In Japan, there has been strong support for sustainable finance from across the private sector as well as from policymakers and regulators. Institutional investors are now widely encouraged to consider environmental, social and governance (ESG) factors – provided they are financially material. However, it is not well understood whether investment institutions in Japan can use their resources to intentionally pursue sustainability outcomes.
This report aims to clarify the extent to which institutional investors in Japan are currently permitted or required to invest for sustainability impact. It then makes recommendations for Japanese policymakers that would empower and support investors to better integrate the consideration of sustainability impacts into their decision-making.
The report also introduces the concept of investing for sustainability impact (IFSI). This is used in the report’s legal analysis as a concept to catch, broadly, any activities that involve an investor intentionally attempting (through investment decisions, stewardship or policy engagement) to bring about assessable behaviour changes among investee companies, policymakers or other third parties to achieve positive sustainability outcomes.
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