This week in asset owner history: GPIF’s influence on Japan’s ESG efforts
In early August 2016, AsianInvestor reported doubts concerning corporate Japan’s commitment to boardroom change.
The concern was raised despite the country’s Government Pension Investment Fund (GPIF), the world’s largest pension fund and an ESG juggernaut, being the only Asian institution among the 20 founder members of a new global ESG platform announced in July 2016, the Global Asset Owners’ Forum.
Since 2018, GPIF has published an annual ESG report, the latest in September 2021. Since 2020, those reports have been supported by an annual analysis of climate change-related risks and opportunities in the GPIF portfolio, the latest from October 2021.
These followed its move in 2016 to begin selecting a number of ESG-related indices for equity investments both overseas domestically and overseas, the latest being adoption of an ESG index for Japanese equities announced in March 2022.
PROGRESS MADE
With a large investor such as GPIF moving the needle on the ESG agenda, the corporate world in Japan has shown noteworthy signs to reshuffle boardroom culture. According to statistics released by the Tokyo Stock Exchange on August 3, 99.2% of companies listed in the prime market segment appointed two or more independent directors, up from almost 78% in 2016. The share among JPX-Nikkei 400 companies is 99.5%.
Furthermore, 92.1% of prime market-listed companies appoint a third or more independent directors, a marked increase from 22.7% in 2016. The share for JPX-Nikkei 400 companies is 95%.
However, when it comes to companies that appoint a majority of independent directors, the share is only 12.1% of the Prime Market listed companies, although up from as low as 2.5% in 2016. The share for the JPX-Nikkei 400 companies is 17%.
On July 12, Japan’s Financial Services Agency (FSA) sent out a new draft code of conduct for ESG evaluation and data providers, the first of its kind. The voluntary code advises investors to pay attention to the objectives and limitations of ESG data.
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