Category

ESG

Nov 14
0

Daily Brief ESG: Conflicts of Interest Prevent TSE from Resolving Prime Market Listing Criteria Issues and more

By | Daily Briefs, ESG

In today’s briefing:

  • Conflicts of Interest Prevent TSE from Resolving Prime Market Listing Criteria Issues

Conflicts of Interest Prevent TSE from Resolving Prime Market Listing Criteria Issues

By Aki Matsumoto

  • For companies applying transitional measures, it was an opportunity to attract investor attention and consider what is listing. This should serve as an opportunity to promote metabolism of listed companies.
  • Listing fees are set at the highest rates for prime market, so if the number of prime market companies decreases, TSE revenues will decrease. A conflict of interest has arisen.
  • With such a conflict of interest at TSE, it is unlikely that the contradiction between the prime market concept and listing criteria that many market participants perceive can be resolved.

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Nov 12
0

Daily Brief ESG: A Fundamental Discussion of the Nature of Policy Shareholdings Will Be Required and more

By | Daily Briefs, ESG

In today’s briefing:

  • A Fundamental Discussion of the Nature of Policy Shareholdings Will Be Required

A Fundamental Discussion of the Nature of Policy Shareholdings Will Be Required

By Aki Matsumoto

  • The reduction of policy shareholdings of companies (excluding financials) for March fiscal year end companies was 2.3 trillion yen, about 600 billion yen more than in the previous fiscal year.
  • It was a special year in which changes in the TSE’s criteria regarding tradable shares included in the market’s listing criteria contributed to the reduction of policy shareholdings.
  • Going forward, companies will need to discuss the nature of cross-shareholdings based on capital allocation even more than they do now.

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Nov 09
0

Daily Brief ESG: The First Step in Major Shift in Management Strategy Is for Sapporo to Sell Its Cross-Shareholdings and more

By | Daily Briefs, ESG

In today’s briefing:

  • The First Step in Major Shift in Management Strategy Is for Sapporo to Sell Its Cross-Shareholdings

The First Step in Major Shift in Management Strategy Is for Sapporo to Sell Its Cross-Shareholdings

By Aki Matsumoto

  • It is doubtful that independent outside directors are actually able to actively bridge the gap between shareholders and the board of directors, as the Corporate Governance Code states in Japan.
  • Behind the lack of willingness on the executive team to make major changes in the way things have been done is high % of specified shareholders (40%), including cross-held shares.
  • No major change in business strategy is expected unless foreign shareholder ratio exceeds 30%. In order for the current large shareholders’ equity to decline, Sapporo should sell its cross-held shares.

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Nov 07
0

Daily Brief ESG: Huge Gap in Awareness of Human Rights Between Japanese Companies and Investors and more

By | Daily Briefs, ESG

In today’s briefing:

  • Huge Gap in Awareness of Human Rights Between Japanese Companies and Investors

Huge Gap in Awareness of Human Rights Between Japanese Companies and Investors

By Aki Matsumoto

  • While 80% of Japanese institutional investors place a high value on corporate respect for human rights, only 10% of companies have conducted human rights due diligence.
  • Japanese institutional investors should make it “visible” to their beneficiaries how they require companies to respect human rights in their engagement and how they encourage effective responses.
  • To ensure that the guidelines don’t end up as mere figure of speech, the government should make concrete policies to ensure that respect for human rights takes root in society.

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Nov 04
0

Daily Brief ESG: Reason Behind the Difference in Management Between Family Companies and Others Is the Shareholding and more

By | Daily Briefs, ESG

In today’s briefing:

  • Reason Behind the Difference in Management Between Family Companies and Others Is the Shareholding

Reason Behind the Difference in Management Between Family Companies and Others Is the Shareholding

By Aki Matsumoto

  • Correlation analysis of the major shareholder factor with ROE, ROA, and Tobin’s Q shows that founding family companies tend to have relatively high profitability (ROA) and high stock price valuations.
  • On board practices, companies with more than 50% ownership are generally less concerned about improving their practices, because they don’t have to worry as much about voices of minority shareholders.
  • With regard to key actions, companies with shareholders holding more than 50% interest are presumed to be proactive in growth investments.

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Nov 02
0

Daily Brief ESG: Changes in Voting Practices of Japan’s Major Investment Managements Will Take Time to Take Hold and more

By | Daily Briefs, ESG

In today’s briefing:

  • Changes in Voting Practices of Japan’s Major Investment Managements Will Take Time to Take Hold

Changes in Voting Practices of Japan’s Major Investment Managements Will Take Time to Take Hold

By Aki Matsumoto

  • Because there’s nothing about addressing environmental issues that the company itself opposes because they are global issues, it’s relatively easy to vote in favor of shareholder proposals on environmental issues.
  • Governance proposal is the most sensitive because it’s directly related to election of directors. It’s challenging for domestic investment managers to vote in favor of shareholder proposals during proxy fights.
  • FSA’s tightening of oversight of ESG investment trusts has triggered shift by major Japanese investment managers toward establishing ESG-related-voting policies and exercising their voting rights in accordance with these policies.

