Climate Change - ESG
In order to increase transparency Vale's resilience to climate change risks and opportunities and to detail our commitments, Vale, in accordance with the Task Force on Climate-Related Financial Disclosures guidelines, presents its Climate Change Report.
The quality of iron ore, specifically in Carajás.
Vale’s iron ore mines located in Brazil have ores with very high iron (Fe) content and low slag content. Consequently, Vale’s iron ore emits less carbon when processed in steel mills. For instance, S11D Eliezer Batista Complex in Carajás produces iron ore with 66.7% Fe content, besides being the biggest iron ore project in the world. producing about 150 million tons annually.
The predominance of Class I nickel in its reserves (60%), which has a high quality that allows a wide range of applications.
Vale has nickel mines that reserve around 60% of the world’s Class I nickel, a more refined product that enables greater application diversification and stability for sales volumes. With the increase of electric car production, it is expected that an increase in the demand and price of Class I nickel will enable Vale to benefit as Class II nickel begins to be sold with higher added value.
Mining activity highly dependent on logistical infrastructure sensitive to extreme climate risks.
Fixed assets such as railways and ports are especially vulnerable to extreme climate events, since they have a long term useful life and little, if any, flexibility to change location.
Find out more about Vale´s initiatives on the subject:
Goals and Deadlines
Vale adhered to the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) in 2017, with the aim to increase transparency about the risks and opportunities related to climate change.
Scenario analysisVale, aligned with the TCFD recommendations, analyzed the resilience of its strategy regarding the climate change and disclosed a report with the complete analysis and results.
RisksRegarding the risks related to climate change, Vale has developed specific analysis methodologies divided between impacts resulting from the transition to a low carbon economy and physical impacts, in line with the guidelines of the Task Force on Climate-related Financial Disclosures – TCFD and disclosed a specific report with Vale's analysis and actions for managing this issue.
Total GHG Emissions of Vale(millions of CO2e)
Other Indirect GHG Emissions(Scope 3 - millions of tCO2e)
Goals and Deadlines
Main factors to reach 2030 goals
Plans to reach the 2030 goal
Investments in 2020 encompasses a series of initiatives related to three main solution routes:
- Open pit mine: energy efficiency including automation and artificial intelligence, electrification studies, alternative fuels, among others;
- Underground mine: use of electrical vehicles and mine equipment, including studies for infrastructure and battery recharging, in addition to assessing the use of alternative fuels;
- Processing plant: studies to optimize production stages;
- Metallurgy and Pelletizing: energy efficiency, electrification, alternative fuels, new processes;
- Railway: electrification studies, use of artificial intelligence, as well as investments in equipment/systems for continuous improvement of energy efficiency;
- Shipping: implementation of pilot tests to apply new technologies and solutions that contribute to improving the energy efficiency of ships, as well as studies on the use of new fuels;
- Renewable energy generation: prospecting and acquisition studies for new projects on electricity generation based on renewable energy sources;
- Strategy and diagnostics: investments in management tools and studies to reduce greenhouse gas emissions.
Nota: Science based target.
Regulatory / Legal
Disputes over non-compliance with policies to mitigate climate impacts.
Substitution of products/processes for more efficient/current technologies.
Changes in supply and demand due to awareness of cleaner products.
Consumer and investor perceptions of the Company's adherence to greener policies.
Are those caused by the impacts resulting from global warming and are notable through temperature increase and greater occurrences of extreme events, such as hurricanes, storms, among others.
Vale methodologies for climate change risks and opportunities
- Technical contribution to the construction of the TCFD framework through the public consultation process;
- Review of published industry briefs and comment on performance indicators to be reported in financial reports, such as 20 F.
- We endorse the TCFD framework as one of the first signatory companies;
- We signed a new positioning letter from the Brazilian business sector in favor of global carbon pricing (letter from CEBDS  – Brazilian extension of the WBCSD ;
- Definition of the emission intensity reduction target with 2017 as the base year;
- Vale's first resilience assessment against the climate change scenarios IEA ;
- We report and publish the CDP in line with TCFD’s recommendations;
- Update on carbon pricing risk analysis;
- Implementation of the Powershift program (transforming the company's energy matrix into renewable) at Vale;
In 2021, the targets related to the climate agenda represent 5% of short-term remuneration (10% related to Sustainability) for all Vale employees and 6% of long-term remuneration (20% related to ESG) for all Vale leadership, including the President and Executive Committee. A target consisting of greenhouse gas emission indicators, forest recovery and protection, and renewable energy assurance has also been tied to long-term leadership remuneration. The corporate areas, which work on climate change, and the operational areas, which implement the decarbonization strategy also have targets linked to variable, additional and specific remuneration for project implementation, emissions management and/or risk management associated with climate change.
Sounding Panel, an advisory board within the Executive Board composed of global ESG experts."
