Fossil Fuel Developers
Corporate failure to adequately disclose climate-related financial risks raises questions about audit committee responsibility
Published: 14 April 2025 | Updated: 15 April 2025
Investors are unable to assess risk because of limited disclosure of climate risk and oversight mechanisms by trading houses and Chubu/JERA.
These shareholder proposals request better disclosure on the financial impact associated with transition and physical risk as well as how the audit & supervisory committee (or auditors) evaluates company strategy, policies, and processes to enhance corporate value through improved management of climate-related financial risks and opportunities.
- Japanese trading houses -Mitsubishi, Sumitomo, Mitsui, and utility Chubu/JERA* are not disclosing key risks, including the percentage of assets that operate in areas of high physical risk or reasonably adequate estimated costs associated with ensuring their new fossil fuel investments and existing fossil fuel assets are aligned with the Paris Agreement (transition risk).
- Although the companies have announced net zero by 2050 commitments and/or 1.5°C-aligned transition plans, analysts have found that their current business plans are aligned with catastrophic levels of warming**.
- The companies’ current climate risk disclosures are inadequate, preventing investors from accurately assessing the financial impact of company strategies and future investment costs.
- Although the audit & supervisory committee (or auditors) are responsible for overseeing directors’ duties, they fail to provide a clear rationale for how climate-related risk controls are monitored and assessed. Current disclosures lack transparency on risk oversight, assessment criteria, and the effectiveness of board supervision.
*JERA is a 50-50 joint venture between TEPCO Fuel & Power (a wholly owned subsidiary of Tokyo Electric Power Company) and Chubu Electric Power.
** Based on analysis by the MSCI Sustainability Institute
Download the documents
Investor briefing Apr 15
Chubu Shareholder proposal April
Mitsubishi Corporation Shareholder proposal April
Mitsui & Co. Shareholder proposal April
Sumitomo Corporation Shareholder proposal April
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Disclaimer
Informational purposes only – This communication is provided solely for informational purposes only and is not, and should not be construed as, investment advice or investment recommendations for the purposes of the Financial Instrument Exchange Act of Japan.
No joint-exercise of voting rights – Nothing in this written communication, nor in any related oral discussion, is intended to be, nor should it be construed as, an offer, an acceptance or a consent, to enter into an agreement for the joint exercise of voting rights or any other shareholder’ rights for the purposes of the Financial Instrument Exchange Act and Foreign Exchange and Foreign Trade Act of Japan. If needs be, it is hereby emphasised that each shareholder exercises its shareholder’s rights independently based upon its own decision and shall not be held liable for its exercise of its shareholder’s rights in any event or in any result, as a breach of any discussion between the shareholders.
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Analysis featured in this briefing does not substitute analysis and disclosure from the companies themselves with primary information. The purpose of the information featured here is to demonstrate to investors the substantial climate-risks the companies are exposed to, and encourages them to undertake their own detailed, forward-looking analysis to demonstrate to investors how they are managing these risks.