Different tactics are needed in the region for institutional investors who want to hold corporations accountable for net zero strategies.
Regulatory change offers investors in Asia new opportunities to look at the climate commitments and performance of investee corporations, but their ability to place shareholder judgments varies widely.
The new guidelines provide support for efforts to engage institutional climate investors in the region by identifying governance opportunities and constraints in 11 jurisdictions where climate-related resolutions can be proposed.
“Investors have called for increased engagement with Asian corporations in adopting net zero transition strategies,” said Rebecca Mikula-Wright, CEO of the Asia Investor Group on Climate Change (AIGCC).
“Regulators in Asia are increasingly encouraging the adoption and disclosure of transition strategies aligned with the Paris Agreement, alongside an increased focus on effective corporate engagement.”
The report was published by environmental law firm ClientEarth and AIGCC, providing specific guidance on climate-focused shareholder resolutions in Japan, South Korea, India, Hong Kong, Malaysia, Singapore, Indonesia, Thailand, Vietnam, the Philippines and the People’s Republic of China. of China.
A complex regulatory environment and a traditionally more restricted approach to shareholder influence over company management have previously limited submission and support for climate resolutions in Asia. But this is beginning to change in light of shifting policy and regulatory priorities towards net-zero pathways for corporations and a growing focus on climate-related risks and opportunities by institutional investors in the region.
Previous research by AIGCC noted that net zero commitments have increased among Asian investors, with 40% of survey respondents committing to net zero in 2022, compared to none the previous year.
Explicit encouragements for investors to hold firms accountable include Japan’s revised Corporate Governance Code and the 2021 Guidelines for Investor and Company Engagement, which support increased medium- and long-term corporate value and engagement between investors and companies.
Sharp increase in resolutions
The report noted that common demands in shareholder climate resolutions tabled during the most recent AGM season include calls for increased climate transparency and disclosure, net zero commitments, Paris-aligned transition plans with short- and long-term goals, investment of capital aligned futures. with decarbonisation targets and climate and energy policy lobbying disclosures.
Japan, in particular, saw a sharp increase in shareholder climate resolutions, according to the report. In 2022, a group of institutional investors with a combined $3 trillion in AUM co-filed shareholder climate resolutions at J-Power, the nation’s largest coal-fired power operator, calling for a business plan aligned to Paris, objectives and annual reporting. It received 25.8% of shareholder support.
Common themes in the legal experts’ guidance in the report included a recommendation that shareholders should identify whether a proposed shareholder climate resolution “falls within the types of matters on which they can ordinarily bring resolutions.”
The extent to which shareholders have a say in company policy varies widely across Asia, the report said, noting that Malaysian shareholders have a “broad capacity to bring about resolutions on a wide range of issues” and climate resolutions are not excluded. In China, shareholders can also file resolutions and vote on issues related to business policies and investment plans, but shareholder resolutions on climate “would not normally fall within the prescribed matters for which shareholders can file a resolution’ in India.
If a climate change resolution should be framed as an amendment to a company’s statutory documents, shareholders need to be careful about how to make such changes, the report said. Such amendments may be necessary in jurisdictions where a shareholder climate resolution does not fall within the subjects for which shareholders are authorized to file them. In Japan, for example, the articles of incorporation should be amended to contain “the climate ‘question’ itself,” the report said.
Investors may also need to check whether it is more appropriate to table a climate-focused shareholder resolution at a future AGM or a separate shareholder meeting, as this also varies by jurisdiction, the report added. Most of the 11 jurisdictions reviewed allow shareholder resolutions to be tabled at AGMs, but in some, including India, the report recommends that shareholders call an extraordinary general meeting (EGM).
AIGCC said the report is meant to complement the Climate Action 100+ Investor Guide to Engaging in Asia, which was updated this year.
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