寄稿

Climate Change’s Impact
on Asset Management
Kei Okamura
Director of Japan Investment Stewardship | East Asia
Neuberger Berman
1.1 degrees Celsius. That is how much Earth’s
temperature has increased on average in the last 140
years1. 1.1 degrees may not feel like a considerable
change. After all that is how much the human bodyheats up during a jog. But in the last several decades,
this 1.1 degrees variance has resulted in extreme
weather patterns around the world unleashing vast
forest fires and break-ups of polar icecaps the sizeof small countries. The key contributor to increasing
global temperatures is greenhouse gases (GHGs)
unleashed by human activity. In particular, carbon
dioxide persists in the atmosphere for hundreds ofyears which means if no policy action is taken to
reduce such gases, the warming effects may remain
irreversible for the next several decades potentiallymaking catastrophic weather events the norm2.
Governments around the world have begun to takenotice and some have agreed a coordinated policy
response is necessary, resulting in the adoption of theParis Agreement in 2015 that aims to limit global
temperature increases to 2 degrees relative to preindustrial levels3. Central bankers and financial
regulators in the UK and EU have gone a step further
to indicate that the physical, liability and transition
risks of climate change could result in a systematic
risk to the financial industry and that ultimately acoordinated response from both the public andprivate sectors would be needed to thwart what isincreasingly viewed as a “green swan” across thehorizon4. To address such risks, the Financial
Stability Board (FSB) led by former Bank of England
Governor Mark Carney set-up the Task Force on
Climate-related Financial Disclosure (TCFD) thataims to encourage companies to improve disclosureon the business’ resilience to climate change risks,

which this paper will discuss in more depth later.
For institutional investors, climate change poses
both risks and opportunities to the assets andportfolios they manage. On the one hand, climatechange risks may have material impact to theportfolio and the valuation of its underlying assets
suggesting that addressing such issues runs core to
their fiduciary duties to clients. On the other hand,climate change may be seen as risk mitigating(beta) and opportunity creating factors (alpha) toimprove risk adjusted returns over the mid to longterm investment horizon. Hence, this prospect for
long-term sustainable returns is seen as one of thekey drivers fueling the strong global demand for
ESG investing in the last several years. Between
2013 and 2018, the number of ESG mandated
equity portfolios have increased 75% to just above
1,400 funds globally with roughly US$400 billion
in assets under management5.
Globally, the EU has traditionally been a leader inESG integrated investing but in recent years, Japan
has come to the forefront of this movement led by
the Government Pension Investment Fund (GPIF)
that seeks to integrate ESG factors and sustainability
into the management of the world’s biggest pool ofpension fund assets. As part of those efforts, theGPIF became a signatory of the UN-backed
Principles of Responsible Investing (PRI) in 2015,
which acted as a wake-up call to Japanese investors
to consider ESG integration more seriously. Between
2016 and 2019, Japanese sustainable investingmandates witnessed a 2.5x increase in inflows andtoday constitutes 56% of total assets undermanagement in Japan6. GPIF also acknowledges
2020.515

climate change as a material risk to its investment
time horizon spanning decades. As a result, in 2018,
it became a supporter of TCFD and Climate Change
100+ --an investor action group engaging the world’s
biggest emitters of GHGs.
In response to the increased pressure by GPIF and
its external asset managers to address climate changerisks, Japanese companies led by large-cap issuers
have responded by publicly stating their support for
TCFD reporting by joining the TCFD Consortiumthat aims to educate companies on reporting
requirements. Today, the Consortium boasts morethan 200 companies and organization, which is thehighest number of supporting members of any
country in the world7. However, it is worth notingthat while backing TCFD reporting is certainly apositive step in the right direction; that move in itself
is not the objective. Eventually Japanese companies
will have to walk the talk and communicate tostakeholders the resilience of their business models
in a 2 degrees scenario. Unfortunately, engagementswith many of those large cap issuers have revealed
that companies are struggling to comply with key
components of the framework most notably theScenario Analysis that provides a quantitative
assessment of how businesses will survive in a 2degrees scenario. Divisions within the organization
tasked with the Analysis have expressed difficulties
setting key parameters while also facing challenges
gaining cooperation from other departments thatthat may become directly affected by transition
risks. As a result, we have witnessed a substantial
increase in TCFD supporters but only a handful ofthese companies have actually become fullycompliant with the reporting standards. This is asomewhat concerning trend given Japan, the world’s
5th biggest emitter of GHGs, has faced increased
criticisms for its inadequate action on meeting the2030 targets of the Paris Agreement. In particular,
the Ministry of Environment’s announcement inMarch to reduce carbon emissions in FY2030 by
26% versus FY2013 has been described as
inadequate given global temperatures would end up
exceeding 3 degrees under the current scenario8.
16

