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METI Formulates Guidance for Integrated Corporate Disclosure and Company-Investor Dialogues for Collaborative Value Creation For encouraging ESG integration and non-financial information disclosure and investment in intangibles

In August 2016, the Ministry of Economy, Trade and Industry (METI) established the Study Group on Long-term Investment (Investment evaluating ESG Factors and Intangible Assets) toward Sustainable Growth and since then, the study group has been holding discussions on ideal approaches to strategic investment for companies to enhance their mid- to long-term corporate value, methods that investors should take for evaluating companies from mid- to long-term perspectives, and ideal approaches for encouraging companies to disclose information and hold dialogues with investors. As part of this effort, METI compiled a guide that may assist corporate managers in holding dialogues with investors or in disclosing management strategies, non-financial information and other elements. It may also assist investors’ evaluation of companies’ performance and management therefor improving corporate value.

1. Background

More and more companies are recognizing the importance of investing in intangible assets that are not necessarily recorded in the balance sheet, e.g., human capital, technologies/intellectual capital and customer bases, to enhance their competitiveness and profitability. Optimizing business portfolios through such investment strategies, mergers and acquisitions and securing long-term funds by winning confidence from shareholders/investors, are significant management challenges for companies.

Non-financial information of companies, e.g., business models, management strategies and measures for responding to potential risks, is also important for investors in assessing corporate value. Moreover, in recent years, institutional investors have also been trying to integrate ESG (environment, social and governance) factors into their evaluation, investment decision, monitoring investee companies, and other stewardship activities.

Meanwhile, it is pointed out that investment in intangible assets and efforts involving ESG factors are merely recognized as expenditures which drive profits downward in the short term, and that information about such investments/efforts are not sufficiently disclosed, thereby hindering companies and investors from deciding on investment on a long-term basis and holding purposeful dialogues between them.

Based on the recognition of these challenges, the study group, established by METI in August 2016, presented the necessity of establishing a framework as “common language” to promote information disclosure by companies and enhance the quality of company-investor dialogues, and the study group formulated a draft guidance as a proposal.

Based on this proposal, METI has compiled guidelines titled “Guidance for Integrated Corporate Disclosure and Company-Investor Dialogues for Collaborative Value Creation: ESG integration, non-financial Information disclosure and Intangible Assets into Investment (Guidance for Collaborative Value Creation).”

In recent years, the Government of Japan has taken policy initiatives to accelerate cooperate governance reform, focus on promoting timely and decisive decision making processes of corporate managers and enhance the quality of dialogues/engagement between companies and investors, promote companies’ sustainable growth and increase mid- to long-term corporate value.  A series of policy initiatives, e.g., the Ito Review and two codes, i.e., Japan’s Stewardship Code and Japan’s Corporate Governance Code, has shown the importance of companies’ integrated information disclosures and opportunities for holding constructive company-investor dialogues. This guidance presents an overview of information that companies should convey to investors, and companies are expected to effectively utilize the guidance in addressing respective requirements for information disclosure and holding dialogues.

2. Outline of the guidance

The guidance aims to contribute to deepening mutual understanding between companies and investors through information disclosure and dialogues and to encourage companies and investors to cooperatively create value. From this viewpoint, METI expects the guidance to play the following roles:

Firstly, the guidance is expected to play a role as guidelines according to which business owners/managers are able to comprehensively convey a variety of information, e.g., their management philosophies, business models, strategies and governance, to investors. As a direct goal, the guidance aims to promote companies’ information disclosure and enhance the quality of company-investor dialogues. However, through efforts for achieving this goal, METI further expects such business owners/managers to streamline ideal approaches to improving their business management for creating corporate value, reviewing corporate strategies and business operations and taking further actions.

Secondly, the guidance is expected to play a role as guidelines for investors to assess companies from mid- to long-term perspectives and utilize assessment results for investment decisions and conducting activities based on their fiduciary duties/stewardship responsibility, e.g., principles of the Stewardship Code. METI expects investors having interest in sustainable enhancement of corporate value to utilize the guidance to fill the gap between investors and companies in terms of information and recognitions necessary for their investment decisions. Institutional investors are able to use the guidance in their dialogues/engagement with companies in their stewardship activities (see the reference).

The guidance provides a basic framework consisting of the following items. Guidelines described in each item are to be utilized by companies according to their strategies and goals.

  1. Value (which gives companies the core principles for their decision making on their future directions and strategies, e.g., corporate philosophies and visions)
  2. Business models (frameworks in which companies are able to provide customers and society with value through their business and to lead results to sustainable corporate growth)
  3. Sustainability/growth (material elements for making business models sustainable and keeping companies’ growth potential, e.g., ESG factors and potential risks)
  4. Strategies (retaining and investing in management resources, intangible assets, etc. that support companies’ competitive edge and optimizing their business portfolio.)
  5. Performance and KPIs (Key Performance Indicators) (financial and non-financial KPIs to assess companies’ financial performance and achievement of their strategies)
  6. Governance

3. Future actions

The guidance is the first step for promoting integrated disclosures of companies and enhancing the quality of company-investor dialogues. METI will provide an environment where companies and investors can share their experiences and discuss further improvement in their disclosure and dialogues using the guidance and develop methods to support such efforts.

(Reference) Revision of the Stewardship Code
On May 29, 2017, the Council of Experts on the Stewardship Code compiled a revised Stewardship Code. The revised Stewardship Code is prepared based on the standpoint that to further enhance the corporate governance reform from formulation-based efforts to substance-based ones, institutional investors should hold deepened, constructive dialogues with companies. In this context, institutional investors are expected to utilize the guidance in fulfilling their stewardship responsibilities based on the Stewardship Code.


Release date

May 29, 2017

Division in Charge

Industrial Finance Division, Economic and Industrial Policy Bureau

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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