“ESG cannot be delegated… it must be led from the very top”

Q: What impact does ESG have on your firm’s overall strategy and investment decisions?

JUN TSUSAKA: At Nippon Sangyo Suishin Kiko (NSSK), ESG is embedded in everything we do – both in our strategic and investment frameworks. It’s not a separate initiative or something that gets added in later; it’s central to our approach and always has been.

When we established the firm 11 years ago, ESG was a core and fundamental principle. One of the benefits of being a relatively young firm is that we were founded at a time when discussions around sustainable development goals and ESG were just gaining traction but may have lacked clear paths for implementation. So that allowed us to take a leadership position from the outset, integrating ESG into our investment strategy across the entire lifecycle of an investment.

That means we focus on ESG starting with the screening phase and due diligence, then managing portfolio companies with these ESG values, principles and processes. We put in place KPIs to track progress, and even in the exit process we consider how potential buyers approach ESG as a value add and within their own operations.

Q: How have your views and approach to ESG evolved over time?

JUN: In truth, our approach has not changed all that much, because from the beginning, our mission has been to integrate ESG considerations into everything we do. What has changed is the world around us – specifically, how others view ESG and sustainable development goals and how they are being implemented today.

For us, ESG remains critical to achieving better investment outcomes. It must generate alpha. If ESG is being treated as a charitable contribution, then that belongs outside the investment arena.

We’ve coined the term “alpha-generating ESG” to describe our practice and commitment to these efforts. It reflects our belief that ESG, when done right, can drive performance. It’s become part of our identity and investment style.

We also align our practices with global standards. NSSK is a signatory and practitioner of good sustainable investment practices, like the United Nations PRI and World Bank’s IFC Impact Principles. In fact, we’ve been selected as the private sector representative and Asia Pacific chair for the Impact Principles, which means that, in this role, we don’t just practice sustainable investment, we also contribute to oversight and community-building around these standards.

Q: What outcomes have you seen as a result of your firm’s commitment and implementation of ESG in investments?

KIYOMI MATSUDA: At NSSK, we see women’s empowerment in the workplace as both a social priority and a driver of superior business outcomes. Across our 22,000 employees in portfolio companies, 74% are women. This is much higher compared to the market overall, and we view it as a strength and also focus on ensuring that representation translates into leadership. About 30% of managerial positions in our firms are held by women, nearly three times the national average in Japan.

This commitment has delivered measurable results. Over the past five years, we have exited 13 businesses with strong financial performance, generating average returns of 3.6x and IRRs exceeding 46%. By embedding women’s empowerment in our strategy, we’ve demonstrated that advancing social priorities can also create significant value for investors.

Q: Is your investment team’s compensation linked to ESG goals or targets at all?

KIYOMI: Yes, our investment team’s compensation is tied to ESG goals, with each member evaluated on specific KPIs as part of the performance appraisal process. Importantly, we don’t view ESG as a stand-alone measure – it’s directly connected to driving stronger financial outcomes, including revenue, earnings and cash flow.

The way we see it, ESG is about creating transparency and building a workplace where people are proud of the company’s values and mission. When you combine that with doing good for the environment and society, you create a culture that motivates people, which in turn generates strong business and financial results. ESG and performance go hand in hand; they reinforce one another.

Q: What are your thoughts on the recent pushback against certain aspects of ESG in the United States? And generally, how should ESG be led within organizations going forward?  

JUN: Over the past decade, and particularly over the past year, ESG has often swung like a pendulum. At times, it’s gone too far toward being treated purely as a charitable exercise, and more recently there has been backlash in the opposite direction. Ultimately, though, we believe the balance will return to where it belongs, because no one seriously argues against protecting the environment, building stronger communities, or making society better for future generations. These are universal values.

At the organizational level, I think it’s important to remember that ESG cannot be delegated. It must be led from the very top. That’s why, in our organization, the CEO is ultimately responsible for ESG. When leadership drives ESG initiatives, it quickly and effectively becomes embedded in strategy and operations, rather than being treated as a side project. People follow the example set by their leaders and, for us, ESG is a leadership mandate that starts at the top and flows through the entire organization.

Read more in the Asia Funds ESG + Sustainability Survey 2025 Report.