Japan Ahead: MPower Partners' Kathy Matsui on ESG

Japan Ahead: MPower Partners' Kathy Matsui on ESG

• 00:00[CC may contain inaccuracies] Let's just ask a broad question on where Japan is headed when it comes to ESG what change does the country need to see the most
• 00:08right now. Thank you for having me. I think to answer your question the
• 00:15most important missing ingredient perhaps is that he is G is not just a compliance exercise but rather E G is an important and
• 00:26critical driver for growth. I believe that many companies many people still believe that it's a box ticking exercise. Hence we
• 00:36have seen greenwashing incidents here and there. Japan is not an exception to the global trend but I think the real missing
• 00:46ingredient and the reason why we're trying to integrate ESG is these start startups that we're investing in is so that they get
• 00:54these values injected into their DNA before they become fully formed adults. And these are really basic principles good
• 01:02governance employee engagement worrying about how diverse your management team is the impact your business is having on the
• 01:11climate you're existing in. So all of these elements which we think are actually quite basic really do need to be at the core
• 01:19of a company's business strategy. And that's what we're trying to help integrate here in Japan. And these are all they seem
• 01:26very positive trends when it comes to really implementing ESG across the country. But we are now facing these questions on
• 01:33whether or not ESG is also having some exposure in the invasion of Ukraine and some of those Russian assets. Do you have an
• 01:42understanding at this point where Japan stands in terms of ESG in relation to Russia Ukraine.
• 01:49It's a very timely question Sherry. And I think that we've already been seeing companies in the automobile sector in the
• 01:55technology sector beginning to either halt and or sort of pull back some of their presence in in Russia for instance. But again
• 02:06this is a very delicate balance because as you know for example Russia does account for a certain percentage. I believe it's
• 02:13around 6 or 7 percent of Japan's total energy imports. Japan is wholly reliant on imports for its fuel supplies and these fossil
• 02:23fuel supplies. And so it always has to walk this delicate balance between geopolitical considerations but also economic
• 02:30realities. But we have seen many many companies begin to step forward not only with regard to their businesses and operations
• 02:38in Russia but also some very generous philanthropic charitable support for the country and people of the Ukraine.
• 02:48One of the points that the story that we did on this points out is that it kind of lays bare the confusion or the conflation
• 02:54between sustainability and ethical investing. Right. Where do you sit in terms of ESG as just a screening tool to help funds
• 03:03avoid these risks to actual ethical investing. So it's your absolute right. It's very confusing. How do you
• 03:12where do you draw the line. Are these lines becoming more blurred by the day. But at the end of the day to me there is
• 03:19still a bit of a difference in so far as you know ESG is quite a broad framework. It's not just looking at ethical
• 03:27considerations. It's looking at like I said you know what kind of emissions is this company having not just in its own
• 03:35operations for instance but if you go down to scope three for instance what kind of emissions impact is this company having in
• 03:43its broader supply chain. And a lot of industries that's where the biggest impact is being felt. So it's not just about is it
• 03:52good or not good to do business with a certain customer or with certain counter parties. But how are you doing business. How is
• 04:00it impacting the environment on the governance side of things. What kind of decision making structure do you have. How diverse
• 04:08is that decision making structure have that has significant ramifications of course for risk management
• 04:16practices as well. Your fund launched last year. I'm wondering since then how much
• 04:22of a push have you seen from the cash to government in terms of green funding in terms of agenda oriented funding. And have you
• 04:29seen any investments. What what opportunities are you looking at.
• 04:35So indeed Kishi the government has basically reiterated the thrust of the previous regime which was Japan really has two big
• 04:45buckets of focus when it comes to economic policy. Number one is green investments and British administration has committed to
• 04:54doubling the amount of investments in so-called green technologies should also. I made a speech earlier this year
• 05:02basically stating that Japan will actually back a carbon pricing system which I think has been a controversial subject of
• 05:11discussion in this country for quite some time. So that was very encouraging to see. But I think we need more than just
• 05:17pronouncements. We need real money backing very innovative startups and innovative companies in this space. Like I said
• 05:25earlier Japan is very dependent on imported fossil fuels but it has this very ambitious target. At the same time to reach carbon
• 05:32neutrality by 2050. In my personal view you will not be able to get there if you do not invest in innovative technologies as
• 05:40some of those technologies may come from outside Japan not just inside Japan. On your other question on diversity there has been
• 05:47some talk about womenomics and diversity within the Keystone government. But personally speaking I think they could do more.
• 05:55I think there is more about focus on women in terms of income redistribution angle as opposed to let's get women
• 06:02more fully engaged in society more fully represented and leaders in positions of leadership and decision making and that being a
• 06:09positive engine for growth. Kathy what do you make of. It is new capitalism. Is it a more
• 06:16appropriate framework to look at the economic and social challenges of Japan's time now than through genomics.
• 06:26Well I think he is framework. Is reflective of the challenges that Japan's society is facing
• 06:32namely that growth has been present but growth has not been enforced evenly distributed. So he's tried to address on the one
• 06:40hand you know the inequities within society. But frankly speaking it's hard to redistribute income if you don't have much
• 06:47income to begin with. So the first thing is how to drive growth in innovation and living in the venture and start of the startup
• 06:56ecosystem. For the past less than a year my partners and I truly truly believe there are some brilliant founders in this country.
• 07:04There's not enough infrastructure to support that growth though not enough risk capital. But we think that if the government and
• 07:11private sector can work together and collaborate to drive more innovative startups that can really drive the income growth that
• 07:20the government needs to redistribute more broadly to the overall society.