5&6 March, Tokyo. Conference Report

Transcription

1 RI Asia &6 March, Tokyo Conference Report

2 Hosted by In Partnership with Lead sponsor Co-sponsors Associate sponsors Exhibitor Supporting organisations 2

3 RI Asia 2014 attracted 273 delegates from 168 companies and 14 countries By region: Japan 84% Others 16 % By type of company: By job level: CEO/CIO/CFO/COO/ Executive Director/ Partner 14% Others 28% Asset owners and advisers 15% (eg pension funds, faith groups, investment consultants, fund buyers) Asset managers 18% (and suppliers of investment management services) Others 27% (corporates, government and regulators, associations,legal, academics etc) Managers 34% MD/Director/ Business Head 24% Service provider 40% (eg research agencies, indices, data vendors) Response Global Media Ltd Managing Editor, Hugh Wheelan Tel: +33 (0) Mobile: +33 (0) hugh@responsible-investor.com Editor, Daniel Brooksbank London Tel: +44 (0) Mobile: +44 (0) daniel@responsible-investor.com Correspondent, Jan Wagner, Frankfurt Tel: +49 (69) jan@responsible-investor.com Publisher, Tony Hay, London Tel: +44 (0) Mobile: +44 (0) tony@responsible-investor.com Events Director, Rachel Pine, London Tel: +44 (0) rachel@responsible-investor.com Sales Manager, David Mac, London Tel: +44 (0) david@responsible-investor.com Sales Manager, Aneta Atanasova, London Tel: +44 (0) aneta@responsible-investor.com New Subscriptions Sales, Haydon Zaccaria, London Tel: +44 (0) haydon@responsible-investor.com Office Manager & Subscriptions Enquiries, Gabrielle Fox, London Tel: +44 (0) gabrielle@responsible-investor.com Publishing Assistant, Aurora Balashi, London Tel: +44 (0) aurora@responsible-investor.com Correspondence: Response Global Media Limited, Tower Bridge Business Centre East Smithfield London E1W 1AW info@responsible-investor.com RI INSIGHT is published by Response Global Media Limited. No part of this publication may be reproduced in any form without prior permission of the publishers. 3

