A time of opportunity for gender lens investing in Japan: An interview with 2X Global Japan Ambassador Tatjana Gerling
Tatjana Gerling is 2X Global’s Ambassador for Japan.
She is a sustainable investment practitioner with FMO - the Dutch Development Bank and serves on the Advisory Board of the Ukrainian professional ESG association ASDE.
Previously, Ms Gerling led sustainable business programs in WWF - World Wide Fund for Nature, one of the world’s largest NGOs, specialising in reducing human impact on the environment.
With 20 years of professional experience, Ms Gerling is passionate about making a business case for gender equality in the corporate environment and ensuring access to finance for female entrepreneurs. She has a strong interest in impact investing in Japan and a background in researching Japanese environmental and social policy in Saitama University and setting up sustainable procurement initiatives with Japanese companies.
Ms Gerling shared her thoughts with 2X Global about responsible investing, the investment landscape in Japan and the opportunities to build upon and strengthen the gender lens investing ecosystem in Japan.
Why did you decide to focus specifically on ESG? Can you share more about your journey?
My professional journey started when I was 18, combining full-time university study with gaining professional experience. So, I am not a stranger to how important professional development opportunities are for the financial independence of women. Early on, I realised the overwhelming power of cultural norms and power dynamics in society to allow women to reach their full potential. That made me an advocate for changing those cultural norms to allow for a more equitable social and professional environment, where both men and women can thrive and contribute to societal and economic success.
“Early on, I realised the overwhelming power of cultural norms and power dynamics in society to allow women to reach their full potential. That made me an advocate for changing those cultural norms to allow for a more equitable social and professional environment, where both men and women can thrive and contribute to societal and economic success.”
As for my focus on ESG, I grew up in the Far East, in the pristine natural area where the Sikhote-Alin mountains meet the Sea of Japan. Witnessing the high speed of industrial development in this area after the 1990s, associated with a loss of forest and pollution of the sea, moved me to join the world’s largest nature conservation NGO, that championed a set of ecological certifications to make industries more sustainable. I started my career developing public-private partnerships between nature reserves and tourism companies to create sustainable business models and generate income for local communities.
Later on, I applied the lessons learnt from this experience to the food production industry, where I led a sustainable procurement initiative bringing together a German buyer, a Japanese intermediary and a Russian fishery to ensure no illegal fish enters the supply chain. That was a turning point in my career, where I realised the importance of investors and policy-makers in triggering corporate action to make a business case out of sustainable production and procurement. I engaged with a member of the European Parliament to investigate gaps in the European regulation on seafood supply chain management and, later on, joined a development finance institution to further scale up application of ESG principles in shaping sustainable supply chains.
What is responsible investing? How can this be used to create positive social and environmental impact?
Traditionally, from an investor perspective, the financial performance of an investee has been viewed as the major variable to be considered when making investment decisions.
Over the course of the last fifty years, investors have realised that there are other factors also influencing the financial success of businesses, and they started to include assessment of those factors in their decision-making metrics. Factors such as robust decision-making processes (corporate governance), the qualifications and composition of the workforce (social diversity) and the environmental impact on the company and vice versa (environmental) moved to the category of both financial and operational risks. Such a comprehensive approach is now called ‘responsible investing’ or ‘consideration of ESG factors’ to differentiate it from the narrower traditional approach of looking solely at the financial variables without considering a broader underlying context.
I welcome such a change as it enables financiers to boost their returns through identifying areas where a company can improve their performance and profitability, while creating value for the society. For example, investing in a cocoa processor after assessing how climate change impacts cocoa tree plantations in the next ten to thirty years will give a good indication as to whether the investment is financially viable. Responsible investment will mean including the costs of replanting cocoa trees and introducing agroforestry models at the plantations where the company sources its cocoa beans.
Another example is that many countries in the northern hemisphere face the issue of declining populations while being under pressure to maintain healthy economic development and have a sufficient and qualified workforce. For many of them, including Japan, providing professional and business opportunities for women is a question of maintaining their national wealth. Investing in female-led businesses, in social infrastructure to free up women from household work and in setting up social systems that allow women to contribute to decision-making at the executive management level, is another example of a responsible investment approach.
Tell us about the investing landscape in Japan - what is unique about this market?
