RI Asia 2017: Japan’s METI ministry says it is working on non-financial disclosure guidance

Senior official says guidance will help investors assess companies

Japan’s powerful trade and economics ministry is working on disclosure guidance for companies, according to a senior official speaking on the second day of the RI Asia 2017 event in Tokyo today.

Takuya Fukumoto, Director Industrial Finance/New Business Division, Economic and Industrial Policy Bureau at the Ministry of Economy, Trade and Industry (METI) said it plans to issue the guidance next month.

The guidance will help investors to better assess the non-financial capital of Japanese companies, as, according to Fukumoto, efforts of Japanese companies regarding intangibles aren’t visible enough.

Providing the foundational material to create a constructive dialogue between investors and companies, the guidance seeks to optimize the investment chain and create sustainable growth in a virtuous cycle.

To optimize investment in human and intellectual capital and drive long-term wealth, METI is implementing a reform of the capital markets, conducts research in the Study Group on Long-Term Investment and provides guidance to corporates through the Corporate Governance Code, Fukumoto explained.

It follows Hiromichi Mizuno, Executive Managing Director and CIO of the giant Government Pension Investment Fund (GPIF), saying at the event yesterday that he wants to make Japan one of the leading ESG countries in the world.

In the panel after today’s keynote, the focus turned to the Japanese Corporate Governance Code and how it has developed since its introduction in 2015.Koji Watanabe, Head of Planning Section, Listing Department at the Tokyo Stock Exchange – hosts for the event – said that “we need to wait and see what the outcome of the Corporate Governance Code is”.

At the same time, he found a high compliance rate of Japanese companies with the code; 64.8% of 1,639 companies complied as of December 2016.

The two other panelists, Matt Christensen, Head of Responsible Investment at AXA Investment Managers, and Gerard Fehrenbach, Senior Advisor Responsible Investment at PGGM Investments, agreed in seeing a change in Japanese corporate culture. Fehrenbach called it a “fundamental change in attitude”.

Christensen said investors should look beyond the compliance discussion and be more strategic in their evaluation. Looking at the bottom line of carbon reporting, for example, helped to drive the discussion to ‘substance versus form’.
Elsewhere in the region today, Securities Commission Malaysia has released its new Malaysian Code on Corporate Governance (MCCG), a set of best practices aiming to strengthen corporate culture anchored on accountability and transparency. It places greater emphasis on the internalisation of corporate governance culture, not just among listed companies, but also encourages non-listed entities including state-owned enterprises, small and medium enterprises (SMEs) and licensed intermediaries to embrace the code.

RI Asia 2017, featuring a line-up of high level speakers from Japan, Australia, Europe and the US, attracted 600 registered delegates.