Shareholder climate proposals in Japan
MarchMarch 2021
2021

Shareholder climate proposals inJapan
Summary

Last year, Japan’s first ever shareholder proposal on climate change was submitted at Mizuho
Financial Group, receiving nearly 34% shareholder support.
Under Japanese corporate law, the sole legal pathway for a shareholder proposal on climatechange is via an amendment to a company’s articles of incorporation (as at Mizuho Financial
Group last year).
Shareholder proposals in the form of amendments to articles of incorporation of Japanesecompanies are relatively common in Japan, with 31 submitted in 2020, and in other jurisdictions.
The legal effect of such shareholder proposals is the same as the “special resolutions” on climatechange filed and passed at UK companies including Barclays, BP, Royal Dutch Shell, Rio Tinto
and Anglo American, which take binding effect as part of the companies’ constitutions.
Investors should support reasonable shareholder proposals calling for strengthened disclosureand management of climate-related information in line with the goals of the Paris Agreement.

Shareholder climate proposals in Japan
Last year in Japan, a landmark shareholder proposal on climate change at Mizuho Financial Group saw
substantial 34% shareholder support.1 It called on the company to disclose a plan outlining its businessstrategy to align its investments with the goals of the Paris Agreement. This first-of-its-kind submission inJapan was part of an ever-growing global movement of shareholder proposals on climate change, whichhave encouraged adoption of stronger climate policies at major corporations. This continued growth ofshareholder climate proposals reflects the clear financial materiality of climate risks and opportunities
Responsible Investor, Japan’s first climate resolution receives substantial support at Mizuho, July 2020, available at https://www.responsibleinvestor.com/articles/japan-s-first-climate-resolution-receives-substantial-support-at-mizuho
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March 2021
and an ongoing lack of alignment of many companies’ business strategies with the sustainability
principles embodied in their various climate-related pledges.2

Reason for framing proposals as amendments to the articles ofincorporation
The Mizuho Financial Group shareholder proposal took the form of an amendment to the company’s
articles of incorporation.3 This is the only available mechanism under Japanese corporate law for
addressing climate change-related issues in a shareholder proposal.
In a Japanese joint stock company with a board of directors, a shareholder proposal can be filed onlywith respect to the matters that shareholders are entitled to vote on and resolve at a shareholders’meeting under either the Japanese Companies Act or the company’s articles of incorporation. A
shareholder climate proposal would not be among the limited matters prescribed for resolution at ashareholders’ meeting (such as appointing a director or approving a merger) under the Companies Act.4
It would instead require an amendment to the articles of incorporation. Unless a shareholder climate
proposal is filed in the form of an amendment to the company’s articles of incorporation, it is highly likelythat it would be rejected by the board as impermissible under the Act. Even if a shareholder proposal inanother form were to be accepted by the board and resolved at a shareholders’ meeting, such resolution
could still be regarded as void if it were not on a matter that is permitted to be resolved by shareholders
under the Companies Act or the articles of incorporation.5

