Thursday, June 17, 2021 | The Japan Times | 5

(Sponsored content) Nippon Life special Working to achieve SDGs through strong ESG investing As asset owners, insurance companies are trying Takeshi Kimura, high costs in dealing with various environ- special adviser to the mental regulations or a risk of becoming to contribute to a safe and sustainable society board of Nippon Life stranded assets due to environment- Insurance Co., poses related factors. Stranded assets are those In his book “A Brief History of the Future: don in 2006 to help investors engage in at the company’s that have suffered from devaluations or A Brave and Controversial Look at the responsible investment, urges the fac- Tokyo headquarters conversion to liabilities due to various Twenty-First Century” (2006), Jacques tors related to ESG be taken into account in May. factors, such as a sudden policy shift or Attali predicted two industries would in investment decisions. The number of YOSHIAKI MIURA changes in market environment. emerge as the most influential of the 21st asset owners and investment managers If the value of such companies drops, century — entertainment and insurance. that are signatories to the PRI has grown then their investors will also suffer. According to his book, it is because in to over 4,000 globally and collectively rep- “That is why we need to achieve the periods of uncertainty, people will look to resents about $100 trillion in assets under net-zero target. We will try to push the the entertainment industry for something management. investees to move toward sustainable enjoyable and to the insurance industry In PRI’s annual assessment in 2020, Nip- development goals and improve their for a safety net. pon Life received the highest assessment enterprise value through constructive dia- What the French economic and social grade, A+, in the four modules of Strategy logue on ESG issues,” he said. thinker predicted has already proven true, and Governance, Listed Equity-Incorpora- given the success of Netflix and increasing tion, Listed Equity-Active Ownership and ESG has long way to go demand for insurance amid the COVID- Property for the second consecutive year. As for the challenges Nippon Life faces 19 pandemic and the growth of natural Nippon Life’s ESG strategy is based on in the coming years, the company says disasters worldwide, said Takeshi Kimura, four pillars: integration, engagement, ESG- its initiative to incorporate ESG factors a special adviser to Nippon Life Insurance themed investment and loans, and nega- into all investment processes is still in the Co. “But what he didn’t see coming was tive screening. early stage. Hence, there is still work to be the emerging role of insurance companies Under its previous medium-term man- done to make sure it is an effective means as institutional investors involved in ESG agement plan through 2020, Nippon Life to boost enterprise value and return on (environmental, social and governance) achieved its initial investment with a long-term perspective. investment.” ESG-themed invest- Kimura pointed out that fully integrat- “The role of insurance companies isn’t ‘People ment and loan target ing ESG factors into investment process merely offering insurance products to talk about of ¥200 billion in less requires trial and error to find a best hedge future risks and uncertainties. They transitional than a year in 2017, practice. also play the role of asset owners to cre- risks with and revised its target When people talk about climate ate flows of capital and realize a safe and regard to upward to ¥700 bil- mation overall.” change, they often associate that with sustainable society through ESG invest- lion in the following Cumulative excess return of equities with high ESG rating “The Nippon Life Group’s strength is corporate risk because decarbonization ment,” Kimura said in a recent interview climate year. As of the end of that it has the functions of both asset requires businesses and governments to change, but (%) in Tokyo. “By having two such roles, there fiscal 2020 ended in 300 owner and asset manager. By fully utiliz- make investments. But Kimura says that is something that only insurance compa- there should March, accumulated ing the experience and expertise in ESG is only one side of the coin. nies can offer to society.” also be ESG-themed invest- investment accumulated by NAM, we can “People talk about transitional risks As a leading private institutional inves- opportunities.’ ment and loans had enhance responsible investment and con- with regard to climate change, but there 225 tor in Japan, Nippon Life is spearhead- TAKESHI KIMURA, surpassed ¥1 trillion. tribute to the realization of a sustainable should also be opportunities. Because ing a movement to support activities to SPECIAL ADVISER Under the cur- society,’’ he said. huge investments will be made, such as in achieve the sustainable development TO NIPPON LIFE rent medium-term INSURANCE CO. new technologies to reduce carbon emis- goals adopted by the United Nations management plan sions, it is important to figure out where 150 The road to net-zero through ESG investment and loans with a through 2023, Nip- As for the target for reaching net-zero the money will flow to,” he said. “That’s an long-term perspective. pon Life has set a cumulative target of ¥1.5 greenhouse gas emissions in its portfolio opportunity for making returns. We need The SDGs were adopted in 2015 and trillion from fiscal 2017. by 2050, Nippon Life aims to achieve its to watch out for such chances.” consist of 17 targets, such as ensuring As for its negative-screening, Nippon 75 goal through ESG integration and engage- To fulfill its coverage obligations to access to clean and sustainable energy, Life has made it clear that it will prohibit ment with investees. policyholders even in a harsh environ- reducing inequality and conserving sus- investment in and loans to companies Nippon Life holds equity in roughly ment with ultralow interest rates, Nip- tainable oceans. that manufacture cluster munitions, bio- 1,500 Japanese companies. As of 2019, the pon Life aims to ensure long-term stable Beginning in April, the company began logical weapons, landmines or chemical 0 volume of carbon dioxide emissions pro- investment returns. “To this end, we are to incorporate ESG factors into all invest- weapons. It also recently announced that duced in its portfolio came to about 10 working to bolster its investment and ing processes across its ¥70 trillion it will prohibit new investment in coal- million tons per year. Stock prices linked loans in new and growing fields, includ- portfolio. fired power projects in Japan or overseas. -75 with coal-fired power plants have recently ing ESG investment and loans,” Kimura Moreover, the nation’s largest insurer 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 underperformed. said. by revenue earlier this year made a bold Narrowing the perception gap Prime Minister Yoshihide Suga pledged Kimura was