Explanatory material for investors

Shareholder Proposals for 20th Annual General Meeting of Shareholders of SMBC Group:
Despite committing to the goal of net zero emissions by 2050 and the goals of the Paris
Agreement, SMBC Group is aligning its financing with the failure of these goals. Without
disclosure to ensure that SMBC Group’s business strategy is in keeping with these commitments,
including clear short and medium-term emissions reduction targets and disclosure of proactive
measures taken to ensure that the bank is not financing the expansion of new fossil fuel supply,
shareholders face unnecessary and unacceptable transition and reputational risks.
April 20, 2022
On April 11, 2022, 350.org Japan1, Market Forces, Rainforest Action Network2 and Kiko Network(hereinafter referred to as co-filers) submitted shareholder proposals to Sumitomo Mitsui Financial Group(hereinafter referred to as SMBC Group).3 This document explains the content and the rationale of theshareholder proposals.
The shareholder proposals seek SMBC Group to set and disclose short- and medium-term
greenhouse gas emissions reduction targets for its portfolio and disclose measures to ensure nocontribution to new fossil fuel development so that investors can have confidence SMBC Group’sbusiness strategy will keep pace with market and governmental action to meet the Paris climate goals.
The proposals also seek to maintain and improve SMBC Group’s corporate value by reducing the bank’s
exposure to climate risk.
Shareholders should support the proposals on the basis that
(1) Disclosure of short- and medium-term emissions reduction targets to manage down exposure
to carbon-intensive sectors aligns with investor expectations;(2) SMBC Group needs to disclose the measures it is taking to align with the Paris Agreement andthe global goal of net zero by 2050, as its current policies and actions demonstrate that it isexpanding fossil fuel supply, contrary to those goals;(3) SMBC Group is falling behind peer banks in terms of policy, underscoring the need for further
disclosure to show proactive management of climate risk; and(4) Engagement with SMBC Group has not provided assurance of necessary disclosure.
We ask investors to support the shareholder proposals in the following ways:●●●

Vote for these shareholder proposals at the SMBC Group Annual General Meeting in June 2022;
Communicate to SMBC Group your intention to vote for the proposals, and publicly express yoursupport for the proposals;
Engage with SMBC Group on the need to take positive measures to ensure the proceeds of the1

Individuals affiliated with 350.org Japan.
An individual affiliated with RAN Japan.
3
The proposals were mailed on April 11, 2022 in accordance with the procedures stipulated in the Companies Act of Japan. It is
expected to be received by SMBC Group on April 12.
21Company's lending and underwriting are not used for the expansion of fossil fuel supply or
associated infrastructure, including strengthen its investment and financing policies related tofossil fuels, deforestation and other business activities that increase climate risk, and encourage
further information disclosure on these matters, including emissions reduction targets.
The co-filers remain open to engaging with SMBC Group up to and beyond the Annual General Meeting.
Early and concerted engagement from investors will assist with making progress in relation to corporate
policy and practice.

1. Reasons to support the shareholder proposals(1) Investors expect short- and medium-term emissions reduction targets to manage down
exposure to carbon-intensive sectors
As the effects of climate change intensify, it has become clear that serious damage will be unavoidable
unless average global temperature rise is kept not only below 2°C, but rather at 1.5°C.4 The most recent
IPCC’s report pointed out that we need to peak out our global emissions by 2025 at the latest and need
43% emission reductions by 2030 compared to 2019 level.5 According to the IPCC, “progress on thealignment of financial flows towards the goals of the Paris Agreement remains slow” and “public andprivate finance flows for fossil fuels are still greater than those for climate adaptation and mitigation”.6 It
further pointed out that we are on track for 3.2°C warming of the planet by the end of this century and“increased actions must begin today not tomorrow, otherwise we will continue to sleepwalk a climate
catastrophe” as UNEP-FI’s Executive Director Inger Andersen has put it.7 The United Nations
Environment Programme (UNEP) points out that over 7 times more effort than current commitments for2030 must be made to reach the 1.5°C target.8
Although the SMBC Group’s commitment to its portfolio-wide net zero target by 2050 represents a crucial
step, it alone does not ensure that the company is on track to achieve it. This long-term target can be
only credible when combined with short- and medium-term targets.
As UNEP’s Emissions Gap Report 2019 indicated, short- and medium-term targets are especially crucial.
According to the report, we need a 7.6% annual emissions reduction between 2020 and 2030 to stay
below 1.5ºC warming. It also emphasized that annual reductions by 2025 are especially crucial because
if we delay, “the steeper and more difficult the cuts become,” and “by just 2025, the cut needed will be
15.5% each year, making the 1.5°C target almost impossible.”
While SMBC Group has made commitments to set interim targets through the NZBA, these only apply tolending, and only include targets from 2030 onwards.
In October 2021, the G20 Task Force on Climate-related Financial Disclosures (TCFD) publicized new
guidance metrics, targets and transition plans as it became more aware of investors’ increasing focus on
4

