Global trends in ESG investment and the present situation in Tokyo Fiona Reynolds, CEO, Principles for Responsible Investment - R E S P O N S I B L E I N V E S T M E N T -
The PRI Investor-led, supported by the United Nations since 2006 2 2800+ 86+ 2
82 PRI signatories in Japan Japan signatories Asset 12% Owners 28% Investment Managers 60% Service Providers 3
Evolution of sustainable investment An increasing proliferation of investable options Launch of First SRI fund in an S&P 500 $625bn screened to emerging market First ESG Index exclude investment created stewardship in South Africa code Creation of Text here SDGs EU Action Domini Social First green bond Text here Plan released Index created 2007 2010 1990 1998 2018 1971 1993 2001 2006 2015 2019 Text here Pax launched first Unibanco launches First social socially responsible the first sell-side impact bond mutual fund in US brokerage which offers SRI research Paris agreement Launch of PRI Launch of UK Combined Code on Corporate Governance 4
The importance of incorporating ESG factors into investments ESG analysis helps better manage risks, meet market demand and fulfil investor duty 1 2 3 Materiality Regulation Market demand Higher levels of regulatory Increasing recognition within Growing demands from guidance that incorporating the financial community that beneficiaries and investors for ESG factors is part of an greater transparency about ESG factors often play a investor’s fiduciary duty to material role in determining how and where their money is risk and return. being invested. their clients and beneficiaries. Growing academic evidence supports that ESG incorporation does not come at a cost 5
Demand for responsible investment is growing Institutional demand Retail demand PRI asset owner signatories actively include ESG Percent who feel sustainable investing is more (2) criteria in their RfPs important now than five years ago Millennials* 86% $3.9 trillion of assets are 68% likely to be 79% GenX transferred to future generations over 10 years (3) Baby Boomers 67% (1) *Millennials are born between 1983-2000, GenX 1978-1982, Baby boomers 1949-1967 Sources: (1) PRI 2018 Reporting Framework responses, (2) “Global perspectives on sustainable investing – Global Investment study” Schroders, 2017 (3) Wealth X and NFP Wealth Transfer Report, 2016 6
Responsible investment policy is widespread And the pace is increasing NUMBER OF POLICY INSTRUMENTS PENSION FUND CORPORATE DISCLOSURE STEWARDSHIP CODES REGULATIONS GUIDELINES 7
ESG incorporation across all assets % signatories incorporating ESG issues to some extent (by asset class) Listed equity Forestry Inclusive finance Farmland Infrastructure Private Equity FI - corporate financial Property 2019 FI - corporate non-financial 2016 FI - SSA FI - securitised Hedge funds ESG issues Fund of hedge funds considered to Money market instruments some extent in unconventional Commodities assets Cash 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 8
Megatrends Multidimensional transformations across society, technology, economics, environment & politics Technological disruption, societal imbalance and climate-related trends stand out as concerns. Technological advances Emerging economy Environmental challenges growth & dynamism THE FIVE MEGATRENDS Society and demographics Globalisation & connectivity Source: PRI and WTW Global Investment Megatrends report (2017) 9
Climate change is the highest priority ESG issue facing investors Encouraging investor action across four key areas Investment Corporate engagement Investor disclosure Policy advocacy These four areas are defined by the Investor Agenda, a global investor platform set up by investors to tackle climate change of which PRI is a co-founder. 10
Climate Action 100+ Investors compel the world’s largest corporate greenhouse gas emitters to take action on climate change 400+ INVESTORS SIGNED UP 40+ US$ trn ASSETS COMMITTED CA100+ focus company TCFD supporter SBT status 160 Daikin Industries, Ltd. Yes Committed Hitachi Ltd. Yes Honda Motor Company Committed JXTG Holdings, Inc. Yes COMPANIES Nippon Steel Corporation Yes 80% Nissan Motor Co., Ltd. Yes Committed Panasonic Corporation Yes Approved targets Suzuki Motor Corporation GLOAL INDUSTRIAL Toray Industries, Inc. Yes EMISSIONS Toyota Motor Corporation Yes Committed 11
Climate risk reporting for PRI signatories Momentum behind TCFD is building 12
Growth in ESG investing in Japan Proportion of ESG themed financing relative to total managed assets 2014-18 *Global Sustainable Investment Review 2018 13
RI driven by the insurance sector Types of AO signatories globally Types of AO signatories in Japan DFI 4% DFI 2% Other Foundation & Insurance 13% Endowment 18% 13% Foundation & Endowment Insurance 15% 57% Pension 26% Pension 52% 14
Congratulations to the 2020 Tokyo Financial Award winners! Mitsubishi UFJ Securities Holdings Co., Ltd. Contribution to the spread of ESG bonds in the domestic market Shinsei Corporate Investment Implementing impact investment through the establishment of a childcare and nursing care support fund S&P Dow Jones Indexes Development of "Index for Greenhouse Gas Reduction" 15
Thank you This presentation is being provided to you by PRI Association (“the PRI”) and its subsidiaries for information purposes only. The presentation is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by the PRI. No reliance may be placed on its accuracy or completeness. Neither the presentation, nor any of its contents, may be reproduced, or used for any other purpose, without the prior written consent of the PRI. PRI Association is incorporated in England & Wales, registered number 7207947 and registered at 25 Camperdown Street, London E1 8DZ. 16
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