Nippon Life Insurance, the largest Japanese insurer by revenue, has said that it will introduce ESG ratings for all investments across its ¥70trn ($663bn) portfolio from April 2021.
The initiative aims to improve investment returns and reduce risks by increasing positions in companies with high ESG ratings. These companies are believed to be superior in management transparency.
This new strategy also means that Nippon Life will consider reducing investments in domestic companies with persistently high carbon emissions and sovereign bonds with low ESG ratings.
Nippon Life is one of the biggest institutional investors in the country, having some ¥70 trillion in investment assets such as stocks, bonds and real estate.
Other Japanese institutional investors are also stepping up ESG investment as they struggle to get high returns amid low interest rates.
While Asian insurers' ESG adoption remains shy so far, many have invested in thematic funds, including Exchange Traded Funds (ETFs) to gain exposure. "What we are seeing is a huge demand for thematic products," said Gabriel Wilson-Otto, head of stewardship in Asia at BNP Paribas Asset Management.
Gabriel Wilson-Otto, BNP Paribas AM ETFs have generally been gaining credence with regional investors. GSAM's findings showed that 72% of Asia Pacific insurers who responded to the survey reported using ETFs, the highest proportion compared with 56% in the Americas and 52% in Emea. And the Covid-19 crisis and the market volatility it has brought has accentuated a global rise in interest in ESG ETFs.