The different supply and demand behaviors in the three IEA scenarios result in changing competitiveness dynamics that affect the long-term price of Vale's main commodities and its strategy.
For the company, the Current Policies Scenario impacts, in part, its value-generating capability. Besides the higher exposure to physical risks, the Current Policies Scenario (CPS) does not consider the opportunity for renewable growth, electrification of transportation and the need for decarbonization of steel, all of which are key parts of Vale's strategy today.
The Sustainable Development Scenario (SDS), in turn, creates an ecosystem that encourages the company's growth options and amplifies the relevance of its strategic pillars, which are base metals transformation and maximization of iron ore flight-to-quality.
The coal asset is negatively impacted in the Stated Policies Scenario (STEPS) and SDS scenarios, but is not representative in the consolidated result. On the path to carbon neutrality, Vale has evaluated its asset portfolio and announced in early 2021 the disinvestment of its coal business, which had its sale announced in December 2021. The responsible disinvestment of Moatize and CLN benefits the communities and governments where these operations are located and offers a sustainable future for operations. At the same time, the disinvestment was aligned with the company's focus on prioritizing its core businesses, its ESG agenda and a way to mitigate its exposure to transition risks.
Under a variety of climate change scenarios, Vale's EBITDA performs in a range of 90% to 140% relative to the base case used in our strategic planning. This resilience is the result of a flexible portfolio, able to adapt to different market conditions and has a strategic positioning well aligned with the trends of transition to a low-carbon economy.In 2022, Vale will update its scenario analysis, adding a scenario in which the global temperature increase is limited to 1.5 °C."
1. Analysis of climate change scenarios and Vale Climate Forecast, with robust methodologies for analyzing risks and opportunities related to climate change. For example, the Vale Institute of Technology has regionalized (downscaled) the global warming models referenced by the Intergovernmental Panel on Climate Change (IPCC) for the Brazilian reality. This allowed Vale to identify changes in rainfall regimes and volumes and temperature variation for all operations in Brazil. The RCP 4.5 and 8.5 models were regionalized.
Based on scenario studies by the Intergovernmental Panel on Climate Change (IPCC), Vale developed, in partnership with the Vale Institute of Technology, the Vale Climate Forecast, a methodology for analyzing risks and opportunities related to climate change. The Vale Climate Forecast enables:
- Very short-term and short-term analysis and seasonal forecasting for physical risks, with the main focus on preventing impacts on the operation and shipment of products;
- Assessment of physical risks and their long-term impacts to identify necessary investments in facilities – for climate change adaptation and/or mitigation.
2. Monitoring the external environment, including new regulatory frameworks, emerging technologies, market dynamics and public policies – the company internally consolidates a Monthly Climate Intelligence Bulletin, which maps the most relevant news to the climate agenda.
3. Engagement with stakeholders in key industry forums to monitor new positioning, trends and regulations."
From changes in rainfall and temperature patterns, 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.
For the transition risks, analyses of the strategy's resilience, financial impacts, in the face of different climate change scenarios, in addition to periodic regulatory monitoring, were elaborated.
Carbon pricing is one of the internal tools for managing the transition risk. The use of the US$50/tCO2e shadow price is in line with what is required to limit the temperature increase to less than 2°C and with the recommendation of the Carbon Pricing Leadership Coalition (CPLC). Internal pricing is integrated into the decision-making process to guide our capital allocation, enabling and accelerating the transition to a carbon neutral economy. It is integrated to the economic-financial feasibility analysis of capital projects and current projects (sustaining), within the budget and strategic planning cycles as of 2020.
For physical risks, their management takes place via the Vale Climate Forecast Methodology, which was implemented in 2021 in the Canada and Northern Corridor operations. This risk mapping and identification process was then integrated into corporate risk management and evaluated according to their severity and probability of occurrence."
- "Absolute emissions and intensity;
- Energy consumption, intensity and matrix profile;
- Water and land use.
- Percentage of assets analyzed to identify physical risks related to climate change, following the ""Vale Climate Forecast"" methodology, percentage of assets with high exposure to transition risks, percentage of assets with high exposure to climate opportunities.
- Expenditures aimed at reducing emissions totaled US$ 187 million in 2021 and cover energy efficiency projects, renewable electricity, biofuels, electrification and innovative technologies."
 WBSD- World Business Council for Sustainable Development
 IA- International Energy Agency
 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.
 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.
- 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.
Analysis of strategy resilience regarding climate change scenarios
Management of Risks related to Climate Changes at Vale
The Climate Change & Carbon directory is responsible for the assessment of the climate change’s R&O based on the business strategic planning, risk management processes, and regulation monitoring. Therefore, for strategy and climate change analysis, Vale considers 3 years as short-term.
