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ESG Investment and Financing

Related Key Priorities in Sustainability

Contribute to shaping a sustainable society through asset management

Since its founding, Nippon Life has based its life insurance operations on the spirit of “co-existence, co-prosperity, and mutualism.” With this in mind, Nippon Life has made efforts to conduct sound management from a long-term perspective, while giving the highest priority to maximizing benefits for our customers. In the asset management field, Nippon Life has carried out investment and finance that contributes to the public good.

Nippon Life believes that ESG investment and finance, which considers Environmental (E), Social (S) and Governance (G) issues, is an approach that seeks to support activities to achieve the SDGs* from investment and finance perspectives. Concurrently, the Company believes that ESG investment and finance essentially shares the same foundation as the asset management approach it has long emphasized―one that considers profitability, security and the public good. Accordingly, Nippon Life is convinced that ESG investment and finance is an approach that will raise the sophistication of its traditional investment and finance decisions from medium- and long-term perspectives.
In the past few years, Nippon Life has been further strengthening its ESG investment and finance activities since it signed the United Nations Principles for Responsible Investment (PRI)* in 2017. In March 2021, Nippon Life established the ESG Investment Strategy Office as an organization to advance overall ESG investment and finance activities.
Nippon Life will continue to push ahead with ESG investment and finance activities. In doing so, the Company aims both to contribute to the realization of a sustainable society and to improve investment returns.

*SDGs (Sustainable Development Goals) are international goals adopted by the UN General Assembly in September 2015, consisting of 17 targets shared by the world for sustainable development and 169 targets.

*PRI are a set of principles aiming to realize a sustainable society by proposing that institutional investors incorporate ESG issues in their investment decisions.

Moreover, Nippon Life views climate change as an important ESG risk for asset management and has supported activities aimed at promoting decarbonization at investee and borrower companies through funding and dialogue. Against this backdrop, to further strengthen measures to address climate change, Nippon Life has endorsed the Japanese government’s policy to target net zero emissions of GreenHouse Gasses (GHG) by 2050 and has set 2030 interim targets for GHG emission reduction in the investment portfolio* in order to achive a net zero target by 2050.

*Target assets are domestic and foreign listed equities, domestic and foreign corporate bonds, and real estate.

2030 Interim Targets for GHG Emission Reduction in the Investment Portfolio
Total Emissions Reduce by more than or equal to 45% (compared to 2010)
Intensity* Reduce by more than or equal to 49% (compared to 2020)

*Emissions per investment unit, total emissions/investment amount

For details of our ESG investment and financing, please refer to the ESG report below.

ESG Report
2021

ESG Investment and Financing Policy

In light of its social responsibilities as a life insurance company, Nippon Life will conduct asset management based on consideration for environmental, social and governance issues across all assets from medium- and long-term perspectives, according to asset and regional characteristics. By conducting such asset management, Nippon Life will work to coexist with the environment, communities and society, and to share sustainable growth with the global economy and other companies, along with striving to secure long-term, stable investment returns.

  • 1.Nippon Life will consider ESG perspectives in investment and finance processes across all assets, as it strives both to contribute to the realization of a sustainable society and secure long-term, stable investment returns. Moreover, in bond investments, financing and related activities based on ESG themes, the Company will confirm whether the use of funds will help to solve environmental or social issues. In addition, Nippon Life will make environmentally and socially considerate real estate investments.
  • 2.As part of constructive dialogue with investee companies, Nippon Life will conduct dialogue based on ESG themes, along with implementing appropriate stewardship activities. In the process, Nippon Life will support the sustainable growth of investee companies.
  • 3.As part of dialogue with investee companies, Nippon Life will request improvement in disclosure of not only financial information but also non-financial information including ESG perspectives. In parallel, Nippon Life will conduct surveys and research on how information should be disclosed appropriately.
  • 4.Nippon Life will make efforts to enhance and share its investment process through sharing ESG investment and financing expertise with its subsidiaries and information exchange with signatory companies, industry groups, and so on, as well as studying advanced case of ESG investment and financing.
  • 5.Nippon Life will contribute to stimulating activity in the ESG investment and financing market by publicly disclosing the status of its ESG investment and financing and proactively communicating opinions related to ESG investment and financing through participation in international conferences and so on.

