1LIAJ initiatives in FY2019


Working groups on stewardship activities and ESG investment and finance were set up to contribute to equity market reinvigoration and achieving asustainable society. Continued to publish the LIAJ recommendations (this report) and implement collective engagement in FY2019.
Implemented measures to refine and raise the sophistication of activities at each LIAJ member firm in FY2019. Key measures included holding
joint working group (WG) seminars based on the common theme of “Addressing climate change” as an institutional investor.
LIAJ believes that when companies and shareholders engage in a constructive dialogue and share a mutual awareness of issues, companies will be
encouraged to take steps to increase shareholder value over the medium and long terms. Based on this belief, LIAJ hopes that this report will help toincrease shareholder value over the medium and long terms, leading to the reinvigoration of the stock market as a whole..

Equity market reinvigoration/Achieving a sustainable society

2017～

Improvingshareholder
returns

1974～

Improving ESG
disclosure

Improvingclimate change
disclosures

Based on surveys of companies/investors

Upgraded initiatives and approaches of WG participants

Stewardship Activities WG(11 life insurers)

Collaborating

ESG Investment and Finance WG(16 life insurers)

Recommendations for companies, investors and government

2

FY2019 policy recommendations


The following recommendations were made for management goals/financial strategy, improving corporate governance, enhancing dialogue,
shareholder voting, and promoting ESG initiatives.
Recommendations for enhancing dialogue were added in FY2019.
Recommendations

Management
goals /financial
strategies

Improvingcorporate
governance①

Raise shareholder returns over the medium andlong terms (dividend payout ratios of at least 30%)②

Set ROE targets adjusted for cost of capital andtarget higher ROE levels③

Improve disclosure about expectations of external
directors and their performance⑧⑤
Enhancing
dialogue

Revised⑥
New

Improve disclosure/dialogue relating to medium- andlong-term investment strategy

Companies⑨

Greater transparency for shareholder voting processes

Investors⑩

Disclose ESG initiatives using integrated reports andother means
Companies⑪

Incorporate ESG initiatives in medium-term
management plans

Formulate ESG investment and finance policies andPromoting⑫ promote dialogue from medium- and long-term
ESG
perspectives according to investment strategies
initiatives Combined

Encourage involvement of top management in
dialogue

Investors

Investors

Companies

New

Enhance disclosure about the impact of climate change
on corporate activities and encourage the use of thisinformation⑭

Take steps to promote ESG initiatives acrossgovernment ministries/agencies

Government⑬

Promote disclosure of non-financial information,
including ESG, as material for dialogue

Promote in-depth dialogue from medium- and longterm perspectives according to enhanced corporate
New analysis and understanding, and investment
strategies⑦

TargetProvide clearer explanations of proposals with a highdissent ratio

Shareholder Revised
votingCompanies④

Recommendations

TargetSurvey on initiatives to enhance corporate value＜Purpose＞To implement recommendations for equity market reinvigoration and achieving a sustainable society based on results of surveys on initiatives and awareness ofcompanies/investors＜Survey targets and response rate＞Listed companies 45% (540/1,200 companies); investors 53% (104/196 companies)

Investors

For Companies

Recommendation (1): Management goals/financial strategies

Continued

3

Recommendation (1): Raise shareholder returns over the medium and long terms(dividend payout ratios of at least 30%)
82% of investors are not fully satisfied with current levels of shareholder returns and dividends.
59% of investors expect firms to offer payout ratios of at least 30% over the medium and long terms. However, the actual payout ratios remain
under 30% for around half of all firms, despite some signs of improvement.
⇒Increase shareholder returns over the medium and long terms, with a payout ratio target of at least 30%,
after gauging investor expectations through dialogue[For investors]
Satisfaction level for shareholder returns and dividends(select one)
Satisfactory at
nearly all firms(80%+)

Satisfactory at little tono firms (under 20%)

“Satisfactory at lessthan about half offirms” totals 82%

1%

2%

Satisfactory at not
many firms (20-40%)

Satisfactory at many firms(60-80%)[For investors]
Desired medium- and long-term level of dividend payout ratios (select one)
Reference: Distribution of payout ratio for companies (actual)
20-30%

40-50%

59%

10-20%
Desirable
投資家にとってlevels for
望ましい水準investors

50-60%

60%
or overLevel does
not matter

30-40%

50%
17%

20%

【2019】
2019Actual
payout ratios
TOPIX構成for TOPIX
components*
銘柄の実績※

57%
Satisfactory at about half offirms (40-60%)

60%【2018】
2018
Actualpayout ratios
TOPIX構成for TOPIX
components*
銘柄の実績※~10%
Note: Percentage figures are rounded to the nearest percent,so they will not necessarily sum to 100.

0%

20%

* Source: Nikkei QUICK
Note: Excluding unprofitable firms

40%

60%

80%

100%

For Companies

Recommendation (1): Management goals/financial strategies

Continued

4(Reference) Disclosure of numerical shareholder return (SR) targets
Proportion of firms with official SR targets

Number of firms disclosing SR targets
700

100%

600

70%

66%

66%

66%

59%

57%

80

54%

51%

45%

90

500

400

300

49

DOE*

43
37

91

91

37

60%

Total payout
ratio, etc.

