Climate Change

KPIs Report

In 2019, Vale’s activities resulted in 575.3 million tonnes of CO₂ equivalent. From this amount, more than 97% was indirect Scope 3 emissions, resulting from Vale’s product utilization in other industries, and doesn’t involve our own activities. The direct emissions from scope 1(fuels and industrial processes), and scope 2 (electricity purchases) added 12.6 million tons of CO₂ equivalent.

Vale’s GHG emissions (in million tCO₂e):

For more information about greenhouse gases emissions (GHG), access our Sustainability Report - 2019

Performance Evolution

Vale's direct GHG emissions (Scope 1) were about 13.3% lower in 2019 compared to 2018, totaling 11.3 million tCO2e. Indirect emissions from electricity purchase (Scope 2) were reduced by 16.6% in 2019, totaling 1.3 million tCO2e, mainly due to the reduction in electricity consumption.

Scope 3 emissions, indirect GHG emissions calculated along the value chain, include upstream emissions (related to goods and services purchased or acquired) and downstream emissions (related to goods and services sold). In 2019, these emissions totaled approximately 563 million tCO2e in the year, a result 4% lower than in 2018. Around 97% of these downstream emissions are due to the processing and use of products sold by Vale.

Goals and Deadlines

Carbon Goal

In 2012, Vale set a target to reduce direct emissions (Scope 1) by 5% by 2020. The goal was reached in 2017. Once the previous carbon goal was reached, in 2018 we set a new goal of 16% reduction in the intensity¹ of our direct and indirect GHG emissions by 2030. This target includes both direct emissions (Scope 1) arising from the use of fuels and processes as well as emissions related to the purchase of electricity (Scope 2) and is based on the 2017 emission intensity.

In 2019, the company reviewed its sustainability goals, including new commitments to reduce greenhouse gas (GHG) emissions, bolder goals than previously established in 2018, aiming to become a carbon neutral mining company, composed by the following target:

Reduction of GHG emissions in line with the Paris Agreement by 2030.

Besides, we approved the target to become carbon neutral by 2050, and for this goal we approved US$50/tCO₂e as an internal carbon price.

¹Emission intensity is the volume of greenhouse gases, in tonnes of CO2 equivalent, emitted for each equivalent tonne of iron ore produced.

Main factors to reach 2030 goals

Plans to reach the 2030 goal

In order to evolve the net zero strategy, the The Low Carbon Forum was created to set and oversee the implementation of the initiatives. The Forum is coordinated by the Sustainability Executive Board with the support of the Executive Officers, as well as the participation of Vale’s CEO. 

The 33% absolute emissions reduction target by 2030, with 2017 as a baseline, is aligned with the Science Based Target Initiative (SBTI) methodology, as well as the Paris Agreement.

Vale has advanced in two key points:

• Development  of a roadmap for use in economic feasibility studies for projects (NPV) and adopting an internal carbon price (shadow price) of US$ 50 per ton of CO2 equivalent;
• Adoption of an internal carbon price (shadow price) of US$ 10 per ton of CO2 equivalent, for carbon sequestration in forest restoration and reforestation projects;

Vale has more than 1 million hectares of protected forest area and already has renewable sources in its energy matrix, these points being a competitive advantage. Vale will invest around US$ 2 billion in renewable energy to support and bring solutions to the low carbon economy, for projects with NPV positive.

To help in this commitment, a marginal abatement cost is under development through a roadmap that starts with renewables, energy efficiency, biofuels, and end up with electrification and breakthrough technology, using an internal carbon pricing.

Vale also aims to establish a goal for scope 3 to encourage clients and suppliers in the same direction. Through active engagement with clients from the steel and metallurgy industries, Vale will work to reduce emissions in its value chain. The company will guide its operations based on win-win relationships, less intensive products, and new technologies. Among the initiatives already implemented we can highlight:

Inclusion of contractual clauses related to greenhouse gas management for suppliers. For more information, visit the page about Suppliers here.

International Maritime Organization (IMO) goals – initiatives that have already added significant value to the environment and Vale shareholders:

Valemax 2G 2018 (Compared to capsize ships in 2011):

Policies and Procedures

Vale's strategy on climate change is based on the “Climate Change Policy,” which has the following elements:

The Policy, among other commitments, defines guidelines on fighting climate change for the Company and its subsidiaries, regarding:

Risks

Risks and opportunities related to climate change are the responsibility of the Sustainability Department and are identified based on strategic business planning, existing risk management processes and regulatory environment monitoring. These topics are periodically presented to the Risk Management Executive Committee, where they are reviewed for quarterly reporting to the Board of Directors and published in the Annual Report and the Sustainability Report. Identified risks are monitored and reviewed annually if no material change occurs during the year.

