”Will better corporate governance boost Japanese equity returns?”

Despite the fact that many folks are still pessimistic as to whether corporate governance reforms will bring a surmountable positive change to the Japanese economy, there has been some notable changes as the writer of this article, Louise Dudley, Hermes Global Equities Portfolio Manager, below puts it. It will take time and patience but will be worth it in the end.

Schroders: ”Investing in the future: Japan’s focus on sustainability”

”Schroders is proud to be one of a very small group of UK companies with a corporate history stretching back more than 200 years. Astonishingly, Japan is home to as many as 3,146 companies which were founded more than 200 years ago; some of which can be traced back more than 1,000 years.

Of course most of these are small, family-run and operate in niche areas, such as hotels and restaurants. Nevertheless, we can consider whether this Japanese aptitude for corporate longevity can tell us anything about the sustainability of Japanese business models in the future, and their ability to reward shareholders over time.

Forbes: U.S. Companies Joining FTSE4Good Index, Banks and Japanese Companies Exiting

“Green” indices are rising in popularity as investors increasingly seek to put business in context of its surroundings, and its wider impact. FTSE4Good, the global index provided by  FTSE Russell, measures how a company operates in terms of environmental, social and governance (ESG) factors rather than what it makes — and ESG risk is everywhere, quite apart from “climate risk,” now at the forefront of attention.

Tougher inclusion criteria has just resulted in the removal of 43 companies from the index, with a startling number from Japan, where the picture of the extent of corporate governance reforms remains unclear. Its latest review sees 77 new additions to the FTSE4Good Global Index, of which 26 companies are from the United States, making it the largest contributor………..”

“What They Do With Your Money: How the Financial System Fails Us and How to Fix It”

Based on the theory that responsible behavior by institutional investors hinges in turn on stimulating a population of active citizen investors, I am attaching two of my recent articles drawn from the new book “What They Do With Your Money: How the Financial System Fails Us and How to Fix It”, by Jon Lukomnik, David Pitt-Watson and me (Yale University Press, just out). The official book launch took place on June 7.

The first article, published on the Harvard Law CG blog, sets out the costs to society and individuals when citizen investors are missing in action, and offers several proposed fixes:

Research Report by Kohei Soga ”Scale of ESG investment in Japan”

‘Summary: This paper will introduce the overview of the results of a questionnaire survey of Japanese domestic investment managers that have signed the United Nations Principles for Responsible Investment (UNPRI) conducted by Nikko Research Center , for the purpose of clarifying the state of environmental, social, and government (ESG) investment in Japan. Until now, ESG investment market research has focused on investment products designed for individual investors and the state of investments including those by institutional investors was never fully understood. From the results of this survey, we learned that ESG investment assets in Japan amount to 46.0 trillion yen, which is an amount that greatly exceeds the scale of individual investor-focused financial products known up until now. In addition, among the ESG investment approaches , the engagement/proxy voting was dominant. After examining the personnel structure related to ESG investment institutions, it was revealed that many institutions have the most personnel devoted to proxy voting operations. Furthermore, an examination into the characteristics of the clientele revealed that institutional investors such as pension funds are the main players in Japanese ESG investment.

Eco – Business: ”Transparency drives sustainability”

”There are several motivations for companies to make sustainability a business priority.

In some instances, it is a fundamental part of a company’s business model. In others, companies are driven by economic imperatives, or are reacting to adverse events that have already affected the firm negatively, such as allegations of child labour or toxic spills.

But whatever an organisation’s disposition towards sustainability may be, there is a growing demand coming from several quarters for companies to be more transparent in their environmental, social, and corporate governance – known as ESG –  practices.

Sonoko Noda and Nobuhiro Sato: ”Japan’s rate of independent directors is one of world’s lowest”


Last year, Japan introduced codes designed to work together to increase corporate value and investor return in Japanese companies. The Corporate Governance Code and the Stewardship Code are supposed to work hand-in-hand to promote transparency and sustainable growth. Part of the Corporate Governance Code calls for companies to have at least two independent directors. Having outsiders on board, it was hoped would bring discipline as companies reach for higher profits.

Kato Takao and Kodama Naomi: ”Corporate Social Responsibility and Gender Diversity in the Workplace: Evidence from Japan”

Abstract: Using panel data on corporate social responsibility (CSR) matched with corporate proxy statement data for a large and representative sample of 1,492 publicly-traded firms in Japan over 2006-2014, we provide rigorous econometric evidence on the effects of CSR on gender diversity in the workplace. Our fixed effect estimates point to positive and significant effects on gender diversity of CSR, yet the effects are felt only after two to three years.