92

Undisclosed

80%

126

40
31

54

51

37

35

35

93

114

99

95

92

Payout ratio(less than 30%)

96
94

40%
Payout ratio
200

Disclosed
20%

30%

34%

35%

34%

41%

43%

46%

49%

55%

306
100

239

244

250

2012

2013

2014

336

373

405

426

2018

2019

0

0%

2011 2012 2013 2014 2015 2016 2017 2018 2019
Source: LIAJ research
Based on survey of top 1,200 stocks by market capitalization

2015

2016

2017

Source: LIAJ research
Based on survey of top 1,200 stocks by market capitalization
Note: Firms with multiple SR targets counted for each target* DOE: dividend-on-equity ratio(at least 30%)

Recommendation (2): Management goals/financial strategies

For Companies

Continued

5

Recommendation (2): Set ROE targets adjusted for cost of capitaland target higher ROE levels
 76% of investors expect ROE of 8%+, yet ROE remains under 8% at 47% of listed firms.
 The percentage of firms that calculate their cost of capital (return expected by shareholders) increased by around 10%.
However, 41% of firms have still not determined their cost of capital. This partly explains the gap between investor expectations
and the status quo.

⇒Set ROE targets adjusted for cost of capital, eyeing medium- and long-term improvement in ROE levels[For companies] (select one)
Do you calculate a precise cost of capital (return expected byshareholders)?

[For investors] Desired medium- and long-term level for ROE (select one)
<Reference> Distribution of ROE levels for listed firms (actual)

Desirable
投資家にとってlevel forinvestors

望ましい水準No assessment of cost of capital

At least 6%
less than 8%76%

At least 8%
less than 10%

At least 10%
less than 12%

41%
Level
At least
does not12%
matter2019 5%47%
ActualROE
上場企業
for listed
firms*の実績※

Less
than 6%

0%

20%

2018

40%

60%

80%

* Source: Nikkei QUICK
Note: All listed firms (including unprofitable firms, excluding the financial sector)

100%

36%

59%

Cost of capitalassessed but notcalculated

Cost of capital
calculated

11%

0%

38%

20%

51%

40%

60%

80%

100%

For Companies

Recommendation (3): Improving corporate governanceContinued

6

Recommendation (3): Improve disclosure about expectations of external directors
and their performance

55% of investors see room for improvement in the roles of external directors, indicating a perception gap between investors and companies on thisissue.
Notably, investors attach even greater importance than companies to certain roles of external directors, such as “involvement in the evaluation ofmanagement” and “supervision to prevent malfeasance.”⇒Improve disclosures about expectations of the roles and performance of external directors,
and explain these matters to investors via respectful dialogue

社外取締役に期待する役割・実績についての情報開示充実[For companies/investors] (select up to three)
What roles expected of external directors do you see as particularly
important?

[For companies/investors] (select one)
Are external directors currently fulfilling the roles that are expected ofthem (see the diagram to the right)?

【2019】 2% Fulfilled to some extent
Companies
企業

Supervisethrough decision-making
経営戦略、重要案件等に対する
on management strategy, important
意思決定を通じた監督
projects and other mattersGetinvolvedin and provide advice
経営層の評価（選解任・報酬）への
on performance evaluations of
関与・助言management(election/dismissal, remuneration)
Supervise systems to prevent
不祥事の未然防止に向けた体制の監督
malfeasance

Fulfilled adequately in linewith expectations

44%

54%

Fulfilled inadequately
and needs improvement
Investors
投資家

55%

34%

11%

Cannot be evaluated byinvestors
0%【2018】 3%
Companies
企業

20%

40%

60%

Companies
Investors
Companies
Investors

Provide advice on business
経営執行に対する助言
execution
Reflect the opinions of minority
少数株主をはじめとするステークホルダーの

80%

100%

Fulfilled to some extent

Fulfilled adequately in linewith expectations

47%

50%

interests and other stakeholders in
意見を経営に反映
management

Deter any conflict-of-interest
利益相反行為の抑止
behavior
Dialogue投資家との対話
with investors
Provide advice as experts in

会計や法律等専門家としての助言
accounting, law and other fields

Fulfilled inadequately
and needs improvement
Investors
投資家

1%

64%

24%

Not fulfilled
at allCannot be evaluated by investors
0%

20%

40%

60%

11%

80%

100%

External directors are notCompanies
企業

特に期待しておらず選任していない
appointed, with no expectations forthem

Investors
投資家

その他
Other

0%

20%

40%

60%

80% 100%

Recommendation (4): Enhancing dialogue Continued

For Companies

7

Recommendation (4): Improve disclosure/dialogue relating to medium- and long-term
investment strategy
 63% of companies believe cash balances are appropriate, but 87% of investors see current levels of cash balances as
excessive. (In FY2018, cash and deposits stood at historic highs for Japanese firms.)
 In their medium- and long-term investment/financial strategies, companies see capex as vital, while investors put moreemphasis on intangibles such as R&D, human capital and IT.
⇒Target appropriate cash levels, and improve disclosure/dialogue related to long-term investment strategy[For companies/investors] (select up to three)
What do you think are important matters to consider, or should beconsidered, in your medium- and long-term investment strategy?

