consideration to the local community and natural environment. As of March 2008, 59 financial institutions in the world (including three institutions from Japan) have registered.

## (2) Expansion of the SRI Market

## A SRI Market in Western Countries

The scale of the SRI market is greatly different depending on how SRI is defined. Furthermore, each country has a different definition for socially responsible investment.

The scale of the SRI market in the United States, which has a long history of SRI, was approximately 2.7 trillion dollars in 2007 (“2007 Report on Socially Responsible Investing Trends in the United States” issued by the Social Investment Forum Foundation) and it has grown about 4.2 times in the last twelve years. Including only the ones using the environment as the screening standard, investment trusts for individuals totaled 44.5 billion dollars and funds managed by institutional investors accounted for 184 billion dollars. Institutional investors manage 90% of SRI in the United States. One characteristic is that pension funds account for most of the SRI.

In Europe, the SRI market has grown thanks to favorable legislative policies. For instance, in Netherlands, the Green Fund Scheme was adopted as a policy measure utilizing the financial function. It is a scheme in which government-approved green banks provide low-interest savings to individuals to gather funds and provide low-interest financing to environmental protection projects. In return, individuals who furnish the funds receive favorable tax treatment. In 2000, the British pension law was revised. The new law requires pension funds to disclose whether their investment principles have considered the social environment and ethics, as well as the level of consideration in their investment. As a result, the proportion of SRI assets in pension funds increased substantially.

In this way, pension funds in western countries, which manage large sums of assets and have a long-term investment horizon, have started to consider and place emphasis on the environmental efforts of the companies in which they invest their funds. There has been doubt in the past whether SRI can add social value to financial value in the investment while balancing the fiduciary duty of the pension funds to keep the benefits of the pensioners always as their highest priority. In recent years, however, opinions have emerged that favor investment activities made with consideration to the environment (E), society (S), and governance (G) as a means to optimize benefits for the pensioners.

## B SRI Market in Japan

In response to the heightening awareness of environmental issues, Eco Fund was introduced in 1999 as one of the investment trust products, which marked the birth of SRI in Japan. The balance of open-type SRI investment trusts in Japan reached 747 billion yen as of the end of September 2007 (from “Japan SRI Annual Report” issued by the NPO Social Investment Forum Japan). Indeed, individual investors investing in investment trusts have been the motive force of Japan’s SRI market (Figure 2-115). The recent trend in SRI investment trusts indicates that an open-type investment trust known as

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## Carbon Disclosure Project

Measures against global warming have become a global issue and directly and indirectly impact the business performances of corporations. To understand how companies respond to and counteract the global warming problem, a non-profit organization together with progressive investors has conducted corporate surveys since 2002. This survey is known as the Carbon Disclosure Project (CDP). While only 221 companies answered the first questionnaire, with the increase in awareness of climate change and the support of investors, participation grew to 1300 companies worldwide for the fifth survey in 2007, including 76% of the 500 largest publicly traded companies in the world by market value (152 Japanese companies were among the 1300). Responses from these 500 firms indicated that although 79% view climate change as a business risk, even more (82%) view it as a business opportunity. Climate change brings physical risks such as loss of assets or delays of projects due to abnormal climate, and also brings regulatory risks such as strengthening of rules and regulations at national and international levels with the aim of GHG emissions reduction. On the other hand, climate change presents business opportunities, and an increasing number of companies view climate change positively, hoping to utilize it for their business benefits. In fact, the findings of the survey are used by 315 institutional investors worldwide (their total assets estimated at US$41 trillion) as practical investment information.