【Research Report】Scale of ESG Investment in Japan

Summary

This paper will introduce the overview of the results of a questionnaire survey of Japanese domestic investment managers that have signed the United Nations Principles for Responsible Investment (UNPRI) conducted by Nikko Research Center , for the purpose of clarifying the state of environmental, social, and government (ESG) investment in Japan. Until now, ESG investment market research has focused on investment products designed for individual investors and the state of investments including those by institutional investors was never fully understood. From the results of this survey, we learned that ESG investment assets in Japan amount to 46.0 trillion yen, which is an amount that greatly exceeds the scale of individual investor-focused financial products known up until now.  In addition, among the ESG investment approaches , the engagement/proxy voting was dominant.
After examining the personnel structure related to ESG investment institutions, it was revealed that many institutions have the most personnel devoted to proxy voting operations. Furthermore, an examination into the characteristics of the clientele revealed that institutional investors such as pension funds are the main players in Japanese ESG investment.
When looking into the ESG fields of interest, greenhouse gases and climate change were brought up in the Environmental field (E), the effective use of human resource in the social issues field (S), and corporate board structure in the governance field (G).  A review of the initiatives other than those of the UNPRI participated in by the respondents of the survey revealed the participation in the Principles for Financial Action for the 21st Century, Japan's Stewardship Code for financial institutions, among others. We also examined the key performance indicators (KPI) that are used to evaluate the promotion and success of women in companies that has become an area interest in recent years. Although only a minority of institutions had adopted specific KPIs, a relatively large number of the institutions in this subgroup had adopted KPIs concerning the number and ratio of female managers and directors related to a women's leadership within an organization, as well as the ratio of female employees.

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