Although it may seem slow to overseas investors, the ESG (environment, social and governance) investment started picking up in Japan just last year. Hiromi
Although it may seem slow to overseas investors, the ESG (environment, social and governance) investment started picking up in Japan just last year.
Hiromichi Mizuno, chief investment officer at the Government Pension Investment Fund (GPIF), who is a master of ESG initiatives in Japan, wants to take it to the next level in 2018 so that Japan can catch up with other countries and possibly get ahead of them.
To do that, he stresses that the domestic corporate sector needs to boost its efforts to disclose more information on how they are contributing to the environment and social sustainability.
Government Pension Investment Fund Chief Investment Officer Hiromichi Mizuno| GPIF
“Two or three years ago, every time GPIF mentioned ESG, we really didn’t get very positive reactions from Japanese corporate leaders. But now, I think we are getting much more supportive reactions,” said Mizuno in a recent interview. “I think they started realizing that our push for ESG helps them communicate with foreign investors.”
ESG investment targets businesses that value environmental, social and governance factors. In other words, it focuses on how these companies are focused on long-term-growth business models that also help the world become more sustainable rather than pursuing short-term profits to the detriment of society.
Some data still highlights indifference among Japanese companies. However, Mizuno said their interest in ESG is growing, saying that the concept of ESG should match with traditional values of Japanese companies who often stress how their business is environmentally friendly based on a sustainable vision.
ESG investment in Japan began to grow last year, mainly due to the GPIF’s massive promotion. The world’s largest pension fund, with about ¥155 trillion under management, selected three ESG indexes covering firms that meet certain environmental, social and corporate governance criteria. It began investing ¥1 trillion in them in July.
The indexes are called the FTSE Blossom Japan Index, the MSCI Japan ESG Select Leaders Index and the MSCI Japan Empowering Women Index.
With ESG investment heating up, some firms have started disclosing more ESG-related information, as it can help them score better on ESG evaluations from investors.
For instance, Mitsubishi Corp. released an ESG data book on Dec. 22 that includes details like how much paper, water and electricity it consumes at its offices and the average annual work hours and overtime of its employees.
Still, how seriously Japanese corporations are thinking about ESG remains unclear, according to a November survey by Reuters.
The survey shows that 72 percent of 247 companies said they were not selected for ESG indexes, and 83 percent of the unselected firms said they were not interested in being chosen.
