Noritz pension fund CIO sceptical about ESG

The Japanese corporate pension fund is wary about how the standards influence investments, its CIO tells AsianInvstor.
Noritz pension fund CIO sceptical about ESG

Japanese Noritz Corporate Pension Fund has reservations about environmental, social, and governance (ESG) standards and their ability to create returns for investors.

Kiyoshi Iwashina
Noritz Corporate Pension Fund

While Kiyoshi Iwashina, chief executive officer and chief investment officer at the fund, is all for ESG as a concept and a social movement, he has his doubts about ESG as a factor in asset management.

“To begin with, ESG, from any perspective, is a cost-increasing factor for companies and does not lead to profits. In addition, much ESG-related data relies on the results of ambiguous qualitative judgments, which are unreliable and will be difficult to improve significantly in the future,” Iwashina told AsianInvestor.

He finds it problematic that ESG brings an increase in social costs, because ESG means that companies are likely to start doing things they haven't done previously, which all contribute to higher costs.

As such, Iwashina considers ESG standards as an inflationary factor.

Asked about what his investment committee said about these views, Iwashina explained that not many people in Japan understand the situation related to ESG in the financial investment world.

“The focus is mostly about the return numbers and fund performance,” he said.

Iwashina manages the defined benefits (DB) pension scheme with an annual return target of 3% for domestic employees at Noritz, a Japanese corporation primarily known for producing tankless water heaters for industrial and private home use.

As of March 31, 2023, the end of the latest fiscal year (FY2022), Noritz Corporate Pension Fund had assets under management (AUM) worth ¥22.7 billion ($170.4 million).


ESG investing boomed in 2020 and 2021 during the COVID-19 pandemic as low oil prices spurred more investors to diversify beyond fossil fuels, and as fund managers sought to appear more climate-conscious.

The category started to fall out of favour in 2022 as conventional energy prices soared following the war in Ukraine, among other factors.

Until now, Iwashina has observed a large and growing movement among European governments and the financial industry to incorporate ESG-related investment products into asset management.

“However, I feel that this movement is more likely to be a revenge action by the European side, which had lost the leadership in the financial industry to the US,” he said.

In the US, political backlash against ESG led by Republican politicians, combined with suspicions of greenwashing and lack of proof of effect, have also damaged the appeal of ESG funds.

ALSO READ: APG, BII urge more proof-of-concept to tackle anti-ESG sentiment

Iwashina found that academic papers have shown that the ability of alpha creation in ESG asset management has not necessarily been proven.

“In fact, although ESG-related investment products have gained momentum for a while, the results in actual asset management have been less than satisfactory, and even the Europeans, who have been eager to incorporate ESG into their investment management recently, have been forced to acknowledge this fact,” Iwashina said.


In 2023, ESG funds were dragged down by too much exposure to clean tech and not enough to big tech. The Invesco WilderHill Clean Energy ETF, for instance, finished 2023 down 20% against a gain of 26%, including dividends, for the S&P 500.

Iwashina has noted this development and find it to be aligned with his own beliefs.

“I, too, have been aware of the problems with ESG-related investment products for some time, and for this reason, I have not and will not take any proactive action to incorporate ESG-related investment products into my asset management activities as they are now,” Iwashina said.

As of FY2022, Noritz Corporation Pension Fund had 14.8% and 15% of the total AUM invested in hedge funds and multi-asset investments, respectively. Fixed income and equities made up 32.3% and 16.4% respectively, while the rest of the AUM was in cash (13%) and general account (8.5%).

ALSO READ: Anti-ESG sentiments drive higher industry standards


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