Major ESG Investment and Financing Methods

Under its ESG Investment and Financing Policy, Nippon Life aims both to ensure profitability and to realize a sustainable society while encouraging corporate growth, thereby increasing customer returns by employing various methods instead of relying on a single approach according to the unique characteristics of different assets and regions.

<ESG Investment and Financing by Nippon Life>

■ Integration

Nippon Life believes that it is crucial to consider ESG factors such as environmental, social and governance issues to expand long-term, stable investment returns. Accordingly, Nippon Life will incorporate ESG factors into all asset management processes.
Nippon life will make investment and finance decisions by gathering and evaluating ESG information with methods tailored to asset characteristics, while factoring in ESG evaluations based on whether they will impact corporate value and creditworthiness, together with performing traditional analysis such as financial analysis.
Nippon Life will apply the expertise of Nissay Asset Management Corporation, which has been engaged in the ESG field over many years, to ESG evaluations.

<Stocks>
Nippon Life evaluates the ESG activities of investee companies based on factors such as information obtained from dialogue with investee companies and information from ESG ratings agencies.
Nippon Life makes investment decisions by factoring ESG evaluations into qualitative evaluations of corporate analysis based on whether they will impact the corporate value of investee companies, together with performing quantitative evaluations of earnings projections and valuations.

<Finance>
Nippon Life evaluates the ESG activities of borrower companies based on factors such as information obtained through on-site company visits of borrowers.
Nippon Life conducts credit assessments of projects by factoring ESG evaluations into qualitative evaluations of corporate analysis based on whether they will impact the creditworthiness of borrower companies, together with performing quantitative evaluations of financial analysis and other factors.
In project finance, Nippon Life will conduct credit assessments of projects considering factors such as environmental and social risks and refer to standards such as the Equator Principles. Nippon Life will also consider ESG factors in the credit assessments of individual projects, in addition to assigning internal ratings based on ESG factors.

<Sovereign Bonds>
Nippon Life evaluates the ESG activities of investees based on international statistics, information from ESG ratings agencies, and other data.
Nippon Life makes investment decisions by factoring ESG evaluations into qualitative evaluations of the analysis of investment targets, based on whether they will impact the creditworthiness of investees, together with performing quantitative evaluations of economic and financial analyses, interest rate levels and other factors.

<Corporate Bonds>
Nippon Life evaluates the ESG activities of investee companies based on factors such as information obtained from dialogue with investee companies.
Nippon Life factors ESG evaluations into qualitative evaluations of corporate analysis based on whether they will impact the repayment ability of investees, together with performing quantitative evaluations of financial analysis, interest rate levels and other factors.

<Real Estate>
Nippon Life proactively acquires environmental and social certifications for investment property by setting environmentally friendly building standards, along with pushing ahead with the introduction of equipment to conserve energy and reduce CO2 emissions.
In the process of selecting real estate contractors, Nippon Life will confirm the status of their environmental and social activities in construction work and the procurement of materials.

<Indirect Investment>
Nippon Life confirms external managers’ policies on ESG and the status of activities such as ESG integration, while considering investment strategies and asset characteristics. Nippon Life will consider these factors in making investment decisions.

*In March 2021, Nippon Life transferred certain investment management functions such as corporate bond investment to its subsidiary Nissay Asset Management Corporation. Integration is being carried out in accordance with the measures described above.

■ Engagement

As an institutional investor that makes long-term investments, Nippon Life conducts constructive dialogue with investee companies in its stock and bond portfolio as part of its stewardship activities. By doing so, Nippon Life encourages medium- to long-term improvement in corporate value and seeks to derive benefits in the form of shareholder returns, stock price appreciation and stable repayment of principal and interest on corporate bonds, thereby paving the way for growth in investment returns, along with aiming to realize a “safe, secure and sustainable society.” In addition, to support the growth of sustainable companies even more than before, Nippon Life is promoting dialogue activities focused on the core theme of ESG.
When deciding whether to vote for or against proposals, Nippon Life does not make sweeping decisions based on quantitative standards, but rather engages in dialogue to make detailed judgments based on factors such as its understanding of the individual status of each company and its initiatives for improvement.
In bond investments, Nippon Life conducts dialogue focused on the theme of ESG issues. In addition, Nippon Life encourages issuers to issue ESG bonds and so forth to spur the creation of investment opportunities.

