XBRL disclosures reveal ESG trends and performance links in Japan

Posted on October 11, 2024 by Editor

A recent working paper by the Asian Development Bank (ADB) investigates Environmental, Social, and Governance (ESG) materiality trends using XBRL data in Japan.

The paper, ESG Materiality in XBRL Disclosures and Its Performance Predictability, leverages textual analysis of annual securities reports from over 3,800 Japanese listed companies to explore the potential of XBRL data for predicting financial and sustainability outcomes.

The research finds a growing trend in environmental materiality disclosures and a correlation between different ESG elements. It also highlights how companies' self-disclosed XBRL data can offer insights into financial and climate-related performance, although the study notes that current ESG disclosure practices alone are not yet robust enough to serve as reliable performance predictors.

Japan has long been a leader in XBRL adoption, with mandatory reporting in place since 2008. This study reinforces the utility of XBRL in enhancing corporate transparency, particularly in the growing field of ESG reporting. However, it underscores the need for further refinement in disclosure frameworks to improve predictive accuracy for financial and environmental outcomes.

Explore the full ADB working paper in this link.