By Lauren Compere, Head of Stewardship & Engagement

During the autumn of 2022, I had the opportunity to travel to Asia for the first time in three years, visiting Japan and Korea to continue Boston Common’s ongoing shareowner engagement work in person. Over several days, I joined an ICGN1 investor delegation, met with Japanese regulators, spoke at the ICGN Korea conference on Human Capital Management, and connected with eight portfolio companies.

Boston Common’s engagement approach, conducted mostly in a virtual setting since the start of the Pandemic, values in-person company meetings for providing a detailed understanding of corporate culture, sustainability governance, ESG momentum, the regulatory environment, and the impact of societal expectations.

1International Corporate Governance Network

Engagement Approach

In Asia, as in other regions, we take a systematic approach to creating impact using investor tools — public policy engagement, proxy voting, and international collaboration — that are further supported by sustained company dialogue. In a recent public policy engagement, we joined the Asian Corporate Governance Network (ACGA) in a call for the Financial Service Agency (FSA) and the Tokyo Stock Exchange to create a public roadmap for companies to raise gender board diversity to 30% by 2027. While in Japan, I was able to reiterate this ask with the agencies.

To support our sustained dialogue, we used Japan’s Corporate Governance Code Revisions, a new classification of issuers from the Tokyo Stock Exchange which included its new PRIME listing and required TCFD disclosure. We focused on evolving global investors expectations like Boston Common’s 2022 Prioritizing Gender Investor Guide, the Finance Sector Deforestation Action (FSDA), issue-area benchmarks (i.e., Corporate Human Rights Benchmark, WBA Digital Inclusion, Global Canopy Forest 500), and leveraging regional or global sector best practices to encourage companies to take needed steps to advance sustainability performance and disclosure.   

Market and Regulatory Drivers

New Japanese regulation supporting Governance of Sustainability and Advancing Women in the Workplace included:

  • Corporate Governance Code (CG) – Revisions included board diversity (gender and non-Japanese), board skills matrix disclosure, TCFD reporting, board sustainability policy, and disclosure of sustainability initiatives.
  • Diversity Policy for Core Human Resources – In 2023, companies will be required to disclose the ratio of women in management positions any diversity policy and voluntary measurable targets in their annual securities
  • Gender Pay Gap – In May 2022, Japan regulators approved a proposal requiring all listed and non-listed companies with over 300 employees to publicly disclosure their gender pay gaps for permanent and non-permanent employees.
  • Male Workers Taking Parental Leave – Public disclosure of the ratio of male workers taking childcare leave.

Across both markets, worker expectations and COVID impacts forced innovation on non-traditional work with companies implementing more flexible, hybrid, and remote work. Younger workers are demanding more work/life balance, and government initiatives in Japan encouraging men to take parental leave are having an impact.

In Japan, there are new regulations supporting governance of sustainability and advancing women in the workplace, while in Korea, regulatory drivers were less of a factor in corporate progress on sustainability issues except the required human rights due diligence related to supply chains. Korean and Japanese companies are, in many cases, subject to EU regulation and will see increased pressure as EU Corporate Sustainability Due Diligence Disclosure (CSDDD) comes into place in 2024, bringing with it due diligence requirements for both climate change and human rights.

Key Insights

ESG Disclosure

Companies in Japan and Korea are advanced in their ESG disclosure, especially on environmental practices. With more focus on mandatory TCFD disclosure, more companies are assessing and disclosing GHG1 emissions and are setting interim emission reduction targets.

Governance of Sustainability

The establishment of sustainability committees at the board or executive level is a key driver in maturing sustainability oversight. Companies are also incorporating ESG KPI’s in performance evaluation and in compensation at the board and/or C-Suite levels.

Board Diversity

There has been little progress in Japan and Korea on gender board diversity, and some boards still do not have any women, although listing requirements will mandate this going forward in Japan. Even less progress has been made in Japan on foreign diversity on boards (less than 10%) but there has been some progress on board independence.

Advancing Women in the Workplace

We have consistently engaged our Japanese companies on advancing women in the workplace. I am encouraged to see the professionalization of human resources which encouraged by government actions and supported internally by companies. Enhancing benefits and health & well-being such as flexible work models and mental health support is critical to advancing women in the workplace. While paternal leave is encouraged by the Japanese government, it also needs to be supported by managers to ensure men are not discriminated against if they take full advantage of leave policies.

Most Japanese companies don’t have informal “affinity groups” where women can come together to share challenges and action steps for advancing in the workplace. In most cases, there are not enough senior women to act as mentors to women colleagues and male managers need mentorship training to ensure the success of their women colleagues.

On the issue of the gender pay gap, Japanese companies already implement equal pay for equal work, however the absolute pay gap remains and issue and more women must be hired at all manager levels with specific goals and mechanisms designed to support closing the gender gap.

Sustainability Target-Setting, Assessment and Disclosure

While sustainability disclosure in both markets has improved substantially over the past few years, it is important for Japanese and Korean companies to continue to expand and improve their disclosure on the governance of sustainability, climate assessment & action, integration of deforestation & biodiversity risk, and human rights.

Company Engagement Focus and Recommendations 


Building long-term engagement relationships is pivotal to our global shareowner engagement approach. Meeting with companies in person allows us to build relationships and provide insights on knowledge or awareness gaps around emerging global investor expectations.

To understand our impact and reach as a global investors, I met with local stakeholders and domestic investors to understand where our voice fits in and how we can raise difficult topics with companies. All the companies we met with were open to discussions on the topics we raised and were actively seeking feedback on material sustainability issues and their own performance and disclosure.

As global engaged investors, we create ESG momentum and impact within companies by acting as a resource, providing logical next steps, sharing peer comparisons, and establishing long-term engagement relationships. We continue to act on behalf of our clients fostering impact through our investments, engagement, and stewardship by addressing real-world, systemic issues.

There is no assurance that any securities we discuss will remain in an account’s portfolio at the time you receive this document. The securities discussed do not represent an account’s entire portfolio and may represent only a small portion of an account’s holdings. It should not be assumed that any securities transactions we discuss were or will prove to be profitable.

Published On: January 6, 2023Categories: From the Commons