Climate investors eye Japan’s banks on board oversight

A coalition of climate groups, including Australia’s Market Forces, Japan’s Kiko Network, and a representative of Rainforest Action Network, have submitted shareholder proposals to Japan’s top three banks, Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, and Mizuho Financial Group.

The proposals call for stricter board oversight of climate-related risks. This is the first time for these climate blocks to approach bank boards to pressure them on climate change, Reuters reported on Monday. The proposals aim to make the banks disclose how they assess director competency for overseeing climate-related business risks. This approach reflects a shift from last year’s strategy, which sought to mandate banks to disclose credible transition plans to meet 2050 carbon neutral targets.

Moreover, these proposals align with the governance standards set by the International Sustainability Standards Board, which require disclosure of how governance bodies oversee sustainability-related risks. Sumitomo Mitsui and Mizuho have confirmed receipt of the proposals, with Sumitomo Mitsui stating it would review them.

Despite some international backlash against green shareholder activism, pressure on Japanese companies continues. The latest proposals will be voted on during the banks’ upcoming annual general meetings in June, although they are expected to face significant challenges. Last year, climate proposals received only around 20 per cent backing at the banks.

The climate groups are also urging the banks to disclose how they assess the climate change transition plans of their fossil fuel sector clients and their plans if clients fail to produce credible schemes. Market Forces and Kiko Network have filed a similar proposal with Chubu Electric Power.

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