Sustainable investment management in Japan

Hiroyuki Bando

Capital Markets Law Journal, 2025, vol. 20, issue 4, kmaf021.

Abstract: Japan adopted the Stewardship Code in 2014, which was modelled on an earlier one (2012) from the UK. Initially, the Prime Minister took initiatives to introduce the Code into Japan as an economic strategy for accelerating its economy. Before Japan adopted its Stewardship Code, there had been existing legal frameworks by fiduciary duties for the investment chain players. Therefore, Institutional investors had difficulty in accepting and understanding the Stewardship Code. However, because the Financial Services Agency (FSA) drafted and controlled the Stewardship Code and asset managers in Japan are regulated firms by the FSA, the Code has functioned as if it were a statute, with almost ‘apply and explain’ requirements. Under these circumstances, the Stewardship Code in Japan has evolved independently to that from the UK and gradually have required investors to monitor sustainability initiatives of investee companies when engaging with them. The Corporate Governance Code, also modelled on a similar code from the UK, has required directors of listed companies to consider the interests of other stakeholders in addition to shareholders since 2015. In order to promote and ensure engagement alone and/or collaboratively between investors and companies, the FSA has made amendments to disclosure obligations by statutes in a timely and appropriately manner. No statute imposes an obligation (eg duty of care) regarding ESG matters on directors and/or companies as they do in European countries other than the statutory disclosure rules. Listed companies conduct ESG initiatives in compliance with the Corporate Governance Code, and investors monitor how companies conduct them in an appropriate manner, that is required by the Stewardship Code. The FSA amends statutes in order to further support greater engagement amongst parties. The relevant parties are well empowered to promote sustainability in Japan not by statutes but by voluntary efforts. That is the ‘Japanese Approach’.

Date: 2025
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