A RENGO Perspective on “Japan’s Stewardship Code”:From the Standpoint of Promoting Responsible Investment of Workers’ Capital

18 September 2014

Formulation of “Japan’s Stewardship Code”

  • The Financial Services Agency (FSA) formulated and published “Principles for Responsible Institutional Investors ”* (hereinafter “the Code”) on February 26th, 2014. In response, by the end of May 2014, 127 institutional investors, including the Government Pension Investment Fund (GPIF), have announced their adoption of the Code.(Institutional investors such as financial institutions and public pension funds have started to adopt the Code, but corporate pension funds not yet.)

160 institutional investors as of 31 August 2014

RENGO’s Actions so far

  • RENGO has been concerning about the influence of the worker’s capital such as pension funds, and working for responsible investments of worker’s capital from the view points of social responsibility to establish fair markets. In particular, we established “Guidelines on Responsible Investment of Workers’ Capital” in December 2010 and the “Handbook of ‘Guidelines on Responsible Investment of Workers’ Capital’” in April 2013 for negotiations to incorporate the philosophy of responsible investment in each company’s “Basic Policy on Pension Fund Investment” trough RENGO affiliates.

RENGO’s Basic Views on the Code

  • The Code is fundamentally in accord with our purposes of responsible investment of workers’ capital, which mean to promote corporate behaviour and financial transactions with respect for social responsibilities and to contribute to fair and sustainable social formation. Therefore, we welcome the Code as effective way to promote our actions.

RENGO’s views on “Principle 3” of the Code’s “7 Principles”

“Principle 3: Institutional investors should monitor investee companies so that they can appropriately fulfil their stewardship responsibilities with an orientation towards the sustainable growth of the companies.”

  • This principle is particularly important to promote responsible investments of worker’s capital. Its guidance shows examples of factors institutional investors should monitor about investee companies, including non-financial ones. They may include “governance, strategy, performance, capital structure, and risk management (including how the companies address risks arising from social and environmental matters) of the investee companies.” Rengo supports this and encourages pension funds to especially focus on worker-related concerns such as compliance with the ILO Core Labour Standards, application of social insurance, promotion of health and safety, advancement of dialogues with workers (trade unions), development of human resources, appointment of women managers, and provision of decent work, including promotion of work-life balance.
  • GPIF published “Policy for Fulfilling Stewardship Responsibilities” in May 2014 that ask outside investors to have dialogue with investee companies about status of corporate governance, risks (including risks related to social and environmental problems) and prevention of antisocial behaviours. ESG issues were first incorporated in GPIF’s policy. It has great significance that GPIF publicly disclosed its clear policy on its stewardship responsibilities. Other pension funds should follow GPIF actions.

RENGO’s Action Plan

  • We encourage the government to familiarize the aims, features and roles of the Code, and to ensure that it is functioning appropriately.
  • RENGO, together with relevant RENGO affiliates, lobbies the government and pension-related commissions to steadily implement responsible investment in public pension funds.

The full texts of “A RENGO Perspective on “Japan’s Stewardship Code”

“Japan’s Stewardship Code” in English¡Êsource¡§ Financial Services Agency¡Ë