UNFCCC, Decision -/CP.26 Glasgow Climate Pact, November 2021
IPCC, IPCC Sixth Assessment Report: Mitigation of Climate Change, April 2022
6
IPCC, Mitigation of Climate Change: Summary for Policymakers, April 2022
7
IPCC, Press Conference on Climate Change 2022: Mitigation of Climate Change, April 2022
8
UNEP, Emissions Gap Report 2021(2021)
52

assessing companies’ transition plans to achieve a net zero target. It points out that to be effective, “anymedium- and long-term targets should have interim targets set at appropriate intervals (e.g., 5-10 years)
covering the full medium or long-term target time horizon”. 9 The TCFD update also includes setting a
reduction in Scope 1, 2 and 3 targets as an example of quantified climate related targets.10
Climate Action 100+ is an investor initiative of 700 investors representing $68 trillion in assets, seeking toengage with companies to take action to reduce greenhouse gas emissions in line with the Paris
Agreement.11 It assesses companies on their short term (up to 2025), medium term (2026 to 2035) andlong term (2036 to 2050) GHG reduction targets.12
The Net Zero Investment Framework of the Paris Aligned Investment Initiative, a global collaboration
supported by four regional investor networks – AIGCC (Asia), Ceres (North America), IIGCC (Europe)and IGCC (Australasia), lists “Short & medium term emissions reduction targets” and “quantified plan todeliver targets” as key metrics.13
These initiatives underscore the fact that investors expect short and medium emissions reductions
targets in order to better evaluate the company’s ability to manage down its climate risk.

(2) SMBC Group needs to disclose the measures it is taking to align with the Paris Agreement
and the global goal of net zero by 2050, as its current policies and actions demonstrate that it isexpanding fossil fuel supply, contrary to those goals.
The International Energy Agency’s (IEA) landmark Net Zero by 2050 scenario finds there is no need forinvestment in any new oil, gas or coal supply if global energy sector emissions are to reach net zero by
2050.14 Additionally, the scenario requires no new LNG export projects and the full decarbonization ofelectricity sectors by 2035 in OECD countries and by 2040 in all countries, phasing out completely fromcoal by 2030 and by 2040 at latest, respectively. 15
The UNEP FI also pointed out that “the swiftest way to ensure (1.5°C) alignment (with no/low overshoot)is, therefore, to transition fossil fuel-based energy to renewable energy as soon as possible and cease
the construction of any new fossil fuel capacities”.16
Yet SMBC Group’s response to climate change has been inadequate and therefore poses a significant
risk to investors. Please see the details of the issues of its policy and practice in light of IEA’s NZE
scenario.

9

TCFD, Guidance on Metrics and Targets and Transition Plans, October 2021

10

Ibid.

11

Climate Action 100+, The Three Asks
12
Ibid.
13
Paris Aligned Investment Initiative, Net Zero Investment Framework 1.5°C, March 2021
14
IEA, Net Zero by 2050, May 2021
15
IEA Net Zero by 2050 report; World Energy Outlook 2021 and associated dataset
16
UNEP FI, Recommendations for credible Net-Zero commitments from financial institutions, October 2021

3

Table 1: Comparison among the Group’s Policy, Practice and the IEA’s Net Zero scenario
NZE2050 conclusions17

SMBC Group policy

SMBC Group practiceNo new coal power“No new final investment
decisions should be taken
for new unabated coalplants [as of 2021].”