Shareholder proposals (including amending articles) in Japan
According to international law firm White & Case, in the 2020 annual general meeting (“AGM”) season,
at least 55 Japanese public companies faced shareholder proposals, a 31% increase since the 2018season.6 More than half (31) of these shareholder proposals were structured as amendments to acompany’s articles of incorporation. The vast majority were not related to environmental matters but
rather to governance issues such as disclosure of capital costs or disposal of strategic holdings.
In a similar form to the Mizuho Financial Group proposal, shareholder proposals to add a clause to thearticles of incorporation restricting the operation of coal-fired power plants or replacing nuclear power
plants with renewable energy sources have been filed at several Japanese electricity utilities (in one
case receiving nearly 20% shareholder support).7 These proposals have not, to date, attracted the2For instance, a number of Japanese companies, including Mitsubishi UFJ Financial Group, Mizuho Financial Group and Sumitomo MitsuiBanking Corporation (Japan’s three megabanks), support the Task Force for Climate-related Financial Disclosures recommendations (“TCFD”),
the UN Principles for Responsible Banking and the Japan Climate Initiative.
3
The shareholder proposal is available at page 55 of the Convocation Notice of the 18 th Ordinary General Meeting of Shareholders FY2019,available at https://www.mizuhogroup.com/binaries/content/assets/pdf/mizuhoglobal/investors/financial-information/stockinformation/resolution18_eng.pdf
4
See article 303(1), and article 295(2) of the Companies Act, which provide the basic framework. Unofficial translation of the Companies Act(Act No. 86 of 2005) available at http://www.japaneselawtranslation.go.jp/law/detail/?id=2035&vm=02&re=02. Also see articles 329, 339, 454,783, 795, 804 and 466 of the Companies Act. Such matters include (i) appointment/removal of directors; (ii) disposition of retained earnings; (iii)
approval of merger, divisive merger or other fundamental organizational changes between stock companies; and (iv) amending a company’s
articles of incorporation.
5In a decision of the Tokyo High Court dated 29 November 1994, it was found that a shareholder resolution to withdraw an appeal to a higher
court was void because such matter was not provided as a shareholder resolution matter under the articles of incorporation of the company.
6See White & Case, Japan's 2020 Proxy Season Results Announced, July 2020, available athttps://www.whitecase.com/publications/alert/japans-2020-proxy-season-results-announced
7It has been the case at Chubu Electric Power Co., Tokyo Electric Power Company Holdings, Inc., Kansa Electric Power Co, Inc. See for asummary in English of these proposals Dr. Yoshihiro Yamada, Dr. Janis Sarra, Dr. Masafumi Nakahigash, Directors’ Duties Regarding ClimateChange in Japan (CCLI Paper), February 2021, available at https://law-ccli-2019.sites.olt.ubc.ca/files/2021/02/Directors-Duties-RegardingClimate-Change-in-Japan.pdf (p. 29 et seq.)2

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March 2021

widespread Japanese and international financial press attention and level of institutional investor supportof the Mizuho Financial Group shareholder proposal.

Majority requirements and effects on corporate behaviour
Under Japanese law, a shareholder proposal seeking to amend the articles of incorporation of a joint
stock company has to take the form of a special resolution. In order to pass, it needs a two-thirds
majority vote of the shareholders present at the meeting. The articles of incorporation of a company may
increase this majority requirement.8
Even if a shareholder proposal related to climate issues has not received sufficient support to beadopted at the AGM, it can have a direct effect on a company’s behaviour. Blackrock analysts found in
the United States that “for shareholder proposals that received 30-50% support, 67% resulted incompanies fully or partially meeting the ask of the proposal.”9 In Japan, the Mizuho Financial Groupclimate proposal was opposed by the company, but resulted in it adopting a pledge – prior to the AGM –to cease financing of coal projects by 2050. This was followed by Sumitomo Mitsui Financial Groupannouncing that it would also stop lending to new coal plants. In 2020 in the United Kingdom,
responsible investment group ShareAction coordinated a group of investors that filed a shareholder
proposal aimed at phasing out fossil fuel financing at Barclays, which in turn prompted the bank to table
its own net-zero ambition resolution. The board-led climate resolution received 99.9% support.10 In 2021,
ShareAction coordinated a group that filed a shareholder proposal at HSBC aimed at putting in place astrategy to reduce exposure to fossil fuels assets and short-, medium- and long-term targets aligned withthe goals of the Paris Agreement, which similarly prompted the bank to propose its own version of theshareholder proposal, to be voted on at the 2021 AGM.11

