The MS&AD Insurance Group always consider sustainability in terms of the environment, society, and governance (ESG) issues in all Group business activities, including the development of products and services, underwriting and investments.
ESG-related impacts include infringements of human rights that threaten respect for basic human rights, deforestation due to illegal logging, and corruption and bribery that undermine economic growth and stability. Our company’s business activities could influence ESG factors, and our company itself could be influenced by ESG factors. While we respond to such ESG-related risks to ourselves, we have been discovering business opportunities in addressing ESG concerns, e.g. offering automotive insurance with driving protection services to support safe driving, and thereby, reduce accidents, and using Big Data to present preventative measures against natural disaster. It is essential that we carefully assess ESG-related risks and opportunities, and reflect them in our business activities. We recognize the wide-ranging ESG risks such as legal risks, reputational risks, quality-related risks, business continuity risks, operational risks, transition risks, financial risks, etc., and these could potentially have a major impact on our company’s business activities and our stakeholders. Accordingly, we carefully identify such ESG-related risks to control them across our entire business activities.
We give an overview of these approaches in our “Perspective of Sustainability of the MS&AD Insurance Group” that describes our policies on addressing ESG concerns.

Signatory to the Principles for Sustainable Insurance (PSI) and the Principles for Responsible Investment (PRI)

The MS&AD Insurance Group has been seeking out what are the best practices for financial institutions that take into account environmental and social sustainability, and it has been participating in the United Nations Environment Programme Finance Initiative (UNEP FI) to disseminate and promote these best practices.
Our company has signed on to the Principles for Sustainable Insurance (PSI) and the Principles for Responsible Investment (PRI) published by UNEP FI, and we have been disclosing details on our initiatives and reporting on the progress made every year. We are also taking part in a PSI pilot project in which representatives from insurance companies meet to discuss the industry’s approaches to the TCFD Final Recommendations and also working on disclosing information on climate change risks.
In addition, in considering ESG, as an external standard and a source, our screening approach standard includes: UN Global Compact, UN Declaration of Human Rights, Guiding Principles for Corporate and Human Rights, International Labor Organization Standard, UN Anti-Corruption It will be notified by the Convention and the OECD Guidelines for Multinational Enterprises.

 

Underwriting Process and Development of ESG-based Products and Services

The MS&AD Insurance Group has underwriting criteria adapted for respective product and service as part of risk assessment process. In each process, certain ESG criteria are considered such as natural disaster risks, involvement with anti-social forces or ethical risks, based on the nature of the risk. Comprehensive process including system verification are properly implemented. Underwriting decision including the Board’s approval are made based on these risk evaluations.
In developing products and services, we examine the value to society and the value for our company generated by our products and services from various angles, and we strive to create value shared with society in providing these products and services. We have also developed a variety of sustainable products and services such as insurance or risk consulting services that support renewable energy projects, discounts to drivers who take a safe driving lecture aiming at reducing traffic accidents, and automotive insurance policies that allow the same-sex partner to be beneficiaries to support diversity.

ESG-basd Investments and loans

As a signatory to the Principles for Responsible Investment (PRI), the MS&AD Insurance Group takes ESG issues into account for investment and loan transactions.
Our company, as an asset owner, promotes ESG-thematic investment on the basis of profitability. MSI and ADI declared their acceptance of Japan’s Stewardship Code, and have since engaged in constructive dialogue about ESG with the companies in which they have invested.

 

Operating Scheme
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Operating Scheme
sample ESG investment methodologies as by our company
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sample ESG investment methodologies as by our company

Key Investments and Loans

Investment in sustainable development bonds

Invested in sustainable development bonds (private placement: $120 million, or approximately 13.5 billion yen) issued by the World Bank (International Bank for Reconstruction and Development).

Investment in Future Creation Fund

Investing in funds with close ties to environmental issues and, by investing in the Future Creation Fund established by the Sparx Group, helping accelerate innovation by supporting companies possessing technology that will drive growth toward the society of the future, including intelligent technologies, robotics and technologies useful in bringing about a hydrogen society. In addition, we are making stock investment decisions only after evaluating individual companies’ responsiveness to environmental and social issues.

Investment in Regional Economy Vitalization Corporation of Japan

Investing in funds established by the Regional Economy Vitalization Corporation of Japan to quickly improve the management of companies that will occupy a core position within their communities and to foster key companies that sustain their communities. By doing so, we are supporting the vitalization of regional economies.

Financing for renewable energy power plants

Encouraging the spread of renewable energy power generation by providing financing for the construction of mega-solar and wind power plants.

Investment in loan origination funds for small and medium-sized enterprises

Supporting the growth and business vitalization of small and medium-sized enterprises by investing in Japan’s first fund designed to provide risk money primarily through loans (fund established by Topaz Capital, Inc.)

Investment in social bonds

Invested in Social Bonds issued in the Japanese market by the Japan International Cooperation Agency.

Investment in African Development Bank’s Industrialize Africa bond

Invested in Industrialize Africa themed bonds issued by the African Development Bank in November 2017 (private placement).

Investment in green bonds

Invested in green bonds issued by Japanese companies in Japanese markets.

Investment in ESG-based real estate funds

Invested in ESG-based overseas real estate funds.

ESG Risk Evaluation Process

In managing assets, we have a process in which ESG factors are assessed when making investments and providing loans. Mitsui Sumitomo Insurance, for example, has integrated ESG risk assessments into their investment approach by performing ESG screenings on domestic shares, and increasing the sophistication of investment decision-making process when evaluating alternative investment funds. They also integrate ESG aspects in providing loans by inspecting their customers' ESG strategy and disclosures.

In the context of stewardship activities, many dialogues have taken place with a focus on non-financial factors including ESG concerns. Since FY2017, we have started to engage in more in-depth dialogues with the investees on ESG-related risks and shaping our approaches in line with the “Value Creation Guidance” issued by the Ministry of Economy, Trade and Industry.

Implementation of Japan’s Stewardship Code

From the perspective of fulfilling their social responsibility as institutional investors, MSI and ADI have announced their support for Japan’s Stewardship Code, a code of behavior laid out for institutional investors. In line with the Code, we carry out a constructive dialogue with investee companies to encourage them to enhance their medium- and long-term value and sustainable growth, and, through the dialogue, we focus on understanding their management issues, their shareholder return policy, ESG, and other non-financial information. From July, 2017 to June, 2018, MSI and ADI conducted constructive dialogues with a total of 481 firms.

External Assessment

Investing methods that assess corporate sustainability from the standpoint of Environmental, Social and Corporate Governance (ESG) are spreading. The MS&AD Insurance Group utilizes the assessments provided by major ESG evaluation organizations to improve its efforts. As of August 2019, the Company is a constituent of the following ESG indices:

* THE INCLUSION OF The MS&AD Insurance Group IN ANY MSCI INDEXES, AND THE USE OF MSCI LOGOS, TRADEMARKS, SERVICE MARKS OR INDEX NAMES HERIN, DO NOT CONSTITUTE A SPONSORSHIP, ENDORSEMENT OR PROMOTION OF The MS&AD Insurance Group BY MSCI OR ANY OF ITS AFFILIATES. THE MSCI INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MSCI INDEX NAMES AND LOGOS ARE TRADEMARKS OR SERVICE MARKS OF MSCI OR ITS AFFILIATES.