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Finance

Japanese watchdog wants asset managers to focus on ESG

FSA set to revise stewardship code for the first time since 2017

The code will be nonbinding, but many institutional investors will likely comply.

TOKYO -- Japan's financial watchdog will revise its code of conduct for institutional investors next spring, urging them to focus for the first time on the environment, society and governance, or ESG, when making investments.

The change by the Financial Services Agency comes as ESG investment is increasingly regarded as a factor for increasing corporate value.

The proposed revisions will call on trust banks and other institutional investors to engage in dialogue with investee companies and clearly state how they will incorporate ESG into investment strategies.

Draft revisions to the code will be explained to a panel of experts at a meeting on Wednesday, with the aim of adopting the revised code as early as March 2020.

It will be the first time the code has been revised since May 2017.

Japan's stewardship code -- modeled after the British version introduced in 2010 -- was first released in 2014. By September 2019, a total of 269 institutional investors worldwide had adopted similar codes.

The revised code, like the previous version, is nonbinding, leaving institutional investors to decide whether to adopt it, but many will likely comply.

According to the Global Sustainable Investment Alliance, global ESG investments in 2018 totaled about 3,330 trillion yen ($30.7 trillion), up 30% from 2016.

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