

Japan’s Ministry of Economy, Trade and Industry (METI) has created a label to identify companies that are reporting on ESG performance, as part of efforts to improve corporate disclosure and improve the long-term investing landscape.
Last year, METI set 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 Guidance for Integrated Disclosure and Company-Investor Dialogues for Collaborative Value Creation (Guidance for Collaborative Value Creation).
It was a key element of the 2014 Ito Review, chaired by leading academic Kunio Ito. Modelled on the UK’s Kay Review, it served as a basis for corporate governance and capital market reforms in Japan.
This month, METI has published what it describes as “four principles” and “four actions” for disclosure and dialogues between companies and investors, based on the discussions of the working group.
A new label created by METI to identify companies that proactively disclose ESG and other ‘non-financial’ information is one of the “four actions”. Also, there will be a “Declaration of Active Fund Managers” to identify those that use the Guidance for Collaborative Value Creation. METI will publish sector-specific guidance following the publication of the main Guidance — specifically for the biomedical industry — and clarify its relationship with existing diversity guidelines. The fourth action will be to improve disclosure from small- and mid-cap companies.
The “four principles” include understanding the meaning of “purposeful dialogues”. In particular, it states that firms and investors should see disclosure and engagement not solely as additional costs, but as investments in future value creation.
Also, companies and investors should use “shared languages”, based on the Guidance for Collaborative Value Creation, to achieve effective and efficient disclosure. All employees should be familiar with the Guidance, including non-executive directors, METI added.
Finally, investors should explain how they use ESG or other ‘non-financial’ information in their decision-making process, so that companies are encouraged to disclose.
The Tokyo Stock Exchange, the Japan Investor Relations Association (JIRA) and the Securities Analysts Association of Japan have all endorsed the Guidance, using it in their own research. JIRA plans to hold seminars explaining how to implement the guidance, according to a statement.
Additional reporting by Ella Milburn