How to Mobilize Funds from Investors?

Mr. Adachi:   Indeed, Japanese companies are taking the lead in addressing climate change and disclosing information about it. Over the past few years, Japan has become the world's leading country with the largest numbers of signatories for the Task Force on Climate-related Financial Disclosure (TCFD).
 
On the other hand, I think there is much room for improvement in the disclosure of information on gender, which is most relevant for the "S" and "G" areas of ESG. As the disclosure of gender-related information is becoming indispensable to obtain funds from institutional investors and others, companies should position the promotion of gender equality as a growth strategy, not merely legal compliance anymore. I believe that the current situation should be recognized as an urgent issue in order to promote gender equality within companies and foster a corporate culture that facilitates innovation to secure competitive and quality human resources in a highly competitive global market in Japan, where the working population is declining. Having said that, in reality, I see that the urgency of this situation is not yet understood.

Mr. Adachi:   Certainly, information disclosure by Japanese companies has progressed compared to the past. However, foreign institutional investors are moving faster than the change that the  Japanese companies are making. A considerable number of foreign institutional investors are paying attention to information on the promotion of women in the companies in which they invest. It is important to note that institutional investors are not only interested in the ‘head count’ such as the number of female managers.
 
In other words, when focusing on sustainable corporate growth from a global perspective, the emphasis is on gender equality in the Social (S) and Governance (G) areas. Here, they evaluate a company's ability to increase its corporate value while flexibly responding to changes and market needs as a management strategy, through their efforts to address gender issues. Companies on the receiving end of investment need to be thoroughly informed about the view of these institutional investors.
 
In addition to the percentage of women in leadership positions, a company's commitment to gender equality can be seen in its promotion and career development opportunities for women, equal pay for equal work, and work-life balance. Companies are also increasingly focusing on quality that cannot be measured quantitatively, such as corporate culture, for example, whether there is diversity in the supply chain, as a criterion for selecting suppliers. In other words, foreign institutional investors make multifaceted judgments, including non-financial information, when determining the value of a company in which they invest, and they invest in the company's growth potential on that basis. Therefore, I believe that Japanese companies will naturally be more demanding in their investment analysis of corporate management strategies (companies promoting women's participation), promotion of dialogue, and visualization of information on the progress and impact of women's participation, from the perspective of investment performance, which is also important for investors.

Mr. Adachi:   Unfortunately, that is the case. In 2019, the SPF published the “Gender Equality in Japan, Hong Kong & Singapore”, a study conducted in collaboration with Equileap, a Dutch data agency specializing in gender-related data to identify the top 100 listed companies in terms of advancement of gender equality. The study compared data on gender equality from 200 listed companies worldwide, with data on gender equality from 100 companies based in three Asian countries. The Asian companies' gender equality scores are much lower than the average global score.
 
The reason for the poor scores by the Asian countries can be explained by the lack of disclosure of gender-related information and data inavailability, in addition to the slower progress made towards gender equality. In our research with Equileap, we assessed a gender equality score of the target companies based on the 19 indicators, which aligned with the UN Women's Empowerment Principles (WEPs). The WEPs, jointly developed by the UN Global Compact and UN Women in 2010, are global action guidelines for companies to voluntarily address gender equality by placing it at the core of their management.
 
In the case of Japan, if this trend continues, it is possible that foreign institutional investors may not value Japanese companies well enough to invest in, regardless of how much Japanese companies try to improve their gender equality scores.

Mr. Adachi:   Together with Gender Action Platform (GAP), a Japanese NPO, we have published a Japanese version of the "WEPs Framework for Transparency and Accountability," which is a guidance note on measuring & reporting gender initiatives in line with the WEPs. This guidance note describes the procedures and concepts for measuring and disclosing the results of specific and transformative initiatives within the company, the company's supply chain, and community. We hope that Japanese companies will use it as a tool to proactively implement gender equality initiatives. We hope that we can contribute to closing the perception gap between domestic companies and institutional investors. I also hope that the disclosure of information will trigger changes in corporate policies and culture within companies, resulting in the promotion of gender equality.
 
Thus, corporate surveys and institutional investor trends on gender are moving across national borders. However, how many Japanese companies are accepting this information and promoting disclosure of their own information? Only a handful of companies are actively disclosing information on gender issues, viewing them as either risks or opportunities for the future.