Rio bows to investor pressure on green-steel spending

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This article first appeared in the AFR on 19 March 2024

Rio Tinto has bowed to sustained pressure from big investors to start reporting how much it spends on so-called green steel projects and other efforts to reduce carbon emissions for iron ore mined in Australia and turned into steel in China.

The decision improves so-called scope 3 disclosures and comes after what Fidelity International and the Australian Council of Superannuation Investors described as years of lobbying for better financial transparency.

Rio’s 2023 scope 3 emissions totalled 578 million tonnes with almost 70 per cent of those coming from iron ore. Bloomberg

Fidelity and ACSI are charged with representing the priorities of Climate Action 100, a group of institutional investors responsible for about $US68 trillion ($104 trillion) in assets under management, in discussions with Rio.

Rio said on Tuesday that in response to talks with investors and the Australian Centre for Corporate Responsibility (ACCR) it had agreed to beef up its reporting on efforts to reduce carbon emissions from the processing of iron ore by its mainly Chinese steel-making customers.

The company intends to spend up to $US6 billion on decarbonisation across its business to 2030. That figure was reduced from $US7.5 billion in December largely based on Rio deciding the technology was not advanced enough to convert its iron ore fleet to electric power by the end of the decade.

Rio committed to improving disclosure on investments to reduce customer, or scope 3, emissions from processing iron ore through investment in green steel-making projects and other technologies.

It will now reveal how much it has spent on steel decarbonisation and provide spending forecasts over three-year periods along with detailing what milestones have been achieved.

Fidelity sustainable investing boss Daniela Jaramillo said the disclosure improvements had been a priority in talks with Rio over the past few years.

“Steel is one of the hardest sectors to abate and will require meaningful coordination between the steel and iron ore sector,” she said in a jointly authored statement with ACSI executive manager of stewardship Ed John.

“We see these commitments as an important step to give long-term investors greater visibility of how Rio is future-proofing its business and where necessary investments are being made.

“Increased transparency is key to enable coordination between the iron ore and steel sectors, and will provide greater insight into the progress being made in decarbonising the whole sector.”

In 2023, Rio’s scope 3 emissions across all operations totalled 578 million tonnes with almost 70 per cent of those emissions coming from iron ore.

“As it stands today, our analysis of our customers’ targets and their governments’ commitments to reduce their emissions shows a trajectory for those processing emissions that approaches net zero by around 2060,” Rio said in a statement.

“We are committed to partnering with our customers and suppliers to find better ways to help them achieve their targets a decade earlier – reaching net zero by 2050.”

Australia’s most lucrative export industry could be hurt by the clean energy transition. Rio, fellow iron ore heavyweight BHP, and steelmaker BlueScope, last month agreed to work together on fast-tracking the path to near carbon-free steel production.

Meanwhile, it is understood BlueScope is a month or two away from deciding whether it will match the $US1.65 billion Indonesian bid for the South32-owned Illawarra coal mines that feed the Port Kembla steel mill.

BlueScope has a supply contract in place until 2032 and has indicated it would prefer to remain a buyer of coal rather than a mine owner.