Category

ESG

Feb 18
0

Daily Brief ESG: Different Criteria for Exercising Voting Rights for Overseas and Domestic Institutional Investors and more

By | Daily Briefs, ESG

In today’s briefing:

  • Different Criteria for Exercising Voting Rights for Overseas and Domestic Institutional Investors

Different Criteria for Exercising Voting Rights for Overseas and Domestic Institutional Investors

By Aki Matsumoto

  • The number of shareholder proposals in June 2022 was 241, significant increase from 136 in June 2021. It’s expected that the number of shareholder proposals will increase again this year.
  • The increase in the percentage of shareholder proposals recommended by voting advisors can be considered an increase in shareholder proposals that are quite reasonable from the shareholder’s point of view.
  • The percentage of overseas investors in favor of shareholder proposals increased, while that of domestic institutional investors remained unchanged at 7%, the same as the previous year.

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Feb 16
0

Daily Brief ESG: Comparability of Disclosures Between Companies Will Enhance Content of Sustainability Information and more

By | Daily Briefs, ESG

In today’s briefing:

  • Comparability of Disclosures Between Companies Will Enhance Content of Sustainability Information

Comparability of Disclosures Between Companies Will Enhance Content of Sustainability Information

By Aki Matsumoto

  • Since the revised Corporate Governance Code in 2021 requires TCFD disclosure for prime market listed companies, TCFD disclosure is expected to expand to all prime listed market companies going forward.
  • Most companies do not have a roadmap for meeting their emissions targets, and there is a need to look carefully at whether their numerical targets and timelines are reasonable.
  • Until now, companies that preceded TCFD disclosures have mainly disclosed information in integrated reports. However, attention will focus on how these information will be disclosed in the Annual Securities Report.

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Feb 15
0

Daily Brief ESG: South Korea’s Top ESG Risk Trend in 2022: Analysis of News Articles on More than 2 and more

By | Daily Briefs, ESG

In today’s briefing:

  • South Korea’s Top ESG Risk Trend in 2022: Analysis of News Articles on More than 2,000 Entities

South Korea’s Top ESG Risk Trend in 2022: Analysis of News Articles on More than 2,000 Entities

By Yujin Oh

  • The result of analyzing 23,940 news articles on 2,722 Korean listed companies released between 1 January and 31 December 2022, reveal that 565 companies (20.7%) had ESG risks.
  • Companies with ESG risks has decreased compared to 2021, which is the first time a decrease trend has been recorded since Who’s Good began conducting ESG analysis in 2015.
  • Social risk ranked as the highest risk among ESG (Environment, Social, Governance) with the highest ranking ESG issue being ‘Supply Chain Management’.

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Feb 14
0

Daily Brief ESG: Earlier Timing of Disclosure in English May Create Another Mismatch with Investor Demand and more

By | Daily Briefs, ESG

In today’s briefing:

  • Earlier Timing of Disclosure in English May Create Another Mismatch with Investor Demand

Earlier Timing of Disclosure in English May Create Another Mismatch with Investor Demand

By Aki Matsumoto

  • Regarding the three most in-demand documents, only 30-50% of companies with over 30% foreign ownership disclose them in English. The mismatch between overseas investors’ demand and companies’ disclosure continues.
  • If TSE requires faster timing of disclosure in English, companies may limit the materials they disclose in English due to increased burden. Disclosing necessary materials is more important than timing.
  • In order to encourage companies to disclose in English in their annual securities reports, the Corporate Governance Code should clearly state the disclosure in English in the annual securities report.

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Feb 12
0

Daily Brief ESG: “Stable Dividend” Tradition May Have Something to Do with Rewarding Cross-Held Shareholders and more

By | Daily Briefs, ESG

In today’s briefing:

  • “Stable Dividend” Tradition May Have Something to Do with Rewarding Cross-Held Shareholders

“Stable Dividend” Tradition May Have Something to Do with Rewarding Cross-Held Shareholders

By Aki Matsumoto

  • The Nikkei article addresses high-dividend investing as short-term strategy, while “Quality Income” is in demand by long-term investors seeking stable long-term performance. Both strategies have different investor segments and needs.
  • Many Japanese companies have basic policy of “stable dividends,” but it is easier for shareholders seeking to increase shareholder interests to understand a dividend policy based on clear cash allocations.
  • Given that Metrical’s analysis also found no correlation between changes in market capitalization and dividend policy scores, linking dividends and stock price is a difficult problem.