Loopholes such as CCUS andmixed-combustion technologies, andno restriction on clients actively
building new or expanded coal power
plants allow significant continued
finance for the coal power sector
throughout this critical decade.

Emissions reduction
target from power sector
Absolute emissions frompower generation fall 57%
from 2020-2030.

The bank has no target to reduce thebank’s financed emissions from thepower sector for 2025 or 2030.

SMBC Group is the world 3rd bank which hasprovided loans for the global coal industry($20.4 billion, January 2019-October 2020),
including:● Kyusyu Electric Power, the fifth biggest
electricity provider in Japan, is involved ina new 2GW LNG power plant at
Sodegaura. The company is also involvedin the IPP business of numerous overseas
gas-fired power plants in the Philippines,
Mexico, Vietnam and Singapore.
● Adani Group, which plans to double its
coal-fired power capacity to 24 GW, morecoal power capacity than all of Australia;● PLN (Indonesia), which along with its
subsidiaries, affiliated entities, associates
and joint ventures, is planning at least
5.9GW of new coal plants.

Coal phase-out target“Phase-out of unabatedcoal in advanced
economies by 2030” &“Phase-out of all unabatedcoal power plants by
2040.”SMBC Group’s current target to“phase-out by 2040” is only applicable
to coal power project financing anddoes not include corporate financing
which consists of much of its
exposure to coal power. It does nothave a geographical approach todistinguish between advanced andemerging economies.

No new coal mining“No new coal mines ormine extensions are
required.”

Current policy restricts theMountainTop Removal method only
but it presented its intention to update
its policy in May 2022, to ban newand expansion of coal mining projects
and related infrastructure projects.18
However, it is more likely not to apply
to corporate financing which allows
SMBC Group to continue financing
coal expansion through coal mining
companies.19

Financing companies pursuing new or
expanded coal mines, such as:● Lending AU$115 million to AustralianWhitehaven Coal in 2020, which plans tospend around AU$2 billion (approximately
US$1.4 billion) on three new coal minesand expansions. These proposed projects
have marketable coal reserves of almost
500 million tonnes and could see
Whitehaven’s coal production more thandouble by 2030.
● US$713million loaned (2006-2021,
including participation in a 2021 US$400
million loan) to Adaro Energy Indonesia,
which has stated an intention to ramp up
coal production beyond its current rate of
50 million tonnes per year. By independent
analysis, Adaro Energy has a businessplan aligned with a catastrophic 5-6°C of
global warming.

17

NZE2050 statements and data from: IEA Net Zero by 2050 report; World Energy Outlook 2021 and associated dataset
SMBC Group, Enhancement of Initiatives for Sustainability, April 2022
19
For example, New Hope Coal and Whitehaven Coal (Australia), and Adaro Energy (Indonesia).
18

4

No new oil and gas
development“Beyond projects alreadycommitted as of 2021,
there are no new oil andgas fields approved fordevelopment in ourpathway… Also notneeded are many of theliquefied natural gas (LNG)
liquefaction facilities
currently underconstruction or at theplanning stage.”

There is no policy that restricts
financing for new oil and gas projects
and companies active in such sectors,
which allows SMBC Group tocontinue financing these sectors
throughout this critical decade andbeyond. SMBC Group has put inplace sector policies of “Oil Sand”,“Shale Oil and Shale Gas”, “Oil and
Gas Mining Projects in the Arctic” and“Oil and Gas Pipelines” but they only
require enhanced due diligence ofenvironmental and social risk
assessments of those projects, whichallow banks to continue financing insuch oil and gas sectors.

Absolute emissions
reduction targets for oil
and gas sectors
Absolute emissions fromoil and gas fall by 23%
from 2020-2030 (oil 27%,
gas 17%).

