Zenkyoren announces investment in climate focused Exchange Traded Fund to help counteract climate change

Thursday, 15 October 2020

Japanese ICMIF member Zenkyoren (National Mutual Insurance Federation of Agricultural Cooperatives) and The Norinchukin Bank (Central Cooperative Bank for Agriculture, Forestry and Fisheries), both of which belong to the JA (Japan Agricultural Cooperatives) Group, have announced that they have invested JPY 10 billion (USD 95 million) each i.e. JPY 20 billion (USD 190 million) in total into an Exchange Traded Fund (ETF) focused on dealing with the environmental and social issues caused by climate change. The ETF, which is managed by Norinchukin Zenkyoren Asset Management Co., Ltd.(NZAM), is aimed for tracking the S&P/JPX Carbon Efficient Index . The investment is structured to selectively invest in companies with low greenhouse gas emissions and encourages a wide range of companies to improve greenhouse gas emissions and information disclosure. The aim of the investment is to collaboratively contribute as the JA Group towards solving climate change issues as they have huge, negative impacts on the agricultural industry

Zenkyoren and The Norinchukin Bank, as cooperative organisations which support the industry of agriculture, forestry and fisheries, are tasked with contributing to the sound development of the industry and the national economy. Today, natural disasters such as torrential rain and typhoon caused by global warming are increasing and the negative impact of climate change on the industry and local communities, which are the areas of their business foundation, is escalating. This collaboration has shown their strong stance against climate change as the JA Group.

This ETF is focused on companies carbon efficiency (carbon emissions per sales) and disclosure of environmental information and is expected to lead to an improvement in carbon efficiency by about 20% against investment products tracking Tokyo Stock Price Index (TOPIX) (according to The Norinchukin Banks investigation). The ETF also has some elements to encourage investors engagement in urging industries and companies to improve carbon efficiency and information disclosure and therefore making a potential contribution to realising low carbon society.

The ETF invests in a wide range of stocks (investment universe is TOPIX) which are carefully selected with a consideration for the associated climate change risk and the characteristic of risk and return is similar to TOPIX. It is highly regarded as an alternative to TOPIX tracking products in the passive investment of Japanese stocks. In addition, taking also into consideration its management expense is the lowest in TOPIX tracking funds and ETFs (The Norinchukin Banks investigation), it is expected to be a steadily tradable product for institutional investors as well as individual investors in the Tokyo Stock Exchange by utilising their initial JPY 20 billion investment. The investment in the ETF structured and managed by NZAM has become a step for Zenkyoren and The Norinchukin Bank to proceed with ESG investment and it is believed that this will make some contribution to revitalising the stock market and creating an opportunity to improve companies carbon efficiency and information disclosure.

Zenkyoren stressed, “Risk mitigation of climate change is important. It is significant to make the large scale investment as the JA Group” (Research and Public Relations Department).

Zenkyoren continues to seek investments which address various environmental and social issues.