ENVIRONMENT-JAPAN: Green is the Colour of Money

By Suvendrini Kakuchi Reprint | | Print |

Suvendrini Kakuchi

TOKYO, Feb 25 2000 (IPS) - Profit obviously remains a primary concern of Japanese investors, but these days that is no longer enough for many of them. Now they want the companies they put their money in to be green-minded as well.

Fund managers say more and more investors are turning to ecology funds, an innovative financial instrument that was introduced here only last year but already has the makings of a major hit.

Ecology funds, or eco-funds, operate on the notion that the companies included in the portfolio demonstrate environmental consciousness in the way they operate and are managed.

According to Nikko Securities, which launched the first eco- fund here in August, investor response has been “much higher” than what it had expected. Indeed, it had aimed to raise a modest five billion yen (45 million dollars) during the two-week initial subscription period, but ended up with some 23 billion yen (207.3 million dollars).

Investment in the open-ended fund continued strong into early October when it reached a cumulative total of 50 billion yen (450 million dollars).

Yasuda Fire and Marine Insurance Co., Dai-ichi Mutual Life Insurance Co., and UBS Fund Management (Japan), in partnership with Sumitomo Bank, report similar strong responses to their own eco-funds.

Yasuda says that a month after it launched its eco-fund in September, it had already raised 20 billion yen (180.2 million dollars) while UBS-Sumitomo and Dai-ichi Mutual, which introduced their eco-funds in October, collected a combined total of 40 billion yen (360.4 million dollars).

“There is no doubt that the birth of the eco-fund is the result of a rising consciousness among consumers who want to use their money toward the long-term goal of improving Japan’s environment,” says Hideaki Kotaka of Nikko Securities.

“Green investors are indicating a change in the way the Japanese are seeing the future,” he adds. “They are becoming mature investors because they are ready to wait for results that are not always measured by money gains.”

Brokers say that 99 percent of the investors in eco-funds are individuals and not companies. Most of them are also women, young and old alike.

Yoshinobu Kimura, a researcher at Good Bankers — the only local company so far that specialises in the eco-evaluation of firms — says that the minimum requirements for a company to be included in an eco-fund includes a pass on a test on the level of eco-consciousness within the management of the company, as well as the ISP 14001 certification for international environmental standards.

Good Bankers is linked to the Nikko Securities and the UBS- Sumitomo funds and evaluates major Japanese companies listed in the first and second indexes of the Tokyo Stock Exchange.

Its seven-member staff conducts surveys and use a variety of checklists upon which a corporation’s environment policies are judged. The findings are then presented to financial institutions.

“The topmost popular companies with investors right now are electronic companies that are producing low-energy products,” says Kimura. “But companies that have developed new policies, such as a management system that supports recycling within the company, or steps aimed to reduce the consumption of resources, are also highly recommended.”

Kimura predicts that the boom in eco-funds will only grow more.

He points out: “The Japanese are turning their backs against mass production and saying that while the nation’s economic development might have made them financially rich, their environment is in tatters and many of their fellow nationals victims of pollution. They want to change the situation and help build a sustainable society.”

At the same time, he says, the emerging “green” consciousness of the Japanese stems from a disgust with the “bubble” economy of the 1980s, when banks lent lavishly to companies that later ended up with massive debts, and the current long recession.

Analysts meanwhile say the rising support for a pollution-free future will force Japanese companies to change their policies that have often sacrificed the environment in the name of economic development.

Such a change may then qualify them for inclusion in the eco- funds, which in turn can lead to a rise in their share prices and ease in finding funding.

Some of Japan’s corporate giants are already taking heed of the investors’ mood. For instance, Taiheiyo Cement Corp., the country’s largest cement manufacturer, has announced plans to make more cement out of industrial waste.

It also says it will get into the environmental restoration business by using special types of plants that decompose polychlorinated biphenyl, which is considered to be an environmental hormone disrupter.

Then there is Ebara Corp., a major manufacturer of garbage incinerators, which has become the largest shareholder of Eco Power Co., a wind- power utility company. Analysts say the move reflects a trend among companies to try building an industrial ecology base.

Given the current credit crunch, any effort to get included in eco-funds only makes sense.

The popularity of eco-funds, however, is only the latest proof of the greening of the Japanese public.

The 11-year-old Eco-Business Network, a publisher specialising in ecological issues, reports that sales of books on the environmental protection have been on the rise in the past few years.

Green Purchase Network, which was set up in 1996 to promote the purchase of “environmentally responsible” goods and services, says that its members — including companies and local municipalities — have increased from 400 to the current 2,000.