Japanese pension funds and asset owners have until the end of May to sign up to the initial list of signatories to the Japanese Stewardship Code in what will be an early sign of the success of the new initiative, attendees to the RI Asia 2014 conference in Tokyo this week were told. Speaking at the conference, Motoyuki Yufu, Director, Corporate Accounting and Disclosure Division in the Financial Services Agency of the Japanese government, said the agency, which is overseeing the Stewardship Code, also known as the “Principles for Responsible Institutional Investors”, expected the first list to be published in early June. The Japanese Stewardship Code is part of the Abe government’s “Revitalisation Strategy” to kick deflation and spur economic growth. The Code aims to promote medium- to long-term sustainable corporate returns based on seven principles to guide investors on their stewardship responsibilities. Yufu said the Code encouraged “purposeful dialogue” between investors and companies, which he said was a relatively new concept in the country. In 2009, he said, a study revealed that 80% of companies never spoke with their investors and that the remaining 20% only spoke with investors by telephone: “We are looking to encourage a change of mindset here to promote the sustainable growth of companies.” Japan’s Stewardship Code closely follows the voluntary comply-or-explain regime of the UK Stewardship Code in encouraging asset owners and assets managers to vote their shares, publish their voting records, and engage in dialogue with companies on issues that could impact long-term share value, or to explain why they don’t. The concept is new inJapan where regulation tends to be rules based. Yufu said he hoped that asset managers in Japan would seek to differentiate themselves regarding their application of Stewardship practices and that they would use it as a marketing tool. Yufu said: “There is a tail-wind here. The Japanese and foreign media have a good view on Stewardship” Yufu was asked whether Japanese public-sector pension funds, which include the $1.3 trillion (122 trillion yen) Government Pension Investment Fund (GPIF), the world’s largest pension scheme, would sign up to the Stewardship Code. Yufu said he expected the federation of Japanese public pension funds to support the Code and that his understanding was that GPIF should consider signing, although he said the decision remained with GPIF. The RI Asia conference was hosted by the Japan Exchange Group at the Tokyo Stock Exchange and held in partnership with the UN-supported Principles for Responsible Investment.
*The seven principles of the Japanese Stewardship Code are: *
1. Institutional investors should have a clear policy on how they fulfill their stewardship responsibilities, and publicly disclose it.
2. Institutional investors should have a clear policy on how they manage conflicts of interest in fulfilling their stewardship responsibilities and publicly disclose it.
3. Institutional investors should monitor investee companies so that they can appropriately fulfill their stewardship responsibilities and support the sustainable growth of the companies.
4. Institutional investors should seek to arrive at an understanding in common with investee companies and work to solve problems through constructive engagement with investee companies.
5. Institutional investors should have a clear policy on voting and disclosure of voting activity. The policy on voting should not be comprised only of a mechanical checklist; it should be designed to contribute to the sustainable growth of investee companies. 6. Institutional investors in principle should report periodically on how they fulfill their stewardship responsibilities, including their voting responsibilities, to their clients and beneficiaries.
7. To contribute positively to the sustainable growth of investee companies, institutional investors should have in-depth knowledge on the investee companies and their business environment and capabilities to appropriately engage with the companies and make proper judgments in fulfilling their stewardship activities.