SUMITOMO MITSUI TRUST HOLDINGS, INC. Sustainability Report
2020 / 2021
Reason for Existence ("Purpose")
Creating new value with the power of trusts and let prosperous future for our clients and society bloom
Management Principles ("Mission")
(I) Swiftly provide comprehensive solutions to our clients by fully utilizing the significant expertise and comprehensive capabilities.
(II) Adhere to the principles of sound management based on a high degree of self-discipline with the background of fiduciary spirit and establish strong credibility from society.
(III) Strive to fulfill all shareholder expectations by creating distinct values through fusing the various functions featuring the trust bank group.
(IV) Offer a workplace where the diversity and creativity of its employees are more fully utilized to add value to the organization and where employees can have pride and be highly motivated in fulfilling their missions.
Ideal Model ("Vision")
-Towards "The Trust Bank"-
Based on the fiduciary spirit and with significant expertise and comprehensive capabilities, the Sumitomo Mitsui Trust Group will create dis-tinct values by leveraging a new business model, combining its banking, asset management and administration, and real estate businesses, and will move onto the global stage as a leading trust bank group which boasts the largest and highest status in Japan.
Codes of Conduct ("Value")
In order to pursue the Management Principles of the Sumitomo Mitsui Trust Group, the executives and employees commit themselves to comply with the six Codes of Conduct described below.
Completely Client-oriented-Truthfulness and Loyalty
We will adhere to the highest degree of "Truthfulness and Loyalty" as well as credibility and sureness, and will carry out all our responsibilities for client satisfaction and comfort as our top priority.
Contribution to Society-Dedication and Development
We will remain dedicated in all our efforts, with "Frontier Spirit," and continue to contribute to society.
Realization of Organizational Capability-Trust and Creativity
We will realize our organizational capabilities with full of mutual trust and creativity through improvement by mutual learning and continuous per-sonal transformation of various people who share the enthusiasm for trust.
Establishment of Individuality-Self-help and Self-discipline
With a spirit of self-help and self-discipline as well as a sense of ownership, we will carry out our responsibilities.
Strict Compliance with Applicable Laws and Regulations
We will strictly comply with all applicable laws, rules and regulations, and will ensure that all our corporate activities meet the highest standards of social norms.
Resolute Stance against Antisocial Forces
We will continue to take a resolute stance against antisocial forces, which may threaten public order and the security of civil society.
Basic Policy on the Social Responsibility of Sumitomo Mitsui Trust Group (Sustainability Policy)
At Sumitomo Mitsui Trust Group, based on our Reason for Existence ("Purpose"), our Management Principles ("Mission"), our Ideal Model ("Vision") and our Codes of Conduct ("Value"), we respect dialogue with all stakeholders, such as clients, shareholders, investors, employees, business part-ners, local communities, NPOs, government authorities and international institutions, and play an active role in building a sustainable society.
1. Contribute to Solving Social and Environmental Problems through Business
• We work to solve social and environmental problems from a global perspective through our core businesses.
• We integrate the diverse functions that are unique to a trust bank group and develop new business models and inno-vative products and services to help solve social and environmental problems.
2. Serve Clients with Sincerity
• We strive to provide in-depth explanations and proposals so that clients can fully understand the details of our prod-ucts and services. In addition, we make efforts to quickly meet the demands of clients and link their feedback to busi-ness improvements and product and service enhancement.
• We strive to undertake meticulous management of client information.
• We engage in educational and awareness-raising activities by cooperating with educational institutions, govern-ment authorities, NPOs, etc., to enable clients to take the lead in rationally selecting financial products and building sound assets.
S u m i t o m o M i t s u i Tr u s t H o l d i n g s , I n c .
3. Earn the Trust of Society
001
• We strictly adhere to all laws, regulations and rules, and conduct our activities in a sincere and fair manner that con-forms to societal norms.
• We build sound and proper relationships with stakeholders, and fulfill our responsibilities as a member of society, engaging in fair competition and appropriate disclosure of corporate information, etc.
• We maintain a resolute stance against antisocial forces which threaten public order and safety, and work to prevent improper use of financial functions by organized crime.
4. Address Environmental Issues
Sustainability Report 2020/2021
• We aim to build a low-carbon society, a natural symbiosis society which fosters biodiversity, and a circulatory society, and will work to solve problems which obstruct these aims through our core businesses by cooperating with various stakeholders.
• We work on energy and resource conservation to reduce the environmental burden caused by our own activities.
5. Respect the Individual
• We respect individual rights and diverse values, rejecting unjustifiable acts of discrimination in all our activities.
• We create a safe and pleasant workplace environment, respect employees' diverse ways of working, and strive to achieve work-life balance.
• We work to develop the skills of employees and strive to build sound minds and bodies.
6. Participate in and Contribute to the Community
• We aim to revitalize the community and build a rich living environment in cooperation with various partners in all communities where we engage in corporate activities, through our business activities and social contribution such as educational and cultural activities.
Editorial Policy
This report focuses on the ESG (Environmental, Social and Governance) initiatives of the SuMi TRUST Group, which strives for the balanced creation of both social value and economic value. The Group has been publishing integrated reports with investors as the primary reader since 2017, and this report pro-vides comprehensive disclosure to investors and non-investor stakeholders seeking more detailed ESG information.
This report was prepared based on the Common Metrics presented in the white paper "Measuring Stakeholder Capitalism-Toward Common Metrics and Consistent Reporting of Sustainable Value Creation," which was com-piled by the four major global accounting firms based on recommendations from the World Economic Forum's International Business Council. In addition, at the end of the report, there is a comparison table with these common metrics, the US non-financial disclosure standard SASB (Sustainability Accounting Standards Board) and financialsector accounting metrics, and the GRI (Global Reporting Initiative) international non-financial disclosure standards, as well as annual disclosure information as mandated by the Principles for Responsible Banking to which the Group became a signatory in September 2019.
Scope of This Report
Sumitomo Mitsui Trust Group (comprised of Sumitomo Mitsui Trust Holdings, Inc., Sumitomo Mitsui Trust Bank, Limited, and other group companies)
Target Readers
All stakeholders, including customers, shareholders and inves-tors, employees, business partners, local communities, NPOs, governments, international institutions, etc.
Period Covered by This Report
October 1, 2019 to September 30, 2020
*This report also includes the most recent information on activities before fiscal year 2019 as well as after October 2020.
Sustainability Information Disclosure Outline
In addition to this report and the Integrated Report, the Group discloses a variety of information on sustainability. First, there are separately published versions spun off from this report, which are the TCFD (Task Force on Climate-related Financial Disclosures) Report (formerly the "Climate Change Report"), the Natural Capital Report, and the Environmentally Friendly Property Report. In addition, SuMi TRUST Bank publishes two types of digest reports for seniors ("Considering the Problems of Dementia" and "Senior-Generation Housing") every other year, and publishes the SuMi TRUST With You Social Contribution Report every quar-ter. Meanwhile, asset management business Sumitomo Mitsui Trust Asset Management publishes the Stewardship Report and Nikko AM publishes the Sustainability Report annually to disclose details of their respective ESG investment initiatives. Our web-site carries extensive information on the Sustainability activities that Sumitomo Mitsui Trust Group does not cover in this report.
Specifically, the website provides more detailed information on our ini-tiatives related to issues such as successful aging and support for the environment and living creatures.
The quarterly journal "SuMi TRUST With You" reports on the "With You" social contribution activities of SuMi TRUST Bank (four issues per year).
Sustainability in Sumitomo Mitsui Trust Grouphttps://www.smth.jp/en/csr/index.html
Contents
004 Management Commitment
006 Response to the Spread of COVID-19
008 The Sumitomo Mitsui Trust Group's Reason for Existence ("Purpose")
009 Medium-Term Management Plan (FY2020-2022)
010 SuMi TRUST Bank Message from the President
011 Sumitomo Mitsui Trust Asset Management Message from the President Nikko Asset Management Co., Ltd. Joint Message from Co-CEOs
013 The Group's Approach to Principles of Governance
014 Corporate Governance
016 Sustainability Promotion System
026 Compliance and Conducting Business Activities Fairly
033 Initiatives for Appropriate Tallying Operations of Voting Rights Exercise Forms at General Meetings of Shareholders
034 Risk Management and Materiality Management
045 Consideration for Borrowers' Environmental and Social Impact
057 The Group's Approach to Planet (Environmental Issues)
058 Climate Change
068 Natural Capital (Biodiversity Issues)
077 Environmentally Friendly Property
S u m i t o m o M i t s u i Tr u s t H o l d i n g s , I n c .
085 Environmental Burden Reduction Measures
093 The Group's Approach to People (Social Issues)
094 Respect the Individual
113 Addressing Issues of a Super-Aged Society
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127 The Group's Approach to Prosperity (Economic Considerations)
128 Creation of Employment and Wealth
129 Providing Value to Clients
141 Helping Invigorate Communities and Society
177 Trust Forum Foundation
178 The Sumitomo Foundation
179 Comparative Table of the World Economic Forum's Common Metrics
190 GRI Content Index
207 Financial Review
182 PRB Initiatives
188 SASB Index
208 Basic Information of the SuMi Trust Group
Management Commitment
S u m i t o m o M i t s u i Tr u s t H o l d i n g s , I n c . Sustainability Report 2020/2021
Integrating sustainability into management and developing sustainability initiatives as our business
As COVID-19 continues to spread with no end in sight, there are concerns that social and economic activities will be stagnant for a long time. We would like to express our heartfelt sympathy to those who have been infected and their families, and to all those whose lives and business activities have been severely disrupted by COVID-19.
In addition, regarding the issue of forward processing in the tallying operations of exer-cised voting rights which came to light in September 2020, we would like to express our sincere apologies once again for causing great inconvenience and concern to all companies that have entrusted the provision of stock transfer agency services business to SuMi Trust Bank, Tokyo Securities Transfer Agent and JAPAN SECURITIES AGENTS, as well as to all shareholders and capital market participants.
We have defined our Purpose (reason for existence) as "To create new value with the power of trusts and let prosperous future for our clients and society bloom," and have launched a Medium-Term Management Plan that places the "balanced creation of both social value and economic value" as a core management philosophy. By steadily advancing initiatives to solve a variety of social issues in the Group's wide-ranging business domains, we aim to achieve sustainable development of society as well as sustainable and stable growth for the Group.
Looking at the macroeconomic environment, the concept of "Build Back Better" is being advocated to realize a stronger economy going forward compared to pre-COVID times based on lessons learned from the Global Financial Crisis. In Europe, enormous sums are being allocated on accelerating the climate-neutral Green Deal policy initiative to make it a pillar for economic recovery. Even in Japan, which has been lagging behind, a change in government policy is expected to lead to a strong push for monetary policies that promote environmental innovation. As a signatory to the Principles for Responsible Banking (PRB), which calls for conformity with the Paris Agreement and Sustainable Development Goals (SDGs), we will also play our expected roles in realizing a carbon-free society by promoting innovation of or facilitating the transition to renewable energy, hydrogen, next-generation storage batteries, and carbon recycling.
In addition to raising concerns about climate change, the spread of COVID-19 has also highlighted the importance of human capital. I feel that it is the mission of top manage-ment to create a workplace where the people responsible for executing the Medium-Term Management Plan and supporting the sustainable growth of the Group can safely take on the challenge of figuring out new ways to work under the new normal environment and contribute to improving performance. In March 2020, the Company was selected for the first time as one of the Nadeshiko Brand enterprises by the Ministry of Economy, Trade and Industry (METI), which recognizes companies that are carrying out outstanding initiatives to promote the advancement of women. We will continue to make every effort to support women's career development by promoting them to positions of responsibility. Moreover, diversity is not just about gender. We are determined to further strengthen our initiatives to create a comfortable workplace and reform awareness in consideration of the super-aging society, for example by expanding opportunities for seniors with specialized skills and help-ing employees balance work and nursing care.
S u m i t o m o M i t s u i Tr u s t H o l d i n g s , I n c .
This year's Sustainability Report adopted the common metrics of stakeholder capitalism, which was announced at the World Economic Forum (Davos) in January 2020 and officially released in September. As such, it is organized into four sections: Principles of Governance, Planet (Environment), People (Society), and Prosperity (Economy). This report also serves as the first release of the Report and Self-Assessment on the Principles for Responsible Banking required of PRB signatories.
Sustainability Report 2020/2021
Precisely because we are in this challenging environment, we will strive to become a com-pany that creates positive impact by integrating sustainability into our management and developing sustainability initiatives as our business. I am grateful for the continued warm support of all our stakeholders.
January 2021
Sumitomo Mitsui Trust Holdings, Inc. Director, President
Response to the Spread of COVID-19
The Group has been focusing on supporting various stakeholders in the prolonged efforts to combat the COVID-19 pan-demic. To continue providing services in an unprecedented situation as a financial group specialized in trust banking, we will continue to take action based on three basic stances: ensuring the health and safety of employees and their families, ensuring business continuity as a key piece of social infrastructure, and preventing the spread of infection in society (includ-ing activities to create a society that is less prone to the spread of infection).
As a financial institution that plays an important role in social infrastructure, we will continue to ensure the stable con-tinuation of business operations while maintaining the safety, security, and health of our clients and employees as our top priority.
Response Policy 1 Ensuring business continuity as a key piece of social infrastructure (response to clients)
In response to client comments such as, "I need to go to the bank, but I want to avoid going out or coming into contact with people because I am worried about getting infected," or "I am worried about the impact on my assets if the market declines due to changes in the economic environment," the Group's branch offices are taking mea-sures to prevent the spread of infection, such as holdingseminars online and installing acrylic panels to prevent droplet infection. In addition, we are working to improve client convenience by shifting various procedures and consultations to be handled through our website, online, and by telephone, as well as by developing new products designed to address COVID-19.
Banking business
• Provided flexible financing options for individuals and corporations
• Established a ¥100 billion support fund to combat COVID-19 (until the end of September 2020)
• Set up a consultation desk for interest-free and unse-cured loans
• Expanded coverage of home loan with special guar-antee against eight major diseases; newly added loan repayment guarantee in case of unemployment (see page 143)
Strengthen contactless online client support
• Online consulting for retail services
Jan. 2020 Mar. May Jul. Sep.
*Tablets with a video conferencing system
Respond to needs such as request to have family members living far away attend consultation sessions on inheritance related matters
Family members living far away
Client's home
Trust-related business
(Pension) Continued administrative, management, and reporting tasks to ensure reliable delivery of pension and lump-sum payments
(Stock Transfer Agency Services) Provided support for preparation and operation of General Meeting of
Shareholders
(Asset Management) Continued operations to maintain the flow of capital markets
(Asset Administration) Continued to settle securities and funds for smooth capital market operations
(Real Estate) Continued accounting and settlement reporting services for real estate securitization trusts and J-REITs
• Opened trust type next generation branch
In November, SuMi TRUST Bank opened the first trust type next generation branch, which offers online consul-tation services, in the Chukyo area and is making efforts to further expand services for clients in the COVID-19 era. Overview of Online Consultation:
• Online consultation is a service where visual information as well as audio information is shared simultaneously with clients to provide consulting services unique to SuMi TRUST Bank regardless of location, number of par-ticipants, or distance.
• The service enables clients who are unable to visit the branch to consult online from their homes, while review-ing the brochure and seeing the staff, making it easier than ever to consult comfortably and safely.
• Furthermore, we can receive consultations from multiple locations at the same time, which enables family mem-bers who live far away to also join the session online.
Response Policy 2
Ensuring the health and safety of employees and their families
Each Group company is focusing on initiatives to avoid the "three Cs" (crowded, close contact, confined) in the work-place and to promote diverse work styles among employees.
We are making efforts to promote telework through-out the entire Group. For example, SuMi TRUST Bank has established a system that enables employees of its head-quarters to telecommute, utilizing its branches to open atotal of 26 satellite offices (as of November 2020) in the Tokyo, Chukyo, and Kansai areas so employees can tem-porarily work at offices near their homes, as well as dis-tributing devices for teleworking. In addition, Sumitomo Mitsui Trust Asset Management and Sumitomo Mitsui Trust Research Institute are distributing devices for tele-working to all their employees.
Employee feedback on this initiative
• The Company responded quickly and I believe we were able to get ahead despite the difficult situation. Many of my co-workers have expressed their appreciation for the Company, and I feel that this has brought a sense of unity to the workplace.
• I want to contribute to the Company's growth and business development through carrying out my duties. I was reminded once again that our Company is the one that can be trusted in case of emergency.
• Leveraging the Group's strengths in agility and flexible responses as an indepen-dent company will help differentiate us from our competitors in times like these.
Response Policy 3
Preventing the spread of infection in society (including activities to create a society that is less prone to the spread of infection)
SuMi TRUST Bank, with the understanding and coopera-tion of its clients as well as society, has implemented the following activities and received high marks for them.
• To support various activities, including medical treatment and prevention of COVID-19, the Company donated ¥100 million to the Japanese Red Cross Society. As a result, the Company was awarded the Gold Medal for Merit, which is given to those who make large donations to the Japanese Red Cross Society.
• The Company donated 100,000 medical masks to sev-eral medical institutions.
• To support 14 universities and research institutions work-ing on the development of vaccines and treatments for COVID-19, the Group established an "Account for Donations" to accept donations mainly from individual clients, with the Group itself donating ¥10 million to each university (this account was closed on August 31, 2020, and a total of ¥260 million was donated).
• As part of the Yen Bank Deposit from Home: Special Interest Rate Campaign under the Direct and Internet Banking business, the Company announced that it would donate ¥25 per deposit to organizations that develop and research vaccines and treatments to combat COVID-19 (this campaign ended on August 31, 2020).
In the situation where donation-related malicious scams were rampant, we received many comments from our clients saying they felt comfortable donating because the donation activities were carried out by the SuMi TRUST Group and that they were happy to be able to contribute to society in this way. This gave us an opportunity to reaffirm the strength of everyone's determination to help society.
