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In our first article in a three-part series on shareholder activism in Japan, we reviewed the history and evolution of activism in Japan. Against this backdrop, in our second piece, we now introduce the Japan equity investment team’s approach to engagement and value realization, as illustrated by recent case studies.
Figure 1 is a conceptual diagram showing how we classify Japanese companies into one of three groups (Group A: Quick adopters, Group B: Recent adopters, and Group C: Slow adopters) according to the degree to which they have adapted to reform.
Our engagement efforts cover a comprehensive range of areas that contribute to increasing corporate value, such as shareholder returns, communication with capital markets, and business portfolio management. Where companies have significant areas for improvement (Groups B and C), we often conduct collaborative engagements by leveraging companywide investment resources. In recent years, we have also worked to escalate engagements with some Group C companies, through proxy voting and engagement letters. Our experience over the years has shown that a significant improvement on engagement metrics tends to lead to a revaluation and reassessment of corporate value.
We believe that our engagement success is underpinned by our balance of global scale with regional perspectives and expertise. Below, we outline three key elements that we believe differentiate us, creating a strong foundation for success. (Figure 2).
We believe the rise of shareholder activism in Japan will continue to drive significant opportunities for investors to enhance corporate value through engagement. Ongoing policy support is expected to continue, anchoring the Japanese stock market’s position as a sustainable investment theme.
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Monthly Asset Allocation Outlook
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Multiple authors
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