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Nov 01
0

Daily Brief ESG: COP27: Agriculture and Food Stocks Likely to Be Most Affected by Conference Talks and more

By | Daily Briefs, ESG

In today’s briefing:

  • COP27: Agriculture and Food Stocks Likely to Be Most Affected by Conference Talks
  • COP27: Despite Limited Expectations There Are Several Potential Bright Spots
  • ISSB Affirms Scope 3 Emissions Reporting Requirements and Investor-Centric Focus

COP27: Agriculture and Food Stocks Likely to Be Most Affected by Conference Talks

By Kyle Rudden

  • COP27, the 27th annual United Nations international conference on climate change, starts on 6 November and runs through 18 November – in the Egyptian coastal city of Sharm el-Sheikh.
  • Whereas climate mitigation and clean energy were the main focus of prior conferences, climate adaptation and sustainable agriculture and food are top priorities for the COP26 Presidency.
  • Therefore, agriculture and food stocks are poised to be the most impacted on a relative basis by COP27 proceedings and outcomes. This Insight considers the potential “winners and losers.”

COP27: Despite Limited Expectations There Are Several Potential Bright Spots

By Kyle Rudden

  • COP27, the 27th annual United Nations international conference on climate change, starts on 6 November and runs through 18 November – in the Egyptian coastal city of Sharm el-Sheikh.
  • World leaders and delegations from 196 nations and territories are expected to collaborate on a host of issues such as finance, decarbonisation, agriculture, water, energy, and biodiversity.
  • Overall expectations are being kept in check, but COP27 is likely to focus on climate adaptation and sectors like agriculture/food that heretofore have taken a back seat to clean energy.

ISSB Affirms Scope 3 Emissions Reporting Requirements and Investor-Centric Focus

By Kyle Rudden

  • The International Sustainability Standards Board (ISSB) recently confirmed important aspects of its proposed sustainability reporting standards. One step closer to a unified standard.
  • Particularly noteworthy is confirmation that disclosures of Scope 3 emissions will be required. Scope 3 emissions are largely unreported, but account for the majority of total emissions.
  • Scope 3 disclosure could have repercussions for ESG ratings, ESG indices based on ESG ratings, and potentially (though too soon to tell) reconstutions of exchange-traded funds.

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Oct 31
0

Daily Brief ESG: Do Not Miss the Movement of Deemed Cross-Held Shares and more

By | Daily Briefs, ESG

In today’s briefing:

  • Do Not Miss the Movement of Deemed Cross-Held Shares, Which Are the Last Resort of Cross-Held Shares

Do Not Miss the Movement of Deemed Cross-Held Shares, Which Are the Last Resort of Cross-Held Shares

By Aki Matsumoto

  • Clearly, the pace of decline of deemed cross-held shares held in retirement benefit trusts is slower than the pace of decline of ordinary cross-held shares held on the balance sheet.
  • Companies with deemed shareholdings tend to have larger total assets than companies with general policy shareholdings (policy shareholdings account for 7.3% of total assets).
  • Although they are less visible, the reduction of deemed shareholdings will come later because shares of important business partners and banks are contributed to retirement benefit trust as deemed shareholdings.

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Oct 29
0

Daily Brief ESG: Hostile Takeovers Should Be Well Thought Out on Fair Basis and more

By | Daily Briefs, ESG

In today’s briefing:

  • Hostile Takeovers Should Be Well Thought Out on Fair Basis, Both in Boardroom and in Judicial Arena

Hostile Takeovers Should Be Well Thought Out on Fair Basis, Both in Boardroom and in Judicial Arena

By Aki Matsumoto

  • Since hostile takeovers are one of the key strategies to quickly gain market share in domestic market with limited growth, more hostile takeovers are expected to occur in the future.
  • Only 12.1% of prime market companies have majority of independent directors. This raises concerns about whether the opinions of independent directors in minority position will be heard by the boards.
  • The court’s decision to dismiss the claims of companies that proposed hostile takeovers makes us think about whether hostile takeovers are being considered on fair standpoint, even in judicial arena.

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Oct 27
0

Daily Brief ESG: Human Capital Investment Is Also Necessary to Remind Valuations of Growth-Based Corporate Value and more

By | Daily Briefs, ESG

In today’s briefing:

  • Human Capital Investment Is Also Necessary to Remind Valuations of Growth-Based Corporate Value

Human Capital Investment Is Also Necessary to Remind Valuations of Growth-Based Corporate Value

By Aki Matsumoto

  • Human investment, the engine of medium-to-long-term growth, was burden for companies without high profit margins, and it wasn’t of much interest to investors seeking stock price returns from short-term perspective.
  • Today, where people are required to do jobs that machines and robots cannot do and to think about mechanisms for making them work, investing in people is becoming more important.
  • The fact that investors have focused more on short-term earnings volatility indicates that they have failed to assume growth-based corporate value in valuations. Growth investing is essential to raising valuations.

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