InformationESG Investment Survey 2023 — Institutional Investors with ESG Investment Ratio of “90% or More” Approaching Majority in 5 Years
Mar 05, 2024
QUICK Corp.
On January 30, ESG Research Center of QUICK Corp. (Headquarters: Chuo-ku, Tokyo; President & CEO: Shinzo Takami) released the results of “ESG Investment Survey 2023,” an annual survey of Japan-based institutional investors. The proportion of institutional investors with a ratio of ESG investments to total assets under management of “90% or more” is expected to increase from the current 33% to 46% in five years. This finding indicates a common understanding among institutional investors that ESG investments will become even more important. Regarding sustainability information in annual securities reports, whose disclosure has become mandatory since the fiscal year ending March 31, 2023, 85% of respondents answered that they were “Using” such information.
For the first time, this survey asked the number of companies with which institutional investors had “Engagement (Dialogue).” The most common response was “50 companies or more, but less than 100.” Concerning ESG investment methodologies implemented, the most frequent response was “ESG integration,” which incorporates ESG factors into investment analysis and decisions, returning to the top spot for the first time in two years.
Detailed Survey Results
◆ ESG investment ratio is on the rise, and the proportion of institutional investors with an “ESG investment ratio of 90% or more” is expected to increase from the current 33% to 46% in five years.
- Currently, the ratio of ESG investments to total assets under management is polarized, with “Less than 10%” at 34% and “90% or more” at 33%. However, in five years, it is expected that “Less than 10%” will fall to 24%, while “90% or more” will rise to 46%. The results show that ESG investment ratio is on the rise.
- The most common reason for raising the ESG investment ratio was “Commitment by the company’s top management” at 50%. Meanwhile, only 29% selected “Earning returns.”
◆ 85% utilize sustainability information in annual securities reports.
A new section for sustainability information has been added to annual securities reports starting in the fiscal year ending March 31, 2023, and disclosures on “Human capital and diversity” have been initiated. This survey asked institutional investors about their use of such information, and 85% of the respondents answered that they were “Using” the information. The top use of the information was “As a resource for conducting engagement (dialogue)” at 77%, far exceeding “As an internal evaluation indicator for selecting companies for investment” at 40%.
◆ “50 companies or more, but less than 100” was the most common response for the number of companies with which institutional investors had “Engagement.”
- This survey asked for the first time about the implementation status of engagement (dialogue) by institutional investors. The most frequent response was “50 companies or more, but less than 100” for all E, S, and G issues.
- The top three themes of “Engagement” were “Climate change,” “Diversity and inclusion,” and “Human rights,” the same as the past two years. On the other hand, the percentage of “Labor practices (health and safety)” saw a significant increase to 41% from 31% in the “2022 Survey.”
◆ The major investment methodologies were “ESG integration,” “Engagement (dialogue),” and “Exercise of voting rights.”
- Regarding the implementation status of ESG investments by methodology, “ESG integration” to incorporate ESG factors into investment analysis and decisions accounted for 90% of the total, returning to the top spot for the first time in two years. This was followed by “Engagement (dialogue)” to encourage companies to engage in ESG activities at 84%, and “Exercise of voting rights” at general shareholders’ meetings at 76%. Although the ranking order was changed this time, these three methodologies have occupied the top positions since the “2021 Survey” and have become the mainstream.
- The top factor incorporated into “ESG integration” was “Breakdown and total greenhouse gas (GHG) emissions of scopes 1, 2, and 3” at 65%, which has remained at the top since the “2021 Survey.”
[About the ESG Investment Survey]
The survey has been conducted among major institutional investors in Japan since 2019. The objective is to find how institutional investors evaluate the sustainability and profitability of the business based on information related to the environmental (E), social (S), and governance (G), in addition to the financial information of the companies in which they invest. The survey asks respondents to answer a wide range of questions about their investment balances and methods; how they incorporate these kinds of information into corporate evaluations; how institutional investors interact with the companies in which they invest; and how they use sustainability information newly added to annual securities reports. This year’s survey, the fifth in the series, received more responses from asset managers and asset owners (asset holders), including “pension funds” such as corporate pension plans and mutual aid associations. The results of the survey reflect a more diverse range of views.
[Outline of Survey]
Survey target: Japan-based 265 institutional investors selected from the companies that have declared acceptance of the “Japanese Stewardship Code” or are signatories to the Principles for Responsible Investment (PRI)
Number of respondents: 73 institutions (46 asset managers and 27 asset owners)
Survey period: August 21 – October 10, 2023
Click here for the ESG Investment Survey 2023
[QUICK ESG Service]
https://corporate.quick.co.jp/en/quick_esg/