4 By Company: Alamco - asahi life asset management All-Japan Prefectural and Municipal Workers Union AllianceBernstein Japan AMP Capital Amundi APG Asset Arabesque Asset Ark Totan Alternative Asahi Shimbun Asia Market Data and Research Asia Pacific Economic Journal Australian Council of Superannuation Investors Australian Trade Commission Awa Securities Best Mix Investment Big Lobe Bloomberg BNP Paribas Boston Common Asset British Embassy Tokyo Business for Social Responsibility (BSR) CalPERS Capital Dynamics Colonial First State Global Asset cre-en CSR Design & Landscape Dai-ichi Life Research Institute Daiichi Sankyo Daiwa Insititute of Research Daiwa SB Investment Daiwa Securities Group Dasos Capital Deloitte Touche Tohmatsu Development Bank of Japan DIAM Dragon Capital Edge International EIRIS ESG factars Institute Far East Securities Federation of National Public Service Personnel Mutual Aid Associations FINEV First State Investments French Embassy in Japan FTSE Group Fukoku Life Investment Global Compact Japan Network Governance for Owners Japan Government of Japan Henley Business School Hermes Equity Ownership Services Hermes Fund Managers IFM Investors ITOCHU Corporation James Cook University Japan Asia Asset Japan Business Assurance Japan Investor Relations & Investor Support Japan Shareholder Services Japan Social Investment Forum JPC Office Toyosu KDDI Pension Fund Kokkusai Kogyo KPMG Azusa Sustainability Link Corporate Comminications Mariner Japan Markit Asia MEDINET Ministry of Health, Labour and Welfare Ministry of the Environment Mitsubishi Corporation Disaster Relief Foundation Mitsubishi Electric Pension Fund Mitsubishi UFJ Trust and Banking Corporation Mizuho Bank Mizuho Information & Research Institute Mizuho Trust & Banking Morgan Stanley MUFG Securities MSCI MSCI ESG Research MU Investment Advisory Nadir National Federation of Mutual Aid Associations for Municipal Pensions NEC Capital Solutions NEC Corporation Nikkei Nikko Financial Intelligence Nikko Securities Nippon Ham Pension Fund Nippon Life Global Investors Singapore Nishin Oillio Group Pension Fund Nissay Asset Nomura Nomura Asset Nomura Holdings Nomura Research Institute Nomura Securities Northern Trust NTT Oji Office Okasan Asset Ontario Teachers' Pension Plan ORIX Corporation Osaka Electro- Communication University Parnassus Investments Pension Fund Association Pension Fund Association for Local Government Officials PGGM PRI Initiative PwC QUICK Corporation Rengo - Japanese Trade Union Confederation Research Institute for Policies on Pension & Aging Resona Bank Response Ability Rich Appraisal Institute Rob Lake Advisors Robeco Asia Pacific S.T. Corporation S&P Dow Jones Indices SA&C SCS Global Holdings SCSK Pension Fund Secom Corporate Pension Fund Seven & i Holdings Shinkawa Shiseido SMBC Nikko Securities Sompo Japan Insurance Stanley Pension Fund Sumitomo Corporation Sumitomo Mitsui Asset Sumitomo Mitsui Trust Bank Sun Messe Sunrise Advisors Sustainalytics Sustainavision T&D Asset Taiyo Life Insurance Takara Printing Takasaki City University of Economics Tau Investment The Good Bankers The Japan Research Institute The Mutual Aid Association of Prefectural Government Personnel The Nishi-Nippon City Bank The Pension Fund of Bridgestone The Taffrail Group Tokio Marine Asset Tokio Marine Holdings Tokuyama Corporation Toppan Towers Watson Trucost TSE / Japan Exchange Group UBS Global Asset (Japan) UNEP Finance Initative United Nations International Strategy for Disaster Universities Superannuation Scheme (USS) Vigeo Waseda University Wellington International Yamamoto Group Pension Fund Yamamoto Transport Yokogawa Electric 4

5 The RI Asia 2014 Conference was held at the Tokyo Stock Exchange on March 5-6. Over two days, 273 delegates heard high-level presentations from some of the leading figures in responsible investment and corporate sustainability, and joined in lively Q&A sessions and networking breaks. RI Asia 2014 was produced by Responsible Investor which is published by Response Global Media Limited. 5

6 Opening the 2014 RI Asia conference at the Tokyo Stock Exchange on March 5, Professor John Kay, the author of the Review of UK Equity Markets and Long-Term Decision-Making, more commonly known as the Kay Review, began his keynote speech with a quote from Cliff Stoll, the American astronomer: Data is not information, information is not knowledge, knowledge is not understanding, understanding is not wisdom. Professor John Kay The quote, he said, resonated with his belief that more than 100 years of deliberation about financial markets had led to many false premises. These, he said, included the assumption that markets are good at processing information, that more information automatically leads to better markets, and that the reaction to every market failure requires more information. Kay said a dependency on big data had diverted financial attention from the importance of human skill and judgement as qualities for the economic stewardship of companies. He questioned whether increased computer power and speed could ever replace the knowledge, understanding and wisdom essential to running a sustainable economy. Kay said the limitations of mechanising finance had been a clear factor in the crisis as computerised credit scoring crowded out good judgement on mortgage lending. Data is not information, information is not knowledge, knowledge is not understanding, understanding is not wisdom. 6