No absolute emissions reduction
targets for oil and/or gas.

SMBC Group provided a total of
approximately $109 billion in the global fossil
fuel sector (between 2016 and 2021). 34% of
these funds were provided to the top 100
companies expanding fossil fuels. SMBC
Group is especially active in the LNG sector
which the Group ranked the world 4th, andoil and gas in the Arctic region which it
ranked the world 8th, exceeding otherJapanese banks.
Recent examples of continued financing of oil
and gas companies and projects
demonstrably misaligned with net zero by2050 include participation in:● SMBC Group is involved in highly
controversial projects such as the East
Africa Crude Oil Pipeline (EACOP) where
SMBC is serving as one of the financial
advisors. Between 2016 and 2020, thebank provided $1.08 billion in finance forthe project owner Total. While Mizuho
announced it will not be involved in the
project unless the ongoing social andenvironmental issues are solved, SMBC’s
involvement has been severely criticized.
● SMBC Group is the only Japanesecommercial bank with known involvementin proposed LNG power projects in
Bangladesh and Vietnam at this stage. It is
expected to be involved in funding two
LNG projects in Vietnam with 3 GW
capacity. SMBC is also the financial
adviser of the 1.4 GW Pertamina LNG
Power Plant proposed in Bangladesh.
● A 2022 $3.5 billion loan related to the
Scarborough-Pluto LNG project, which
independent analysis has concluded“represents a bet against the world
implementing the Paris Agreement”.

Furthermore, according to a report, SMBC ranked 1st in terms of the number of fossil fuel projects it
supported under the Equator Principles since 2016.20 The rampant expansion of fossil fuels that SMBC isfacilitating necessitates disclosure of the proactive measures that SMBC Group is taking to ensure that it
does not contribute to new fossil fuel supply.
20

Banktrack, Equator Compliant Climate Destruction: How Banks Finance Fossil Fuels Under the Equator Principles, November
20215

(3) SMBC Group is falling behind peer banks in terms of policy, underscoring the need for further
disclosure to show proactive management of climate risk
SMBC Group is also falling behind its domestic competitors and international peer banks with
policies which are better suited to the management of climate risk. These policies demonstrate that thebanks below are taking more positive steps towards meeting their net zero by 2050 commitments.
Table 2: Examples of other Japanese banks with policies better suited to the management ofclimate risk
Thematicarea

Financial
institution

Policies (*excerpt of relevant provisions or summary by the authors)Coal

MUFG21“For extending credit to customers in the power sector, we newly set atarget to reduce the balance of corporate finance for coal-fired power
generation to zero* by FY2040.”* Projects that contribute to the transition toward a decarbonized society
are excluded following the MUFG Environmental and Social Policy
Framework.

Transition
risk
associatedwith fossil
fuel sectors

Mizuho22“Companies whose primary businesses are in coal-fired power generation,
oil-fired power generation, gas-fired power generation, coal mining, and/or
other oil and gas operations may be exposed to transition risk if they do
not take appropriate measures for the transition to a low-carbon society.
At Mizuho, we are undertaking engagement with clients to ensure they
make progress on addressing transition risks associated with climatechange. In undertaking such engagement with our clients, if a client does
not make progress on addressing their transition risks even after a certain
period of time, we carefully consider our transactions with the client.”

Medium-ter
m target

MUFG23

MUFG set the 2030 target in the (1) “power” and (2) “oil and gas” sectors
toward net-zero portfolio emissions in 2050. (1) Reduce from
349gCO2e/kWh in 2019 level to 156-192gCO2e/kWh in 2030. (2) Reduce
absolute emissions by 15%-28% in 2030 from 83MtCO2e baseline in
2019.

Recognitionof Palm oil
certification

MUFG24

MUFG does "request" clients "to have relevant operations certified by
RSPO as well as to publicly commit to No Deforestation, No Peat and No
Exploitation(NDPE), when providing financing to the business activities
developing and managing palm oil plantations." while SMBC Group admits
weak certifications by "an equivalent certifying body" like ISPO and MSPO.