[For companies/investors] (select one)How do you see current levels of cash holdings?

7%
Companies
企業

30%

63%
Inadequate

Appropriate

Excessive
Investors
投資家

87%

12%

Companies
Investors

R&D
investment
研究開発投資1%

Companies
Investors

Humancapital
人材投資

Companies
Investors

IT投資
IT investment
Shareholder
株主還元
returns

0%

20%

40%

60%

80%

100%

Reference: Corporate cash/deposit balance (actual)

Ｍ＆Ａ
M&A
Companies

Capital
設備投資
expenditure
Interest-bearing
有利子負債の返済
debt repayment（Trillions of yen）
200

Investors

Companies
企業

その他
Other

100

Investors
投資家(Companies) Undecided（企業）特に決まっていない

Source: Financial Statements Statistics of Corporations by Industry(excluding financial firms and insurers)

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

0

0%

20%

40%

60%

80%

* Apart from the options listed above, 36% of investors emphasize the need to improve the capitalmix, while only 14% of companies emphasized this priority.

For Companies

Recommendation (4): Enhancing dialogue Continued

Reference: Labor costs, IT investment, capex, and R&D spending in Japan/US* Indexed with the 1997 values set as 1.0.

2.0

Labor costs (US)IT investment (US)Capex (US)R&D spending (US)
1.5

1.0

R&D spending (Japan)
Capex (Japan)
Labor costs (Japan)
IT investment (Japan)
0.51997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Sources: OECD statistics, “Databook of International Labour Statistics” by Japan Institute for Labour Policy
and Training, “2019 WHITE PAPER Information and Communication in Japan” by MIC

8

For Companies

Recommendation (5): Enhancing dialogue

Revised

9

Recommendation (5): Encourage involvement of top management in dialogue 81% of companies have systems in place to share dialogue content with management, but investors feel that “dialogue content
does not reach management” and there is “non-participation by senior managers.”⇒Actively involve management in dialogue and provide feedbackon the results of sharing dialogue to investors[For companies/investors] (select up to three)
What are the main dialogue-related issues regarding the systems andmeasures of your company / the systems and measures forcompanies?

[For companies] (select one)
Do you have a system in place to share dialogue content with management?

0%

20%

仕組みあり
Systemin place

仕組みなし
None

81%

19%

40%

60%

80%

Inadequate disclosure of
対話の材料となる情報開示が不十分
information as material for dialogue

100%[For companies] (Select multiple)
System for sharing dialogue content with management, if such a system isin place

Dialogue content does not reach
対話内容が経営層に届いていない
management

Companies
Investors
Companies

Non-participation by senior
経営トップが対話に関与していない
managers

レポート形式にして定期的に経営陣へ送付しているLack of resources and personnel
対話関係のリソース・人材が不足
involved in dialogue

定期的に経営陣が投資家と対話を行い、経営陣内でDialogue with investors is held regularly by

Improve investor dialogue and
投資家の対話や議決権行使方針へのunderstanding of policies onshareholder voting
理解度向上

Dialogue is compiled into a reportand regularly sent to management

management andshared within management
共有化している

Investors

Opportunities are given

取締役会や経営会議でIR担当者が報告する機会を
to IR personnel to report

Improvethe skills and knowledge
対話担当者のスキル・知識の向上
of dialogue staff

to the Board設けている
of Directors and Executive
Committee
Opportunities are given to provide direct,
経営トップに直接定期的に報告する機会を設けている
regular reporting to top management

特段なし
None
Companies
企業

Other
その他

Investors
投資家

Other
その他
0%

20%

40%

60%

80%

* Options are based on the written
responses of investors.

0%

20%

40%

60%

80%

For Companies

Recommendation (6): Enhancing dialogue

New

10

Recommendation (6): Promote disclosure of non-financial information, including ESG,
as material for dialogue

Investors have stronger expectations for companies to disclose information as material for dialogue than assumed by companies.
Investors expect companies to enhance disclosure of “non-financial information on Environmental (E), Social (S) and related issues,” and“evaluation of the effectiveness of the Board of Directors (G)” in addition to providing an “analysis of operating results and management’s views.”⇒Promote disclosure of non-financial information, including ESG, as material for dialogue[For investors] (select up to three)
What do you expect companies to do to provide opportunities for dialogue
and improve disclosures as material for dialogue?

[For companies/investors] (select up to three)
What do you feel are the main dialogue-related issues regarding
policies and activities at your company, or the main dialogue-related
issues for companies in general?
Inadequate disclosure of
対話の材料となる情報開示が不十分
informationas material for dialogue

Evaluationof the effectiveness
取締役会の実効性評価（G)of the Board of Directors (G)Companies
Investors

Analysis of operating results
業績の分析・経営陣の見解
and management’s views
Non-financial information on
Environmental (E), Social (S) and環境（E）・社会（S）等の非財務情報
related issues

Dialogue content does not reach
対話内容が経営層に届いていない
management
Non-participation by senior
経営トップが対話に関与していない
managers

Reasons for the appointment of社外取締役の選任理由や活動状況
external directors and their activities

Lack of resources and personnel
involved
対話関係のリソース・人材が不足
in dialogue

Plans to nurture successors to theCEO等の後継者の育成計画
CEO and other key posts

Improve investor dialogue and
投資家の対話や議決権行使方針へのunderstanding
理解度向上
of policies
on shareholder voting

Supplemental and detailed
決算に関する補足・詳細データ
earnings data
Policy on remunerationof役員報酬の方針
Board members

Improvethe skills and knowledge
対話担当者のスキル・知識の向上
of dialogue staff

Policy on nominationof役員指名の方針
Board members

None
特段なし

Companies
企業
Investors
投資家

Other
その他
* Options are based on the written
responses of investors.

