Presentation slide @SCAI2020

1. WHAT DO GOOD INTEGRATED REPORTS
TELL US?: AN EMPIRICAL STUDY OF
JAPANESE COMPANIES USING
TEXT-MINING
Nomura Asset Management Co., Ltd
Tokyo Polytechnic University
Seikei University
Kei Nakagawa, Shingo Sashida, Ryozo Kitajima, Hiroyuki Sakai

2. Contents
1. Introduction
2. Methodology
3. Empirical Study
4. Related Works
5. Conclusion
2

3. 1. Introduction
▪ Focus on ESG Investment
3
➢ ESG investment seeks long-term
returns by investing in a company
that manages environmental, social,
and corporate governance issues.
✓ In 2017, GPIF started passive
investment linked to three ESG
indices.
✓ The Integrated reports that include
both financial and non-financial
information have been attracting
attention.
Environmental
Social
Governance
Financial
information
Integrated
Report

4. 1. Introduction
▪ What is Integrated Report?
4
➢ An integrated report is a concise
communication about how an
organization's strategy, governance,
performance and prospects lead to
the creation of value over the short,
medium and long term.
✓ An integrated report makes explicit
the connectivity of information to
communicate how value is created
over time.
Sustainability
Reporting
Financial
Reporting
Integrated
Reporting

5. 1. Introduction
▪ Integrated reports in japan
5
✓ Growing number of companies
are releasing integrated reports
✓ In 2019, 513 companies issued an
integrated report. The ninth straight
year of growth surpassing 20%.
✓ The companies listed on the 1st
section of the Tokyo Stock Exchange
account for 93% of all issuing
companies.
0
100
200
300
400
500
600
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Source “List of Japanese Companies Issuing Self-Declared
Integrated Reports 2019,” Corporate Value Reporting Lab
513companies

6. 6
▪ Research Design
1. Introduction
Excellent
Significant
improved Unranked
What’s the difference?
NLP
Government Pension Investment
Fund (GPIF) has presented two
kinds of best practices of integrated
reports from 2017.
We examined the differences from
each group by using natural language
processing (NLP).
Good Report
➢ Excellent Reports
➢ Significant-Improved Reports
Not Good Report
➢ Unranked Reports

7. 7
✓ Extract the characteristic descriptive words from each
group reports.
2. Methodology ~ TF-IDF
Bag of words
TF-IDF
➢ Preprocessing
1. Fill in the numbers with zeros
2. Convert words to lowercase
3. Normalize words
4. Exclude words whose
occurrence rate is more than
90%
✓ Same preprocessing is performed
in other methods.
Extracted top five words in
order of the highest TF-IDF
value.

8. 8
✓ Extract each of the topics to be included in the reports
2. Methodology ~ LDA
LDA
Algorithm
Topics: 5
Extracted top 5 words of each topics

9. 2. Methodology ~ Word2Vec
9
✓ Check whether there are any characteristics of ESG in
each report groups.
ESG Key Words
➢ Sustainability
1. sustainability
(持続可能性, サステナビリティ)
➢ Governance
1. corporate governance
(企業統治)
2. governance
(ガバナンス)
3. risk management
(リスクマネジメント)
Check similarityinput
SUM
prediction output
out
ESG words

10. 3. Empirical Study ~ DataSet
✓ We analyze these integrated reports quantitatively.
▪ Data Period : FY 2017 - FY 2019
▪ 33 industry, 372 companies, 1026 reports
10
year rank # of reports # of words # of NVA words
2017 Excellent 49 4,158,746 1,665,058
Improved
49 3,293,330 1,326,357
Unranked
148 8,204,216 3,344,189
2018 Excellent 59 5,262,300 2,126,353
Improved 73 4,872,157 1,971,672
Unranked 212 12,040,775 4,868,704
2019 Excellent 66 5,073,506 2,040,683
Improved 78 5,475,954 2,234,614
Unranked 292 16,976,584 6,895,736

11. 11
3. Empirical Study ~Result (TF-IDF)
Rank Word
Excellent exposure (エクスポージャー)
securitization (証券化)
customer (お客様)
our bank (当行)
tier
Improved customer (お客さま)
vending machine (自販機)
human resources (人財)
medicine (医薬品)
our bank (当行)
Unranked do (する)
business (事業)
our company (当社)
group (グループ)
our bank (当行)
✓ “Excellent” and “Improved”
reports considers the customer
and human resources.
→ Good reports are more
emphasis creating value over the
long term than unrated companies.
Using 2017-2019 reports
customerhuman resources

