Sustainable Development Goals and ESG investment for a better future
The Nikkei Sustainable Development Goals (SDGs) Forum Symposium was held in Tokyo on the 7th December 2018. Norikazu Suzuki, Parliamentary Secretary for Foreign Affairs, and Kaoru Nemoto from United Nations Information Centre, delivered welcoming speeches. Pedro Conceição from the UN Development Programme and Keiko Honda from the World Bank gave keynote addresses. Following lectures by Japanese Companies and organisations contributing to ESG and SDGs Activities, a panel discussion was conducted.
The panel included Atsuko Suzuki from Asahi Group Holdings, Wataru Ogihara from Nomura Asset Management Co., Ltd, Haruyoshi Ito from the International University of Japan, Satoshi Ikeda from the Financial Services Agency, and was chaired by Taro Tanaka from Nikkei ESG Magazine. The speakers provided insight on their experiences in developing and implementing ESG and SDGs Activities, including their trends and challenges, both in Japan and overseas.
Ogihara commented how institutional investors see ESG investment. He said ESG does not mean only environmental and social friendly products, but also business sustainability in its risk management strategy. ESG is an index to measure if a company is able to respond to a transformation of the business framework, along with changes of environmental regulation and community values, such waste reduction and introductions of corporate governance guidelines. It is also an index for business sustainability in the long term. ESG score is a proxy for business risk.
Haruyoshi Ito explained ESG investment can be used to hedge against downside risk for investors. during the 2008-2009 Financial Crises, firms with high social capital had returns four to seven percentage points higher than firms with low social capital (1).
Professor Kunio Ito of Hitotsubashi University gave a closing speech about management engagement in sustainability. He chaired the Ministry of Economy, Trade and Industry project in “Competitiveness and Incentives for Sustainable Growth: Building Favorable Relationships between Companies and Investors”, and compiled a report of the discussions known as the 'Ito Review' (2). He stated investors focused on Governance among ESG factors because the required elements of Environmental and Social factors are constantly changing, and good governance is the key to measure whether a company is able to respond properly to these elements. He concluded with 8 recommendations including further expansion of SDG activities and ESG investment towards a low carbon society.
(1) Lins, Servaes and Tamayo, 2017, Social Capital, Trust, and Firm Performance: The Value of Corporate Social Responsibility during the Financial Crisis, The Journal of Finance. 72(4): 1785-1824.
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