Japan’s giant government pension fund keen to engage with companies on stewardship, short-termism

Leading investor releases survey of JPX Nikkei 400 companies

Japan’s giant Government Pension Investment Fund (GPIF) says it would be happy to meet with any company to discuss stewardship issues.

The fund has released its first ever survey of companies on the JPX Nikkei Index 400 to evaluate the stewardship activities of its external asset managers and to “grasp [the] real situation of constructive dialogues.”

The massive fund wants to raise the standard of dialogues between institutional investors and Japanese companies as part of a wider push to improve corporate governance in the country. Last month the fund appointed Hiroshi Komori, the former SuMi Trust executive who joined late last year as Director of the Public Markets Investment Department, as head of its new Stewardship Enhancement Group.

“We would be pleased to meet directly with any companies who are interested in meeting with us to discuss their views or concerns,” the fund said, announcing the survey.

The survey, conducted in January, had responses from 260 companies and found they have “recognized and appreciated” the change of institutional investors’ questions about business strategy and ESG issues after the introduction of the country’s two-year-old Stewardship Code.But, the GPIF notes, “there are many companies which pointed out undesirable changes where investors increased formal questions and enforcement of meetings with top management to make their performance records”.

Another finding is that companies complain of “one-way propositions” of investors lacking correct understanding of companies’ circumstances.

To help solve asset mangers’ short-termism, the survey found that many companies expect asset owners – including the GPIF itself – to “work on the issue in a proactive manner”.

It goes on to say that effective engagement is possible even in the case of passive management by effectively narrowing down the number of companies to engage.

The survey suggests that companies have concerns about the undesirable effects of short- termism on the part of investors. GPIF also raises “serious concerns” about how investor short-termism could cause companies to become shortsighted as well: “That is why we place high value on mid- to long-term engagement in our evaluation of asset managers.” Link