- New Climetrics report reveals for the first time climate performance of over 1.000 Japanese funds.
- Results show better performance of Japanese companies in managing climate-related risks.
January 31, 2019 (Tokyo): A new analysis by Climetrics, the climate rating for funds, finds that the Japanese fund industry outperforms its global peers in terms of its exposure to climate change-related risks.
The report compares more than 1.000 equity funds available for sale in Japan, finding that in regard to exposure to climate change-related risks, funds investing in Japanese stocks perform better than those that invest internationally.
The outperformance is mostly due to Japanese listed companies tending to operate more carbon-efficiently and managing the risks and opportunities of climate change better than their global peers.
Backed by global environmental non-profit CDP and ISS-climate, a unit of ISS ESG, Climetrics' simple 1-5 rating enables any investor to identify funds that are well-positioned in the transition to a low-carbon economy. Its ratings can be freely searched on climetrics-rating.org and other platforms across Europe.
A fund’s overall Climetrics rating is based on three parts: the climate impact of its its portfolio company holdings, the fund’s investment policy as it relates to a specific ESG mandate, and the extent to which the asset manager integrates climate change into its governance and investment processes.
Despite Japanese funds’ overall outperformance, the analysis finds that Japanese asset managers often do not achieve top scores through Climetrics, suggesting their governance and investment processes with respect to climate change issues is less mature than in Europe.
Another finding of the report is the dominant role of a small number of index-tracking ETFs in the Japanese market. With 18% market share, such ETFs make up a much larger part of the overall fund market in Japan compared to Europe. This has implications for climate mitigation, as US equity ETFs which are highly popular in Japan, are known to be less progressive on climate mitigation than their Japanese peers.
The Climetrics analysis also confirms a neutral to positive relationship between sustainability factors and financial performance of an investment. The report shows that, on a risk-adjusted return basis, highly rated 4 and 5-leaf funds perform at least equal to funds with lower ratings.
Nico Fettes, Head of Climetrics at CDP, said:
“With the right level of transparency over climate change issues, Japanese investors would have the means to build well-diversified, climate-friendly portfolios. This analysis is an important milestone in our efforts to raise further awareness for climate change among investors globally – a crucial step towards shifting capital towards a low-carbon economy. The study points to some of the benefits of investing locally in Japanese companies, which are often ahead of their global peers in measuring and managing such risks. Looking ahead, global initiatives to promote climate action in financial markets might welcome stronger participation by Japanese asset managers as governance of climate change issues seems more mature in Europe at this point.”
Maximilian Horster, Head of ISS-climate adds:
„The expansion of the Climetrics analysis into the Japanese market is an important step for the global responsible investment community as it allows for meaningful insight into the carbon exposure and climate-related risks on a global scale.“
Until this current analysis, Climetrics has only rated funds available for sale in Europe. The 1,000 funds covered in the analysis of the Japanese market account for about 15% of the fund market in Japan and were included based on the transparency of their full holdings and for meeting portfolio coverage thresholds. The full Climetrics methodology is publicly available here.
The list of rated funds is available here; https://bit.ly/2FVUwnm
Notes to editor
For more information or for exclusive interviews with the Climetrics team, please contact:
- Joshua Snodin, CDP : +49 (0)17645910909 | e: [email protected]
- Dieter Niewierra, ISS ESG : +49 (0)89 4622481-57 | e: [email protected]
Climetrics is the first rating that provides a holistic assessment of a fund’s climate-related risks and opportunities. It independently rates thousands of actively managed funds and ETFs and its ratings are free-to-search, providing investors with transparency on climate change-related risks when comparing funds. Climetrics looks inside each fund, measuring its portfolio holdings' exposure to climate risks and opportunities, as well as the fund’s investment policy and the asset manager’s public action on climate change. It was developed by two recognized climate specialists, non-profit CDP and ISS-climate. The project was catalyzed and funded by Climate-KIC, the EU's main climate innovation initiative.
For more information visit www.climetrics-rating.org.
About ISS ESG
ISS ESG is the responsible investment arm of Institutional Shareholder Services Inc., the world’s leading provider of environmental, social, and governance solutions for asset owners, asset managers, hedge funds, and asset servicing providers. Under the ISS ESG umbrella are three discrete units that draw on deep historical and industry expertise, including: ISS-ethix, which enables investors to develop and integrate responsible investing policies and practices, engage on responsible investment issues, and monitor portfolio company practices through screening solutions; ISS-climate, which provides data, analytics and advisory services to help financial market participants understand, measure, and act on climate-related risks across all asset classes; and ISS-oekom, which provides corporate and country ESG research and ratings and enables its clients to identify material social and environmental risks and opportunities including through advisory services. ISS ESG clients rely on the expertise of all three to help them integrate responsible investing policies and practices into their strategy and shareholder voting decisions. For more information, visit issgovernance.com/esg.
CDP is an international non-profit that drives companies and governments to reduce their greenhouse gas emissions, safeguard water resources and protect forests. Voted number one climate research provider by investors and working with institutional investors with assets of US$87 trillion, we leverage investor and buyer power to motivate companies to disclose and manage their environmental impacts. Over 7,000 companies with over 50%% of global market capitalization disclosed environmental data through CDP in 2017. This is in addition to the over 750 cities, states and regions who disclosed, making CDP’s platform one of the richest sources of information globally on how companies and governments are driving environmental change. CDP, formerly Carbon Disclosure Project, is a founding member of the We Mean Business Coalition. Please visit www.cdp.net or follow us @CDP to find out more.
 EFAMA International Statistical Release Q3 2018, https://www.efama.org/Publications/Statistics/International/Quarterly%20%20International/International%20Statistical%20Report%20Q3%202018.pdf