Vale uses a risk matrix that considers the severity and probability of each occurrence. In the case of risks related to climate change, Vale has developed specific analysis methodologies divided between impacts arising from regulatory changes and physical impacts.

Our main risks related to climate change are:

Regulatory / Legal

• Changes in policies to restrict or adapt to the effects of climate change;
• Disputes over non-compliance with policies to mitigate climate impacts.

Technological

Substitution of products/processes for more efficient/current technologies.

Market

Changes in supply and demand due to awareness of cleaner products.

Reputation

Consumer and investor perceptions of the Company's adherence to greener policies.

Physical risks

Direct damage to assets and indirect impacts on the supply chain such as floods, droughts, etc.

Vale methodologies for climate change risks and opportunities

Regulatory risks: Vale has developed an internal carbon pricing model to assess the risks linked to climate change through projections of possible impacts on the operating costs of each business unit. This model takes into account impacts on direct and indirect costs, including impacts on the supply chain.

Physical risks: Based on the Intergovernmental Panel on Climate Change (IPCC) studies, Vale developed, together with the Vale Technological Institute, a projection and mapping model of the possible physical impacts that pose risks to the Company's operation. Climate projection is performed using a climate modeling system that allows future temperature and precipitation scenarios to be obtained. Projections were made for the North Corridor, South Corridor and Corumbá sections.

Carbon Pricing

In 2017, Vale signed the CEBDS¹ letter about carbon pricing, which is a CEBDS initiative with Mundial Bank and Business Initiatives on Climate (IEC in Brazilian Portuguese) to foster the discussion about carbon pricing in Brazil.

What would be the impact of carbon pricing to our operations?

Direct cost (Process)

Indirect Cost – fuels (Purchase)

Rising cost of products and services (Purchase)

Direct Cost: Accounts for the increased cost due to taxes on Vale’s emissions.

Indirect Cost: Accounts for the cost increase due to the taxation of fossil fuel production and fossil-fueled electricity.

Currently 20% of global emissions are priced. 27% of mining emissions are subject to carbon pricing (in South Africa, Chile, Canada and the EU). Vale has a low exposion to carbon pricing, but if Brazil adopts carbon pricing, this reality changes completely.

¹The Brazilian Business Council for Sustainable Development (Conselho Empresarial Brasileiro para o Desenvolvimento Sustentável)

Emission Reduction Initiative

Our projects and initiatives have prevented or reduced direct emissions by about 1 million tonnes of CO₂e, which means that emissions would be around 7.8% higher in the absence of these projects, justifying the anticipation of reaching the 2020 target.

Below are some emission reduction initiatives:

Truckless system

Fuel change in pelletizing plants

Energy efficiency measures

Biomass used in furnaces

Adoption of higher biodiesel shares

External Engagement

We follow trends and studies related to climate change in global forums that aim to define regulatory and economic strategies for mitigation and adaptation worldwide. In Brazil, we participate in discussions on the theme, collaborating on policies and strategies aimed at transitioning to a resilient and low-carbon economy.

Examples of relevant agreements and initiatives on climate change in which Vale participates:

TCFD

In 2017, Vale adhered to the Task Force on Climate-related Financial Disclosure (TCFD) recommendations led by the Financial Stability Board, containing guidelines for reporting financial risks related to climate change by companies and financial institutions.

Upon signature, the Company also began an in-house project to tailor climate risk qualification and quantification to the TCFD recommendations.

Our Management

As part of the strategy, and in line with the recommendations of the Task Force on Climate Related Finnancial Disclosures (TCFD), Vale conducted a preliminary scenario analysis of its business resilience in the three climate change scenarios, considering the scenarios of the International Energy Agency (IEA).

The construction of climate-related scenarios allows Vale to identify indicators to monitor the external environment and more quickly recognize changes in the scenarios, allowing an agile adaptation to current needs. As a result, the company invests in businesses and technologies that support the growth of a low-carbon economy and provide solutions for the supply chain and society.

As main actions related to the TCFD, in the last years, we highlighted:

Several actors were also involved, more than 100 documents were analyzed, interviews with internal and external stakeholders and benchmarking assessments, for example, were also carried out. In line with the update of our strategy in 2019, new commitments by 2050 in climate change were signed and for that, four pillars became the basis for these changes:

Greenhouse gas emissions reduction:

Promote the absolute reduction of emissions (scope 1 and 2) in line with the Paris Agreement, as well as act actively to reduce emissions in the chain (scope 3).

