Category

ESG

Dec 22
0

Daily Brief ESG: Companies Have Begun to Be Aware of Cash Flow and more

By | Daily Briefs, ESG

In today’s briefing:

  • Companies Have Begun to Be Aware of Cash Flow, but the Reality Is that It Doesn’t Produce Results

Companies Have Begun to Be Aware of Cash Flow, but the Reality Is that It Doesn’t Produce Results

By Aki Matsumoto

  • Operating income and depreciation, the components of operating cash flow, have been sluggish. This has undeniably dampened expectations for expanding corporate value.
  • Many companies have begun to be aware of cash flow, but have yet to see results. They are at the stage of producing results by selecting business to invest cash.
  • In terms of “not being conscious of cash flow,” shareholder returns are still strongly net income oriented and not cash flow oriented.

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Dec 20
0

Daily Brief ESG: The Impact of the 2025 Revision of the Stewardship Code Is … and more

By | Daily Briefs, ESG

In today’s briefing:

  • The Impact of the 2025 Revision of the Stewardship Code Is …

The Impact of the 2025 Revision of the Stewardship Code Is …

By Aki Matsumoto

  • For investors, it is a step forward to lower the hurdles for collaborative engagement, and for institutional investors, it is a step forward to reduce costs. 
  • It is hoped that passive funds, which have been reluctant to engage in engagement due to cost, will take a more positive approach.
  • Rule amendments to make it easier to identify substantial shareholders are expected to be negotiated in advance with substantial shareholders prior to voting.

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Dec 18
0

Daily Brief ESG: Shareholder Activism Plays a Significant Role in Companies that Are Slow to Change and more

By | Daily Briefs, ESG

In today’s briefing:

  • Shareholder Activism Plays a Significant Role in Companies that Are Slow to Change

Shareholder Activism Plays a Significant Role in Companies that Are Slow to Change

By Aki Matsumoto

  • Shareholder activism approaches include those seeking to resolve balance sheet issues, those targeting governance practices, those seeking to restructure business portfolios, and those seeking to improve business profitability.
  • In approaches that call for business strategy reform, shareholders may require the company to establish a special committee, including outside directors and outside experts, to discuss solutions to issues.
  • The discussions of “Strategy Committee” can significantly alter the shape of a company. Since few managers manage to evolve with changes in business environment, shareholder activism plays a significant role.

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Dec 16
0

Daily Brief ESG: The Situation Is Different for REITs that Rely on Capital Increase and more

By | Daily Briefs, ESG

In today’s briefing:

  • The Situation Is Different for REITs that Rely on Capital Increase, Despite the Same Low P/B Issue

The Situation Is Different for REITs that Rely on Capital Increase, Despite the Same Low P/B Issue

By Aki Matsumoto

  • Repurchasing investment units, increasing dividends through property sales, and increasing EPS through negative goodwill of M&A seem to be the share price raising measures necessary for capital increase for growth.
  • When increasing capital amid stagnated REIT stock prices, it’s questionable whether the picture that is drawn after capital increase is reasonable in the face of rising required returns by investors.
  • When the profitability of REIT investment companies is in question, it is not surprising that activist investors will focus on management issues, including cost of capital or corporate governance.

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Dec 14
0

Daily Brief ESG: Guarantee Program for GHG Disclosure Will Start in FY3/2028 with Limited Guarantee for Scope 1 and 2 and more

By | Daily Briefs, ESG

In today’s briefing:

  • Guarantee Program for GHG Disclosure Will Start in FY3/2028 with Limited Guarantee for Scope 1 and 2

Guarantee Program for GHG Disclosure Will Start in FY3/2028 with Limited Guarantee for Scope 1 and 2

By Aki Matsumoto

  • From FY3/2027, companies with market capitalization of over 3 trillion yen will be required to disclose GHG sequentially. 76% of companies with market capitalization of over 500 billion yen disclose.
  • A guarantee program is scheduled to be introduced in FY3/2028, but only 21% of companies with market capitalization of over 500 billion yen have disclosed their guarantees.
  • The guarantee program will begin in Scope 1 and 2 with limited guarantees. Disclosure of guarantees will increase once the discussion on qualification system for guarantee service providers is finalized.

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Dec 12
0

Daily Brief ESG: Sustainability Information in Annual Securities Reports Is Evolving into Valuable Information and more

By | Daily Briefs, ESG

In today’s briefing:

  • Sustainability Information in Annual Securities Reports Is Evolving into Valuable Information

Sustainability Information in Annual Securities Reports Is Evolving into Valuable Information

By Aki Matsumoto

  • One year has passed since the disclosure of sustainability information in annual securities reports, and the FSA is considering restructuring its disclosure guidelines to support sustainability disclosure by listed companies.
  • Sustainability information in annual securities reports is shifting from “what should be stated” to “what content should be stated,” and the volume of information is increasing accordingly.
  • Valuable information is that investors can understand what initiatives the company has implemented to address the challenges, the goals and timelines it has set, and whether its progress is justified.

