In Japan, governance will take centre stage as wages rise and regulatory governance reforms start to come into force.
Yu Shimizu, fund manager of the SPARX Japan Sustainable Fund, said megabanks and major property companies have been reviewing their governance systems and strengthening their profit base despite the headwinds of the past 30 years.
“Sustainability measures, which have lagged behind those in Europe and the US, are also being rapidly put in place,” he said.
“Companies such as Mizuho Financial Group, which can use decarbonisation as a business opportunity, and Mitsubishi Estate, which operates buildings in central Tokyo that use 100% renewable energy, could be good investment candidates from an ESG perspective.”
The focus this year will be on mandatory disclosure of human capital, he added.
Companies closing their books after March 2023 are required to disclose non-financial information, including human capital metrics, in their annual financial reports.
“If companies disclose their human capital, it will make it easier to make horizontal comparisons of human resources strategies. If horizontal comparisons can be made, this will have an impact on recruitment activities, as people considering employment will refer to these information. It will also lead to investor interest, as human capital is a key determinant of the future fundamentals of a company.”