Domestic Investors Drive Surge In Asian Activism While ESG Prospers

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Data from Corporate Governance in Asia 2023, a new report by Insightia, a Diligent brand, show that local investors are adopting activism as a tool to maximize value creation, while investors and regulators alike are actively working to strengthen corporate ESG reporting.

ESG Is Becoming A Priority For Asian Companies

NEW YORK, MARCH 21, 2023 | Insightia data released today as part of a new special report highlight a rise in shareholder engagement across Asia, caused by increased activity from domestic investors and mounting pressure on regulators to enhance corporate ESG credentials.

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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.

Corporate Governance in Asia 2023, produced by Insightia (a Diligent brand), 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.

The ever-evolving number of ESG engagements and reporting requirements for Asian issuers underscores the need for leaders to have a 360-view of data across their organization, strengthening their ability to identify which red flags to escalate to the board, monitor and mitigate evolving risks, and document compliance and risk management efforts in defensible, auditable detail.

“With domestic activists becoming the dominant force in shareholder engagement and the heightened focus on ESG on the part of both investors and regulators, it’s increasingly important for Asian issuers to understand and proactively address stakeholder concerns,” said Josh Black, editor-in-chief at Diligent.

Among the report’s top findings:

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.
  • 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.

Japan and South Korea become 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. Average support for proposals of this kind increased to 17%, compared to 5.6% just two years prior.
  • 2022 marks the first year in history that activists launched environmental campaigns in South Korea. A record 12 environmental demands were made last year.
  • ESG reporting is gaining traction more broadly, with Hong Kong and Singapore both introducing mandatory ESG reporting for selected public companies in the past year.

Financing and unlocking shareholder value takes center stage:

  • With activists eager to recoup pandemic-related losses, return cash to shareholders demands were common. 63 demands of this kind were made at Japan-listed companies in 2022, nearly triple the 24 seen in both 2020 and 2021.
  • 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 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.

To download the full report, simply click here, or to view our archive of publications, please visit the resource center section on the Insightia website.