Preservation and reforestation:

Act as a global catalyst for the protection and reforestation of tropical forests.

Renewable Energy:

Expand the self-production of electricity from renewable sources in operations and promote a greater participation of renewable sources and electricity in Vale's energy matrix through the replacement of fossil fuels (PowerShift Program

Energy Efficiency:

promote the implementation of energy management and energy efficiency practices and routines to encourage the adoption of efficient and innovative behaviors and solutions for rational use of energy and that stimulates the search for new technological solutions, considering social, economic and environmental impacts.

Portfolio:

Align the business portfolio to the transition to a low carbon economy, leveraging new business opportunities.

Greenhouse gas emissions reduction:

Promote the absolute reduction of emissions (scope 1 and 2) in line with the Paris Agreement, as well as act actively to reduce emissions in the chain (scope 3).

Preservation and reforestation:

Act as a global catalyst for the protection and reforestation of tropical forests.

Renewable Energy:

Expand the self-production of electricity from renewable sources in operations and promote a greater participation of renewable sources and electricity in Vale's energy matrix through the replacement of fossil fuels (PowerShift Program

Energy Efficiency:

promote the implementation of energy management and energy efficiency practices and routines to encourage the adoption of efficient and innovative behaviors and solutions for rational use of energy and that stimulates the search for new technological solutions, considering social, economic and environmental impacts.

Portfolio:

Align the business portfolio to the transition to a low carbon economy, leveraging new business opportunities.

Medium targets were also defined to achieve the ambition of neutrality of scopes 1 and 2 emissions by 2050. These goals are: 

• Produce 100% of the electricity it consumes from renewable sources by 2025 in Brazil and globally by 2030;
• Reduce its scope 1 and 2 emissions according to the SBTI - Science Based Target Initiative methodology (well bellow 2 ºC) by 2030. This target is linked to the variable remuneration of Vale employees;
• Adoption of an internal carbon price (shadow price) of USD50 / tCO2e in line with the recommendations of the Carbon Pricing Leadership Coalition (CPLC);
• Definition of governance structure to manage carbon neutral strategy through the Low Carbon Forum and implementation of the Sounding Panel (sustainability advisory forum for the company's top leadership);
• Define a goal/ambition to reduce scope 3 emissions;
• Recover and protect 500 thousand hectares by 2030;
• Engage for international recognition of the relevance of protecting forests and recovering degraded areas in the fight against global warming.

For the year 2020, the highlights are:

• Implementation of the Low Carbon Forum;
• Implementation of carbon pricing in capital projects, strategic planning and budgeting;
• Definition of ambition for scope 3.

The table below shows Vale's main advances in relation to the recommendations proposed by the TCFD:

Key elements of the disclosures on climate risks and opportunities recommended by the TCFD
TCFD Recomendation	Disclosure Vale
1. Governance - transparency regarding the governance of risks and opportunities related to climate change
1.1. Description of the supervision of the Board of Directors	Sustainability Committee and Board of Directors responsible for validation sand low-carbon monitoring of guidelines
1.2. Role of executives in mapping and managing the agenda	Low Carbon Forum, with monthly meetings to assess the deployment and implementation of the Vale Carbon Neutral strategy. This forum is coordinated by the Executive Officers for Sustainability and Institutional Relations, with the support of the Executive Officers for Coal, Strategy and Mineral Exploration, Business Support, Ferrous and Base Metals, and with the participation of Vale’s CEO and CFO. The meetings involve top management and technical groups from the business and corporate areas.
2. Strategy - current and potential impacts on the company’s business, strategy and financial planning
2.1. Transparency on risks and opportunities identified in the short, medium and long term	Preliminary and qualitative assessment of potential transition and physical risks, as well as low carbon opportunities. The studies will be further developed over 2020
2.2. Impact of identified themes on portfolio and strategy	Adoption of ongoing internal carbon pricing (shadow price) of USD50/t CO2 and in line with what is required to limit temperature increase to 2°C, to be integrated into analyses of capital projects, current projects, budget cycle and strategic planning in 2020
2.3. Business Resilience to Climate Scenarios	Initial exercise prepared in 2018 in relation to EBITDA sensitivity to International Energy Agency scenarios, including 2°C scenario. Preliminary analysis of physical risks of temperature increase and rainfall regime prepared by Instituto Tecnológico Vale. Sensitivity analysis to climate scenarios in progress within the current Strategic Planning cycle, based on the scenarios of the International Energy Agency.
3. Risk management - process of identification, evaluation and management of corporate risks
3.1. Process for mapping and assessment of climatic risks	Environmental and climate change issues are embedded in the corporate risk management process. Physical risks related to impacts that climate change may have on Vale’s assets and their surroundings, as a result of increased temperature, altered rainfall patterns, increased extreme events and rising sea levels, for example, affecting Vale’s operations [5]. Other risks, such as possible impacts of climate legislation on the company’s activities, through the imposition of limits on the emission of greenhouse gases by sector and increases in direct and/or indirect costs due to carbon pricing, are also among the risks identified by the company.
3.2. Climate risk management process	The main climatic risks are part of the company’s risk management process. In addition, the monitoring of the main risks is also communicated in the framework of the Low Carbon Forum
3.3. Integration into the corporate risk management process	Climate risks mapped by the different areas within the scope of Corporate Risk Management (CRM), and included in the Operational and Business Risk matrices Regulatory and physical risks included in risk factors (20 F)
4. Metrics and goals
4.1. Metrics Reporting used to monitor climate risks and opportunities	Absolute emissions and intensity Absolute emissions and intensity Energy consumption, intensity and matrix profile Water and land use
4.2. Transparency regarding scopes 1, 2 and 3 emissions	Emissions reporting scopes 1, 2 and 3 in the Sustainability Report, ESG Portal and CDP Questionnaire
4.3. Setting goals clearly	In December 2019, Vale assumed more ambitious goals in its climate agenda, with 2017 as the base year. These are the goals: Achieve carbon neutrality in scopes 1 and 2 by 2050 Reduce scopes 1 and 2 emissions by 33% by 2030, a level compatible with a global temperature increase of up to 2 ºC. This target is linked to the variable remuneration of all Vale employees  Produce 100% of the electricity consumed globally from renewable sources by 2025 in Brazil and globally by 2030 Establish ambition to reduce scope 3 emissions • Recover and protect 500,000 hectares by 2030