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Feb 10
0

Daily Brief ESG: Quality Issues Are a Common Challenge for TSE Market Restructuring and Corporate Governance Reform and more

By | Daily Briefs, ESG

In today’s briefing:

  • Quality Issues Are a Common Challenge for TSE Market Restructuring and Corporate Governance Reform

Quality Issues Are a Common Challenge for TSE Market Restructuring and Corporate Governance Reform

By Aki Matsumoto

  • There seems to be consensus on the end of the transitional measures in 3 years. Even if this issue is finally settled, the issue of prime market quality will remain.
  • There’s no better solution to raise stock price than for companies to develop their own strategies and expand corporate value. TSE should promote metabolism and improve quality of the market.
  • If the quality of corporate governance is an issue, it is necessary to encourage change in boards that are dominated by male internal executive directors and lack diversity.

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Feb 08
0

Daily Brief ESG: Japanese Companies with Low Debt Should Evaluate Profitability in Terms of ROA Rather than ROE and more

By | Daily Briefs, ESG

In today’s briefing:

  • Japanese Companies with Low Debt Should Evaluate Profitability in Terms of ROA Rather than ROE

Japanese Companies with Low Debt Should Evaluate Profitability in Terms of ROA Rather than ROE

By Aki Matsumoto

  • While OP margin remains flat, ROE increased moderately due to higher in total-asset-turnover. Going forward, the drivers of ROE growth are likely to continue through reductions in cash and cross-shareholdings.
  • It would be more likely to find it in a company that already has high operating profit margin and where ROE can be improved by improving the total asset turnover.
  • Based on my analysis so far, I assume that companies that raised their stock price valuations did so by clarifying their cash allocation policies and engaging in communication with investors.

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Feb 06
0

Daily Brief ESG: Unreasonable Company Opposition and more

By | Daily Briefs, ESG

In today’s briefing:

  • Unreasonable Company Opposition, but No Change in Outlook for Shareholder Proposals to Be Rejected

Unreasonable Company Opposition, but No Change in Outlook for Shareholder Proposals to Be Rejected

By Aki Matsumoto

  • Zojirushi’s low profitability and numerical targets are at the root of the problem with this shareholder proposal, which required disclosure of cost of capital to verify reasonableness of the targets.
  • To ensure transparency of BOD, it would have required individual disclosure of director compensation, divestment of policy shareholdings, and elimination of takeover defenses, which are issues of corporate governance practices.
  • When % foreign shareholders reaches 30% level, companies tend to eliminate takeover defense. Since Zojirushi’s % foreign shareholders is 20%, the shareholder proposal will be very likely to be rejected.

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Feb 04
0

Daily Brief ESG: Overseas Investors Have Done a Great Deal to Improve the Governance of Japanese Companies and more

By | Daily Briefs, ESG

In today’s briefing:

  • Overseas Investors Have Done a Great Deal to Improve the Governance of Japanese Companies, But…

Overseas Investors Have Done a Great Deal to Improve the Governance of Japanese Companies, But…

By Aki Matsumoto

  • 11 of 14 corporate governance criteria confirmed the significance of % foreign shareholder. In particular, 9 of 14 criteria showed progress in their efforts due to engagement of overseas investors.
  • Overseas investors are concerned about whether the interests of minority shareholders can be secured in companies with large shareholders, such as listed subsidiaries, and whether governance will function properly.
  • As for the independence of the Nominating and Compensation Committee, which didn’t show significant correlation with % of foreign shareholders, it’s still beyond the power of engagement by overseas investors.

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Feb 02
0

Daily Brief ESG: Could the Turnaround Be Due to a Change in Management? and more

By | Daily Briefs, ESG

In today’s briefing:

  • Could the Turnaround Be Due to a Change in Management?

Could the Turnaround Be Due to a Change in Management?

By Aki Matsumoto

  • Fujikura and JVC Kenwood, which could generate cash flow by restructuring their business portfolios, were evaluated as “value stocks” due to the gap between their corporate value and stock prices.
  • Fujikura and JVC Kenwood haven’t posted record profits in 17 and 11 years, respectively. The key to solving why it took so long may be the change in top management.
  • If management doesn’t listen, structural reforms won’t be implemented, even if shareholders repeatedly suggest restructuring business portfolio. This is why it’s important for shareholders to replace management that continues underperforming.

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