Featured Discussion

The IIRC visits Edge Internationalin Tokyo during its “Japan Week.”

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International Integrated Reporting
Council (IIRC)
Chief Executive Officer

3
International Integrated Reporting
Council (IIRC)
Region Lead: Japan

Richard Howitt

Hiroko Ozawa (Moderator)

From 1994 to 2016, Mr. Howitt was a
Member of the European Parliament (MEP).
During the last years of his tenure as anMEP, he also acted as an IIRC Ambassador.
After five years in this role, Mr. Howitt wasappointed CEO of the IIRC in 2016.

After working at the consulting arm of an
accounting firm, Ms. Ozawa joined Ernst& Young ShinNihon LLC. Since 2012, she
has also served as Region Lead in Japanof the IIRC.

2International Integrated Reporting
Council (IIRC)
Chief Strategy Officer

Jonathan Labrey
Mr. Labrey served as head of government
relations for the Royal Institute of British
Architects from 2000 to 2004. From 2004
to 2010, he led the public affairs andpolicy team at the Institute of Chartered
Accountants in England and Wales. From2010 to 2012, he was head of communications at the U.K.ʼs Financial Reporting
Council. In 2012, Mr. Labrey joined the IIRC
and currently leads its global policy work.

4
Nomura Asset Management Co., Ltd.
Managing Director, Responsible
Investment Department

Toshiyuki Imamura
Since 1994, Mr. Imamura has worked at
Nomura Asset Management. He began
his career as a portfolio manager in Tokyoand moved to New York City in 2003 towork as an equity analyst for the company.
Since 2008, he has headed the London
office for an affiliate company. In 2016,Mr. Imamura was appointed head of
Nomura Asset Managementʼs
Responsible Investment Department.

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5
Goldman Sachs AssetManagement Co., Ltd. (GSAM)
Vice President, Head of
Stewardship Responsibility Group,Portfolio Management

Emi Onozuka
After working at JPMorgan Chase & Co.,
Ms. Onozuka joined GSAM in 2000. She
has experience working in a number ofareas within the company, including sales,
infrastructure, and portfolio management,
where she was the teamʼs chief operating
officer. Currently, Ms. Onozuka is incharge of ESG research and engagementwith Japanese companies.

6Edge International, Inc. (EDGE)
Chief Executive Officer

Nobuhiro Kajiwara
Building on his vast experience in theinvestor relations industry, Mr. Kajiwara
established Edge International, Inc. in
1990, which supports Japanese companies in their efforts to communicate
effectively with investors and ensure thetransparent disclosure of information.

Ozawa Thank you very much for your time

opportunities in business with the ability totoday. We are honored to be with you and to bematerially affect value over the long term.

able to interview you here at Edge International.

Although the current financial filings and level

Today, we would like to talk about integratedof compliance are important, the <IR>

reporting (<IR>) and what is happening withapproach entails creating a better dialogue

regard to it around the world and in Japan. To

between businesses and investors. This is what

begin, we would like Mr. Howitt to explain what

Japanese companies wanted in order to get

the current situation is with regard to <IR>

increased access to international capital mar-worldwide and gain some insight.

kets, where the <IR> approach is accepted
and acknowledged to become the global norm

Howitt First, thank you for hosting us here,
Mr. Kajiwara,as well as for your support withfor corporate reporting in the future.
Japanese companies and those around theregard to <IR>. I am the new CEO of the IIRC.

world are embracing <IR> as it is providing a

In my role, I travel the world and meet many

bridge between businesses and investors forpeople from our priority markets and various

discussing strategy and the impact of the sixorganizations and at international meetings

capitals, which represent the wider resources andand conferences. Among our priority markets,

relationships that have an impact on businesses

I often call Japan the world leader in terms ofworldwide, and for recognizing that the whole<IR>. The 300 companies and organizations

concept of stewardship is about active business–here that publish integrated reports represent

investor engagement and the creation of long-term

the largest number of such entities in the world,business value. Based on what I learned during

which makes it exciting for me to be in Japan.