The table below shows Vale's main advances in relation to the recommendations proposed by the TCFD:

Key elements of the disclosures on climate risks and opportunities recommended by the TCFD
TCFD Recomendation	Disclosure Vale
1. Governance - transparency regarding the governance of risks and opportunities related to climate change
1.1. Description of the supervision of the Board of Directors	Sustainability Committee and Board of Directors responsible for validation sand low-carbon monitoring of guidelines
1.2. Role of executives in mapping and managing the agenda	Low Carbon Forum, with monthly meetings to assess the deployment and implementation of the Vale Carbon Neutral strategy. This forum is coordinated by the Executive Officers for Sustainability and Institutional Relations, with the support of the Executive Officers for Coal, Strategy and Mineral Exploration, Business Support, Ferrous and Base Metals, and with the participation of Vale’s CEO and CFO. The meetings involve top management and technical groups from the business and corporate areas.
2. Strategy - current and potential impacts on the company’s business, strategy and financial planning
2.1. Transparency on risks and opportunities identified in the short, medium and long term	Preliminary and qualitative assessment of potential transition and physical risks, as well as low carbon opportunities. The studies will be further developed over 2020
2.2. Impact of identified themes on portfolio and strategy	Adoption of ongoing internal carbon pricing (shadow price) of USD50/t CO2 and in line with what is required to limit temperature increase to 2°C, to be integrated into analyses of capital projects, current projects, budget cycle and strategic planning in 2020
2.3. Business Resilience to Climate Scenarios	Initial exercise prepared in 2018 in relation to EBITDA sensitivity to International Energy Agency scenarios, including 2°C scenario. Preliminary analysis of physical risks of temperature increase and rainfall regime prepared by Instituto Tecnológico Vale. Sensitivity analysis to climate scenarios in progress within the current Strategic Planning cycle, based on the scenarios of the International Energy Agency.
3. Risk management - process of identification, evaluation and management of corporate risks
3.1. Process for mapping and assessment of climatic risks	Environmental and climate change issues are embedded in the corporate risk management process. Physical risks related to impacts that climate change may have on Vale’s assets and their surroundings, as a result of increased temperature, altered rainfall patterns, increased extreme events and rising sea levels, for example, affecting Vale’s operations21. Other risks, such as possible impacts of climate legislation on the company’s activities, through the imposition of limits on the emission of greenhouse gases by sector and increases in direct and/or indirect costs due to carbon pricing, are also among the risks identified by the company.
3.2. Climate risk management process	The main climatic risks are part of the company’s risk management process. In addition, the monitoring of the main risks is also communicated in the framework of the Low Carbon Forum
3.3. Integration into the corporate risk management process	Climate risks mapped by the different areas within the scope of Corporate Risk Management (CRM), and included in the Operational and Business Risk matrices Regulatory and physical risks included in risk factors (20F)
4. Metrics and goals
4.1. Metrics Reporting used to monitor climate risks and opportunities	Absolute emissions and intensity Absolute emissions and intensity Energy consumption, intensity and matrix profile Water and land use
4.2. Transparency regarding scopes 1, 2 and 3 emissions	Emissions reporting scopes 1, 2 and 3 in the Sustainability Report, ESG Portal and CDP Questionnaire
4.3. Setting goals clearly	In December 2019, Vale assumed more ambitious goals in its climate agenda, with 2017 as the base year. These are the goals: Achieve carbon neutrality in scopes 1 and 2 by 2050 Reduce scopes 1 and 2 emissions by 33% by 2030, a level compatible with a global temperature increase of up to 2 ºC. This target is linked to the variable remuneration of all Vale employees  Produce 100% of the electricity consumed globally from renewable sources by 2025 in Brazil and globally by 2030 Establish ambition to reduce scope 3 emissions • Recover and protect 500,000 hectares by 2030

