19 Dec 2023 5 min read

Climate policy engagement: spotlight on Japan

By Aina Fukuda

We believe Japan has much to gain from adopting more robust Paris-aligned policies that avoid tying the country down to a carbon-intensive economy and instead drive it toward greater resilience. Here are some discussions we are having with stakeholders in Japan to help push for change.


In an earlier blog, we discussed our expectations of companies and how we evaluate their climate policy engagement activities. Here we focus on Japan, where preparations for the next round of energy policy deliberations are underway.

Why do we care about climate policy engagement, and what are we doing about it?

Policy engagement, including but not limited to exerting influence through trade associations membership1, can be a powerful force in shaping the regulatory environment.

As shareholders, we expect companies to advocate for public policies that support the delivery of a net-zero economy.

Policy engagement is also a way for us to work out whether a company is consistent with its official positions. Actions speak louder than words; we expect companies to align their climate advocacy activity with their decarbonisation commitments.2

At LGIM, the topic is not only a common engagement theme but is also factored into our ESG scores3 and Climate Impact Pledge4 ratings. We also press for advocacy efforts to be transparent, and we will be introducing potential voting consequences next year where climate lobbying is a 'red line’ for us across all 20 climate-critical sectors.

What else is LGIM doing in Japan?

Our policy and regulatory engagements have tackled nationally determined contributions (NDCs), real economy policies and disclosure standards through:

  • Engaging with regulators, the Tokyo Stock Exchange and disclosure standard setting bodies, both individually and collaboratively with our peers
  • Making climate and energy policy suggestions with the Japan Climate Leaders' Partnership (JCLP), including speaking directly with members of parliament
  • Sharing our views as a global long-term investor with major business associations (e.g., Keizai Doyukai)
  • Speaking to media and at events5 to help raise awareness and share best practices

What have we learned about climate policy engagement in Japan?

Japanese companies included in our Climate Impact Pledge engagement programme fall in the middle of the pack in terms of climate lobbying, lagging European companies but outperforming companies in the US and other Asian countries.

This year, we also saw the first shareholder resolution calling for a Japanese company to report on its climate lobbying activities (which we supported), bringing the discussion into boardrooms.

Nevertheless, our engagements with Japanese companies give us the impression that climate policy engagement – and in particular the governance of this activity – may still be relatively unfamiliar, despite it being common business practice.6

We sometimes even hear that such advocacy is a covert operation. It is rare to find a company that combines its public affairs and environmental or sustainability departments, although this is a trend we see in Europe.

Meanwhile, and in a phenomenon that is by no means unique to Japan, policy making is not always inclusive.7 A study by global thinktank InfluenceMap found that Paris-aligned climate and energy policy in Japan continues to be held back by powerful business groups representing heavy industry.8 In contrast, research shows that Japan's ‘leading’ companies in climate advocacy have relatively low levels of engagement.9

What are the challenges and opportunities for climate-related policies in Japan?

Japan's recent $1 trillion Green Transformation (GX) Policy may be seen as an example of the challenges, with various groups questioning the policy’s capacity to address the climate crisis.10, 11, 12, 13

Worryingly, we note that the policy fails to commit to a phase-out of coal and other fossil fuels, continuing to rely on them (with an emphasis on ammonia co-firing14 and currently unviable carbon capture and storage) and nuclear power,15 while giving limited attention to the demand-side of the economy. There are also concerns that the policy’s carbon pricing scheme will not be effective.

With 70-80% of electricity dependent on fossil fuel imports, Japan has the lowest share of renewables among the G7 countries (not to mention the significant security risks and import costs).16 While offshore wind power appears promising, the scale and speed of installation fall behind both developed peers and neighbouring countries.17, 18

Key questions

Achieving carbon neutrality in Japan through a robust carbon pricing mechanism and supporting policies could provide opportunities for economic growth, research suggests.19, 20

In addition, renewables are now the cheapest form of power in many countries.21, 22, 23 There is also evidence to suggest that tipping points for other low-carbon technologies will also be reached within the next five to 10 years. We share the view that increasing the share of renewables in Japan’s 2030 energy mix by scaling up proven technologies is both possible and essential.24, 25, 26, 27

From a predominantly economic standpoint, further questions for debate include:

  • Are Japan’s current policies consistent with climate science and globally agreed goals?
  • Do the policies signal specific priority actions that are needed today and over the next 10 years?
  • Do the policies provide the right backdrop to enable Japanese businesses, once world leaders in low-carbon technologies, to remain competitive?
  • Are the policies in the interest of the whole of Japan, or do they prioritise the interests of certain businesses?
  • What are the consequences if businesses keep struggling to procure renewable electricity in Japan, leaving them unable to satisfy the demands of business partners and customers?28

Advocating for policies, both positive and negative, now will have far-reaching ramifications for Japan’s medium term climate strategy. As 2023 draws to a close, researchers claim we effectively have five years to reach net-zero emissions to limit global warming to 1.5C.29 The window of opportunity may be closing fast.30, 31

I would like to thank Professor Toru Morotomi of Kyoto University’s Graduate School of Economics, Masaaki Yamamori of IGES, Tatsuro Yuzawa of PRI, and other subject matter experts and peers for their valuable insights and input.



