The Board Director Training Institute of Japan (BDTI)

A New Era in Reporting: Empowering Board Members with IFRS Sustainability Standards

2023-07-07 posted by Competent Boards

By Helle Bank Jorgensen, CEO of Competent Boards

As we enter summer, an extraordinary shift is taking place in the realm of corporate sustainability. A momentous occasion occurred on Monday, June 26th, marking a significant milestone in our journey towards a more sustainable and resilient economy. The International Sustainability Standards Board (ISSB), an independent entity operating under the esteemed IFRS Foundation, has introduced its groundbreaking inaugural standards: the IFRS S1: General Requirements for Disclosure of Sustainability-related Financial Information, and IFRS S2: Climate-related Disclosures. These transformative standards, set to come into effect on January 1, 2024, are poised to revolutionize the complex landscape of sustainability reporting, rendering it more accessible for businesses and analysts alike.

This unveiling of the IFRS Sustainability Standards is akin to the birth of a new language—one that distills intricate concepts into actionable insights. Are we standing on the precipice of a game-changer? All signs point to a resounding yes.

Imagine a shared vocabulary that empowers stakeholders to discern, compare, and evaluate companies uniformly, presenting a transparent and cohesive view of the corporate sustainability panorama. This is precisely the promise encapsulated by these pioneering standards.

95% Execs and Directors Say Sustainability Key to Shaping Future Boardrooms

2023-07-04 posted by Competent Boards

By Helle Bank Jorgensen, CEO of Competent Boards

The vast majority (95%) of business leaders and board directors believe that sustainability plays an important or very important role in shaping successful future boardrooms. That’s according to a Competent Boards white paper Why sustainability plays a key role in shaping future boardrooms that examined five key areas of focus for company board directors.

Two-thirds (66%) of poll respondents cited investor demand as the key driver of sustainable change in boardrooms. Other critical factors noted by respondents include: regulations; customer, employee and stakeholder demands; and board members’ fiduciary duty.

AGM Season in Japan: Time to Encourage Director Training!

2023-06-08 posted by Admin

BDTI's Three-Course Package for Director Training

Unfortunately, every June at AGMs in Japan most investors approve the vast majority of director candidates –even first-time director candidates — without confirming whether they have ever received any form of director training to prepare them, or a “refresher” course on emerging issues and new best practices. Because of this, an increasingly large percent of directors in Japan have served less than three years (at least 30% in the case of outside directors!) in their very first director position, but have never even received basic training. METI and the FSA are starting to consider this as a major problem.

Serving as a director on a public company board is not the same job as serving as a lawyer, academic, or the head of global sales. It requires different knowledge, mindset and preparation. Raising PBRs, improving sustainability, DEI, and optimizing the business portfolio are not going to “happen” by themselves just because those topics appear in pronouncements and the press. They will only take root and consistently improve if the quality of Japanese boards increases. But right now, the average quality of boards is quite low, as can be seen from these…

Collaborative Engagement in the UK: Much More Active

2023-05-30 posted by Nicholas Benes

The 2022 report by the FRC in the UK, “The influence of the UK Stewardship Code 2020 on practice and reporting”, shows a stark contrast between the virtual absence of collective engagement in Japan as compared to the UK. A large proportion of asset managers in the UK are participating in a variety of collaborative engagements:

Some Quotes from the FRC’s report:

“Most respondents identified collaborative engagement (working with other investors) as an increasingly important escalation tool.”

“One of the things about collaboration is you don’t have to do all the work yourself. You are adding the value of your assets to the engagement and hopefully sending a better signal – that’s quite a lot of change in the sector in dealing with [ESG] issues.” (Head of responsible investment, large UK asset owner)

Director Skills in Japan: The Picture Worth 1,000 Words

2023-05-27 posted by Nicholas Benes

Take a look at the chart below, from materials recently published by the FSA’s Committee on the Stewardship Code and the Corporate Governance Code. This is from an analysis of ALL directors (both executive and non-executive) at TSE1 firms that disclosed a skills matrix in 2019. From left to right, the categories are: a) technology; b) finance and/or accounting; c) executive management experience; and d) global (international) experience. Can you guess which country is the dark blue bar? Yep, that low guy is Japan. Right across the board.

