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Forum: Mobilizing our capital towards sustainability

Forum: Mobilizing our capital towards sustainability

Tokyo (SCCIJ) – The fourth Switzerland-Japan Economic Forum discussed insights, perspectives and solutions on the topic of sustainable finance. The two panel talks focused on steps to achieve higher sustainability through capital allocation. About 150 people on average attended the forum online. The Embassy of Switzerland in Japan, the Swiss Chamber of Commerce and Industry in Japan (SCCIJ), and IMD Business School jointly organize the annual event. For this 4th forum edition, the organizers welcomed Lombard Odier Group as knowledge partner. Full recording available here!

Forum: Mobilizing our capital towards sustainability

The fourth Switzerland-Japan Economic Forum at the Embassy of Switzerland in Japan was held online.

Opening addresses

In his opening remarks, Dr. Andreas Baum, Ambassador of Switzerland to Japan, emphasized that Switzerland and Japan both aim for a carbon-neutral economy by 2050. The financial sector would be crucial for the necessary transition and should become a key driver. The Ambassador pointed to the upcoming 22nd round of bilateral financial dialogue. Also, he asked all forum participants to move beyond sharing experiences. “Let us leave the forum with one action point”, he said.

SCCIJ president Mr. Andre Zimmermann looked in his introductory address at the challenges to mobilize capital towards sustainability. “We want to act responsibly but what looks sustainable might not always be sustainable,” he cautioned. For example, the switch to solar panels, batteries and wind turbines poses new recycling challenges. “But what could be better for Japan than to team up with Switzerland,” Zimmermann said. A support of green financing should not mean sacrifice but smart and responsible investing.

Paradigm shift

In his keynote speech, Mr. Patrick Odier, Senior Managing Partner of Lombard Odier Group and President of Swiss Sustainable Finance, put the spotlight on the current paradigm shift in the financial industry. “We believe that the sustainability revolution represents the single largest investment revolution in our lifetime,” he said. “The transition to a net zero and nature positive economy will unlock trillions of untapped value. Companies that do not realise the magnitude of the sustainability challenges and the speed at which they should react, will face existential threats.”

“But the road ahead remains challenging and certainly bumpy,” Mr. Odier remarked. The low-carbon strategies that financial markets are currently focusing on would be “flawed” because companies would not be encouraged to reduce their greenhouse gas emissions. “Let us not exclude companies in sectors such as the steel and cement industries, which appear to be damaging the climate,” he argued. “Starving them from capital is not helpful.” Investors should move from shaming and instead embrace those companies that are fit for the transition.

Forum: Mobilizing our capital towards sustainability

(from left) Moderator Mr. Jonas Pulver (Embassy of Switzerland), Mr. Stefan Flückiger (Federal Department of Finance of Switzerland), Mr. Satoshi Ikeda (Financial Services Agency Japan), and Dr. Sayuri Shirai (Keio University).

Panel 1: Effective framework

The three speakers were grouped under the slogan “Shaping effective framework conditions: Ambitions and Roadmap”. Mr. Stefan Flückiger, Depute State Secretary for International Finance, Federal Department of Finance of Switzerland, called the shift in capital markets a “great opportunity for Switzerland. “Our goal is that Switzerland becomes a leading global center for sustainable finance” by creating transparency, setting and applying clear standards for the real economy and financial products and fostering a green fintech industry. However, a longer-term solution requires a higher global price on carbon.

Mr. Satoshi Ikeda, Chief Sustainable Finance Officer at the Financial Services Agency of the Government of Japan, pointed to his job title to illustrate how relevant the topic would be for his employer. The FSA would be working on many policy measures to drive sustainability through capital allocation and developed guidelines to assist for institutional investors to be engaged with companies. “The disclosure of related information is very fundamental for financial participants, and risk management has to be enhanced,” he stated.

Ms. Sayuri Shirai, Professor of Economics at the Faculty of Policy Management, Keio University, took the scholar perspective and explained that sustainable investment is a broader concept than ESG (environmental, social, governance) investing. Institutional investors like pension funds, insurance companies and fund managers engage with corporate actors and try to orient their behavior toward sustainability. In Japan, ESG disclosure has become part of the governance code for companies listed on the primary market but carbon pricing does not get a lot of support among the corporate sector, she pointed out.

Forum: Mobilizing our capital towards sustainability

(from left) Moderator Ms. Seema Bhayat (Lombard Odier Trust Japan), Ms. Yumiko Murakami (MPower), Mr. Bertrand Gacon (Impaakt), Mr. Zuhair Khan (UBP Investments), and Mr. Shin Taejun (Gojo & Company).

Panel 2: ESG, growth and yield

The four speakers addressed the panel topic of “Is ESG a path to business growth and financial return?” First, Mr. Bertrand Gacon, Co-Founder and CEO of Impaakt, predicted a coming wave of impact investing. “This means that private companies are answering to the world’s challenges,” he said. But it would be important to understand that different terminologies on the issues could co-exist.

Mr. Zuhair Khan, CFA, Senior Portfolio Manager of UBP Investments, named three current transitions: First the reduction of the carbon footprint, second the battle for talent, especially incorporating more women and foreigners in the workforce, and third a digital transformation, including the use of big data. “We invest in the good ones and short the bad ones,” he described his capital allocation approach. It would be shocking how big ESG has become. “Make sure that you are ahead of it”, he advised.

Ms. Yumiko Murakami, General Partner of the venture fund MPower, explained that ESG investing had been around for quite some time but until recently no one really talked about it. “Standards are still not perfect but there are better ways for capital market participants to assess what is happening with companies today than 10 years ago,” she stated. Due to this development, she had decided that this would be the time to launch a venture fund in the ESG field “to make a difference and take action”.

Mr. Shin Taejun, Founder, Chair of the Board and CEO, Gojo & Company, highlighted the aspect that most investment professionels would manage other people’s money. “Therefore, these investors are demanding both financial returns and social impact,” he said. There would be two ways to achieve this: either to pick the right market with high growth or do micro-finance which offers good interest rates. But in developing markets, a combination of technology and field agents would be the way to success in micro-finance, he explained.

“Three-way satisfaction”

In his closing remarks, Mr. Naoshi Takatsu of IMD Business School summarized the two panel discussions and elaborated on the concept of “sanpo yoshi”, the Japanese business principle of success through responsibility, literally translated as “three-way satisfaction”. ESG and sustainable investments would be good for sellers, buyers and society. “Those Japanese companies who know this concept are conducive to ESG investments.” Mr. Takatsu concluded the forum with a clear statement: “At the end of the day, we agree that time is now and there is no Plan B. Let us continue to mobilize ourselves for a sustainable future.”

About the Switzerland–Japan Economic Forum

By bringing together high-level representatives from business, government, and academia from Japan and Switzerland annually since 2018, the Forum contributes to strengthening relations and understanding between the two countries and economies. It is held annually as a half-day event in Tokyo.

Text: Martin Fritz for SCCIJ; Pictures: © Sakurako Kuroda

Find below the complete recording of the Forum:

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