1. UNEP, UN Global Compact, WRI, & WWF. (2013). Guide for Responsible Corporate Engagement in Climate Policy.

2. GFANZ. (2022). Expectations for Real-economy Transition Plans.

3. LGIM's ESG Scores capture minimum standards on environmental, social and governance metrics – as well as companies' overall levels of transparency. These scores are used to help prioritise engagements and for use in index construction across LGIM’s Future World ESG-tilted indices. LGIM has applied this tool to score approximately 17,000 global companies (see methodology document). Scores are publicly available on LGIM’s website.

4. LGIM’s Climate Impact Pledge is a targeted engagement campaign we started in 2016 to address the systemic risk of climate change. It maps over 5,000 companies worldwide and over 100 potential ‘dial-movers’ targeted for direct engagement, in 20 ‘climate-critical’ sectors, against key indicators. Companies that fail to demonstrate adequate climate commitments may have voting sanctions applied across LGIM’s entire book with investment decisions made within some funds. Scores are publicly available on LGIM’s website.

5. One recent example is the 2023 PRI in-Person Side Event in Tokyo hosted by InfluenceMap/JETI.

6. Most major companies are members of industry associations whose primary function is to influence political decision-making.

7. OECD. (2021). Lobbying in the 21st Century.

8. InfluenceMap. (2022). Japanese Industry Groups and Climate Policy.

9. InfluenceMap. (2023). InfluenceMap Corporate Climate Policy Engagement Leaders 2023.

10. InfluenceMap. (2023). Japan’s $1 Tn GX (Green Transformation) Policy. (The study argues, among other things, that nine industry associations and eight heavy industry companies have disproportionately dominated the GX Policy discussions in Japan, even though they account for just 15% of Japan’s employment and economy.)

11. Climate Action Tracker. (2023). Japan | Climate Action Tracker.

12. Renewable Energy Institute. (2023). The GX Basic Policy Falls Short in Proposing Strategies for Overcoming the Current Crises.

13. Climate Integrate. (2023). What is Green Transformation (GX)?

14. BloombergNEF. (2022). Japan’s Costly Ammonia Coal Co-Firing Strategy. (This study found that a coal-fired power plant burning ammonia at a co-firing ratio of less than 50% will not only be more expensive than renewable alternatives, but will also release as much CO2 as a combined cycle gas turbine powered by natural gas. It also has the potential to release more nitrous oxide, a greenhouse gas with 273 times the warming potential of CO2 over a 100-year period.)

15. See footnotes in the preceding paragraph where authors argue that nuclear power is ’unlikely to’ or ‘cannot’ help Japan meet its decarbonisation objectives.

16. Renewable Energy Institute. (2023). Statistics (in Japanese).

17. Lawrence Berkeley National Laboratory. (2023). The 2035 Japan Report: Plummeting Costs of Solar, Wind, and Batteries Can Accelerate Japan’s Clean and Independent Electricity Future.

18. World Wind Energy Association. (2023). WWEA Annual Report 2022.

19. Lee, S., He, Y., Suk, S., Morotomi, T., & Chewpreecha, U. (2022). Impact on the power mix and economy of Japan under a 2050 carbon neutral scenario: Analysis using the E3ME macro-econometric model.

20. Climate Group. (2022). Japan and the global transition to zero emission vehicles.

21. IRENA. (2022). Renewable Power Generation Costs in 2021.

22. Stern, N., Romani, M. (2023). The global growth story of the 21st century: driven by investment and innovation in green technologies and artificial intelligence. (For example, the study indicates how cost for solar and wind power fell below that of new coal and gas in 2018. It also predicts that the tipping points will arrive before 2030 even in the shipping, steel, and cement sectors.)

23. IEA. (2020). Projected Costs of Generating Electricity 2020.

24. See footnote 17.

25. IEA. (2023). World Energy Outlook 2023.

26. JCLP. (2023). 20231120_JCLP_GXによる脱炭素化の加速に向けた提言 (opinion letter in Japanese).

27. IGES. (2023). IGES 1.5°C Roadmap: An action plan for Japan - more ambitious emissions reduction and a prosperous, vibrant society.

28. RE100, Climate Group, & CDP. (2023). Driving renewables in a time of change.

29. Lamboll, R.D., Nicholls, Z.R.J., Smith, C.J., et al. (2023). Assessing the size and uncertainty of remaining carbon budgets.

30. UNEP. (2023). Emissions Gap Report 2022.

31. IEA. (2023). Net Zero Roadmap: A Global Pathway to Keep the 1.5 °C Goal in Reach.

Aina Fukuda

Head of Japan Investment Stewardship

Based in Tokyo, Aina leads LGIM's stewardship efforts in Japan. Working with colleagues in London and Chicago, she engages directly with companies, regulators and other investors on a range of issues, including climate change, biodiversity, board governance, and diversity. Prior to joining LGIM in 2019, she was a sustainability consultant at PwC Japan where she helped build the firm’s corporate sustainability advisory practice. Aina serves as the Deputy Chair of the Asian Corporate Governance Association (ACGA) Japan Working Group, which comprises 29 members with a combined global AUM of more than US$20 trillion. She also sits on the SASB Standards Advisory Group and represents LGIM at a number of organisations, such as the 30% Club Japan Investor Group and Japan Climate Leaders’ Partnership (JCLP). She is a licensed Certified Public Accountant (CPA) in the USA. Outside work, she enjoys spending time in nature and at the Aikido dojo.

Aina Fukuda