Investor Concerns Rise Over Concentration of AGMs in Japan

Key Takeaway

• Kansai Electric Power plans to issue ¥30 billion ($191 million) in transition bonds for nuclear and zero-carbon projects, reflecting Japan's support for such debt.
• Investor concerns grow over the concentration of AGMs in Japan, with nearly 60% scheduled this month, impacting shareholder engagement.
• Legal constraints and time pressures hinder efforts to spread out AGMs, despite calls from institutions like Legal & General Investment Management.

Kansai Electric's Transition Bond Plans

Kansai Electric Power Co. is set to issue Japan’s second transition bond aimed at financing nuclear power projects, reflecting the country's ongoing support for such debt instruments. The Osaka-based utility plans to sell approximately ¥30 billion ($191 million) of transition notes in two tranches in July, as reported by SMBC Nikko Securities Inc., one of the underwriters. The funds raised will be allocated to the company’s carbon-neutral initiatives, including nuclear power and zero-carbon thermal power projects.

The issuance of transition bonds in Japan has seen a significant uptick following the government's own issuance of such debt earlier this year, which provided implicit support for these financial instruments. The Japanese government has advocated for transition bonds as a means to achieve climate goals more gradually, which is deemed necessary for an industrialized nation like Japan. However, these bonds have faced skepticism internationally because, unlike green bonds, they do not typically finance specific environmental projects. Last month, Kyushu Electric Power Co. also issued similar bonds.

Investor Concerns Over AGM Scheduling

Investors are expressing concerns about the concentration of annual general meetings (AGMs) in Japan, which they believe hampers shareholder engagement and poses challenges to corporate governance. According to Japan Exchange Group Inc., nearly 60% of companies will hold their AGMs this month, with 30% of them scheduled for June 27. This includes major companies like Nintendo Co., Sumitomo Mitsui Financial Group Inc., and Mitsui Fudosan Co.

“There’s been cases where you cannot physically attend AGMs,” said Mamoru Shimode, chief strategist at Resona Asset Management Co. “It’s natural for activist investors to want it spread out.” The frustration among investors comes at a time when Japan’s government and the Tokyo Stock Exchange are urging companies to enhance shareholder returns, a move that has contributed to the Nikkei 225 Stock Average reaching an all-time high. A recent study by Japan’s state pension fund, the world’s largest, found that investor engagement can boost a company’s market value.

Challenges in Spreading Out AGMs

Despite efforts to alleviate the concentration of AGMs, peak days remain clustered in the last week of June. This is partly due to a legal requirement for companies to hold AGMs within three months after the record date, which determines a shareholder’s eligibility to vote. In contrast, overseas markets allow meetings to be held four to five months after the end of the business year, according to Yoshio Kawatani, a researcher from Dai-ichi Life Group.

Institutions like Legal & General Investment Management have been advocating for companies to move the record date to reduce time pressure on companies and auditors. An extension would also enable firms to provide more documents in English, aligning Japan more closely with global standards. “Despite ongoing efforts, we haven’t seen much positive change,” said Aina Fukuda, head of Japan investment stewardship at the fund manager. “I believe that without addressing these issues it’s unlikely we will see AGM dates spread out any further beyond the currently concentrated week.”