ESG

• Japan has the largest number of TCFD endorsing institutions in the world, and the number of listed companies endorsing the TCFD has increased by 350 since last year.
• It’s hoped that more companies will follow the example of those that disclosed specific climate change impact estimates under certain conditions, and that other companies will attempt to do so.
• There are many companies that have endorsed TCFD, but have only endorsed it and not disclosed it, so the issue isn’t about endorsing TCFD, but about the content of disclosure.

• TSE market reorganization triggered the reduction of policy shareholdings, and now the test will be whether policy shareholdings can be reduced in order to raise ROE, which is sluggishly growing.
• Companies that maintain excessive policy shareholdings should provide a rational explanation of their holding policies and the reasons for each shareholding in their corporate governance reports and annual securities reports.
• Improving OP Margin, which is highly correlated with ROE, is a shortcut to raising ROE. Policy shareholdings, should not be accumulated in cash on hand, but used for profitable investments.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We view Vale’s ESG as “Adequate”, given its “Adequate” scores for all pillars. Controversies are “Material”, while Disclosure is “Strong”.

• Overseas investors feel that the disclosure of English documents by Japanese companies is slow-paced and the majority of overseas investors are not satisfied with the English disclosure.
• Without sufficient disclosures in English, it is impossible to conduct a detailed analysis of the portfolio company. This also casts a shadow over engagement.
• Given the narrowing coverage of sell-side analysts, companies should proactively disclose English-language materials at the earliest possible time. For long-term investors, English-language disclosures such as annual securities reports are also useful.

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

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

• The problem of agenda setting in engagement with investment firms is due to the mismatch that is occurring in each of the listed companies and investors.
• Meetings without top management present disappoint investors who have prepared thorough analyses of the issues facing the portfolio company. Top management should also avoid listening to template questions at meetings.
• It’s unrealistic to ask passive funds that cannot devote resources not to ask template questions. Active funds of Japanese investment managers may have too many portfolio companies to engage adequately.

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We assess Novafives’ ESG as “Adequate”, in line with its Environmental, Social and Governance scores. Controversies are “Immaterial”, but Disclosure is “Weak”.
• Novafives is an industrial engineering group that designs and supplies plant equipment. It also provides services spanning a wide variety of industrial sectors, including automotive, logistics, steel, aluminium, energy, cement and aerospace.

• Absolute value of index-linked assets is the ultimate measure of market share, but it misses an important aspect of the ESG-related indexing market – i.e., relative market share growth.
• A category of ESG index providers that leads vis-à-vis relative growth is exchange-owned ESG index providers, a group which currently accounts for US$46.3 billion in indexed assets.
• Asian exchange-owned ESG indexers are the clear leaders in that subcategory, with Singapore Exchange (SGX SP) and Korea Exchange leading that cohort with double-digit growth.

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We view PPF Telecom’s ESG as “Adequate”, in line with the Governance score, while the Environmental and Social scores are “Strong”. Controversies are “Immaterial” and Disclosure is “Adequate”.
• PPF Telecom Group (PPF) is part of the PPF Group, a holding company with investments in financial services, telecommunications, real estate and other industries.

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We assess SierraCol’s ESG as “Adequate”, in line with the Environmental, Social and Governance pillars. Disclosure is “Adequate” and Controversies are “Immaterial”.
• SierraCol has an “Adequate” Environmental score, mainly owing to the targets set for all key environmental factors.

• Regardless of “TSE request,” only 31% of prime market listed companies disclosed “measures to realize management with awareness of cost of capital and stock price” in their corporate governance reports.
• The lack of ready disclosure measures on companies’ side seems to be the reason why few companies disclosed information, but many of those that did are also poor in content.
• For companies with large shareholders and low P/B, the parent company has not yet TOB or sold the company, which may be the reason for the delay in disclosure.

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We assess Victoria’s ESG as “Weak”, in line with its Environmental, Social and Governance scores. Controversies are “Material” and Disclosure is “Weak”.
• Victoria PLC designs, manufactures and distributes flooring products across the UK, Continental Europe and Australia.

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We assess Hunt Oil’s ESG as “Adequate”, in line with its Social and Governance scores. However, the Environmental pillar is “Weak”. Controversies are “Immaterial” but Disclosure is “Weak”.
• Hunt Oil Company of Peru LLC, Sucursal del Peru (HOCP) is a wholly owned, indirect subsidiary of Hunt Oil Company, one of the largest privately owned hydrocarbon companies in the US.

• Increase in the number of non-regular workers is a factor in gender wage disparity and has also put pressure on profit margin since labor was invested in low value-added jobs.
• In Japan, childcare is assumed to be dependent on the efforts of the family, and there is little thought of society solving childcare issues, and government policies reflect this idea.
• Problems also exist on the part of employers, with low rates of men taking childcare leave, and the top reason being an atmosphere that makes it difficult take childcare leave.

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We view Metalsa’s ESG as “Adequate”, in line with its “Adequate” scores for the Environmental, Social and Governance pillars. Controversies are “Immaterial” and Disclosure is “Strong”.
• Metalsa is a Tier 1 automotive parts supplier of structural components for light and commercial vehicles, headquartered in Monterrey (Mexico).

• The question is whether companies can achieve results by increasing investment to secure and train human resources who can contribute to transitioning to a business that produces high value-added products.
• Regarding the disclosure of human capital, many issues remain, such as the lack of unified definition of the required items and the inability to use this data as comparable data.
• Percentage of women in managerial positions is more serious. The lack of on-the-job training for women is an on-going issue that makes the path to future managerial positions more difficult.

• Recognizing the cost of capital and return on capital is an important factor in determining business strategy, but not many companies disclose their cost of capital and specific management vision.
• In order to increase the effectiveness of disclosure of the cost of capital, we should consider changing the Corporate Governance Code to require disclosure by prime market listed companies.
• JPX Prime 150 Index, which is based on “equity spreads,” has begun to be calculated, but it has’t attracted much attention since its performance doesn’t differ from that of TOPIX.

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

• Activist investors’ proposals were consistently based on increasing shareholder returns. The change in the environment, in which ％ of foreign shareholders increased while cross-held shares decreased, had a major impact.
• Regarding the selection of directors, discussion on contents of Skill Matrix should be more active, as it’s suspected that top management is selecting candidates who are aligned with their wishes.
• The voting standards of domestic institutional investors are iridescent and still dependent on public opinion for each proposal. The change in public opinion has only just begun.