SectorMizuho25

Mizuho covers not only "palm oil" and "large-scale agriculture" but also

21

MUFG, MUFG Progress Report, April 2022
Mizuho Financial Group, Strengthening our sustainability action, May 2021
23
MUFG, MUFG Progress Report, April 2022
24
MUFG, Revision of the MUFG Environmental and Social Policy Framework, April 2022
25
Mizuho, Overview of our Environmental and Social Management Policy for Financing and Investment Activities, March 2021
22

6

coverage ofNDPE
policy"lumber and pulp". SMBC Group fails to cover the pulp and paper sector.

Table 3: Examples of industry-leading sector policies by non-Japanese banks
Thematicarea

Financial
institution

Policies (*excerpt of relevant provisions or summary by the authors)

Coal

CréditMutuel26

Crédit Mutuel entities will refuse all operations defined within the scopeof application if the exclusion thresholds listed below are notrespected:● Annual coal production > 10 million tonnes,● Installed coal power capacity > 5 GW.
● Coal share of revenue > 20%,
● Coal share of power production > 20%.
These non-cumulative exclusion thresholds will be revised downwards
annually in order to ensure a gradual and total phase-out of coal
activities by 2030.
Moreover, Crédit Mutuel will not interact with companies developing
new coal capacity (the 417 companies identified on the Global Coal
Exit List - GCEL, 2019 version).

Oil & Gas

La
BanquePostale27

French bank La Banque Postale has set an international precedent bycommitting to both ruling out all oil and gas companies listed in the
Global Oil and Gas Exit List, as well as a total phase out by 2030.
Projects: Exclusion of financial services dedicated to upstream andmidstream28 oil and gas projects, and exclusion of oil-fired & gas-fired
power plants.
Expansion: Exclusion of all companies listed in the Global Oil & Gas
Exit List.
Phase-out: Has announced a phase-out strategy from oil and gas
upstream and midstream activities by 2030 / exclusion of allcompanies with oil and gas expansion plans.

No
Deforestation

ABM
Amro29ABM Amro sets a minimum requirement of NDPE policy for sevencommodities including palm oil and pulp & paper. Especially for thepalm oil sector, ABM Amro applies the minimum requirements not only
to producers but also to processors.

26

Crédit Mutuel, Our Sector Policies: Coal Sector
Reclaim Finance, Oil and Gas Policy Tracker
28
Oil and Gas Policy Tracker defines upstream activities as “exploration, development, production” and midstream activities as“pipelines, LNG terminals, other transport infrastructure (including transportation vessels) and storage infrastructure”.
29
ABM Amro, Summary Sustainability Requirements: Summary - Agri-Commodities
27

7

(4) Engagement with SMBC Group has not provided assurance of necessary disclosure
The co-filers have respectively engaged with SMBC Group over several years on its financing of fossil
fuels and deforestation and its governance of climate-related risks. The co-filers have also raised theseissues through the publication of reports and writing letters to the bank on its environmental policy andspecific carbon-intensive projects and sectors it has financed, with a particular focus on the coal, oil andgas, and deforestation risk sectors. The co-filers have further engaged with SMBC Group on its
disclosure of climate-related risks and other TCFD reporting. We have also conducted intensive
engagement with the company for the last a few months before filing the shareholder proposals.
While the company has shown a willingness to engage on these issues, the engagement has not
sufficiently raised hopes that the company is committed to formulating and disclosing a business plan,
including short- and medium-term targets, aligning its financing and investments with the goals of theParis Agreement or taking proactive measures to ensure that its lending and underwriting is notinconsistent with the IEA’s net zero emission scenario and the UNEP FI’s recommendation to G20. While
we recognize that SMBC Group has made some progress on its strengthening of the climate-related
governance, targets and policies (including coal mining sector policy), and is willing to do so in the future,
it is not the scale and urgency the climate science warns us to prevent catastrophic consequences. Its
policies and practices are still far from aligned with the goals of the Paris Agreement. Unless there is asignificant strengthening of measures, we believe SMBC Group’s financial risk will remain extremely high.
As such, the co-filers have decided to submit the shareholder proposals to SMBC Group.
The co-filers of these proposals ask investors to vote for the proposals at the 2022 General
Meeting of Shareholders of SMBC Group and advise SMBC Group and the broader public of thisintention. At this time, we urge investors to engage with SMBC Group and request the publicationof concrete measures to reduce the risks from financing and investments that are not alignedwith the Paris Agreement.