While carrying out each activity, we also focused on raising client awareness by holding press conferences with the universities we supported and lobby exhibitions at branches located near the universities. As a result, some clients made donations after visiting the lobby exhibitions, and others commented that they were happy to help because their favorite regions and universities were the recipients of the donations.
The Sumitomo Mitsui Trust Group's Reason for Existence ("Purpose")
Background of setting the Purpose
The SuMi TRUST Group has recently defined its reason for existence, or Purpose as "To create new value with the power of trusts and let prosperous future for our cli-ents and society bloom," and has also placed the "bal-anced creation of both social value and economic value" at the core of its management approach. This is basedon the Group's "client-oriented" management principles, which have remained unchanged since our founding, and reflects our mission to take responsibility for future gen-erations as the most trusted "Best Partner" of our clients to build a society that is more responsive to change, and to grow sustainably by proactively contributing to solving social issues.
To create new value with the power of trusts and let prosperous future for our clients and society bloom
Truthfulness and
LoyaltyDedication and Development
Trust and CreativitySelf-help and Self-discipline
The "power of trusts" mentioned in our Purpose refers to a broad concept that includes the diverse functions of trusts, its significant expertise and comprehensive capa-bilities, and its fundamental philosophy of fiduciary duties. We are using the power of trusts to develop new services and solutions by crossing and integrating a wide variety of functions. Furthermore, we will take on the challenge of solving social issues by creating products and services that society demands but are not yet available, and tie it into results and growth. At the same time, we will make a positive impact on our clients and stakeholders to build a sustainable society and pass it on to the next generation.
The SuMi TRUST Group's Purpose
The purpose defines why a company exists, or in other words, it answers the question "How is our company's existence valuable to society?" The Group's Purpose has also been set based on our founding spirit and the unique and essential strengths we have cultivated over the course of our history, as well as what society demands from us.
The historical background behind the Purpose
The newly defined Purpose reflects the Group's history of contributing to the development of our country by resolv-ing various social issues in response to the needs of the times based on the relationship of trust with our clients.
The Mitsui Trust Company, Limited was established in 1924 and Sumitomo Trust Co., Ltd. was established in 1925 as the first two trust companies in Japan. Thefounding prospectus of both companies includes the noble philosophy of contributing to the national economy and becoming an indispensable part of society through providing the best and optimal management and prob-lem-solving capabilities and a spirit of social service, as well as a strong commitment to maintaining independent management, as the trust business is a social service and trust companies are institutions of social public interest.
Putting our Purpose into practice
The Group's logo, known as the "future bloom," symbol-izes our Purpose and represents our four values.
"Truthfulness and Loyalty" has its origins in the found-ing prospectus of The Sumitomo Trust and Banking Co., Ltd., "Dedication and Development" is the founding spirit of The Mitsui Trust and Banking Co., Ltd., and "Trust and Creativity" comes from the corporate slogan of The Chuo Trust and Banking Co., Ltd. In addition, "Self-help and Self-discipline" is the fundamental philosophy that under-pins the Group's independent management as Japan's only financial group specialized in trust banking.
They are also valuable assets that embody an "entre-preneurial spirit" and the "crystallization of passion and diligence towards trusts" inherited in each trust bank that now form the foundation of the Group. We would like to take these assets and spirit that our predecessors have built and pass them on to future generations so that they can bloom in the future.
Medium-Term Management Plan (FY2020-2022)
We formulated the three-year strategy after reassessing the roles and functions expected of us as a financial group spe-cialized in trust banking, as well as our own reason for existence (Purpose) based on a long-term perspective.
In the previous Medium-Term Management Plan (FY2017-2019), we implemented our business model transformation to meet the diversifying needs of our clients, and in the Medium-Term Management Plan starting in fiscal 2020, we will further promote these initiatives and proactively address the social issues that arise for individuals, corporations, and investors, positioning the next three years as a time to solidify the foundation for the Group's sustainable and stable growth.
Continue reforms to strengthen fee businesses
Guided by our management philosophy of balanced creation of both social value and economic value, the three-year plan period aims to shore up our business platform with the goal of realizing the development of a sustainable society and achieving sustainable and stable growth for the Group.
Social issues to actively address
S u m i t o m o M i t s u i Tr u s t H o l d i n g s , I n c .
Asset administration suited for Japan's aging society and asset formation of individuals
• Providing asset administration services that help find solutions to issues like dementia
• Supporting the asset formation for the working generation, particularly people still in the wealth creation stage of life
Sustainable growth of the Japanese economy and corporations (addressing both financial and non-financial issues)
• Responding to various financial needs, strengthening the governance frameworks of business partners, and supporting their initiatives on sustainability
Diverse range of investment opportunities and development of the invest-ment chain
Sustainability Report 2020/2021
• Leveraging the Group's strengths to enhance the appeal of our investment products, in addition to traditional assets
• Providing efficient and high value-added services for a broad range of investment processes
Commenced business model transformation
We think the diversification of values in society and the growing number of uncertainties in the environment suggest that now is the right time for the SuMi TRUST Group to take on the mantle of providing trust schemes that can help achieve a safe and secure society. As the "Best Partner" most trusted by our clients, we intend to do everything we possibly can to pass on to the next generation a society that is even more capable of coping with change.
For more information on the Medium-Term Management Plan, please refer to pages 22-27 of the 2020 Integrated Report.
SuMi TRUST Bank
Message from the President
S u m i t o m o M i t s u i Tr u s t H o l d i n g s , I n c . Sustainability Report 2020/2021
Sumitomo Mitsui Trust Bank, Limited President
Masaru Hashimoto
The global COVID-19 pandemic continues to spread, showing no signs of slowing down. I would like to express my heartfelt sympathy to those who have been infected while also extending my deepest gratitude to all the medical personnel and others who are working hard to stop the spread of COVID-19.
In a report released in July, the United Nations pointed out that the spread of COVID-19 is partly due to the increased contact between humans and animals carrying unknown viruses, resulting from the ongoing destruction of nature. Since the industrial revolution, humans have become extremely prosperous, but in exchange we have continued to inflict great harm on the global environment. Particularly with regard to climate change, we are on the verge of rapid and irreversible changes to the climate. In other words, we are nearing the point of no return. The idea that we must act decisively before reaching the point of no return is gaining ground around the world, especially in Europe, and the COVID-19 pandemic is further accelerating this movement.
Expectations for the financial industry are also very high. ESG (Environmental, Social and Governance) invest-ment, which started with asset management in 2006, has become mainstream in capital markets. Further, the Principles for Responsible Banking (PRB), launched in 2019, is aimed at playing a proactive role in improving the effectiveness of ESG by focusing on the concept of "Impact," which is the pursuit of both economic and social returns.
We at SuMi TRUST Bank have been boldly taking up the challenge that comes with these changes in the environment as an opportunity. First, regarding the concept of "Impact," in March 2019 we became the first company in the world to offer operating companies Positive Impact Finance (PIF) solutions that do not specify the use of funds. In March 2020, we became the first financial institution in Asia to sign the Poseidon Principles, which is an initiative led by financial institutions to address climate change risks in the shipping industry. In addition, we have substantially strengthened our sustainability management consulting services by leveraging the Group's practical know-how, which has been very well received by our clients.
The Japanese government's Carbon Neutral Declaration has completely shifted the mood of the business world. I feel that the areas where trusts can demonstrate their strengths have expanded even further. We will con-tinue to take the lead in promoting sustainable finance and do our absolute best to build a sustainable society.
Sumitomo Mitsui Trust Asset Management Message from the President
Nikko Asset Management Co., Ltd. Joint Message from Co-CEOs
Sumitomo Mitsui Trust Asset Management Co., Ltd. Representative Director and President
Yoshio Hishida
With the spread of COVID-19, there are concerns that social and economic activities will be stagnant for a long time. We would like to express our heartfelt sympathy to those who have been infected, as well as their families, and to all those whose lives and business activities have been severely affected by COVID-19.
Today, both in Japan and around the world, there is a major shift in the way businesses operate, with companies seriously exploring ways to address social issues and achieve business results at the same time. As an asset management company, we will strive to simultaneously address social issues and achieve economic returns by carefully tracking these shifts, and discovering, evaluating, and investing in companies that grow by solving social issues. We are working to strengthen our ESG product lineup, and in 2018 we launched and began managing a Japan Equity Impact Investment fund using our own capital. By investing in companies that contribute to solving social issues in a more concrete way, we aim to gen-erate economic as well as social returns.
Climate change is the ESG theme that we focus on the most, and we believe that it is essential for the survival and growth of companies over the medium- to long-term that investees proactively address this issue. In addition, we will continue to actively contribute to sustainability on a global scale through our activities in international initiatives, such as our participation as the only Asian company in discus-sions with the Brazilian government on environmental con-servation in the Amazon River basin, and our engagement with the Indonesian government, which passed a package of revised legislation that may accelerate deforestation.
Nikko Asset Management Co., Ltd. | Nikko Asset Management Co., Ltd. |
Executive Chairman and Co-CEO | President and Co-CEO |
Junichi Sayato | Hideo Abe |
We would like to express our deepest sympathy to all those affected by COVID-19 and their friends and families. We would also like to express our deepest gratitude to all the medical personnel and others who are working every day to stop the spread of COVID-19.
The mission of Nikko Asset Management is to act in the best interests of our clients, which is why we have adopted the Fiduciary and ESG Principles as our corpo-rate philosophy. Over the past year, we have established an unwavering investment management operations struc-ture with each business function dispersed across multi-ple offices, while at the same time developing a remote work environment and promoting digitalization. The asset management division set up a dedicated contact point for investee companies wishing to engage, and carried out flexible stewardship activities in light of the actual situa-tion of companies affected by the COVID-19 pandemic. As a result of these initiatives, we were able to facilitate smooth communication with our stakeholders without compromising service quality, and successfully created new value despite the pandemic.
In addition, we strengthened the Corporate Sustainability Department in 2020, and voluntary working groups at each business site worked vigorously to achieve a sustainable society despite the restrictions set forth by the COVID-19 pandemic. We believe that the source of innovation that underpins our groundbreaking solutions comes from respecting diversity and inclusion, which is at the core of our corporate culture. We will continue to proactively carry out sustainability-related activities.
S u m i t o m o M i t s u i Tr u s t H o l d i n g s , I n c .
011
Sustainability Report 2020/2021
Governance is foundational for a company in setting purpose and provides oversight for a company's activ-ities that contribute to a prosperous, sustainable so-ciety. Without good governance, companies lack the supportive context within which to make progress on the other three pillars: Planet, People, and Prosperity.
From the World Economic Forum White Paper "Measuring Stakeholder Capitalism"
013 The Group's Approach to Principles of Governance
014 Corporate Governance
016 Sustainability Promotion System
026 Compliance and
Conducting Business Activities Fairly
033 Initiatives for Appropriate Tallying Operations of Voting Rights Exercise Forms at General Meetings of Shareholders
034 Risk Management and Materiality Management
045 Consideration for Borrowers' Environmental and Social Impact
The Group's Approach to Principles of Governance
In order to adhere to the principles of sound management, based on a high degree of self-discipline with the background of fiduciary spirit, and to establish strong credibility with society, SuMi TRUST Holdings commits itself to enhancing its corporate governance system in line with the following basic philosophy, with the objective of supporting sustainable growth and medium- to long-term enhancement of the enterprise value of the SuMi TRUST Group. In addition, the Board of Directors sets out and discloses the SuMi TRUST Group's Reason for Existence ("Purpose"), Management Principles ("Mission"), Ideal Model ("Vision"), and Codes of Conduct ("Value") as the anchor for all of our activities, which is shared by all of the directors, officers, and employees of the Group.
Basic Philosophy
• SuMi TRUST Holdings shall respect shareholder rights, and en-deavor to develop an environment in which shareholders can exercise their rights appropriately and effectively, and to secure the effectively equal treatment of shareholders.
• By recognizing the importance of its social responsibilities and public mission, SuMi TRUST Holdings shall endeavor to appro-priately cooperate with its stakeholders, including shareholders, clients, employees, business partners, and local communities, and to establish a corporate culture and climate in which it con-ducts sound business operations based on a high degree of self-discipline.
• In order to establish a basis for constructive dialogue with its stakeholders, SuMi TRUST Holdings shall separately set out its
Related Materiality
Impact Materiality
Disclosure Policy, and endeavor to appropriately disclose cor-porate information, including non-financial information, and en-sure the transparency of its corporate management.
• As the financial holding company that assumes the corporate management function of the SuMi TRUST Group, SuMi TRUST Holdings adopted the institutional design of a "company with Three Committees," and, by separating the execution and su-pervision of business, shall endeavor to ensure the Board of Di-rectors' role of effective supervision.
• SuMi TRUST Holdings shall engage in constructive dialogue with its stakeholders in order to contribute to sustainable growth, as well as the medium- to long-term enhancement of the enterprise value of SuMi TRUST Holdings.
Materiality | Risk/Opportunity | Key Stakeholders | Main Responses |
Considering impacts on society and the environment of investees and borrowers | Risk | Clients, communities, NPOs | Minimizing negative impacts through business (e.g., investments and loans in line with sector policies and ESG guidelines, and engagement that takes into account how borrowers and investees impact society and the environment) |
Management Foundation Materiality
S u m i t o m o M i t s u i Tr u s t H o l d i n g s , I n c .
013
Materiality | Risk/Opportunity | Key Stakeholders | Main Responses |
Corporate governance | Risk/Opportunity | All stakeholders | Sustainable improvement of the management framework that balances the creation of both social value and economic value and enables us to realize our Purpose (please see Integrated Report for details) |
Risk management and resilience | Risk | Shareholders, investors, employees, governments | Response to risks, including event risks such as natural disasters (identifying risks and formulating clear policies, establishing a comprehensive management system, and developing a risk-response culture through employee training) |
Systems maintenance and combatting cyber attacks | Risk | Clients, governments | Response to cyber attacks (ransomware, DDoS attacks, information theft), prevention of system development delays and cost increases |
Safety of financial products | Risk | Clients | Appropriate management of risks inherent in financial products (including proper sales to customers) |
Compliance | Risk | Clients, employees, governments, international organizations | Fostering a corporate culture that does not deviate from corporate ethics and codes of conduct, elimination of transactions with antisocial forces, crime pre-vention (money laundering, terrorist financing, special frauds such as bank transfer scams, etc.) |
Sustainability Report 2020/2021
Financial Materiality
Materiality | Risk/Opportunity | Key Stakeholders | Main Risks (For detailed guidelines, please refer to our Annual Report -Financial Data Section) |
Preserving financial capital | Risk | Shareholders, investors, governments | Deterioration in creditworthiness of certain large creditors, unfavorable real estate market conditions, and decline in value of cross-shareholdings |
Acquiring sustained earnings | Risk | Shareholders, investors, governments | Decrease in gross business profit in the loan and deposit business |
Highly Relevant SDGs
Corporate Governance
Perspectives Regarding the Corporate Governance System SuMi TRUST Holdings is a financial holding company with subsidiaries such as SuMi TRUST Bank, Sumitomo Mitsui Trust Asset Management, and Nikko Asset Management, and aims to be our clients' "Best Partner," by providing "Total Solutions" that combine our banking business, asset management and administration business, and real estate business, based on a fiduciary spirit, and by
Corporate Governance System
making full use of our significant expertise and creativ-ity. To fulfill our principles and meet the expectations of stakeholders, SuMi TRUST Holdings endeavors to ensure the soundness and reliability of its business model and the transparency of the management of the SuMi TRUST Group, and will work to further enhance the Group's cor-porate governance.
Supervise
Executive body
Board of Directors
Executive Committee
Representative Executive Officers Executive Officers, etc.
The Board of Directors ensures the fairness and transpar-ency of the SuMi TRUST Group's corporate management as its central role, by setting out the basic management policy of the SuMi TRUST Group and supervising the overall management of the Group. In light of the impor-tance of environmental and social issues related to sus-tainability, the Board of Directors prescribes a basic policy on the social responsibility that is to be implemented by each Group company (the "Sustainability Policy"). Under this Sustainability Policy, the Board of Directors enhances awareness among its officers and employees, and pro-motes positive efforts to resolve these issues while taking its stakeholders into consideration, with the aim of sup-porting the sustainable growth of society and increasing the enterprise value of the SuMi TRUST Group.
In light of the importance of the functions of external directors in corporate governance, as a general rule, at least one-third of the directors on the Board of Directors are independent external directors. The Board of Directors establishes and discloses Independence Standards of Independent Directors. In determining candidates for directors, SuMi TRUST Holdings takes into consideration, among other factors, a balance between individuals who are capable of exerting strength in the management ofspecific business fields, and individuals who are suitable for corporate management. SuMi TRUST Holdings strives to secure a board that is, as a whole, sufficiently balanced and diverse in terms of knowledge, experience, and capa-bility to properly supervise the wide range of business fields in which SuMi TRUST Holdings has dealings, as a financial group specialized in trust banking.
Individual Committees
Composition of the Board of Directors
Chair-man
External directors (7 directors) | Internal directors (8 directors) |
Percentage of external directors
47%
Non-executive directors
(11 directors)
Percentage of non-executive directors | 73% |
Executive directors
(4 directors)
All seven external directors have been registered as independent officers with the relevant financial instruments exchange.
Breakdown of 15 directors: 14 men, 1 woman
16 Board of Directors meetings were convened during the period July 1, 2019 through June 30, 2020. Only on one occasion was one director absent.