Japan is the fourth largest economy in the world. Traditionally, in Japan, major investments are done by large, diversified corporations in the areas of their strategic interests rather than by independent financial institutions and investment funds operating at the open market. Japanese investors tend to be interested in long-term, bottom-up equity investments. They meticulously analyse the ability of the investees to go through bad as well as good times and prefer diversified approaches.
Currently, Japan is at a turning point - leaving three decades of stagnation and deflation behind, following the reforms and economic measures introduced by the late prime-minister Shinzo Abe back in the 2010s. One of these measures included creating opportunities for women as Japan has been suffering from a rapidly declining population for quite some time. Thus, Japanese companies must report the number of women in the workforce and at the senior and board levels, as well as a gender-based wage gap. The intent is that these statistics will be used to drive corporate governance and compensation towards more equal opportunities and the same pay for the same job for both genders. A similar approach was used by the Japanese government to resolve a problem of unpaid overtime, another chronic issue that had plagued the Japanese professional world for decades.
How does gender lens investing fit into this landscape?
“I am convinced we are living in a critical time for Japan to embrace gender-lens investing as one of the key solutions to its economic challenges. ”
I am convinced we are living in a critical time for Japan to embrace gender-lens investing as one of the key solutions to its economic challenges.
According to the Japanese National Institute of Population and Social Security, by 2060, the Japanese population will drop from 125 million people with a 36% share of elderly citizens (65+ years) down to 78 million people with a respective share of 44% of elderly citizens. That creates an urgent pressure to free up women to contribute to the economic prosperity of the country and invest in industries that support this transfer – social infrastructure, education – as well as to change corporate culture and governance.
Besides, one of the key reasons for the demographic decline are patriarchal values in the society, where men are expected to build a career and women are expected to care for children and the elderly. The prolonged economic stagnation resulted in a model where one breadwinner cannot sustain a family, which led to declining birth rates and women juggling household chores and low-paid part-time jobs. Unlike other OECD countries facing similar challenges such as Sweden and Norway, Japan has been struggling to adjust its rigid societal structures to a post-industrial, more equal and inclusive society.
Having said that, I have seen a series of drastic measures by government and regulators aiming to change the current status quo on gender roles. Unlike other countries, in Japan the government plays a crucial role in guiding business policies and corporate governance codes. Back in 2013, late Prime-Minister Abe launched the national Stewardship Code to ensure transparency and accountability for companies’ investors. It primarily targets institutional investors investing in Japanese listed shares. The Code created a solid base to formulate principles and criteria for diversifying corporate boards.
The next step was including gender-based targets into investment decisions, such as 30% of women on the corporate boards. I would expect targets like 50% of women in the workforce and equal pay for equal jobs for men and women to follow soon.
It means respective corporate values, criteria, and non-financial reporting are to be introduced into corporate strategies on that journey. The governmental requirements and accountability mechanism, as well as associated financial leverage, may play an important role in Japan, as they shape a level playing field for all companies in the country.
What are the clear opportunities to build a gender-smart ecosystem in Japan?
Despite regulatory and disclosure measures undertaken in the last decade, implementation has been a challenge. Partially, understanding how to close these gaps in practice in the Japanese societal structure has been among the reasons behind those slow developments.
“At first, it looks like a prolonged crisis. But every crisis is also an opportunity. In the case of Japan, it is an opportunity to build on the current regulatory and economic measures to guide businesses and investors towards creating more opportunities for women.”
As a result, the World Economic Forum Global Gender Gap Report 2023 puts Japan towards the bottom of its ranking (place #125 of #146), with an outlook of 189 years towards gender parity, if the implementation approach does not improve. The gender-based wage gap for full-time earners in 2023 has been 22%, among the widest in the OECD.
At first, it looks like a prolonged crisis. But every crisis is also an opportunity. In the case of Japan, it is an opportunity to build on the current regulatory and economic measures to guide businesses and investors towards creating more opportunities for women.
2XGlobal can bring added value with clear examples of how gender-lens investment contributed to corporate success in other OECD and emerging economies. We can also bring tested gender-lens tools for investment decisions and train asset managers, corporate boards and senior management to build corporate culture and HR systems that allow both men and women to tap into their potential.