[1] CEBDS - Brazilian Business Council for Sustainable Development
[2] WBSD- World Business Council for Sustainable Development
[3] IA- International Energy Agency
[4] The greenhouse gases (GHG) considered under this policy are: CO2, CH4, N2O, HFC, PFC, SF6 and NF3. From now on, they will be called "emissions"; "carbon"; or GHG.
[5] The Vale Technological Institute regionalized (downscalling) the global warming models referenced by the Intergovernmental Panel on Climate Change (IPCC) for the Brazilian reality. This allowed Vale to identify rainfall regimes changes and volumes and temperature variation for all operations in Brazil. Models RCP 4.5 and 8.5 were regionalized. Based on changes in rainfall and temperature standards, it was possible to identify the main vulnerable assets and potential changes in the intensity and frequency of operational risks previously identified by the company's risk management process.

Goals and Deadlines

Our next steps to evolve in the theme and in line with our commitments are:

• Conduct an strategy evaluation to achieve the neutrality, involvin forest assets, carbon credits, compensation, among others, with completion forecast for 2021;
• Conduct extensive carbon pricing training for capital project leaders, budgeting and planning teams;
• Update a scenario analysis by the strategic planning team.

CDP

CDP is a British NGO that aims to make companies more transparent regarding climate change theme management and on the business' risks and opportunities related to climate change. We respond to the CDP Worldwide questionnaire annually since 2003.

In 2018, CDP adapted the questionnaire to the TCFD recommendations and, as we understand the complexity of the challenge for all adjustments to this new type of reporting, we maintain our publications and are promoting a series of internal actions that lead us to better management and efficiency.

Download Vale’s CDP Questionnaire

Business Case

Autonomous Truck

Huge 240-tonne off-highway trucks travel on the roads of a large mining area without a cab operator. Controlled only by computer systems, GPS, radar and artificial intelligence, vehicles move efficiently between the mine front and the unloading area. Autonomous trucks are a reality at Brucutu mine, in the state of Minas Gerais, Brazil. The autonomous operation of iron ore transportation has a higher productivity, generates less wear on parts and extends equipment life by 15%. The initiative has great importance to the Company’s ability to reduce both emissions and fuel and to decrease CO₂ particulate emissions.

PowerShift

Vale has created an internal program called PowerShift to support its sustainability goals, focusing on the transition to a low-carbon economy. The program aims to make the Company's energy matrix clean by focusing on the use of renewable energy and alternative fuels, greater efficiency of operations using new technologies, and forest promotion. PowerShift-linked initiatives are expected to contribute approximately 40% of Vale’s planned reductions to help us reach the United Nations 2030 Agenda target.

Sentinela Project – Artificial Intelligence

Vale's AI Centre, located in Vitória in the state of Espírito Santo, has been developed in partnership with researcher Ali Soofastei from the University of Queensland in Australia. It is a new tool that uses artificial intelligence for better off-highway truck operation. The tool offers the best speed option for the least fuel consumption on the vehicle operator panel.

This technological solution was tested on 50 trucks in Itabira, Minas Gerais, resulting in a reduction of 585 thousand liters of diesel consumption and generating savings of R$1.8 million. In terms of environmental impact reduction, the reduction in diesel consumption prevented the emission of 1,500 tonnes of CO₂. This is the equivalent of planting 3,000 trees in the Atlantic Forest.

Perspectives

Vale is constantly evolving its climate change risk management guidelines. In 2018, we collaborated with an external consultancy to survey and detail the impacts of this theme on the Company's long-term strategy. The results of this work will allow us to refine, over the next cycle, our climate change management by focusing on identifying risks and opportunities.