ESG

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We assess Standard Profil’s ESG as “Adequate”, in line with its “Adequate” Environmental, Social and Governance scores. Controversies are “Immaterial”, but Disclosure is “Weak”. 
• Standard Profil (SP) is a European manufacturer of automotive sealing solutions.

• In Japan, many companies have large gap between their stock price and their intrinsic value due to issues related to the use of assets and other resources or cash flow.
• Companies want to use the example of “improvement measures” to be released by TSE in January as a template, so we can’t expect “management is serious about  tackling this issue.”
• The fact that ROE has improved modestly over the past decade indicates that management hasn’t made fundamental changes to traditional management strategies to address the challenges faced by individual companies.

• TSE’s request to raise P/B was issued March end, and the number of companies that have disclosed their improvement measures is still low, at only about 30% of all companies.
• Companies are likely to use good examples, but because the factors that increase share price vary from company to company, companies must offer their own solutions to their own situations.
• Investors don’t want to see “P/B improvement plan” that follows the template, but want to see compelling measures that demonstrate cash flow growth, which is based on share price appreciation.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).

We assess Almaviva’s ESG as “Adequate”, in line with its Environmental and Governance scores. The company has a “Strong” score for the Social pillar. Controversies are “Immaterial” and Disclosure is “Adequate”.

Almaviva is an Italian company with a focus on IT services and business process outsourcing (BPO) in customer relationship management (CRM).

• Companies with large shareholders’ interests of 20% or more account for 779 of 1,784 companies in Metrical Universe. A number of companies are investment targets as TOB  and MBO candidates.
• Companies with large shareholder influence may feel distanced from general corporate governance practices, but their interests are aligned with those of minority shareholders in terms of shareholder-oriented management.
• For quality markets, it’s necessary to reduce the number of companies by increasing TOBs and MBOs, and to do so, managers need to be aware of the cost of listing.

• Toyota’s sale of Denso shares is believed to be aimed at securing cash for full-scale EV production, and it’s premature to expect “governance improvement through the sale of cross-held shares.”
• Since Toyota intends to maintain a 20% equity stake in Denso, which is an equity method affiliate, there will be no change in the influence on Denso for a while.
• While intercompany shareholdings and board reciprocity based on business relationships were one of Toyota’s strengths, the interests of minority shareholders were at risk of being left behind.

• Rather than “management with awareness of stock price,” the question is whether management is carrying out its duties toward “the goal of increasing shareholder interests,” to put it more accurately.
• In determining TOB price, the question is whether independent committee was established, whether that committee actually functioned, and whether the directors performed their duties in the best interests of shareholders.
• The real objective of an MBO is to restart the company for a sustainable expansion of corporate value, not to rip off the equity stake of a bothersome activist investor.

• The efforts of SMEs aren’t initiatives for disclosure by listed companies, but measures born out of situations that compelled them to promote diversity as integral part of their business operations.
• Not only SMEs, but also listed companies with management keenly aware of business risks could promote diversity initiatives that are rooted in their business without taking time to make decisions.
• The goal should be to make human capital and diversity a core competence rooted in the business, not a passive initiative such as doing it for disclosure.

• Not much progress has been made in the early disclosure of convocation notices. The key to even earlier disclosure of convocation notices is the moving up of earnings announcement dates.
• Overseas investors require that all materials in the notice of convocation be provided translated in English, and only 27.3% of prime market listed companies have responded.
• Few companies file their annual securities reports prior to AGMs. This can be taken as companies’ intention to provide as little detailed information as possible to shareholders prior to AGMs.

• 60% companies have established policies to promote human capital. Companies will be asked whether their goals are reasonable and whether their actual measures and progress toward those goals are sufficient.
• Since many companies have set a target of 14-15% for % female managerial positions around 2025, it makes us worry whether they can really achieve 30% target in 2030.
• Few companies have disclosed specific impact estimates under certain conditions. It’s expected that some proactive companies will push others to do the same regarding “Scope 3” in the future.