Working with high-emitting companies to drive the transformation of their businesses rather than divesting them is increasingly important to combat climate change, an executive at Japan’s largest insurance company said. “When we think about society as a whole, it is important that we asset owners also support the global trend so that the world can make progress towards carbon reduction targets,” said Shinichiro Kashima, the Chief Sustainability Officer of Nippon Life Insurance Co. thematic investments contributing to the UN Sustainable Development Goals, etc. total ¥2.6 trillion ($16.6 billion).
A growing number of European and US institutional investors have pledged to divest from fossil fuel assets. But while dumping such stocks and bonds may make portfolios look clean, this approach alone would not be enough to solve the core problem, especially in Japan, which currently relies on fossil fuels for about 70% of its wealth. fuels, he said.
“What is needed is to encourage their transition away from dependence on fossil fuels, and for that purpose it is important how they can reduce their emissions,” Kashima said, noting the importance of institutional investors actively working with companies in which investments that emit large amounts of greenhouse gases. to encourage them to take steps towards greener processes.
To increase CO2 reductions, Nippon Life has focused on engagement with the companies in which it invests. It has identified around 70 high-carbon emitting countries and urges them to release emissions data and establish roadmaps to achieve net-zero emissions by 2050, while also monitoring their progress towards medium-term reduction targets monitored.
According to the Ministry of Environment, about 60% of Japan’s industrial carbon emissions come from sectors such as iron and steel, chemicals and machinery manufacturing.
Nippon Life’s position is also reflected in the latest investment guidelines published last year. Under its new negative screening policy, which excludes certain types of companies that do not meet investment criteria, the insurance company says it will exclude new financing for oil and gas projects if they do not take measures to reduce carbon emissions.
He said the new policy is based on guidance from the Net-Zero Asset Owner Alliance, a global alliance of asset owners, including insurers and pension funds, committed to achieving net-zero greenhouse gas emissions in their portfolios by 2050. The alliance calls on consumers and suppliers of oil and natural gas to set targets for reducing emissions, with fixed pathways to limit global warming to a maximum of 1.5 degrees Celsius.
Kashima was chosen as a member of the alliance’s steering committee last year.
Phasing out fossil fuels is an urgent issue amid the increasingly destructive signs of climate change seen in many parts of the world, including record high temperatures, droughts, wildfires, torrential rains and devastating floods.
On April 30, Group of Seven environment and energy ministers agreed to phase out existing coal-fired power stations in the first half of the 2030s, or on a timeline consistent with the 1.5 degree target.
When it comes to ESG information, Japanese companies are proactive, Kashima said. But one thing they could do better is explain their strategy to investors and show how they plan to maximize their value going forward. “What else they could do is reveal a whole story about what they plan to do and what social impact they would have in the future,” he said.
Kashima said Nippon Life’s investment in Japan’s GX Economy Transition Bonds (GX) is another step to boost the country’s energy transition. The government plans to issue a total of 20 trillion yen in bonds over the next decade to support Japan’s technological development in areas such as renewable energy, batteries, next-generation nuclear reactors, hydrogen-based steel production and capture and storage of carbon.
Nippon Life takes steps to promote sustainability management to solve social problems based on three areas: people, community and environment.
Nippon Life wants to offer people security and safety, which is the essence of life insurance. On the community side, it contributes to a wide range of communities through its national sales offices. For the environment, the various steps the company is taking include reducing the use of plastic files, to prevent damage to marine life, and paper documents to protect forests. Salespeople previously used these materials conventionally when visiting customers.
In addition, Nippon Life set up a new section last year to promote its sustainability activities, and converted it into a department this year. The reason for the reorganization “is, among other things, to create sustainability-related efforts with a sense of unity within the company,” Kashima said. “Secondly, it is to convey more messages about each effort to society.”
