Japan Markets ViewUnicharm and McDonald’s HD Japan rose to 3rd and 9th in Japanese ESG score ranking in January 2021— Arabesque S-Ray

[Taigi Endo, QUICK ESG Research Center] Unicharm (8113) rose to 3rd in the ranking of Japanese companies in terms of ESG scores as of 31 January by German ESG evaluation firm Arabesque S-Ray, up from a tie for 14th as of 31 December 2020. OMRON (6645) and Tokyo Electron (8035) remained unchanged at 1st and 2nd, respectively.

OMRON (Japan’s top company) and Tokyo Electron (Japan’s 2nd company) are ranked in the world’s top 20
In the world ranking that includes overseas companies as of 31 January, OMRON, Japan’s top-ranked company, ranked 6th, and Tokyo Electron, Japan’s 2nd ranked company, ranked 11th, with two Japanese companies in the top 20. Looking at the distribution of the 566 Japanese companies in 10-point increments, the largest number of 269 companies scored between 50 and 60 points, followed by 132 companies scored between 40 and 50 points. The average score was 52.68, which was lower than the 31 December 2020 score of 52.81 on average of 569 companies.

Arabesque S-Ray automatically collects data necessary for ESG assessment from public information of more than 7,000 companies in more than 70 countries and regions, as well as from sources around the world, and updates the ESG score daily using a unique method based on artificial intelligence (AI). The ESG score is based on a 100-point scale and consists of 3 sub-scores: E (environment), S (society) and G (corporate governance).

 

Unicharm rose from a tie for 14th at the end of December 2020
Unicharm’s ESG score as of 31 January was 70.90 (3rd highest among Japanese companies), up from 67.93 (tied for 14th) as of 31 December 2020. Looking at the sub-scores, all 3 areas increased their scores from a month ago: environment from 71.96 to 73.86, society from 67.97 to 68.61, and corporate governance from 64.76 to 70.09. The ESG score as of 31 January 2020 was 61.07, up nearly 10 points from a year ago. The ESG score as of 31 January 2020 was 61.07, up nearly 10 points from a year ago.

Unicharm’s website has a “Sustainability” tab between the “Corporate Information” and “Investor Relations” sections. On this page, the latest information, a message from the top management, important CSR themes, and initiatives by ESG are placed. In October 2020, the company announced the Unicharm Group’s mid and long-term ESG goals, “Kyo-sei Life Vision 2030”. By implementing this vision, Unicharm aims to contribute to solving environmental and social issues, contribute to consumers and local communities, and achieve sustainable business growth. These efforts seem to have led to the company’s ESG score.

 

McDonald’s HD Japan has jumped from a tie for 49th at the end of December 2020
ESG score for McDonald’s Holdings Japan as of 31 January 2021 was 68.59 (9th in Japan), up from 64.41 (tied for 49th) as of 31 December 2020. The company’s sub-scores in the 3 areas of environment, society, and corporate governance all improved from a month ago, and its ESG score a year ago was 61.75, a significant improvement.

McDonald’s HD Japan website has a tab titled “ESG Initiatives” along with “Corporate Information” and “IR Information”. The five pillars that the company focuses on are “Sustainable Food Procurement”, “Packaging & Recycling”, “Commitment to Families”, “People Empowerment” and “Climate Change Initiatives”.

For example, in the area of “Packaging & Recycling,” in 2016, the company began using paper instead of plastic for iced coffee containers, and the paper cups were made of FSC-certified paper, an international standard for forest conservation. For take-out, the company basically uses paper bags to reduce the use of plastic bags. It is believed that these various measures have been well received.

 

ESG score as one of the measures to evaluate companies
Unicharm’s stock price closed at JPY4,700 on 29 January, down 2.9% from 30 October 2020, but up 24.6% from 31 January 2020. On the other hand, McDonald’s HD Japan closed at JPY5,100 on 29 January, up 3.0% in the last three months, but 1.5% lower than a year ago.

It is difficult to say that the stock price has risen linked to the high ESG score, but more and more investors seem to be interested in the ESG initiatives of companies. It would be better to look at the ESG score as one of the measures to evaluate companies along with their profitability and investment indicators.

Back to Japan Markets View Top