■ ESG-Themed Investment and Finance

Nippon Life is proactively carrying out investment and finance for which the use of funds is linked to the theme of achieving the SDGs, with the assumption that profitability will be secured. In the implementation process, Nippon Life conducts monitoring activities such as confirming the use of funds.
Under the previous medium-term management plan (2017-2020), Nippon Life set a quantitative target for ESG-themed investment and finance of JPY 700 billion and achieved the target around one year ahead of schedule. Under the current medium-term management plan (2021-2023), Nippon Life has newly set a target of JPY 1,700 billion for the cumulative amount of investment and finance to be made since FY2017 and is working to achieve this target.
Of this amount, Nippon Life has set aside JPY 500 billion for a decarbonization financing facility that covers green finance, transition finance, etc. (2021-2023)

〇Impact Investment
In addition, Nippon Life aims to generate a positive impact on the environment and society alongside earning a financial return. To this end, Nippon Life also carries out impact investing, an approach that measures our performance in terms of the impact Nippon Life is having on the environment and society. Nippon Life will continue to increase our investment while exchanging information with leading investors around the world.

<Status of Progress against the ESG-Themed Investment and Finance Target of JPY 1,700 Billion>

April 2017 - March 2022
ESG-Themed Investment and Finance Approximately JPY 1,357.2 billion

■ Negative Screening

In light of the mission and public nature of the life insurance business, Nippon Life prohibits investing in and financing companies that manufacture Cluster Munitions, Biological Weapons, Antipersonnel Landmines, and Chemical Weapons.
In addition, there has been rapidly growing international interest in climate change in response to initiatives such as the SDGs and Paris Agreement adopted by the United Nations. With this in mind, Nippon Life has embraced a policy, not to engage in new investment and financing in coal-fired power generation projects anywhere in Japan or overseas.

■ Other

〇Environmentally-Friendly Real Estate Investment
Nippon Life conducts environmentally-friendly real estate investment by, for example, actively introducing highly energy-efficient equipment when constructing new buildings and updating facilities. Furthermore, Nippon Life acquires third-party certifications, such as BELS*, as part of efforts to visualize the energy-saving performance of buildings.

*Based on the guidelines summarized by the Ministry of Land, Infrastructure, Transport and Tourism and abbreviated as Building an Energy-efficient Labeling System, third-party organizations objectively evaluate and display the energy consumption data related to buildings such as offices.

〇CSR Loans
Nippon Life supports CSR loans by offering preferential interest rates for loans to individuals and companies that are engaging in activities that take into consideration the global environment, and for loans to corporate customers that are actively engaged in providing child-rearing support.

Nippon Life Insurance Group Initiatives

<Nippon Life Signs The United Nations Principles For Responsible Investment>

Nippon Life signed PRI in 2017 to realize a sustainable society. Nippon Life acquired the highest assessment grade, A+, in the four modules for two consecutive years for Strategy and Governance, Listed Equity - Incorporation, Listed Equity - Active Ownership and Property in the annual PRI assessment targeting 2019 activities.

<Agreement with the Recommendations of the Task Force on Climate-related Financial Disclosure (TCFD)>

Nippon Life agreed with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) established by the Financial Stability Board (FSB).

Nippon Life will work to enhance disclosure concerning various core elements of TCFD-recommended climate-related financial disclosures, such as governance, strategy, and risk management. As an institutional investor (asset holder), Nippon Life will take steps such as encouraging investees to disclose information, with the view to contributing to the formation of a sustainable society.

<Adoption of the Equator Principles>

Nippon Life first adopted the Equator Principles, which are international frameworks that take consideration for the environment and society in terms of project financing and other issues, as an Asian insurance company in April 2019. In accordance with adoption of these principles, Nippon Life is undertaking monitoring of compliance after carrying out loans, along with assessments on environmental and social impact in decision-making processes for project financing.

