Governance

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.

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.

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.

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.