Climate investors target Japan’s top banks, this time on board oversight, sources say

By Thomson Reuters Apr 14, 2024 | 8:53 PM

By Makiko Yamazaki

TOKYO (Reuters) – A coalition of climate groups filed shareholder proposals with Japan’s top three banks, including Mitsubishi UFJ Financial Group, calling for stricter board oversight of climate-related risk, people familiar with the matter told Reuters.

The proposals from Australia’s Market Forces, Japan’s Kiko Network and a representative of Rainforest Action Network mark the first time climate groups have targeted the boards of the banks as a way to pressure the lenders on climate change.

The proposals focus on board oversight of climate-related business risks and seek to make the megabanks – Mitsubishi UFJ, Sumitomo Mitsui Financial Group and Mizuho Financial Group – disclose how they evaluate director competency for such oversight, the people said on condition of anonymity as the information is not yet public.

It represents a strategy shift from last year when the climate groups sought to mandate banks disclose credible transition plans to meet 2050 carbon neutral targets.

This year’s proposals reflect governance standards set by the International Sustainability Standards Board (ISSB) requiring disclosure around how governance bodies oversee sustainability-related risks, the people added.

Mizuho confirmed it had received the proposals, but declined to comment further. Mitsubishi UFJ declined to comment. Reuters could not get immediate comments from Sumitomo Mitsui.

While there has been some backlash against so-called green shareholder activism abroad, pressure on Japanese companies has continued unabated, with some activists and shareholders saying corporate Japan has been too slow in moving away from fossil fuel and its financing.

The latest proposals from the climate groups will be voted on at the banks’ annual general meetings in June although they are likely to face high hurdles.

Last year, shareholders voted down climate proposals at the banks, with the proposals getting around 20% backing.

Climate resolutions commonly take the form of proposals to amend a company’s articles of incorporation, which in Japan requires a two-thirds majority. As such, no climate resolutions have yet passed, but the pressure has prompted some policy changes at companies.

The climate groups are also calling on the banks, all key to financing oil and gas projects, to disclose how they assess fossil fuel sector clients’ climate change transition plans and what they plan to do if the clients fail to produce credible plans.

Separately, Market Forces and Kiko Network also filed a similar proposal with Chubu Electric Power on disclosure of director competencies in managing climate risks.

Reuters could not get immediate comments from Chubu Electric.

Shareholder activism on climate change has gained momentum in Japan since 2020, when Mizuho became the first listed company in the country to face a climate-related vote.

(Reporting by Makiko Yamazaki; Editing by David Dolan and Himani Sarkar)