© Reuters. FILE PHOTO: Toyota Motor Corporation’s BZ Compact SUV after a briefing on the company’s battery electric strategies in Tokyo, Japan, December 14, 2021. REUTERS/Kim Kyung-hoon/File photo
Written by Daniel Lusink and Maiko Yamazaki
TOKYO (Reuters) – Institutional Shareholder Services (ISS), the proxy advisor, has recommended that shareholders in Toyota The Motor Company (NYSE: Corp.) has voted in favor of a resolution urging the automaker to better disclose its climate change-related lobbying.
The ISS also considered in a report that three of the four candidates for Toyota External Directors are not independent. Toyota said all candidates met the TSE’s independence criteria.
The recommendation comes as Japan’s largest company by market capitalization faces pressure from green investors and climate activists who have criticized it for being slower than rivals to adopt battery electric vehicles (EVs).
Concerned that Toyota is missing out on profits from soaring electric vehicle sales, Danish pension fund AkademikerPension, Storebrand Asset Management in Norway and Dutch pension investor APG Asset Management want Toyota to commit to a comprehensive annual review of climate-related stress.
A Toyota spokesperson pointed to a statement from the board urging shareholders to vote against the proposal, saying the fluidity of the disclosure made the proposal unsuitable for enshrinement in the Articles of Incorporation.
“Toyota does not provide shareholders with sufficient information to assess its lobbying activities,” the ISS said.
“Shareholders will benefit from the company’s disclosure of information about direct, indirect and grassroots lobbyists in the various regions in which it operates.”
Significant hurdles for the resolution to pass because it requires a two-thirds majority and Toyota’s shareholder base includes suppliers and other business partners.
Dealership advisor Glass Lewis did not support the decision, saying Toyota had shown “great responsiveness” to shareholders.
Toyota, which aims to sell 1.5 million fully battery electric vehicles by 2026, has long argued that a combination of energy solutions, such as a gasoline battery and hydrogen fuel cells, will be necessary to reach carbon neutrality.
This month, Toyota’s chief scientist said that a focus on entirely battery electric vehicles may encourage some drivers to stick with polluting cars, and that a lack of resources means that battery-only cars cannot be the industry’s only response to climate change.
independence
The ISS also argued that three of the four nominees to Toyota’s 10-member board that the automaker said were independent should be considered “affiliates” given the company’s ties to the candidates’ current or past organizations.
These organizations include the International Paralympic Committee, with which Toyota has a mobility partnership, and the company’s primary lender, Sumitomo Mitsui (NYSE:) Financial Group Inc.
“We have determined that there are no concerns regarding objectivity, independence and the ability to conduct appropriate oversight,” Toyota said in a statement.
Japanese corporate governance law requires that at least one-third of the board members of companies listed on the main section of the Tokyo Stock Exchange be independent.
However, the ISS recommended voting in favor of the two candidates because voting otherwise “might risk increasing management dominance over the board.”