Nomura Institute of Capital Markets Research (NICMR), a subsidiary of Nomura Holdings, probes the issues affecting financial and capital markets. In December 2019, Nomura Research Center of Sustainability (NRCS) was established within NICMR. Investment Japan (IJ) asked the head of NRCS, Akane Enatsu, to describe the focus of their research.



How did the Nomura Research Center of Sustainability come about?


As issues such as climate change gain increased attention, there is a growing willingness to implement sustainability initiatives in the economy and society.  In recent years, NICMR has been conducting research on sustainability-related topics such as climate change, aging population, social welfare, agriculture, education and corporate governance, from financial/capital market perspectives.  I have personally been doing research on ESG bonds from a public finance perspective.

Our new center will conduct strategic research on sustainability and provide value-added information and proposals to our clients.  The center aims to build an open platform that enables NICMR to exchange research ideas with external advisors and experts to expand and deepen our sustainability research.


Sustainability is a broad theme.  What exactly will you focus on?


Nomura is an Asia-based global financial institution.  One of our roles is to identify and conduct research on sustainability-related issues from Japanese and Asian perspectives.

Japan faces a number of issues directly linked to the sustainability of its economy, including the “super aging” of the Japanese society.  Japan enjoys one of the world’s longest life expectancies while  simultaneously having one of the world’s lowest birth rates.  There are other issues such as shrinking regional economies as a large concentration of people live around Tokyo, economic and income inequality, energy mix issues and national disasters.  The responsibility to address these issues was believed to rest with the public sector, mainly national and local governments.  However, this has become difficult in light of fiscal sustainability.  In terms of funding, corporations, financial institutions and investors will likely play a greater role in financial markets going forward.  We conduct research on how Japan and countries in Asia can contribute to sustainability, taking into consideration the structural differences between the industries, economies and societies of Japan and Asia.

Asian countries need to take a different approach than Europe to achieving a low carbon society because their energy mix is different and some countries do not have sufficient social infrastructure.


As interest in in ESG investment grows in Japan, Japanese bond issuers are often evaluated by the standards of Europe and other ESG-advanced countries.  Shouldn’t the standard of evaluation take into consideration Japan’s historical engagement with sustainability?


In September 2015, the Government Pension Investment Fund (GPIF), the world’s largest public pension fund, announced that it had become a signatory to the Principles for Responsible Investment (PRI).  Since then, interest in ESG investment has increased among Japanese institutional investors.  In November 2017, the “Charter of Corporate Conduct” was revised by the Keidanren (Japan Business Federation), Japan’s most influential business lobby, to urge businesses to give due consideration to the Sustainable Development Goals (SDGs) in the development of management policies and to focus on contributing toward reaching the goals.  The movement took hold among institutional investors and corporations.  As of the end of March 2020, 261 Japanese entities have become supporters of the Task Force on Climate-related Financial Disclosures (TCFD).  While there is currently no particular movement in Japan toward regulation based on the recommendations of the TCFD, some countries and regions such as the European Union (EU) are moving toward regulation.

Many Japanese companies have a longstanding history of more than 100 years.  Their businesses have been in harmony with society since before ESG investment became popular in western countries.  Japan needs to get used to explaining its experience and achievement to investors around the world.

Although there is no global consensus on impact assessment at present, the International Capital Markets Association (ICMA) proposed a harmonized framework for impact reporting for social bonds in 2018.  In order to boost ESG investment globally, it is essential to develop tools for evaluating impact that provide a basis of comparison for investors.


You are an expert on bonds and credit.  ESG investments are currently focused on equity, but why are you focused on fixed income?


I started to focus on ESG investments in fixed income markets a few years ago when I researched green bonds issued by local governments in the United States and other public sector entities around the world.  NICMR later enhanced its sustainability research with the establishment of a dedicated, cross-collaborative research group comprising experts from industry, government and academia to focus on the sustainable development of ESG.

While negative screening, ESG integration and ESG engagement are the main ESG investment approaches employed in equity markets, fixed income markets have been mainly focused on sustainability-themed investing and impact investing.  However, in recent years more fixed income investors have been incorporating ESG integration and other ESG investment approaches.

In addition, ESG financial instruments for fixed income are becoming more diverse.  Transition bonds are a new type of bonds that aim to promote greening in the future.  For example, an electric power company in Hong Kong issued a transition bond to raise funds for building a gas-fired unit to replace coal.


Do you see ESG bond issuing and investing becoming commonplace in Japan?


Japan accounts for only 3% of total ESG bonds outstanding globally as of the end of 2019.  However, the number of issuances has been growing since 2017, thanks mainly to measures by the Ministry of Environment to support green bonds.  ESG bond issuance in Japan has increased from approximately USD 500 million in 2015 to approximately USD 12 billion in 2019.  Currently, ESG bond issuance is growing rapidly in various sectors and some issuers are repeating their issues (Some issuers raise funds through ESG bonds and return to the primary market).  As various types of ESG bonds are issued and traded in Japan, investors in Japan and the world are able to find bonds that meet their investment needs.

IJ: Thank you very much.

About Nomura Institute of Capital Markets Research:


Akane Enatsu

Head of Nomura Research Center of Sustainability
Nomura Institute of Capital Markets Research (Japan)

Akane Enatsu has been a Senior Analyst at Nomura Institute of Capital Markets Research (NICMR) since 2012 and the Head of Nomura Research Center of Sustainability since 2019.  Her main research coverage includes public finance, credit ratings and analysis and ESG.  She has published several books including the Municipal Bond Investment Handbook.  She also serves several government organizations as a panel member.

Prior to joining NICMR, Ms. Enatsu was a credit research analyst for various financial institutions including Citigroup, Barclays, and Merrill Lynch.  She earned an MBA from University of Oxford and a PhD (Economics) from Saitama University.