Japan is taking a pioneering step towards redefining how financial markets value companies, with the announcement of the JPX-Nikkei Index Human Capital 100. This new index, announced this month and launching in July, will rank and track 100 Japanese companies recognised for their excellence in human capital development
The initiative reflects growing recognition that a company’s workforce and specifically its knowledge, skills, and motivation, is a key driver of long-term value creation.
The new index rewards companies that lead in areas such as “inclusive hiring across gender and nationality, training advanced talent in areas like digital technology, and raising pay to reflect performance”.
The top 100 listed companies will be selected based on their Comprehensive Human Capital Score, which has been developed based on work by German company, ESG Book. Companies earn higher rankings on the score “if the growth rate of the average annual salary of employees is in the top 10%” of the 400 largest companies on the JPX-Nikkei stock exchange; “if the growth rate of operating profit per employee is in the top 10%” of the Top 400 listed companies; and “if the ratio of female managers is 30% or more.”
In a global economy increasingly defined by knowledge and innovation it is inspiring to see Japan move in this direction. If replicated in Australia and elsewhere, similar indices could serve as levers for systemic change in how companies prioritise their staff and in turn contribute to improved economic productivity.
