Seven companies in the Tokyo Prime Market face climate votes, even after rejecting advisory resolutions from climate groups
Market Forces
FoE Japan
Kiko Network
Rainforest Action Network (RAN)
A coalition of environmental organisations and shareholders have filed climate-related shareholder resolutions targeting Japan’s largest banks, trading houses, and Chubu Electric Power, calling for greater disclosure by the companies on how they will meet their net-zero commitments.
Resolutions have been filed to Japanese megabanks Mitsubishi UFJ Financial Group (MUFG), parent company of SMBC, Sumitomo Mitsui Financial Group (SMFG), Mizuho Financial Group (Mizuho), as well as “Sogo Shosha” trading houses, including Mitsubishi Corporation, Mitsui & Co. and Sumitomo Corporation plus the energy giant Chubu Electric Power which jointly owns JERA, the largest thermal power generator in Japan. The resolutions have been filed by shareholders including representatives or civil society organisations, Market Forces, Kiko Network, FoE Japan and Rainforest Action Network.
The environmental groups initially lodged non-legally binding advisory resolutions in the form of a letter to the companies’ Chief Executive Officers. However, all seven companies rejected the advisory resolutions leading the the groups to file resolutions imposing changes to their articles of incorporation. That wasn’t what filers had initially hoped for, as advisory resolutions would ensure more open dialogue between the companies and their investors on enhancing climate change risk management and increasing long-term corporate value.
Since 2020, Japan’s high-emitting companies and financial institutions have faced shareholder proposals on climate change during the annual meeting season. In many cases, 25 per cent or more of shareholders supported climate-focussed resolutions, including ones that were filed last year, requesting the companies disclose Directors’ competency in managing climate risk.
For instance, The UK’s Corporate Governance Code states: If 20 per cent or more of votes are cast against a board recommendation at a general meeting of shareholders, the company should explain, when announcing the results of the general meeting, what action it will take to understand the background that led to the negative vote.
This year, the environmental organisations and shareholders are seeking improved governance and requesting increased disclosure on the exercise of Audit and Supervisory Committee/Board’s role in monitoring the Board of Directors’ risk management.
Studies have shown that the fires that spread in Okayama City, Okayama Prefecture, and Imabari City, Ehime Prefecture, were spread by the effects of climate change due to industrialization, and it is critical to prevent the harmful impacts of global warming in Japan.
Following significant investor support for improved policies, the environmental organisations and shareholders have consistently asked the banks and trading houses and energy companies to revise their policies and provide adequate disclosure.
It is extremely disappointing that the companies are refusing to accept advisory resolutions, which would give shareholders more opportunities to express their opinions at the annual general meetings. At the same time, the filers hope to gain a broader understanding of our efforts from more shareholders and stakeholders, including the background that led to filing proposals to amend the articles of incorporation, as the management of these companies rejected the advisory resolutions.
Shareholder proposals
| wdt_ID | Propose first enterprise (Ticker) | Contents of the proposal | Proponents |
|---|---|---|---|
| 1 | Mitsubishi UFJ FG (8306) | - Disclosure of audit committee assessment of directors’ oversight of risk controls - Disclosure of assessment of clients’ climate change transition plans |
Rainforest Action Network(individual) Market Forces Kiko Network |
| 2 | Sumitomo Mitsui FG (8316) | - Disclosure of audit committee assessment of directors’ oversight of risk controls - Disclosure of assessment of clients’ climate change transition plans |
Rainforest Action Network(individual) Market Forces Kiko Network |
| 3 | Mizuho FG (8411) | - Disclosure of audit committee assessment of directors’ oversight of risk controls - Disclosure of assessment of clients’ climate change transition plans |
Rainforest Action Network(individual) Market Forces Kiko Network |
| 6 | Chubu Electric Power (9502) | - Disclosure of Audit & Supervisory Committee assessment of the Board of Directors' effective oversight of risks - Disclosure of the financial impact of failing to meet a 1.5 degree Celsius target |
Market forces Kiko network |
| 7 | Mitsubishi Corporation (8068) | -Disclosure of Audit & Supervisory Committee assessment of the Board of Directors' effective oversight of risks - Disclosure of the financial impact of failing to meet a 1.5 degree Celsius target |
FoE Japan Market forces |
| 8 | Mitsui & Co. (8031) | - Disclosure of Audit & Supervisory Board and Members' assessment of the Board of Directors' effective oversight of risks - Disclosure of the financial impact of failing to meet a 1.5 degree Celsius target |
