September CG Stock Performance

CG Top 20 stocks raised its outperformance, hitting all-time high Top 20 CG Score Index continued outperformance for September 2017 in favor of stock market rally for September. CG top 20 stocks hit its all time high of June 2015 when Corporate Governance Code was launched. This would be due to a sign that an increasing number of long-term investors are coming […]

“A New Dawn for Japanese Governance” by Frank Curtiss

Steady progress is indeed being made as a result of the efforts being made to improve corporate governance in Japan now that remarkable changes are  observed.  “Japan is the land of the rising sun, but as far as corporate governance is concerned, it has been more a land of false dawns over the past 15 years or so. However, some significant […]

Attribution Analysis of Change in CG Scores 09/2015-09/2016

Titlis has updated corporate its governance ratings for 500 major public companies in Japan as of September 2016. The CG scores improved 3/100 pts from a year ago,  steadily but at a slower pace than expectations at the inception of Corporate Governance Code. According to the attribution analysis of the changes in CG scores for a year, the category (factor) of the Board of Directors was the largest contributor and the categories of Incentive of Remuneration, Takeover Defense, and Share Cancellation also inched up scores.

Cross-shareholdings should be considered the effect of share price plunges. The resolution of cross-share holding is extremely slow. We should keep eyes on enhancement of CG.
http://www.titlisgroup.com/mwbhpwp/wp-content/uploads/CGR-attribution20161008.pdf

Report: Investor Obligations and Duties in Asian Markets

By Peter Knight, President, Generation Investment Management, Fiona Reynolds, Managing Director, PRI,  Nick Robins, Co-Director, UNEP Inquiry into a Sustainable Financial System and Eric Usher, Head, UNEP Finance Initiative

Executive Summary:

In China, Hong Kong, India, Malaysia, Singapore and South Korea there are compelling national interest reasons for policy makers to promote the incorporation of environmental, social and governance factors into investment practice. Issues include addressing air quality, improving citizens’ long-term health, reducing inequality, providing for an ageing population and attracting the international capital necessary to meet economic growth targets. Investing prudently requires ESG factors to be considered in investment decision-making and to be part of the dialogue between investors and companies. This is consistent with the legal framework in all the markets studied in this report.

However, despite growing awareness of responsible investment, many investors have yet to fully integrate ESG factors into their investment decision-making processes. Public policy and regulation are a key influence. Currently, these markets have few formal requirements to integrate ESG factors, but investor obligations and duties are dynamic concepts that continuously evolve as society changes.

By working together, policy makers and investors can shape investment frameworks to clarify the obligations and duties investors owe to beneficiaries – obligations to embed ESG factors into investment decision-making, ownership practices, and ultimately, the way in which companies are managed.

”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:
https://corpgov.law.harvard.edu/2016/06/02/how-the-financial-system-fails-us-and-how-to-fix-it/

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.