Japan’s Ministry of Economy, Trade and Industry (METI) is setting up a working group of companies, investors and relevant industry players to research and discuss best corporate practice for disclosing long-term, strategic information to investors under new Guidance for Integrated Corporate Disclosure and Company-Investor Dialogues for Collaborative Value Creation (Guidance for Collaborative Value Creation).
The working group is also being promoted as a forum for businesses and investors to collaborate on solutions.
The Guidance is part of the Ito Review 2.0 released last month and represents the final report of the Study Group on Long-term Investment toward Sustainable Growth established by METI. It summarises the study group’s discussions on how companies can better make strategic investments to improve corporate value, as well as looking at how best to disclose information and to discuss with investors on long-termism. In turn, it looks at ways investors can evaluate companies from long-term perspectives.
The Ito Review 2.0 follows on from the 2014 Ito Review chaired by leading academic Kunio Ito and backed by METI. The 2014 report, modelled on the UK’s Kay Review, served as a basis for corporate governance and capital market reforms in Japan. It presented data and policy recommendations on how to increase the capital efficiency of Japanese companies, improve Japanese corporate return on equity (ROE), and enhance dialogue between companies and investors.
Link to RI report on the findings of the first ITO review
Eight recommendations were put forward in the new Ito Review 2.0 as part of the Guidance.Regarding the achievement of sustainable value creation and on investor dialogues, companies are recommended to:
1. Formulate guidance for Collaborative Value Creation
2. Establish a working group that facilitates integrated disclosure of corporate information and company-investor dialogues
3. Encourage institutional investors to utilize the guidance in their investment decision-making and stewardship activities
4. Develop a better environment for corporate disclosure and dialogue/engagement between companies and investors
5. Improve the database for non-financial information in capital markets and enhancing its accessibility
6. Enrich research and statistical surveys concerning intangible assets, etc. as a foundation of policies, corporate strategies and investment decisions
7. Design incentives to promote investment in intangible assets that improve corporate value, e.g., human capital, investment in R&D or IT and software
8. Continuously discuss challenges to sustainably improve corporate value
METI plans to implement the recommendations in cooperation with other ministries, agencies and organisations.
METI said the ROE of companies listed in the first section of the Tokyo Stock Exchange (TSE) had increased from 2.5% – 5% in 2014 and from 5% – 7.5% in 2016.
Meanwhile, JPX, the operator of the Tokyo Stock Exchange, said yesterday (November 30) that it would join the Sustainable Stock Exchange Initiative.