FoE Japan (individual) Market forces |
| 9 | Sumitomo Corporation (8053) | -Disclosure of Audit & Supervisory Board and Members' assessment of the Board of Directors' effective oversight of risks - Disclosure of the financial impact of failing to meet a 1.5 degree Celsius target |
Market forces |
The key issues of the companies are as follows (by industry);
■ Mega-banks
“After withdrawing from the Net-Zero Banking Alliance, Japanese megabanks must meet their commitment to net zero emissions and global climate goals. Banks face serious financial risks unless they outline a timeframe for fossil fuel and energy companies to deliver credible climate transition plans. Despite strong shareholder support for similar climate resolutions last year, banks have made no meaningful progress. Inaction in the coming months risks another serious shareholder backlash against the banks. Greater disclosure of the audit committee’s evaluation of risk is essential for improving governance and enhancing corporate value. ”
— Eri Watanabe, Japan Energy Finance Campaigner of Market Forces
“Megabanks’ audit committees don’t seem to be functioning. Megabanks continue to finance companies without credible net-zero transition plans or companies that contribute to destroying tropical forests and peatland, important carbon sinks, and violating human rights. It is concerned that not only megabanks’ managing executives are not able to manage risks, but also the audit committees’ oversight function of risk management have serious issues. MUFG and Mizuho finance the Rio Grande LNG project, which is planned to be built ignoring the opposition of the local Indigenous community. This financing does not comply with their commitment to the Equator Principles, a framework for managing social and environmental risks associated with large projects. Megabanks should immediately strengthen their governance, disclose information and strictly manage risks.”
— Toyoyuki Kawakami, Japan Senior Adviser, Rainforest Action Network
■ General trading houses
“Trading companies support the net-zero target, but they have not changed their plans to continue investing in high-carbon sectors. It would be extremely meaningful for shareholders and for climate if they disclosed how they will respond to the physical risks and transition risks caused by the intensifying climate crisis and presented their response measures. Trading houses invest in controversial projects including Mozambique LNG and LNG Canada which allegedly are involved in human rights violations, thus resolutions on governance and risk management is also important to further mitigate risks. ”
— Ayumi Fukakusa, Executive Director of FoE Japan
“As climate-related financial risks continue to grow, trading houses lack transparency about the risk they face and the governance needed to manage these threats. Companies are facing mounting pressure from investors to demonstrate how financial and climate risks are identified and reflected in strategies and investment decisions. It’s critical that Japan’s biggest trading houses increase the transparency of their governance structures that underpin how they manage risks to ensure decisions in the best interest of investors and the companies’ long-term viability”
— Kentaro Nunokawa, Japan Energy Campaigner, Market Forces
■ Chubu Electric Power
“JERA, which is 50% owned by Chubu Electric Power, is the largest thermal power utility in Japan. While emphasising a stable supply of electricity, relying heavily on uncertain technologies is nothing less than a risk. Expanding the use of ammonia/hydrogen as a low-carbon fuel will not only be a national security issue by requiring fuel import, but will also reduce the public burden by driving up the electricity cost. Setting a target to 2050 is not enough to make progress. Information disclosure is necessary for shareholders to judge whether the company develops detailed plans and implements and assesses the impact of climate change properly, appropriately addressing various risks.”
— Yasuko Suzuki, Program Coordinato, Kiko Network
“Chubu Electric and JERA have failed to disclose any meaningful improvement in their climate transition plans, and JERA’s expansion of its fossil fuel business heightens transition risks. Japan’s biggest power companies must take the increasing risks of severe fires, floods, and typhoons fuelled by accelerating climate change seriously. JERA and Chubu’s delayed response to climate risk management poses doubt about the effectiveness of the current governance structure. It’s essential to improve disclosure of the financial risks posed by climate change and improve adequate board oversight.”
— Kentaro Nunokawa, Japan Energy Campaigner, Market Forces
Media enquiries
For media inquiries and interviews contact:
Market Forces
Antony Balmain E-mail: antony.balmain[@]marketforces.org.au
FoE Japan
Ayumi Fukakusa E-mail: fukakusa[@]foejapan.org
Kiko Network
Tokyo Office：TEL:+81-3-3263-9210
Yasuko Suzuki E-mail: suzuki[＠]kikonet.org
Rainforest Action Network（RAN）
Yuki Sekimoto E-mail: yuki.sekimoto[@]ran.org