7 He said a level playing field of market information should - in an efficient market, - imply little gain from data that is available to all. Instead, he said: The truth is that real understanding of companies is elicited by understanding them and engaging with them closely across different sectors, size brackets and markets. By the same token there should be a heavy legal duty on fiduciary responsibility to clients, with strict penalties for transgression. I believe we have reached the stage where less information is more He said: The wisdom of crowds leads to insider information and trading, and breaches of fiduciary duty. The myth of efficient markets needs to be replaced by fiduciary duty. Big data, he said, was less about better understanding of the companies or GDP, but more of replicating the economy and feeding off it rather than investing in it: I believe we have reached the stage where less information is more. Kay s conclusion echoed one of the major Japanese RI themes that would come up in the conference, that of Japan s adoption of a version of the UK Stewardship Code - itself an initiative backed by Kay in his Review - as part of the Abe government s Revitalisation Strategy to kick deflation and spur economic growth. 7

8 Motoyuki Yufu Japanese financial regulation tends to be rules based, whereas the new Stewardship Code is a voluntary comply-or-explain construct, a novelty in the country. Motoyuki Yufu, Director, Corporate Accounting and We Disclosure Division in the Financial Services Agency of the Japanese government, said Japanese pension funds and asset owners have until the end of May to sign up to the initial list of signatories to the Code in what will be an early sign of its success. It aims to promote medium- to long-term are looking to encourage a change of mindset here to promote the sustainable growth of companies 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. Motoyuki Yufu (standing), Hugh Wheelan, Megumi Terayama and Daniel Summerfield 8

9 Chihiro Kawashima, Chief of the Department of Economic and Social Policy at RENGO, which has strong links to pension plans accounting for almost half of the schemes in Japan s JPY50 trillion ( 450bn) corporate pensions sector, said the union-linked funds were looking very closely at capital markets safety and gender equality particularly women on boards both issues raised under the Abe reforms. Chihiro Kawashima Daisei Koyagi, Director, Research Division, Gender Equality Bureau, Cabinet Office within the Government of Japan, said the gender issue had been singled out under Abenomics as being able to raise or protect company value over time. Pointing to the World Economic Forum s (WEF) 2014 Global Risks Report, Fiona Reynolds, Managing Director of the Principles for Responsible Investment (PRI) highlighted more ESG value markers. She noted Fiona Reynolds & Chihiro Kawashima that water crises, climate change risks and severe income disparity dominated the top 5 risks, a clear reminder that issues confronted by responsible, long-term investors were front and centre of global economic concerns. A WEF global risk, she noted is defined as potentially causing significant negative impact for several countries and industries over a time frame of up to 10 years, with a particular accent on potential systemic breakdown. As a result, she said the PRI would be focusing its own forthcoming work on issues of operationalising long-termism via responsible investment mandates and investment and engagement collaboration platforms. L-R Junko Nakagawa, Tsukasa Kanai and Daisei Koyagi 9

10 Ai Kaibu Ai Kaibu, Deputy Director, Environment and Economy Division, Environmental Policy Bureau, Ministry of the Environment in Japan, said the Ministry was promoting ESG and financial activism for local institutions via the Principles for Financial Action (PFA). She said the PFA had been set up as a Japanese stepping-stone for local players to understand responsible investment and take part in global initiatives. Launched two years ago it has 180 members with the Ministry acting secretariat. She said the seven Principles of the PFA, which are modified slightly depending on the relevance to industry sectors via three sector-specific working groups and one cross-sector working group, had been broadly accepted by the Japanese financial services industry. Talking about how different pension funds internationally respond to responsible investment, Claudia Kruse, Managing Director, Head of Governance and Sustainability at APG, the Dutch pension fund manager, pointed out that as a large pension fund managing the money of public sector employees, what the fund does is closely monitored by Dutch society. Kruse was asked what this meant in terms of excluding companies from its portfolio and verifying the status of excluded companies. She explained that the fund had excluded 15 companies, mostly for cluster munitions breaches, but that TEPCO, Petrochina and Walmart, had been divested for breaches of the guidelines of the Global Compact. She underlined, however, that the fund preferred corporate engagement to exclusion. L-R Rob Lake, Claudia Kruse, Fiona Reynolds & Chihiro Kawashima 10

