Daily Brief ESG: Policy Shareholdings and more

• 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”.