0%

20%

40%

60%

80%

None
特段なし
Other
その他

0%

20%

40%

60%

80%

For Investors

Recommendation (7): Enhancing dialogue

New

11

Recommendation (7): Promote in-depth dialogue from a medium- and long-term perspective according
to enhanced corporate analysis and understanding, and investment strategies
Both companies and investors feel that the key dialogue-related issues for investors are that dialogue is based on a short-term perspective and there
is only a superficial analysis and understanding of companies.
Both companies and investors also believe that dialogue focused on medium- and long-term themes such as “management strategies and businessmodels” is important.
⇒Promote dialogue focused on long-term themes such as “management strategies and business models”
according to investment strategies, through deeper corporate analysis and understanding.

[For companies/investors] (select up to three)
What are the main dialogue-related issues for investors/what do investors
themselves see as the main issues?
Dialogueconducted based only on short-term
短期的な視点・テーマのみに基づく対話の実施
perspectives and themes

Companies
Investors

Superficial analysis and understanding of
企業に対する分析や理解が浅い(対話内容が形式的)

Companies
Investors

companies (dialogue is mostly a formality)[For companies/investors] (select up to three)
What themes do you think are important to conduct in-depth,
constructive dialogue?
Management strategy
経営戦略・ビジネスモデル
and business model

Companies
Investors

Management philosophy and経営理念・ビジョン
visionFinancial strategy
財務戦略（資本コスト含む）(including cost of capital)

None
特段なし

Corporate business
企業業績
performance

Inadequate explanation of the purpose of
dialogueand other matters (shareholding policy,
対話目的等の説明が不足（保有方針、議決権行使方
shareholder
voting policy, role of dialogue,
針、対話の位置づけ、対話後のプロセス等）
process after dialogue, etc.)

コーポレート・ガバナンス
Corporate governanceLack of resources and personnel involved
対話関係のリソースや人材が不足
in dialogue

Initiatives to address
環境・社会課題への取り組み
environmental and social issues

Lackof dialogue skills among
対話担当者の対話スキルが不足
dialogue staff

Shareholder
株主還元
returns

Other
その他

企業
Companies

Companies
企業

Matters related to AGM agenda
株主総会議案・議決権行使関係
and shareholder voting

投資家
Investors

Investors
投資家

Other
その他

(Investors only) Clarify policy on（投資家のみ）対話活動の方針や考え方の明確化
and approach to dialogue activities* Options are based on the written
responses by companies.

0%

20%

40%

60%

80%

0%

20%

40%

60%

80%

100%

Recommendation (8): Shareholder voting

For Companies

Revised

12

Recommendation (8): Provide clearer explanations of resolutions with a high dissent ratio Companies have been working intensively to provide clearer explanations of proposed agendas in convocation notices.
Accordingly, around 80% of both companies and investors feel that explanations on individual agenda proposals have
improved to a certain extent.
 That said, investors have stronger expectations than assumed by companies, for companies “to enhance explanations throughdialogue and AGM notices” for prior resolutions that had substantial opposition.
⇒Provide better explanations of prior resolutions with high dissent ratios through dialogue and AGM notices[For companies/investors] (select up to three)
What intensive measures are being taken and what means would bedesirable for companies to provide better explanations of individual
proposals?
Explainproposals more clearly
招集通知の議案内容の説明充実
in AGM notices[For companies/investors] (select up to three)
What measures do companies take to address prior resolutions that
had substantial opposition/and what measures do you expect ofcompanies?

Companies
Investors

Explain proposals moreclearly before AGMs

総会前の議案の事前説明の実施・充実

Companies
企業

Explain resubmitted
再度付議する場合の招集通知書での説
motions better
明充実in AGM notices

Investors
投資家

Other
その他
0%

20%

40%

60%

80%

[For companies/investors] (select up to one)
Are explanations of individual proposals adequate?
Adequate

79％

Inadequate
73%

Almost none
19%

2%

To some extent
Compa企業
nies
0%

22%

82％
20%

Companies
Investors

Investor
dialogue
投資家との対話

Provide explanations of proposals via
ホームページ等を活用した議案の説明
websites and other means

Investors 6%
投資家

Companies
Investors

Dissenting
vote analysis
反対理由の分析

Regularly explain the company’s
対話を通じた継続的なスタンスの説明
stance through dialogue

議案の修正・取り下げ
Modify/withdraw
resolutions
Analyze opposing
反対株主の分析
shareholders
None
特段なし
企業
Companies

60%
40%

Companies
Investors

15%
60%

80%

4％

Investors
投資家

Other
その他

100%
0%

20%

40%

60%

80%

For Investors

Recommendation (9): Shareholder voting

Continued

13

Recommendation (9): Greater transparency for shareholder voting processesCompanies expect investors to vote case by case based on the actual circumstances of each company, and to provide better explanations of the reasonsfor voting decisions on each company’s proposals.
Investors themselves recognize the importance of voting case by case based on the actual conditions of each company and providing better
explanations of the reasons for voting decisions on each company’s proposals.
⇒Greater transparency for shareholder voting processes through voting rationale and explaining voting decisions tocompanies.