2. Shareholder Proposals and Objectives(1) Content of the Proposals
The contents of the shareholder proposals submitted by the co-filers are as follows:
Proposal 1
Partial amendment to the Articles of Incorporation (Setting and disclosing short- and medium-term
greenhouse gas emissions reduction targets consistent with the goals of the Paris Agreement)
Proposal details
The following clause shall be added to the Articles of Incorporation:
Chapter X: “Shift to Decarbonized Society”
Clause Y: “Setting and disclosing short- and medium-term GHG emissions reduction targets
consistent with the goals of the Paris Agreement”
1. To promote the long-term success of the Company, given the risks and opportunities
8

associated with climate change, and in accordance with the Company’s commitment to the Paris
Agreement on climate change, the Company shall set and disclose a business plan with short-term
and mid-term greenhouse gas emissions reduction targets across its overall investment and loan
portfolio aligned with Article 2.1(a) of the Paris Agreement (the “Paris goals”).
2. The Company shall report on its progress against such targets in its annual reporting.
Reasons for proposal
This proposal aims to maintain and increase the Company's corporate value, by appropriately
managing the Company’s exposure to climate change risks, and ensuring information transparency
through setting and disclosing business plans aligned with the Paris Agreement goals, including
short-term (by 2025) and medium-term (by 2030) greenhouse gas emissions reduction targets
across its entire investment and loan portfolio.
To align with the 2050 net zero goal set by the Japanese government and the Company’s own
goal of net zero emissions across its entire loan and investment portfolios, it is imperative to set
concrete short- and medium-term targets and develop compatible business plans. Disclosing its
progress against such targets annually will ensure the Company’s financing activities are consistent
with these goals.
By adding this clause to the Articles of Incorporation, the Company can effectively manage
exposure to climate change risks, align with its long-term net zero goal and promote sustainablegrowth.

Proposal 2
Partial amendment to the Articles of Incorporation (Financing consistent with the IEA's Net Zero
Emissions Scenario, etc)
Proposal details
The following clause shall be added to the Articles of Incorporation:
Chapter X: “Shift to Decarbonized Society”
Clause Z: “Financing consistent with the IEA's Net Zero Emissions Scenario, etc.”
Acknowledging the Company's support for the goal of net-zero emissions by 2050, and inaccordance with both the Environmental Program Finance Initiative (UNEP FI) recommendations to
the G20 Sustainable Finance Working Group and the International Energy Agency (IEA)’s Net Zero
Emissions by 2050 Scenario, the Company shall set and disclose proactive measures to ensure theproceeds of the Company's lending and underwriting are not used for the expansion of fossil fuelsupply or associated infrastructure.
Reasons for proposal
The purpose of this proposal is to manage the Company’s exposure to climate risk appropriately
and maintain and improve corporate value. The proposal addresses climate change risk by setting
and disclosing measures to ensure that the company’s financing activities are not inconsistent with
the IEA’s net-zero by 2050 emissions scenario and the UNEP FI recommendations to the G20
Sustainable Finance Working Group.
The risks of the IEA scenario are widely recognized, and it is clear from the scenario and climate
science that there is no room to develop new oil and gas fields or coal mines, or new infrastructure
to facilitate such development if we are to reach the 1.5 °C target of the Paris Agreement.
9

The Company has set a goal of net-zero greenhouse gas emissions from its entire investment
and loan portfolio by 2050, but continues to provide significant funding to facilitate fossil fuelexpansion. We propose to add this clause to the Articles of Incorporation in order to manage theCompany’s exposure to transition risk and to become a financial institution that drives the trend
toward a carbon-free society.