my visit to Japan, such objectives seem deeply

Also, the championing of the stewardshiprooted in Japanese corporate culture. <IR> iscode by investors is an essential part of thelinking traditional Japanese values of contributing

philosophy of <IR> worldwide. The change

to society for long-termism with the opening up

that is taking place within the investor com-of more and more swathes of Japanese businessmunity highlights the recognition by niche

to international capital markets and Westerninvestors as well as by mainstream investors ofmarket capitalism. It is very, very interesting.

the fact that there are non-financial risks and

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Labrey I have been with the IIRC for five years
and in that time I have been leading our market
engagement efforts in Asia. As Mr. Howitt said,
Japan is really leading the way when it comes to<IR> adoption, and that has really translated in
the last two or three years in terms of the levels“In the case of Japan,
the country is still in
the process of reforming
its corporate information
disclosure practices.”of <IR> adoption and interest across Asia,
including Singapore, China, and South Korea.

Ozawa Thank you very much for yourFor example, in South Korea, a stewardshipcomments. Secondly, I would like to ask yourcode similar to the code here in Japan has justopinions regarding <IR> in Japan.

been introduced. Adoption of <IR> in South
Korea is relatively low; we have identified only

Imamura Japan is still in the process ofnine companies in that market that have taken

reforming its corporate information disclosure

up <IR>. Nonetheless, we believe that thepractices. My company has plenty of opportuni-

regulatory innovation of the countryʼs steward-

ties to communicate with Japanese companies;

ship code will increase dialogue between

we have over 5,000 meetings with our investee

businesses and investors. I hope that what I

companies each year. When engaging withhave said has provided you with some insightcompanies, we consider integrated reports to bewith regard to developments in <IR> in Japan

key information disclosure tools. But currently

as well as across Asia.

only 300 out of more than 2,000 Japanesecompanies in our portfolio are adopting or haveadopted <IR>, and it is clear that more needs tobe done because the goal of such engagement

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is realizing corporate value creation andsustainable growth of investee companies.
In order to achieve this goal, companies
should realize high-quality corporate governance. Strengthening corporate informationdisclosure can improve the accountability ofcompanies by improving transparency, which
can lead to corporate governance reform.
Therefore, we have to try and convince all of
those companies in our portfolio to produce
integrated reports and improve the quality of
their reports.

Onozuka What I have found with regard to
the value of an integrated report is that it isa very good way of giving investors an overview“There is confusion in
the market place between
the different voluntary
frameworks.”

of a companyʼs business, its main strategies,
and its corporate governance structure.

Imamura On the other hand, a problem thatHowever, the most important aspect of an

we have faced with <IR> in Japan is the lack ofintegrated report, and something I always lookcomprehensiveness and comparability. Somefor, is senior managementʼs commitment tocompanies focus on their business model

ESG, which means a commitment to thewhile others mainly discuss ESG, among othersustainability of the world as well as the sus-related topics.

tainability and growth of its business. The
integrated report is very helpful for investors

Howitt I think that is a good point and it is

who need to quickly gather such information.

something that we plan to raise in this meeting.

The observation that I have made as an

We know that there is confusion in the market

outsider is that a year ago, the discussion wasplace between the different voluntary frame-

focused more on having more Japanese com-works. And, of course, <IR> has been set up as

panies produce integrated reports to reach thea global movement drawing on those frame-

current number of around 300 and on getting

works but also trying to integrate non-financialmore and more companies and investors withand financial information within <IR>. The IIRC

varying motivations to engage in discussions

is the convener and <IR> is the umbrella.

about integrated reports. However, in the last six

Various sustainability and financial standard

months or so, we have seen more mainstream

setters have all agreed to work with us to align allinvestors starting to read integrated reports.

of the different frameworks with the overall aimof promoting integration within reporting.
We have done some really valuable work
together, including creating common landscapemapping that makes it very easy for companies tocheck and compare the different frameworks.

