Toyota Shareholders Defeat Climate-Change Proposal, Decline ESG Funds

A climate-change disclosure proposal at Toyota that was pushed forward by three European funds has been voted down by shareholders.

Danish pension fund AkademikerPension submitted the climate resolution together with Norway’s Storebrand Asset Management and Dutch pension investment company APG Asset Management in May. The resolution sought to make Toyota improve the disclosure of its climate change-lobbying activities. Back then, Toyota’s board recommended that shareholders vote against the climate resolution. On Wednesday, shareholders did just that and rejected the resolution, which is the first investor proposal to come before the company’s annual general meeting in roughly 20 years.

Shareholders at the meeting applauded the rejection. Around 3,800 shareholders took part in the event that was held at Toyota City, Aichi Prefecture. The majority of Toyota’s shares are held by the company, its group firms, retired workers, and others who are sympathetic to the business’ viewpoints.

The three European funds collectively held around $400 million worth of Toyota’s shares in May. “We’re concerned that Toyota is missing out on profits from soaring EV sales, jeopardizing its valuable brand and cementing its global laggard status,” Anders Schelde, AkademikerPension’s chief investment officer, said in May, according to Reuters.

“We need concrete policy changes and a better annual review drawing on independent data to calm international investors.”

Major U.S. pension investments like the California Public Employees Retirement System and the New York City Comptroller’s Office had backed the climate-change proposal.

The market took the shareholder rejection of the climate proposal in a positive light. On Thursday, Toyota shares opened in the green and were up by 0.45 percent as of 03:50 a.m. EDT. It was up 20.64 percent for the month and close to 29 percent year to date.

Like Toyota, shareholders of many American companies have increasingly been rejecting such environmental, social, and corporate governance (ESG) proposals.

A recent report from Financial Times that cited data from the Sustainable Investments Institute showed that proposals to force corporations to act against climate change won the approval of only 23 percent of shareholders on average by May-end this year, down from 36.6 percent in 2022, and 50 percent in 2021. Support for social justice causes is down by 10 percentage points from last year.

Toyota officials have stressed that the company is aiming for carbon neutrality in its lineup by 2050. But instead of focusing solely on battery electric vehicles (BEV), the firm is also exploring multiple energy options for its vehicles, including hydrogen-powered ones, hybrids, and plug-ins.

“Various options need to be readied,” said Masahiro Yamamoto, one of the executives, according to the Associated Press. “What is important is to better convey our efforts to all shareholders.”

In December, Akio Toyoda, president of Toyota Motor Corp., said that automakers pursuing an electric-only agenda did not reflect the reality of the market as technology and infrastructure are yet to mature.

“People involved in the auto industry are largely a silent majority,” Toyoda told reporters during a visit to Thailand, according to The Wall Street Journal.

“That silent majority is wondering whether EVs are really OK to have as a single option. But they think it’s the trend so they can’t speak out loudly … Because the right answer is still unclear, we shouldn’t limit ourselves to just one option.”

A shareholder proposal at Wednesday’s annual general meeting had also challenged the reappointment of Toyoda. Investors voted to retain Toyoda as chairman.

On May 18, Gill Pratt, Toyota’s chief scientist and CEO of the Toyota Research Institute, told reporters in Hiroshima that large-scale transition to electric vehicles would require massive amounts of battery-making materials as well as developing proper infrastructure like charging stations.

“It will take decades for battery material mines, renewable-power generation facilities, transmission lines, and seasonal energy-storage facilities to scale up,” he said.

“Eventually, resource limitations will end, but for many years we will not have enough battery material and renewable recharging resources for a BEV-only solution.”