Regarding the selection of external directors, the com-position of the Board takes into consideration a balance of expertise, which include the areas listed below. In addi-tion, to further improve the effectiveness of our corporate governance, we regularly hold external directors' meet-ings, which are only attended by external directors. These
Skill Map of External Directors
Current positions and responsibilities at the Company
Takeshi Suzuki | Director |
Mikio Araki | Director |
Isao Matsushita | Director |
Shinichi Saito | Director |
Takashi Yoshida | Director |
Hiroko Kawamoto | Director |
Mitsuhiro Aso | Director |
Committees |
(Chairman of the Board of Directors)
Nominating Committee member | Compensation Committee member |
Risk Committee member | Conflicts of Interest Committee member |
Nominating Committee member | Compensation Committee member |
Risk Committee chairperson
Nominating Committee chairperson | Compensation Committee member |
Nominating Committee member | Audit Committee chairperson |
Audit Committee member
Nominating Committee member | Compensation Committee chairperson |
Audit Committee member
To ensure the effectiveness of corporate governance and further enhance the soundness and reliability of the Group's business model, as well as the transparency of management, we have established the Risk Committee and the Conflicts of Interest Committee as advisory bodies to the Board of Directors to complement the three committees required under the Companies Act, namely, the Nominating Committee, the Compensationexternal directors engage in discussions that are active and unrestrained, sharing information and awareness from independent and objective positions. These meet-ings contribute to the greater objectivity and indepen-dence of the Board of Directors.
Expertise of Director Candidates
Corporate managementFinancial accountingLegal
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Committee, and the Audit Committee. As a financial group specialized in trust banking, the Conflicts of Interest Committee possesses supervisory functions unlike at any other financial group. Also, every year each committee conducts a self-evaluation in an effort to improve its autonomous management by considering and adopting measures aimed at improving issues iden-tified in the evaluation.
Members of Committees (: Chairperson,: Member (external),: Member (internal/non-executive),: Member (internal/executive))
NominatingCompensation
Audit
*Mr. Hideki Kanda is an external director of SuMi TRUST Bank. Mr. Haruyuki Toyama and Ms. Akiko Hosokawa are external experts.
Risk
Conflicts of Interest
For more information on corporate governance, including the evaluation of the effectiveness of the Board of Directors, succession plan, and compensation system for directors and executive officers, please refer to pages 68-79 of the 2020
Integrated Report.
Sustainability Promotion System
In our Medium-Term Management Plan, we have incorporated a basic strategy for generating positive impacts geared towards solving social issues and have placed sustainability at the core of the Group's management. Each SuMi TRUST Bank business and its affiliated companies will independently select the social issues that must be addressed first, and we will strengthen efforts on these issues through our core business. Meanwhile, for climate change and other key sustainability issues in Japan and overseas, our Sustainability Promotion Committee functions as a command center for the entire Group and formulates strategies to swiftly implement initiatives whilst collaborating with mainly international organizations.
1. Sustainability Promotion System
Board of Directors
• Establishes the Basic Policy on the Social Responsibility of the Sumitomo Mitsui Trust Group (Sustainability Policy).
• Stipulates (in the Basic Policy on Corporate Governance) that one of its main roles is to address the problems of climate change and other environmental and social issues linked to sustainability and determines the policy direction the Group should take.
• Hears the findings of the Risk Committee and engages in exhaustive discussions to decide on mainly the issues (materiality) that have a serious impact on balanced creation of both social value and economic value, as well as operational frameworks.
ExecutiveCommittee
• Hears the findings of the Business Risk Management Committee and engages in exhaustive discussions to establish policies regarding items of materiality for submission to the Board of Directors.
• Engages in exhaustive discussions to decide on all initiatives for Group companies, taking into account the perspective of balanced creation of both social value and economic value.
• For initiatives on key sustainability issues, the Committee establishes medium-term policies in line with the Medium-Term Management Plan, as well as policies for each fiscal year, and manages operations that reflect the PDCA cycle (convenes meetings as the Sustainability Promotion Committee).
Management |
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Business development |
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Employee education |
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Dialogue |
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Close collaboration
Roles of Sustainability Promotion Committee
Executive Compensation that Reflects Sustainability Evaluations
As a rule, executive compensation is paid through a com-bination of monthly compensation (consisting of fixed compensation and individual performance compensation), executive bonuses (performance-linked bonuses), and stock compensation (share delivery trust). One of the KPIsused to determine stock compensation for each officer includes assessments of ESG-related activities and rating agency scores, etc. to promote sustainability as a part of management.
For details, see 2020 Integrated Report, pages 74-75.
2. Basic Philosophy of Sustainability Promotion
To achieve the balanced creation of both social value and economic value, we need to organically combine the process of creating positive impact while maximizing stakeholder value based on our Purpose with the pro-cess of sustainably strengthening our own financial andnon-financial management foundation (six types of capi-tal). Additionally, we must establish a system to appropri-ately manage these processes at the management level. We call this system the "value creation process."
Mission
To provide value to clients, society, shareholders, and employees
Creating new value with the power of trusts and let prosperous future for our clients and society bloom
Truthfulness and loyalty
Purpose
Value
Dedication and development
Trust and creativity
Self-help and self-discipline
Vision
Realization of "The Trust Bank"
Sustainability issues such as climate change and infectious diseases
Individuals: Asset administration suited for Japan's aging society
Asset formation of individuals
Corporations: Sustainable growth of the Japanese economy and corporations (addressing both financial and non-financial issues)
Investors: Diverse range of investment opportunities and development of the investment chain
Materiality (factors that promote and inhibit the circulation of capital)
Creation of Positive Impacts
Identification of social issues to be addressed first
Balanced creation of both social value and economic value has been placed at the very core of our manage-ment philosophy in our Medium-Term Management Plan. In some cases, social value is created by our Group's cor-porate activities, but in many cases, it is created through the chain of effects from one stakeholder to the next. In other words, our Group's social issue-solving business consists of activities that contribute to the realization of SDGs and ultimately create positive impacts and mini-mizes negative impacts on the economy (Prosperity), soci-ety (People), and the environment (Planet).
Materiality management
In our Medium-Term Management Plan, we identi-fied three priority issues to be addressed in our social issue-solving business. In addition to issues such as cli-mate change and the super-aging society, which we have traditionally focused on, we also plan to address new sus-tainability issues such as COVID-19 as a business. On the other hand, there is a growing concern about previously unanticipated ESG risks, such as the COVID-19 and cli-mate change issues. As such, it is important not only to pursue business opportunities, but also to strengthen our resilience to these new risks.
Prioritizing three social issues
Key sustainability issuesProblems in a super-aged societyCOVID-19 issues
Circulation of Capitals
The capital needed to execute business operations usu-ally consists of cash, equipment, and other tangible assets that appear on financial statements, as well as intangi-ble assets that do not convert so easily into money, like human resources, know-how, and networks. We must inject both financial and non-financial capital into our businesses and establish a mechanism through which our launching pad for growth is enhanced in a sustained man-ner by the (1) circulation of capital within our businesses, for example, the generation of profits and development of human resources through business execution, as well as client base expansion, and the (2) circulation of capital outside of our businesses whereby benefits that extend beyond the Group come back to the Group in the long term owing to the internalization of the external economy.
The SuMi TRUST Group's value creation process-pre-sented in line with the International Integrated Reporting Framework-is a mechanism that facilitates the circulation of capital through our social problem-solving businesses.
Examples of Circulation Within Our Businesses |
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Examples of Circulation Outside of Our Businesses |
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Materiality
(1) Definition of Materiality
The circulation of capital is similar to the circulation of blood. If capital is steadily accumulated in the same way blood flows freely around the body, the ability to gener-ate value will continue to increase in a sustained fashion. Too much bad cholesterol in the body causes arteries to harden, which prevents blood flow.
Conversely, good cholesterol in the body helps pre-vent the arteries from hardening. Applying this analogy to priority issues (materiality) that affect our value creation process over the medium to long term, we consider mate-riality to be comprised of factors that either inhibit (bad cholesterol) or promote (good cholesterol) the circulation of capital.
Materiality is an event that has a significant impact on the process of improving the ability to generate value sustainably through the accumulation of financial and non-financial capital
(2) Materiality Identification Process
The Company identified materiality in FY2015 and conducted a materiality review in FY2019. In the FY2015 identification process, the Executive Committee confirmed 17 items which had been selected from a list of 28 items that were consid-ered highly important to a banking group after interviewing external directors, external experts, and relevant internal departments about their medium- to long-term impact on the Group's enterprise value and the Group's impact on stake-holders. At the same time, we identified top risks as financial risk events likely to have a significant impact on management,and managed each of them separately. However, we now believe that integrating these two approaches is indispens-able if we are to execute a growth strategy that places the balanced creation of both social value and economic value at the very core of our management philosophy. In October 2019, a new materiality plan determined by the Executive Committee was deliberated on by the Risk Committee and then approved by the Board of Directors. More specifically, we laid out the seven previous top risks and 14 previous mate-riality items, sorted out duplicate or similar items, renamed them as necessary, and added the latest items.
(3) The Group's Materiality Issues
The Group's materiality issues can be divided into three categories: impact materiality, which refers to the pos-itive or negative impact of corporate activities on the economy, society, and the environment; management foundation materiality, which affects the foundation of
value creation; and financial materiality, which has a direct impact on financial performance. In addition, the Group also identified which capital circulation each materiality is mainly related to, which helps in understanding and man-aging the significance of the materiality in the value cre-ation process.
Type Materiality Risk Opportunity Main relevant capitalRelevant pages | |
Impact Materiality | Pursuing sustainability-themed business opportunities Intellectual capitalNoted in each section |
Considering impacts on society and the business environment of companies to whom we extend investments and loans Social and Relationship capitalPages 45-49, 52-53 | |
Financial inclusion Social and Relationship capitalPages 142-145 | |
Population decline and super-aged society issues Social and Relationship capitalPages 113-125 | |
Climate change Natural capitalPages 58-67, 85-91 | |
Technological (digital) innovation Intellectual capital - | |
Management Foundation Materiality | Corporate governance All capital Pages 14-15 |
Risk management and resilience Financial capitalPages 34-44 | |
Systems maintenance and combatting cyber attacks Manufactured capitalPage 44 | |
Bolstering human resources and developing workplace environments Human capital Pages 94-112 | |
Protecting personal information and client data Intellectual capital Page 140 | |
Safety of financial instruments Intellectual capital Page 43 | |
Compliance Social and Relationship capitalPages 26-33 | |
Client-orientated approach / fiduciary duty Social and Relationship capitalPages 130-140 | |
Stability of financial system Financial capitalPages 36-43 | |
Financial Materiality | Preserving financial capital Financial capitalPages 40-42 |
Acquiring sustained earnings Financial capital - |
(4) Management and Administration of Materiality The management and advancement of each materiality item to facilitate the capital circulation is generally carried out by the department in charge (specific measures are described on pages 13, 57, 93, and 127).
To ensure that each department does not fall into the trap of "inner logic," we have introduced a system called internal engagement to incorporate the perspectives of stakeholders, and the content and status of improvements are reported to the Board of Directors (see page 22). At the same time, the Risk Committee receives consultations from the Board of Directors on matters related to materi-ality, examines the appropriateness of such matters, and
submits a report.
In addition, the Group added five new items including climate change and financial inclusion during its FY2019 materiality review. As sustainability issues constantly change to reflect social developments, the Group has adopted the concept of dynamic materiality to flexibly respond to these changes. It goes without saying that this requires thorough discussions at the management level. At the time of the FY2019 review, the Board of Directors made a resolution after a total of 12 discussions, including with the Executive Committee, the Business Risk Management Committee (an advisory committee to the Executive Committee), the Risk Committee, and top management.
3. Stakeholder Engagement
The Company lists clients, shareholders, employees, and society as stakeholders in its Management Principles ("Mission"), and clients, shareholders, investors, employ-ees, business partners, local communities, NPOs, govern-ment authorities, and international institutions as major stakeholders in its basic policy on the social responsibility
Stakeholders of the Group
• Nonprofit corporations and public interest corporations
• Nonprofit organizations, etc.
• Institutional investors
• Individual investors
• Corporate shareholders, etc.
• General public
• Consumers
• Local communities, etc.
• Business groups and industry bodies
Three Approaches to Stakeholder Engagement
The Group's stakeholder engagement is divided into three approaches: (1) direct engagement by relevant affiliates/relevant departments (in the case of SuMi TRUST Bank) according to the theme (see page 21), (2) direct participation in multi-stakeholder partnerships by relevant affiliates/relevant departments (see page 23), and (3) internal engagement by the Sustainability
(the "Sustainability Policy"), and has declared that it will respect dialogue and play an active role in building a sus-tainable society. By identifying its stakeholders in this way, the Company is able to clearly understand how the Group relies on and impacts each stakeholder, providing a strate-gic foundation for the creation of social value.
Management Department with relevant affiliates/rele-vant departments based on its own dialogue with stake-holders and information gathered from ESG assessment organizations (see page 22). These approaches are used to diversify dialogue channels and enhance the quality and quantity of inputs.
Engagement with Major Stakeholders
Clients | The SuMi TRUST Group strives to be our clients' "Best Partner," who provides the maximum value to clients, by accurately capturing their needs through various dialogues with individual and corporate clients, and by offering "Total Solutions" that provide the best highly specialized products and services in a wide range of areas. For example, in SuMi TRUST Bank's Retail Total Solution Services Business, we not only receive feedback from sales branches and sales counters nationwide, but also capture opinions and requests through "Customer Services Promotion Office," "Voice of Customers Questionnaires," and "Sumitomo Mitsui Trust Direct" to improve client satisfaction (see pages 134-135 for details). |
Shareholders/ Investors |
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Local communities |
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NPOs |
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Government authorities |
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International institutions |
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Employees |
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Business partners |
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4. Internal Engagement
Basic Philosophy
Owing to the introduction of Japan's Stewardship Code in 2014, active engagement (purposeful dialogue) between institutional investors and investee companies has been commonplace. That said, the topics of such engagement usually revolve around financial matters and there are not many opportunities for parties to engage in dialogue about wide-ranging non-financial topics. Accordingly, our Sustainability Management Department engages in investor-like dialogue with relevant departments with respect to the non-financial materiality items in the finance sector that ESG investors are most interested in and for which the Group's initiatives may face challenges in order to improve our approaches and enhance infor-mation disclosure. We refer to this initiative as internal engagement, and its importance as a check and balance function based on an external perspective on day-to-day
FY2020 InitiativesInternal Engagement
operations, different from the supervisory function of the Board of Directors from a management perspective, has been increasing over the years. The annual plan for internal engagement, results of initiatives, and progress of improvements are reported to the Board of Directors.
The Internal Engagement Process
The Sustainability Management Department selects themes for internal engagement based on ESG-related letters from investors, the latest assessments and feed-back from ESG assessment organizations, and the latest high-profile issues related to ESG and SDGs. In addition, the Sustainability Management Department first engages in direct dialogue with NPOs and other organizations on economic, social, and environmental issues that are mate-rial to our stakeholders, and then engages with the rele-vant departments based on the contents of the dialogue.
Theme
Departments covered
Corporate governance Human capital
Human Resources Department, Corporate Secretariat Human Resources Department
Data security
IT & Business Process Planning Department
Compliance
Compliance Department
Risk management Climate change
Risk Management Department Wholesale Business Planning Department
Current issues surrounding fossil fuels and policies to address them
Engagement points
Mainly current issues pointed out by ESG assessment organizations The relationship between human capital and corporate value
Mainly current disclosure standards pointed out by ESG assessment organizations
Same as above Same as above
5. Multi-Stakeholder Partnership
Goal 17 of the SDGs promotes a diverse range of partnerships. Given the vital role of finance in the for-mation of a sustainable society, the Group places a strong emphasis on taking action, in partnership with various stakeholders, including other financial institutions, to tackle solutions to difficult challenges. We participate actively in partnerships within Japan and overseas.
Principles for Financial Action for the 21st Century towards a Sustainable Society (The Principles for Financial Action towards the formation of a sustainable society) We, together with Sumitomo Mitsui Trust Asset Management (SMTAM), Nikko Asset Management (NAM) and Sumitomo Mitsui Trust Panasonic Finance, support the aims of the Principles for Financial Action for the 21st Century (PFA21), an effort in which over 280 financial institutions of all types collaborate towards the formation of a sustainable society. We have had a central role in this work since the Principles were drafted in 2011. Moreover, since 2013 we have been a member of the Financial Principles Steering Committee (the "Steering Committee"), and served as chair of the Sustainable Community Support Working Group (WG), which practices outreach and education in sustainable finance in regional areas. In FY2020, this WG has been holding a series of online seminars entitled "What is a Regional Circulation Symbiotic Sphere?" under the theme of "Considering the Role of Financial Institutions in Regions" jointly with the Bank Deposit, Lending, and Leasing WG. Regarding the PFA21, we also participate in the Ministry of Environment's High Level Panel on ESG Finance as an observer. At the third meeting held in October 2020, SuMi TRUST Bank's Positive Impact Finance solutions were introduced as a representa-tive example of impact finance in the financial world, and we (observers) explained the advanced nature of the Japanese government's initiatives in a global context. | |
United Nations Environment Programme Finance Initiative (UNEP FI) UNEP FI is an international network to encourage financial institutions to consider sustainability in their behavior. In 2003, we were the first Japanese trust bank to become a signatory. We also participate in the Property Working Group and the Natural Capital Finance Alliance (formerly the Natural Capital Declaration) within UNEP FI. Not only in Japan but we have been contributing to stronger action in the global finance industry. Moreover, we signed the Principles for Responsible Banking (PRB), which came into effect in September 2019, and declared that we do business in conformity with the SDGs and the Paris Agreement. Since January 2019, we have also affirmed the Principles for Positive Impact Finance (UNEP FI), which provide the theoretical backbone of the Principles for Responsible Banking, and joined the Positive Impact Initiative. We are actively working together with overseas banks towards establishing more advanced measures. | |
PRI (The Principles for Responsible Investment) In May 2006, we, together with SMTAM and NAM, signed the PRI, which were formulated by the United Nations Global Compact and the United Nations Environment Programme Finance Initiative (UNEP FI) as a joint secretariat. The Principles call on institutional investors such as pension funds and asset managers to consider ESG (Environmental, Social, Governance) when making investment decisions. SMTAM is participating in the Water Risk Working Group, and both SMTAM and NAM are participating in the Palm Oil Working Group and other groups to practice engagement with relevant companies. | The Principles for Responsible Banking (PRB) The Principles for Responsible Banking were formulated for the purpose of making bank operations conform with social goals, such as the SDGs and action on human rights problems and global warming countermeasures indicated by the Paris Agreement on climate change. In September 2019, SuMi TRUST Holdings announced that it will do its utmost to practice stra-tegic business operations in conformity with the SDGs and the Paris Agreement, becoming the first signatory institution to the Principles for Responsible Banking (see pages 182-187). |
S u m i t o m o M i t s u i Tr u s t H o l d i n g s , I n c .
