ESG

• A year after human capital disclosure became mandatory, little progress was made, but few companies, even those in top 100 in market capitalization, have self-assessed their milestones and actual progress.
• While it was favored that companies with higher scores on human capital disclosure outperformed in stock price, it is reasonable to assume that multiple other factors had an impact. 
• Some companies formulated growth strategies by presenting clear cash/capital allocations and have actually achieved improved capital profitability. Human capital initiatives can be viewed as part of such autonomous “kaizen” activities.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We view Braskem’s ESG as “Weak”, in line with its scores for the Environmental, Social and Governance pillars. Controversies are “Material”, but Disclosure is “Strong”.

• Outside director compensation is increasing, but there is a considerable difference in compensation for outside directors between large and small companies and between small and medium-sized publicly traded companies.
• Every time a scandal occurs, there is a lack of shareholder-oriented management and a smattering of outside board members who turn a blind eye to the scandal.
• A compensation model that includes equity compensation should be created to maximize the power of outside directors, with “management from the perspective of shareholders” as a necessary condition.

• The number of days to disclose first- and third-quarter financial results was 37.0 days, roughly the same timing as the previous year, regardless of whether reviews were conducted or not.
• The larger market capitalization companies are more likely to conduct voluntary reviews, and the larger market capitalization companies are more positive about ensuring the reliability of their disclosure information.
• Despite a slight increase from the previous year, only a little more than 10% of all companies disclosed cash flow statements in the first and third quarters.

• It’s understandable that compensation is paid for managing a global business and achieving significant growth, but it’s also paid for bloated performance in yen terms due to the weak yen.
• Employee engagement is very important for value-added products and more money should be spent on human capital. Otherwise, higher profit margins are unlikely to be achieved.
• The election of directors at AGMs rarely results in rejection of the company’s proposal. Cross-shareholdings should be reduced so that managers whose “employment” is protected by cross-shareholdings don’t receive commensurate compensation.

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

• Keppel Ltd, once renowned for its offshore marine and real estate businesses, is undertaking a fundamental transformation to become a global asset manager with S$200bn in funds under management (FUM) by 2030.
• It is unprecedented for an industrial operator to successfully transform into an asset manager of such scale.
• As such, close attention ought to be given to the progress and prospects of Keppel’s transformation. 

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

• There’s gap in timelines for results between many companies that started to incorporate the cost of capital into their management and investors who are looking for results in investment performance.
• If this gap surfaces, investor expectations will be stripped away. Companies that determine that it will take a long time to achieve results can be expected to consider going private.
• For a company to seek access to institutional investors, it must first produce results. The race is on to achieve results within limited timeframes and faster than other companies.

• Business portfolio reforms are lagging and improving profitability, the driver of ROE, will take more time. Further Reducing policy shareholdings and cash on hand are needed to improve capital profitability.
• In days of cross-shareholdings, management tended to be less conscious of the goal of sustainable growth in shareholder interests because they need not listen to opinions of other minority shareholders.
• Cross-Shareholdings have decreased, and management is now required to be more conscious of capital profitability. ”TSE’s request” will hopefully prevent this change from going backwards.

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

• A comparison of two surveys shows progress in disclosing GHG emissions over half-year, with small increase in Scope 1 and Scope 2, while little progress was made in Scope 3.
• Many companies are cautious about disclosing in annual securities reports, even if they are certified by a third-party certification body or stated in their own integrated reports.
• However, FSA will require companies with over 3 trillion yen in market capitalization to disclose to Scope 3 in FY3/2027, and most companies are likely to comply with this requirement.

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