AkademikerPension sends ‘strong signal’ to Toyota that better governance is needed

Denmark’s AkademikerPension has said that it, and other investors, have sent a “strong signal” to Japanese car maker Toyota that better governance is needed.

The pension fund had submitted a shareholder resolution calling for Toyota to improve its climate lobbying reporting, which received just 9 per cent of votes, at its annual general meeting, yesterday 18 June.

It also voted against the re-election of chairman, Akio Toyoda, due to both leadership and climate considerations. However, he was re-elected with 72 per cent of the vote in favour.

Commenting on the outcome, AkademikerPension CIO, Anders Schelde, told European Pensions: “Toyota’s shareholders have now sent a strong signal that better governance is needed at the very top of the company. Almost 30 per cent disapprove of the re-election of Mr. Toyoda and major international investors like LGIM, Allianz, CalPERS, NYC have requested better governance of Toyota’s climate lobbying by voting in favour of our shareholder proposal.

“At AkademikerPension, we share the concerns expressed and expect the chairman to reflect on the best interest of the company when deciding his next move.”

On the outcome of its shareholder resolution, Schelde, said: “Nine per cent support is a minor drop from last year, but still very significant support. The company has now had three attempts to make a decent report, including an undisclosed third-party assessment, without appeasing major international investors. We believe it's time for Toyota to embrace a future stronger governance, both in its disclosures, strategy and in the board room.

We encourage the board to take note of shareholders’ concerns and adjust Toyota’s strategy accordingly.”

The Danish pension fund’s shareholder proposal was backed by several other shareholders, including pension funds/investors such as APG, Church of England Pensions Board and KLP. It asked for Toyota to report on its engagement in all key markets, including the US, Europe and Australia. “We believe the assessment should apply to all relevant climate lobbying across geographies,” the pension fund stated.

AkademikerPension believes that Toyota’s climate policy engagement and climate-related lobbying works against the goals of the Paris Agreement and “poses a risk to both the company and its shareholders”.

"Fundamentally, we are deeply concerned about the company's continued strategy of producing fossil-fuel vehicles instead of delivering a plan to phase them out in favour of zero-emission vehicles. And we therefore call on Toyota's management to report better on how its direct and indirect lobbying efforts align with the scientific pathway to achieve the goals of the Paris Agreement,” Schelde, said.

He continued: "What matters now is that the company stops its lobbying activities that can be seen as going against binding and ambitious climate policies. This would be a step towards protecting the company from growing consumer distrust and shareholder protests, which in our view could reduce the value of the company and thus affect our members' long-term returns."

AkademikerPension has been engaged with Toyota's management since 2021, which has led to Toyota promising to review its lobbying practices. This happened after pressure from AkademikerPension, Storebrand and other investors for the first time in December 2021 and since then Toyota has annually published and developed its lobby report.

While the pension fund acknowledged that Toyota has improved, it said the car maker is far from comprehensive. It is also said that it is problematic because Toyota’s report claims that there are no challenges with the company's well-documented direct lobbying against EV mandates and through industry and interest groups.

"From our perspective and that of many other investors, Toyota's lobbying has given the company a status as a global laggard in terms of ambitious climate action in the automotive sector. This jeopardises Toyota's valuable brand to the detriment of shareholder interests," Schelde said.

"Active ownership is and will be a long-term process. But I hope that Toyota's management will soon listen to our pressure and deliver the reporting we demand. Because I can promise that we will maintain our shareholder pressure.”

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