Sachiko Suzuki is Asia climate and energy analyst for Market Forces.
Japan faces another scorching summer, but the country’s biggest investment companies are stalling the shift to clean energy with the risk of making global warming-fueled disasters worse by pouring billions into new coal, oil and gas development.
Japan’s biggest investors, including Nippon Life, Nomura, and Sumitomo Mitsui Trust, are in the spotlight leading up to the peak of company annual general meetings (AGMs) this week. Japanese companies are under increasing scrutiny facing a sharp rise in shareholder proposals, particularly those addressing growing risks associated with climate change. Japan’s corporate powerhouses must back the urgent shift to clean energy rather than pumping investment billions into fossil fuels, escalating risks for the climate and the economy.
There is no room for new coal, oil and gas development if we are to achieve the Paris Agreement goal of limiting global warming to 1.5 C, as outlined by the International Energy Agency and Intergovernmental Panel on Climate Change.
Japan and other countries in Asia face more severe and frequent disasters as the world is set to endure new record temperatures over the next five years, according to a recent report from the World Meteorological Society.
On the bright side, science is beginning to resonate with corporate chiefs. An overwhelming majority of Japanese business leaders and executives (96%) are in favor of transitioning to renewable energy, according to a recent global poll. Nearly two-thirds are pushing for the shift to clean energy to take place by 2035 and a clear majority (58%) favor renewable energy and skipping gas after phasing out coal.
Japan’s largest institutional investors rank in the top 100 worldwide in terms of assets. These companies have a duty to use their financial influence to drive an end to new coal, oil and gas production and use, and speed up the critical shift to clean energy for Asian economies and beyond.
Yet, a new Market Forces report finds that Japan’s top investors still have $40.6 billion invested in companies expanding coal, oil and gas and are delaying the clean energy transition. Japan’s biggest investors are jeopardizing their customers’ wealth, their reputation and making catastrophic climate impacts worse.
The new analysis reveals Japan’s five biggest investors are injecting only slightly more of their capital in clean energy than fossil fuels, falling far short of the 4:1 ratio needed by 2030 to meet the Paris Agreement goal.
The largest investors in Japan have committed to supporting global efforts to achieve net zero greenhouse gas emissions by 2050 or sooner by limiting warming to 1.5 C. All these asset managers, apart from Tokio Marine Asset Management, are still signed on to meet global climate goals via the Net Zero Asset Managers Initiative, despite big U.S. banks and investors abandoning their commitments.
Japanese investors have good reasons to drive the companies they invest in away from fossil fuels. There is strong and mounting evidence that favoring clean energy over fossil fuels protects stable long-term market returns. The costs associated with unavoidable climate damage, including to agriculture, human health and economies, is six times greater than the investment needed to limit warming to 2 C, according to a recent groundbreaking study published in Nature.
The investment case for limiting warming to well below 2 C is clear and must not be ignored.
Japanese investors must do everything within their power to limit warming to 1.5 C, given that the global economy and their customers’ wealth will be far worse off due to accelerating and dangerous climate change.
They are also failing to hold energy and fossil fuel companies to account for neglecting their responsibility to align with agreed global climate goals. In fact, Japan’s top five investors have voted 99% of the time over the past three years in favor of the directors of Japanese companies with the biggest fossil fuel expansion plans.
When big investors give companies expanding fossil fuels such a free pass and green light, it jeopardizes the transition to clean, reliable and renewable energy. Failing to hold companies to account risks negating any advancement made by investing in clean energy and all emission savings. What’s worse, investor inaction risks more destructive climate impact.
Big asset owners such as Japan’s Government Pension Investment Fund (GPIF) and people who have retirement savings have the most to lose. Japanese investors have an important opportunity at this year’s AGMs to demonstrate how effective they are as custodians of our money and our precious planet.
This article first appeared in Nikkei Asia