Dai-ichi Life is ramping up environmental, social and governance (ESG) investing in Japan, and as part of these plans intends to more than double its investments into social-related investments and screen all assets for sustainability in two years.

The insurer, which had ¥39.18 trillion ($353.66 billion) of investment assets as of December 2020, is seen as a frontrunner in the ESG space in Japan. It signed the United Nations Principles for Responsible Investment in 2015, widely seen as the kitemark for ESG committed investing.

It has since made impact investments into about 20 projects for a combined ¥8.2 billion over the last four years and is seeking more to support, a company spokeswoman told AsianInvestor.

Impact investments are often direct investments that combine an intent to gain investment returns while supporting a project that seeks to generate a positive structural change in society. They form one of several investment approaches under ESG principles.

Dai-ichi Life’s most recent impact investment was a ¥500 million amount in Noile-Immune Biotech, a local cancer immunotherapy start-up that primarily develops therapies for haematological cancers. One in two people in Japan are currently diagnosed with cancer. 

The insurer said in a press statement that it expects an unspecified but high level of returns through this investment, and it will provide capital support for Noile-Immune's initiatives.

The insurer said it intends to more than double the ¥550 billion it invested into solutions to social issues in the 2019-2020 financial year to around ¥1.2 trillion by 2023. It also intends to incorporate ESG in research and screening for all assets by the same year.

Dai-ichi Life's record of investments for solutions to social issues (Source: Dai-ichi Life)

The insurer’s focus on ESG investing has gained it plaudits from investment industry experts.

“In our view, Dai-ichi Life is a leader in ESG among several other asset owners in Japan. Its commitment to social responsibility across its business, and in particular its focus on ESG within its investments portfolios, reflects global good practice,” Alexis Cheang, partner and head of responsible investment for Asia Pacific at Mercer, told AsianInvestor

“Dai-ichi Life’s focus on delivering strong investment returns, while also contributing to solutions to social issues is commendable,” she added.

Alexis Cheang

Dai-ichi Life has also committed to engaging more with its investee companies, to encourage them to change their ways. The spokesman said it will have more dialogue with investee companies emitting the highest levels of greenhouse gases and discuss approaches on how to deal with climate change considering the Paris Agreement.

However, he said Dai-ichi Life will only set itself a carbon footprint reduction target by 2025, noting that a recent media report about its plan “to reduce carbon dioxide emissions from its investment portfolio by 30% by 2025” is incorrect.

ESG IN JAPAN

Dai-ichi Life may be at the forefront of ESG investing, while Japan is generally seeing the concepts enjoy more penetration of the need for more sustainable investing.

In some respects, it has been embracing greater investor responsibilities for close to a decade. The country first introduced the Japan Stewardship Code in 2013, well ahead of most other stewardship codes in Asia. And in November 2020 Prime Minister Yoshihide Suga officially announced that the country intends to become carbon neutral by 2050.

That is a notable goal, given that fossil fuels accounted for around 70% of its energy generation in 2019, according to the US Energy Information Administration.

However, many pension funds in the country continue to pay relatively little priority to ESG when it comes to investing. As a result, the country’s insurers are ahead of pension funds when it comes to integrating ESG across their businesses, as climate change and social circumstances can materially affect their bottom lines, Cheang said.

ESG factors like climate change, health and safety, and gender equality are relevant to both a life insurer’s policyholders and its investment portfolios. Therefore, it is sensible risk management for lifers to consider ESG when identifying risks and considering their impact on the value of assets, she added.

Hiroki Tsujimura

The development of ESG investing in Japan has been accelerating in recent years as the foundations of the concepts have been laid, said Hiroki Tsujimura, global head of investment and chief investment officer at Nikko Asset Management. Companies are more actively participating in the climate related financial disclosures, and they are expected to make more advancements in ESG activities and disclosure, he told AsianInvestor.

Japanese corporations also lead many of their Asian peers in producing high quality, market-relevant sustainability or ESG reports, added Cheang. This enables investors to better assess their ESG strategy in the country and has led many Japanese companies to be included in ESG indices such as the FTSE4Good and the Dow Jones Sustainability Index.