The Principles for Responsible Investment (PRI), UNEP FI and the Generation Foundation today published a new report — the Japan Roadmap — which builds on the report Fiduciary duty in the 21st century.
The roadmap was launched today at RI Asia in Tokyo by Mr Takejiro Sueyoshi, special advisor to the UNEP Finance Initiatives in the Asia Pacific Region.
Japan is currently the fastest growing market for responsible investment, having previously lagged other markets. A combination of Japan’s Government Pension Investment Fund (GPIF) recently signing the Principles for Responsible Investment and Japan’s Revitalisation Strategy — under the label “Abenomics”— has generated significant market focus on stewardship and corporate governance.
The roadmap makes recommendations to ensure Japanese institutional investors understand that their fiduciary duties require them to consider material ESG issues in their investment and decision-making processes. The recommendations cover five categories: stewardship and engagement, corporate governance, ESG disclosure for pension schemes, corporate disclosure and the signature role of GPIF in Japan’s investment chain.
“The rapid growth in responsible investment in Japan is a good example of how the financial services sector, with the support of national policymakers, can very quickly catalyse change,” said Eric Usher, head, UNEP Finance Initiative.
“The Japan Roadmap is another step forward in this process, and will help asset owners put in place improvements that will benefit their pension fund beneficiaries.”
“The PRI believes that failing to consider longer-term drivers like ESG issues in investment practices is actually a failure of fiduciary duty,” said managing director, Fiona Reynolds.
“The Japanese investment industry is steadily moving towards an ESG-friendly environment and the recommendations outlined in the roadmap will assist investors in this journey.”
The recommendations address crucial issues for Japanese investors, such as cross-shareholdings, proxy voting disclosures and corporate disclosure of material ESG information. They also highlight the implications of proposed changes to Japan’s stewardship code and will support the work of Japanese regulators and stakeholders and embed Japan’s recent rapid progress in responsible investment.
“PFA has been focusing on increasing the number of corporate pension schemes who sign up to the stewardship code. We welcome the support the roadmap provides to this initiative,” noted Ken Hokugo, director, head of corporate governance, Pension Fund Association.
“This roadmap identifies the imminent problems of Japan’s stewardship code and corporate governance code, and recommends those who are responsible to swiftly act on them to create an environment where more pension schemes can embrace good stewardship activities.”
The report’s recommendations draw on 25 interviews with key Japanese regulators and investors and a roundtable in Tokyo hosted by MSCI attended by 30 Japanese investors. The roadmap also identifies policy examples from other mature financial markets, such as the US, UK and Canada which have been the subject of other country roadmaps.
“Japan’s governance reforms will fail unless more asset owners join in, and all the talk about stewardship is accompanied by analysis, action and sweat,” said Nicholas Benes, representative director, The Board Director Training Institute of Japan.
“The Japan Roadmap makes sensible recommendations to turn governance goals into realities.”