By Kimberly Gladman, CFA, Ph.D., Director of Research and Risk Analytics
The market for sustainable investment looks very different in Japan than in other developed countries. As the recently-released review of global sustainable investment explains, the most obvious difference is the small size of the industry—but it is growing, and in a unique way. Impact investing, which commands a relatively small share of the market in most countries, represents the largest portion of sustainable assets in Japan, with $7 billion in AUM. Much of this represents money invested in community development and economic restoration funds following the March 2011 earthquake. Another intriguing development is the expanding interest in bonds with sustainability impact, such as poverty alleviation or climate change mitigation: $7 billion of these were sold in the period from 2008-2011. (In contrast, sustainable equity funds have suffered from the long-term stagnation of Japanese public equities, and represented only $4.2 billion in AUM as of September 2011). Meanwhile, sustainable investment guidelines released in 2010 by RENGO, the Japanese Trade Union Confederation, are beginning to influence pension fiduciaries, who have powered the responsible investment movement in so many other parts of the globe.