TOKYO -- Some of Japan's largest companies will get investors' judgment on their climate goals at a string of shareholder meetings in the coming days as the push for greater action from the corporate sector expands beyond environmental campaigners.
Five major companies -- three power utilities and two financial groups -- face votes calling for new information or tougher targets on carbon emissions. One of the proposals has been submitted by individual investors, in a first for Japan. Another has been submitted by foreign asset managers -- also a first.
Managers have defended their existing policies and asked shareholders to vote the motions down, so the size of any protest vote will draw close attention.
Japanese investors have been slower than those in Europe and the U.S. to use annual meetings to push companies on the impact of fossil fuels, but while shareholder proposals have become more common there are also increasing concerns about energy security.
"The Russia-Ukraine war highlighted that climate change was only one of many other problems the world is facing, leaving many questioning whether environmental campaigners' 'monotheistic' demands to value the environment truly help companies to manage sustainably," said Sumiko Takeuchi, a senior fellow at the International Environment and Economy Institute.
Among the companies targeted is Sumitomo Mitsui Financial Group (SMFG), where the eight shareholders who have jointly submitted proposals to the meeting on June 29 include individual stockholders as well as climate groups. They include a university student who says he is alarmed by the slowness of Japanese business to tackle climate change and a mother of two who says her hometown used to be known for its cool summers but has recently endured unprecedentedly hot temperatures.
It is the first time in which "ordinary citizens" have participated in a climate shareholder proposal, according to 350.org Japan, a campaign group.
SMFG is the latest of the three Japanese megabanks to face shareholder proposals regarding its financing for fossil fuel projects, after Mizuho in 2020 and Mitsubishi UFJ Financial Group last year.
In April, SMFG announced it would stop providing funding for new thermal coal mining projects, as did Mitsubishi UFJ. Mizuho committed to a similar policy change in 2021.
However, the shareholders say SMFG's efforts are weak in comparison with its counterparts. The two resolutions submitted call for it to set targets consistent with the Paris Agreement or an even tougher International Energy Agency blueprint last year that laid out a path to net-zero emissions.
SMFG responded in May with additional commitments, including ruling out financing for the expansion of existing thermal coal mining projects and related infrastructure developments.
Yutaka Suzuki, chief researcher at the Daiwa Institute of Research, said the increasing number of proposals in Japan follows a trend begun in the U.S. "Japan ... is a country where shareholders can gain the right to submit proposals with a relatively affordable amount of money," he said.
Climate proposals submitted at four major Japanese companies in 2021 achieved an average 18% support from shareholders, with asset managers split on the issues, according to Daiwa.
Support at all four was well below the 34% for the proposal at Mizuho Financial Group in 2020, which urged the banking giant to align its investments with the goals of the Paris Agreement.
But this year's discussions may gain more support from institutional investors based abroad, Suzuki predicted.
On June 28, a trio of shareholder showdowns will take place at Japan's big power companies, including Electric Power Development, Japan's largest coal-fired power generator. All have climate goals aligned with the Japanese government's approach to climate change, which encourages power plants that burn fossil fuels to gradually add cleaner fuels such as ammonia and hydrogen to the mix, with emissions being offset through carbon capture, utilization and storage. Activists say this relies on unproven technologies and will not cut emissions fast enough.
Electric Power Development, commonly known as J-Power, is the first Japanese company to receive climate-related proposals from a group of global asset managers.
U.K.-based Man Group, France's Amundi and HSBC Asset Management want the company to set credible targets for reducing emissions, disclose the plans to achieve them and annually report on its progress, including on how its capital spending and executive pay policies reflect the targets.
J-Power, with one-fifth of the country's coal-fired capacity, is responsible for 5.6% of national greenhouse gas emissions, according to an analysis by the U.K.-based think tank TransitionZero.
Since February 2021, the company has been committed to cutting 40% of its carbon dioxide emissions by 2030 and achieving net-zero by 2050, with emphasis on the use of hydrogen. The investor group has questioned the feasibility of J-Power's approach.
Tokyo Electric Power Co. Holdings (TEPCO) and Chubu Electric Power face shareholder demands to disclose more details about the long-term viability of their fossil fuel assets, including at JERA, their joint venture power utility. JERA owns 27 thermal plants nationwide, accounting for half of Japan's thermal power generation capacity, according to the company, and expanded in natural gas by investing in an Australian gas field in December 2021.
The climate activists behind the shareholder proposals, Market Forces from Australia and Kiko Network of Japan, say these risk becoming so-called stranded assets, without a viable future. A 2021 International Energy Agency report said no new gas fields or coal plants should be approved for development if the world is to achieve net-zero by 2050.
TEPCO and Chubu have rejected the proposals, highlighting their current climate efforts and the importance of an energy transition that does not undermine the availability of power.
The first of the scheduled votes is at the trading house Mitsubishi Corp., which faces two shareholder proposals at its meeting on June 24. Investors are demanding it set short- and medium-term emission reduction targets aligned with the Paris Agreement and indicate how its capital expenditure plans for oil and gas assets align with a plan for net-zero emissions by 2050.
The company says the proposals' requirements are unnecessary because it already sets such targets and has a risk management framework for making sure its operations are sustainable in an environment of net-zero emissions.
Takeuchi of the International Environment and Economy Institute said this year's votes will heighten corporate Japan's awareness of climate issues and was hopeful they will open the door to a wider variety of proposals in future years, including on human rights and energy security.