[For companies] (select up to three)
What kinds of improvements do you expect from investors on shareholder
voting?

[For investors] (select up to three)
What kinds of improvements do you think will be necessary with respect toyour shareholder voting?

Voting based on the actual
対話等により個別企業の実態を踏まえた
circumstances
議決権行使の実施
of eachcompany through dialogue

Voting based on the actual
対話等により個別企業の実態を踏まえた
circumstances
議決権行使の実施
of eachcompany through dialogue

自社への議決権行使賛否判断理由のExplainthe reasons for voting decisions
on each 説明company’s proposals

議決権行使に関する対話の充実
Improvevoting-related dialogue

Improve
disclosure of voting criteria
議決権行使基準の開示の充実

Improve voting from a medium- and
中長期的視点での議決権行使の実施
long-term perspective

中長期的な視点での議決権行使の実
Improve voting from a medium- andlong-term
perspective
施Explainthe reasons for voting decisions
投資先企業個社への議決権行使賛否
on individual companies receiving
理由の説明 investments

議決権行使に関する対話の充実
Improve voting-related dialogue

Improve
disclosure of voting criteria
議決権行使基準の開示の充実

Improve
disclosure of voting results
議決権行使結果の開示の充実

Improve
disclosure of voting results
議決権行使結果の開示の充実

Utilizeproxy advisory firms properly
議決権行使助言会社の適切な活用

Consistency between dialogue
対話内容と議決権行使判断の整合and voting decisions

Consistency between dialogue
対話内容と議決権行使判断の整合and voting decisions

Utilizeproxy advisory firms properly
議決権行使助言会社の適切な活用

その他
Other

Other
その他
0%

20%

40%

60%

80%

0%

20%

40%

60%

80%

For Companies

Recommendation (10): Promoting ESG initiatives

Continued

14

Recommendation (10): Disclose ESG initiatives using integrated reports and other meansInvestors’ evaluations of disclosure by companies on ESG initiatives have improved.
There remains a perception gap between companies and investors on the adequacy of ESG disclosure. Around 30% of companies believe that
disclosure is adequate, while only a few investors hold this view.
Firms often use their website as the main medium for their ESG disclosures. However, investors are seeking ESG disclosures through Integrated
Reports and other means.
⇒Encourage communication with investors by improving ESG disclosure,using integrated reports and other publications, as well as websites[For companies/investors]
What kinds of media do you use to disclose ESG initiatives? (selectmultiple)/Which would you like companies to use? (select up to three)[For companies/investors]
Is the current disclosure of ESG initiatives adequate? (select one)

【2019】
Adequate
Compa企業
nies

26%

49%

7%

17%

Integrated
Report
統合報告書

20%

40%

Companies

60%

80%

Investors

IR presentation

To some extent
Investors
投資家

0%

Not
disclosed

Inadequate

67%

1%

4%

28%

IR説明会資料
materials
Websiteホームページ

Investors

Companies

CSR Report/Sustainability Report
CSRレポート・サステナビリティレポート
0%【2018】
企業
Companies

20%

40%

60%

100%

Adequate
28%

1%

47%

18%

56%

7%

Not
Inadequate disclosed

20%

40%

60%

80%

Earnings
Report
決算短信
Other
その他

Investors
投資家
Companies
企業

42%

No
ESG-related disclosure is needed
ESGに関する情報開示は必要ない

1%0%

Corporate Governance Report
コーポレート・ガバナンス報告書
Annual有価証券報告書
Securities Report

To some extent
投資家
Investors

80%

100%

For Companies

Recommendation (11): Promoting ESG initiatives

Continued

15

Recommendation (11): Incorporate ESG initiatives in medium-term management plansCompanies responding that ESG initiatives are extremely important for business and companies incorporating ESG initiatives in medium-term
management plans both increased by around 10% compared with last year.
Most investors believe that ESG investment and finance lead to improved investment gains and medium- and long-term returns.
⇒Increase corporate value over the medium and long terms through efforts to strengthen the business-level commitment
by including ESG initiatives in medium-term management plans[For investors]
What is the purpose of ESG investment and finance and what impact does it
have on investment performance? (select one)

[For companies] Are ESG initiatives important for business? (select one)
0%

20%

40%

2019

60%

66%

2018

57%
Extremely
important
非常に重要

80%

100%

33%

2%

41%

Somewhat
important
ある程度重要2%Notthat important
そこまで重要ではない

 Increase in companies responding that ESG initiatives are extremely
important[For companies]
Which management policies incorporate ESG initiatives? (select multiple)
0%