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Dec 10
0

Daily Brief ESG: In Order to Avoid Scandals in the Future and more

By | Daily Briefs, ESG

In today’s briefing:

  • In Order to Avoid Scandals in the Future, Management Must Take Leadership in Changing Mindsets

In Order to Avoid Scandals in the Future, Management Must Take Leadership in Changing Mindsets

By Aki Matsumoto

  • In many cases, management is involved rather than seeking clarification of the actual situation from an independent body. This is the reason why scandals are repeated.
  • In Japan, awareness of integrity and code of ethics compliance remains very low. A thorough awareness change is required to consider “what is ethical to do and what is not.”
  • Even after the revision of Whistleblower Protection Act in 2022, harassment of whistleblowers hasn’t stopped. Consequently, the number of whistleblowers is low and whistleblowing hasn’t been able to deter scandals.

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Dec 09
0

Daily Brief ESG: “Parent-Subsidiary Listing” Heaven Continues to Provide Rich Investment Performance for Investors and more

By | Daily Briefs, ESG

In today’s briefing:

  • “Parent-Subsidiary Listing” Heaven Continues to Provide Rich Investment Performance for Investors
  • Keppel Infrastructure Trust – Desalination Plant Disappears into Murky Off Balance Sheet Waters

“Parent-Subsidiary Listing” Heaven Continues to Provide Rich Investment Performance for Investors

By Aki Matsumoto

  • With the TSE shortly declaring the conclusion of discussions regarding parent-subsidiary listings, more parent-subsidiary listings (including listed affiliates) are likely to continue to appear going forward.
  • “TSE’s Request” states a restructuring of business portfolio, but leaves out the issue of restructuring the parent company’s business portfolio and shifting to a management approach that increases corporate value.
  • The parent-subsidiary listings (including listed affiliates) that continue to be created will continue to provide investment opportunities for investors, including activist investors.

Keppel Infrastructure Trust – Desalination Plant Disappears into Murky Off Balance Sheet Waters

By Tan Yee Peng

  • KEPPEL INFRASTRUCTURE TRUST (KIT) is an infrastructure trust listed in Singapore. KIT is managed by Keppel Infrastructure Fund Management Pte Ltd (KIFM) and is sponsored by Keppel, a global asset manager and operator. KIFM is a wholly-owned subsidiary of Keppel.
  • The Trustee-Manager, KIFM, has dual responsibility of safeguarding the interests of KIT Unitholders, and managing the business conducted by KIT.
  • The Trustee-Manager has general powers of management over the business and the assets of KIT and its main responsibility is to manage KIT’s assets and liabilities for the benefit of Unitholders as a whole.

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Dec 06
0

Daily Brief ESG: Independent Directors Are Responsible for Disclosures that Have Gaps from the Investors’ Perspective and more

By | Daily Briefs, ESG

In today’s briefing:

  • Independent Directors Are Responsible for Disclosures that Have Gaps from the Investors’ Perspective

Independent Directors Are Responsible for Disclosures that Have Gaps from the Investors’ Perspective

By Aki Matsumoto

  • In many cases of bad disclosures where the capital allocation policy has not been adequately considered, the company often fails to develop a concrete growth strategy using cash.
  • The reason for the misaligned disclosures with investors may be that the company lacks the process to produce projected financial statements and to estimate corporate value/share price calculated from DCF.
  • If a plan containing unreasonable figures is disclosed as is, the independent outside director may not be involved in the decision making or may not be accompanied by adequate skills.

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Dec 04
0

Daily Brief ESG: In the Dissolution of the Parent-Subsidiary Listing and more

By | Daily Briefs, ESG

In today’s briefing:

  • In the Dissolution of the Parent-Subsidiary Listing, the Second Step Is Key for the Parent Company

In the Dissolution of the Parent-Subsidiary Listing, the Second Step Is Key for the Parent Company

By Aki Matsumoto

  • The measure to implement 100% inclusion or separation of subsidiary profits from parent company profits is only the first step, and this alone won’t reflect positively on the stock price.
  • The key is the second phase of measures to strengthen the parent company’s overall ability to generate cash flow by investing in highly profitable businesses after restructuring its business portfolio.
  • Hitachi is one of the few cases where it quickly implemented the second phase and reflected growth in corporate value in its stock price through realization of cash flow expansion.

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