BlackRock, Nomura, Tokio Marine lead call for Japanese government to rethink investor duties

Senior figures at BlackRock, Nomura Asset Management and Tokio Marine Holdings are among key Japanese market players to suggest it’s time for the country’s government to rethink the idea of fiduciary duty to accommodate sustainability.
A study group on the Sustainable Development Goals (SDG) and ESG investing, convened by Japan’s Ministry of Economy, Trade and Industry (METI), made the recommendation in its final report.
The paper’s ‘policy proposal’ section read: “In light of societal and economic changes being driven by millennial values, it seems the need is emerging to review or reorganise the construct of fiduciary duty, as well as to reconsider the norms that govern investor behaviour.”
The report comes on the heels of the group’s SDG Management Guide, published in May, which warned that companies should embrace the goals urgently or risk backlash from millennial “SDG natives”, who will soon be the majority of consumers, shareholders and employees globally.
The group comprises BlackRock Japan’s CIO Takeshi Fukushima, Nomura’s CIO of Global Equities Wataru Ogihara, and Tokio Marine Holdings’ CEO Tsuyoshi Nagano, as well as representatives from Japan’s corporate and academic worlds.
Government and industry bodies including financial regulator the Financial Services Agency (FSA), Japan Exchange Group, powerful corporate lobby group Keidanren, the Ministry of Foreign Affairs and the Japan Investment Advisers Association have all been observers to the group’s six meetings, which have taken place over seven months.
Takuya Fukumoto, Director of Industrial Finance Division at METI and a key player in Japan’s ongoing governance reform, said the main goal of the study group was to “establish a common language for Japanese businesses, investors and stakeholders”.
He said the group’s findings would be conveyed to the Japanese and global business community, and would be discussed at the UN SDG Summit in September.The group is one of a string of spin-off forums and initiatives from 2017’s Ito Review 2.0, which explored ways of deepening the investor-corporate disclosure and dialogue.
The “2.0” review was a follow up to the 2014 original, spearheaded by renowned academic Kunio Ito, which led to the establishment of the Stewardship and Corporate Governance Codes.
Ito is chairing the study group.
METI’s efforts include its Guidance for Collaborative Value Creation from 2017 and 2018’s Declaration of Active Fund Managers, which the most recent ESG / SDG group report has recommended promoting further.
In Japan, the FSA requires financial institutions to comply with fiduciary duty in “rules-based” and “principle-based” approaches.
The “rules-based” approach refers to the requirement for financial institutions to comply with a duty of loyalty and duty of care for trustees, stipulated in the acts such as Financial Instruments and Exchange Act and Trust Business Act.
The “principles-based” approach, meanwhile, refers to the “Principles for Customer-Oriented Business Conduct”, introduced by METI in March 2017, which state that financial institutions should “make efforts to conduct customer-oriented business in order to help households’ stable asset building”.
The FSA did not confirm what its role would be in taking the proposals forward, but said it supports private sector-led initiatives, such as the government and industry-backed TCFD consortium.
A spokesperson for METI said the government body was currently unable to share official plans on implementing the recommendations, but that the issue required “careful consideration”.
She said: “In order to promote constructive dialogue between companies and investors, we need to pursue what kind of action investors should take, as well as how to define the concept of ‘fiduciary duty’.”