12. 12
3. Empirical Study ~Result (LDA)
✓ Excellent and improved reports many
descriptions of providing their services and
products to customers.
Rank topic word
Excellent
1 product(製品), revenue(売上高), and(および), product(商品), pertaining(係る)
2 product(製品), customer(お客様), customer(お客さま), and(および), product(商品)
3 product(製品), product(商品), revenue(売上高), report(レポート), customer(お客さま)
4 product(製品), and(および), revenue (売上高), pertaining (係る), customer(お客さま)
5 product (製品), and (および), aim (目指し), product (商品), branch offices (支店)
Improved
1 product (製品), and (および), revenue (売上高), report (報告書), medium-term plan (中期経営計画)
2 and (および), customer(お客さま), product (製品), customer (お客様), aim (目指し)
3 product (製品), revenue (売上高), and (および), customer (お客様), customer(お客さま)
4 product (製品), and (および), revenue (売上高), medium-term plan (中期経営計画), aim (目指し)
5 product (製品), customer(お客さま), revenue (売上高), aim (目指し), customer (お客様)
Unranked
1 transactions (取引), remuneration (報酬), product (製品), and (および), customer(お客さま)
2 product (製品), and (および), compensation (報酬), revenue (売上高), product (商品)
3 product (製品), transactions (取引), customer(お客さま), capital (取引), product (商品)
4 product (製品), customer(お客さま), transactions (取引), revenue (売上高), compensation (報酬)
5 product (製品), product (商品), capital (取引), and (および), revenue (売上高)
Using 2017-2019 reports
service customer

13. 13
3. Empirical Study ~Result (Word2Vec)
Rank Word Similar words
Excellent
Sustainability
(持続可能性)
consistency (整合性)
symbiosis (共生)
Society
Sustainability
(サステナビリティ)
human resources strategy (人材戦略)
growth strategy (成長戦略)
respect for human rights (人権尊重)
Improved
Sustainability
(持続可能性)
growth (成長性)
materiality (マテリアリティ)
social (社会的)
Sustainability
(サステナビリティ)
governance (ガバナンス)
human resources management
(人材マネジメント)
GRI (Global Reporting Initiative)
Unranked
Sustainability
(持続可能性)
social responsibility (社会的責任)
public nature (公共性)
public interest (公益性)
Sustainability
(サステナビリティ)
EHS (Environment, health and safety)
CSR (Corporate Social Responsibility)
Corporate (コーポレート)
➢ Sustainability
✓ “Excellent” and
“Improved” reports
consider the growth
strategy, and human
resources strategy.
Using 2017-2019 reports
- human resources
- growth strategy
- symbiosis

14. 14
✓ Word2Vec
Rank Word Similar words
Excellent
corporate governance
(企業統治)
management structure(経営体制), management(マネジメント), compliance(コンプライアンス)
risk management
(リスクマネジメント)
business management(経営管理), management(マネジメント), quality assurance(品質保証)
corporate governance
(ガバナンス)
management structure(経営体制), board of directors(取締役会), effectiveness(実効性)
Improved
governance
(企業統治)
global governance(グローバルガバナンス), compliance(コンプライアンス), privacy protection(個人情報保護)
risk management
(リスクマネジメント)
quality assurance(品質保証), business management(経営管理), Information management(情報管理)
corporate governance
(ガバナンス)
management structure(経営体制), business operation(事業運営), business strategy(経営戦略)
Unranked
corporate governance
(企業統治)
global governance(グローバルマネジメント), business continuity management(事業継続マネジメント),
RAF (Risk Appetite Framework)
risk management
(リスクマネジメント)
BCM (Business continuity management), crisis management(クライシスマネジメント),
quality management(品質マネジメント)
corporate governance
(ガバナンス)
global management(グローバルマネジメント), governance(統治),
supply chain management(サプライチェーンマネジメント)
➢ Governance
✓ All reports are making
sufficient efforts.
The unranked companies are conscious of
initiatives in line with frameworks
3. Empirical Study ~Result (Word2Vec)
Using 2017-2019 reports

15. ✓ What Do Good Integrated Reports Tell Us?
15
3. Empirical Study ~ Discussion
➢ TF-IDF
✓ Good reports considers the customer and human resources.
→ Creating value over the long term
➢ LDA
✓ Good reports considers the customer, products and medium-term plan.
✓ Unranked reports have the word ”compensation” on many topics.
→ Are there too many financial explanations than good reports?
➢ Word2Vec
✓ Good reports consider the symbiosis, growth strategy and human resources
strategy.
✓ All reports are making sufficient efforts for governance.

16. 4. Related Works
✓ There are many studies that use NLP techniques to predict
stock prices or company performance
16
Author studies
Izumi (2019) Constructed an economic causal chain network and predicted the
stock price by the lead-lag effect
Nhi (2019) Investment strategy using ESG indicators and deep learning
✓ The relationship between ESG and corporate performance has
been studied for a long time
Author studies
Porter (1995) positive relationship between environmental performance and financial
performance
Fatemi (2018) Investigated the relationship between ESG disclosure and corporate
evaluation

17. 5. Conclusion
✓ Good reports tend to place more emphasis on employees, product and
customers in creating value over the long term.
17
service
customer
- human resources
- growth strategy
governance

18. References
18
Nhi (2019) Deep learning for decision making and the optimization of socially responsible
investments and portfolio. Decision Support Systems, 124:113097, 2019.
Izumi (2019) Economic causal chain and predictable stock returns. In 2019 8th
International Congress on Advanced Applied Informatics (IIAI-AAI),
Porter (1995) Toward a new conception of the environment-competitiveness relationship. Journal
of economic perspectives, 9(4):97–118, 1995.
Fatemi (2018) Esg performance and firm value: The moderating role of disclosure. Global Finance
Journal, 38:45–64, 2018.