Page 7 - DIY Investor Magazine | Issue 29

Management accepted that this stemmed primarily from poor disclosure on chemical safety and carbon emissions, as well as their reluctance to engage with shareholders. The company committed to dealing with these issues. The first positive outcome was a meeting with the CEO, who had never met with investors before, to further discuss ESG-related initiatives and disclosures.
Following further meetings by our investment team, the company announced new medium-term financial targets, which positively surprised the market as it represented a first constructive commitment to shareholders. This was followed by the release of its first integrated report and a detailed ESG data book, which now constitutes best practice and included our recommendations: a reduction plan for CO2 emissions and the establishment of a procurement policy that encompasses environmental and human rights issues.
Misumi Group, a factory automation supplier, is another company we think could potentially improve its ESG rating. It ranks low on ESG despite its business of delivering efficiency solutions. We are currently in discussions with the company and the management understands its ESG ratings gap comes from poor disclosure.
Over time, we think executives at Japanese companies will treat the disclosure of sustainability as important as financial data.
Find out more about Fidelity Japan Trust PLC here >
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Select Fidelity Japan Trust PLC (FJV) - GB0003328555
Important Information:
Finding those companies that will disclose sooner and better, perhaps by engaging with them, will potentially create additional opportunities for excess returns on investments.
POSITIONING FOR RECOVERY
Overall, I am cautiously optimistic on the investment outlook for Japanese stocks in 2021. I am also looking to widen the net a bit further and find companies with recovery potential in areas such as leisure and travel as the vaccination rollout in Japan accelerates from here.
As we start to see better earnings announcements in fiscal 2021, there will be an opportunity to pick up companies that are changing into or returning as growth names.
Japan continues to offer a wealth of under-researched mid/ small cap growth companies, where we typically find better business models and returns on equity, and management is more incentivised in terms of shareholder returns.
Active managers such as myself, based here in Japan, have the opportunity not only to invest in established global leaders, but also to unearth less well-known companies (including pre- IPO), where lower levels of analyst coverage can often create some great mispriced opportunities.
In an uncertain environment, our in-depth research and on-the- ground knowledge is invaluable when looking at the micro level and speaking to company management to fully understand the current dynamics.
‘JAPAN CONTINUES TO OFFER A WEALTH OF UNDER-RESEARCHED MID/SMALL CAP GROWTH COMPANIES’
Past performance is not a reliable indicator of future returns. The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser. Investors should note that the views expressed may no longer be current and may have already been acted upon. Fidelity Japan Trust PLC invests more heavily than others in smaller companies, which can carry a higher risk because their share prices may be more volatile than those of larger companies and the securities are often less liquid. Changes in currency exchange rates may affect the value of investments in overseas markets. The shares in the investment trust are listed on the London Stock Exchange and their price is affected by supply and demand. This investment trust can gain additional exposure to the market, known as gearing, potentially increasing volatility. The latest annual reports and factsheets can be obtained from our website at www.fidelity.co.uk/its or by calling 0800 41 41 10. The full prospectus may also be obtained from Fidelity. Fidelity Investment Trusts are managed by FIL Investments International. Issued by Financial Administration Services Limited, authorised and regulated by the Financial Conduct Authority. Fidelity, Fidelity International, the Fidelity International logo and F symbol are trademarks of FIL Limited. UKM0621/34400/ISSCSO00003/0921
7 DIY Investor Magazine | Jun 2021