Vale’s short-term horizons include risk factors related to the increase in the intensity of and frequency flood-causing rains, which can lead to operational stopages and material environmental impacts; increase ore humidity impacting transportation; and operational accidents (such as train derailment, flooding, equipment damage, etc). In this regard, Vale's methodology for managing physical risks related to climate change allows for short-term analysis and seasonal forecasts, with the focus on impacts on our operations and product shipment. The analysis of short-term climate risks enables the inclusion of climate variables in the decision-making processes of Vale’s operations systematically and generates a higher control against the impacts of climate change.
For the climate change area, the medium-term is equivalent to 10 years. Medium-term horizons are likely to include risk factors related to regulatory risks such as: i) changes in policies to restrict emissions or adapt to the effects of climate change, imposing costs on issuers, for example more stringent emission regulations and carbon pricing, e.g., carbon boarder taxes, and country-specific carbon pricing policies that will affect margins for carbon intensive businesses; and ii) market risks such as reduction in demand for thermal coal due to the energy transition and consequential substitution of the fossil fuel by renewables, also changing the met coal market dynamics due to the necessity of low-carbon products for steel industry decarbonization.
Vale considers 11 years or more as long-term. For instance, Vale the company conducted a business resilience test in the various climate change scenarios for a twelve-year horizon (until 2030), with the aim of being prepared for the challenges of the transition to a low carbon world.
Long-term analysis includes for physical risk chronic and acute risks are considered such as shifts in climate patterns (e.g., sustained higher temperatures). For example:
- Changes in precipitation patterns and extreme variability leading to increased operating costs.
- Sea-level rise impacting production and distribution of the ore, leading to losses.
Event-driven, including increased severity of extreme weather events, such as cyclones, hurricanes, or floods.
The long-term analysis for physical risks associated with climate change are focused on identifying necessary investments in facilities to adapt to and/or mitigate impacts due to climate change Additionally, Vale is mapping key emerging long-term risks that embed transition risks to a low-carbon economy. These risks are those related to technological, market, regulatory and legal or reputational aspects and includes: a) Product substitution due to new technologies and processes may result in the advent or discontinuation of some products in our portfolio; b) Alterations in demand, specifically for low carbon products, may impact our business, according to the scenario variation; c) Changes in public policies, including carbon taxation, may impose higher costs on emitters, which impacts the cost of our products; d) Litigation may occur as a result of more restrictive laws and reputational impacts due to consumer and investor perceptions about Vale’s approach to the transition to a low carbon economy.
Carbon Disclosure Project (CDP)
Through CDP, companies respond to detailed questionnaires covering topics such as GHG emissions, mitigation strategies, environmental risk management and sustainability initiatives. Based on the responses, CDP evaluates and scores the organizations, resulting in ratings that reflect their approach to sustainability. These results are then used to create reports and rankings that highlight the companies that excel in transparency and environmental action. This system promotes healthy competition and the dissemination of best practices.
In 2018, CDP adjusted its questionnaire to align with the guidelines recommended by the TCFD. Recognizing the complexity of the adjustments required to comply with this new reporting format, CDP continues to publish its analyses while implementing several internal initiatives. The aim of these actions is to improve the management and effectiveness of the organization and to progressively align with best practice in the sector.
See below for Vale's responses to the questionnaire. And we would like to point out that the 2023 rating will only be published at the end of the year.
- Carbon Markets: an economic instrument, where a cap is set for the GHG emissions and there is allocation of rights or allowances to emit until achieving the threshold set by the jurisdiction (country, province or region). This allocation can be done by means of free distribution  of the permits and/or by means of auctions (current scenario of the European Union). Thus, a market for trading of permits is created, called Emissions Trading System (ETS), where the companies that emit quantities lower than their cap can sell such permits to companies that emit above their cap. The carbon price is defined by the market (offer and demand), but many governments set a minimum price to regulate the market. This instrument is also called carbon market or cap and trade.
- Carbon Taxes: it consists of charging a fixed price per emission unit (ex.: reals or dollars per metric ton of carbon dioxide emitted). This fee is paid to the government, serving as a carbon tax. In this instrument, there are no emission limitation, but the fee value is calculated in a way to achieve the socially optimal level of emissions. This optimal level represents the point, in which global heating is contained within the limit set forth in the Paris Agreement (below 2°C), assuring the highest possible level of well-being to the society.
 Using the grandfathering criteria based on historical emission, or benchmarking based on reference index for the sector.
2 It is considered an initiative with planned implementation when it is formally adopted by means of legislation and there is an official start date.
Internal carbon price at Vale
US$50 / tCO2-eq
US$10 / tCO2-eq
- Achievement of reduction (scopes 1 and 2) and neutrality targets
- Cost-benefit analysis of mitigation options
- Scope 1 and Scope 2
- Not applicable to Scope 3
- GHG emissions of the operation phase of the projects and the native vegetation removal
- Emission Cost
- NPV (Net Present Value) with and without carbon
- IRR (Internal Return Rate) with and without carbon
- Marginal Abatement Cost
Policies and Procedures