W20, an international civil society organization, recently recommended that Prime Minister Shinzo Abe promote gender investment ahead of the Group of 20 summit of major and emerging economies to be held in Osaka in June.
Such investment involves analyzing companies eligible for investment when considering gender equality as a factor, such as whether women are actively involved in corporate activities.
Management risks
At a panel discussion held Saturday in Tokyo, an official from U.S.-based investment firm State Street Global Advisors responsible for the Asia-Pacific region said that among Japanese firms in which it invests, 281 had no female board members as of March 2018.
The firm, which manages a 2.5 trillion dollars portfolio (275 trillion yen), informed the companies it would vote against their proposals at general shareholders' meetings if they did not appoint female board members. According to the official, more than 50 companies complied with the request.
The episode highlights the growing perception that failure to promote female participation at companies hinders diversity and management innovation.
W20 is comprised of experts from G20 member countries and has advised G20 host countries on policies related to women since 2015. The group's recommendation to Abe marks the first time it has raised the issue of gender investment, which has been increasingly embraced in Western countries.
Interest in gender investment grew after the United Nations adopted the Principles for Responsible Investment, a set of guidelines calling for investors to consider the environment, human rights and other social issues when making investments, in 2006.
After the collapse of Lehman Brothers in 2008, investors began to reconsider strategies that emphasized short-term profit, instead prioritizing long-term investment. Major financial instutions such as Morgan Stanley and UBS released reports concluding that companies with equal numbers of female and male directors have greater return on investment.
Investments on the rise
"In Japan, gender is considered a matter of corporate social responsibility, and many companies do not perceive gender as an investment-related matter," said Tadashi Maeda, governor of the Japan Bank for International Cooperation.
In 2017, the Government Pension Investment Fund (GPIF), which manages 150 trillion yen, added the MSCI Japan Empowering Women Index (WIN) to its list of gauges used to identify investment targets.
The index was created by financial information service company MSCI and measures levels of female participation at companies. MSCI aims to evaluate 500 major Japanese companies, excluding those involved in scandals, based on the percentage of employees and directors who are female, among other factors. Companies that do not disclose such information receive lower scores.
"Considering the severe shortage of the labor force, companies that promote active female participation can more easily secure employees. Such companies can expect long-term growth," an MSCI official said.
MSCI currently picks the top 214 stocks in which GPIF makes investments worth 388.4 billion yen.
"Diversity in management teams is the most important key to corporate productivity. Our investment purpose is to secure long-term profits," GPIF President Norihiro Takahashi explained.
After disclosing information on how it will encourage women to take more active roles, leading precision motor maker Nidec Corp. received 7.3 billion yen in investment from GPIF.
"We didn't think the measures would lead to investment," a Nidec official said.
Dai-ichi Life Insurance Co., Nomura Asset Management Co. and other companies have also launched investment funds that take into account indexes measuring female corporate participation.
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