Shareholder proposals in Japan compared to the United Kingdom
Shareholder proposals in Japan seeking to amend companies’ articles of incorporation have the samelegal effect as the many climate-related shareholder resolutions filed at high-profile UK companies inrecent years, which often passed with board support. These UK resolutions have been structured as
special resolutions, which require 75% shareholder support to pass. They take effect as part of thecompany’s constitution once passed.12
In other words, shareholder proposals such as the 2020 Mizuho Financial Group proposal are no more“heavy-handed” in their effect than equivalent climate-related special resolutions seen in the UnitedKingdom, such as those passed at Barclays in 2020 and BP in 2019.13 Each of the “Aiming for A”
resolutions passed in 2015 and 2016 at Royal Dutch Shell, Rio Tinto and Anglo American14 also took the8See article 309(2)(xi) of the Companies Act. Unofficial translation of the Companies Act (Act No. 86 of 2005) available at
http://www.japaneselawtranslation.go.jp/law/detail/?id=2035&vm=02&re=02.
9
See BlackRock, Our 2021 Stewardship Expectations, Global Principles and Market-level Voting Guidelines, 2021, available athttps://www.blackrock.com/corporate/literature/publication/our-2021-stewardship-expectations.pdf (p. 5)
10See voting results for resolution 29 in Barclays PLC, Results of Annual General Meeting (2020), available athttps://home.barclays/content/dam/home-barclays/documents/investor-relations/reports-andevents/AGM2019/AGM%202020%20Poll%20results%20RNS.pdf
11HSBC, HSBC announces resolution on climate change, March 2021, available at https://www.hsbc.com/-/files/hsbc/investors/results-andannouncements/stock-exchange-announcements/2021/march/sea-210311-climate-resolution-rns.pdf
12
See sections 17, 29 and 283 of the Companies Act 2006, available at https://www.legislation.gov.uk/ukpga/2006/46/section/17,
https://www.legislation.gov.uk/ukpga/2006/46/section/29, and https://www.legislation.gov.uk/ukpga/2006/46/section/283
13
Text of the Climate Action 100+ shareholder resolution (resolution 22), available at https://www.bp.com/content/dam/bp/businesssites/en/global/corporate/pdfs/investors/bp-agm-notice-of-meeting-2019.pdf
14
See for instance for wording of the Aiming for A resolution (resolution 21): 2016 AGM Notice available athttps://www.angloamerican.com/~/media/Files/A/Anglo-American-Group/PLC/investors/reports/agm-2016-voting-results.pdf, voting results(96% of support), available at https://www.angloamerican.com/~/media/Files/A/Anglo-American-Group/PLC/investors/reports/agm-2016-votingresults.pdf

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March 2021
form of special resolutions and therefore took effect as part of the companies’ constitution under UK
company law.

Board and investor support for reasonable shareholder climate
proposals
Boards of Directors in Japan are legally obliged to properly identify and manage climate risk.15 We would
encourage boards to support reasonable shareholder proposals on proper disclosure and managementof climate change risks and opportunities in alignment with the goals of the Paris Agreement, as part ofproperly discharging their existing legal duties in relation to climate change.
Principles for Responsible Investment (PRI), an initiative in partnership with UNEP Finance Initiative andUN Global Compact, recently released a report restating the importance for responsible investors to votein favor of resolutions aimed at aligning a company’s corporate policy with the goals of the ParisAgreement. PRI highlights that “investors should support all resolutions which, if successful, would beconsistent with their voting principles.”16

Nothing in this document constitutes legal advice. The contents of this document are for general
information purposes only. Specialist legal advice should be taken in relation to specific circumstances.
ClientEarth endeavours to ensure that the information it provides is correct, but no warranty, express orimplied, is given as to its accuracy

Asahi Yamashita
Attorney at Law
Legal Advisor to ClientEarth in JapanTokyo Surugadai Law Offices

Beijing

BerlinBrussels

Raphael Soffer
Climate and Energy Lawyer
Asia Climate and Energy Programme

LondonLos Angeles

Luxembourg

MadridWarsawClientEarth is an environmental law charity, a company limited by guarantee, registered in England and Wales, company number 02863827,registered charity number 1053988, registered office 10 Queen Street Place, London EC4R 1BE, a registered international non-profit organisation inBelgium, ClientEarth AISBL, enterprise number 0714.925.038, a registered company in Germany, ClientEarth gGmbH, HRB 202487 B, a registered
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See Dr. Yoshihiro Yamada, Dr. Janis Sarra, Dr. Masafumi Nakahigash, Directors’ Duties Regarding Climate Change in Japan (CCLI Paper),February 2021, available at https://law-ccli-2019.sites.olt.ubc.ca/files/2021/02/Directors-Duties-Regarding-Climate-Change-in-Japan.pdf
16Principles for Responsible Investment (PRI), Making voting count, March 2021, available at https://www.unpri.org/download?ac=12730 (p. 5)154