TOKYO -- Mizuho Financial Group is about to come up against Japan's first shareholder call for corporate action on climate change as campaigners take aim at the world's leading lender to coal power projects.
At the bank's annual meeting this month Mizuho investors will vote on a resolution submitted by the environmental group Kiko Network that would amend the articles of incorporation to require annual disclosures on "a plan outlining the company's business strategy, including metrics and targets, to align its investments with the goals of the Paris Agreement."
That refers to the international compact to reduce greenhouse gas emissions and limit the global temperature rise to 2 C above preindustrial levels.
Three pension funds, two Norwegian and one Danish, that manage a combined $200 billion in assets have said they will support the proposal, pointing to the material financial risk of climate change and the waning competitiveness of coal-powered energy.
"Coal is not going to be part of the future," said Jeanett Bergan, head of responsible investments at KLP, a Norwegian pension fund that holds 5.9 million shares in Mizuho. Increasingly stringent regulations in certain markets "can affect a company that has a lot of emissions connected to their lending policy."
The action underlines growing concern by some investors that the value of a range of companies -- from producers of oil and coal to banks that finance projects -- could be hit by global regulatory shifts against carbon.
Resolutions are brought to a vote by shareholders typically as a last resort, when actions demanded by investors are opposed by a company's management. Mizuho, Japan's third largest bank by assets, has already shifted ground this year under pressure from shareholders by announcing it would end lending for new coal projects.
In its notice for the shareholders meeting on June 25, Mizuho called the proposed resolution "unnecessary."
"Many investors and NGOs praised the progress we have announced in April," a Mizuho spokesperson said. "We will continue to do more and improve disclosure under the environment policy in the future."
KLP called the April policy revision a "good first step."
"It signaled they will be more restrictive in terms of coal financing in the future," Bergan said. "But we will still support the resolution to set targets that are more aligned with the Paris Agreement and require scenario analysis, which is important to secure future value and revenues."
In May, Mizuho became the first Japanese financial services group to disclose a report to the Task Force on Climate-Related Financial Disclosures. This month Mizuho announced it will join 18 other companies, including Mitsubishi UFJ Financial Group, Ajinomoto and Hitachi, to study environmental, social and corporate governance disclosures.
Shareholder resolutions aimed at climate change are not unusual in the U.S. and Europe, but the Mizuho case is the latest development under the stewardship code, a set of responsible investment principles outlined by the Financial Services Agency.
The sustainability of the thermal coal sector has become an urgent matter for Japan's three big banks and power plant manufacturers, said Shin Furuno, project manager for the Asia Investor Group on Climate Change.
"The financial viability and competitiveness of the coal energy industry has deteriorated," Furuno said. Major international financiers such as Standard Chartered and CLP Holdings have pulled out of coal power plants in Vietnam. "That's left primarily Japanese institutions holding the credit risk on that," he said.
The effect of the resolution on Mizuho's lending practices will be difficult to gauge. "That's why shareholders are asking companies to have such policies in place on climate-related disclosures," Bergan from the Norwegian pension fund said, "because that would enable them to get a better view of what practices or assets could be at high risk."
Norwegian asset manager Storebrand ASA, another Mizuho investor, has also said it will vote in favor of the resolution.
"The biggest change in the European banks is ruling out all finance to corporations that are involved in the coal business," said Hanna Hakko, senior energy campaigner at Greenpeace Japan. "That's something the Japanese banks are not doing yet."