”How the ESG landscape is changing in Japan” – A participant’s personal observation of RI Asia 2016


”RI Asia 2016 took place at the Tokyo Stock Exchange on the 23-24th February, and was attended by approximately 400 domestic and international participants. As an ex-resident of London now based in Tokyo, it has been interesting to observe the changingESG landscape in Japan. RI Asia acted as a useful milestone to stop, reflect and analyse the progress that has been made in Japan and around the world over the last few years. Whilst each participant may have a different take on the two days, I am delighted to share with you my own thoughts:

“From small talk to engagement, structure to content”

One of the key themes highlighted at this year’s conference was the noticeable progress that has been made in Japan in relation to ESG.

First, it is important to consider the potential assets under management (AuM) available to sustainable investment in Japan. This was previously only thought to be approximately JPY800bn, when considering both equities and fixed income. However due to the lack of disclosure in this space, that figure is predominantly comprised of assets linked to mutual funds, which are publically available. The Japan Social Investment Forum’s inaugural survey conducted at the end of 2015, showed that there was approximately JPY26.6 trillion linked to sustainable investment, when including institutional investments. Approximately 65% (or JPY17.5trn) of this total AuM was reported to involve some sort of ESG integration approach. Whilst it is difficult comparing different survey cycles, the AuM figure quoted is almost equivalent to that of Australia’s in 2014. This provides a better reflection of the potential growth of ESG investment within Japan.

Next, I feel it prudent to reflect on the corporate governance progress made since the Corporate Governance Code which was introduced last year. According to the statistics provided by the Japan Exchange Group at this year’s conference, 94% of the Japanese companies listed in the first section of the Tokyo Stock Exchange have outside directors, 87% have independent directors, and 48% have more than two independent directors. This in itself is a major shift in Japan, however local panellists repeatedly emphasised that they felt companies could do more. The introduction of independent directors should be a means to an end, with the overall goal to create a wider strategic vision that contributes to the long-term growth of the local companies.

Finally, I would like to touch on the Japanese Stewardship Code. It sits alongside the Corporate Governance Code and encourages better engagement and dialogue between companies and investors……………………”

Read full article here: https://www.responsible-investor.com/home/article/arisa_kishigami_ri_asia_2016/

Source: Responsible Investor

The Board Director Training Institute (BDTI) is a "public interest" nonprofit in Japan dedicated to training about directorship, corporate governance, and related management techniques. It is certified by the Japanese government to conduct these activities as a regulated nonprofit. Read a summary about BDTI here, and see a menu of its services for both corporations and investors here.

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