Japan’s 2026 AGMs Reveal Shift in Directors’ Accountability on Climate Risk

TOKYO, 3 July 2026 — Sumitomo Mitsui Financial Group (SMFG) has suffered one of the biggest ever votes against a Japanese bank director when 21.47% of shareholder votes were cast against SMFG Board Chair, signalling growing investor scrutiny and dissatisfaction with the company’s governance and management of climate risk.

MUFG’s Nomination Committee Member and the Group CEO, Junichi Hanzawa has also suffered a significant 11% vote against their election at this year’s annual general meeting in Tokyo.

Voting results have been disclosed for the 2026 Annual General Meeting (AGM) season of Japan’s three megabanks, Mitsubishi UFJ Financial Group (MUFG), Sumitomo Mitsui Financial Group (SMFG), and Mizuho Financial Group, as well as two major trading houses, Mitsui & Co., and Sumitomo Corporation, in which Market Forces holds shares.

In April 2026, Market Forces launched an initiative to hold Japan’s major companies and their governance to account, recommending that institutional investors vote against the re-election of key board directors — including the Chair of the Board, Chair of the Nomination Committee, and Chair of the Audit Committee — due to systemic failures in overseeing material climate, transition and regulatory risks in companies’ corporate governance.

As is the case with many of Japan’s major companies, directors are facing strong pressure from investors. Market Forces is concerned that more needs to be done to hold the boards of Japan’s trading houses and banks to account.

Voting results at the AGM’s are starting to reflect a permanent shift across three distinct areas: investors, directors, and imminent project-by-project capital allocation decisions.

Eri Watanabe, Japan Energy Finance Campaigner, Market Forces said:

“What matters most is whether boards of megabanks are effectively managing mounting climate, transition, regulatory, and litigation risks, not just uttering empty words to shareholders.”

“Investors are starting to sound the alarm bells for these giant companies but must do more to hold boards to account on growing climate and governance risks.”

“How will the boards of Japan’s big banks handle high-risk fossil fuel financing decisions, beginning with Papua LNG, which pose huge dangers for the Indigenous communities, climate and the economy.”

AGM Vote Results (For Completeness)

*The table above summarizes the votes against the directors at the 2026 AGMs, compiled from the Extraordinary Reports (Rinji Hokokusho) filed with the Financial Services Agency.
Methodology: The estimated opposition vote ratio is calculated by deducting the approval rate (%) from 100%, without taking abstentions into account.

1. Investors: A Sharper, Clear Framework for Accountability.

During the 2026 AGM season, institutional investors engaged in dialogues with heightened awareness of oversight responsibilities held by board chairs and committee leaders in companies exposed to corporate governance and climate risks. Market Forces’ ’Baseline Governance Expectations’ serves as the framework investors need today to structurally assess whether key board roles — including the Chair of the Board, Chair of the Nomination Committee, and Chair of the Audit Committee — are fulfilling their oversight duties regarding material climate, transition, regulatory, and human rights risks.

This shift has been driven by three key developments:

• The ICJ Advisory Opinion:
  Effectively heightens the expected “standard of care” for corporate directors globally due to intensified transition risks. As highlighted by prominent Australian legal firm MinterEllison, “as the probability and magnitude of climate-related risks rises, so too does the standard of care expected of directors.“
• Growing Recognition of Systemic Risk
  Investor dialogue with Japan’s megabanks and trading houses has reached an unprecedented level of substance and depth, with investors raising director-level oversight concerns more substantively than in prior periods surrounding annual general meetings. This intensity partially reflects a growing global recognition among institutional investors that systemic climate risks have historically been severely underestimated, as highlighted by recent research from Carbon Tracker.
• Investor’s Enhanced Engagement on Governance
  This enhanced investor engagement yielded unprecedented real-world consequences at Nissan Motor’s AGM on June 23, 2026, where shareholders rejected the re-election of an independent director, a former Vice President of Mizuho Trust & Banking. Driven by proxy advisors and catalyzed by Renault’s strategic 15% voting abstention, this historic ouster demonstrated growing market intolerance toward a lack of genuine director independence from Mizuho FG.

2. Directors: Put on Notice Regarding Specific Project

Named directors at all focus companies are now on the record as being fully informed of the financial, legal, and human rights risks within their portfolios. The context for these project-specific risks is broader: liquefied natural gas (LNG) demand destruction is underway following the dual energy crises of the early 2020s, which caused LNG price volatility and insecurity due to imported fossil fuel dependence, accelerating renewable cost-competitiveness. This LNG demand destruction is being compounded by long lead times of new LNG capacity creating a significant stranded asset risk profile for any new fossil fuel project sanctioned in the current decade.

