Sumitomo shareholders reject climate change resolution

FILE PHOTO: Logos of Sumitomo Corp are seen after the company's initiation ceremony at its headquarters in Tokyo
FILE PHOTO: Logos of Sumitomo Corp are seen after the company's initiation ceremony at its headquarters in Tokyo, Japan April 2, 2018. REUTERS/Toru Hanai

June 18, 2021

By Aaron Sheldrick

TOKYO (Reuters) -Sumitomo Corp shareholders on Friday rejected a proposal requiring the trading house to align its business with global climate change targets in a victory for the board over activist investors seeking more action on environmental issues.

The proposal, the second climate resolution to be brought before shareholders of a major Japanese company, was supported by shareholders, including Legal & General Asset Management.

“Resolution No. 5 was rejected,” a Sumitomo spokesperson told Reuters by email, referring to the proposal’s number in the order of business at the meeting. A breakdown of voting was not immediately available. Sumitomo’s board in May had recommended voting against the proposal.

Activist investors are increasingly turning their attention to Japanese companies, using resolutions that have been employed in Europe and the United States to push companies and banks away from investing in, or financing, fossil fuels like coal, which still has strong support in Japan.

The proposal was “essential for investors to correctly assess the transition risk and ambition level of the company, when it comes to addressing climate change,” Eric Christian Pedersen, head of responsible investments at Danish fund manager Nordea Asset Management, told Reuters by email.

The 2015 Paris Agreement requires countries to curb emissions enough to keep temperature rises to within 1.5-2 degrees Celsius of pre-industrial levels to avert the worst effects of climate change.

Sumitomo is involved in two controversial coal power projects in Southeast Asia, the Van Phong 1 station in Vietnam and the Matarbari plant in Bangladesh, countries that have fast growing energy needs. Sumitomo recently announced it would aim for carbon neutrality by 2050.

“While we acknowledge the company’s net zero commitment for 2050 and recent policy updates, we do not believe these are sufficiently aligned to limit global warming to 1.5C,” Sachi Suzuki, senior engager at EOS at Federated Hermes, told Reuters by email.

This is “particularly because its policy for coal power generation allows various exceptions and would not affect the plants already under construction,” Suzuki said. EOS at Federated Hermes has $1.5 trillion in assets under advice.

A similar proposal was put before shareholders of Mizuho Financial Group last year and defeated by a margin of around 65%-35%, the bank said at the time.

(Reporting by Aaron Sheldrick Editing by Gerry Doyle and Mark Potter)