Sustainability Report 2020/2021
S u m i t o m o M i t s u i Tr u s t H o l d i n g s , I n c . Sustainability Report 2020/2021
United Nations Global Compact (UN Global Compact) The UN Global Compact, proposed by former UN Secretary-General Kofi Annan, is a code of conduct regarding human rights, labor, the environment, and anti-corruption. Signatory companies are called on to take measures to implement the compact. In July 2005, we became the first Japanese bank to sign the compact, and declared our resolve to act as a good corporate citizen by complying with and pro-moting the code of conduct. We also became a member of the "Global Company Network Japan (GCNJ)," in which signatory companies of the UN Global Compact participate. | TCFD The FSB (Financial Stability Board), recognizing climate change as a risk affecting finance, announced its Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) in June 2017, calling for even higher levels of transparency in dis-closures related to climate change. We, along with SMTAM and NAM, support the TCFD recommendations, and are working on information disclosures in line with the recommendations (see 2020/2021 TCFD Report). |
UNEP FI Property Working Group (UNEP FI PWG) The UNEP FI PWG is one of the working groups formed by sig-natory institutions of the UNEP FI to promote property finance that facilitates sustainable development, namely Responsible Property Investment (RPI). In addition to joining the working group in June 2007, the Group became a member of the media team that promotes RPI and conducts activities as one of its leading members. | The Equator Principles The Equator Principles are international guidelines for pri-vate-sector institutions to ensure that impacts on the environ-ment and regional communities are fully taken into consider-ation when implementing loans such as project finance loans. SuMi TRUST Bank became a signatory to the Equator Principles in February 2016 (see pages 47-48). |
Business and Biodiversity Initiative "Biodiversity in Good Company" Leadership Declaration At the ninth meeting of the Conference of the Parties to the Convention on Biological Diversity held in May 2008 in Bonn, Germany, the Group, together with 33 other companies from around the world, signed a leadership declaration under the Business and Biodiversity Initiative "Biodiversity in Good Company," which was led by the German government. Since that time, we have been playing a role as a leading company in this field and making proactive efforts to address this issue (see page 70). | The Poseidon Principles In March 2020, SuMi TRUST Bank became the first financial insti-tution in Asia to sign the Poseidon Principles, which is an ini-tiative established to help financial institutions address climate change risks in the shipping industry. Financial institutions that are signatories to the Principles will annually evaluate the level of achievement of CO2 emission reduction efforts for ships covered by ship finance, and calculate and announce the contribution of each bank's overall ship finance portfolio to CO2 emission reduction efforts (see page 49). |
Natural Capital Finance Alliance (formerly the Natural Capital Declaration) The Group became a signatory to the Natural Capital Declaration (NCD) proposed by the United Nations Environment Programme Finance Initiative (UNEP FI) in June 2012. The Natural Capital Declaration will be reorganized as the Natural Capital Finance Alliance to expand its initiatives (see page 69). | COLTEM COLTEM (Collaboration Center of Law, Technology and Medicine for Autonomy of Older Adults) is a social technol-ogy development center, supported by the Japan Science and Technology Agency under the Ministry of Education, Culture, Sports, Science and Technology. It integrates law, engineering, and medicine to provide seamless support for older adults to live in the community in conditions ranging from health to cog-nitive impairment. SuMi TRUST Bank participates in COLTEM, and contributes to the creation of systems for supporting those with dementia in making decisions and smoothly managing their financial transactions and assets (see page 115). |
PlanetPeople
Prosperity
Climate Action 100+ "Climate Action 100+" is a program of collaborative engage-ment with companies believed to have major impacts on global warming, taking place for five years from December 2017. This program is conducted based on the Task Force on Climate-related Financial Disclosures (TCFD), lists over 100 companies around the world that have high emissions of greenhouse gas, then practices engagement with them, in collaboration with PRI, Ceres, and other signatory institu-tions to call for information disclo-sures. SMTAM and NAM participate in this initiative. | CDP The Carbon Disclosure Project, founded in 2000 by international NGOs active on environmental issues such as climate change, is the forerunner of the CDP. This project sends annual question-naires to companies with high market capitalizations in leading countries. The response rate it obtains from companies is rising year after year. Questionnaire responses are basically published, and scores based on action each company takes are published to the world. SMTAM and NAM participate in this initiative. |
AIGCC The AIGCC (Asia Investor Group on Climate Change) is a group of Asian investors concerned with climate change. It is an initia-tive to generate awareness among Asian asset owners and finan-cial institutions of the risks and opportunities associated with cli-mate change and low-carbon investment. SMTAM and NAM participate vigorously in engagement through the AIGCC. | Ceres Ceres (Coalition for Environmentally Responsible Economies) is an NGO that encourages companies to take action on envi-ronmental issues, such as global warming. It practices positive engagement through an investor network that includes 150 participating institutional investors, mainly in North America. SMTAM participates in this initiative. |
FAIRR SMTAM has joined FAIRR (Farm Animal Investment Risk & Return), an engagement group that mainly targets the fisheries and live-stock industries, and participates in the "Sustainable protein supply chains," one of the group's current collaborative engagement pro-grams. It aims to raise awareness among target companies of the large ESG risks and opportunities of products made from fisheries and livestock produce, linking that awareness to improvements in corporate activities. SMTAM aims to globalize its engagement activities, and gain knowledge and presence as a result. | Access to Medicine Access to Medicine is a collaborative body which has major Western asset managers and asset owners as signatories. Its activities address major global pharmaceutical companies to raise their awareness of medical treatment services in devel-oping countries, and to call for improved access to medicines. SMTAM aims to strengthen its engagement with global pharma-ceutical companies. |
The 30% Coalition (USA), 30% Club (UK), and 30% Club Japan This is an investor network that works to raise diversity in com-pany boards of directors. SMTAM has signed and engaged in the activities of the Thirty Percent Coalition in the USA and the 30% Club Investor Group in the UK. It also became a signatory to the 30% Club Japan Investor Group when it was founded in May 2019, with NAM following suit in July 2019, and both companies began activities in Japan. | Investor Agenda The Investor Agenda was founded in February 2018 by asset managers (around 480 groups and agencies) that had signed the PRI, CDP, and Ceres. It is an initiative of institutional inves-tors promoting low carbon in climate change-related behavior. Its purpose is collaboration and liaison on investment, corporate engagement, information disclosure by investors, and policy proposals. SMTAM and NAM participate in this initiative. |
S u m i t o m o M i t s u i Tr u s t H o l d i n g s , I n c .
Sustainability Report 2020/2021
Compliance and Conducting Business Activities Fairly
1. Basic Initiative Policy
The SuMi TRUST Group sees compliance as adhering to laws, regulations, market rules, and internal company rules, etc., in addition to conformity to social norms, so we can fulfill the expectations of the stakeholders (clients, communities and society, shareholders, and employ-ees) and earn their trust as stated in our Management Principles ("Mission"). The Group positions compliance as one of the most important management issues necessary for creating "The Trust Bank (Vision)" we aspire to be.
So that the Group can implement a proper compliance framework at "The Trust Bank," the Codes of Conduct ("Value") declare our "strict compliance with applicable laws and regulations" and the Compliance Rules stipulate
Compliance Standards for Directors, Officers, and Employees
what directors, officers, and employees need to comply with.
In addition, the Compliance Manual, a detailed com-panion guide to the Codes of Conduct, offers (1) explana-tions of codes of conduct that must be followed regard-less of one's duties and (2) clarification on how to respond when one discovers illegal behavior, while the Compliance Handbook and Company Rules provide specifics of the understanding and awareness directors, officers, and employees need to have according to their duty. We thus implement compliance by following these codes of con-duct strictly in our daily business operations.
We must establish public trust through awareness of our social responsibilities and public mission, as well as through sound business administration founded on strong self-discipline.
We must carry out all the functions of a trust bank group and endeavor to provide clients with quality financial products and services.
We must be firm against antisocial forces.
In accordance with the "Anti-Money Laundering Compliance Policy," we must make efforts to prevent abuse of our financial services by taking a firm stance against money laundering and terrorist funding, and by strictly complying with relevant laws and regulations.
We must strive toward appropriate and fair disclosure of how we manage our business and information about SuMi TRUST Holdings to ensure management transparency.
In accordance with the "Anti-Bribery and Corruption Compliance Policy," we must strictly comply with applicable laws and regulations on preventing bribery and corruption as we avoid pursuing profits by improper means. With respect to public servants/deemed public servants, as well as shareholders and other concerned parties with a business interest, we shall not offer entertainment, favors, or the like beyond socially accepted courtesies, nor shall we accept such entertainment or favors from concerned parties or other third parties (unless permitted under laws, regulations, internal company rules, or the like).
We shall always distinguish between business and personal matters, and in the course of business operations, we shall not take a position contrary to SuMi TRUST Holdings' interests nor use one's position to advance personal interests or those of a third party.
We shall not release to others any information obtained in the course of business or confidential matters of SuMi TRUST Holdings. We shall not, for any reason, use important unpublicized informa-tion, SuMi TRUST Holdings' business secrets, or the like for illicit gain, to cause harm to SuMi TRUST Holdings or others, or for other illegitimate purposes.
With regard to the trusts offered by the Group, we must recognize our obligation as a fiduciary toward settlors and beneficiaries, and as a fiduciary we must faithfully carry out our trust operations with the care of a good manager.
In the event that a client or other party suffers a loss originating from a financial product or service provided by the Group, losses shall not be compensated without rational grounds.
We must respect individual people's personalities and traits without discriminating in any situation. We must also emphasize, and constantly endeavor to sustain and improve, order in the workplace, thus ensuring a pleasant work environment.
In accordance with the "Policies regarding the Fiduciary Duties of the Sumitomo Mitsui Trust Group," we must endeavor to uphold our fiduciary duties.
Initiatives to Foster Compliance Awareness
With the approval of the Board of Directors, the SuMi TRUST Group has created a compliance manual which provides an explanation on the background and purpose of the Codes of Conduct and rules concerning laws, reg-ulations, and other conventions to be adhered to, and measures to be taken in the event of any complianceinfractions. The contents of this manual have been made widely known to all directors, officers, and employees across the Group.
Furthermore, the Group is improving training on compli-ance throughout the entire Group to help foster an aware-ness of compliance matters. Specifically, support is pro-vided with trainings carried out by supervising departments
responsible for compliance at each Group company, such as by providing training materials, dispatching instructors, and planning and implementing discussion-based study sessions on themes that span the whole Group.
In addition to the above, efforts are being made at each Group company to raise awareness and ensure thorough implementation of compliance matters through training and study sessions tailored to the characteristics of busi-ness and products at each company and the aspects of their clients, as well as through e-learning programs on
specific themes and guidance on a daily basis.
Furthermore, in order to accurately ascertain how mat-ters of compliance are being understood, the Group con-ducts an annual survey on compliance awareness each fiscal year at major subsidiaries and elsewhere, in an effort to understand the actual situation and improve any issues. The survey is an attempt to understand the situation of the entire Group by, for example, setting common questions in order to grasp Group-wide issues and to implement any effective measures.
2. Outline of Initiatives
Compliance System of the Group
With the approval from the Board of Directors, the Group formulates a compliance program consisting of a detailed implementation plan for compliance each fiscal year, and the Board of Directors regularly monitors and evaluates the program's progress.
Furthermore, in order to maintain an appropriate com-pliance framework in line with the business characteris-tics of each Group company, we manage the compliance framework for the entire Group, such as by formulating compliance programs for each company and providing guidance and oversight on the state of progress and achievement of these programs.
Group companies create compliance structures that
SuMi TRUST Holdings
Supervisory
Body
Risk Committee
Core Subsidiary (SuMi TRUST Bank)
are suited to their operations and founded on the com-pliance policy and other guidelines prescribed by SuMi TRUST Holdings.
For example, the supervising unit for compliance at core subsidiary SuMi TRUST Bank is the Compliance Department. In accordance with SuMi TRUST Holdings' compliance policy, SuMi TRUST Bank formulates its own compliance policy and a Compliance Program, while also monitoring the state of management and administration. In addition, the state of management and administration and other states are reported to the Executive Committee and the Board of Directors upon verification by the Compliance Committee, which is chaired by the officer in charge of the Compliance Department.
Board of Directors
Supervisory/ executive bodyDepartment
Risk Management-related Department, etc.
ExecutiveCommittee
Conflicts of Interest Management
Officer in charge of Compliance DepartmentComplianceDepartmentCorporate Mgt./ Investment and Loan Mgt.
RetailWholesale
Stock TransferTotal SolutionTotal Solution
Services Business
Services Business
Agency Services Business
Board of Directors
Compliance Committee
Enhancement CommitteeWholesale BusinessReal Estate Business
Fiduciary Services Business
Global Markets Business
Domestic base | Business department | Overseas base |
compliance officer | compliance officer | compliance officer |
Internal Audit DepartmentSuMi TRUST Bank subsidiariesConflicts of Interest Committee
Core Subsidiary (Sumitomo Mitsui Trust Asset Management)
ExecutiveCommitteeOfficer in charge of Compliance Department
Compliance DepartmentDepartmentsBoard of DirectorsInternal Audit DepartmentInternal Audit DepartmentOther Group Companies
The Roles of the Board of Directors, Executive Committee, and Compliance Department Officers
• Establish the Group's compliance framework, supervise execution
• Set policy and organizational structure pertaining to compliance
• Prepare the compliance manual, assess preparation, progress, etc. of the compliance program
• In advance examine Board of Directors decisions and reports (decisions on compliance matters and matters on constructing frameworks for supervisory departments)
• Matters concerning the approval and publicity of rules and regulations
• Analyze the state of compliance, look into problems
• Execute compliance-focused management while keeping in mind important points such as compliance's importance and laws and regulations pertaining to assigned duties
• Review policies and concrete measures that establish and entrench a proper compliance framework based on an accurate understanding on the state of compliance in the Group
• Generally supervise compliance in the Group
• Prepare required rules for our compliance framework, implement action and guidance, address issues, augment the training system
• With regard to the compliance program, formulate plans and manage progress, etc., provide guidance by monitor-ing the state of administration
• Bring up and report to the Board of Directors, the Executive Committee, etc. on compliance matters
Compliance Hotline System
In order to promptly and appropriately respond to any serious violation of laws/regulations and internal rules or to acts that likely constitute such violation, SuMi TRUST Group has established a compliance hotline system* where all officers and employees, etc. (including part-time employees, dispatched employees, retired employ-ees, and officers and employees, etc. of partner business operators, etc.) can directly report to the Compliance Department or external law firms, in addition to the regu-lar reporting channels. This hotline system enforces rigor-ous control of information and protection of whistleblower privacy to ensure their protection, and prohibits adverse treatment of whistleblowers who utilize the system appro-priately and those who cooperate with the investigation. In addition, in order to ensure unified management of the Group, SuMi TRUST Holdings has its subsidiaries estab-lish systems equivalent to this system (as necessary). The reported information is consolidated at SuMi TRUST Holdings, so that the Company can utilize this information to enhance its compliance system going forward.
Furthermore, in order to promote the appropriate use of the system, SuMi TRUST Bank, one of the major sub-sidiaries, has taken the lead in establishing and provid-ing Q&As and training tools for employees and others. Compliance awareness surveys are also implemented at major subsidiaries, etc. in order to gauge their level of awareness. Starting last fiscal year, to improve the acces-sibility of the hotline system, the company expanded the reporting channels available, introducing options such as telephone reporting to external law firms, as well as a 24-hour online reporting system that enables anonymous and safe communication at SuMi TRUST Bank.
The approach taken for the compliance hotline sys-tem is also taken for the accounting hotline system for the reporting of the Group's inappropriate accounting, etc. SuMi TRUST Holdings conducts activities to raise the awareness of subsidiaries, etc. as well as discloses the contact points for whistleblowers on its website.
(See our website for more information:https://www.smth.jp/en/about_us/management/compliance/index.html) *For overseas offices, a reporting system in the local language is available.
Response at the Time of Compliance Violations
To effect an appropriate response when compliance viola-tions by directors, officers, or employees are discovered, the Group clarifies "How to Respond to the Discovery of Illegal Behavior" in the Compliance Manual, a detailed companion guide to the Codes of Conduct, and obli-gates directors, officers, and employees to report to the Compliance Department through higher-ups. When the Compliance Department receives a report from a depart-ment committing a compliance violation, the Compliance Department will conduct an investigation with the report-ing department, coordinate with clients to reach a solu-tion, submit reports in-house and to the authorities, determine whether a public announcement is necessary, and otherwise provide guidance and advice on executing the required response in order to settle the issue. Along with verifying the appropriateness of measures to prevent recurrence by the violating department and its supervis-ing unit, the Compliance Department will improve the report and control framework to deter/curtail accidents and to raise the quality of work.
3. Response to Major Compliance Risks
• Leakage of customer information
Major Compliance Risks
• Inappropriate acquisition and use of personal information
• Lack of credibility in products and services offered
• Violation of the principle of suitability
• Inadequate explanations to customers
• Insincere responses to customer consultations and complaints
• Relationships with customers that lack moderation
• Transactions with conflicts of interests
• Inappropriate accounting treatment
• Disregard for information disclosure
• Illegal payoffs
• Inhibiting free and fair competition
• Insider trading and other forms of unfair trading
• Violation of Foreign Exchange and Foreign Trade Act
• Infringement of intellectual property rights
• Opaque relationships with government authorities
• Dealings with antisocial forces
• Money laundering
• Financing of terrorism
Prevention of Money Laundering*1
With the approval of the Board of Directors, the Group has published its Anti-Money Laundering Compliance Policy, making clear its resoluteness in standing up to money laundering.
