[ESG Investment Survey 2022] (3) Only a Few Institutional Investors Changed Policies due to the Ukraine Situation

The ESG Research Center of the Enterprise Services Dept. at QUICK Corp. released its "ESG Investment Survey 2022" on January 19. Previously, the first issue had examined ESG investment methodologies and promotional structures, while the second issue had been focused on engagement themes. The newest and third issue covers the impact of the situation in Ukraine on ESG investment policies and ESG investment plans in five years, which was asked as a special question.

Figure 1: Impact of the situation in Ukraine on ESG investment policy
Has the situation in Ukraine changed your ESG investment policy? Please choose one answer.

* Excerpt from the "ESG Investment Survey 2022"

As noted above, nearly 80% of respondents chose "Not having changed the investment policy." This was because they already had a monitoring system in place for companies dealing in inhumane weapons, while they see international cooperation on climate change issues and the transition to decarbonization remaining unchanged. The situation in Ukraine has reminded investors of the impact of country-related risk on companies. Some organizations have made alterations to their investment portfolios, but overall, they accounted for a minority.

The survey results suggest that "negative screening," which excludes companies that derive revenue through certain unethical businesses, etc. from investments, and "screening based on international norms" are already in place and functioning.

Figure 2: Proportion of ESG investments in 5 years
Looking ahead 5 years at your company, roughly what percentage of total outstanding assets under management for Japanese stocks do you expect will be ESG-related investments?

* Excerpt from the "ESG Investment Survey 2022"

In answer to the above question, 14 of the 46 organizations that gave valid responses said they would increase the percentage in the coming 5 years. The remaining 32 organizations answered they would maintain the status quo, presumably because the percentages of their investments accounted for by ESG-related assets are approaching their upper limits. In fact, 21 (66%) organizations that gave this answer have a current ESG-related investment percentage of 90% or higher.

ESG investors are being forced to make difficult decisions as the valuations of energy-related stocks rise in the wake of Russia's invasion of Ukraine. Nevertheless, there is a view that the transition to clean and sustainable energy sources should be funded for security reasons and not just due to climate change. The survey results suggest there is no sign of a change in the mid- to long-term expansion of investments that take climate change and other ESG-associated issues into account.

(Reported on January 19)

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