Sustainable investment is growing rapidly in Japan. Sustainably invested assets under management (AUM) grew a staggering 300% between 2016 and 2018, from almost ¥57 trillion to nearly ¥232 trillion. Although this documented growth might be partly due to increased reporting—a topic I’ve written about recently—the Japanese government, businesses, and investors alike have launched or participated in a series of initiatives in recent years that have promoted the practice.

These include, for example, establishing Japan’s first Stewardship Code and first Corporate Governance Code, and the Japanese Government Pension Investment Fund (GPIF) and Pension Fund Association signing the Principles for Responsible Investment (and GPIF’s Chief Investment Officer, Hiro Mizuno, serving on the board) and encouraging managers to incorporate environmental, social, and governance (ESG) considerations into investment selection.

Despite these important developments, sustainable investment appears to appeal solely to niche, boutique, and explicitly long-term investors (e.g., pension funds) in Japan and has not otherwise gained traction with the mainstream financial community.

Earlier this year The Sasakawa Peace Foundation (SPF), a Japanese private foundation, commissioned The Investment Integration Project (TIIP), the applied research and consulting founded by Steve Lydenberg and William Burckart, to understand the disconnect between the growth of sustainable investing in Japan and its uptake by mainstream investors. The resulting report was released yesterday in Tokyo at the “Impact Investment Forum 2019 – Post G20: Achieving the SDGs” hosted by the Japan Social Impact Investment Foundation and the Japan National Advisory Board of the Global Steering Group for Impact Investing.

This report, entitled “Sustainable Investing in Japan: An Agenda for Action,” examines why few Japanese investors incorporate sustainable investing into their practices and recommends steps needed to grow the practice in Japan. The report is available in both  English and Japanese. explained by Burckart. “The Agenda for Action provides a series of steps that, once taken, will clear the path to fulfilling the potential for sustainable investment in the region.”

Co-authored by Burckart and Jessica Ziegler of TIIP, the report relies on an extensive literature review on sustainable investing in Japan. It is also informed by consultations with more than 50 industry experts, including from the CFA Institute, Financial Services Agency (FSA), GPIF, Nissay Asset Management Corporation, and Sumitomo Life to name a few.

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