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sustainable japan

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Nippon Life exec urges shift to stakeholder capitalism
ESG Talk
TOMOKO KAICHICONTRIBUTING WRITER

Efforts to promote ESG (environmental,social and governance) investing, whichwere led by Europe, have been rapidly
spreading across the globe. In Japan, many
companies are committed to efforts tomake our society sustainable, led by major
corporations. One of the issues in the country is to encourage companies’ pension
funds to make investments from the ESG
perspective.
“If we can find an ingenious way to activate the corporate pension fund system,
we will be able to drive a paradigm shift
to stakeholder capitalism,” said Takeshi
Kimura, who became the first person froman insurer to be appointed director of theboard of the United Nations-supported
Principles for Responsible Investment inJuly 2021. “It is important to focus efforts ofall parties involved on creating a structure
for that. There is large room for improvement in Japan.”
The PRI was established in 2006 to promote ESG investing around the world.
“Since 2018, the number of signatories to
the PRI has increased by about 25% annually. Institutional investors have strong
awareness about ESG,” said Kimura, a former director-general of the Bank of Japan’s
payment and settlement systems department who currently serves as an executive
officer of Nippon Life Insurance Co. However, ESG investments represented just 24%of the total outstanding assets under management in Japan in 2020, well below theworldwide figure of 35.9%.
Japan “is behind Europe and the United

rencies at the BOJ,
States in terms of
Kimura believes
how broad-based”
it is necessary to
the awarenessactively participateof ESG investingin discussions at theis, according toInternational OrgaKimura. Japanesenization for Stanentities currently
dardization and “fortotal about 100
businesses, superamong the 5,000
visory authorities,
signatories to thethe Bank of Japan
PRI, far behind theand other entities
1,000 for the U.S.
to work closely
and 800 for the
together and focus
U.K. and Ireland
their resources” tocombined.
link initiatives in
A key factor forJapan with global
the lackluster presstandards.
ence of Japanese
Kimura also
entities is a notable
thinks large busiabsence of thenesses shouldcountry’s corporate
support their penpension funds, only
sion funds’ efforts
three of which are
to introduce ESG
among the PRI sigintegration to help
natories. “The trend
expand the breadthin recent yearsof ESG investing inis that efforts toJapan. By presenting
address ESG issues
investment policies
lead to improved
incorporating bencorporate value andeficiaries’ sustaininvestment returns
Takeshi Kimura, executive officer and special adviser to the board, finance and investment planning department and corporate planning department,
ability preferences
over the long term,”
at Nippon Life Insurance Co. HIROMICHI MATONO
to asset managers,
Kimura said. “Givencorporate pension funds can contribute to
In October 2021, Nippon Life Insurance
them. They publish guidelines, promote
that, the scarcity of ESG investors in Japan
improving the corporate value of investors
joined the Net-Zero Asset Owner Alliance,
best practices and lobby regulatory authoriis a serious problem that can impact thethrough the stewardship activities of asset
an international initiative of institutionalties in different countries to develop ancompetitiveness of Japan’s economy andmanagers, and thereby accomplish a duty
investors committed to making greenhouse
investment environment from a legal perfinancial market.”to act in the long-term best interests of theirgas emissions from asset management portspective. It is difficult for investors in Japan,
PRI signatories form advisory combeneficiaries.
folios net-zero by 2050. According to Kimura,which has few signatories, to have issues
mittees and working groups on different
According to Kimura, the role of asset
this brought the number of Japanese life
specific to Japan and their views reflected
themes, totaling about 25. In these, the sigowners in the upstream of the investment
insurers in the alliance up to four; together
in such guidelines. Views from Europe andnatories report on their responsible-investchain, such as pension funds and insurthey represent nearly 20% of the assets
the United States, which have more signament initiatives to each other and discuss
ance companies, is very important. That isunder management of all alliance members.
tories, end up forming best practices. In that
because no matter how loudly asset manNZAOA members, which share common
sense, there is no denying that JapaneseAt the Japaneseagers in the downstream may call for ESG
goals, work together to solve global-scalecompanies have forgone the opportunity
central bank,investing, it would lack substance unlessissues by influencing investee companies.
to participate in efforts to create internaKimura engaged in
asset owners had policies on ESG invest“Now that we have an advantageous
tional rules, according to Kimura.
monetary policy
ment, and the best interests of beneficiaries,
position in terms of volume of funds, it has“It is important to become involved inand directed his
including company employees, would not
become easier for Japan to disseminate
the upstream process of formulating global
efforts toward
be ensured.
information,” Kimura said. “The next imporbest practices to prevent responsible investresearch on central“In Japan, there has long been a spirit oftant step is to consider how we should influment in Japan being isolated from the rest ofbank digital currenrespecting the benefits of a broad range ofence views and contribute to the alliance.”
the world,” Kimura said. “If you participate
cies and cashlessstakeholders, including business partners,
Based on his experience of having been
halfway in the series of movements for ESG
payments.
employees and local communities — not
involved in the standardization of digital curinvestment, you may end up being too late.”
HIROMICHI MATONOIn July 2021, Kimura was appointed director of
the board of the United Nations-supported
Principles for Responsible Investment
HIROMICHI MATONO

