Japanese insurers are adopting a well-balanced approach to Environmental, Social and Governance (ESG) factors, Fitch Ratings said in a report.
Fitch, in the report titled "Japanese Insurers Tread the ESG Tightrope", said that this balance is achieved by reconciling the pressures from ESG activists and government strategies with the interests of policyholders.
ESG considerations have become important for Japanese insurers, particularly environmental issues. This shift aligns with Japan’s national ambition to attain net-zero carbon dioxide emissions by 2050. Japanese insurers are keeping a close watch on the progress on similar goals in Europe and North America, and are actively participating in prominent ESG initiatives to help shape the criteria for ESG-related activities.
Fitch anticipates that Japanese insurers will persist in effectively incorporating ESG considerations into their enterprise risk management frameworks. They are likely to navigate the complexities of ESG dynamics adeptly, taking into account various influencing factors such as pro- and anti-ESG movements, the Japanese government's stance on "transition finance", and the risk-return profiles of ESG-related investments.
Fitch expects that Japanese insurers will invest in ESG-related assets only when they present an appealing risk-return profile.