Blog : BOARD TALK
|Posted on March 15, 2016 at 12:00 PM|
A (good) sign of the times? Stewardship is catching on with global investors, and one of the largest pension funds in Japan has just set an example for its peers.
Japan's Pension Fund Association (PFA) has just appointed Hermes EOS, the stewardship division of Hermes Investment Management, to develop and implement its stewardship activities. With ¥12.7 trillion** (US$112.1 billion) in assets under management, PFA is one of the largest pension funds in Japan.
“We are honoured to have been selected by one of Japan’s largest pension funds to provide our stewardship services and look forward to working with Japanese companies on PFA’s behalf. This comes at a crucial time for stewardship and corporate governance in Japan and we are delighted to be a part of these important developments” said Hans-Christoph Hirt, Co-Head of Hermes EOS.
It does, indeed, come at a critical time for stewardship and corporate governance in Japan. The country introduced its Stewardship Code – the Principles for Responsible Institutional Investors – in 2014. This was followed by the country’s first ever Corporate Governance Code, which came into force last year, in June 2015.
Despite the signing of codes amid a government push in Japan for improvements in corporate governance across the board, progress has been slow. Last September the world’s largest pension fund – the $1.1 trillion Japanese Government Pension Investment Fund (GPIF) signed up to the UN’s Principles for Responsible Investment network.
At the time, just 34 signatories had come from Japan as opposed to 239 from the United States, followed by the United Kingdom's 201.
But last month GPIF was blocked by the Japanese government from investing directly in equities amid corporate fears that it could wield too great an influence over the private sector. The Financial Times quoted Nicholas Benes, a Tokyo-based expert on corporate governance (@benesjp on Twitter) as saying that mention of Japan’s corporate governance code was “conspicuously absent” from any of the GPIF’s investment policy documents.
PRI aims to keep a close eye on the commitment of its signatories, while also spreading the word on responsible investment world-wide. When GPIF signed up, Fiona Reynolds, its Managing Director, said she hoped it would make others in the region take notice of responsible investment.
In this, its 10th anniversary year, a key focus for PRI is on increasing its profile and values in the Asian market. Its next conference, #PRIInPerson, will be in Singapore in September.
As Sir Mark Moody-Stuart of U.N. Global Compact (which is in partnership with PRI) said to me in an interview featured on this website; "It’s about continually trying to raise the bar. Even when standards are voluntary, they get baked in if the bar is constantly rising."
Colin Melvin, Chair of Hermes EOS and Global Head of Stewardship at Hermes Investment Management
"The introduction of the Stewardship and Corporate Governance Codes has produced a step change in the relationship between Japanese companies and their shareholders. We have already seen a change in our dialogue with Japanese companies" said Colin Melvin, Chair of Hermes EOS and Global Head of Stewardship at Hermes Investment Management.
Daisuke Hamaguchi, CIO Japan's Pension Fund Association
"At a high level, our focus is to improve the transparency and efficiency of Japan’s capital markets in order to attract more investors, not only from within Japan but also from overseas. It is about time the industry starts acting as good stewards” said Daisuke Hamaguchi, Chief Investment Officer at the Pension Fund Association.
Hermes EOS recently appointed Masaru Arai as a senior engagement consultant, based in Japan. He will focus on engagements in the country on behalf of Hermes EOS and its clients.