whom have committed to the implementation of the Paris Agreement. The interests of member companies and their stakeholders (including shareholders) diverge with the activities of certain lobbyists in undermining action on climate change.

The influence of Australian trade associations on climate action and energy costs Australian trade associations including the Minerals Council of Australia (MCA), the NSW Minerals Council (NSW MC) and the Queensland Resources Council (QRC) campaign for public funding for coal power and against effective policy measures to cut carbon emissions.

These campaigns have influenced the Australian government to continue to support coal production, stymied sensible bipartisan policy to reduce emissions, and undermined Australia's chances of meeting climate targets. Lobbying by these groups has created policy uncertainty that has deterred investment, increasing costs for Australian business and large energy users like Rio Tinto.

About ACCR

ACCR is a non-profit organisation promoting responsible corporate behaviour and responsible investment. ACCR holds a small portfolio of shares in ASX100 companies for the purpose of engaging with those companies about their environmental, social and governance (ESG) performance. ACCR is philanthropically funded.

ACCR’s shareholder resolution to BHP

In 2017 ACCR’s shareholder resolution to BHP resulted in an uncomfortable and public airing of tensions between BHP and lobby groups. BHP has committed to leaving the World Coal Association, is reviewing its relationship with the US Chamber of Commerce, and has given the Minerals Council of Australia an ultimatum: one year to refrain from hardline coal advocacy, or face a high-profile exit.

Coordinating groups

This resolution has been the effort of ACCR and the following global legal and financial institutions, NGOs and think tanks:

AP7: AP7 is a government agency and the default alternative within the Swedish premium pension, a part of the Swedish public pension. More than 3.5 million Swedes have their premium pension placed with AP7 and with AUM over SEK 440 billion it is the largest of the Swedish public pension funds. AP7 is an active universal owner and has been an ESG-investor since the start in year 2000.

Church of England: The Church of England Pensions Board manages funds in excess of £2.3bn. It provides retirement housing and pensions for those who have served or worked for the Church of England, assisting over 38,000 people across more than 450 employers.

ClientEarth: ClientEarth is a non-profit environmental law organisation based in London, Brussels, Warsaw and Beijing. We are lawyers working at the interface of law, science and policy. Using the power of the law, we develop legal strategies and tools to address major environmental issues. ClientEarth assisted with the filing of the ‘Aiming for A’ shareholder resolutions by a group of over 100 global institutional investors in 2014-16.

InfluenceMap: A London based non-profit think tank. Our metrics for measuring corporate influence over policy are in use by over 100 investors globally, including Legal & General Investment Management, Sweden's AP7 and Boston Common.

Local Government Super: Local Government Super manages over $10 billion of retirement savings for current and former local government employees across New South Wales. Committed to a responsible and sustainable investment strategy, we have comprehensive active ownership practices and take our proxy voting responsibilities seriously as a means of protecting our members’ long-term retirement savings.

ShareAction: ShareAction is an NGO with a mission to turn the investment system into one that truly serves savers, communities, and protects our environment for the long term.