<Participation in the ESG Disclosure Study Group>

In June 2020, Nippon Life participated in the ESG Disclosure Study Group, which will carry out research related to the disclosure of ESG information.

<Nippon Life Joins Net-Zero Asset Owner Alliance>

In October 2021, Nippon Life joined the Net-Zero Asset Owner Alliance (hereinafter “NZAOA”), an international initiative on climate change. Through membership in the NZAOA and by working with alliance members in Japan and abroad, Nippon Life will obtain the latest information on scientific analysis related to climate change and GHG measurement methods and so forth that are being discussed in the international community, and will enhance efforts to reduce GHG emissions in its investment portfolio.

<Nippon Life joins Partnership for Carbon Accounting Financials (PCAF)>

Nippon Life has joined the Partnership for Carbon Accounting Financials (PCAF), which is an international initiative to develop GHG emission measurement methods.
By joining PCAF, Nippon Life will work together with financial institutions in Japan and abroad and engage in discussions on formulating GHG emission measurement rules, as it strives to develop sophisticated GHG emission measurement and disclosure methods using the knowledge and data held by PCAF. In these ways, Nippon Life will implements measures to reduce GHG emissions in the investment portfolio.

Major ESG Financing and Investment Examples

<Impact Investment>

Investment in Decarbonization Venture Investment Fund

We invested in Decarbonization Venture Investment Fund.
Investments will be made in startups that create new technologies or services that address the climate change issue.

(March, 2022)

CP Climate Impact Fund managed by SVB CP Climate Impact GP, LLC

Investment in Decarbonization Fund of Funds

Through investments in private equity funds that address the climate change issue, investments will be made in unlisted companies expected to help realize a decarbonized society.

(March, 2022)

Impact Investment in Global Climate Fund

We invested in a dedicated climate investing fund managed by TPG, through a fund managed by Nippon Life’s subsidiary Nippon Life Global Investors Americas, Inc.
The Fund will invest in climate solutions that have the potential to meaningfully avoid or reduce CO2e and contribute to the realization of a decarbonized society.

(November, 2021)

Source: TPG

Investment in Social Impact Bonds

We invested in a Largest Social Impact Bond (hereinafter, “SIB”) in Asia set up by Dream Incubator Inc.
Social Impact Bonds are one type of Pay for Success business whereby the private sector is contracted to perform a business to try to keep down public sector costs and resolve social issues.

(July, 2021)

Source: Dream Incubator Inc.

Impact Investment through Investment in a Healthcare Venture Fund

We have invested in a fund managed by the affiliates of Grove Street Advisors, LLC through a fund managed by our subsidiary Nissay Asset Management Corporation.
This fund will invest in companies seeking to generate social impact mainly in the area of healthcare.

(September, 2020)

Source: GroveStreet

Impact Investment through Private Equity Fund

We are going to invest in a fund managed by TPG Capital L.P. and its affiliates through a fund of funds managed by Nippon Life’s subsidiary Nippon Life Global Investors Americas, Inc. TPG Capital L.P. is a top-tier fund manager engaged in impact investments.
This fund will invest in companies seeking to generate a positive impact that helps to solve environmental and social issues.

(July, 2020)

(The image is for illustration purposes)
Source:TPG

<Environment>

Investment in Renewable Energy Infrastructure in US

We invested in North American renewable energy through the joint investment sponsored by Sun Life Financial Inc. Our investment has taken place through our asset management subsidiary Nippon Life Global Investors Americans, Inc.
The Initiative targets renewable energy infrastructure assets such as wind, solar, and batteries in the US, and will contribute to the expansion of renewable energy in the US.

(October, 2021)

Source: Sun Life Financial Inc.

Conclude First Green Loan Agreements

We singned our first green loan agreements with Japan Logistics Fund, Inc. and IINO Kaiun Kaisya, Ltd.
Funds raised by the Loans will be used for the acquisition, construction and renovation of green buildings that meet prescribed requirements.

(August, 2021)

Source: Japan Logistics Fund, Inc.

Financing of Offshore Windfarm Project in Akita

This project is Japan’s first commercial offshore windfarm project and will support the expanded use of renewable energy in Japan.

