Reference no: EM133197543

Background

In 2021 Rio Tinto Group launched a new business strategy focused on low-carbon transition. At Rio Tinto's annual general meeting held in April 2022, investment management firm Sarasin & Partners voted against the 2021 company's financial statements1 due to its lack of disclosures on actions to align with a 1.5°C temperature resilience target and the related financial implications (i.e., net zero accounting disclosures). Rio Tinto is a significant emitter of greenhouse gas emissions with large Scope 3 emissions.

Specific Requirements

Assume you are a business consultant, reporting to the Board of Directors of Rio Tinto, the world's second-largest metals and mining corporation. Rio Tinto Group is a dual-listed company traded on the London Stock Exchange (trading as Rio Tinto Plc) and the Australian Securities Exchange (trading as Rio Tinto Ltd). You have been contracted to provide a business report to Rio Tinto's Board of Directors which:

1. Discusses why Rio Tinto's current poor net zero accounting disclosures disadvantage its shareholders taking an agency theory lens. In your response, ensure you explicitly define, explain and apply agency theory.