Press Release 2024.05.03


A group of shareholders in Kobe Steel, Ltd. (“Kobelco”), one of Japan’s leading steelmakers, welcomes the announcement of revisions to its remuneration system for directors (excluding independent directors and directors who are the audit and supervisory committee members) and executive officers (hereinafter collectively referred to as “Executives”) to incorporate ESG indices.

Kobelco announced on 5 April the following revisions to enhance the company’s governance:

  • An increase in the ratio of performance-linked remuneration for the Executives
  • The introduction of ESG indices, including a climate change score announced by CDP to the stock portion of its remuneration for the Executives

The shareholder group, which includes Legal & General Investment Management (LGIM), Man Group,  Australasian Centre for Corporate Responsibility (ACCR), and Corporate Action Japan (CAJ) has been engaging in dialogue with Kobelco on its climate-related strategy, including disclosures, credible transition plans and governance, including remuneration system incentivizing Executives to achieve climate targets.

The announcement by Kobelco is a recognition of the importance of incentives such as a remuneration system linked to climate-related indices. With such an ESG-linked remuneration system, we expect the Executives to actively pursue the achievement of its ESG targets including carbon neutrality, and more closely align their interest with that of shareholders to improve corporate value.

The shareholder group expects climate specific metrics and ESG-linked remuneration systems to be introduced at more steel companies in Japan and to make corporate directors more accountable for their ESG targets and climate transition plans.

Aina Fukuda, Head of Japan Investment Stewardship at Legal & General Investment Management (LGIM) said:

“As a universal owner and long-term shareholder of Kobelco, we welcome the company’s announcements which have come about amid recent engagements. The move to integrate climate and other ESG metrics into their director remuneration system marks a positive initial step towards aligning incentives with Kobelco’s climate objectives. While acknowledging sector-specific challenges, notably within Japan’s energy landscape, LGIM has outlined climate expectations for companies globally in climate-critical sectors such as steel; one expectation being to link a portion of executive compensation to emission targets. We will continue to build on our constructive engagement with Kobelco to ensure the company maintains resilience and thrives in a net-zero emissions world.”

Brynn O’Brien, Executive Director of Australasian Centre for Corporate Responsibility (ACCR) said:

“Kobelco’s actions to incorporate ESG metrics into its remuneration framework are a welcome step forward. ACCR expects the contribution of climate factors as a portion of remuneration to increase further, and we would welcome a more direct link to reduction in actual CO2 and carbon intensity levels, across both the steel and power business, as well as stronger board oversight and accountability on climate commitments. Further steps in this direction will give shareholders confidence that Kobelco will meet its decarbonisation objectives in line with the Paris Agreement and support long term shareholder value.”

Yasunori Takeuchi, CEO / Representative Director at Corporate Action Japan said:  

“More and more Japanese companies are issuing pledges to net zero 2050, but without clear incentives and accountability, they will be empty pledges. The linkage of director remuneration to climate-related metrics is one step forward. Directors are supposed to have incentives to better incorporate climate risks and opportunities into corporate strategy in pursuit of achieving the pledge. But actual progress in achieving climate targets must be monitored closely through continued and constructive dialogue with shareholders. We expect more Japanese companies to introduce remuneration systems linked to climate and sustainability metrics. This announcement demonstrates the effectiveness of shareholder stewardship in accelerating climate transition in Japan.”

About each shareholder

Legal & General Investment Management (LGIM) is one of Europe’s largest asset managers and a major global investor, with total assets under management of £1.2 trillion* (JPY 208 tn, $1.5tn, €1.3tn, CHF 1.2tn). We work with a wide range of global clients, including pension schemes, sovereign wealth funds, fund distributors and retail investors.  *Data as at 31 December 2023. Data combines assets under management by LGIM in the UK, LGIMA in the US and LGIM Asia in Hong Kong. Assets under management include securities and derivatives positions. 

Australasian Centre for Corporate Responsibility (ACCR) is a not-for-profit, philanthropically-funded

shareholder advocacy and research organisation headquartered in Australia that engages with listed companies and investors globally, enabling and facilitating active stewardship.

Corporate Action Japan (CAJ) is a shareholder advocacy organisation, which collaborates with institutional investors, international philanthropic foundations and other stakeholders, leveraging the power of investment to drive climate action in the private sector.