Category

ESG

Mar 24
0

Daily Brief ESG: First Step in Engagement in Term of Listening to Overseas Investors Is Seeking Disclosure in English and more

By | Daily Briefs, ESG

In today’s briefing:

  • First Step in Engagement in Term of Listening to Overseas Investors Is Seeking Disclosure in English

First Step in Engagement in Term of Listening to Overseas Investors Is Seeking Disclosure in English

By Aki Matsumoto

  • Companies with the highest Disclosure in English scores have the highest ROE, Tobin’s Q, Market Capitalization, and Foreign Shareholder Ratio, while companies with the lowest scores have the lowest values.
  • Companies with the highest Disclosure in English scores also show generally higher Board Practices and Key Actions. Both Disclosure in English and these practices are the result of engagement efforts.
  • If Disclosure in English and corporate governance efforts are advanced through engagement, it can be hypothesized that profitability will also increase through engagement with overseas investors.

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Mar 22
0

Daily Brief ESG: A Change in Manager’s Mindset that Has Begun Will Lower the Investment Risk for Activist Investors and more

By | Daily Briefs, ESG

In today’s briefing:

  • A Change in Manager’s Mindset that Has Begun Will Lower the Investment Risk for Activist Investors

A Change in Manager’s Mindset that Has Begun Will Lower the Investment Risk for Activist Investors

By Aki Matsumoto

  • In the past, value traps were macro environment that couldn’t generate profits in deflationary economy, and micro problem of managers who didn’t listen to constructive management improvement proposals from investors.
  • The introduction of Stewardship Code and Corporate Governance Code, and TSE’s request for change in awareness of companies, has reduced the risk of activist investors’ investment strategies flailing around in vain.
  • Management awareness has just begun to change, and few companies generate intrinsic value, as evidenced by the fact that ROE hasn’t begun to improve. Activist investors will continue taking interest.

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Mar 20
0

Daily Brief ESG: Continued Creation of JPX Prime 150-Type Passive Funds Will Help Solve TOPIX Challenges and more

By | Daily Briefs, ESG

In today’s briefing:

  • Continued Creation of JPX Prime 150-Type Passive Funds Will Help Solve TOPIX Challenges

Continued Creation of JPX Prime 150-Type Passive Funds Will Help Solve TOPIX Challenges

By Aki Matsumoto

  • TOPIX-Type passive funds have the challenges of buying stocks that aren’t of high quality and of not providing sufficient engagement. JPX Prime 150 is expected to resolve these issues.
  • Some believe that JPX Prime 150, a market capitalization-weighted index, shows little difference in performance from TOPIX. However, more careful engagement will contribute to value creation in the long run.
  • The continued creation of passive funds linked to the JPX Prime 150 Index is expected to further highlight high quality companies.

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Mar 18
0

Daily Brief ESG: In the Prime Market and more

By | Daily Briefs, ESG

In today’s briefing:

  • In the Prime Market, Disclosure in English Also Widens the Gap in the Company’s Attitude

In the Prime Market, Disclosure in English Also Widens the Gap in the Company’s Attitude

By Aki Matsumoto

  • Most companies with large market capitalization (i.e., those with a high ratio of foreign shareholders) already disclose their financial statements, timely disclosure materials, and convocation notices in English.
  • Disclosure in English of corporate governance reports and annual securities reports, which have lagged behind, is gradually increasing among companies with large market capitalization.
  • Similar to the results of the recent disclosure regarding the ”TSE’s request”, there is also a difference in the disclosure stance between companies with large market capitalization and other companies.

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Mar 16
0

Daily Brief ESG: Is the Emission Data of a Company that Doesn’t Disclose in Annual Securities Report Reliable? and more

By | Daily Briefs, ESG

In today’s briefing:

  • Is the Emission Data of a Company that Doesn’t Disclose in Annual Securities Report Reliable?

Is the Emission Data of a Company that Doesn’t Disclose in Annual Securities Report Reliable?

By Aki Matsumoto

  • 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.

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Mar 14
0

Daily Brief ESG: Will Parent Company Valuations Remain Undervalued Until the Parent-Subsidiary Listing Is Dissolved? and more

By | Daily Briefs, ESG

In today’s briefing:

  • Will Parent Company Valuations Remain Undervalued Until the Parent-Subsidiary Listing Is Dissolved?

Will Parent Company Valuations Remain Undervalued Until the Parent-Subsidiary Listing Is Dissolved?

By Aki Matsumoto

  • 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.

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Mar 12
0

Daily Brief ESG: Will Disclosure for This P/B Rise Based on the Failure of Transitional Companies “Plan” Work? and more

By | Daily Briefs, ESG

In today’s briefing:

  • Will Disclosure for This P/B Rise Based on the Failure of Transitional Companies “Plan” Work?

Will Disclosure for This P/B Rise Based on the Failure of Transitional Companies “Plan” Work?

By Aki Matsumoto

  • 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.

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Mar 10
0

Daily Brief ESG: TSE Should Aim for a Quality Market Rather than a Market Where Listed Companies Can Easily Inhabit and more

By | Daily Briefs, ESG

In today’s briefing:

  • TSE Should Aim for a Quality Market Rather than a Market Where Listed Companies Can Easily Inhabit

TSE Should Aim for a Quality Market Rather than a Market Where Listed Companies Can Easily Inhabit

By Aki Matsumoto

  • 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.

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Mar 08
0

Daily Brief ESG: From the Reality of 4% and more

By | Daily Briefs, ESG

In today’s briefing:

  • From the Reality of 4%, Mandatory English Disclosure of Annual Securities Reports Is a High Hurdle

From the Reality of 4%, Mandatory English Disclosure of Annual Securities Reports Is a High Hurdle

By Aki Matsumoto

  • 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.

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Mar 06
0

Daily Brief ESG: The Standard that All 1 and more

By | Daily Briefs, ESG

In today’s briefing:

  • The Standard that All 1,600 Prime Market Companies Could Do Would Be Loose

The Standard that All 1,600 Prime Market Companies Could Do Would Be Loose

By Aki Matsumoto

  • 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.

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