This autumn we travelled to Japan to visit some of our portfolio companies as well as attend the PRI in Person conference. While there, we took the opportunity to discuss the topics in our active ownership strategy with some of our portfolio companies.
At Storebrand's Solutions team, we focus on a specific set of governance topics when we are in dialogue with our portfolio companies. This is because we believe that undertaking positive dialogue around these governance issues, such as fair remuneration and board and management diversity, supports our work in aiming to contribute to a more sustainable future. As such, we expect companies to execute fair remuneration policies and ensure board and management diversity across, but not limited to, gender, ethnicity, age, marital and parental consideration when starting a dialogue with them. As many topics have different levels of maturity in different regions, it is important to develop clear, manageable and mutually understood expectations for our portfolio companies.
Last year, the Japanese Financial Services Agency (JFSA) proposed new ESG disclosure requirements for public companies. This year, the JFSA amended sustainability disclosure rules.
Some of the proposed mandatory disclosure requirements include:
- The representation of women in management positions
- The percentage of male employees who have taken paternity leave
- Salary disparities between female and male employees.
With these new regulations setting the stage for better and improved sustainability reporting, we found our visit to Japan for the PRI conference was an excellent opportunity to meet the Japanese companies in our portfolios.
Our meetings with companies gave us better insight into how these companies are addressing these new requirements, as well as a better understanding of the inner workings of the companies. Our impression was that the companies were very keen to improve their sustainability reporting as well as increase their level of English-language reporting.
That said, some concerns were raised. One topic that was particularly mentioned by several companies was related to gender diversity and female representation in certain fields. When hiring new employees for jobs requiring STEM (Science, Technology, Engineering, and Math) education, the number of female applicants were very limited. According to the OECD, Japanese girls score the second highest in the world in math and third in science, however Japan ranks last among wealthy nations with only 16% of female university students majoring in engineering, manufacturing and construction. Academics are also highlighting the importance of having better diversity within technology as it is a source to innovation and without it the technology developed can have significant deficiencies.
In order to meet some of these challenges, some of the companies we met with had launched programs educating their employees, to ensure better diversity across the various positions within the company, including the management.
Sekisui House, one of the companies we met with in Japan, has been an early adopter of ESG targets with its Sustainability Vision 2025, which is being continually updated to reflect the refining sustainability goals. The company, which is one of Japan's leading homebuilders, talked about how they work with setting ESG targets and measuring and monitoring according to the framework.
We wanted to learn more about their ambition and drive behind working systematically with ESG issues. In 2018, the company launched a paternity leave program, and in response to how the employees have given feedback to the paternity program, they told us that it has generally been very well received. The program has provided employees with a better work-life balance, while also enabling them to stay in their houses for a longer period of time, which in turn inspired them with insights and ideas on how to build better functioning homes.
In general, the meetings with the companies gave us a better understanding of how the companies aim to meet the new disclosure requirements and how they aim to improve some of the areas discussed. When working with a global mandate, it is very helpful for us to get a better understanding of the companies operating in a region that is different from our own, as well as learn more about the working environment they operate within.
To learn more about how we work with active ownership, read our recent blog about the Solutions team's active ownership practices.
Sources:
Japan FSA Looks to Enhance Sustainability Disclosure Rules – ESG Investor
Smart girls don’t marry? Japan rushes to erase stigma for women in science | Reuters