10%

20%

30%

40%

50%

Purpose ESG投融資の目的
of ESG investment and financeTo achieve a sustainable society
持続可能な社会実現のため
To improve investment gains
投資収益向上のため
To fulfill societal demands
社会的な要請に応えるためTo mitigate risk
リスク抑制のため
To fulfill trustee demands
委託者からの要請に応えるため
To improve brand value
ブランド力向上のため
Other
その他

60%
53%
45%
42%
18%
10%
3%

Impacton investment performance
運用パフォーマンスへの影響
Improved medium- and long-term
中長期的なリターン向上
returns
Risk mitigation
リスク抑制

No impact
影響なし
Other
その他
Reduced medium- and long-term
中長期的なリターン低減
returns
Reduced short-term returns
短期的なリターン低減
Improve short-term returns
短期的なリターン向上
Increased risk
リスク上昇

62%
19%
12%
3%
2%
2%
0%
0%

[For investors] What is your stance on ESG investment and finance? (select one)
Contributes to society and should be invested in,even at the expense of returns

60%

Cannot make investment
decision as returns are uncertain

CSR
policies
CSR方針
Action 行動指針
guidelines
Medium-term
中期経営計画
management
plan

Should invest without sacrificing returns

Management philosophy
経営理念

2019

Internal内部統制方針
control policy

2018

Not incorporated
組み込んでいない
Other
その他

5% 5% 0%90%

 Progress on incorporating
ESG into medium-term
management plans

0%

20%

40%

60%
80%
100%
Do not invest, since returns are often sacrificed

 90% of investors replied that ESG investment should be madewithout sacrificing returns

For Investors

Recommendation (12): Promoting ESG initiatives

Combined and continued

16

Recommendation (12): Formulate ESG investment and finance policies and promote dialogue
from medium- and long-term perspectives according to investment strategiesEven investors implementing ESG investment and finance have not yet fully formulated and announced ESG investment and finance policies.
Around half of firms believe the problem lies in the fact that investors only seek dialogue focusing on short-term topics. Meanwhile, there was anincrease from the previous year in the ratio of companies that said they took, or improved, actions based on dialogue on environmental and social
topics, or on matters involving external directors.
⇒It will be important for investors to formulate policies, while promoting dialogue from medium- and longterm perspectives according to their investment strategies[For investors]
Are you implementing ESG investment and finance? (select one)

[For companies]
What issues are discussed during dialogues with investors? (select three)

Question for investors implementing ESG
investment and finance (Have you formulated andannounced ESG investment and finance policies?)

0%

40%

60%

Dialogue based only on short-term topics and

短期的な視点・テーマのみに基づく対話…
perspectives
Superficial analysis and
企業に対する分析や理解が浅い

実施してunderstanding of companies
特段なし
None

No

いない
34%

Not formulated
41%

実施して

Yes

Insufficient explanationof the purpose of dialogue
対話目的等の説明が不足

Formulated,announced
48%

Lack of resources and personnel involved in
対話関係のリソースや人材が不足
dialogue

いる

Other
その他

66%

Lack対話担当者の対話スキルが不足
of dialogue skills among dialogue staff

Formulated,
not announced
11%[For companies] What actions did you take or improve based on dialogue?

[For investors]
Have you set up a team to promote ESG investment and finance? (select one)

0%

23%

37%
20%

40%

40%
60%

80%

A dedicated team has been set up
専任担当組織を設置
専任担当組織は設置していないが、推進担当組織を選定
No dedicated team, but a promotion team has been selected
A dedicated team has not been set up,
専任担当組織の設置、推進担当組織の選定も行っていない
nor has a promotion team been selected

100%

10%

20%

30%

40%

50%

60%

Information
disclosure
情報開示Management/businessstrategy
経営戦略・事業戦略
Shareholder
returns
株主還元

0%

20%

Environmental/social (E/S)
E（環境）・S（社会）関係
Financialstrategies
財務戦略
Profitability
収益性External directors
社外取締役関係
No actions taken
アクションを起こしていない
Anti-takeovermeasures
買収防衛策
Other
その他
Malfeasance response
不祥事等の対応

24%
19%
12% 18%2019
2018

Recommendation (13): Promoting ESG initiatives

For Companies and Investors

New

17

Recommendation (13): Enhance disclosure about the impact of climate change on corporate
activities and encourage the use of this informationFor climate change, 80% of investors say investment opportunities exist, while 75% of companies say that business opportunities exist. Both investors
and companies emphasize the opportunities, as well as the risks posed by climate change to corporate activities.
Consideration of the disclosure and use of climate change-related information based on TCFD recommendations by companies and investors has
advanced compared with the previous fiscal year. However, consideration for the disclosure and use of this information has not advanced as much as
expected given that both companies and investors recognize that climate change presents opportunities.
⇒Identify risk and capture investment and business opportunities by enhancing companies’ disclosure of climate change-related
information and encouraging the use of information by investors[For investors]
Are you considering using TCFD-style climate-related disclosures in theevaluation of firms or for dialogue? (select one)

[For investors] What is your stance on climate change? (select one)

80%
78%
0%

20%

40%

Investment opportunities exist, with risks
リスクとともに、投資機会がある
Risks exist, without investment opportunities
リスクはあるが、投資機会はない