In order to prevent abuse of financial services through-out the entire Group including at its overseas offices, the Company has established its global guidelines on AML/ CFT*2 as guidance across the Group for establishing a pre-ventive framework. The Company oversees the Group's anti-money laundering framework and provides guidance on improvements towards any issues through regular risk assessments of the anti-money laundering framework at each Group company and by checking the implementa-tion status of risk mitigation measures.
Each Group company implements risk mitigation mea-sures for those identified risks. Specifically, in addition to checks based on laws and regulations at the time of opening an account or accepting remittances (Act on Prevention of Transfer of Criminal Proceeds, Foreign Exchange and Foreign Trade Act, etc.), rigorous screen-ing is carried out including the hearings on aspects of the client and the purpose and details of the transaction. Additional hearings are also implemented depending on the degree of risk associated with money laundering.
Moreover, even after the start of a transaction, the system monitors whether there has been any unlawfulaccount activity, etc., and in the event that any transac-tion is suspected to be related to money laundering or the financing of terrorism, such activity will be properly reported to authorities in accordance with the reporting standards and procedures set forth in the internal reg-ulations, with reference to the Suspicious Transaction Reference Cases published by the competent authorities. Should the use of financial services for fraudulent pur-poses become apparent, measures are taken, such as by promptly restricting transactions as necessary, to prevent further abuse of financial services.
Furthermore, in order to enhance the above frame-work, the Group provides support through in-house train-ing on the prevention of money laundering, etc. in line with the business characteristics of each Group company and provides training materials and advice on obtaining professional qualifications, etc. By doing so, efforts are being made to improve the preventive framework against money laundering and other crime activities throughout the Group.
*1 Money Laundering is the act of hiding a source of money obtained illegally (for example, through the sale of illegal drugs) by routing it through multiple bank accounts or financial instruments in order to make it appear as if the money had been obtained through legitimate means. Financing of terrorism refers to providing terrorists with the necessary funds to perform terrorist acts, such as bombings and hijacking. The Group terms the prevention of our financial services from being used for financial crime activities, such as money laundering and the financing of terror-ism, as anti-money laundering measures.
*2 AML: Anti-Money Laundering, CFT: Combating the Financing of Terrorism
Anti-Money Laundering Compliance Policy
1. Organizational structure
The SuMi TRUST Group has established and developed a comprehensive organizational structure and its Anti-Money Laundering Compliance Program for preventing money laun-dering and terrorist financing.
2. Management commitment
Top-level executives are assigned to be in charge of overseeing the Anti-Money Laundering Compliance Program.
3. Assessing money laundering risk
The SuMi TRUST Group conducts a periodic money laundering risk assessment, and based on it, implements and enforces its Anti-Money Laundering Compliance Program.
4. Customer Due Diligence
The SuMi TRUST Group has established and maintains risk-based customer due diligence, identification, verification and know your customer (KYC) procedures.
5. Sanctions list screening
The SuMi TRUST Group fully complies with applicable sanctions laws and regulations in every jurisdiction in which it operates, including filtering customers and other persons.
6. Suspicious activity monitoring and reporting
The SuMi TRUST Group conducts transaction monitoring on an ongoing basis to detect and report suspicious transactions to the appropriate regulatory body.
7. Training
All officers and employees are required to take appropriate training regarding anti-money laundering compliance on a regular basis.
8. Record keeping
The SuMi TRUST Group maintains appropriate records for the minimum prescribed record-keeping periods.
9. Disciplinary action
All officers and employees may be subject to disciplinary action, up to and including dismissal, in case of violation of applicable laws or internal rules.
10. Monitoring and testing
The SuMi TRUST Group regularly conducts monitoring and testing including internal audits for compliance with the Anti-Money Laundering Compliance Program through a risk-based approach.
Response to Antisocial Forces*
In order to realize the Group's Management Principles and Ideal Model of "The Trust Bank," the Group has declared its resolute stance against antisocial forces in its Codes of Conduct ("Value"), taking initiatives to prevent transac-tions with antisocial forces.
Specifically, in addition to incorporating a clause to exclude the involvement of organized crime group in various products and services as a check against antiso-cial forces and as a contractual justification to cancel any transactions if they are determined to be antisocial forces after the start of any transaction, a framework has been established to prevent transactions with antisocial forces by checking with a database operated by the National Police Agency, via the Deposit Insurance Corporation of Japan, mainly for new loans for individual clients. In addi-tion, we have a framework in place to check whether the counterparty to a transaction is an antisocial force after the commencement of the transaction. In cases where the counterparty is found to be an antisocial force, we have established a framework that allows us to take measures in close coordination with external specialist organiza-tions, such as the police, for the eventual cancellation of the transaction.
Additionally, training for the prevention of transactions with antisocial forces is provided to directors, executive officers, and employees once every fiscal year to improve awareness of preventing such transactions.
*Antisocial forces refer not only to organized crime groups and their members, but also to individuals and companies related to these groups that threaten the order and security of civil life.
Prevention of Insider Trading
In order to prevent insider trading, the Group strictly man-ages and stipulates the reporting obligations, delivery and management practices for insider information that may be obtained during the execution of working duties in its Rules on Insider Information Management.
In 2018, the asset management function of SuMi TRUSTBank was integrated into Sumitomo Mitsui Trust Asset Management Co., Ltd. (SMTAM) to strengthen the asset management business, which is positioned as the Group's growth business, thereby establishing a strict information blocking system with other Group companies.
As well as having particularly strict controls and infor-mation blocking to prevent insider information from being leaked to departments that handle investments (asset management), SMTAM has established its Guidelines on Contact, etc. with Securities Companies, etc. prohibiting improper contact between our employees in charge of investing and sales persons at securities companies.
In addition, the Group has established a training frame-work for preventing insider trading in a way that is tailored to each company's situation. For example, our core sub-sidiary SuMi TRUST Bank conducted two rounds of train-ing for all employees (in addition to four rounds a year for Fiduciary Services Business), while all directors, officers, and employees submit a vow twice a year (four times a year in the Fiduciary Services Business) that includes a pledge to comply with internal company rules on prevent-ing insider trading.
Progress in the implementation of the measures to prevent recurrences of insider trading
We have implemented all the measures to prevent recur-rence of insider trading that were announced by the SuMi TRUST Group in March and June 2012.
In addition, while investment services at SuMi TRUST Bank were integrated with Sumitomo Mitsui Trust Asset Management on October 1, 2018, SuMi TRUST Bank is still working to prevent recurrent insider trading as SuMi TRUST Holdings continues to take a lead in conducting regular monitoring of how the preventive measures are being implemented and entrenched.
*Details of the violation of insider trading regulations that occurred in 2012 are described in the 2012 CSR Report.
URL:https://www.smth.jp/en/csr/report/2012/2012e_04.pdf
Initiatives to Prevent Bribery and Corruption*
In order to prevent the exchange of entertainment and gifts in violation of laws, regulations, social practices, and customs, the Group has published its Anti-Bribery and Corruption Compliance Policy with the approval of the Board of Directors, and is implementing a program against bribery and corruption under the supervision of the management team. The program is reviewed and improved through regular risk assessments on bribery and corruption, and at overseas offices where bribery and cor-ruption risks are particularly high, the Group is working to improve its system for preventing bribery and corruption, such as by building close coordination with local legal offices to allow for swift and proper responses.
In addition, to make sure we abide by anti-bribery ini-tiatives, the Group periodically conducts monitoring to
Example Initiatives in Anti-Bribery and Corruption Programs
confirm the state of implementation, and every fiscal year conducts training for directors, officers, and employees. These training sessions are aimed at raising awareness of the Group's stance on bribery and corruption, the neces-sary pre-approval procedures such as the absence of con-flicts of interest with counterparties (e.g., licensing, sub-sidies, contracts), and acceptable guidelines (e.g., when dealing with public officials who are not stakeholders of the Company). Additionally, departments that are more likely to face bribery risks, such as business management, wholesale, and investment and loan-related departments, are required to undergo additional specialized training and submit a pledge of compliance.
*The Group defines bribery and corruption as the act of offering, promising, or pro-viding entertainment, gifts of money or goods, or other benefits with the intent to improperly influence the counterparty, and the act of receiving or requesting goods or services with the intent to improperly benefit the provider.
For corporate action that could lead to bribery or corruption-including of course entertainment and gift-giving, as well as bearing expenses, making donations, or providing aid-we manage this action to require prior authorization, even if the said action is permitted under relevant laws, regu-lations or other rules
To prevent illegitimate provision of benefits through hiring or trainee acceptance, we have built mechanisms that are centrally managed by HR departments
To address the risk of funds being provided through consultants or other third parties, due diligence on the said third parties is obligatory before concluding certain kinds of contracts
Periodic monitoring and testing verify the state of implementation on an individual basis
Anti-Bribery and Corruption Compliance Policy
1. Management commitment
Top-level executives are assigned to be in charge of overseeing the Anti-Bribery and Corruption Compliance Program.
2. Assessing bribery and corruption risk
The SuMi TRUST Group conducts a periodic bribery and corrup-tion risk assessment, and based on it, implements and enforces the Anti-Bribery and Corruption Compliance Program.
3. Pre-approval before providing entertainment and gift
All officers and employees are required to obtain pre-approval before providing any form of facilities such as entertainment, gift, or donation to any governmental official or any related per-sons even where it is specifically permitted by law or regulation.
4. Conducting an appropriate due diligence
When establishing a relationship with a new third party, includ-ing an agent or consultant, or merger and acquisition targets, the SuMi TRUST Group conducts a due diligence regarding bribery and corruption risk through a risk-based approach.
5. Overseeing employment and trainee acceptance
The SuMi TRUST Group assesses the appropriateness of hiring employees and accepting trainees to avoid even the appear-ance of unlawfully offering a benefit to any governmental official or any related persons.
6. Training
All officers and employees are required to take appropriate training regarding anti-bribery and corruption compliance on a regular basis.
7. Whistle-blowing system
If a violation related to bribery or corruption is detected, all officers and employees can use a whistle-blowing system with a prohibition against any retaliation of anyone who makes a report in good faith.
8. Disciplinary action
All officers and employees may be subject to disciplinary action, up to and including dismissal, in case of violation of applicable laws or internal rules.
9. Monitoring and testing
The SuMi TRUST Group regularly conducts monitoring and testing including internal audits for compliance with the Anti-Bribery and Corruption Compliance Program through a risk-based approach.
Prevention of "Dango" Bid-Rigging and Cartels
To comply with the Antimonopoly Act, the Group has insti-tuted the Company Code of Conduct for the Antimonopoly Act in the compliance manual. This code of conduct spreads awareness among directors, officers, and employ-ees by providing them with comprehensible and relatable content, which includes specific examples using problems that could occur in the course of business at the Group.
Furthermore, at group companies we have created rules for checking up on prohibited concerted action, abuse of one's dominant position, false or exaggerated advertising and the like as a means of strict management to remain compliant with the Antimonopoly Act.
Protection of Intellectual Property Rights
The Group's compliance manual contains a policy on respecting intellectual property rights. Directors, officers, and employees are strictly prohibited from engaging in the unauthorized duplication or use of other people's copyrighted materials or the like. To further properly defend intellectual property rights, the Group writes inter-nal rules for the proper use of such rights belonging to group companies.
Management of Conformity with Legal Revisions
To respond appropriately to legal revisions or the like, the administrative departments of core subsidiary SuMi TRUST Bank lead the collection of information on these revisions, and the Compliance Department plays a central management role while building a framework for instruct-ing affected departments on their response. For group
Tax Law Compliance
companies other than SuMi TRUST Bank, SuMi TRUST Holdings shares information it collects on revised laws and regulations so that each company can also respond, thus enabling a proper response to these revisions throughout the Group.
The SuMi TRUST Group's Basic Policies on Tax Compliance
The Group recognizes that properly fulfilling tax obliga-tions is an important social responsibility.
The Group has established the basic policy on tax compliance by resolution of the Executive Committee in order to raise the tax awareness of the Group's officers and employees, appropriately manage taxation, and con-duct corporate activities while balancing the interests of all stakeholders, including clients, investors, national gov-ernments, and local communities.
Based on this policy, we comply with the tax laws, notices and guidelines of each country, tax treaties, OECD transfer pricing guidelines, BEPS*1 action plan, etc., and strive to pay appropriate taxes and prevent tax avoidance activities in violation of these laws*2.
Under the direction of the Chief Financial Officer, who is responsible for taxation, the Group's tax team and the management of the Group's domestic and overseas offices work together to carry out tax-related work in line with this basic policy.
In addition, highly important matters are reported to and resolved by the Board of Directors.
*1 BEPS: Base Erosion and Profit Shifting *2 UK tax strategyhttps://www.smth.jp/about_us/management/compliance/pdf/UK_Tax_strategy.pdf
Tax Compliance Policy
We comply with rules regarding taxes such as national tax laws, directives and tax treaties and properly fulfill our tax obligations.
Response to Tax-related Risks
The Group recognizes risks relating to taxes as an important issue from a management viewpoint. In a context where we balance the interests of various stakeholders such as clients, investors, national governments and local communities from an overall perspective, we appropriately manage tax-related risks and conduct our corporate activities.
Relationship with the Tax Authority
We build a relationship of trust with the tax authority by enhancing transparency through information disclosure and other means.
The Group documents transactions that comply with the principle of arms' length transactions between independent companies for transactions that cross borders but are between Group companies. We have put into place systems we can explain to the tax authority of each country where we operate.
Initiatives for Appropriate Tallying Operations ofVoting Rights Exercise Forms at General Meetings of Shareholders
Recognition of the Inappropriateness of
Tallying Operations of Voting Rights Exercise Forms
The SuMi TRUST Group, in its execution of operations for the tallying for the voting rights exercised at the shareholders' general meetings for each partner company that entrusts it with such operations (said operations, hereinafter, the "tallying operations"), takes receipt of voting rights that are exercised by the company shareholders in written form by postal mail or via website by smartphone devices, etc.
During the busy months of each year when there is a concen-tration of shareholders' general meetings, Japan Stockholders Data Service Company, Limited (hereinafter "JaSt"), to which the Group entrusts the tallying operations, conducts the tal-lying of a large volume of Voting Rights Exercise Forms. For this reason, in order to secure time for the tallying operations, JaSt had been coordinating with the post office so that the pre-scribed postal office tasks relating to said items would be com-pleted and such items would be delivered the day before the actual delivery date in the absence of this special arrangement, and JaSt had then commenced the tallying operations with respect thereto. In the course of this processing, JaSt received a "certificate of delivery" issued by the post office that bears the date that such items would have been delivered in the absence of this special arrangement. Based on this, JaSt had made a determination that these Voting Rights Exercise Forms arrived on the date indicated on the certificate of delivery, and it con-ducted the tallying operations on the basis of the date that was on the certificate of delivery (the above series of processing operations are hereinafter referred to as "forward processing").
As forward processing had become a long-standing prac-tice, JaSt and SuMi TRUST Bank had not doubted the appro-priateness of the handling of the tallying operations. However, upon conducting a review into the appropriateness of the forward processing implemented by JaSt in consultation with external law firms, SuMi TRUST Bank and JaSt have come to the final conclusion that the Voting Rights Exercise Forms received in written form by forward processing on the deadline for the written and electronic exercise of voting rights should have been counted as part of the tallied results, notwithstand-ing the date on the certificate of delivery, and have come to recognize the inappropriateness of the tallying operations.
Reform of Operations
Going forward, we will suspend the forward processing that has been conducted as a part of the tallying operations and will introduce a new method for tallying, as well as further strengthen our legal compliance and management systems, and promote the transition to electronic exercise of voting rights. The specifics are as follows.
(1) Introduction of a New Method for Tallying
We will work on instituting strict and smooth practices for the tallying of voting rights exercised without conducting forward processing by reforming the method for receiving Voting Rights Exercise Forms and striving to improve the capacity for processing the tallying tasks, so as not to interfere with the administration of the general meetings of shareholders of the companies that have entrusted the provision of these opera-tions to us.
(2) Further Strengthening of Legal Compliance and
Management Systems
Based on the lessons learned from this matter, the entire Group will endeavor to prevent its recurrence through the fol-lowing measures.
1) Framework for Legal Compliance, etc.
In light of the fact that the legal problems with forward processing by JaSt went undetected for many years, we will further strengthen the involvement of the Legal and Compliance divisions in reviewing the legality of rules regarding operations entrusted to Group companies and external business operators.
2) Management of External Parties Entrusted with Operations With respect to companies that are entrusted with important operations, we will conduct, with exacting detail, manage-ment of the status of business operations, in accordance with the degree of legal and other risks involved in the entrusted operations and the degree of impact on stakeholders.
3) Internal Audit System
We will place greater emphasis on the effectiveness of our legal compliance framework and enhance the effectiveness of internal audits, including audits of Group companies.
4) Fiduciary Duties
Our Group will expand and strengthen the education and guidance for employees, including Group company employ-ees, in order to inculcate thorough awareness of the fiduciary duties to clients, shareholders of clients, and other stake-holders in the value chain of the services that we provide.
5) Measures for Stock Transfer Agency Services
SuMi TRUST Bank, in collaboration with JaSt, will take further measures to strengthen the framework for the legal com-pliance, etc. of JaSt, as well as strengthen the monitoring function vis-à-vis JaSt. We will also strengthen our organiza-tional structure to proactively detect legal issues, etc. in the business processes for stock transfer agency services overall.
(3) Promotion of Transition to Electronic Exercise of
Voting Rights
Part of the background to this matter is the fact that a large number of voting rights are exercised by postal mail in the busy months when the dates of the shareholders' general meetings are concentrated, which results in a massive expansion of the tallying operations during these periods. Our Group will fur-ther step up the promotion of initiatives for the widespread use of electronic voting, which is a more accurate and speedy method, and highly convenient for shareholders of the compa-nies that entrust these operations to us.
