The Impact of ESG factors on Stock Performance

Nissay Asset Management Corporation (NAM) — an asset management company wholly owned by Nippon Life Insurance Company —has been an active ESG investor over the past decade, but it is not currently active in impact investments. Recently it had undertaken a comprehensive study on behalf of the Financial Services Agency, a Japanese financial regulator, on the evolution of impact investing in listed equities. The study was meant to equip NAM with practical analysis for impact investing in public equities, including standards and practices used by other asset managers and asset owners to create impact.

Over the course of three months, the team interviewed a total of 16 asset managers and asset owners located in the United States, Europe, and Japan as well as researched over 100 investment funds. The study focused on defining impact investing, identifying investment strategies for public equities, surveying impact measurement methods, and evaluating the importance of engagement with portfolio companies. The study found the following three key points: first, impact fund managers should identify the strategy of the fund. For example, they can pursue a best-in-class strategy by selecting the most impact-generating companies for a given sustainability theme. Second, stewardship is crucial for impact investing in public equities, which impact fund managers can carry out through voting, submitting proposals at shareholder meetings, participating in proxy contests, and engaging with portfolio companies. Third, impact fund managers should disclose their impact investment process to all stakeholders including asset owners. The report also included an analysis of existing impact funds.