just seeking to maximize shareholder
benefits — as represented by the word
‘sanpōyoshi’ (three-way satisfaction),”Kimura said.
“In order to realize the shift to stakeholder
capitalism, which is the modern version ofsanpōyoshi, it is desirable that businesses
ensure their corporate pension funds adopt
the ESG perspective in asset management,
not just prioritizing SDGs (sustainable development goals) in their main business,” hesaid.
Pension plans’ participants are not only
indirect shareholders of investee companies
but also company employees, consumers
and local residents at the same time. As
such, it is ideal that they should be involvedin corporate governance as representatives for stakeholders of businesses. It is
important to incorporate their values aboutsustainability into the investing process ofpension funds.
When it comes to ESG, critics havepointed out that there is a large gap
between businesses and their pension
funds in Japan in the level of commitment
to sustainability. But once this weakness
is overcome, Kimura believes, Japan canmake a significant
advance in theshift to stakeholder
capitalism.
The ESG Talk series areinterviews with businessleaders who are active proponents of ESG investingand practices in Japan.

Symposium aims to help Japan’s female entrepreneurs
ESG/SDGs
JACOB REEDCONTRIBUTING WRITER“Japan is one of the worst in terms of thegender gap,” professor Hidetoshi Tahara
reminded listeners in his opening remarks
at the Women in Entrepreneurship Education Symposium held at Hiroshima University on International Women’s Day,
March 8.
The daylong symposium was part of theEffectuation Conference 2022 and included
speakers such as renowned effectuation
theory founder Saras Sarasvathy, Hiroshima Gov. Hidehiko Yuzaki and a host of
business-oriented professionals students,
recent graduates and academics, all with astrong interest in supporting more womenchoosing entrepreneurial pathways.
“Japan has an enormous opportunity
to leverage the power of women by making entrepreneurship more accessible andattractive,” Tahara argued.

Entrepreneurial way of life

The symposium featured Sarasvathy, a professor at the University of Virginia Darden
School of Business. Her scholarship is
highly regarded, and she has had far-reaching influence within entrepreneurshipeducation. Her talk focused on explaining
effectuation theory and how leading aneffectual life can be the start of novel entrepreneurial ideas.
Entrepreneurs look for cause-and-effectpatterns in the world around them. A person can either work out the means to causea goal to happen — this uses “causal reasoning” — or take the means at hand and thenwork out what goal to bring into effectwith them, using “effectual reasoning.”
Living effectually can be done by anyone.
It simply requires a perspective change:
to think about what one already has —their “bird in the hand” — and what they
can afford to lose while preserving theirstandard of living. “Living effectually,” sheexplained, “is working with what’s alreadywithin our control to co-create the futurewith self-selected stakeholders without
having to predict it.”
To illustrate, Sarasvathy used a cooking metaphor. Cooking “causally,” sheexplained, is like following a recipe. “Following a recipe is safe, and the cost of failure
is low. Whatever the causal cook set out tomake, that is what they will end up with.”
On the other hand, by cooking “effectually” — by looking at what one alreadyhas available in the kitchen and improvising — the chances of creating somethinginteresting and innovative are much higher.
This effectual mindset can be applied toother parts of life. Sarasvathy contends that
putting emphasis on experimentation, networking and being open to surprises is thedisposition that is most likely to lead to successful entrepreneurship.
But is entrepreneurship only for people
planning to start a business? “No,” Sarasvathy said, “even if we never start a company, just knowing that we have the key
to do so is empowering. We should learn
entrepreneurship so that it becomes a life
option for us.” She believes this is particularly important for women, and especially
so in Japan, which was in 47th place in the
Mastercard Index of Women Entrepreneurs 2021 global rankings. When looking
only at high-income nations, Japan wasand even rural. “Entrepreneurship is notjust about high-growth potential techstartups,” she insisted. Hiroshima is a wellknown urban area, but the university itself
is in the more rustic Higashihiroshima,east of the main city. This situates it perfectly for the type of awareness-raisingthat Zollet is doing. “We are trying tochange the narrative of rural spaces from‘spaces of decline’ to ‘spaces of possibility,’”
she said. “The students make a project proposal and engage with the local community and businesses. This shows them thatstarting a business is not impossible — it
can be done locally.”
Together with the other panelists, Zollet
thought about how she could involve more
female students. She said many entrepreneurship classes in Japan tend to discourage
female student participation. “Many female
entrepreneurs are motivated by changing
things in the world rather than money orfame and so on, so that’s why we decided
to frame the course around social and local
issues.” she explained.
Panelists and pitch participants pose for a quick photo opp at Mirai-crea TAKUMI KATAYAMA

