Shareholder proposals in Japan

The AGM 2024 marks the fifth season since the first climate shareholder proposal was filed at a corporation listed in Japan at Mizuho Financial Group.

A number of climate proposals have been filed at leading listed corporations in Japan in the AGM 2024 and most of them received higher level of support than in preceding years, with the notable exception of Toyota. Therefore, while the FT finds that overall in the US "shareholder support for environmental and social issues at US companies has waned for the second straight year" (see FT, Proxy season results show support for ESG efforts continues to ebb, 5 July 2024, here), the increased support for climate proposals in Japan demonstrates that any debate about the existence of an "ESG backlash" is not a relevant discussion in Japan.

Of particular interest is the high level of support of the shareholder proposal filed by LGIM on climate lobbying at Nippon Steel this year (27.98%). The two other climate-related shareholder proposals at Nippon Steel on alignment of capex with climate commitments and financial incentivisation of directors to deliver climate commitments received significant support as well (respectively 21.48% and 23.01%). Nippon Steel is Japan's largest producer of steel and the world fourth biggest by output. Reports by think-tank Influence Map finds that Nippon Steel has a negative climate engagement among their global peers.

Civil society-led climate proposals at the three mega-banks were filed this year on two sets of topics: assessment of transition plans and competencies of directors. The level of support to proposals filed in relation to transition plans increased compared to last year (e.g. 24.21% vs. 20.9% at SMBC). Level of support for proposals aiming to assess and improve the level of competencies of directors achieved or exceeded 25% at each mega-bank.

We see that the current levels of support are delivering impact in terms of evolution of climate strategies by major corporations in Japan. For instance, J-Power, at which climate proposals were filed by investor-led groups in 2022 and 2023 released in May 2024 a new medium-term management plan and indicated it would close up to 5 domestic coal plants by FY2030 (see ACCR analysis here)

Noting the historically low level of 71.9% of support for renewal of Mr. Akio Toyoda as Chairman of Toyota Motor, we expect that investors-led and civil society-led coalition will want to focus in the coming seasons on challenging directors seen as not having adequate skillsets to manage climate risks and reap opportunities from the energy transition (See Nikkei, Environmental proposals move from 'miracle drugs' to 'standing medicine', 6 July 2024, here).