Alternative Investments/ESG: Here’s Japan’s First ESG-Focused REIT ETF From Nikko

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The innovative new ETF from Nikko Asset Management will provide an exposure to Japan’s real estate investment trust (REIT) with an ESG angle.

The Listed Index Fund Nikkei ESG REIT (2566 JP) launched by Nikko Asset Management has begun to trade on the Tokyo Stock Exchange with effect from September 7. It is the first Japanese ETF that provides investors the opportunity to invest in the country’s real estate investment trust market with a sustainable approach. (ETF Strategy)

Listed Index Fund Nikkei ESG REIT (2566 JP)

The ETF tracks the Nikkei ESG-REIT Index. It is compiled from all of the real estate investment trusts (REITs) traded on the Tokyo Stock Exchange. It first excludes the ones with low liquidity. Thereafter, it puts a focus on market capitalization and environmental, social, and governance (ESG) factors.

The index will utilize the ESG assessments based on benchmarks set by the Netherlands-based ratings agency GRESB.

GRESB is a specialist agency that performs ESG ratings of companies and building owners on a portfolio basis.

“This is the first ETF on the Tokyo Stock Exchange that tracks a REIT index with ESG elements,” said Nikko AM.

Nikkei Inc. started calculating and publishing two new Japan REIT indexes from July 20. The Nikkei ESG-REIT Index comprises real-estate investment funds listed on the Tokyo Stock Exchange. However, the Nikkei High Yield REIT Index comprises higher-yield J-REITs.

ESG and REITs – answering investors’ demands

“In recent years, both retail and institutional investors in Japan and around the world have been placing more emphasis on ESG when choosing investees,” said Nikko AM Head of ETF Center Koei Imai. “We expect they will make the same ESG considerations when choosing REITs. Nikko AM’s ETF development and other innovations are driven by investors’ needs, and we strive to always stay one step ahead.”

The ETF intends to distribute dividends four times per year based on a distribution policy. However, it does not guarantee the same.

It charges a management fee of 0.15%.

The launch of the new ETF combines an alternative investment such as real estate with responsible investing.

“A recovery that addresses acute economic issues as well as chronic environmental and social issues will require the efficient and equitable deployment of large amounts of capital,” said Ruben Langbroek, Head of Asia Pacific at GRESB. “The Nikkei ESG-REIT Index allows investors to align their listed real estate investment allocation with this green recovery.”

Related Story:   ESG Investments to Gain Popularity in Real Estate                                                   

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