In October, Jefferies and SMBC co-hosted a forum for senior executives from leading Japanese corporations and investment firms. The event, titled “How to Commercialize the Japanese Energy Transition,” examined how companies can monetize opportunities tied to the global transition and Japan’s Green Transformation (GX) Plan, a $1 trillion initiative to reduce emissions over the next decade.
One session brought together global investment leaders to discuss how asset allocators (pensions, insurers, and sovereign wealth funds) are deploying capital into Japan’s transition. The panel featured Helga Birgden, Global Chair of Sustainable Investing at Mercer; Glenn Yelton, Global Head of Investment Stewardship & ESG at Invesco; and Debanik Basu, Head of Sustainable Investing (APAC) at APG.
Their prompt: explain how the ultimate owners of capital think about risk, return, and policy in the context of the transition.
Allocation Is Now Broad, Not Niche
The transition has moved from specialist strategies to market-wide allocation.
As Mr. Yelton of Invesco explained, clients now expect energy-transition exposure “across every strategy that we manage… fixed income, our equity strategies, our private market strategies,” and if managers are not doing that, “we are in fact not allocating alongside the market.”
He noted that almost half of Invesco’s ESG-characterized AUM is now climate-focused and growing, and that in 2024 the firm launched two climate-transition ETFs for a single U.S. client totaling “over $4 billion.”
What’s Working, What Isn’t
Ms. Birgden described where capital is flowing today: “core investments in renewables, efficiency… batteries and electrification.”
Ms. Birgden cited survey work showing transition readiness is a high priority for asset owners (Morningstar’s read of 500 owners across 11 countries) and that a majority of investors KPMG surveyed have already invested in energy-transition companies, with “a big drive towards electrification.”
Private Markets Lead, But Public Markets Still Matter
The panel agreed that most transition investment activity today is happening in private markets. Mr. Basu noted that private allocations offer clearer attribution — “we can select real assets rather than companies” — and give investors greater ability to shape strategy through ownership and engagement.
Public markets, however, remain essential
Ms. Birgden added that asset owners are also reshaping public exposures by “choosing transition-aligned benchmarks” and applying climate considerations across global equity and credit portfolios.
Policy as a Valuation Input
Policy support matters because it changes the economics of projects, but only if it’s durable.
Mr. Yelton called it “the off-balance-sheet component” that can make a marginal deal attractive “if you believe that the government is going to be committed… for an extended period of time.” He contrasted Japan’s policy cohesion with U.S. volatility, which forces “a discount factor on those supplemental components,” while noting state-level building codes and programs can still drive activity.
Mr. Basu underlined why policy fills a practical gap: many customers “are not willing yet to pay a green premium,” investors are “not willing to put in concessionary finance,” and key technologies in hard-to-abate sectors “do not yet exist or are not yet fully scalable.”
He offered two examples: a steelmaker with credible decarbonization roadmaps in Europe but uncertainty in India due to feedstock and technology constraints; and a Mexican cement company limited by U.S. building codes that restrict lower-clinker cement despite its lower carbon profile.
The Backlash and the Reset
The panel characterized recent pushback as a move toward pragmatism, not a retreat. Mr. Yelton said, “The biggest pushback we get is when performance goes down,” which is true of any strategy. He argued that early net-zero pledges moved from “ideation to implementation” too fast” Economics must track decarbonization for fiduciaries.
Ms. Birgden described a “pendulum swing”: fewer public green claims due to tighter rules on greenwashing, alongside continued, quieter work on decarbonization. She also noted investors working directly with governments, citing Australia, where institutional investors helped shape national targets.
Follow along for more insights from Jefferies’ Sustainability and Transition Team on the Japan GX Plan and other important climate investing themes in the weeks ahead.
