Investors applaud Nippon Steel, as world’s fourth largest steel company takes strides towards green steel

A group of investors comprising of Storebrand Asset Management, Man Group, Corporate Action Japan (CAJ) and the Australasian Centre for Corporate Responsibility (ACCR), has been co-engaging with Nippon Steel in recent months with a focus on enhancements to decarbonisation.

“To ensure the realization of their long-term climate objectives, companies must display ambitious action in the near future. Accelerated progress prior to 2030 is imperative to establish a credible decarbonization of the steel industry, ultimately leading to net neutrality by 2050. As shareholders, we value the constructive dialogue and engagement with Nippon Steel regarding these matters and find encouragement in this announcement.”, comments Victoria Lidén, Senior Sustainability Analyst at Storebrand Asset Management.

On Wednesday 10 May, at its FY2022 Earnings Announcement, Nippon Steel committed to the start of studies to shift from a blast furnace (BF) steelmaking process to an electric arc furnace (EAF) steelmaking process, with the Kyushu Works steel plant in Yawata, and the Setouchi Works steel plant in Hirohata, identified as candidate sites.

In dialogue with Nippon Steel, the co-engagement group understands that Nippon Steel intends to align with the decarbonisation targets of the company through converting blast furnaces that reach the end of their life into EAFs, or taking measures such as retrofitting them to ensure real emissions cuts at scale. The group also understands that Nippon Steel intends only to temporarily prolong the life of the BFs that use conventional technology, where economic, maintenance or safety matters stand in the way of immediate conversion.

These new commitments are in line with the expectations of investors that the company set a credible decarbonisation strategy to promote the long term value of the company.

The co-engagement group also welcomes Nippon Steel’s statement that a stable supply of green hydrogen and green power - in other words, renewable energy - is needed as a key input to achieve its target of carbon neutrality.

Jason Mitchell, Head of Responsible Investment Research at Man Group said: “The Japanese steel industry has a vital role to play in supporting Japan’s net zero efforts. As Japan’s largest steel company, Nippon Steel has the unique opportunity to help lead the sector towards a strong, Paris-aligned commitment. The company’s announcement to both begin studies and to shift its blast furnace steel production process to an electric arc furnace-oriented one,is testament to its leadership. Indeed, one of the powerful lessons that we take away is that a constructive, multi-stakeholder engagement can drive climate action.”

Yasunori Takeuchi, CEO/Representative Director, Corporate Action Japan, said:
“This is an important moment for Japanese steelmaking and for the Japanese industry broadly.

“This will help Nippon Steel not only increase its future corporate value but mitigate climate risk. The shift from a BF to an EAF in the plans will be a trigger of further decarbonization in the electric power sector through increasing demand. We commend the leadership shown by Nippon Steel in this announcement and look forward to continuing our very productive conversation with them and the study being materialized.”

Brynn O’Brien, Executive Director, at ACCR, said:
“Constructive, science-based investor-company engagement is an extremely promising accelerator of decarbonisation around the world, and we commend Nippon Steel for their responsive approach to dialogue that has resulted in an outcome designed to protect long term corporate value. We are looking forward to engaging with Nippon Steel and other Japanese companies to promote long term shareholder value and ensure a safe climate."

“Momentum for green steel is clearly growing and we hope that the Japanese Government understands Nippon Steel’s message about the need for massive amounts of green energy in Japan going forward.”