Director skill gaps in Japan - BDTI

Taro Kono, Could You Please Speak to the FSA and TSE?

2023-05-27 posted by Nicholas Benes

The FSA and TSE have been assiduous in encouraging more engagement between investors and Japanese companies, and in highlighting the problems raised by the ever-increasing share of funds invested on a passive basis in the Japanese market – which is leading to a sort of “hollowing out” of meaningful feedback from institutional investors. I would encourage anyone who reads Japanese to read the most recent Action Plan for corporate governance, especially including the reports by the Secretariat in the FSA’s May 16th meeting. This is very commendable.

On the other hand, there is a stark contradiction between this stance and a big defect in the machine-readability of the Corporate Governance Reports (CG Reports) submitted by Japanese companies to the JPX/TSE, which is regulated by the FSA . The defect renders a major portion of these reports almost entirely useless for rigorous analysis by computers… even though I pointed it out some six years ago. In a word, the 11 (or more) different “disclosure items” required to included in CG Reports, which account for close to half of the meaningful information in each report, are all mashed together into one XBRL “barrel” that does not even have a standardized format.

BDTI Newsletter – 6/23 Boot Camp, 6/13 Webinar on High-Level Research, and More!

2023-05-22 posted by Admin

Here is BDTI’s most recent newsletter. Please sign up at the top right of https://bdti.or.jp/en/ to receive this periodically.

BDTI – Boot Camp & Research!

Click on the link above to see the newsletter.

Webinar: “Using High-Dimensional Corporate Governance Variables to Predict Firm Performance in Japan”

2023-05-19 posted by Admin

On June 13th, join us for a discussion showing the future of corporate governance analysis. In this webinar we will introduce the results of leading-edge academic research to determine whether corporate governance practices and firm characteristics can be used to predict firm performance over the short-, mid-, and long-term. Earlier attempts at this research have always come with limitations or been focused narrowly on certain practices, but using BDTI’s detailed database focusing on Japanese corporate governance practices and important characteristics of all listed firms in Japan, researchers have been able to conclude that certain corporate governance practices and facts should be of interest to every investor.

Using BDTI’s High-Dimensional CG Big Data to Predict TSR in Japan (working paper)

2023-05-18 posted by Admin

This is the first draft of a working paper led by two respected Japanese academicians who used governance and firm-specific big data to predict future equity returns in Japan . Conclusion: “we constructed a prediction model of firms’ future TSR and used it to show that the investment strategy based on the model’s predictions could generate non-negligible improvement in returns. These results suggest that high-dimensional corporate governance variables contain informative signals associated with future firm performance over and above reliance on purely financial data.”

The research was conducted using BDTI’s detailed, Japan-specific time-series database for all listed companies in Japan. The results are consistent with the fact that every fund manager that has backtested our data so far has bought a license, and every licensee has renewed so far. It would seem that Japan’s square peg of three different governance structures and peculiar practices does not seem to fit into the standard “global” round hole framework used by other data providers.

METRICAL : CG Stock Performance (Japan) for April 2023

2023-05-15 posted by Aki Matsumoto

The solid U.S. stock market, which has settled down from last month’s financial system unrest, led Japanese stocks to move higher toward the end of the month.
The CG Top20 stock price index significantly outperformed both TOPIX and JPX400 for the second consecutive month.

The stock market rallied toward the end of the month on the strength of U.S. stock prices as U.S. stocks gradually calmed down from the financial system unrest triggered by the failure of the Silicon Valley Bank in the U.S. On the last day of the month, the Bank of Japan’s monetary policy meeting maintained monetary easing, and stock prices rose sharply.

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