ESG

• Since the list of companies disclosing information based on TSE’s request only shows “whether they disclosed,” more companies will disclose the information in their corporate governance reports by December anyway.
• Good practices published by TSE will provide hints for companies to improve their future disclosures. Investors will also be more likely to demand improvements from companies based on good practices.
• The next step after disclosing the cost of capital is whether companies can disclose measures to fill gap between cost of capital and actual return and to raise return further.

• TSE suggests presenting management strategies without sticking to the medium-term management plan, but the “medium-term management plan briefing” is the only opportunity to hear management policies from the company.
• The primary reason why companies whose stock prices outperform even though they don’t publish medium-term management plan are founding-family companies is that their interests align with those of their shareholders.
• To align management with shareholders, it was also necessary to require CEOs with low stock ownership to increase the ratio of variable compensation and adopt stock grants in director compensation.

• Since Corporate Governance Code limits disclosures on climate change to prime market companies, it’ll encourage the transition from Prime to Standard market and discourage the transition from Sandard to Prime.
• While it’ll be interesting to see how many years “Scope 3” disclosures will be mandatory, more attention will be paid to how companies uses the cash from reducing policy shareholdings.
• Although the situation is different than it was in 2000 because few companies are underfunded, attention should be paid to whether retirement benefit trusts will become a refuge for policy-shareholdings.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Iochpe-Maxion’s ESG as “Adequate”, in line with its Environmental, Social and Governance scores. Controversies are “Immaterial” and Disclosure is “Strong”.

• Tobin’s Q is not high for companies whose policy holdings are low relative to their net assets or total assets. When discussing policy shareholdings, deemed shareholdings should be included.
• Companies with a low ratio of total policy holdings plus deemed holdings to total assets have notably higher ROE, ROA, and Tobin’s Q. Vice versa.
• These companies generate returns exceeding their cost of capital and are managed with asset and capital efficiency in mind, which shows in their approach to policy shareholdings as governance practices.

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We assess Azul’s ESG as “Adequate”, in line with its Environmental, Social and Governance scores. Controversies are “Immaterial” and Disclosure is “Adequate”.
• Founded in 2008, Azul SA is a Brazilian airline offering the largest number of flights and destinations in the domestic market.

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We assess PureGym’s ESG as “Adequate”, in line with its Social and Governance scores. The company has a “Weak” score for the Environmental pillar. Controversies are “Immaterial”, but Disclosure is “Weak”.
• PureGym is the second-largest gym and fitness operator in Europe by number of gyms

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We assess Tele Columbus’ ESG as “Adequate”, in line with its Social and Governance scores. The company has a “Strong” score for the Environmental pillar. Controversies are “Immaterial” and Disclosure is “Adequate”.
• Tele Columbus (TC) is Germany’s third-largest cable operator, offering cable TV, broadband Internet and fixed-line telephony services.

• 30% female board member set by TSE isn’t surprising, as it’s level within reach, but the fact that TSE set explicit target that companies can’t excuses is a first step.
• To ensure that a female board member isn’t isolated from other board members, multiple female board members should be elected. In this sense, 30% female board members goal makes sense.
• In fact, the most interesting question is how many more companies will approach 50% after achieving a 30% of female board members.

• TSE plans to publish a list of companies that disclosed and those that are “under consideration” for disclosure in “Management Conscious of Cost of Capital and Stock Price.” 
• TSE’s plan to introduce actual investor feedback on how investors view dialogue and engagement and what kind of information disclosure and IR they expect from companies is commendable.
• It is very important to know what investors actually want to know, what management is doing to achieve this, and how they should interact with investors in IR activities.

• The baseless confidence of the 177 companies that finally moved to Standard Market that their market capitalization would increase in18 months was nothing more than a waste of time.
• It is fine for a company to aim to be listed on the highest prime market, but high shareholder returns and quality management must come first.
• If the listing criteria for prime market was JPY100 billion market capitalization, the gap with investors who initially expected prime market before the market restructuring would have been much smaller.

• Companies disclosing in English increased to 97.2% in 2023 prime market. However, only 15% of overseas investors responded “satisfied,” indicating a continuing mismatch between disclosure content and investor needs.
• TSE will prioritize the documents according to whether disclosure requires immediacy, and divide companies into mandatory companies and effort companies according to the size and foreign ownership of a company.
• However, disclosure in English of lower priority documents would be more difficult. Separating companies would allow the prime market to include companies that don’t need to interact with global investors.

• Even after the “TSE’s request,” the average P/B of listed companies has not increased. In addition, ROE, which can be considered a driver for corporate value expansion, has remained flat.
• Japanese managers tend to be caught up in formalistic thinking about whether or not a company is listed, and whether or not it’s listed on the highest market or not.
• Instead of being caught up in formalistic thinking, I would like managers to seriously rethink the value of the company and what it means to be listed.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Lippo Malls Indonesia Retail Trust’s ESG as “Adequate”, in line with its Environmental and Social scores. We deem Governance as “Weak”, despite the “Adequate” score in quantitative terms. Controversies are “Immaterial” and Disclosure is “Adequate”.