Figure 5-3-5 Trends of the Market Size for SRI in Europe (100 million euros)

Note 1: Core SRI is composed of the following strategies:

· Ethical exclusions (three or more negative criteria applied);

· Positive screening, including Best-in-Class and SRI Theme Funds;

· Combination of ethical exclusion and positive screening.

2: Broad SRI is composed of the following strategies:

· Simple screening, including norms-based screening (up to two negative criteria).

· Engagement.

· Integration (strategy to include environmental, social and corporate governance (ESG) risks into traditional financial analysis)

Source: Prepared by Ministry of the Environment based on Eurosif, "European SRI Study 2008"

Figure5-3-6 Trends of Net Assets of Publicly-Offered SRI Investment Trust Funds and Number of Funds in Japan

Source: Prepared by Ministry of the Environment based on NPO Social Investment Forum Japan (SIF-Japan), "2008 Review of Socially Responsible Investment Japan"

United States. As of 2007, SRI investment in Europe and the United States was in the range of several ¥100 trillion, while SRI investment in Japan stood at just several ¥100 billion. It is believed that this is because that while SRI investment is made mainly by institutional investors with large pools of funds under management in Europe and the United States, SRI investment in Japan is done mainly by investment trust funds with relatively small amounts of funds under management for individual investors. Particularly in Europe, 94% of core SRI investment is dominated by institutional investors (Figure 5-3-7).

While there are differences in the size of investment and rates of increase among countries and regions, in the world as a whole, SRI investment made in consideration of environmental and other considerations, can be said to be on the increase in recent years.

It is believed that behind this trend is the “diversification of investment needs” seeking active

Figure5-3-7 Core SRI Investment Ratios of Institutional and Individual Investors in EU Member States

Source: Eurosif, "European SRI Study 2008"

investment in environment-friendly areas and areas conducive to social contributions instead of just pursuing higher investment returns. Publicly offered funds require the participation of many investors and thus are structured on the needs of investors. Therefore, the steady increase year after year in the number of publicly offered eco-funds in Japan can be seen as an expansion of green investment, which reflects the rising environmental consciousness among individuals and the rising needs of “green investors” who want to aggressively invest in environment-friendly companies.

Aside from SRI, another movement related to the environment and financing are efforts in international financing based on the “Equator Principles,” the leading voluntary standard set by financial institutions for managing social and environmental risk in project financing. The Equator Principles are the principles for financial institutions that provide a framework for determining, when they are making new project financings globally with total project capital costs of US$10 million or more, whether projects to be financed are paying due heed to potential impacts on local communities and the natural environment. The Equator Principles were first adopted by 10 U.S. and European financial institutions in June 2003.

Financial institutions adopting the Equator Principles classify projects they are financing into the three categories of A (projects with potential significant adverse social or environmental impacts), B (projects with potential limited adverse social or environmental impacts) and C (projects with minimal or no social or environmental impacts) in accordance with the environmental and social screening criteria of the International Finance Corporation (IFC). When a project is classified as Category A and Category B, a financial institution should carry out a detailed environment review using the industry-wide “check list,” and a borrower also should make social and environment assessment, including the consideration of an environmentally and socially feasible, desirable alternative. At the same time, an independent social or environmental expert not directly associated with the borrower will review the financial institution’s environment assessment. Financial institutions that have adopted the Equator Principles are required to disclose