Public comments on the revised draft Corporate Governance Code

ClientEarth Japan submitted a public comment in May 2026 in response to the Tokyo Stock Exchange’s public consultation, which was launched April 10, 2026, on the proposed revisions to the Corporate Governance Code.

Originally introduced in 2015 and revised in 2018 and 2021, the Corporate Governance Code is now under further review based the 2024 “Action Programme for Corporate Governance Reform 2025.”

The proposed revisions aim to continue promoting the substantive enhancement of corporate governance reform based on autonomous awareness and behavioral change by companies and investors and to “promote more effective corporate governance by encouraging dialogue grounded in a ‘relationship of disciplined trust’ between companies and investors, supporting sustainable growth and medium- to long-term corporate value. Key topics include capital allocation, pre-annual shareholders’ meeting disclosure of annual reports and strengthening the function of the board.

Notably, the current Principle 1 (Securing the Rights and Equal Treatment of Shareholders) and the Principle 5 (Dialogue with Shareholders) will be consolidated and moved to the initial Principle of the Corporate Governance Code, reflecting their importance.  These principles are particularly essential in addressing environmental and climate-related issues. Sustainability-related responsibilities will also be more clearly integrated into the role of the board. These directions are broadly positive, including from a climate governance perspective.

To further strengthen the Corporate Governance Code, given the growing trend among companies to adopt principles regarding corporate and shareholder proposals at general meetings of shareholders, the need for outside directors specialising in sustainability, the mandatory adoption of climate-related disclosure standards, and the establishment of sustainability committees, ClientEarth submitted comments focusing on the following five points:

1. Treatment of Voting Outcomes at Shareholder Meetings Under the proposed revisions (which would elevate the current Supplementary Principle 1.1.1 to a Principle), where a company proposal at a general meeting of shareholders is approved but nevertheless receives a considerable number of opposing votes, the company is expected to analyse the reasons for the opposition and the factors contributing to the opposing votes and to respond appropriately. However, compared with the corresponding provisions of the UK Corporate Governance Code, the proposed revisions lack clarity. In order to ensure that shareholders are able to exercise their voting rights adequately at the following year’s general meeting, such analysis and the company’s response should be disclosed through statutory or voluntary disclosure documents no later than three months prior to the next general meeting. In addition, defining “a considerable number” as 20% would enhance clarity.
2. Decarbonisation Transition Plans and Boards’ Responsibility
   Following ISSB’s establishing IFRS S2 (Climate-related Disclosures) and the introduction of the mandatory disclosure obligation in accordance with SSBJ’s Sustainability Disclosure Standards No.2 (Climate-related Disclosure Standards) in Japan, boards should develop and integrate decarbonisation transition plans into business strategy.
3. Establishment of Voluntary Sustainability Committees
   To strengthen oversight and advisory functions in relation to the implementation of decarbonisation transition plans, companies should establish and effectively utilise a voluntary sustainability committee within the board of directors.
4. Sustainability Expertise on Boards
   To enhance the board’s understanding of and response to sustainability-related challenges, companies should ensure that at least one independent outside director possesses expertise in sustainability as part of the board’s overall composition.
5. Role of Independent Outside Directors in Climate Risk Management
   For independent outside directors to function effectively, it is essential that they devote sufficient time to deliberations within board committees. In companies with statutory committees - such as Companies with a Nominating Committee etc. or Companies with an Audit and Supervisory Committee - it is particularly important that Audit Committees and Audit and Supervisory Committees function effectively.

In particular, given that sustainability disclosures in accordance with SSBJ’s Climate-related Disclosure Standards have become mandatory, and that climate risks now constitute significant financial risks, Audit Committees and Audit and Supervisory Committees should play a proactive and leading role in the management and mitigation of climate-related risks.