2%11%
60%

80%

Investment
opportunities exist, without risks
リスクはないが、投資機会がある

70%
20%

40%

Risks
exist, without business opportunities
リスクはあるが、ビジネス機会はない

5%
60%

20%

18%

0%

30%

18%

26%

40%

60%

80%

Under consideration
検討しているNot familiar with the TCFD
TCFDについてよく知らない

100%

Plan to consider
検討する予定[For companies]
Are you considering TCFD-style climate-related disclosures? (select one)

6%

80%

20%
Already using
すでに活用している
Planning not to use
活用しない予定

Norisks or investment opportunities
リスクもないし、投資機会もない

75%

Business
opportunities exist, with risks
リスクとともに、ビジネス機会がある

9%

100%

[For companies] What is your stance on climate change? (select one)0%

57% (53% in the previous fiscal year)

9%

60% (50% in the previous fiscal year)

8%

21%

31%

15%

25%

100%

Business
opportunities exist, without risks
リスクはないが、ビジネス機会があるNo
risks or business opportunities
リスクもないし、ビジネス機会もない

Reference: Task Force on Climate-related Financial Disclosures (TCFD)
 Taskforce set up under the Financial Stability Board (FSB) at the requestof the G20 finance ministers and central bank governors
 Issued recommendations in June 2017 on corporate disclosure of financial
risks and opportunities relating to climate change

0%

20%

40%

Already disclosing
既に開示している
今後、開示に向けて検討する予定
Planning to consider disclosure
Not familiar with the TCFD
TCFDについてよく知らない

Recommended
disclosures

60%

80%

Studying adoption for disclosure
現在、開示に向けて検討中
No plans for disclosure
開示しない予定

100%

OutlineGovernance

The organization’s governance around climate-related risks and opportunities

Strategy

The actual and potential impacts of climate-related risks and opportunities on theorganization’s businesses, strategy, and financial planning

Risk Management

The processes used by the organization to identify, assess, and manage climaterelated risks
The metrics and targets used to assess and manage relevant climate-related risks
and opportunities

Metrics and Targets

For Government

Recommendation (14): Promoting ESG initiatives

Continued

18

Recommendation (14): Create cross-sectional policies within the government to promote
ESG initiativesTo promote corporate ESG initiatives and ESG investment and finance by investors, investors and companies both expect the government toimprove the system for disclosures, foster cooperation between government bodies on related policy planning, and take steps to prevent duplicationof guidelines and other frameworks.
Multiple governmental guidelines and other frameworks exist at each responsible body, despite some steps to foster cooperation between
government bodies.
⇒Create policies on the promotion of ESG initiatives across government ministries and agencies,in order to encourage the disclosure of ESG information and ESG investment and finance[For companies and investors]
What do you expect government authorities to do to promote ESG initiatives(companies) and ESG investment and finance (investors)? (select up to two)

Reference: Government meeting structures and guidelines on ESG
promotion initiatives
Ministries/Agencies

0%

20%

40%

60%

80%
Ministry of theEnvironment

Improved system for

情報開示制度の充実
disclosure
Fostercooperation between
関連政策の立案におけるgovernment bodies
on related
policy planning
省庁間の連携強化
Stepsガイドライン等の複線化
to prevent duplicationof guidelines and other
防止に向けた対応
frameworks

Companies

Investors

Financial Services
AgencyCompanies
Investors

Ministry of Economy,
Trade and Industry
Ministry of Land,
Infrastructure,
Transport andTourismCompanies
Investors

ESG Initiative Promotion Council
ESG Finance High-Level Panel
Study Group on Green Bonds and Green Loans
The Council of Experts Concerning the Follow-up ofJapan’s Stewardship Code and Japan’s Corporate
Governance CodeTCFD Summit

Study Group on ESG Real Estate Investment

Recognize exemplary firms
モデル企業の選定、表彰制度
via awards

Ministries/Agencies
Ministry of theEnvironment

Sustainable Development Goals (SDGs) Application
Guide

Establish
a hotline
相談窓口の設置

Financial Services
AgencyGuidelines for Dialogue Between Investors andCompanies

Companies
企業

Guidance for Collaborative Value Creation

Investors
投資家
Other
その他

ESG Initiative Promotion Guidelines

Ministry of Economy,
Trade and Industry

TCFD Guidance
SDGs Management GuideImplementation of collective engagement

19

Identified “improving climate change disclosures” as a new theme

From FY2017, to help reinvigorate the equity market over the medium and long terms and achieve a sustainable society, thelife insurers in the Stewardship Activities Working Group (WG) jointly initiated a collective engagement campaign to convey
their awareness of issues to companies.
In FY2019, the campaign targeted 142 listed companies (a total of 149 companies) on the themes of improving shareholder
returns and improving ESG disclosures, which were continued from the previous fiscal year, as well as improving climatechange disclosures, which was a new theme.

