Pandemic drives ESG uptake in corporate Japan

May 21, 2021

Japan’s listed companies are increasing their focus on environmental, social, and governance (ESG) issues in the wake of the Covid-19 pandemic, according to a survey by the country’s Government Pension Investment Fund (GPIF).

The survey, carried out as the proxy voting season gets underway in Japan, also found that companies were taking a longer-term view of their business plans.

The GPIF, the world’s largest asset holder with more than $1.6 trillion in assets under management, surveyed companies listed in the First Section of the Tokyo Stock exchange on a range of stewardship activities.

Of the 681 companies that responded, more than half said their business vision was now 10 years or longer and 70% said they discussed their long-term vision with institutional investors.

More than three quarters (78%) of companies said the global pandemic had changed the themes and issues most discussed with their institutional investors, and more than half said the pandemic had led to a change in approach on ESG issues.

Among ESG factors, governance was named as the main theme by 72% of companies, climate change by 64% and diversity by 43%.

The themes that saw the largest increases in responses from companies were climate change, followed by health and safety for employees – the latter often cited in direct response to Covid-19.

The majority (80%) said they explained ESG and other non-financial information in their financial results. Only a small minority said they provided separate briefings to investors on ESG issues, but 166 companies (around a quarter of those responding to the survey) said they were planning or considering the introduction of dedicated briefings in the future.

The GPIF survey also asked companies how much value they placed on four leading ESG indices. About half said they valued them highly, with larger cap companies the most positive. However, there was less enthusiasm for the indices among smaller companies with most answering ‘don’t know’.

The survey's findings fall in line with the increased expectations from the GPIF announced last year.