The following blog post contains data from Corporate Governance in Asia 2023, a new report by Insightia, a Diligent brand. The report shows that that local investors are adopting activism as a tool to maximize value creation, while investors and regulators are working to strengthen corporate ESG reporting.
According to data from Insightia released today as part of a new special report – shareholder activism is rising in Asia. This rise is caused by increased activity from domestic investors and mounting pressure on regulators to enhance corporate ESG credentials.
According to the report, produced in association with Kekst CNC, Japan took the second-place spot for the number of companies subject to activist demands in 2022, with 108 companies facing demands in 2022, almost double the 66 seen one year prior and ranking second only to the U.S.
The report also shows that ESG is also becoming a priority for Asian companies and shareholders. ESG engagements dominated the proxy season in Japan and Korea, while Singapore, China, and Hong Kong issuers face robust new ESG reporting requirements.
Domestic investors contribute to surge in activism
The number of Japan-listed companies subject to demands in 2022 almost doubled to 108, compared to 67 and 66 throughout 2020 and 2021, respectively. Japan took the second-place spot for the number of companies subject to activist demands in 2022, up from third place in 2021 and second only to the U.S.
Meanwhile, South Korea ranks fifth in the number of companies subject to activism globally, with 47 Korea-listed companies facing activist demands in 2022, nearly double the 27 seen one year prior.
The recent increase in activity can be attributed to an increasing number of domestic activists joining the fray, eager to capitalize on undervalued companies. 129 Asia-based activists made a public demand at Asia-based companies last year, compared to 112 a year prior.
Are Japan and South Korea becoming ESG hotbeds?
Environmental shareholder proposals dominated the 2022 proxy season, with 12 climate change proposals subject to a vote at Japan-listed companies, quadruple the three in 2021. The average support for these proposals increased to 17%, compared to 5.6% in 2020.
Additionally, 2022 marks the first year in history that activists launched environmental campaigns in South Korea. A record 12 environmental demands were made last year.
In the past year, Hong Kong and Singapore also both introduced mandatory ESG reporting for selected public companies, indicating that ESG reporting is gaining more traction.
Financing and unlocking shareholder value takes center stage
With activists eager to recoup pandemic-related losses, return cash to shareholders demands were common – with 63 being made made at Japan-listed companies in 2022, nearly triple the amount seen in both 2020 and 2021.
Meanwhile in Hong Kong, three campaigns featured capital structure demands, up from zero just two years prior, while in South Korea demands of this kind increased by 50%.
Financial concerns are also translating into rising opposition for executive remuneration. As of March 13, 2023, director remuneration proposals subject to a vote at Asia-based companies have won 96.7% average support, compared to 98.1% and 97.7% throughout 2020 and 2021, respectively.