ESG

• Metrical’s past analysis also shows that a company’s capital allocation to investors is effective in raising valuations, so a proper allocation between investment and shareholder return is a baseline.
• The correlation analysis between TOPIX and nominal GDP suggests that the shift from deflation to inflation has triggered overseas investors to focus on the further expansion of company profits.
• While average P/B and ROE have remained flat, the rise in P/E has boosted the stock recently. This suggests that further share price appreciation will require an increase in profits.

• There are concerns about the ability of female directors hired solely for the purpose of recruiting women directors without a reasonable director nomination process to demonstrate strength on the BOD.
• Board diversity issues were considered a low priority until more institutional investors voted against the top management of companies with zero female directors at shareholder meetings.
• Given the small population of full-time female employees and the relatively young age bias, it’s likely that even in 2030, most female board members will be relying on outside talent.

• The TSE listing rules that include numerical targets for female board members are limited to prime market listed companies, so the majority of listed companies are not covered.
• The “priority policy” on diversity is not budgeted or legislated. In the absence of underlying legislation, it is left to companies to decide how seriously they will implement it.
• Regarding “30% or more female board members by 2030,” if companies want to achieve this goal, they’ll have to rely on female outside board members to make up the numbers.

• The relationship between % of female managers and P/B doesn’t appear to be as strong as the significant correlation found between % of female directors and the value creation indices
• Currently, companies in business categories where women have greater opportunities to play active roles (new business models) are appointing female employees to management positions, and such  companies have higher P/Bs.
• Since the gender wage gap is attributed to % of female managers, unless a company has significant opportunities for women to play active roles, the gender wage gap is large.

• TSE market capitalization of has doubled since 1990 and the number of companies has doubled, while TOPIX is 20% lower than its 1989 high. Money went mainly to IPOs.
• P/B, TSE’s expectation for stock price appreciation, had high correlation with TOPIX, 0.84 from 1999-2019. However, it correlated negatively for 4 years from 2020 with other factors having significant impact.
• Correlation between TOPIX and nominal GDP is 0.94 for 2020-2023, showing higher correlation. Expectations of higher nominal profits caused by transition from deflation to inflation are behind the stock rally.

• Samsung SDI is currently facing legal challenges in the United States stemming from a scooter fire during charging and a separate incident involving a lithium-ion battery fire. 
• These incidents are part of a series of recurring battery fire controversies involving Samsung SDI dating back to 2016. 
• Notably, the ESG (Environmental, Social, and Governance) risk level for Samsung SDI has been assessed as ‘High,’ supported by an ESG risk score of 2.7.

• Companies enjoy the benefits of going public, as a larger market capitalization expands their financing and makes it easier to acquire other companies, without capital raising through equity issuance.
• In a market economy, cash returned to shareholders through share buybacks etc is rationally allocated by investing it in companies that need more funds or are worthy of investment.
• Companies should successfully communicate their strategies for expanding corporate value and how to use cash to do so. More such companies will lead to the expansion of Tokyo market.

• Modest profit growth and slow ROE growth are expected this year, and sustained TOPIX appreciation in the future will depend on increases in ROE and ROE+DOE.
• Lower OP Margin is the reason for the lack of ROE growth in FY3/2023. OP Margin and ROE are expected to have difficulty rebounding from this year’s profit forecast.
• Looking at the results of DOE, Total Dividends Paid and Dividend Payout for FY3/2023, which have not improved, there is still a lot of room for shareholder returns.

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

• The number of companies that announced their intention to move to Standard Market has increased to 48, while most of 268 transitional companies are expected to move to Standard Market.
• Companies that cannot meet Prime Market listing criteria in 2026 can also move to Standard Market by undergoing examination, so they don’t need to announce their move in a hurry.
• Prime Market has slimmed down from TSE 1st Section by 600 companies, but it will remain market where many companies with market capitalization of about 50 billion yen are listed. 

• To narrow the gender wage gap for all workers, reducing non-regular female workers, who make up the majority, is a possible solution, but changing this structure will not be easy.
• Many companies recognize that the low ratio of female managers (about 10% among listed companies) is behind the gender wage gap among regular workers.
• However, many companies aren’t taking immediate actions because they believe that % of female managers will increase as the age of newly hired female full-time hires in recent years increases.