Akihabara News (Tokyo) — Environmental, Social, and Corporate Governance (ESG) commitments are seen as a means to encourage for-profit corporations to promote the welfare of society beyond simply bringing returns to shareholders. After a slow start, Japan too has begun to embrace this international trend, led by the central government.
In 2021, the overwhelming majority (81%) of global ESG investment was found in Europe. The United States made up a further 13%, leaving the rest of world far behind.
In Japan’s case, this appears to be changing. In March, Prime Minister Fumio Kishida announced an estimated US$157 billion in government-funded green bonds to boost carbon neutral development.
Also, the Government Pension Investment Fund, the country’s largest pool of retirement savings, announced its commitment to the state’s Society 5.0 initiative, which is regarded as an example of ESG development.
For its part, the Tokyo Metropolitan Government is also setting out plans to deepen ties on sustainable investment with the City of London, recently crowned the world’s leader in ESG finance.
So far, ESG commitments are emerging mostly from the national and local governments much more than from the business world itself.
London-based international law firm Clifford Chance argues in a report on ESG in Japan that further progress hinges upon uptake from the corporate world, especially among smaller companies.
Japan is making the most progress on the environmental policy aspects of ESG, but this is only one area of concern. In fields such as social and corporate governance, Japan’s improvement has been sluggish, especially when compared to Europe.
For example, Japan’s gender equality rankings are the lowest among G7 nations. As of 2019, only 5.2% of board directors were female. Gender equality outside the executive floor also suffers–44% of women work in part-time or temporary jobs compared to less than 12% of men, according to figures from the Ministry of Internal Affairs and Communications.
Also, while the Japan Business Federation (Keidanren) has significantly altered its Charter of Corporate Behavior to focus more on human rights–now including measures to promote the rights of women in professional environments such as providing maternity leave and taking tougher action on sexual harassment–progress on the ground has been gradual.
