The next Japanese Fad: environmental, social and governance-screened investments

business_ethics_highlights_2 “ESG assets” are investment funds that are screened for Environmental, Social and Governance. That is, such funds only invest in companies that score well on those factors. A cynic might hypothesize that such fnds are successful because they bundle 2 things most investors don’t care about (environment and social impact) with something they do care about: good governance. The article linked below suggests that in Japan, at least, the nearly reverse is true: lots of Japanese companies score relatively well on the first two (E and S) but less well on G (for governance).

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LINK: The craze for ethical investment has reached Japan (by the Economist)

… In 2014-16 funds invested in ESG assets grew faster in Japan than anywhere else (and not just because of better reporting and a low base).

Today Japan’s sustainable-investment balance is $474bn, or some 3.4% of the country’s total managed assets—low compared with Europe or America, but high for Asia. The shift is driven from the top down, rather than, as elsewhere, by ethically minded individual investors.

The big boost for ethical investing in Japan came from the Government Pension Investment Fund (GPIF), the world’s biggest public-sector investor, with $1.3trn of assets under management. In 2015 GPIF signed the UN’s Principles for Responsible Investment. This year it invested 3% of its holdings in socially responsible assets, using three ESG indices. Smaller investors have started to follow suit…

What do you think?


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