(2) The difference with shareholder proposals to MUFG
These proposals are the third shareholder proposals filed in respect of a Japanese financial institution
on the subject of climate risk, following shareholder proposals on Mizuho Financial Group (hereinafter,
Mizuho) and MUFG.30 Similar to the two past proposals, these proposals are not intended to be unduly
prescriptive, disclose confidential commercial information, or limit the authority of the company toformulate or change its business strategy. We believe these proposals grant SMBC Group the flexibility
to realize these proposals while taking into account client relationships and corporate interests.
The content of the first proposal is similar with the last year’s proposal to MUFG in that it requires theformulation and disclosure of a business plan with short- and medium-term portfolio-wide greenhousegas emissions reduction targets aligned with the goals of the Paris Agreement. This proposal also
requests the company to report annually its progress against such targets. The importance of setting
short- and medium-term targets and annual reporting against such targets are also in line with the
TCFD’s new Guidance on Metrics and Targets and Transition Plans.31
The content of the second proposal is similar to the other shareholder proposals filed to many financial
institutions in different countries (Please see Appendix). This proposal asks the Company to takeproactive measures to ensure that the Company’s lending and underwriting is not inconsistent with the
IEA’s net zero scenario and the UNEP FI’s recommendations to the G20 Sustainable Finance Working
Group. The IEA’s scenario has confirmed there is no room for exploration or development of new
fossil fuel supply projects (coal mines, oil fields and gas fields). As such, development of new
infrastructure to facilitate new fossil fuel supply projects is also incompatible with the IEA’s scenario. The
UNEP FI’s recommendations has stated, “A financial institution establishing a net-zero commitment
should begin aligning with the required assumptions and implications of IPCC 1.5°C no/low overshootpathways as soon as possible. This is because the pathways require immediate actions to have arealistic chance of limiting warming to 1.5°C. This would include, for example, the immediate cessationof any new fossil fuel investments, and rapid decommissioning of remaining fossil fuelproduction as indicated by the scenarios.”32
By adding above mentioned clauses into the Articles of Incorporation, the Company can manage its
exposure to climate risk appropriately, and maintain and increase its long-term corporate value.

(3) Format of the Proposals
In Japan, unlike in some countries in Europe and most states in the US, if the target company has aboard of directors, a shareholder proposal can be made only with respect to the matters regarding which
30

Kiko Network, Japan’s Largest Bank Targeted by Climate Resolution, March 2021
TCFD, Guidance on Metrics and Targets and Transition Plans, October 2021
32
UNEP FI, Recommendations for credible Net-Zero commitments from financial institutions, Oct 2021
31

10

shareholders are entitled to vote and make a resolution at a shareholders’ meeting under the Companies
Act of Japan (the “Act”) e.g. disposition of retained earnings; appointment or removal of directors;
approval of mergers and divisive mergers; amendments to the Articles of Incorporation; or othershareholder resolution matters under the Articles of Incorporation of the target company (Article 295,
Paragraph 2 of the Act). If a shareholder proposal does not fall into any shareholder resolution matter
under the Act or the Articles of Incorporation regarding which shareholders have no voting rights at ashareholders’ meeting under the Act or the Articles of Incorporation, such shareholder proposal would
simply be rejected by the company as unlawful (Article 303, Paragraph 1, limitation proviso in theparenthesis, of the Act).
Therefore, in Japan, the formality of a shareholder proposal for a resolution in which a shareholder can
specify the contents of its requirement is normally limited to a proposal to amend its Articles ofIncorporation in part. It is clearly a shareholder resolution matter under Article 466 of the Act. Any
shareholder proposal that simply states its requirement without using the form of an amendment to the
Articles of Incorporation and calls for a shareholder resolution would not be placed on the ballot as anagenda item at the shareholder meeting due to its illegality, unless it falls into a different shareholder
resolution matter under the Act or the Articles of Incorporation of the target company. For the reasonsmentioned above, these proposals are made legally in the form of an amendment in part to the Articles
of incorporation in accordance with the Companies Act of Japan.

