Joint statement on Toyota AGM

Storebrand Asset Management, AkademikerPension, APG & statement after Toyota AGM 2023 - Responding to the climate lobbying vote results
We are glad to see so many investors supporting our resolution on disclosure of Toyota’s lobbying activities. The high backing should serve as a clear wake up call for the company to focus on being competitive in the transition to the net zero society instead of trying to water down important climate legislation, including phasing out internal combustion engines. Given the two-thirds requirement we are not surprised that the proposal was not passed, and we note that many institutional investors pre-declared in public the support for the resolution.

The aim of this proposal is to protect long term shareholder value and mitigate reputational risk, not only to successfully deliver on the Net Zero commitment, but also for the long-term sustainability of the business. We will continue to engage actively and support Toyota.

Background
The proposing shareholders recognize the centrality of ambitious climate policy and responsible corporate climate lobbying to limiting global warming to 1.5⁰C, in line with the Paris Agreement. We recognize that corporate lobbying directly and through organizations such as trade associations has frequently opposed policy measures that would support the goal of delivering net-zero emissions by 2050. Equally, we recognize that responsible corporate lobbying has the potential to unlock action on climate transition initiatives.

This proposal focused on protecting and enhancing the long-term shareholder value and was a response to a clear financial risk associated with Toyota’s lagging transition, negative climate lobbying and reputational risk.

Toyota has demonstrated leadership on climate change in a number of important areas. However, despite improved transparency, the company has also continued to lobby against climate-related regulation and policies in several countries, according to independent think tank InfluenceMap.

After more than two years of intense investor engagement with Toyota, it has unfortunately not been possible to reach common ground with the company on its lobbying activities. Hence, we submitted the shareholder proposal urging Toyota to improve disclosures of its lobbying activities and demonstrate further industry leadership in support of the goals of the Paris Agreement.

We are investors concerned with long-term shareholder value and leading up to this annual general assembly we have seen many other Toyota shareholders having the same concern support the proposal. We believe it is in the company’s best interest to be open and transparent on its lobbying activities as it will enhance Toyota’s market value, and we will continue to engage actively and support Toyota in this journey.

Notes

The Resolution (2023)

1. Details of the proposal It is proposed that the following provision be added to the Articles of Incorporation. The Company shall conduct a comprehensive, annual review and issue a report (at reasonable cost, omitting proprietary information) describing if, and how, the Company’s climate-related lobbying activities (direct and through industry associations), including public statements, serve to reduce risks for the Company from climate change and how they align with the goals of the Paris Agreement and the Company’s goal of carbon neutrality by 2050. The report should disclose any instances of misalignment with those goals, along with the planned actions to address these.

2. Reason for the proposal

The new provision in the Articles of Incorporation is intended to ensure that the Company makes robust disclosures, as part of its annual reporting, of (i) which lobbying activities directed at the issue of climate change the group companies are pursuing (whether through directly or indirectly influencing the legislative and administrative process or through public influence activities), and (ii) the extent to which these serve to reduce risks for the group companies from climate change and how they are aligned with the goals of the Paris Agreement of 12 December 2015 to keep average global temperature rise well-below 2 degrees Celsius, aiming for 1.5 degrees Celsius. The co-filing Shareholders of the proposal recognize and appreciate that the Company issued a second report on climate lobbying in December 2022; “Toyota’s Views on Climate Public Policies 2022.” However, like the first report, this report falls far short of investor expectations as set forth, for example, by the Climate Action 100+ Net Zero Company Benchmarks for Climate Policy Engagement (please see the October 2021 edition (ENG) (JPN) and the September 2021 edition (ENG) (JPN) for details). Using the CA100+ Benchmark criteria, the quality of the Company’s disclosure on climate policy engagement as of December 2022 was scored 36/100, the same low score as of December 2021. The co-filing Shareholders of the proposal find that the Company and shareholders alike could benefit from a strengthening of the Company’s disclosures in 1) scope, covering more jurisdictions and trade associations, and 2) rigor in the analysis of potential misalignment with the goals of the Paris Agreement, and seek to support such strengthening by proposing an adjustment to the Company’s Articles of Incorporation to introduce annual reporting on this material topic to the Company, shareholders and wider stakeholder groups in line with global investor expectations. Such disclosures could serve to mitigate reputational and other risks, including potential backlash from customers, business partners, employees and investors associated with the Company’s climate-related lobbying activities in recent years. The co-filing Shareholders of the proposal and other like-minded institutional shareholders of the Company have engaged intensively and constructively with the Company since 2021 and encourage the Board of Directors to support and recommend a vote for this proposal.