Takejiro Sueyoshi

Special Adviser, United Nations Environmental Programme and Financial Initiative (UNEP FI)

Mariko Kawaguchi

Specially Appointed Professor, Rikkyo University Graduate School of Social Design Studies, Executive Advisor to CEO, Fuji Oil Holdings Inc.

Yasunori Iwanaga

Chief Responsible Investment Officer, Amundi Japan Ltd.

1. Global Trends in Sustainable Finance (Mr. Sueyoshi)

At the beginning of his keynote speech, Mr. Sueyoshi first presented the perspective of ‘The starting point when thinking about the management of the planet in the 21st century’. He quoted words by Dr. Johan Rockström, who introduced the concept of planetary boundaries （i）, emphasizing that we are currently facing a planetary emergency. He also referred to, the United Nations Secretary-General António Guterres’ words, "Our planet is broken", and pointed out that this represents the starting point when thinking about the management of the planet. He emphasized the importance of a harmonious coexistence between humanity and nature in order to manage the planet well in the 21st century.

He then introduced the history of various initiatives that UNEP FI has been promoting as a leader in sustainable finance, net zero, a recent global movement, as well as trends such as the Nature-Related Financial Disclosure Task Force (TNFD), Sustainable Blue Economy, TCFD disclosures and the merger of IIRC and SASB. He also used examples to explain how these trends impact financial institutions and private companies.

With regard to net zero, governments in various countries have announced a series of policies, and private companies have also developed ambitious strategies. Mr. Sueyoshi pointed out that the very essence of capitalism is being reconsidered due to the net zero movement. He explained that major social and economic reforms have become necessary. The mindset of CEOs has also transitioned from shareholder capitalism to stakeholder capitalism, in other words, from "shareholder first" to "society first."

Regarding the purpose and vision of Japan’s financial industry, he emphasized the need to build a new order between the environment and the economy, from the past principle of putting the economy first. The net zero movement will bring about the biggest social reform in Japan since World War II, and it is time for financial institutions, as well as businesses and society as a whole, to reconsider the ideal financial system, as finance plays a role of infrastructure of society.

2. History of the Development of Sustainable Investment in Japan: From SRI to ESG Investment

Professor Kawaguchi categorized the history of sustainable investment in Japan into three phases: “The dawn of sustainable finance: Socially Responsible Investment (SRI)," "Settlement and preparation period: From social responsibility to ESG (Sustainability)," and "Take-off period: Integration of SDGs and ESG, sustainability with economy." She introduced the detailed history of each stage, including the context of the time.

During 1990s and 2005, socially responsible investment (SRI) was born and subsequently declined. In the 90s, Japan was experiencing an eco-boom, and companies begun environmental efforts. In the financial sector, the first SRI fund in Japan, the Nikko Eco Fund, was established in 1999, and became extremely popular. Subsequently, many SRI funds were established as other companies followed suit. The decline was partly attributable to the absence of asset owners, although there was no growth due to a variety of factors, such as the slump in stock prices.

The subsequent period between 2005 and 2015 was when the transition from SRI to ESG (Sustainability) occurred in Japan, despite gradual change, sustainable finance was stagnant. The number of signatories of the PRI, which launched in 2006, steadily increased even in the aftermath of the global financial crisis, however, as of March 2009, only 13 agencies were signatories in Japan. Later, with the advent of the Stewardship Code and the Corporate Governance Code, frameworks for institutional investors and major financial institutions to implement ESG-conscious investments appeared. As a result, the growth of the sustainable finance market in Japan accelerated.

Professor Kawaguchi defined the period after 2015 precisely as the high growth period. PRI signatories grew rapidly since GPIF joined the initiative, and Japan's market for sustainable finances still expanding today. In the future Japan could become the world financial leader for solving global and local social issues by integrating Japan's traditional values with the latest financial technologies.

3. Sustainable Finance trends in Japan and overseas from the perspective of investors (Mr. Iwanaga)

Mr. Iwanaga explained trends in sustainable finance in Europe and Japan from an investor's perspective. First, he introduced specific initiatives of Amundi, as a pioneer in responsible investment.

As of 2018, Europe accounted for approximately half of (JPY) 3,200 trillion worldwide balance of responsible investment. Europe’s position is attributable to policies formulated by the European Commission, including the non-financial disclosure regulation. Regarding investor awareness and investment approaches, it was explained that, ESG investment has two elements, the pursuit of economic return and the impact on social and environmental issues, and various investment approaches based on the balance between them.

In Japan the implementation of the Stewardship Code and the Corporate Governance Code is behind the growing demands for ESG based corporate and investment activities. Based on the latest statistical information from the Japan Sustainable Investment Forum (JSIF), a breakdown of (JPY) 310 trillion in ESG investments was provided. In addition, based on the outcomes of a survey of asset owners, the lack of confidence in economic returns and difficulties of measuring impact to social and environmental value were identified as issues in promoting ESG investment in the future.

From the investor's viewpoint, Mr. Iwanaga stated that engagement with an emphasis on ESG integration can contribute to enhancing corporate value, and he also mentioned four essential perspectives in engagement: management strategy, governance, performance management, and disclosure.

As mentioned above, in the keynote speeches, three speakers from different backgrounds and perspectives discussed the history of sustainable finance, the latest trends, and issues.
The next article, ‘Tokyo Sustainable Finance Week Results (2/2)’, provides an overview of panel discussions.

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