ESG

Concepts of ESG

What is ESG?

EnvironmentGlobal warming/Countermeasures/Energy usage reductions/Carbon dioxide (CO2) emissions reductions, etc.

SocialDiversity/Female labor force participation rate/Work-life balance initiatives, etc.

GovernanceComposition of Board of Directors/Responsibility to stakeholders, etc.

Glossary

ESG

ESG stands for Environment, Social, and Governance. Investment in well-managed companies based on these three elements is referred to as ESG investment. ESG investment targets companies that are coping with ESG challenges and the investors support these companies through their investment activities to eliminate environmental problems or social challenges and to foster a transparent capital market.

Diversity(Diversity and Inclusion)

Diversity (Diversity and Inclusion) is a concept of actively unitizing diverse human resources. The term was originally used to refer to the expansion of employment opportunities for social minorities. Today, it refers to management that improves productivity by embracing the diversity of age, personality, academic background, and value, in addition to gender and race, and utilizing a wide variety of human resources. Corporations focus on diversity to find great talents, encourage unconventional ideas, and address a variety of needs of society.

Work-life balance

Work-life balance is balancing work and life while fully exercising one’s innate abilities to live the life one desires. Corporations promote work-life balance to bring the best out of their employees to help them contribute to the company by providing an environment where they can fulfill their responsibilities and demands outside of work while working. The concepts and policies of work-life balance emerged in the US as a response to various changes. Its core component is “workstyle reforms”.

Stakeholders

Stakeholders are interested parties such as people and organizations that can be affected by corporate activities directly and/or indirectly. Specifically, stakeholders include shareholders, executives, employees, financial institutions, creditors, clients, competitors, customers, local residents, environmental protection organizations, tax authorities, administrative authorities, etc.

Relations between ESG investment and SDGs (sustainable society)

The utmost principle of the Sustainable Development Goals (SDGs) proposed by the United Nations is “human rights”.

Relations between ESG investment and SDGs
Resolving societal challenges creates business and investment opportunities.

Glossary

SDGs

「SDGs stands for “Sustainable Development Goals.” The background to the SDGs is described below.
In the UN Millennium Summit held in the United States in September 2000, the Millennium Declaration was adopted. The Millennium Development Goals (MDGs) formed based on this declaration are common goals for international society to support developing countries, and eight goals to be reached by 2015 were indicated in order to secure environmental sustainability, etc. As the MDGs goal limit approached, debate over the ideal “Post-MDGs” to start in 2016 became more active.
(* Logos of 17 items of the Sustainable Development Goals (SDGs))

GPIF

GPIF is an organization that supports stabilization of employees’ pension insurance and national pension businesses.
GPIF stands for Government Pension Investment Fund.

PRI

Principle 1 We will incorporate ESG issues into investment analysis and decision-making processes.
Principle 2 We will be active owners and incorporate ESG issues into our ownership policies and practices.
Principle 3 We will seek appropriate disclosure on ESG issues by the entities in which we invest. (Principles 4 through 6)

CSV

CSV stands for Creating Shared Value, and is defined as the policy and action to enhance a company’s own competitiveness while improving the economic or social conditions of the local society where the company runs its business. In order to create shared value, we should place a premium on clarification and enlargement of the relationship between social development and economic development. This concept is mainly proposed by Michael Eugene Porter, professor at Harvard Business School.

For medium- to long-term investment in corporations, corporations with a good balance between financial information and non-financial information (ESG) are targeted.

Standards for evaluating sustained corporate growth
Financial information

Traditional evaluation items

Financial conditions/Growth potential/Revenue quality/Management quality, etc.

Non-financial information

ESG Elements

Environment/Social/Governance

Enhancing ESG activities leads to more trust from employees, investors, customers, suppliers, and all other stakeholders.