Specifically, with the cooperation of the companies that entrust these operations to us, we will work to promote the use of electronic exercise of voting rights by expanding the range of companies that employ electronic voting, and by promoting the use of electronic voting by individual shareholders.
In light of these reforms, Our Group, as a financial group specialized in trust banking that plays a central role in corpo-rate governance and that is expected by society to steadily and reliably execute operations, reaffirms our strong recognition of our concomitant responsibilities, and we will continue to con-tribute to the sound development of the capital markets.
Risk Management and Materiality Management
Risk Appetite Framework
1. Positioning of the Risk Appetite Framework
The Risk Appetite Framework (RAF) is a group-wide cor-porate management framework consisting of the pro-cess for determining risk appetite (the type and amount of risk to be willingly taken to achieve the management plan) within the Group's risk capacity, in order to achieve the management strategies formulated by management based on the Group's social role and management princi-ples, together with the internal control system underpin-ning that process.
Outline of the Risk Appetite Framework
The Group's RAF aims primarily to strengthen profitability and enhance risk management, and promote the enhance-ment of the transparency of deliberation and determination process for the overall risk taking policy in capital allocation and profit maximization, etc. through the setting, com-munication, and oversight of risk appetite, as well as the optimization and speed-up of allocation of management resources and reinforce the monitoring system through the use of RAF as the universal language of the Group.
2. Operation of Risk Appetite
(1) Determining Risk Appetite
The Group classifies risks into two categories: (1) risk to be taken (that occurs in relation to activities that generate returns) and (2) risk to be avoided (such as conduct risk that cannot be tolerated by the Group).
Under RAF, the Group establishes a risk-taking pol-icy, which is an overriding management policy based on its Purpose, Mission, Vision, and Value, and takes into account the results of stress tests to set risk appetite indi-cators, then they are resolved by the Board of Directors. In addition, the Group sets more in-depth risk-taking policy and risk appetite indicators for each business within the scope of policy set by the Board of Directors, which will be then resolved by the Executive Committee.
The risk-taking policy and risk appetite indicators are determined in accordance with the management plan. These are reviewed at any time at least once a year or when necessary.
(2) Monitoring of Risk Appetite
In order to verify that risk taking is carried out appropri-ately based on its business model, the Group sets sepa-rate risk appetite indicators from the perspective of return, risk, and cost, and monitors them regularly. If the indicators deviate from the set levels, the Group analyzes the cause and implements countermeasures or revises the levels.
Risk Appetite Framework Operating System
(3) Risk Governance
Risk governance, which forms a part of corporate gover-nance, is a framework for identifying, measuring, manag-ing, and controlling risks, as well as ensuring appropriate risk taking, by clarifying and monitoring risk appetite.
The Group promotes the enhancement of risk gover-nance, with the aim of achieving the sound development of the Group.
SuMi TRUST Holdings strives to enhance the operation of risk appetite through discussions at the Risk Committee and the Conflicts of Interest Committee, etc. as part of its initiatives to enhance corporate governance.
Supervision
Audit Committee
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Execution
Business Risk Management Committee
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SuMi TRUST Holdings
3. Fostering a Risk Culture that Takes Root across the SuMi TRUST Group
The Group defines risk culture as a basic philosophy that prescribes the codes, attitudes, and conduct of the Group's organizations, as well as its directors, officers and employees, that flexibly carry out risk taking, risk manage-ment, and risk control based on an appropriate assess-ment of risks, guided by a high degree of self-discipline based on the fiduciary spirit.
In order to foster a risk culture that takes root acrossthe Group, we have formulated risk-taking policies for each business to clarify management strategies, and are endeavoring to have all its employees secure soundness through appropriate risk taking and develop a sustainable business model. In addition, we have formulated a Risk Appetite Statement clearly stating our RAF, which is used as a universal language in lively discussions concerning risk appetite within the Group.
Risk Management
1. Basic Policy on Risk Management
In order to ensure sound management, secure revenue through risk taking based on management strategies, and achieve sustainable growth, the Group follows a basic pol-icy of accurately assessing risk conditions and implement-ing necessary risk-related measures through a series of risk management activities, including risk identification, eval-uation, monitoring, control and mitigation, validation for advancement, and review, based on the Group's manage-ment policy and basic policy on the internal control system.
The Group's risk management framework encompasses the Risk Appetite Framework, and integrates it to function organically within the Group.
2. The Group's Risk Characteristics
Based on a fiduciary spirit, and leveraging its significant expertise and comprehensive capabilities, the Group, as a financial group specialized in trust banking, strives to cre-ate distinct value through a total solution business model
Businesses and Main Risk Characteristics of the Group
that combines its banking, asset management and admin-istration, real estate businesses and others.
The Group's businesses consist of the Retail Total Solution (TS) Services Business, the Wholesale Total Solution (TS)
*Strategic shareholdings management, etc.
Risk Definition
Risk Category
Credit Risk
Market RiskFunding Liquidity RiskOperational Risk
(Below are "risk sub-categories" within Operational Risk)
Business Processing RiskSystem RiskInformation Security RiskLegal & Compliance RiskConduct RiskHuman Resource RiskEvent RiskReputational RiskDefinition
Risk that the Group may incur losses due to a decrease or impairment of the value of assets (including off-balance sheet assets), for reasons such as deterioration of the financial condition of obligors. In this regard, "country risk" in particular refers to the risk that the Group may incur losses on credit provided overseas, due to the foreign exchange, political, or economic conditions in the countries where our clients operate.
Risk that the Group may incur losses due to fluctuations in the value of assets/liabilities (including off-balance sheet assets/liabilities), or in the earnings generated from assets/liabilities, due to fluctuations in various market risk factors, such as interest rates, foreign exchange rates, stocks, commodities, and credit spreads. In this regard, "market liquidity risk" in particular refers to the risk that the Group may incur losses due to a sit-uation in which it becomes impossible to conduct transactions in the market, or becomes obligatory to trade at prices that are significantly more disadvantageous than usual, due to market turmoil.
Risk that the Group may incur losses in a situation where it becomes impossible to secure necessary funds, or becomes obligatory to raise funds at interest rates significantly higher than usual.
Risk that may adversely affect the Group, clients, markets, financial infrastructure, society, or the work environment due to inadequate or failed business processes, the activities of executives or employees, computer systems, or due to external events.
Risk that the Group may incur losses due to inappropriate business procedures arising from executives or employees neglecting to engage in proper business activities, or other incidents such as accidents or fraud.
Risk that the Group may incur losses due to reasons such as computer system failures, malfunctions, and defects, as well as the risk that the Group may incur losses due to unauthorized computer usage.
Risk that the Group may incur losses due to the improper management or maintenance of information assets. This includes information leaks, information errors, and misuse of information, as well as an inability to use the information system.
Risk that the Group may incur losses due to uncertainty regarding the legal aspects of transactions, or due to insufficient compliance with laws, regulations, etc.
Risk that may adversely affect the Group, clients, markets, financial infrastructure, society, or the work environment due to the actions of Group companies, executives, or employees that are unprofessional or do not meet the expectations and trust of stakeholders*.
*Appropriate service level set by the Group based on an understanding of reasonable expectations
Risk that the Group may incur losses due to personnel and labor management issues, such as unequal or unfair management of personnel, and harassment.
Risk that the Group may incur losses due to external events that impair business, such as natural disasters, crimes such as terrorism, damage to public infrastructure that prevents its functioning, and the spread of infectious diseases, or due to the inappropriate use or management of tangi-ble assets.
Risk that the Group may incur losses as a result of a deterioration of the reputation of SuMi TRUST Holdings or its subsidiaries, due to reasons such as mass media reports, rumors, or speculation.
Services Business, the Wholesale Asset Management (AM) Business, the Stock Transfer Agency Services Business, the Real Estate Business, the Fiduciary Services Business, the Global Markets Business, the Private Banking Business, and the Asset Formation Advisory (Work Place) Business, etc.
The Group faces various risks, including credit risk, mar-ket risk, funding liquidity risk, and operational risk, which vary depending on the business characteristics of each of the Group's businesses.
As a basis for improving management of risks related to trust business operations, we have established Group-wide Trust Business Guidelines to provide information about basic matters that warrant caution. SuMi TRUST Bank primarily manages these risks in the operational risk category, particularly in terms of its duty of due care as a prudent manager, duty of loyalty, and duty to segregate property as a trustee.
Reporting is regularly performed regarding whether the overall risk of the Group, combining the risks of each business, is within the limits of risk capacity (soundness and liquidity) that have been determined by the Board of Directors.
3. Risk Governance System
For the group-wide risk governance system, the Group has developed a Three Lines of Defense system consisting of risk management by individual businesses (first line of defense), risk management by the Risk Management Department and individual risk management-related departments (second line of defense), and validation by the Internal Audit Department (third line of defense).
Risk Governance System
General Meeting of Shareholders
(1) First Line of Defense
Each Group business identifies and gains an understand-ing of the risk characteristics involved in carrying out its own business, based on knowledge of the services and products in that business.
Each business engages in risk taking within the estab-lished range of risk appetite, and, when a risk materializes, promptly implements risk control at the on-site level.
(2) Second Line of Defense
The Risk Management Department performs overall risk management, identifies and evaluates group-wide risks, creates a risk management process, and sets risk limits in accordance with the group-wide risk management policy determined by the Board of Directors. In addition, it for-
mulates group-wide recovery strategies, in advance, to prepare for cases when risks materialize.
The Risk Management Department and risk management- related departments act as a restraint function for the risk taking of the first line of defense, and supervise and provide guidance regarding the risk governance system.
The Risk Management Department reports on the sta-tus of risk management to the Executive Committee and the Board of Directors.
(3) Third Line of Defense
The Internal Audit Department verifies the effectiveness and appropriateness of the group-wide risk governance system and processes from an independent standpoint.
(4) Executive Committee
The Executive Committee is composed of representative executive officers and executive officers designated by the President. It makes decisions on matters concerning risk management and undertakes preliminary discussions regarding matters to be resolved by and reported to the Board of Directors.
(5) Board of Directors
The Board of Directors is composed of all of the directors. It decides on the Group's management policy and stra-tegic goals for risk taking, formulates a risk management policy, etc. that reflects these strategic goals based on a solid understanding of the location and nature of risks, and develops an appropriate risk governance system and supervises its implementation. The Board of Directors has voluntarily established the Risk Committee and the Conflicts of Interest Committee, as advisory bodies,
based on the business strategies and risk characteristics of the Group.
Risk Committee
The Risk Committee receives requests for consultation from the Board of Directors on matters concerning the business circumstances surrounding the Group and the effectiveness of its risk management, etc., reviews their appropriateness, and reports its findings.
Conflicts of Interest Committee
The Conflicts of Interest Committee receives requests for consultation from the Board of Directors on matters con-cerning the Group's fiduciary duties and conflict of inter-est management, which are the foundation on which the Group seeks to become the "Best Partner" of its clients based on a fiduciary spirit, reviews their appropriateness, and reports its findings.
4. Risk Management Process
In the Group, the Risk Management Department and individual risk management-related departments act as the second line of defense, performing risk management using the following procedure. This risk management process, along with its associated systems, undergoes regular auditing by the Internal Audit Department, which acts as the third line of defense.
Risk Identification
The risks faced by the Group are comprehensively identified, while ensuring the comprehensiveness of the Group's opera-tions, and the risks to be managed are identified based on the scale and characteristics of the identified risks. Of note, risks that are particularly important are managed as material risks.
Risk Evaluation
The risks identified as requiring management undergo analysis, assessment, and measurement in a manner appropriate for the business scale, characteristics, and risk profiles. We periodically evaluate material risks in terms of frequency of occurrence, degree of impact, and severity to determine whether they can be classified as top risks or emerging risks. The former are risks that have the potential to significantly affect the Group's capac-ity to execute business and achieve earnings targets within one year, while the latter are risks that have the potential to have a significant effect over the medium to long term.
When risks cannot be quantified, their impact is assessed to the greatest extent possible, and they are managed through measures such as implementing preventive mea-sures based on the nature of the risks.
Risk Monitoring
Risk conditions are monitored with appropriate frequency, given the conditions of the Group's internal environment (risk profiles, allocated capital usage status, etc.) and exter-nal environment (economy, markets, etc.). Recommendations, guidance, and advice are given to each of the Group's busi-nesses based on the risk conditions. Monitoring contents are
reported and submitted to the Board of Directors, the Executive Committee, and other bodies regularly or as needed.
Risk Control and Mitigation
If any incidents that could have a significant impact on the soundness of management occur, such as the risk amounts exceeding the risk limits, or the existence of concerns that it might do so, appropriate reports are presented to the Board of Directors, the Executive Committee, and other bodies, and the necessary countermeasures are implemented.
Risk predictor management for top risks, etc.
Risk appetite indicators are defined for risks resulting from internal factors, based on the features of the Group's busi-ness model and risk characteristics, and these management indicators are monitored. Regarding risks resulting from ex-ternal factors, the top risks are selected, and risk predictors are monitored. Countermeasures are implemented based on the monitoring results for both types of risks. The top risks at present include "the global spread of COVID-19," "falling prices for strategic shareholdings, etc." "concentration of credit to large obligors in the credit portfolio," and "cyber attacks." Along with countermeasures, these risks are report-ed to the Board of Directors and the Executive Committee.
Emerging risks at present include "climate change," "in-novation," and "Japan's declining birthrate and aging popu-lation." We are analyzing these risks and considering neces-sary countermeasures.
For more information on climate change risks, please refer to page 11 of the 2020/2021 TCFD Report.
5. Enterprise Risk Management
(1) Enterprise Risk Management System
We manage risks by comprehensively grasping the risks faced by the Group, which are evaluated on an individual risk category basis, and comparing and contrasting them against our corporate strength (enterprise risk management).
Among the risks we manage through our enterprise risk management, we combine the risk values for risks that can be quantitatively measured using a single standard, such as VaR, and compare the combined value against our cor-porate strength (capital position), thereby managing risks (integrated risk management).
(2) Capital Allocation Operations
For the purpose of the Group's capital allocation oper-ations, SuMi TRUST Holdings allocates capital to each business, including the Group companies, based on each risk category (credit risk, market risk, and operational risk) in consideration of the external environment, risk-return performance status, scenario analysis, and the results of assessments of capital adequacy levels. The capital allo-cation plan is subject to the approval of the Board of Directors. Capital allocation levels are determined based on the Group's risk appetite.
Each business is operated within both the allocated amount of risk capital and its risk appetite. The Risk Management Department measures the risk amount on a monthly basis, and reports regularly on the risk condi-tions, compared to the allocated capital and risk appetite, to the Board of Directors, and others.
Capital Allocation Scheme
(3) Stress Tests and Assessment of Capital Adequacy Level The Risk Management Department performs three types of stress tests (hypothetical scenario stress testing, histori-cal scenario stress testing, and examination of probability of occurrence) each time a capital allocation plan is for-mulated or reviewed, with the aim of ensuring capital ade-quacy from the standpoint of depositor protection. Based on the results of these stress tests, it assesses the level of capital adequacy, and reports to the Board of Directors, and others.
Stress Tests with Hypothetical Scenarios
We assess capital adequacy level by formulating plausible stress scenarios that are sufficiently strong and realistic to estimate capital adequacy ratio during times of stress.
Stress Tests with Historical Scenarios
We also assess capital adequacy level by using parame-ters from previous times of stress to estimate capital ade-quacy ratio during times of stress.
Likelihood Validation
We further assess capital adequacy level by calculating the amount of risk (with a confidence interval of 99.9%) to compare those figures with total capital under capital adequacy regulations.
Stress Test Framework
1. Formulate scenarios | Formulate multiple scenarios, including future "hypothetical scenarios" and "historical scenarios" based on past events |
2. Deliberate on and select scenarios | A committee of directors and officers deliberates on and selects scenarios |
3. Assess monetary impact | Calculate the monetary amount of the impact when a selected scenario occurs, then assess capital adequacy level |
4. Report to the Board of Directors, etc. | Receive a report on the assessment results to use for formulating management plan |
6. Managing Risk in Each Risk Category
(1) Managing Credit Risk
1) Definition of Credit Risk
Credit risk is "risk that the Group incurs losses due to the value of an asset (including off-balance sheet assets) decreasing or impairing owing to such reasons as deteri-oration in the financial condition of an obligor." Of this, country risk in particular means "risk that the Group incurs losses on credit provided to business partners overseas, due to foreign exchange, political, and economic condi-tions of the country of the obligor."
2) Characteristics of Credit Risk
Credit risk is the most fundamental risk related to "credit creation," the primary function of a finance. As the Group manages bank operations, it is also an important risk affecting the Group.
The major credit risk affecting the Group is the risk of sizable bad debt (or the provision of reserves) due to a default or deteriorated credit for a large obligor. To prop-erly control for "concentrated credit risk" arising as the result of concentrated credit at a certain company or com-pany group and "the risk of default chain" reaction arising as the result of concentrated credit to a region or indus-try, the Group sets credit guideline amounts according to borrower ratings and country ratings and conducts moni-toring of loan balances and risk amounts in each industry.
3) Credit Risk Management Policy
The Group's basic policy on credit risk management consists of two parts: "strict management of individual loans" and "a decentralized credit portfolio." The first is a meticulous process of managing individual loans by screening and studying deals, self-assessment, internally assigned credit ratings and so forth. The latter involves efforts to mitigate concentrated risk by managing the decentralization of the overall credit portfolio, including
Credit Risk Management System
Inspect state of management
large accounts, by industry and country. In addition, we measure credit risk amounts to quantitatively understand the portfolio's potential for loss.
Furthermore, to set "appropriate risk-return," we con-figure earnings levels that include such factors as antici-pated losses and expenses for each credit rating, and we strive to ensure a certain profit margin (i.e. spread) pro-portionate to the risk by reflecting the terms of each deal.
4) Credit Risk Management System
The Bank supervises group-wide credit risk manage-ment while endeavoring to build structures for each group company. SuMi TRUST Bank has built a structure for managing consolidated and global based risk while managing credit risk.
