Gold, silver, bronze: Japan ESG funds in focus

Morningstar looks at the effect the country's revised governance code has had on three sustainable funds

The Olympics and Paralympics in Japan took centre stage over the summer, but as we look away from the sporting arena and ahead to 2022, the country’s corporate governance code for stock market listings is shaping up for some material changes.

Key areas in focus are board independence, diversity and sustainability. At least a third of board members will be required to be independent directors, and the membership of the nomination and remuneration committees must comprise a majority of independent directors, who will review material transactions and conflicts of interest.

Regarding sustainability, the revised code calls for companies to collect and analyse data on the impact of climate change-related risks, as well as improve their climate-related disclosure.

There are currently few dedicated Japanese equity funds with an ESG or sustainability mandate, but with the government pension fund allocating to ESG investments since 2017, domestic companies are starting to up their game on disclosures.

With the corporate governance code helping on ‘G’ aspects, further information on environmental and social factors can only be a good thing to allow investors to make deeper, more rounded assessments.

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Natasha Turner

Natasha is global editor at ESG Clarity, part of Mark Allen Financial, and has been a financial journalist for seven years. She has been shortlisted for Story of the Year and Investment Journalist of the...