Fair Finance Guide Japan Case Study Report
Japanese Investors Mostly Don't Disclose Voting Results for Foreign Shares
In recent years, environmental, social and governance (ESG) related shareholder resolutions are increasing at the Annual General Meetings (AGM) of companies. At the AGMs of companies, shareholders have the opportunity to raise questions and use their voting rights. Responsible investors can use their voting rights when they hold equity and engage with companies in their portfolio to foster the adoption of sustainable practices and strategy.
In Japan, at the AGM of Mizuho Financial Group on June 25, 2020, a shareholder resolution requiring the financial institution to include a business strategy aligned with the goals of the Paris Agreement in its articles of association was filed by the environmental NGO Kiko Network. This drew a great deal of attention as Japan’s first-ever shareholder resolution on climate change.
This study was conducted with the aim of selecting 43 ESG related shareholder resolutions between 2019 and 2020, and revealing the voting results of major Japanese financial institutions (18 asset managers and owners). Of the 43 resolutions, 28 are related to climate change, while the remaining 15 are related to other human rights, social and governance topics. Only 3 of the 43 selected ESG resolutions were carried, which were all related to climate change.
A desk review was conducted through voting results reported on the websites of each institutional investor and through Proxy Insight Online, a database of voting results. Then, a questionnaire based on the aforementioned desk review was sent to each investor. As a result, we were able to receive responses from 11 investors, of which 7 reported that they did not disclose their voting results for foreign shares held. We also received responses from 2 investors that they do not hold foreign shares directly. Resona Asset Management was the only leading investor that responded with a record of their voting results. The questionnaire results are as follows.
Looking at leading examples overseas, many institutional investors publish their both domestic and foreign voting results online. Storebrand and BNP Paribas and many other investors have established specific guidelines for voting on shareholder resolutions regarding ESG topics and disclosures. In Germany, legislation has been put in place to disclose engagement policies and voting behaviors.
Japanese investors only disclose their voting results for domestic shares. This result shows a lack of transparency on the voting results for overseas companies, and it is inconsistent with the United Nations Principles for Responsible Investment (UNPRI). Therefore, Japanese investors should disclose the voting results for all investee companies.