Smaller Japanese firms lack resources to comply with environmental, social and governance principles, a stumbling block in advocating corporate ESG in Japan, according to Keiichi Aritomo, executive director of FinCity.Tokyo, a quasi-government body that promotes Tokyo’s financial industry.
Aritomo said Japan is very advanced in the “E” component of ESG, particularly in the development of clean energy, recycling and renewable technologies.
But the Japanese government and FinCity.Tokyo are still facing challenges persuading companies, primarily the small and medium enterprises, to comply with ESG principles and reporting.
“There are over 3,900 listed companies [in Japan]. The majority of them are SMEs,” he said at a seminar organised by Asia Asset Management in Hong Kong on April 18. “They don’t have sufficient internal capabilities and human resources to meet the ESG requirements or actively engage in communications with investors [on ESG issues].”
He said many SMEs are unwilling talk to the government or FinCity.Tokyo about integrating ESG into their business operations for a number of reasons. For example, he said they are put off by the additional workload for ESG reporting and having to learn technical terms and rules.
Nevertheless, FinCity.Tokyo, through its extensive networks, is pressing ahead with company visits to persuade them to comply with ESG practices.
According to Aritomo, these efforts have paid off. For instance, he said the number of listed firms that publish an English language version of their ESG objectives is increasing by around 15 every year, which can help attract more international capital.
