Investors applaud Nippon Steel, as world’s fourth largest steel company takes strides towards green steel

A group of investors in Nippon Steel Corporation has welcomed the company’s concrete steps towards achieving its decarbonisation targets.

On Wednesday 10 May, at its FY2022 Earnings Announcement, Nippon Steel committed to the start of studies to shift from a blast furnace (BF) steelmaking process to an electric arc furnace (EAF) steelmaking process, with the Kyushu Works steel plant in Yawata, and the Setouchi Works steel plant in Hirohata, identified as candidate sites.

In dialogue with Nippon Steel, the co-engagement group understands that Nippon Steel intends to align with the decarbonisation targets of the company through converting blast furnaces that reach the end of their life into EAFs, or taking measures such as retrofitting them to ensure real emissions cuts at scale. The group also understands that Nippon Steel intends only to temporarily prolong the life of the BFs that use conventional technology, where economic, maintenance or safety matters stand in the way of immediate conversion.

The investor group, comprising Man Group, Storebrand Asset Management, Corporate Action Japan (CAJ) and the Australasian Centre for Corporate Responsibility (ACCR), has been co-engaging with  Nippon Steel in recent months with a focus on enhancements to decarbonisation generally, and the above topics specifically.

These new commitments are in line with the expectations of investors that the company set a credible decarbonisation strategy to promote the long term value of the company.

The co-engagement group also welcomes Nippon Steel’s statement that a stable supply of green hydrogen and green power - in other words, renewable energy - is needed as a key input to achieve its target of carbon neutrality.

Jason Mitchell, Head of Responsible Investment Research at Man Group said:

“The Japanese steel industry has a vital role to play in supporting Japan’s net zero efforts. As Japan’s largest steel company, Nippon Steel has the unique opportunity to help lead the sector towards a strong, Paris-aligned commitment. The company’s announcement to both begin studies and to shift its blast furnace steel production process to an electric arc furnace-oriented one, is testament to its leadership. Indeed, one of the powerful lessons that we take away is that a constructive, multi-stakeholder engagement can drive climate action.”

Victoria Lidén, Senior Sustainability Analyst at Storebrand Asset Management, said:

“To ensure the realization of their long-term climate objectives, companies must display ambitious action in the near future. Accelerated progress prior to 2030 is imperative to establish a credible decarbonization of the steel industry, ultimately leading to net neutrality by 2050. As shareholders, we value the constructive dialogue and engagement with Nippon Steel regarding these matters and find encouragement in this announcement.”

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

“This is an important moment for Japanese steelmaking and for the Japanese industry broadly.

“This will help Nippon Steel not only increase its future corporate value but mitigate climate risk. The shift from a BF to an EAF in the plans will be a trigger of further decarbonization in the electric power sector through increasing demand. We commend the leadership shown by Nippon Steel in this announcement and look forward to continuing our very productive conversation with them and the study being materialized.”

Brynn O’Brien, Executive Director, at ACCR, said:

“Constructive, science-based investor-company engagement is an extremely promising accelerator of decarbonisation around the world, and we commend Nippon Steel for their responsive approach to dialogue that has resulted in an outcome designed to protect long term corporate value. We are looking forward to engaging with Nippon Steel and other Japanese companies to promote long term shareholder value and ensure a safe climate."

“Momentum for green steel is clearly growing and we hope that the Japanese Government understands Nippon Steel’s message about the need for massive amounts of green energy in Japan going forward.”

Background

About Man Group

Man Group is a global, technology-empowered active investment management firm focused on delivering alpha and portfolio solutions for clients. Headquartered in London, we manage $144.7 billion* and operate across multiple offices globally. We invest across a diverse range of strategies and asset classes, with a mix of long only and alternative strategies run on a discretionary and quantitative basis, across liquid and private markets. Our investment teams work within Man Group’s single operating platform, enabling them to invest with a high degree of empowerment while benefiting from the collaboration, strength and resources of the entire firm. Our platform is underpinned by advanced technology, supporting our investment teams at every stage of their process, including alpha generation, portfolio management, trade execution and risk management.

Our clients and the millions of retirees and savers they represent are at the heart of everything we do. We form deep and long-lasting relationships and create tailored solutions to help meet their unique needs. We recognise that responsible investing is intrinsically linked to our fiduciary duty to our clients, and we integrate this approach broadly across the firm.

We are committed to creating a diverse and inclusive workplace where difference is celebrated and everyone has an equal opportunity to thrive, as well as giving back and contributing positively to our communities. For more information about Man Group’s global charitable efforts, and our diversity and inclusion initiatives, please visit: https://www.man.com/corporate-responsibility

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*As at 31 March 2023. All investment management and advisory services are offered through the investment “engines” of Man AHL, Man Numeric, Man GLG, Man Solutions / FRM and Man GPM.

About Storebrand

Storebrand Asset Management is part of the Storebrand Group, managing NOK 1100 billion of assets for Nordic and international clients. A key guiding principle in our work is to generate the best possible risk-adjusted returns for our clients, while not compromising the ability of future generations to meet their own needs. Storebrand Asset Management is a pioneer in the field of sustainable investments since the mid-1990s and a founding signatory of the UN Principles for Responsible Investment (PRI). We take a holistic and integrated approach to ESG, aiming for real impact and long-term value creation.

About Corporate Action Japan

Corporate Action Japan (CAJ) is an independent Japanese non-profit organization that was established in June 2022. We encourage leading Japanese corporations to engage in climate action and speed up the transition process towards carbon neutrality (net zero greenhouse gas emissions).