Global trends in ESG investment and the present situation in Tokyo - - PowerPoint PPT Presentation

• R E S P O N S I B L E

I N V E S T M E N T -

Global trends in ESG investment and the present situation in Tokyo

Fiona Reynolds, CEO, Principles for Responsible Investment

The PRI

Investor-led, supported by the United Nations since 2006

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2 2800+ 86+

82 PRI signatories in Japan

28% 60% 12% Asset Owners Investment Managers Service Providers

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Japan signatories

Evolution of sustainable investment

An increasing proliferation of investable options

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2007 2019 2006 2001 2010

Text here Text here Text here Unibanco launches the first sell-side brokerage which

• ffers SRI research

First green bond Launch of PRI First stewardship code First social impact bond Launch of S&P 500 ESG Index

1971

Pax launched first socially responsible mutual fund in US

1998

Domini Social Index created

2015

Creation of SDGs Launch of UK Combined Code

• n Corporate Governance

1990

First SRI fund in an emerging market created $625bn screened to exclude investment in South Africa

1993

EU Action Plan released

2018

Paris agreement

The importance of incorporating ESG factors into investments

ESG analysis helps better manage risks, meet market demand and fulfil investor duty

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Increasing recognition within the financial community that ESG factors often play a material role in determining risk and return. Growing demands from beneficiaries and investors for greater transparency about how and where their money is being invested.

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Higher levels of regulatory guidance that incorporating ESG factors is part of an investor’s fiduciary duty to their clients and beneficiaries.

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Growing academic evidence supports that

ESG incorporation does not come at a cost Materiality Market demand Regulation

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Demand for responsible investment is growing

PRI asset owner signatories actively include ESG criteria in their RfPs 68% 86%

79%

67%

Millennials* GenX Baby Boomers

*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

Retail demand Percent who feel sustainable investing is more important now than five years ago Institutional demand

$3.9 trillion

• f assets are

likely to be transferred to future generations

• ver 10 years

(1) (2) (3)

Responsible investment policy is widespread

And the pace is increasing

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NUMBER OF POLICY INSTRUMENTS PENSION FUND REGULATIONS STEWARDSHIP CODES CORPORATE DISCLOSURE GUIDELINES

ESG incorporation across all assets

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0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Cash Commodities Money market instruments Fund of hedge funds Hedge funds FI - securitised FI - SSA FI - corporate non-financial Property FI - corporate financial Private Equity Infrastructure Farmland Inclusive finance Forestry Listed equity

% signatories incorporating ESG issues to some extent (by asset class)

2019 2016 ESG issues considered to some extent in unconventional assets

Megatrends

Multidimensional transformations across society, technology, economics, environment & politics

9 Environmental challenges Technological advances Society and demographics Emerging economy growth & dynamism Globalisation & connectivity

THE FIVE MEGATRENDS

Technological disruption, societal imbalance and climate-related trends stand out as concerns.

Source: PRI and WTW Global Investment Megatrends report

(2017)

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.

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Climate Action 100+

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400+

INVESTORS SIGNED UP

40+

ASSETS COMMITTED

US$ trn

160

COMPANIES

80%

GLOAL INDUSTRIAL EMISSIONS

Investors compel the world’s largest corporate greenhouse gas emitters to take action on climate change

CA100+ focus company TCFD supporter SBT status Daikin Industries, Ltd. Yes Committed Hitachi Ltd. Yes Honda Motor Company Committed JXTG Holdings, Inc. Yes Nippon Steel Corporation Yes Nissan Motor Co., Ltd. Yes Committed Panasonic Corporation Yes Approved targets Suzuki Motor Corporation Toray Industries, Inc. Yes Toyota Motor Corporation Yes Committed

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Momentum behind TCFD is building

Climate risk reporting for PRI signatories

Growth in ESG investing in Japan

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Proportion of ESG themed financing relative to total managed assets 2014-18

*Global Sustainable Investment Review 2018

RI driven by the insurance sector

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Insurance 57% Pension 26% Foundation & Endowment 13% DFI 4%

Types of AO signatories in Japan

Insurance 18% Pension 52% Foundation & Endowment 15% DFI 2% Other 13%

Types of AO signatories globally

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"

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Thank you

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