Japan’s Stewardship Code, Third Revision: Accelerating Collaborative Engagement Between Investors and Companies

In June 2025, Japan’s Stewardship Code underwent its third revision. The key points of this revision are to enhance the quality of collaborative engagement among investors, improve transparency around beneficial ownership, and streamline the principles to emphasize substance over form.

The Code was first introduced in February 2014 as a basic framework for institutional investors to support the long-term enhancement of corporate value through responsible dialogue with investee companies. The first revision in May 2017 reaffirmed the role of asset owners such as pension funds and clarified investor responsibilities in greater detail. The second revision in March 2020 explicitly incorporated considerations of sustainability and ESG, expanded the Code’s applicability to asset classes beyond equities, strengthened requirements for disclosure of reasons behind proxy voting, and extended the Code to service providers such as proxy advisors and pension consultants.

The third revision in 2025 builds on this trajectory, marking a turning point toward making investor behavior more substantive and effective. By positioning collaborative engagement as an “important option,” the revision signals a clear intention to further promote dialogue between institutional investors and companies.

In response to these developments, Japanese companies are also evolving in their approach to dialogue. For example, at Cadira, the proactive dissemination of sustainability-related information since last year has led to an increasing number of companies reaching out directly to request dialogue. These requests range from seeking advice on advancing sustainability initiatives, to inviting Cadira to speak as an external expert at in-house workshops, and even participating alongside management at investor briefings on integrated reports.

The rise in such requests reflects a shift in corporate mindset. Indeed, these companies often demonstrate a strong commitment to improving management quality as a means of enhancing corporate value. For companies with significant potential to benefit from dialogue, Cadira seeks to invest in them and conduct active engagement with the aim of contributing to both corporate value creation and improved investment performance.

Looking ahead, investors who are chosen by companies and invited into such dialogues may gain an advantage in investment decision-making, as they are better positioned to detect corporate change. For Cadira, the ability to communicate effectively and to engage in meaningful dialogue represents a major strength, and we are committed to continuing to hone these capabilities going forward.