Equity market
reinvigoration

Achieving a sustainable society

Improving shareholder returns(continued)

Improving ESG disclosure (continued)
Improving climate change disclosures(new)Targeted: 67 listed companies

Targeted: 65 listed companies

Companies with strong finances, lowinvesting CF relative to operating CF, anda long-term dividend payout ratio of lessthan 30%

Companies in the top 300 by market
cap that do not provide integrated
disclosure of financial and nonfinancial information

Dialogue by letter and meetings
Stewardship Activities WG(11 life insurers)

Targeted: 17 listed companies
Companies that emit large amounts ofgreenhouse gas emissions whose policies on
climate change-related disclosures and related
matters need to be confirmed

Implementation of collective engagement

20

Results of the collective engagement campaign in the previous fiscal yearIn the previous fiscal year, the collective engagement campaign targeted 107 companies (a total of 112 companies) on the themes of improving
shareholder returns (48 targeted companies) and improving ESG disclosure (64 targeted companies).
With regard to improving shareholder returns, 27% of the targeted companies have met the standard of a dividend payout ratio of 30%, indicating acertain degree of progress.
Looking at improving ESG disclosure, only 6% of the targeted companies newly issued integrated reports. Together with companies showing
progress on the disclosure of non-financial information in environmental (E) and social (S) areas, around 20% of the targeted companies improved
their ESG disclosure.

Improving shareholder returns
Companies
excluded fromthe standard*

Improving ESG disclosure
Issued integrated
reports

6%

Improved ESG
disclosures:a total of 20%

6%

Dividend
payout ratio ofat least 30%

14%

開示充実
を検討

27%

Progress on
disclosure

No progress on
disclosure*2

Dividend payout ratioof less than 30%*1

80%

67%

*2 The campaign confirmed that even
*1 Around 70% of the companies

that have a dividend payout ratioof less than 30% have increased
dividends recently.

* Companies that no longer infringe upon screening standards due to factors
such as a decrease in the equity ratio.

companies that have not shown
progress on disclosure areresponding positively to providing
integrated disclosure.

Upgraded activities by life insurers: Stewardship Activities WG

21

Initiatives and approaches conducted or considered by WG participants to improve
dialogue content
 Based on interviews with external investors and other experts and the sharing of best practices among WG participants, each
WG participant is promoting efforts to improve E/S dialogues and factor the dialogue findings into investment decisions.

Activity details

Approach(Number of WG participants)

Comparison with the previous fiscal year
FY2018FY201910

11

Organization• Set up dedicated dialogue team

4

4（5）

Dedicated
staff• Assigned dedicated dialogue staff

5

5（6）

Expertcommittee• Set up expert committee, including
outsiders

8

9（10）

• Governance (G) dialogue

1011• Environmental (E)/Social (S) dialogues

611• Dialogue findings used in investment
decisions7

10（11）

Dialogue topic

Factoring into
investment decisions* Figures in parentheses include thenumber of companies considering
implementation in the next fiscal year.

Upgraded activities by life insurers: ESG Investment and Finance WG

22

Initiatives and approaches conducted or considered by WG participantsEach WG participant is conducting interviews with external investors and other experts, as well as sharing information and exchanging views on
participants’ initiatives and approaches.
Each WG participant is pushing ahead with initiatives relating to ESG investment and finance, based on factors such as their respective investment
strategies.

Activity details

PolicyOrganization

TCFD
recommendations

Main ESG
investment andfinance methods
being used

Comparison with the previous fiscal year
FY2018FY20191116• Become a signatory to PRI• Formulate ESG investment and financepolicy711 (12) *4

5

11 (15)• Create cross-divisional meeting structures6

11 (14)• Endorse TCFD recommendations*1

5

14 (16)• Disclose information according to TCFD
recommendations0

9 (16)• Engagement (Dialogue)

10

13 (14)• Integration*2

8

12 (13)• Negative screening*3

7

13 (14)(Number of WG participants)

Approach*1 Including cases where TCFD recommendations are signed and endorsed at the holding company level andthe commitment also covers group companies.
*2 Meaning that ESG factors are reflected in the investment process.
*3 Defining securities for portfolio exclusion from an ESG perspective*4 Figures in parentheses include thenumber of companies considering
implementation in the next fiscal year.

Upgraded activities by life insurers: ESG Investment and Finance WG

23Interviews on progressive actions to enhance initiatives/approaches
 Participants in the ESG investment and finance WG continued to invite external experts to host seminars to foster
understanding of ESG investing and finance and enhance initiatives/approaches.
 Moreover, LIAJ has endorsed the TCFD recommendations. Based on this, LIAJ has adopted addressing climate change as acommon theme for the ESG Investment and Finance WG and the Stewardship Activity WG, and has held joint seminars on thistheme.
Instructor

Seminar

Professor Mizuguchi(Takasaki City University of Economics)•

Recent trends in ESG investment and finance

Ministry of the Environment••

Recent trends in ESG finance and the Ministry of the Environment’s initiatives
The Ministry of the Environment’s measures relating to resource recycling of plastics

GPIF

•

GPIF and ESG – ESG activity report for FY2018 –Ministry of Economy, Trade and Industry•

Green finance-related developments (centered on the TCFD Summit)

Nissay Asset Management•

Diverse spectrum of ESG investments, Nissay Asset Management’s ESG investments＜Joint seminars with the Stewardship Activity WG ＞

Instructor
Green Pacific (a total of two seminars)

Seminar••

Addressing the climate change problem and TCFD
Key perspectives on dialogue based on TCFD recommendations