Green Wind in the Stock Market - Environmental Ratings and the Rise of Eco-Funds (1999-2001)

Green Wind in the Stock Market - Environmental Ratings and the Rise of Eco-Funds (1999-2001)

In the late 1990s, the "environment" suddenly began to become a central management issue for Japanese companies. The background was the prolonged recession that followed the collapse of the bubble economy. Companies that were forced to change their industrial structure came to see "environmental responsiveness" as a way to increase their corporate value, along with "technological innovation" and "overseas expansion. In particular, the adoption of the Kyoto Protocol in 1997 turned responding to international climate change measures into an issue that companies could not ignore.

A new indicator called "environmental rating" has emerged in the midst of this trend. This evaluation method, which quantifies and visualizes "sincere environmental efforts" that cannot be measured by conventional financial indicators alone, was already in widespread use in Europe and the United States, and began to be introduced on a full scale in Japan in 1999. Ratings were made from both quantitative and qualitative perspectives, such as how much a company contributes to global warming prevention, whether it has an environmental management system, and whether it discloses information.

The so-called "eco-funds" were introduced to the stock market in the early 1990s. Eco funds are investment trusts that invest only in environmentally conscious companies, and were first introduced in Japan in 1999. Many funds incorporated the aforementioned environmental ratings into their stock selection criteria, appealing to investors with investments that combine "environmental value" and "future potential.

During this period, eco-funds expanded rapidly throughout Japan, reaching approximately 120 billion yen in size in 2001. Furthermore, by the beginning of 2000, when the stock market was strong, the total size of the fund had grown to nearly 200 billion yen. This scale was unprecedented in the Japanese investment trust market at the time, and marked the moment when environmental considerations were recognized not only as an "image strategy" but also as an "economic factor" that could actually affect a company's stock price and ability to raise funds.

Environmental ratings were not merely a selection of investment targets, but also influenced the management decisions of companies. Many companies began to engage in "environmental reporting" and "environmental accounting," quantifying and disclosing their environmental conservation costs and benefits. In addition, there was a growing trend to view environmental risk as a management risk, and an increasing number of companies required their entire supply chain to acquire IS014001 certification.

Thus, from 1999 to 2001, Japan was in a transitional period of a major shift toward "environmental management. The fusion of economic and environmental values became a substantial market pressure with the emergence of environmental ratings and eco-funds, making companies aware of "environmental deviations. Thus, the environment was elevated from a mere part of CSR to "competitiveness itself.