(February, 2020)

(Rendering)
Source: Akita Offshore Wind Corporation

<Society>

Financing of Rolling Stock Project in Australia

We have executed a syndicated loan agreement to finance a rolling stock project in Australia.
The Reliance Rail has been providing a critical component of the public transport system, with the aim to improve availability, reliability, accessibility and operational performance of the fleet, and achieve strong safety.

(March, 2022)

Investment in University of Tokyo FSI Bonds issued by the University of Tokyo

The funds raised by these bonds will be used for Future Society Initiative (FSI) projects, which refer to various research and education projects that contribute to the achievement of the SDGs. The University of Tokyo will use the funds to develop cutting-edge, large-scale research facilities for research based on new global strategies for the post COVID-19 era and to improve its campuses to make them safer, smarter and more inclusive for the societies living with COVID-19 and its aftermath.

(October, 2020)

Photo Courtesy of TAO Project

<Integration>

Make Sustainability Linked Loan Agreement

We have made a first Sustainability Linked Loan (hereinafter “Loan”) agreement with Tokyo Century Corporation as a co-arranger.
The interest rate of the Loan changes depending on the achievement of the following SPTs:
SPT1: Achieve annual power generation and CO2 avoided emissions target from Kyocera TCL Solar LLC’s solar power generation business.
SPT2: Achieve the target (cumulative) for the estimated GHG avoided emissions of the JCM (Joint Crediting Mechanism).
SPT3: Maintain DX Certification (Ministry of Economy, Trade and Industry).

(September, 2021)

(Solar power plant operated by Kyocera TCL Solar LLC.)
Source: Tokyo Century Corporation

Collaboration between Nissay Asset Management and overseas asset management services

We are investing in funds for which Nissay Asset Management collaborates with overseas asset management services of our Group in managing them. Through this initiative, we will share our know-how about ESG investment and financing with Group companies, and share and improve operational processes. Moreover, as a Nippon Life Group we will contribute to the realization of a sustainable society.

【Examples of Investments】

・Nippon Life Announces Investment in a Global Equity Investment Fund(February 2017)
・Nippon Life Announces Investment in the Global SDGs Equity Investment Fund (June 2018)
・Nippon Life Announces Investment in the SDGs European Corporate Bond Investment Fund (March and September, 2019)

Real Estate Investment Reflecting Health and Safety Considerations

Nippon Life Hamamatsucho Crea Tower has earned the WELL Health-Safety Rating*, a global health and safety rating. It marks the first WELL Health-Safety Rating earned by an insurance company in the world.

(March, 2022)

*WELL Health-Safety Rating is a new rating unveiled in June 2020 by the International WELL Building Institute (IWBI) of the U.S. The rating evaluates how well a property is operated and managed in consideration of the health and safety of staff and individuals who use the facilities.

Environmentally Considerate Real Estate Investment

Nippon Life actively installs facilities for limiting CO2 emissions when new buildings are constructed or building facilities are upgraded. In fiscal 2014, NIPPON LIFE MARUNOUCHI GARDEN TOWER received DBJ Green Building Certification “Five Stars*” as a real estate property with high environmental and social awareness. In fiscal 2015, the building acquired LEED-CS Certification* “Gold”.

*DBJ Green Building Certification “Five Stars” is a certification system for real estate showing consideration for the environment and society and carried out by the Development Bank of Japan and Japan Real Estate Institute. “Five Stars” is the highest rank in the five stages of certification.

*“LEED-CS Certification” refers to the Core & Shell Division of Leadership in Energy & Environmental Design (LEED), one of the most popular environmental indicators in the world. LEED is sponsored by the U.S. Green Building Council, and tenant buildings are under this category.

CSR Loan

We provide interest rate incentives to support individuals and corporate customers undertaking environmentally considerate initiatives.

*The logo attached to the above case symbolizes our belief in the main goal of contributing to SDGs through investment and financing.

<Corporate Governance>

Initiatives Related to Japan’s Stewardship Code
In undertaking stewardship activities, Nippon Life engages in dialogues with investee companies on a variety of topics including management plans, business strategy, shareholders returns policy, and corporate governance.