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Governance

Governance

MUFG's Governance for Countering Climate Change -Board Oversight of Climate Change Initiatives-

MUFG's Governance Structure for Countering Climate Change

At MUFG, the Sustainability Committee, which operates under the Executive Committee, is charged with periodically deliberating policies on and determining the status of the Group's response to opportunities and risks arising from climate change and other environmental and social concerns.

MUFG has positioned climate change-related risk as one of the Top Risks that it must pay close attention to. Accordingly, these risks are discussed by the Credit & Investment Management Committee, the Credit Committee and the Risk Management Committee, all of which are under the direct supervision of the Executive Committee.

Conclusions reached by the above committees are reported to the Executive Committee‒which is tasked with deliberating and making decisions on important matters regarding business execution‒and, ultimately, reported to and discussed by the Board of Directors. In addition, matters discussed by the Credit & Investment Management Committee and the Risk Management Committee are also examined by the Risk Committee, which mainly consists of outside directors, and then reported to the Board of Directors. In these ways, the Board of Directors exercises supervision over MUFG's climate change-related initiatives.

Specifically, the Board of Directors handles issues requiring a groupwide perspective and, to this end, identifies important themes deserving intensive discussion, thereby managing these issues based on a PDCA cycle in accordance with an annual schedule.

Also, sustainability management is considered an important theme. The Board of Directors actively addresses matters related to this theme through dedicated sessions in addition to deliberations at regular Board meetings.

Promotion Structure for Sustainability Management

Committees Related to Climate Change and Items Discussed and Reported

Committee

Major Climate Change-Related Items for Deliberation and Reporting from FY2022 Onward

Supervision Board of Directors

・State of progress related to the Carbon Neutrality Declaration
 ▸Progress of sustainable business

 ▸Setting interim targets for financed portfolio (real estate, steel, and shipping sectors)

 ▸Setting interim targets in the asset management domain

 ▸Progress of results in sectors with disclosed interim targets (power, oil and gas sectors)

 ▸Reduction of in-house GHG emissions, etc.

・Revision of MUFG Environmental and Social Policy Framework

・Evaluation by ESG rating agencies

・Response to shareholder proposals

Risk Committee ・Recommendations for Board of Directors resolutions and reported items
Compensation Committee ・Revision of the executive compensation system (inclusion of ESG-related items into performance evaluation items)
Audit Committee ・Monitoring, supervising, and recommending towards our ESG responses 
Execution Executive Committee

・Progress related to the MUFG Carbon Neutrality Declaration

・Revision of the MUFG Environmental and Social Policy Framework

・Status of MUFG’s sustainability management initiatives and address for future (Report on matters to be deliberated by the Sustainability Committee)

Credit & Investment Management Committee

・Recognition of current conditions and issues

・Direction of the management system for climate change-related risks

Risk Management Committee

・Monitoring the status of climate change-related risks using the Risk Appetite Framework and integrated risk management methods

・Reporting on risks arising from climate change, as one of the Top Risks

Credit Committee

・Recognition of current conditions and issues related to climate change

・The status and direction of climate change-related risk management efforts

・Revision of credit policies related to climate change

Sustainability Committee

・Progress toward the Carbon Neutrality Declaration

 ▸Progress of sustainable business

 ▸Setting of interim targets for financed portfolio (real estate, steel, and shipping sectors)

 ▸Progress of results in disclosed sectors (power, oil and gas sectors)

 ▸Reduction of in-house GHG emissions, etc.

・Revision of the MUFG Environmental and Social Policy Framework

・Assessment by ESG rating agencies

We regularly hold discussions on climate change response and other sustainability management topics with outside directors, and use these discussions to deepen sustainability initiatives.

<Key comments from outside directors>

 

  • ・Our initiatives since our MUFG Carbon Neutrality Declaration have made great progress. I continue to expect responsive, prompt, and apt actions.
  • ・It is important to consider sustainability from a long-term perspective, with awareness of not only current stakeholders but future ones as well.
  • ・It is vital that we act with an awareness of the gap with Global Systemically Important Banks (G-SIBs).

