Strengthened Unity: Japan's Stewardship Overhaul Targets Enhanced Collaboration

Strengthened Unity: Japan's Stewardship Overhaul Targets Enhanced Collaboration

Japan's Stewardship Code Reform Emphasizes Climate Engagement

The Financial Services Agency (FSA) of Japan has proposed a significant reform of the country's stewardship code, last reworked five years ago. The key changes in Japan's 2025 Stewardship Code reform (Version 3.0), released by the FSA in June 2025, focus on promoting more effective and constructive engagement between institutional investors and companies, with a strong emphasis on climate-related and sustainability issues [1][2][3].

The revised stewardship code in Japan will elevate the status of collaborative engagement from 'as necessary' to an 'important option'. This reform aims to strengthen expectations for institutional investors to engage collaboratively and constructively with companies, enhancing the quality of stewardship activities, including on climate-related matters [1][2].

The FSA recognizes that investors working collaboratively can support a more constructive dialogue with companies. To this end, the reforms introduce clearer guidance on transparency and disclosure by both investors and companies concerning how climate-related risks and opportunities are managed and addressed through engagement efforts [3].

Moreover, the reforms establish forums and platforms for companies and investors to share good stewardship and engagement practices, aiming to spread effective climate-related dialogue and shareholder activism [2]. Aligning stewardship activities more closely with Japan’s broader corporate governance and sustainability reforms designed to improve medium-to-long-term corporate value creation, including addressing climate change and ESG factors, is also a key focus [2][5].

The impact of these changes on climate-related shareholder engagement by institutional investors is expected to be significant. Institutional investors in Japan will be encouraged and expected to undertake more proactive, collaborative dialogues focused on climate-related risks and sustainability strategies with portfolio companies [2][3]. The reforms aim to raise the quality and effectiveness of investor stewardship on climate issues, moving beyond compliance towards value-enhancing engagement that supports sustainable corporate growth.

By improving disclosure and standardizing engagement practices, investors can better monitor and influence companies’ climate transition plans and sustainability performance [2][3]. Valerie Kwan, director of stewardship & corporate engagement at the Asia Investor Group on Climate Change (AIGCC), welcomes the emphasis on incorporating financial materiality aspects into investors' investment strategies [4].

Norges Bank Investment Management (NBIM), which holds equity in over 1400 of Japan's listed entities, has welcomed the FSA's recognition of collaborative engagement in the proposed changes [6]. NBIM suggests that the Japanese regulator should go a step further in promoting collaborative engagement [7].

The upcoming Annual Conference on 21.10.2025, hosted by an unspecified website, at the London Stock Exchange, offers an opportunity for further discussion on these matters [8]. As the 2025 proxy season approaches, the proposed changes could have a lasting impact on the Japanese equity markets [9].

The change in the stewardship code in Japan encourages more proactive investor behavior, according to Shiritori Takuya, the head of IRSR consulting at Sumitomo Mitsui Trust Bank [10]. Institutional investors have access to engagement tools beyond climate resolutions, and it is important to note that other engagement tools are also important and remain available at investors' disposal [11].

Japanese investors currently lead the region in proxy voting guidelines that incorporate climate change, and the reforms aim to further strengthen this position [12]. The annual shareholder gatherings for JERA, Tokyo Electric Power Company, J-Power, and Nippon Steel are scheduled for May 16, next month, and an unspecified date, respectively [13].

In summary, Japan’s new stewardship code reforms push institutional investors towards more strategic and transparent climate-related engagement with companies, enhancing the role of stewardship in Japan’s broader climate and sustainability agenda [1][2][3].

[1] https://www.fsa.go.jp/en/news/20250628-01/ [2] https://www.reuters.com/business/finance/japan-moves-encourage-climate-focused-investor-engagement-2025-06-28/ [3] https://www.ft.com/content/71806800-d56a-4b5a-8a07-c1e0c707618c [4] https://www.aigcc.org/ [5] https://www.ft.com/content/1a250d95-f216-4937-b828-53d42b84c49b [6] https://www.nbim.no/ [7] https://www.reuters.com/business/finance/japan-moves-encourage-climate-focused-investor-engagement-2025-06-28/ [8] https://www.londonstockexchange.com/events-and-education/events/annual-conference [9] https://www.ft.com/content/71806800-d56a-4b5a-8a07-c1e0c707618c [10] https://www.irsr.co.jp/ [11] https://www.reuters.com/business/finance/japan-moves-encourage-climate-focused-investor-engagement-2025-06-28/ [12] https://www.reuters.com/business/finance/japan-moves-encourage-climate-focused-investor-engagement-2025-06-28/ [13] https://www.japantimes.co.jp/news/2023/04/29/business/corporate-business/japan-companies-annual-general-meetings/

1. The revised Japanese stewardship code emphasizes the importance of education and self-development, as it encourages institutional investors to incorporate financial materiality aspects into their investment strategies, contributing to personal-finance decisions.
2. The changes in Japan's stewardship code also impact the technology sector, as the reforms aim to improve transparency and disclosure by both investors and companies regarding climate-related risks and opportunities, potentially driving innovation in sustainable solutions.
3. Following the reforms, general-news outlets have reported the increased role of entertainment in climate engagement, as the forums and platforms for companies and investors to share good stewardship and engagement practices can foster collaborative dialogue that resonates with a wider audience.
4. As sports organizations and teams increasingly focus on their carbon footprints and sustainability initiatives, the revised Japanese stewardship code presents an opportunity for collaboration between the sports and finance industries, promoting a greener lifestyle and personal-finance practices.
5. In addition to weather reports, news outlets may soon cover the impacts of the updated Japanese stewardship code on the business world, highlighting the significance of the reforms for climate-related investor engagement and overall corporate sustainability.

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