ESG

• Corporate Governance Code requires disclosure based on TCFD, and an ISSB-based disclosure system will be discussed in Japan. While interest in disclosing climate change-related information is growing, disclosure hasn’t progressed.
• In the TSE survey, only one-tenth of the companies that listed Scope 1, 2, and 3 emissions in their integrated reports disclosed them in their annual reports.
• If a company can’t disclose Scope 1/Scope 2 in its annual securities report, there’s concern that the company may have challenges in data collection and risk delaying management decisions.

• It’s true that the difference in profit margins between a listed subsidiary that focuses on specific business and a parent company that has different businesses is the difference in valuations. 
• It will be difficult for a parent company to reverse the valuations of its subsidiaries until the parent company dissolves the parent-subsidiary listing and increases its own profit margins.
• With respect to corporate governance practices, companies with no major shareholders are included with relatively higher corporate governance scores, but this isn’t as significant difference as it tends to be.

• The fact that many companies have low actual returns is the crux of the problem; investors will likely increase pressure on the companies as ROEs haven’t increased noticeably in 2023.
• TSE may have indicated the points for disclosure, based in part on the experience of few companies that achieved the listing criteria by successfully disclosing their “plans” for transitional measures.
• March 2023, TSE published “Request for Disclosure on the Status of Dialogue with Shareholders.” However, mismatches between companies and investors makes it difficult to require all prime market companies this.

• Even if TSE requires new listed companies to disclose the reasons for listing and the possibility of raising funds, it’s questionable whether this will motivate them to grow their businesses.
• Companies that are not eligible for investment in terms of market capitalization and trading liquidity criteria will not be effective if they seek contact with institutional investors.
• If unlisted stock markets are created, IPOs will increase in size. If listing criteria are raised to tens billion yen in market capitalization, institutional interest in growth market will increase.

• TSE has published a proposal to require simultaneous disclosure of financial statements and timely disclosure information in both Japanese and English from April 2025 (for March fiscal year end companies).
• The elimination of time gap between disclosure of financial statements in Japanese and English and the expansion of English-language disclosure of timely disclosure information are advances resulting from this revision.
• As TSE continues to consider expanding the range of documents covered, the focus is on when English-language disclosure of annual securities reports, which cover all important information, will become mandatory.

• TSE wants to make disclosure of financial statements in English mandatory, which many prime market companies do, and to require disclosure in both Japanese and English on the same day.
• The focus will be on expanding to English-language disclosure of documents such as annual securities reports and corporate governance reports, which are in high demand by overseas investors.
• Inadequate English-language disclosure has directly affected listed companies by preventing IR meetings from deepening dialogue and negatively impacting investment decisions.

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

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

• About half of the prime market companies were able to communicate to investors that they are aware of their cost of capital and are committed to share price conscious management.
• Half of the companies are reluctant to engage in constructive dialogue with investors, sustainable growth and medium-to-long-term improvement of corporate value, which is the concept of prime market listing criteria.
• A quarter of prime market listed companies disclosed in English. Since TSE requires disclosure of this information in Corporate Governance Report, disclosure in English of this document becomes more important.

• With IPOs becoming a place for founders to recoup their capital, and the desire for post-IPO growth declining, IPOs are a place for retail investors to speculate using scarce liquidity.
• If a market is provided that recovers funds without relying on IPOs, IPOs will become larger and more selective, which brings them closer to the investment focus of institutional investors.
• The expansion of the private equity market will play a significant role in the “industry restructuring,” as more M＆As between private companies and public companies are expected to take place.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We view Agile Group’s ESG as “Adequate”. The company’s Environmental and Social scores are “Adequate”, while Governance is “Weak”. 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 Medco Energi’s ESG as “Adequate”, in line with its scores for the Environmental, Social and Governance pillars. 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 Natura’s ESG as “Strong”, in line with the Environmental and Social pillars, while Governance is “Adequate”. Controversies are “Immaterial” and Disclosure is “Strong”.