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Japan’s Equities Exposed to Nature Risks

Japan’s capital market and companies face moderate-to-high nature dependency on nature – with public equities particularly vulnerable – according to a new report from the Asia Investor Group on Climate Change (AIGCC). The group’s research shows that 18% – or US$938 billion – of the Japanese stock market’s capitalisation is comprised of companies in sectors with a higher direct dependence on nature. AIGCC’s report points to the food and beverage, tobacco, and energy sectors as being more highly nature dependant, with Japan also exposed to nature risks and opportunities in other markets due to its dependence on energy imports. Overall, 20%, or US$6.72 trillion, of Asia Pacific’s (APAC) Gross Value Added is in economic sectors that are highly directly dependent on nature. This includes reliance on fertile soils, clean water, pollination, and climate stability, which have been subject to severe decline in certain parts of APAC. The AIGCC noted Japan’s government, corporates, and investors have started to address nature degradation and mitigate nature-related risks, with Japanese firms accounting for 25% of early Taskforce on Nature-related Financial Disclosures adopters globally, the largest cohort of early adopters. “Transitioning to a nature-positive future unlocks vast opportunities for investors,” said AIGCC Monica Bae, Director of Investor Practice. “By proactively integrating nature-related risks into their investment strategies, Japanese investors can position themselves to thrive in a sustainable and resilient future.”

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