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June 20, 2003
Attitudes and Actions Behind the Growth of SRI in Japan
    by William Baue

Alongside the highly visible events that demonstrate the spread of socially responsible investing in Japan are shifting attitudes and less visible actions (part two of a two-part article).

Since August 2002, Asahi Life Asset Management Company (ALAMCO) has been hosting a once-a-month "SRI Lounge" at its offices, drawing about 20 to 30 people to discuss issues related to socially responsible investing (SRI). The substance of these discussions offers a glimpse behind the events that portend the growth of SRI in Japan, such as the Mutual Aid Association for Tokyo Metropolitan Teachers and Officials' two billion yen commitment to SRI in its pension funds (see part one of this article for more information on this and other concrete examples). Other less visible developments and commentary from other industry participants also help paint a more complete picture of the attitudes and actions fueling the growth of SRI in Japan.

"The SRI Lounge is not a one-way seminar, but a forum to discuss SRI-related issues in a relaxed mood," explained Tadashi Hayami of ALAMCO, which administers the Asunohane (or "Feather of the Future") fund, one of the first Japanese SRI funds. "SRI gurus in Japan are interested in regulations and standards, such as the Global Reporting Initiative (GRI), but regulations and standards are not SRI."

"We define SRI as connecting personal values to money," Mr. Hayami told "We consider that thinking about social and environmental issues in daily life in more important than learning about SRI."

The SRI Lounge has focused discussion on a number of questions, including what defines SRI, corporate social responsibility (CSR), and sustainability, and how to read an environmental report, identify an eco-friendly company, or apply negative screening.

Education is an important element in the development of SRI in Japan, where understanding of SRI is low.

"Japanese know very little about SRI, because the background for SRI in Japan is different from that in Europe and the USA," said Eiichi Takeda, a corporate planning official at Nikko Asset Management. The Nikko Eco Fund, which was launched in August 1999, was the first SRI mutual fund in Japan. "Firstly, Japanese are not as familiar with stocks and unit trusts, though the most Americans and Europeans have them, as Japanese prefer the bank deposit to the investment."

Secondly, many Japanese are conservative and do not consider cigarettes, nuclear power, gambling and weapons production as "anti-social," according to Mr. Takeda. Mr. Hayami echoed this characterization of the Japanese as generally conservative. Thirdly, Mr. Takeda lamented the relative dearth of nongovernmental organizations (NGOs) to promote the cause of SRI in Japan. Mr. Hayami also stressed the importance of NGOs because they work at the grassroots level.

One Japanese NGO that is promoting socially responsible corporate practice is the Women and Work Research Center, which promotes the rights of women on the job. Stock at Stake, an SRI screening company that operates under the Belgium-based Ethibel Group, prepared a report in December 2002 for the Center that established sustainability criteria for identifying best practice in equal opportunity employment and diversity.

Japanese companies are also taking it upon themselves to adopt best practice in the social and environmental arenas.

"For example, last Friday, Canon (ticker: CAJ) held an investor relations meeting for mainstream institutional investors on Canon's environmental initiatives," said Mr. Hayami. "This is one of the first times that a Japanese company has explained its environmental policies to mainstream investors."

Corporate awareness of the need to communicate about CSR and SRI is fueled by investor interest in these topics.

"Now, Japanese stockholders are starting to pay attention to CSR because of the corporate scandals and low stock prices these days in Japan," Mr. Takeda told "They are also beginning to take an interest in SRI, as it is related to the CSR."

Mr. Takeda believes that when market conditions improve and when corporate investors, pension funds, and 401K plans start adopting SRI strategies, then SRI will grow more popular in Japan. This may already be happening, as Sumitomo Trust Bank announced that it will start marketing SRI products for pension fund clients.

While Mr. Takeda predicts a top-down growth of SRI, Mr. Hayami foresees a more bottom-up or even lateral development.

"In my scenario, mainstream investors will move toward SRI, though this movement may be invisible from the outside," said Mr. Hayami. "I think that in Japan, SRI development will continue without the SRI name: SRI will melt into the mainstream pot."

Part One of this article describes the concrete events and developments spurring the growth of SRI in Japan.


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