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Amundi, Man Group, & HSBC Asset Management’s Shareholder Resolution

At J-Power’s annual general meeting on 28th June 2022 shareholders have a chance to vote on three resolutions. The resolutions call on the company to produce and publish credible greenhouse gas emission reduction targets, as well as capital expenditure and remuneration plans that will help the company achieve them.

The resolutions have been filed by two European asset managers and one hedge fund – Amundi, HSBC Asset Management and Man Group – in collaboration with the Australasian Centre For Corporate Responsibility. The shareholder group’s decision to file followed months of engagement with J-Power on its current decarbonisation strategy.

J-Power operates more coal-fired power plants than any other Japanese company and produces 5.6% of Japan’s greenhouse gas emissions. The asset managers say that J-Power’s current strategy “would see the company lose competitiveness as Japan moves to cut greenhouse gas emissions to net zero by 2050.”

In February 2021, J-Power announced that it would reduce carbon emissions 40% by 2030 towards its goal of net zero by 2050. This would be done by closing old coal-fired power plants, upgrading some existing plants with gasification technology, and also investments in renewables and in nuclear. The upgrades of existing plants include plans to co-burn ammonia and biomass in power stations designed to burn coal.

However, new analysis by research group Transition Zero finds that:

  1. J-Power’s operating revenue is highly coal-reliant (at 42%), exposing J-Power to significant transition risks;
  2. J-Power lacks a clear coal retirement schedule;
  3. J-Power faces both implementation and ambition gaps in its climate strategy;
  4. J-Power can maximise revenue by reprioritising CAPEX allocation to domestic wind projects which will open up new profitable revenue streams;
  5. J-Power’s long-term net zero targets fail to include international activities outside of Japan.

The shareholder group has filed a package of three proposals. They call for amendments to J Power’s Articles of Incorporation, as follows:

  1. To promote the long-term value of J Power (the Company), given the risks and opportunities associated with climate change, and in accordance with the Company’s commitment to achieve net-zero greenhouse gas emissions by 2050, the company shall set and disclose a business plan with science-based short-term and mid-term greenhouse gas emissions reduction targets aligned with Articles 2.1(a) and 4.1 of the Paris Agreement*.
    1. The Company shall report, in its annual reporting, on its progress against such business plan on an annual basis.
  2. The Company shall disclose, in its annual reporting, details of how it assesses the alignment of capital expenditure plans with the Company’s greenhouse gas emissions reduction targets.
  3. The Company shall disclose, in its annual reporting, details of how the Company’s remuneration policies will incentivise progress against the Company’s greenhouse gas emissions reduction targets.

In April 2021, J-Power cancelled plans to build a new coal-fired power plant in Ube, western Japan, following the launch of the Japan Beyond Coal, a joint campaign by Kiko Network and six other organisations.

The institutional investors who have filed the resolutions urge J-Power to go much further, arguing that the company’s current decarbonisation strategy and targets expose it to material financial risk including the risk that continued investment in coal-based power generation technologies will end up stranded as Japan and the company’s overseas markets decarbonise and renewable energy and storage continue to decline in cost. Their proposals seek to encourage J-Power to strengthen its current decarbonisation strategy and targets to protect and enhance its long-term corporate value.

We recommend that investors support the resolutions.

* Article 2.1a) of the Paris Agreement states governments’ agreement to act by’ “Holding the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels, recognizing that this would significantly reduce the risks and impacts of climate change”.

Article 4.1 states that “In order to achieve the long-term temperature goal set out in Article 2, Parties aim to reach global peaking of greenhouse gas emissions as soon as possible, recognizing that peaking will take longer for developing country Parties, and to undertake rapid reductions thereafter in accordance with best available science, so as to achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century, on the basis of equity, and in the context of sustainable development and efforts to eradicate poverty.”

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