March 20, 2017 / 2:43 AM / 5 months ago

Japanese lifers increase green and sustainable investments

TOKYO, March 20 (IFR) - Two major Japanese life insurers, Meiji Yasuda Life and Nippon Life, have unveiled plans to diversify their credit investments, with a special focus on socially responsible debt, in a move that bankers say could expand global appetite for yen products.

Meiji Yasuda announced late last week it will increase purchases of foreign and sustainability credit products to diversify and enhance its investments and lending activities. Under a three-year programme dubbed MY Innovation 2020, the insurer aims to almost quadruple investments and lending in foreign credit products to 800 billion yen ($7.1 billion) from 200 billion-plus, while curtailing investment and lending in domestic credit products to 800 billion from the current 1 trillion target.

Meiji Yasuda will also replace its current 400 billion yen growth-sector investment target, introduced during the 2013 fiscal year, with an expanded 500 billion target for sustainability investments and loans.

Nippon Life is taking a similar track, with some tweaks to its current three-year 2015-2017 programme and drawing up a new programme to contribute to sustainable growth.

In the new plan, Nippon Life said it will invest 200 billion yen in bonds following environmental, social and governance (ESG) principles in fiscal years 2017 to 2020.

Bankers welcomed the life insurers' moves, which they believe will be a boon for the international yen market in the next fiscal year starting on Apr. 1.

"Currency basis swaps, such as the USD/JPY basis, have recently bounced off deep lows, which will make it easier for borrowers to issue bonds next fiscal year than this fiscal year," said a banker. "And such a move by investors to expand room to buy foreign credit products will be a tailwind."

Bankers said the increased sums earmarked for sustainability investments would help bring in more investors to the growing ESG market. This month, Starbucks sold yen-denominated Global corporate sustainability bonds, while Electricite de France sold a Green Samurai earlier this year.

Nippon Life last year invested 4.5 billion yen in women's bonds issued by Banco del Estado de Chile through a private placement, and 3 billion yen in ICICI's Tokyo Pro-bonds, which funded contributions to projects with social and economic benefits for women, while Dai-ichi Life bought 2.3 billion yen of Japan International Cooperation Agency's debut issue of Social bonds last year.

"The investor base for ESG-themed bonds in the Japanese market is currently led by the lifers. However, we think the investor base will expand going forward," said Ryutaro Hiroshima, head of international debt syndicate at Mitsubishi UFJ Morgan Stanley Securities.

"Not just lifers but investors overall are taking proactive steps to set aside money to support the green product market," said another banker. He said there were even some corporate investors dedicated to Green bond investments and trying to be good corporate citizens.

Bankers hope that greater interest in foreign credit and sustainability products will help grow the yen market.

"We believe, by enhancing the product line-up such as sustainability bonds, broadening the investor base one step further will drive the expansion of the international yen market including Samurai bonds," Mitsubishi's Hiroshima said. (Reporting by Takahiro Okamoto; Editing by Vincent Baby)

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