Supporting the realization of a "decarbonized society" through the sophistication of the investment chain
Sumitomo Mitsui Trust Holdings, Inc.
As a "responsible institutional investor," we incorporate ESG factors which is a factor affecting corporate value such as medium-to-long-term business opportunities and risks, in addition to financial information such as corporate performance, into our investment of equities and fixed incomes. We also place great importance on solving ESG issues in our stewardship activities such as engagement with companies and exercise of voting rights. Addressing ESG issues leads to a sustainable society while pursuing upside potential and curbing downside risk of corporate value, as a result, we believe that this will lead to fulfillment of our responsibility to increase the return on investment for our customers, namely stewardship responsibility.
Positioning climate change as one of the most important themes of ESG issues, properly understanding the risks and opportunities associated with this issue and contributing to a smooth transition to a low-carbon and decarbonized society through engagement, we have an important role to play in the investment chain.
Based on various risks and opportunities related to climate change, we have identified "climate change" as one item of ESG Materiality, and addressed as climate-related strategies, "Engagement" with domestic and overseas companies, " Investment Strategy Entrenchment " and " Development and provision of investment products". By optimizing the capital allocation through these measures, we aim to maximize the return on investment for our customers and to contribute to climate change issues by cooperating with investee companies and our company.
We view engagement activities as opportunities to seek best practices from companies and exchange opinions to contribute to the enhancement of corporate value over the medium-to-long-term.
Regarding climate change issues, we view it as a direct opportunity to seek management judgment and system construction that takes risks into account, and by proactively implementing this, we will solve climate change issues, maximize assets under management, and reduce operational risks. In addition to our own engagement, we may engage through collaborative engagement initiatives such as PRI and CA100+ (Climate Action 100+). We also work with stakeholders related to climate change and work with government agencies and industry groups to make policy recommendations.
(2) Investment Strategy Entrenchment
We will adopt investment strategies and investment decisions that take into consideration climate change risks, and strive to reduce operational risks and improve returns. We add factors of climate change according to individual circumstances such as customer's intention and operation strategy. In addition, we will raise or lower the composition weight in consideration of climate change factors when making investment decisions on individual securities.
(3) Development and provision of investment products
By providing investment products, we will provide clients with investment opportunities associated with climate change. In addition to providing ETFs that are linked to indices that determine the investment weight of portfolios according to carbon emissions, we are developing a concentrated investment strategy (impact investment) that targets specific ESG issues such as climate change.
【SMTAM’s Global Engagement】
As a signatory to international guidelines and principles for corporate conduct, we engage with investee companies while cooperating with the United Nations, overseas companies, NGOs, and other organizations to implement activities in keeping with our signatory commitments. We show the example as below.
＜Climate Action 100+＞
Climate Action 100+ is a five-year joint engagement initiative that started in December 2017. It targets companies thought to be major greenhouse gas emitters. Through joint engagements with signatory bodies such as the PRI and Ceres, it calls on the world ’s top 100+ greenhouse gas emitters to disclose information. SMTAM is responsible for the Asia-Pacific region in conducting its engagements.
(Topics) In collaboration with major US asset owners, we are also promoting direct dialogue with three leading Japanese manufacturing companies.
The Asia Investor Group on Climate Change (AIGCC) is an initiative that aims to create awareness among asset owners and financial institutions in Asia about the risks and opportunities pertaining to climate change and low-carbon investments. SMTAM actively participates in engagements through the AIGCC.
(Topics) Participated in a public comment on the climate taxonomy, we expressed an opinion to the Central Bank of Malaysia to disclose information on its efforts to address climate change issues.
The Coalition for Environmentally Responsible Economies (Ceres) is an NGO promoting corporate initiatives relating to environmental issues such as global warming. Ceres actively carries out engagements through its network of 150 institutiona investors mainly in North America.
(Topics) U.S. electricity and utility company that we have been engaged continuously, has announced that it will withdraw from coal-fired power generation by 2050, and succeeded in drawing ambitious goals through collaboration with Ceres.
The Investor Agenda is a collaborative initiative among institutional investors which seeks to promote climate change-related action and the transition to a low-carbon society. It was established in February 2018 by asset managers who are PRI, CDP and Ceres signatories (approximately 480 organizations and institutions). Signatories collaborate with one another on investment, corporate engagement, investor information disclosure and po licy propo sal e fforts. SM TAM bec ame a signatory to the Investor Agenda in June 2019, which coincided with the G20 Summit in Osaka where the leaders of the world ’s major nations were discussing policy recommendations for swift action on climate change. The Investor Agenda provides a framework within which to offer proposals in line with the Paris Agreement to governments around the world.
(Topics) We jointly submitted a letter to the Government of Japan in February 2020, and to the Government of Korea in May, advocating strengthening efforts to tackle climate change.
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