5) Credit Risk Management Method
The Group takes two mutually complementary approaches to properly manage credit risk in our efforts to construct and sustain a sound portfolio. The first is "management of individual loans," which is done through inspection of new loans and management during the term of a loan. The other approach is "credit portfolio management," by which we analyze and assess factors such as the state of concentrated risk to particular industries, regions, or com-pany groups via statistical techniques to gain an under-standing of all loans as a single portfolio, then manage from a macro perspective.
(2) Managing Market Risk 1) Definition of Market Risk
Market risk is "risk that the Group incurs losses due to fluc-tuations in the value of assets/liabilities (including off-bal-ance sheet assets/liabilities), or in the earnings generated from assets/liabilities, due to fluctuations in various market risk factors, such as interest rates, foreign exchange rates, stocks, commodities, and credit spreads." Of this, market liquidity risk in particular means "risk that the Group incurs losses caused in a situation where it becomes impossible to conduct transactions in the market or becomes oblig-atory to trade at prices much more disadvantageous than usual due to market turmoil, etc." In addition, there is interest rate risk in the banking book (IRRBB), which is risk of harm to a bank's capital or profit/loss, either in the present or future, due to interest rates fluctuating to the disadvantage of banking book positions.
2) Characteristics of Market Risk
SuMi TRUST Bank engages in banking operations to ensure earnings through interest rate risk control on assets and lia-
bilities, while also engaging in trading operations to ensure earnings from transactions such as short-term buying and selling to leverage interest rates and foreign exchange rates. We manage market risk by using VaR and other methods in both types of operations. In trading, we seek to secure steady earnings through market-making operations in foreign exchange rates, derivatives and the like.
The major market risk affecting the Group is the risk of losses from price declines in held assets such as strategic shareholdings. The basic policy for the strategic share-holdings held by SuMi TRUST Bank is to reduce balances while we endeavor to properly control risks through hedg-ing and other means.
Additionally, IRRBB may arise in banking book positions due to a maturity mismatch (gap risk), interest rate mis-match (basis risk), optionality accompanying interest rate changes (optionality risk) or the like. Interest rate risks at SuMi TRUST Holdings and SuMi TRUST Bank are low.
3) Market Risk Management Policy
To manage market risk, we seek to guarantee sound oper-ations by properly controlling the risk, while we work to develop more sophisticated management systems, thus ensuring proper earnings in line with the Group's strategic targets as well as the scale and characteristics of our busi-ness. Furthermore, when controlling for interest rate risk, we hedge through interest rate swaps and other means, while applying hedge accounting to transactions that ful-fill the requirements for doing so.
4) Market Risk Management System
The Bank supervises group-wide market and funding liquidity risk management while endeavoring to build struc-tures for each group company. SuMi TRUST Bank has built a structure for managing consolidated and global based risk while managing market and funding liquidity risk.
Market Risk and Funding Liquidity Risk Management System
Inspect state of management
5) Market Risk Management Method
The Bank formulates capital allocation plans to allocate capital to group companies within the amount of capital available. SuMi TRUST Bank sets limits based on allocated capital and also sets loss limits, thereby managing to keep amounts of risk and losses within a certain range.
In addition, for interest rate risks we set alarm points to monitor changes in the economic value of positions.
(3) Managing Funding Liquidity Risk
1) Definition of Funding Liquidity Risk
Funding liquidity risk is "risk that the Group incurs losses in a situation where it becomes impossible to secure nec-essary funds or becomes obligatory to raise funds at inter-est rates significantly higher than usual."
2) Characteristics of Funding Liquidity Risk
The major funding liquidity risk affecting the Group is an intensified risk pertaining to the procurement of foreign currency if credit ratings for Japan or for Japan's financial institutions are lowered. SuMi TRUST Bank formulates medium- to long-term procurement policies tailored to the characteristics of each currency, such as market liquid-ity and the state of assets and liabilities, to manage sta-ble foreign currency liquidity that can withstand market tumult and financial outflows like those that have occurred in the past.
3) Funding Liquidity Risk Management Policy
In the course of managing funding liquidity risk, our basic policy is to execute proper funding liquidity risk manage-ment based on two principles, as we have a thorough understanding that, when a risk manifests itself, the threat could directly ruin the Group's business. One of the two principles is "to seek a balance between procurement costs and stability" by various means of procurement. The other is "to prepare for emergencies" by examining procurement capabilities in a stressed environment and reviewing countermeasures in advance.
We are continuously enhancing our funding liquidity risk management system by adapting to Basel III and other international standards pertaining to bank capital and liquidity.
4) Funding Liquidity Risk Management System
Our funding liquidity risk management system operates under the same framework as the "market risk manage-ment system."
5) Funding Liquidity Risk Management Method
Limits on funding liquidity mismatches for the entire group, individual offices, and each currency act as indi-cators for funding liquidity risk management. We pre-de-fine our response to when a limit is reached and conduct daily monitoring on the state of compliance. In addition, we perform stress tests for multiple scenarios, including dramatic changes in the market environment and changes in the procurement environment specific to the Group, so that we understand the amount of funds we must procure when a funding liquidity risk arises.
itably accompany business operations. Therefore, our basic policy is to properly manage risk according to the scale and nature of the operations and particular risk, thus working to ensure that operations are sound and proper.
The Group is further upgrading our operational risk management system in preparation for the improvement of our operations and the products and services we offer, as well as the manifestation of new risks accompanying changes in society and the business environment, such as advances in information technology and diversifying cli-ent needs.
(4) Operational Risk Management 1) Definition of Operational Risk
Operational risk is "risk that the Group incurs losses resulting from an inadequate operational process, action of a director, officer, or employee, or system, or from an external event." The Group manages the risk by separat-ing it into the following categories: business processing risk, system risk, information security risk, legal/compli-ance risk, conduct risk, human resource risk, event risk, and reputational risk.
4) Operational Risk Management System
The Group works hard to build systems for operational risk management at group companies in line with the basic policy on group-wide operational risk management.
SuMi TRUST Bank has created a risk management department for operational risk in general, as well as risk management units for each subcategory of operational risk. The general risk management department collabo-rates with each operational risk management unit to form and upgrade our operational risk management system.
2) Characteristics of Operational Risk
One of the major operational risks to the Group is impaired business operations caused by a cyberattack (ransomware or a DDoS attack*), followed by the attackers stealing and publicly releasing client information or other data belong-ing to the Group. By ensuring the safety of information systems, the Group takes countermeasures to prevent unauthorized access or use via cyberattacks.
*DDoS attack: Refers to a distributed denial-of-service attack. This is a method of forcing a service to cease functioning by using multiple machines to impose a massive computing load on targeted computers.
Additionally, due to inadequate measures against money laundering and terrorist financing, there are risks which include administrative penalties such as business suspension orders, payments of very large fines, and a tarnishing of the Group's reputation. The Group pro-motes improvements to measures for eliminating money laundering, etc. based on a gap analysis with the regula-tions (including overseas regulations) and a clarification of the issues involved, limits and controls risks using a risk-based approach.
3) Operational Risk Management Policy
When building the operational risk management system, the Group recognizes that some operational risk will inev-
Operational Risk Management System
Inspect state of management
5) Operational Risk Management Method
The Group works to curtail operational risk by managing operational risk in all our business operations, including those of contractors, and properly assessing and iden-tifying risk in both qualitative and quantitative terms, while also taking preventive measures against risks and formulating response, causal analysis procedures, and measures to prevent recurrence in the event a risk does manifest itself.
7. Crisis Management and Business Continuity Plan (BCP) in Disasters
(1) The Group's Initiatives
SuMi TRUST Holdings and SuMi TRUST Bank have devel-oped contingency plans in order to quickly implement emergency response measures in the event of emergen-cies, such as natural disasters, computer system break-downs and outbreaks of new infectious diseases.
Moreover, regarding important business operations, such as financial settlement, SuMi TRUST Holdings and SuMi TRUST Bank have developed systems to continue busi-ness, including BCPs (business continuity plans) and backup offices. In order to ensure the effectiveness of such systems, they periodically conduct exercises and revise BCPs.
When the crisis is serious and its impact is extensive, causing serious disruptions to the normal business oper-ations of SuMi TRUST Bank and the Group and making it necessary to urgently make comprehensive and high-level management judgment, the Group will establish an emergency response headquarters as a company-wide response organization and will quickly implement emer-gency response measures.
In particular, in preparation for the possible occurrence of a major earthquake, SuMi TRUST Bank, which has branches across Japan, periodically conducts exercises inorder to make a response that gives consideration to the safety of clients and employees and to business continuity and ensure the effectiveness of the response.
As for company-wide response, in order to enhance the effectiveness of the functions of the emergency response headquarters, the Group is strengthening systems for information gathering and information coordination, in addition to periodically conducting exercises, and it is also promoting the enhancement of emergency response systems in the Osaka area on the assumption of a disaster in the Tokyo area.
Meanwhile, branches are striving to strengthen response capability through periodic exercises and are promoting disaster countermeasures in light of individual branches' specific circumstances such as the location condition and the status of principal facilities. Branches are also develop-ing a system for mutual support among them.
(2) Response to Threat of Cyberattack
SuMi TRUST Holdings has implemented various measures in order to protect its clients' precious assets from the ever-increasing threat of cyberattack in Japan and over-seas (see page 44 for details).
Code of Conduct for Executives and Employees
1. Executives and employees must fully recognize and understand the importance of crisis management and prepare for emergencies. At the same time, they must strive to develop their knowledge in normal times so that they can quickly and appropriately respond in the event of an emergency.
2. In the event of an emergency, executives and employees must make judgments and take actions based on the following principles:
(1) Securing the Safety of Life
In the event of an emergency, the top priority must be placed on securing the safety of customers, executives and employees, and their families. Executives and employees must also always give pri-ority to humanitarian considerations when taking various emergency response measures.
(2) Protection of Sumitomo Mitsui Trust Bank's Corporate Assets By taking disaster prevention and mitigation measures in prepa-ration for the possible occurrence of emergencies, executives and employees must protect Sumitomo Mitsui Trust Bank's corporate assets in the event of an emergency. They must also do their utmost to take risk mitigation measures to guard against adverse effects that may disrupt business activities.
(3) Business Continuity and Early Restoration
In the event of an emergency, executives and employees must strive to quickly restore and continue priority business operations.
(4) Cooperation with Local Communities
In the event of an emergency, executives and employees must strive to cooperate with local communities in rescue and other local activities.
8. Examination System in Introducing New Products and New Operations
When introducing new products or new operations, it is necessary to develop various systems in order to continue offering products and services, including determining in advance whether there are any inherent risks and identi-fying their type, evaluating and managing such risks, pro-viding explanatory materials to clients, and determining a way to explain. To that end, we have in place a system for examining the introduction of new products and new operations. In the product examination process, multiple departments carry out verification from various angles, with emphasis on introducing products and operations that will earn the trust of clients. We also conduct verifi-cation through regular monitoring after new products or new operations have been introduced.
Product Examination Process
Systems Maintenance and Combatting Cyber Attacks
SuMi Trust Holdings has set systems maintenance and combatting cyber attacks as one of its management foundation materialities, and considers it an important management issue. Information assets are one of the most important man-agement resources and pose risks that may undermine the foundation of corporate management. The Group, therefore, appropriately maintains and manages all information assets it holds.
Information Security Responsibilities
SuMi TRUST Holdings clearly states, in the Information Security Management Rules under the Risk Management Rules on which directors have the authority to amend and approve, that the head of overall information security risk management is the officer in charge of the IT & Business Process Planning Department, and that the supervis-ing department conducting overall information security risk management is the IT & Business Process Planning Department.
Response to Threat of Cyberattack
The threat of cyberattacks and the damage they can inflict are growing both in Japan and overseas. Under such cir-cumstances, SuMi TRUST Holdings is engaged in the fol-lowing activities to protect the precious assets of its cli-ents from the attacks.
Improvement of Internal Response Systems in Preparation for Cyberattacks
The Group has formulated its Cyber Security Management Declaration against cyberattacks, working to strengthen security measures led by management.
To respond to cyberattacks, SuMi TRUST Holdings monitors computer systems of SuMi TRUST Bank around the clock. In addition, SuMi TRUST Holdings has estab-lished SuMiTRUST-CSIRT as an internal organization for gathering information, conducting analysis, and imple-menting measures relating to cyberattacks, and coordi-nates with outside expert organizations to strengthen its management system.
*For details of the Cyber Security Management Declaration please see:https://www.smth.jp/en/about_us/management/risk/pdf/CSMD.pdf
Enhancement of Internet Banking Transaction Security In terms of internet banking, SuMi TRUST Bank offers "Rapport," a type of security software specifically for internet banking, free of charge to help shield clients' pre-cious deposits and other assets from fraudulent transac-tions. Furthermore, the Bank has introduced a telephone authentication service*1. It is strongly recommended that all internet banking clients register for telephone authen-tication in order to prevent any unauthorized payments.
In addition, to combat DDoS attacks*2 in the internet banking service, the Bank has introduced an attack mit-igation service designed to handle large-scale attacks, thereby reducing the risk of service interruptions caused by DDoS attacks.
SuMi TRUST Holdings will continue to keep abreast of other companies' moves and new technologies and imple-ment thoroughgoing security measures so that clients' transactions remain safe. The measures include the early detection and prevention of unauthorized remittances.
*1 An authentication service using a client's mobile phone, smart phone, or home phone number in addition to the Sumitomo Mitsui Trust Direct card's confirmation number when making first transfer to a new account.
*2 A Distributed Denial of Service (DDoS) attack is a type of cyber attack that causes system disruption through malicious, high-volume communication traffic.
Risk Assessment
For the Group's overall systems, self-evaluations are car-ried out every year using the System Risk Evaluation Table of the System Risk Management Guidelines established in line with the Center for Financial Industry Information Systems' (FISC) security measures, and the results are reported to the officer in charge. Furthermore, with regard to cyber security, we conduct regular assessments in Japan and overseas.
Security Training
The Group conducts the following training every year to train management, disseminate knowledge of infor-mation security risk management, strengthen the cyber security response department, and raise awareness within the Group.
Cyber security training for management (once a year)
Information security training, including data privacy management (once every six months)
Countermeasures training on e-mail cyberattacks (targeted attacks) (twice a year)
Response to suspicious e-mails that simulate targeted e-mail attacks on random people (monthly)
Participation in external exercises involving cyber attack scenarios (twice a year)
*Training is available not only for full-time employees but also for some employees of outsourcing contractors.
Consideration for Borrowers' Environmental and Social Impact
1. Initiatives for Loans (Banking Business)
Sector Exposure
Outstanding loans account for approximately 1/2 of the Group's total assets of ¥59.8 trillion. Of the total loan balance, about 33% is for individuals, centered on home mortgages, and the remaining 67% is for corporations. The balance of loans for corporations is divided into corporate and product-related loans, with the corporate loan balance accounting for nearly 1/2 of the total loan balance.
Breakdown of Loan Balance
Loans to IndividualsCorporate Loans for CorporationsProduct-related Loans for Corporations
The table on the right shows the loan balance of approximately ¥30 trillion categorized by indus-try. The figure below shows expo-sure by sector, with approximately ¥15 trillion in loan balance for cor-porations at domestic branches as the denominator. This excludes the loan balance in the Overseas Branches category and loan balance for individuals which is included in the Other category. The Real Estate sector accounts for the largest share, followed by Manufacturing, and Finance and Insurance. The top three sectors account for approxi-
Loans by Industry
(Unit: trillion yen)
mately 60% of the total. Second tier sectors include Electricity & Gas, Transportation & Postal Services, and Wholesale & Retail, with a combined share of about 24%.
(Note) Share ratio calculated based on the assumption that the balance of loans for corporations at domestic branches is 100%.
Sector exposure is managed by the Wholesale Business Planning Department, and the credit portfolio is reported quarterly to the Credit Risk Committee, the highest deci-sion-making body for investments and loans. From the viewpoint of environmental and social considerations in investments and loans, the Sustainability Management Department fulfills the check function for projects that have a risk of violating SuMi TRUST Bank's policy on investments and loans. In April 2020, the company estab-lished the Sustainable Business Promotion Office under the Wholesale Business Planning Department, and began consolidating ESG information for the Wholesale Total Solution Services Business and collaborating with the Sustainability Management Department.
In addition, with regard to climate change, members of the Wholesale Business Planning Department are also participating in the Banking WG of the TCFD Project Team, and are involved in conducting scenario analysis for high-risk sectors. The following figure outlines the transi-tion risks, physical risks, and business opportunities for the sectors belong to the four non-financial groups (energy, transportation, materials and buildings, and agriculture, food, and forest products) that are considered high-risk sectors in the TCFD recommendations.
Heat Map
Sector
Petroleum, gas, and coal
Electric power
Marine transportation
Railway transportation
Automotive and parts
Property management and development*
Chemicals
Paper and forest products
Personal mortgage loans
Transition risk
HighHighMedium
LowMediumLowMedium
Medium
Low
*Personal mortgage loans not included
Physical risk
Opportu- Exposure nity
MediumMediumMediumMediumMediumHighMediumMediumHigh
Low
Low
MediumMediumMediumMediumHighMediumHighMediumMediumMedium
High
Medium
Low
High
Medium
High
Taking into account the results of the qualitative assessment and SuMi TRUST Bank's exposure, we con-ducted a transition risk scenario analysis for the elec-tric utilities sector and a physical risk scenario analysis for individual home mortgages in FY2019. Similarly, in FY2020, we have established priorities based on the level of importance to SuMi TRUST Bank, and are carrying out scenario analysis accordingly.
*Please refer to the 2020/2021 TCFD Report for details.
S u m i t o m o M i t s u i Tr u s t H o l d i n g s , I n c .
Sustainability Report 2020/2021
Policies for Specific Sectors
SuMi TRUST Bank has established policies for specific sectors that promote businesses with a large impact on society, and prohibits or restricts investments and loans to companies and projects that have a negative impacton society, while sharing awareness of environmental and social issues and contributing to building a sustainable society through engagement with loan clients.
