Daily Brief ESG: The Number of TOPIX Components Should Be More Reduced to Raise the Quality of Engagement and more

• The cost is somewhat reduced for the user because of the higher weighting of more liquid stocks. Meanwhile, selling pressure is inevitable for less liquid companies whose weights are reduced.
• Even if the number of stocks decreases, 1,200 stocks isn’t small number. Also, even though the market capitalization of the components has increased, approximately 73 billion yen isn’t sufficiently liquid.
• With calls for increased engagement, the number of issues remains too large for domestic asset managers, where passive funds account for a high percentage of AUM.

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