2020.5

So, what do investors expect of companies underthese circumstances? First, companies need to havetheir own long-term strategy and vision as well as agovernanceframework
tooversee
theimplementation of action plans to manage climatechange risks9. This cannot be a pet project of any
particular division or employee and management
needs to take ownership. This will help facilitate
inter-division cooperation and sharing of
information but also ensure that proper checks arein place as the plan is executed. Second, companies
should not get bogged down by the quantitative
scenario analysis and should consider undertaking
the qualitative assessment first. Once this analysis
is completed, it should be up to management led by
the CEO, COO and CFO to explain their findings
clearly focusing on how the business model may beaffected under various scenarios. Whatever longterm response the CEO lays out, the COO and CFO
should support the explanation with how those
responses may affect the organization and its
capital management. It would also be ideal to havesupplemental commentary from the Chief
Sustainability Officer. Fourth, companies should
regularly report their progress on their policy
responses either in the Integrated or SustainabilityReports to increase accountability with easy tounderstand KPIs and medium-to-longer-termtargets that are 2 degree aligned. And lastly,compensation committees should consider whether
to link a portion of management pay to themanagement of the abovementioned risks.
※The views and opinions included in this material belong to the authorand do not necessarily mirror the views and opinions of the strategy,organization, and or company that he belongs.●

Note 1: Climate Risk and Response: Physical hazards and socioeconomicimpacts (McKinsey Global Institute, January 2020) P.8
Note 2: Ibid, P.10
Note 3: The Paris Agreement, United Nations Climate Change
https://unfccc.int/process-and-meetings/the-paris-agreement/theparis-agreement
Note 4: Bolton, Patrick et al. The green swan: central banking andfinancial stability in the age of climate change(Bank or International Settlements, 2020) P.27
Note 5: Sustainable Finance: Looking Farther(International Monetary Fund, October 2019) P.87
Note 6: T Sustainable assets under management report 2019
(Japan Sustainable Investment Forum, March 2020) P.7

特集：ESG、その解釈とアプローチ
Note 7: TCFD Consortium Membership List
(TCFD Consortium, March 2020)
https://tcfd-consortium.jp/en/member_list
Note 8: Climate Action Tracker, Japan (April 2020)
https://climateactiontracker.org/countries/japan/
Note 9: Technical supplement – the use of scenario analysis in disclosureof climate-related risks and opportunities(The Task Force on Climate-related Financial Disclosures, July 2017)『国際金融機関便覧 2020』のご案内
JOIでは、国際金融機関や諸外国の公的金融機関などの概要や最近の実績を包括的にまとめた冊子『国際金融機関便覧 2020』を2020 年４月に発刊しました。
海外の公的金融機関の概要・動向が一覧できる便利な１冊です。海外事業の企画、調査・研究の資料として是非ご活用ください。
主な掲載機関（国際・地域機関）（諸外国の公的機関）

国際通貨基金 (IMF)

米国輸出入銀行

世銀グループ

UK Export Finance

欧州復興開発銀行 (EBRD)

独オイラー・ヘルメス

アジア開発銀行 (ADB)

伊SACE

アジアインフラ投資銀行 (AIIB)

加EDC

米州開発銀行(IDB)

韓国輸出入銀行

アフリカ開発銀行

ほか

イスラム開発銀行グループ

全47機関

カリブ開発銀行

243ページ

購入価格：会員の方 注 には 5000円 /冊（消費税・送料込）、会員以外の方には 10000円 /冊（同上）にて販売します。
購入方法：JOIウェブサイト (joi.or.jp) の問合せフォーム、またはbd@joi.or.jpまでお問合せ下さい。
Amazonでも非会員価格にてお取り扱いしています。
注：これまで会員企業・団体の窓口の方には、１部を無償で提供しておりましたが、今後は販売のみとなります。

2020.517