11 William Sherwood-McGrew, Portfolio Manager at CalPERS, the Californian pension giant, which has $13bn invested in the Japanese market, said issues such as integrated reporting by companies, regulatory effectiveness and the concept of stewardship were extremely important to the fund. He said CalPERS deployed a rapid reponse team to take ESG issues up with investment managers because many still don t know how to do this. Investment returns over the last three years, he said, showed that the fund was getting it right on investment and governance. William Sherwood-McGrew Hiroichi Yagi Hiroichi Yagi, Managing Director of the pension fund for SECOM, Japan s largest security firm, said the stability of the Y70bn scheme (of which Y20bn is in equities) in terms of income and payment stream for benefits was paramount. But, he said the scheme also gave a lot of thought to its societal role and its contribution to sustainable development. He said the new Japanese Stewardship Code would be very relevant in this regard. Its clear principles, he said, would contribute to the stable income and focus on downside risk that the fund was looking for, especially in its Japanese equity portfolios where it has concentrated portfolios of names where it wants to focus on company durability and dividend stability in the event of market downturns. He said the fund had already sent instructions to its asset managers regarding the contents of the new rules. 11

12 Masaru Arai Tsukasa Kanai The conference heard about the prospects for responsible investment in Japan. Masaru Arai, Chair of the Japan Social Investment Forum, said the country still had a long way to go with RI at just 0.2% of total institutional asset coverage. However, he pointed out that in a 2013 survey of the market 7% of pension funds said they were actively looking at ESG and 5% said they were considering doing so. On the supply side, Tsukasa Kanai, General Manager, CSR, Corporate Planning Department at Sumitomo Mitsui Trust Bank, said Japanese managers had to know about ESG because of foreign funds investing into the market. In Japan (lags) most addition, he said the Japanese public was becoming increasingly sensitised to supply chain issues after a recent report by Global Witness on rainforest slashing in Malaysia had accused Japanese companies of involvement. Nonetheless, Minako Takaba, Senior ESG Analyst at MSCI ESG Research said Japan lagged most developed market companies on research into supply chain labour risk mitigation, leaving many companies exposed. developed market companies on research into supply chain labour risk mitigation Minako Takaba The barriers, he said, were mainly knowledge and understanding. Arai said he was seeing the start of institutions exploring their voting rights in Japan - albeit not publicly - but said he couldn t see joint corporate engagement taking hold amongst Japanese investors. 12

13 Peter Webster George Iguchi Peter Webster, Chief Executive Officer at Eiris, the ESG research company, said a survey of 236 analysts from the Japanese securities analysts association found that 70% believed ESG issues were indispensable to risks not on the balance sheet, but that 70% also wanted more evidence on the link between financial performance and CSR. To that end, George Iguchi, Corporate Governance Officer at Nissay Asset, said research at the firm showed that companies with higher ESG ratings tended to show higher sales growth and margin expansion, with the G factor having a stronger influence on analysts forecasts. However, he noted that the level of value influence of E, S, and G varied across industry sectors and said that in the research S issues had much stronger influence on corporate value than expected, particularly among pharmaceutical, service and retail companies. 13

14 Etsuya Hirose Webster asked rhetorically whether Japan was ready for a breakthrough on responsible investment? He noted that five years ago CSR had became a trendy topic in Japan, and pointed up the idiosyncracy that in Japan responsible investment was led by corporate pension funds; a world first! Looking further back, he noted that green funds had kicked off in Japan in 1999 and grown quickly to Y200bn, a level that had taken ten years in the UK. Impact bonds had also grown to Y500bn in a short space of time, he said. Etsuya Hirose, Director, Executive General Manager, Japan Sales Headquarters at QUICK, the Japanese financial information provider, which has launched an ESG information service incorporating data and analysis from Eiris, said the company would be looking to expand data on Japanese SMEs. The domestic commitment suggests that Japan is fertile ground for responsible investment. may be mirroring the UK s Stewardship Code now, but it could be that in five years everyone is following Japan Japan may be mirroring the UK s Stewardship Code now, but it could be that in five years everyone is following Japan, said Webster. 14

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