Japanese financial giant Dai-ichi Life Insurance is switching its JPY400bn (€3.2bn) in-house foreign equity portfolio to an index based on the MSCI ACWI ESG Universal Index in efforts to “build a portfolio for both generating investment returns and solving social issues”.
The portfolio will now track the MSCI index, but will be actively managed, with constituents’ weights adjusted based on internal research.
As part of the move, the JPY36trn (€290bn) firm will scrap its existing ESG funds for foreign equities, which it launched in 2019 using Arabesque S-Ray data.
The index performs negative screenings, including for arms companies and those with a record of serious misconduct, then adjusts the weightings from the parent index up to 2.5 times based on MSCI’s ESG scores.
Dai-ichi said the decision was part of a broader plan as a universal owner to incorporate ESG across all its assets, as outlined in its ESG policy, launched back in April.
According to the policy, it will incorporate ESG in its research process “sequentially…not just for company assessments, but also assets such as government bonds”.
It said it would also systematically consider ESG in asset allocation and investment decisions, and aim to achieve zero carbon emissions in its real estate power consumption in the latter half of the 2020s.
Dai-ichi follows in the footsteps of Japan’s Government Pension Investment Fund, which started shifting an initial JPY3trn into three ESG indices back in 2017.
According to Dai-ichi’s 2019 Responsible Investment report, in 2019 it had JPY 508bn (€4bn) invested in “ESG-themed investments”, up from JPY 372bn (€3bn) in 2018.
The ESG policy also saw the company commit to proactively investing in the UN Sustainable Development Goals, green bonds and social bonds, and expand impact investments in growth companies and venture companies to “create progressive innovations”.
Dai-ichi said in its ESG policy: “Dai-ichi Life regards ESG investment initiatives for realization of a sustainable society as its fiduciary duty to customers, and has formulated the Dai-ichi Life Basic Policy on ESG Investment in its commitment to further reinforce these initiatives going forward.”