The government will soon release new guidelines it has compiled to attract ESG (environmental, social and governance) investments from overseas.
In ESG investments, investors choose companies that tackle or have a good record on environmental, social and governance issues, such as efforts to cut carbon dioxide emissions.
The guidelines, which cover five industries, such as automobiles, steel and chemicals, specify what types of information are desirable for each industry to disclose. Steel companies, for example, should reveal the amount of carbon dioxide emissions per production amount, according to the guidelines, which are expected to be released within this month.
Apparently, Japan is the first country among the Group of Seven advanced nations to compile such guidelines. The government hopes that Japanese companies will disclose the desired information about their efforts against global warning and other ESG activities through clear-cut standards as a means to expand ESG investments from overseas and boost economic growth.
In Japan, there are many companies that have strengths in making products that can lead to reductions in carbon dioxide emissions, such as cars and tires with good fuel economy, as well as lightweight and long-life fabrics and materials. However, it has been pointed out that many of such companies are overlooked by overseas investors and financial institutions because the country lacks clear standards to appraise their strengths.
The five industries are: automobile, steel, chemical, electric appliances and electronic, and energy (electric power, gas, petroleum).
The guidelines detail which information each industry should disclose. For example, the automobile industry is encouraged to disclose carbon dioxide emission levels while the vehicle is moving, and the electric-appliance and electronic industries are advised to disclose the status of their developments in energy-saving technologies.
The guidelines are nonbinding and companies are left to decide whether or not they disclose the information covered in the guidelines. The government intends to make the guidelines more comprehensive by covering more industries among other measures in the future.
Globally, ESG investments expanded from about 18.3 trillion dollars (about 2,000 trillion yen) in 2014 to about 23 trillion dollars (about 2,500 trillion yen) in 2016. In contrast, ESG investing in Japan remains at 474 billion dollars (50 trillion yen). Therefore, it is seen that there is much room for expansion.
Regarding ESG investing, the Group of 20 major economies have also begun discussions on making relevant international rules. By compiling the guidelines now, Japan hopes to expand investments under the guidelines and take the initiative in discussions from now on.
Read more from The Japan News at https://japannews.yomiuri.co.jp/
