This article is more than 2 years old

This article is more than 2 years old

The voice of Australia’s coal lobby is under renewed threat as the country’s second biggest miner, Rio Tinto, faces a shareholder revolt over its membership of lobby groups including the Minerals Council of Australia and the role it plays in Australia’s climate and energy debate.

Global investors worth $84bn have joined together to file a shareholder motion calling on Rio Tinto to rethink its membership of the MCA, NSW Minerals Council (NSWMC) and the Queensland Resources Council (QRC). It demands Rio Tinto reveal all membership fees paid since 2012, review the consistency of the MCA’s lobbying positions with those held by Rio Tinto, and disclose what it would take for Rio to quit its membership of the MCA.

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The action was coordinated by the Australian Centre for Corporate Responsibility (ACCR), which is fresh from successfully forcing the country’s biggest miner, BHP, to agree to similar demands.

If the campaign successfully forces both companies to leave the MCA, it would remove about a third of the MCA’s revenue from membership fees. As such, even the threat of leaving could force the MCA to shift its lobbying positions.

When ACCR coordinated a similar motion filed at BHP’s annual general meeting, despite it not winning a vote, BHP agreed to conduct a review of industry associations. That review announced plans to leave the World Coal Association, and declared BHP would quit the MCA if it did not change the way it lobbied for coal.

The resolution filed today was submitted by the Australian Local Government Super, the Church of England Pensions Board and the Seventh Swedish National Pension Fund (AP7).

Together they have $84bn worth of assets under management, and collectively are thought to hold more than $100m worth of Rio Tinto shares.

The resolution is unlikely to gain a majority of votes at the two AGMs held in the UK and Australia (Rio is listed in London and Sydney), but even a significant minority of votes would send a strong signal and could secure a win for ACCR, as it did with BHP.

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Despite BHP already agreeing to many of the demands before the AGM voted on the resolution, and the board recommending shareholders vote against it, about 10% of shareholders voted in favour. Brynn O’Brien, the executive director of ACCR, said that was significant, and anything above 5% was taken very seriously by a board.

O’Brien expected more shareholders to support the Rio Tinto motion because it was backed by large institutional investments, unlike the BHP motion, and hoped the board would recommend that shareholders support the motion.

“We think this is really in the company’s interest, so the board should support it and recommend that shareolders vote for it,” she said.

Such a move would not be unprecedented for Rio Tinto. In 2016, the company was faced with a shareholder motion calling for greater transparency on how it deals with climate risk, and the board supported it, recommending shareholders vote in favour.

Bill Hartnett, head of sustainability at Local Government Super, one of the co-filers of the motion, said high energy prices in Australia were a result of the prolonged climate and energy debate here, and that was harming the value of their investment in Rio Tinto.

“We estimate that these high electricity prices are adding tens to hundreds of millions of dollars to Rio Tinto’s overall costs,” he said. “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.”

Adam Matthews, head of engagement for the Church of England Pensions Board, said Rio’s support of the Paris climate agreement demanded that it not support lobbying that is counter to the agreement’s aims.

“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,” Matthews said.

The wording of the resolution is similar to that filed with BHP, and laments climate and energy policy, when it exists in Australia, being “short-lived policy subject to relentless scrutiny and adversarial campaigning by industry bodies”.

It also outlines the way the MCA and other pro-coal lobby groups supported by Rio Tinto have campaigned for the destruction of Australia’s carbon tax and mining tax, and pushed for government funding for coal power stations.

O’Brien said the shareholder motion is part of a growing and unstoppable movement from investors around the world.

“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,” she said.

Dylan Tanner is executive director of InfluenceMap, a UK-based NGO that tracks how corporations influence climate policy around the world. He said his group has seen a rise in interest from investors to improve the role companies in their portfolios play in climate and energy debates.

“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,” he said.

The shareholder revolt has come on the same day as the corporate regulator began legal proceedings in the federal court against Rio, its former chief executive Tom Albanese, and its former chief financial officer Guy Elliott.

The proceedings relate to statements in Rio Tinto’s annual report for 2011, which the Australian Securities and Investments Commission (Asic) alleges were misleading or deceptive.

In December 2010, Rio announced a takeover offer for Riversdale Mining Limited which was completed in August 2011 at a total cost of over US$4bn. Following the acquisition, Rio delisted Riversdale and renamed it Rio Tinto Coal Mozambique.

Asic alleges that Rio Tinto engaged in misleading or deceptive conduct by misrepresenting the reserves and resources of Riversdale in its 2011 annual report.

On 17 January 2013, Rio Tinto announced it expected to recognise a non-cash impairment charge of approximately US$14bn (post-tax) in its 2012 full-year results, including roughly US$3bn relating to Riversdale. It was also announced that Albanese, an American, had stepped down from his role as CEO.