Contacts:
350.org Japan https://world.350.org/ja/, https://350.org/
Contact: Eri Watanabe, E-mail: eri.watanabe[@]350.org
Market Forces www.marketforces.org.au
Contact: Bernadette Maheandiran, E-mail: bernadette[@]marketforces.org.au
Rainforest Action Network (RAN) www.ran.org
Contact: Toyoyuki Kawakami, Email: toyo[@]ran.org
Kiko Network www.kikonet.org
Contact: Yasuko Suzuki, E-mail: suzuki[@]kikonet.org

11

Appendix: Examples of Similar Shareholder Resolutions
In many countries, for this AGM season, financial institutions are facing similar shareholder resolutions
calling on the companies to align financing with the IEA’s Net Zero by 2050 scenario.
At least, six U.S. banks (Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley,
and Wells Fargo) and two Canadian banks (Bank of Montreal and TD Bank) have faced suchshareholder resolutions. 33
Below are some examples of financial institutions’ shareholder proposals in different countries.
Bank

Country

Content of the proposals

Citigroup34

USA

Harrington Investments’ shareholder resolution calls on the company toadopt a policy by the end of 2022 committing to proactive measures toensure that the company’s lending and underwriting do not contribute to
new fossil fuel supplies inconsistent with fulfilling the IEA’s Net Zero
Emissions by 2050 Roadmap and the United Nations Environmental
Program Finance Initiative recommendations to the G20 Sustainable
Finance Working Group for credible net zero commitments.

JP Morgan
Chase35

USA

Harrington Investments and Mercy Investment Services’s shareholder
resolution calls on the company to adopt a policy by the end of 2022 inwhich the company takes available actions to help ensure that its financing
does not contribute to new fossil fuel supplies that would be inconsistent
with the IEA's Net Zero Emissions by 2050 Scenario.

ANZ36

Australia

Shareholder proposal coordinated by Market Forces calls on the following:
Shareholders note the Company’s stated support for the goal of achieving
net-zero emissions globally by 2050, along with the publication of theInternational Energy Agency’s Net Zero by 2050 scenario. Shareholders
therefore request the Company disclose, in subsequent annual reporting,information demonstrating how the Company will manage its Fossil Fuelexposure in accordance with a scenario in which global emissions reachnet-zero by 2050. This information should include:● A commitment to no longer provide Banking and Financing where
proceeds would be used for new Fossil Fuel projects; and● Targets to reduce Fossil Fuel exposure consistent with net-zero by
2050.

Standard
CharteredUK

Shareholder proposal coordinated by Market Forces and Friends Provident
Foundation calls on the following:

33

ICCR, Shareholder Proposals Seeking Accelerated Climate Progress will be on the Proxy at All Major North American Banks
this Spring, Mar 2022
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Climate Votes, Harrington Investments’ shareholder resolution on Citibank
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ICCR, Proposal: JPMorgan Chase - Financing Consistent with the IEA Net-Zero 1.5°C Scenario
36
Market Forces, ANZ 2021 resolution, October 2021

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Bank37

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Noting the company’s stated support for the goal of achieving net-zeroemissions globally by 2050, along with the publication of the International
Energy Agency’s Net Zero by 2050 scenario,to promote the long-term
success of the company, given the risks and opportunities associated withclimate change, the company and the directors be authorized and directedby the shareholders to:
1. Set, disclose and implement a strategy to manage its Fossil Fuelexposure in accordance with a scenario in which global emissions
reach net zero by 2050, including:a. A commitment to no longer provide Financing where
proceeds would be used for new or expanded Fossil Fuelprojects; andb. Short-, medium-, and long-term targets to reduce fossil fuelexposure consistent with the goal of net zero by 2050,
avoiding overreliance on negative emissions technologies.
2. Report annually on progress under that strategy, starting from 2022,
including a summary of the framework, methodology, timescales
and core assumptions used, omitting commercially confidential orcompetitively sensitive information, and at reasonable cost.

Market Forces, Investor briefing: Standard Chartered, February 202213