• Papua LNG: Directors at MUFG, SMBC, and Mizuho can no longer credibly claim to be unaware of key risks including:
  • Almost 30 major banks have already ruled out funding the project.
  • An Equator Principles complaint was officially lodged in December 2025.
• Browse LNG: The 14.4% joint stake held by Mitsubishi Corporation and Mitsui & Co. through Japan Australia LNG (MIMI) is in the Browse project that has remained on hold for nearly a decade, with no LNG production and no revenue from the joint venture. Previously, the two companies had already scrapped their 1.5 million tonnes per annum offtake agreement with the Browse project in December 2013. Both Mitsubishi and Mitsui have taken major financial hits for Browse LNG – each took impairments of JPY 40 billion in FY15, and the project cost has increased to AU$48.7 billion (US$35.2 billion). Directors must justify their decision is in the best interests of shareholders ahead of any further capital commitments and a Final Investment Decision (FID).
• US LNG Projects: Japanese Megabanks are extending massive financing to major US LNG expansion projects, such as Rio Grande LNG and Venture Global CP2 LNG, despite highly uncertain future demand. Driven by the U.S.-Japan Investment Framework, the megabanks have allowed extreme risk concentration by extending an unprecedented $22 billion — two-thirds of the total cost — to a single asset, the Portsmouth gas-fired power plant. Prioritizing geopolitical frameworks over traditional credit standards, this single-project exposure, which would normally be capped below a few hundred million dollars, raises serious concerns regarding Board-level risk oversight.
• Mozambique LNG: Mitsui & Co. holds a 20% stake in this project, which has been suspended since 2021 due to the security situation in Cabo Delgado province and ongoing human rights concerns. UK Export Finance and several European ECAs have withdrawn or paused their support for the project. Mitsui, as part of the Mozambique LNG consortium, on the other hand, agreed to lift the force majeure in November 2025, leading to the full commercial restart of the project in January 2026. This raises critical questions about the depth of board-level scrutiny applied to capital allocation, human rights, and security risks in proceeding with this high-risk development.

3. The Litmus Test: Project Approval, Enhanced Scrutiny

Over the next 12–24 months, observable directors’ action will serve as the ultimate litmus test to determine success in holding directors to account. Directors will be judged on whether they take the following actions:

• Challenging Management on Capex: Questioning management on stranded asset risks particularly with LNG projects, cost trajectories, net-zero alignment, and the overall fiduciary basis for further investments in oil and gas projects.
• Seeking Independent Stakeholder Information: Actively engaging with affected communities, Indigenous representatives, and technical experts. The upcoming Papua LNG Final Investment Decision(FID) serves as the immediate test, for instance.
• Upgrading Risk Escalation Framework: Ensuring that material climate, human rights, and reputational risks identified at project or business-unit level are escalated to the board with sufficient detail and frequency to support genuine oversight, with clear accountability frameworks for project-related risk decisions.
• Up-skilling and Disclosure: Proactively building expertise on climate change, energy markets, and human rights, and publicly disclosing the specific steps taken to do so.

3. The Litmus Test: Project Approval, Enhanced Scrutiny

Over the next 12–24 months, observable directors’ action will serve as the ultimate litmus test to determine success in holding directors to account. Directors will be judged on whether they take the following actions:

• Challenging Management on Capex: Questioning management on stranded asset risks particularly with LNG projects, cost trajectories, net-zero alignment, and the overall fiduciary basis for further investments in oil and gas projects.
• Seeking Independent Stakeholder Information: Actively engaging with affected communities, Indigenous representatives, and technical experts. The upcoming Papua LNG Final Investment Decision(FID) serves as the immediate test, for instance.
• Upgrading Risk Escalation Framework: Ensuring that material climate, human rights, and reputational risks identified at project or business-unit level are escalated to the board with sufficient detail and frequency to support genuine oversight, with clear accountability frameworks for project-related risk decisions.
• Up-skilling and Disclosure: Proactively building expertise on climate change, energy markets, and human rights, and publicly disclosing the specific steps taken to do so.

Market Forces will drive two key initiatives leading up to the 2026–2027 AGM cycles:

1. Tracking and Disclosing Director Governance: Analyze board disclosures and integrated reports to identify and publish instances where director-level oversight is either active or lacking.
2. Engaging Institutional Investors via Strengthened Disclosure Architecture: Leverage Japan’s Financial Services Agency’s (FSA) revised Stewardship Code (June 2025) together with Japan’s incoming sustainability disclosure requirements aligned with the Sustainability Standards Board of Japan (SSBJ) standards, to deepen substantive engagement with institutional investors on director-level accountability.

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Market Forces
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