Engagement and Utilization of External Advisors in the Environmental and Social Fields

We regularly hold meetings for exchanges of ideas between external advisors and members of the Board of Directors to leverage expert knowledge from outside the group in our sustainability initiatives. At such a meeting held in December 2022, the group CEO, bank president, trust and securities companies presidents, group CSO, group CSuO, and other relevant members actively exchanged ideas spanning wide-ranging areas, including the latest trends in the most important issue of climate change response, discussions at COP27, the increasingly important topics of biodiversity and initiatives toward human capital and respect for human rights.

<External Advisors>
Rintaro Tamaki President, Japan Center for International Finance
Junko Edahiro Professor, Graduate School of Leadership and Innovation, Shizenkan University / President, Institute for Studies in Happiness, Economy and Society / Founder and President, e's Inc.
Kenji Fuma CEO, Neural Inc.

<Key Comments from External Advisors>

 

  • ・Climate change, biodiversity, human rights, and so on are complex issues and often involve trade-off relationships. How we should move forward overall is a matter called into question.
  • ・The trend in Europe is statutory disclosure requirements for transition plans. Similarly, the U.S. is moving toward mandating disclosure of transition plans. I think this trend will soon come to Japan as well.
  • ・As there are no longer companies that fail to recognize the importance of decarbonization, what will be important as the next step in engagement is how we support individual companies' strategies.

A Heightened Metric for ESG-Related External Ratings is Installed as an Evaluation Index of the Executive Compensation System

MUFG has revised its executive compensation system to achieve the medium-term business plan and implement sustainability management, and has newly installed a heightened metric for ESG-related external ratings as a medium- to long-term performance-linked indicator for stock-based compensation.

The system is designed to reflect the degree of improvement found through the external ratings granted by five major ESG rating agencies(note) for executive compensation. The intention is to align MUFG's corporate activities with the interests of its diverse stakeholders.

  1. MSCI, FTSE Russell, Sustainalytics, S&P Dow Jones, CDP
Executive Compensation System
  1. To incentivize efforts to improve MUFG’s earnings power, capital efficiency and profit structure, each of which is considered a management issue requiring the utmost priority, the degree of achievement vis-à-vis target levels stipulated in the Medium-Term Business Plan (MTBP) regarding consolidated ROE and consolidated expense reduction (excluding performance-linked expense) is determined on an absolute evaluation basis.
  2. In addition to incentivizing recipients to advance sustainability management, the degree of improvement in external ratings granted by the five major ESG rating agencies (MSCI, FTSE Russell, Sustainalytics, S&P Dow Jones and CDP) is determined on an absolute evaluation basis, with the aim of objectively assessing the recipient’s contribution to MUFG’s initiatives to address ESG issues in a variety of fields.
  3. Relative comparisons with competitors are made with Mizuho Financial Group and Sumitomo Mitsui Financial Group.
  4. In bonus-related qualitative evaluations of performance of duties by the president and other relevant officers, we have set targets related to contribution to the resolution of environmental and social concerns, the promotion of inclusion & diversity, and the strengthening and upgrading of MUFG’s governance structure. In fiscal 2023, we further added targets related to human rights, biodiversity, and human capital.

Skill Matrix of Directors

Our Board of Directors is composed of 15 directors who bring a well-rounded mix of diverse knowledge and expertise. Eight of the members, a majority, are outside directors. As shown in the Skill Matrix, directors possess deep knowledge of MUFG's business and have been selected for their expertise in finance, financial accounting, legal compliance, and other areas.

The Board of Directors overall also has members with experience in the global development of our business and experience in sustainability, IT, and digital technologies, allowing them to lead the solving of social issues such as digital shift and climate change issues.

Skill Matrix of Directors
(As of the end of June 2023)

Carbon Neutrality Project Team and Committee

We have launched a global and group-wide project team to discuss strategies and policies, and to engage in agile decision-making through steering committee and review meetings with participation by the CEO and other key management members. This takes place under the supervision of the Board of Directors. In FY2022, a total of eight thematic review meetings for management were held, along with two steering committee meetings.
Carbon Neutrality Project Team and Committee

MUFG Environmental Policy

MUFG Environmental Policy Statement

Under the MUFG Way, which guides all of our activities, MUFG has established the MUFG Environmental Policy Statement as a specific action guideline for practicing environmental considerations.

The MUFG Environmental Policy Statement has been the matter to be determined in the Board of Directors since May 2021. The Policy Statement clearly states the company's commitment to proactively disclose information on the environment, including climate change.

(As of November 2023)