Wednesday 11 June: A new report by Market Forces has revealed that Japan’s five largest institutional investors — including Mizuho Financial Group/Dai-ichi Life, Sumitomo Mitsui Trust Holdings, Mitsubishi UFJ Financial Group, Nomura Holdings, and Nippon Life Insurance — are collectively investing over US$40.6 billion in companies driving the global expansion of coal, oil, and gas.
The investments by Japan’s largest investors threaten to derail their climate commitments, global goals to limit warming and jeopardise the long-term financial security of millions of people and institutions, which have funds invested in these companies.
The new analysis finds that despite public pledges to achieve net-zero emissions by 2050, Japan’s five largest investors maintain substantial stakes in companies featured in the Fossil Fuel Expansion Index (FFEI), a list of 190 publicly-listed corporations with the world’s most aggressive fossil fuel development plans.
Just ten of these companies — including Itochu, Mitsui, Mitsubishi Corporation, and Chubu Electric — account for 81% of Japanese investors’ fossil fuel exposure and are set to emit an estimated 7.7 gigatonnes of CO₂-equivalent emissions, effectively cancelling out the emissions savings the world has achieved through clean energy deployment in the past 3 years.
Key Findings:
- Japans’ five biggest investors have fossil fuel holdings of US$40.6 billion, nearly matching their clean energy investments ofUS$43.2B far short of the 4:1 ratio needed by 2030 to stay on a 1.5°C pathway.
- 99% of votes cast by Japan’s five largest investors supported directors at Japanese fossil fuel expansion companies, despite many having policies enabling the companies to take firmer steps in line with their commitments to the Paris Agreement on limiting global warming, highlighting a gap between policy and action.
- Chubu Electric received overwhelming shareholder support from Japan’s five largest investors even after consecutive anti-trust violations in 2023 and 2024.
Dr. Sachiko Suzuki, Asia Climate and Energy Finance Analyst, Market Forces said:
“This first ever analysis shines a spotlight on Japan’s five biggest asset managers and their investments in companies with the biggest coal, oil and gas expansion plans around the world.”
“Japan’s biggest investors are enabling fossil fuel expansion causing harmful climate change and failing to adequately support the speedy transition to clean energy needed for a more secure future.”
“If institutional investors opt to stay invested in heavy emitting companies, they must use their power to drive these companies from fossil fuels to clean energy.“
“Japan’s biggest investors must hold companies expanding fossil fuels to account and demonstrate their duty to protect long-term returns by voting against directors at upcoming annual general meetings.”
Exposed: Japan’s five largest investors delay clean energy transition
Report Recommendations:
Market Forces calls on Japanese investors to take urgent actions to:
Asset Managers
- Set ambitious targets
- Commit to aligning their portfolio emissions with a 1.5°C pathway.
- Set targets for aligning portfolio companies with a 1.5°C pathway, particularly those expanding fossil fuels as identified in the FFEI
- Avoid damage to their reputation from ineffective stewardship by:
- Prioritising stewardship of portfolio companies with the largest fossil fuel expansion plans.
- Enhancing disclosure of engagement with companies expanding fossil fuels in their portfolio.
- Effectively implement their voting policies – “walk the talk”:
- Make escalation processes clear, including timelines and thresholds that trigger escalation.
- Vote against directors of companies expanding fossil fuels on climate grounds, and pre-declare the voting intention.
- Vote and pre-declare in favour of climate-related shareholder proposals.
Asset Owners
- Urge their asset managers to enact more effective stewardship, as described in the recommendations above.
- Commit to align their portfolios with 1.5°C.
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Antony Balmain, +61-423-253-477, [email protected]