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METI to Establish the Study Group on Long-term Investment (Investment evaluating ESG Factors and Intangible Assets) toward Sustainable Growth

Aiming to sustainably enhance corporate value and promote mid- to long-term investment, the Ministry of Economy, Trade and Industry (METI) established a Study Group on Long-term Investment (Investment evaluating ESG Factors and Intangible Assets) toward Sustainable Growth. Not only focusing on the aspects of promoting investment considering ESG (Environment, Society and Governance) factors, the study group will explore the ideal approaches for business management and investors to sustainably create corporate value, introduce appropriate governance systems and optimize investment based on a long-term business strategy, and examine policy measures for promoting such investment and other efforts.

1. Background

Japanese companies are facing drastic changes in global competitive environments in the era of the “fourth industrial revolution,” the steep decline of Japan’s population, and other factors. In order for the Japanese economy to be set on the road to sustainable growth, companies contributing to the economy, as key players in achieving this goal, should work on future-oriented, proactive and strategic investment and create mid- to long-term corporate value. To this end, it is also important for companies to invest in intangible assets, including human resources, research and development, knowledge and knowhow, and brands, as well as in tangible assets.

Encouraging companies’ investment and value creation requires risk capital, provided by domestic and overseas investors from a mid- to long-term viewpoint. Investing in such companies will give sustainable returns to the investors, and ensuring long-term/sustained returns will contribute to increasing household financial assets and maintaining/increasing national wealth. By making this “investment chain system” work as a whole, an economic virtuous cycle and sustainable growth will be realized.

In addition, global society has been discussing the importance of evaluating intangible assets and accessing non-financial information as a tool to measure mid- to long-term corporate value and has been prioritizing ESG factors to assess companies’ sustainability and risk.

Recently, , these trends are attracting the attention of both companies and institutional investors, as seen in the fact that the Government Pension Investment Fund, Japan (GPIF), the world’s largest pension fund, signed the United Nations Principles for Responsible Investment (UNPRI) and announced that GPIF considers ESG factors appropriately in managing the pension reserves.

2. Purpose

Within the context described above, the Government of Japan formulated the “Japan Revitalization Strategy 2016” setting a measure for “improvement of sustainable corporate value and promotion of medium- and long-term investments,” described as follows:
Not only from the standpoint of promoting investments based on ESG factors, the Follow-up Council will also consider the way in which corporate management and investments creating sustainable corporate value should be and how such value should be evaluated, and the mechanism of governance facilitating the optimization of investments in human, intellectual, manufacturing and other capital resources based on long-term management strategies, and how managers should make investment decisions and how investors should evaluate those decisions, as well as how information should be provided, and reach conclusion on what policy measures the Government should take to encourage optimization of investments by the end of this fiscal year.

To achieve the goal, METI decided to establish the study group, aiming to ascertain the current situation surrounding the issue of long-term investment involving companies and investors and the challenges thereof, and to discuss necessary policy measures and other initiatives.

3. Subjects to be discussed

  • Ideal approaches to investment in intangible assets and other elements contributing to creating sustainable corporate value
  • Ideal approaches to determining and evaluating investment in intangible assets and ESG factors and other elements concerning long-term investment in companies; challenges to be overcome, and measures to encourage investment in intangible assets and other elements contributing to creating sustainable corporate value
  • Perspectives and most effective evaluation methods for investors in determining mid- to long-term corporate value; ideal approaches to accessing necessary information and encouraging company-investor dialogues; challenges to be overcome, and measures to encourage such long-term investment
  • Future directions of policy measures

4. Schedule

The study group will hold the first meeting on Wednesday, August 24, 2016, the second on Monday, September 26, and the third in October.

The distributed materials and a summary of the minutes of the meetings will be made public; however the meetings will not be open to the public in order to ensure an opportunity for members of the study group to exchange their opinions in a frank and free manner.

Appendix

Release date

August 22, 2016

Division in Charge

Industrial Finance Division, Economic and Industrial Policy Bureau

Related Information

Ministry of Economy, Trade and Industry1-3-1 Kasumigaseki, Chiyoda-ku, Tokyo 100-8901, Japan Tel: +81-(0)3-3501-1511
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