the director-general of announcement to achieve net-zero emis- “In order to enhance our ESG integration, it NOTE: Figure shows how much high-rated equities have performed in October that Japan will become carbon the Bank of Japan’s Payment and Settle- sions for companies in its stock and bond is important to create a positive feedback versus the benchmark (Topix) since 2008. Simple average. neutral by 2050. ment Systems Department until last year. portfolios by 2050. cycle between ESG integration and engage- SOURCE: NIPPON LIFE INSURANCE CO. JAPAN TIMES GRAPHIC “Responding to climate change is no He says his work related to sustainable While insurers worldwide, including ment activities,” Kimura said. longer a constraint on economic growth,” finance at Nippon Life is similar to the France’s and Germany’s , When integrating ESG factors into between investors and investee compa- was founded. It has been actively making Suga said. “I declare we will aim to realize a macroprudential policies he was engaged have introduced similar goals for net-zero investment analysis, investors examine nies with regard to the degree of nonfi- investments incorporating ESG ratings for decarbonized society.” in at the BOJ. carbon dioxide emissions at investee ESG factors alongside other valuation driv- nancial information disclosure,” Kimura more than a decade. The Ministry of Economy, Trade and Macroprudential policies are financial companies, Nippon Life is the first major ers, and adjust the forecasted financials said. According to some survey results, NAM’s ESG ratings are based on various Industry also released a road map to policies aimed at ensuring the stability of Japanese institutional investor to officially (such as revenue and operating costs) of many companies think that they have dis- information sources, including dialogue achieve decarbonization in December, the financial system as a whole to prevent adopt such a policy. investee companies by calculating the closed enough nonfinancial information, with investee companies (see chart). Aver- including the government’s plan to raise substantial disruptions in credit and other expected impact of ESG factors. Inves- but investors do not think so and demand age return of equities with high ESG rat- offshore wind energy output to 45 mil- key necessary for stable ESG pillars tors gather ESG-relevant information more. ings outperform the benchmark (Topix). lion kilowatt-hours by 2040 and increase economic growth. To push ahead with ESG investment from multiple sources (including com- In order to narrow this perception gap “Looking at NAM’s environmental rat- hydrogen power consumption to 20 mil- “It’s similar to what I was doing at the and loan activities, Nippon Life in March pany reports and third-party investment and obtain enough nonfinancial informa- ing, the performance of high-rated equi- lion tons by 2050. BOJ in terms of avoiding systemic risks. established the ESG Investment Strategy research) and identify material factors tion, engagement activities are very impor- ties appears to have improved since the The report also designated 14 industries Climate change is a kind of systemic risk Office. affecting the investee. tant for investors. Paris Agreement in 2015,” Kimura said. where significant growth and investment from ‘externalities,’ ” Kimura said. Founded in 1889, the company has been “Among various information sources, “In addition, we can obtain forward- “The reality is that ESG scores issued by are key to achieving net-zero. These are To avoid systemic risks in the financial engaging in investment and loans that engagement through dialogue with looking information through dialogue with various rating agencies vary from agency offshore wind, ammonia fuel, hydrogen, sector, he said it is important to incorpo- contribute to social infrastructure, such as investee companies is the most important investee companies,” Kimura said. Inves- to agency,” he said, adding that it is espe- nuclear energy, cars, shipping, airlines, rate a macroprudential perspective in pro- railways and waterworks. The company opportunity to obtain ESG-related infor- tors who use more forward-looking nonfi- cially difficult to evaluate ESG’s “social” semiconductors, logistics, agriculture, car- moting a sustainable financial system. said that the recent move toward focusing mation,” Kimura said. nancial information and more information aspects and assign ratings because the S bon recycling, housing, energy recycling “The Nippon Life Insurance group has on responsible investment is in line with Unlike a company’s financial reporting, about internal structures can offer more factor involves human rights, labor issues and the lifestyles of individual people. actively been involved in various initiatives its long-held policy of “co-existence, co- ESG data is considered nonfinancial infor- accurate forecasts. This then raises the and other aspects that are difficult to “Of course, it is not possible to achieve in Japan to improve the environment for prosperity and mutualism.” mation. It is becoming a crucial component effectiveness of ESG integration. quantify. carbon neutrality through institutional sustainable finance,” Kimura said, referring While accelerating moves to strengthen in decisions for investors around the world “That is why it is important to come up investors alone. Our role as a “universal to government bodies working on such ESG investment and loan activities, the as it shows a company’s attitude toward Strength of the group with our own evaluation based on infor- owner” is to accelerate the shift toward the topics as social bonds, transition finance insurer signed the United Nations-sup- the environment, society and governance Kimura pointed out that Nippon Life has a mation we gather from various sources, net-zero goal pledged by the government,” and sustainable finance. “We hope to pro- ported Principles for Responsible Invest- and is believed to indicate its potential for distinct advantage in having Nissay Asset including our own analysts and resources Kimura said. actively cooperate with communities not ment (PRI) in 2017. growth. Management Corp. as a subsidiary. NAM from NAM, ” Kimura said. “We will make If companies fail to reduce carbon diox- just in Japan, but also overseas, in this area PRI, an organization founded in Lon- “However, there is a perception gap joined PRI in 2006 when the organization investment decisions based on the infor- ide emissions, in the future, they may face to further promote ESG investment.”

Our vision for achieving SDGs ESG pillars

Realize a Build a Realize a ESG investment society that ESG-themed society that sustainable and loans that Negative does not create Integration investment Engagement can boast global encourage screening poverty and and loans health and environment achievement inequality longevity of SDGs

SOURCE : NIPPON LIFE INSURANCE CO. JAPAN TIMES GRAPHIC

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