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We are also working together this year on

improvement to try and understand what

SDGs, on the benefits of reporting, and on

the true expectations of <IR> are. So, if they

the implementation of the recommendations

understand the spirit, they will be able toof the Task Force on Climate-related Financialtranslate that very well in their integrated

Disclosures (TCFD).

reports. Any confusion in terms of what toWe are doing this to try and eliminate thisdiscuss in the reports helps us determine

confusion in the market place. We hope that, on

Japanese companiesʼ understanding of <IR>behalf of <IR>, the alignment that is taking

by assessing their current reports.

place will allow companies to feel more confi-

Another reason why this confusion is good isdent to move forward and not be held back bythat while certain frameworks for securities

this confusion.

filing frameworks require companies to report ina certain, highly comparable format, <IR> is a“This confusion helps us
determine Japanese companiesʼ understanding of <IR>by assessing their current
reports.”

voluntary framework that encourages creativity,
creates opportunities for dialogue, and allows
investors to have their opinions and suggestions
reflected.

Howitt I do not view those points as
contradictory. And I agree with your earlier
point about a bit of confusion being good.

Onozuka For the sake of argument, I will take

You probably mean more reports than somethe opposite stance. I think that this confusion

people, so I would keep that in mind. But what

is in a way good for Japanese companies as

you are doing that we would advocate is thatit gives them the chance, or perhaps forces

this goes beyond <IR> to integrated thinking. Itthem, to think. We have a very compliant-

is about changing mind-sets and what you saidoriented culture in Japan, so if there is ahighlights that brilliantly. It is about long-term

framework, all Japanese companies will feelvalue creation and developing a wider view onthat they have to comply, as is happening withwhat such value constitutes. And you cannot

the corporate governance code. Therefore,
they are going through this journey ofCopyright © Edge International, Inc. All Rights Reserved.

do that under rule-based systems. So I reallywelcome what you said.

“If there is an environment
in which the government isencouraging such experimentation and dialogue,
then we will be able to overcome the regulations andarrive at where the market
needs to be.”able to overcome the regulations and arrive at

Labrey I just wanted to add that what else

Ozawa Could we turn to the practical world?

we really welcome in Japan is the Corporate

So, Mr. Kajiwara, what is the opinion of those

Reporting Lab under the Ministry of Economy,

Japanese companies practicing <IR> and what

Trade and Industry (METI), and we have seen

are the kinds of challenges, and benefits,that happen in other markets as well, including

facing them in doing so?

where the market needs to be in terms ofinformation disclosure.

“Materiality and KPIs
represent big challenges interms of <IR> for Japanesecompanies.”

the U.K., where the regulator or the relevant
government department has brought compa-

Kajiwara My company is working withnies and investors to begin a process of experi-

Japanese companies on their <IR> practices.

mentation and do so in a safe environment asToday, there are some 300 companies inthey have the support of the government orJapan producing integrated reports, which

the regulator. Such a development is happening

constitutes about half of the over 600

in different markets, and we really encourage

Japanese companies releasing reports. In theit because one of the barriers to innovation isshort term, we expect the number of Japanese

if companies think, “Will regulators or thecompanies producing integrated reports togovernment allow us to do this?” or “Will we bereach 400. Furthermore, as EDGE is working

punished if we go outside the regulatory bound-with many of the aforementioned 300

aries?” Therefore, if there is an environment inJapanese companies with regard to <IR>, we

which the government is encouraging suchare making a great contribution to <IR>.

experimentation and dialogue, then we will be

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As you may know, materiality and KPIs
represent big challenges in terms of <IR> forJapanese companies. And lots of investors aresaying that it is hard for them to incorporatemateriality and KPIs into their <IR> decisionmaking. In addition, many Japanese companies
are saying that investors should be educated on<IR> and non-financial information, including
ESG. In my opinion, integrated reports are
becoming an important bridge between
companies and investors, and the quality of<IR> will improve in the future if materiality andKPIs are incorporated.

Ozawa In conclusion, Japan is currently ona long journey from a rule-based world to aprinciple-based one. This is a big challenge
because we need to have a change of mind-set,
which will not be easy. I think that the confusionof corporate reporting in terms of <IR> is agood opportunity for companies and investors
to think about what issues are material tothem. This is the future of corporate reporting,and I hope that <IR> becomes an amazing
engagement tool for businesses and investors.
Thank you very much.

Held at Edge International, Inc. on September 14, 2017
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