Japan's Kampo Insurance eyes firms with tech edge in new ESG strategy
18/03/2019 01:15
* New approach to ESG investing, focus on firms with tech
edge
* Plan to double in-house active management of Japanese
stocks
* No plan to increase overall stock portfolio near-term
By Tomo Uetake
TOKYO, March 18 (Reuters) - Japan Post Insurance 7181.T is
shifting its approach to sustainable investing by picking
companies with a technological edge to solving global problems,
its investment chief said, in a move away from typical ESG
selection criteria.
With total assets of 74.5 trillion yen ($670 billion), the
life insurer, also known as Kampo, is one of Japan's biggest
institutional investors and a major player in the world's third
largest stock market.
The firm plans to triple the portion of environmental,
social and governance (ESG) investments in its domestic stock
portfolio to around 100 billion yen over the next couple of
fiscal years starting in April, Chief Investment Officer Atsushi
Tachibana told Reuters.
Kampo is taking a radically different approach compared to
conventional ESG investments, he said.
In recent years many ESG investors have focused on "somewhat
superficial criteria" such as the percentage of female managers,
the average rate of paid leave taken by employees, or a
company's carbon emissions, he said.
Kampo tries to identify companies that it believes have a
technological edge to solve global ESG issues and meet U.N.
Sustainable Development Goals (SDGs), a set of 17 goals and 169
targets aimed at resolving social, economic and environmental
problems troubling the world.
"We look to what extent companies' exposure to businesses or
products that will contribute to solving ESG challenges are
driving their growth," Tachibana said.
"That's not something you can find in their public
disclosure. We try to get an estimate through the 300 to 400
meetings and factory visits our analysts have with companies
annually," he added.
Based on that strategy, Kampo's ESG portfolio looks very
different from other ESG funds, he said.
RECYCLER, LED HEADLAMP MAKER
The top 10 holdings in Kampo's ESG-focused growth stock fund
include FP Corp 7947.T , a leader in manufacturing and
recycling disposable food containers used in supermarkets, and
Koito Manufacturing 7276.T which makes LED headlamps for cars.
The fund does not include common ESG names such as Toyota
Motor 7203.T , Sony 6758.T and KDDI 9433.T , which have
heavy weightings in ESG indices such as MSCI Japan ESG Select
Leaders .dMIJP00006PJP and FTSE Blossom Japan .FTE4GJPNINY .
Since its launch last April, the returns for Kampo's ESG
fund have beaten the benchmark Topix index .TOPX by 2.5
percentage points, MSCI Japan ESG by 0.5 percentage points and
FTSE Blossom by 2.7 percentage points, as of March 8, Tachibana
said.
Kampo is the insurance arm of former state-owned
conglomerate Japan Post Holdings 6178.T . The insurer has
increased investment in riskier assets since it was partially
privatised in 2015.
Previously, the firm has relied heavily on outside asset
managers to oversee its mostly-passive stock portfolio, which
rose in value to 2.118 trillion yen by September 2018 from 997
billion yen in March 2015.
It plans to double its in-house, actively-managed portion of
the portfolio - which includes the ESG-focused growth fund and a
high-dividend fund - to about 20 percent of total stock
holdings, or about 400 billion yen, in the near future, he said.
As for Japan's stock market, he remained cautious despite a
recovery since January.
"We expect the global economic slowdown to continue a bit
more, so we don't plan to increase our domestic stock portfolio
in the near-term," said Tachibana.
"That said, their valuation is cheap and I think they can be
good investments in the longer term."
($1 = 111.60 yen)
(Reporting by Tomo Uetake; Additional reporting by Hideyuki
Sano; editing by Darren Schuettler)
((tomo.uetake@thomsonreuters.com; +81-3-6441-1645; Reuters
Messaging: tomo.uetake.thomsonreuters.com@reuters.net))