second-lowest, just above Saudi Arabia — afact that was puzzling to Sarasvathy. “We
can feel bad about it, but every country
and culture are different,” she said. She suspected that one of the reasons for the low
ranking could be that many jobs are alreadyavailable in a developed country like Japan,
so there is not as much drive to be anentrepreneur and start something new. “Indeveloping countries, we see many entrepreneurs because there simply are no jobs
for people, so you just have to work yourown way through.”

Educating women in Japan

Panelists sharechallenges andopportunities in
education EMERGING TECHNOLOGIES &KAREN MAKINO

Directly related to the symposium’s theme,a panel discussion was held that outlined
the current state of entrepreneurship education for women in Japan. The panel was
moderated by professor Mikiko Shimaoka
of Waseda University and Kanagawa University of Human Services. The panelists
included professors Michiko Ashizawa of
Yokohama City University, Kyoko Yokota
of Ochanomizu University and Simona Zol-

let of Hiroshima University. Following thepanelists’ remarks, Sarasvathy enlivened
the discussion with a Q&A.
In Ashizawa’s view, one of the major
issues with teaching entrepreneurshipand producing world-class startups fromJapanese universities is Japan’s “short history” with startups. Furthermore, shepointed out, “Many networks [in Japan]
are male-centered, which makes it difficult
for women to find confidence in mixed
circles.” Despite these perceived difficulties, Ashizawa headed a business education
program in Cebu in the Philippines, andmost of her seminar students who havetaken part are female. “I guess maybe thatis because I am a female leader myself,” sheexplained.
At Hiroshima University, Zollet is trying
to change students’ preconceived notions
about entrepreneurship entirely. Drawing
upon her background in environmental
science and sustainable development, she
encourages students to see entrepreneurship as something local, within reach,

PAGE: 7

Startups in Japan

Hiroshima Gov. Yuzaki, himself an entrepreneur with experience working in venture capital in Silicon Valley during thelate 1990s, is striving every day to makedevelopment of entrepreneurship a major
initiative in the prefecture. Speaking on
education, he said that the focus is still on
skills but that “more fundamentally, what
we think is more important. We need toencourage an action-taking attitude froma very young age.” From primary schools
through to universities, the focus is beingchanged from “teaching” to “learning.”“This is related to critical thinking, interpersonal skills and how knowledge is used
in interpersonal dynamics,” Yuzaki said.
Sarasvathy was also on hand to ask thegovernor questions and to promote dialogue. “Why do we teach entrepreneurship only for potential entrepreneurs?” shequeried. “Imagine only teaching science
to future scientists!” She said more needs
to be done than “what is done at Silicon
Valley — there was no idea of the middle
class before the 18th century” and insisted
that everyday people need access to entre-

Professor Saras Sarasvathy UNIVERSITY OF
VIRGINIA, THE DARDEN SCHOOL

preneurship education.
Yuzaki outlined some of the criticalissues facing policymakers regarding
entrepreneurship, saying objectives need
to be clear. “Is our objective to create jobs?
One way is to create many small startups,
but they may not survive. Another way is
to focus on large startups, but how manyof those will grow to become the next
Google?” The governor explained thatfor the past 10 years, the policy has beenencouraging as many startups as possible,
although results have been limited. Bothadmitted that too many startups could
lead to negative outcomes. “If everyone
wants to start their own company, then
who would work for them?” Sarasvathy
asked rhetorically.
In Yuzaki’s estimation, Japan’s problem
is that, unlike the United States, where
Sarasvathy is based, it is difficult to findpeople who want to do a startup. Clearly,
Japan and the United States are in different situations
and have different
cultures and value
systems, but both
agreed that more
entrepreneurshipin Japan would behighly desirable.
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