Mr Thompson's call to arms on climate comes six weeks after Rio chief executive Jean-Sebastien Jacques issued an unusually frank challenge to his shareholders, telling them to clarify whether they were willing to tolerate dividend cuts in exchange for investment in emissions reduction projects.

Mr Jacques' challenge came with a warning that many of the projects that Rio was considering to reduce its emissions footprint would not deliver the rates of economic return the company usually demanded before it invested capital.

Australian Foundation Investment Company managing director Mark Freeman said he preferred companies to take leadership on such issues, but indicated he was open to lower dividends if Rio was convinced climate investments were necessary.

"We obviously leave the management of the business to be run by the executives and the board of the company, but if we believe that they're taking the view it is in the right thing for their business in the long term, we would be supportive of it,'' he said on March 29.

Rio shareholders like Aberdeen Standard Investments and Kingfisher Capital have indicated they would be open to a dividend cut if it was required for Rio to prepare its business for a future that was less carbon intensive.

Mr Jacques' challenge is particularly pertinent to AFIC, which typically invests in companies that reliably pay fully franked dividends.

AFIC owned $164 million worth of Rio's Australian shares at March 31, and the miner was AFIC's tenth biggest exposure.


Rival miner BHP was AFIC's third biggest exposure at March 31.

Despite talking a lot about climate change, Rio has not convinced some environmental groups that it is serious about climate actions.

Friends of the Earth subsidiary Market Forces was unimpressed by the new emissions reduction goals that Rio announced in February, where the miner vowed to ensure its total Scope 1 and Scope 2 emissions (those produced in the powering and operating of its assets) in 2030 were 15 per cent lower than 2018 levels.

The company also aims to ensure its emissions intensity – a measure of its emissions per unit of commodity production – is 30 per cent below 2018 levels by 2030.

''Rio Tinto has just released targets for its operational emissions that amount to business as usual for the company and insult the goals of the Paris Agreement,'' said Market Forces executive director Julien Vincent.

''The company has also said it can't do anything to manage it's massive Scope 3 emissions (the emissions generated by Rio's customers) liability, when three of its competitors have committed to do just that in the past year.''

Rio's Australian shareholders will in May vote on resolutions proposed by Market Forces which would compel Rio to set targets for reducing its Scope 3 emissions.


Rio has resisted suggestions it should set a target for its customers emissions, saying it cannot control what its customers do.

Mr Thompson said the Rio board recently debated whether they should join other companies in withdrawing the dividend that was announced in February, but opted to pay it as planned because Rio's balance sheet was so strong.

He said the Rio board would consider the pandemic situation again before deciding whether to pay a dividend at its half year results in August.

It would be a very big surprise if Rio was not able to pay a dividend in August, given it has negligible debt and its flagship business, Australian iron ore, continues to generate enormous cashflows.

Iron ore delivered more than half of the company's revenue and close to 90 per cent of underlying earnings in 2019, and it will likely provide an even bigger share of earnings in 2020 given iron ore prices have so far been resilient through the pandemic.

At the same time, Rio's copper and aluminium divisions have been hit by significant price slumps since the pandemic emerged.

Rio's smaller businesses, like mineral sands, have also suffered export disruptions in the wake of virus lockdowns in South Africa.


Rio's iron ore boss Chris Salisbury said this week the immediate outlook for iron ore was good, with China showing a strong appetite for the steelmaking ingredient since virus lockdowns in that nation were relaxed.

Rio also expects China to stimulate its economy later this year, and it believes that stimulus will drive investment in the sort of infrastructure projects that require iron ore.

Benchmark iron ore prices were steady at $US83.64 per tonne on April 9.