S u m i t o m o M i t s u i Tr u s t H o l d i n g s , I n c . Sustainability Report 2020/2021
1. Prohibited Transactions
• Transactions that are considered immoral
• Transactions that involve anti-social forces
• Transactions where the use of funds is speculative
• Transactions that involve cluster munitions manufacturers as well as credit transactions with companies that have material involvement in the manufacturing process through lending and other activities with cluster munitions manufacturers.
2. Transactions Warranting Special Attention
• Coal-fired power generation (recently revised)
SuMi TRUST Bank, in principle, will not engage in new projects for the construction of coal-fired power plants.
• Weapons manufacturing
SuMi TRUST Bank will avoid lending and other activities where funds will be used for manufacturing weapons of mass destruction such as nuclear weapons, chemical weapons, biological weapons, or for manufacturing inhumane weapons such as antipersonnel landmines.
• Forestry
The rapidly developing global deforestation is creating various problems such as reduction in biodiversity, decline in the stability of ecosystems, lower watershed protection, lower fixation of carbon dioxide and other items. SuMi TRUST Bank engages with timber manufacturers and manufacturers using timbers as raw materials only after careful consideration such as checking their international forest certification status*1 as well as fully taking into account whether or not there are existing problems with original inhabitants and local communities.
*1 FMC (Forest Management Certification) issued by FSC (the Forest Stewardship Council) for forestry management and forestry business operations; CoC (Chain of
Custody Certification) for processing and distribution management of certified forest products, and others.
• Palm oil
Palm oil is derived from "oil palms" grown on plantations. While palm oil demand is rapidly growing owing to its conve-nience and rising preference for wholesome foods, environmentally destructive developments are the main causes for the devastation of tropical rainforests and the decline in biodiversity. SuMi TRUST Bank engages with producers of palm oil and manufacturers using palm oil as a raw material only after careful consideration such as checking their international/ local sustainable palm oil certification status*2 as well as fully taking into account whether or not there are existing prob-lems with original inhabitants and local communities.
*2 RSPO (Roundtable on Sustainable Palm Oil) and others that aim to observe NDPE (No-deforestation, No-peat and No-exploitation) and the preservation of HCS (High
Carbon Stock) forests
3. Review of Sector Policies
SuMi TRUST Bank regularly reviews the suitability of established sector policies and the status of how transactions are being addressed at Sustainability Promotion Committee in our Executive Committee, etc., to reconsider the policies as well as make improvements to our operations as necessary.
4. Education and Training
As a member of a responsible trust bank group, to ensure that SuMi TRUST Bank's directors and employees deepen their understanding of ways to reduce environmental impact, policies for human rights, and sector policies, the Bank continually conducts educational training. The company also spares no effort to ensure that directors and employees comply with all relevant regulations and procedures.
5. Communication with Stakeholders
SuMi TRUST Bank continues to engage in dialogues and collaborations with various stakeholders on themes that are rele-vant to the sector policies that it has established. The Bank trusts that dialogues and collaborations with these stakeholders will prove useful when considering reviews to improve the sector policies to stay in line with the changing social environ-ment and to continue improving their effectiveness.
Project Finance Initiatives
SuMi TRUST Bank is a signatory to the Equator Principles. These international guidelines for private-sector financial insti-tutions in approving loans for project finance etc. are to ensure project implementers give sufficient consideration to impacts on the natural environment and regional communities.
In the decision-making process for lending, banks review the environmental and social risks of projects, the country where projects are located, and impacts on the environ-ment and society according to sector in arriving at a com-prehensive risk assessment.
Systems and Processes for Evaluating Environmental and Social Considerations
The Equator Principles
The Equator Principles are standards that enable private-sector financial institutions approving loans for a larges-cale project to confirm the project pays sufficient care to impacts on the natural environment and regional commu-nities. Regardless of the country where the project is sited or industry, the Principles apply to project finance, project-related corporate loans (PRCL), and bridge loans that are intended to be re-financed by a project finance or PRCL.
The Equator Principles are based on guidelines and stan-dards concerning environmental and social risk manage-ment established by International Finance Corporation, a member of the World Bank Group. These standards and guidelines span many fields from implementation pro-cesses for assessing environmental and social risks and/ or impacts, pollution prevention, and consideration for regional communities to environmental protections.
The Equator Principles Association Annual Meeting in
Application processes: Following internal policies based on procedures for evaluating social and environmental considerations, the Equator Principles Department carries out assessments of environmental and social impacts relating to individual projects.
Implementing environmental and social impact reviews: Reviews of the environmental and social impacts of a project proposed by developerstake into account its industry, the country where it is sited, and whether it meets the standards called for by the Equator Principles, and from there, a comprehensive risk is judged.
Monitoring compliance: Compliance with important items concerning environmental and social impacts have been reflected into loan agree-ments, and compliance with these is regularly confirmed through such methods as reports on project compliance status on these fronts. Company training programs: Regular training sessions are provided for employees in departments and sections relating to sales, assessment, and screening to foster a thorough understanding of internal opera-tions supporting environmental and social impact reviews and raise their awareness about related concepts.
November 2019 adopted EP4, the fourth version of the Equator Principles. Other than stronger consideration of indigenous peoples in developed countries and partial expansion of applicable transactions to include refinancing and the like, EP4 reinforced action on climate change by adding to the due diligence items. The added items were implementation of physical risk analysis in cases likely to cause substantial or greater impact, and, for projects with annual greenhouse gas emissions in excess of 100,000t-CO2, the implementation of transition risk analysis in TCFD in addition to consideration of alternative proposals.
As of December 2020, 111 banks (including export credit agencies) from around the world have signed the Equator Principles. Signatories require project propo-nents to comply with the Equator Principles. The signa-tories can refrain from providing financing if requirements are not met, particularly in the case of large-scale projects in developing countries.
Types of Financial Instruments and Other Criteria Including Financing Size for the Application of the Equator Principles
*1 Project finance advisory services
Application criteria including financing size
All projects with total project capital costs equivalent to USD 10 million or more Same as the above
If all four of the following criteria are met:
1. The majority of the borrowing amount is intended for a single project in which the borrower has effective control (either direct or indirect) of the project;
2. The total borrowing amount is equivalent to USD 100 million or more;
3. The commitment amounts (at syndication or prior to sell-down) of the individual signatories are equivalent to USD 50 million or more; and
4. The loan term is two years or more.
Bridge loans with a loan term of less than two years that are intended to be re-financed by a project finance meeting the above criteria or PRCL
*2 PRCL includes the buyer's credit-type export financing but does not include the supplier's credit-type export financing. Furthermore, it does not include asset financing, M&A financing, hedging transactions, leases, L/C transactions, general funds and general working capital to maintain operations of a company.
S u m i t o m o M i t s u i Tr u s t H o l d i n g s , I n c .
Sustainability Report 2020/2021
Implementing Environmental and Social Impact Reviews
In our processes for assessing project finance for projects subject to the Equator Principles, we conduct environ-mental and social impact reviews to confirm whether the response of project implementers in taking into account environmental and social impacts satisfies the standards set by the Equator Principles.
In environmental and social risk/impact reviews based on screening forms, the relevant project is categorized into one of three categories-A, B, and C as shown below-reflecting its environmental and social risks and/ or impacts. The Structured Finance Department conducts detailed reviews based on environmental impact assess-ment reports that take into account the risk/impact cat-egory, the status of the country (designated* or non-des-ignated country) where the project is sited, and industry. The results of the environmental and social risk/impact reviews are sent to a credit supervision department, where it devises a comprehensive risk assessment based on the review results.
*Designated countries are those countries deemed to have built robust environmental and social governance, legal systems, and institutional capacity to protect their peo-ple and the natural environment. Specifics can be viewed at the Equator Principles Association's website.
https://equator-principles.com/designated-countries/
Project Finance Cases
Sector Mining Infrastructure Oil & Gas Power Petrochemical Others Region Americas
Europe, Middle East, and Africa Asia and Pacific
Country Classification Designated Country Non-Designated Country Independent Review Implemented
Not implemented
Corporate Loans Tied to Projects
Sector Mining Infrastructure Oil & Gas Power Petrochemical Others Region Americas
Europe, Middle East, and Africa Asia and Pacific
Country Classification Designated Country Non-Designated Country Independent Review Implemented
Not implemented
Company Training Programs
In adopting the Equator Principles in February 2016, we pro-vide multiple training sessions for the employees of sales, assessment, screening and other departments and sections involved to foster a thorough understanding of Equator Principles concepts as well as implementation processes for environmental and social risk/impact reviews. Through regular training programs, we strive to go further to raise awareness regarding environmental and social impacts among our employees and deepen their understanding of Equator Principles concepts and implementation processes for environmental and social risk/impact reviews.
Monitoring Compliance with Equator Principles
As a rule, projects subject to the Equator Principles are engaged to submit regular reports in the loan agreement stipulating compliance with important items concerning environmental and social laws, regulations and rules as well as approvals and permits. Based on regular reports submit-ted by the borrower of the projects, we monitor compliance with rules relating to the environment and communities.
Number of Projects Subject to Equator Principles 26 projects were subject to the Equator Principles in fiscal 2019. Projects featuring the mark have received thirdparty certification from PwC Sustainability LLC.
FY2019
A 3
B 19
C 2
Total 24
A
B
C
Total
0
0
0
0
0
4
2
6
0
0
0
0
3
15
0
18
0
0
0
0
0
0
0
0
A 0 0 3
B 0 3 16
C 0 0 2
Total 0 3 21
A 1 2
B 16 3
C 2 0
Total 19 5
A 3 0
B 17 2
C 0 2
Total 20 4
FY2019
A 1
B 1
C 0
Total 2
A
B
C
Total
0
0
0
0
0
0
0
0
1
0
0
1
0
0
0
0
0
0
0
0
0
1
0
1
A 0 0 1
B 1 0 0
C 0 0 0
Total 1 0 1
A 0 1
B 0 1
C 0 0
Total 0 2
A 1 0
B 1 0
C 0 0
Total 2 0
Ship Finance Initiatives
For more than 50 years the Group has given top priority to steadily providing financing to the shipping sector to meet the varied needs of its clients. The shipping market is heavily influenced by mainly global economic funda-mentals and supply and demand for vessels, but strength-ening environmental regulations and addressing climate change risks have become pressing issues. In addition to strengthening our financing of environmentally sound investments and environmental initiatives by client com-panies in response to stricter environmental regulations, we have signed on to the Poseidon Principles to support, from a financial perspective, the reduction of greenhouse gas emissions in the global shipping industry. Not only are companies incorporating environmental measures into their basic philosophy on corporate administration, but even government administrations in Europe and the US are doing the same by focusing on the idea of "Build Back Better." This is an area that is rapidly growing in importance even in the shipping industry, which is why we intend to ramp up our initiatives going forward.
Signatory to the Poseidon Principles
In March 2020, SuMi TRUST Bank became the first
IMO's GHG reduction strategy
financial institution in Asian countries to sign on to the Poseidon Principles, an initiative launched by financial institutions to address climate change risks in the marine transportation industry.
As an initiative spearheaded by private financial insti-tutions to align with the greenhouse gas (GHG) reduc-tion targets adopted by the International Maritime Organization (IMO)*1 for global shipping, as well as the IMO's comprehensive GHG reduction strategy*2, the Poseidon Principles were established in June 2019 by 11 major global banks that provide ship finance. The man-agement and administration of the Poseidon Principles is carried out by the Poseidon Principles Association, which comprises all signatory financial institutions. There are four principles-Principle 1: Assessment of climate alignment; Principle 2: Accountability; Principle 3: Enforcement; and Principle 4: Transparency.
*1 The IMO is a United Nations' specialized agency responsible for shipping safety, preventing marine pollution by ships, and promoting international cooperation on marine affairs.
*2 GHG reduction strategy: This strategy was adopted by the IMO in April 2018 with a vision to reduce GHG emissions from international shipping to zero as soon as possible in this century. Specifically, the strategy aims to reduce total annual GHG emissions by at least 50% by 2050 compared to 2008.
International shipping accounts for around 3% of global CO2 emissions
Base yearCO2 emissions per transport work 40% reduction
Total volume of GHG emissions 50% reductionReduce GHG emissions to zero as soon as possible this century
2008
2030
2050
2100
Signatories to the Poseidon Principles will, on an annual basis, assess the CO2 emission reduction efforts of each ship subject to finance and calculate and publish the overall climate alignment of its ship finance portfolio. SuMi TRUST Bank plans to start calculating CO2 emis-sion reduction efforts (climate alignment) based on the Principles in fiscal 2021.
Financial institutions publish climate alignment of ship finance portfolios
• Every year, signatory financial institutions calculate CO2 emissions for vessels in their portfolio.
• Every year, each financial institution calcu-lates and publishes the climate alignment of their overall ship finance portfolio based on the CO2 emissions of each aforemen-tioned vessel.
• SMTB plans to publish climate alignment calculation results from fiscal 2021.
By becoming a signatory to the Poseidon Principles, and as a member of the maritime cluster of Japan, SuMi TRUST Bank will continue to support the business activi-ties of its clients as a financial institution that offers ship finance worldwide, and will aim to contribute to mitigating climate change risks in the marine transportation industry.
Scope of the Poseidon Principles
Vessels that satisfy the three conditions above are included in the scope of the Poseidon Principles
Example of disclosure
$1,000m
-1%
Note: Actual format of disclosure may differ
Climate alignment
• In order to reduce CO2 emissions by 50% by fiscal 2050, the secretariat of the Poseidon Principles determines the amount of CO2 emis-sions considered currently fair for each ship type and size class (decarbonization trajectory).
• The actual volume of carbon emissions for each single vessel is compared with the aforemen-tioned decarbonization trajectory and the differ-ence represents the vessel's climate alignment.
• A positive climate alignment score means a vessel is misaligned (above the decarboniza-tion trajectory), whereas a negative or zero score means a vessel is aligned.
Sustainable Loan Initiatives
Positive Impact Finance
In March 2019, SuMi TRUST Bank developed the world's first Positive Impact Finance (PIF with unspecified use of funds) solution, which adapts the Principles for Positive Impact Finance of the United Nations Environment Programme Finance Initiative (UNEP FI) for lending to operating companies. PIF is a product that comprehen-sively analyzes and evaluates the impact of a company's supply chain on the environment, society, and the econ-omy, sets specific KPIs for increasing positive impact and reducing negative impact, and asks clients to commit to these KPIs, which are then incorporated into the loan
Principle 1 (Definition):
The Principles for Positive Impact Finance (UNEP FI)
Positive Impact Finance serves to deliver a positive contribution to one or more of the three pillars of sustainable development (economic, environmental, and social), once any potential nega-tive impacts to any of the pillars have been duly identified and mitigated.
Principle 2 (Frameworks):
To promote the delivery of Positive Impact Finance, banks and investors need adequate processes, methodologies, and tools to identify and monitor the positive impact of the entities to be financed or invested in.
Impact Analysis of Positive Impact Finance
There is a need to build a logic where addressing impact leads to solving social issues.
Identifying and responding to impacts across the entire supply (value) chain will affect the competitiveness of businesses (products).
agreement. Then, through subsequent monitoring and disclosure of results, we encourage our clients to con-tribute to achieving SDGs and support their efforts to improve competitiveness (including for their businesses, products, and services) from a global perspective.
(1) Impact Evaluation
(2) Loan agreement
Third-party organization
Principle 3 (Transparency):
Banks and investors are required to ensure transparency and dis-closure on:
• The positive impacts intended by the entities financed or invested in (as per Principle 1);
• The processes they have in place to determine eligibility, and to monitor and to verify impacts (as per Principle 2);
• The impacts achieved by the entities financed or invested in (as per Principle 4).
Principle 4 (Assessment):
The assessment of Positive Impact Finance delivered by banks and investors should be based on the actual impacts achieved.
(3) Third-party opinion
Identify SDGs that the realization of the KPI will link to
Receiving Gold Prize at the ESG Finance Awards Japan and Efforts to Promote ESG Finance
This product won the Gold Prize in the finance category of the Ministry of the Environment's first ESG Finance Awards Japan event in February 2020, not only for the advanced nature of its initiatives, but also for its efforts to promote the product to the banking industry in Japan and overseas. Subsequently, the product has played an active role in putting together the "Basic Approach to Impact Finance" (announced in July 2020) of the Positive Impact Finance Task Force established by the Ministry
of the Environment's High Level Panel on ESG Finance, and in developing regional finance that contributes to regional revitalization.
President Ohkubo and Environment Minister Mr. Koizumi
(Reason for the award)
SuMi TRUST Bank is focusing on sustainable finance by promoting businesses that pursue sustainability as the pillar of its initiatives. In addition, it was one of the first to endorse the various principles established by UNEP FI, and created the world's first PIF for loans to operating companies without specifying the use of funds. The selection committee highly praised SuMi Trust Bank's stance to continue promoting PIF-related initiatives such as impact evaluation and KPI setting through dialogue with clients, as well as its efforts to promote PIF to the banking industry in Japan and overseas.
Results of PIF Initiatives
After signing the world's first loan agreement for PIF (unspecified use of funds) with Fuji Oil Group in March 2019, SuMi TRUST Bank has moved forward and success-fully concluded 14 agreements as of the end of December
2020. As for the monitoring status of the positive impact expansion/negative impact reduction KPI targets set with our clients, we have opened a dedicated disclosure page on the SuMi TRUST Bank website.
Initiative Period Borrower Loan Type | Initiative Period Borrower Loan Type |
March 2019 Fuji Oil Holdings Inc. Direct | May 2020 Sumitomo Rubber Industries, Ltd. Direct |
December 2019 J.Front Retailing Co., Ltd. Direct | June 2020 Mitsui Chemical, Inc. Syndicated |
March 2020 Sumitomo Metal Mining Co., Ltd. Syndicated | August 2020 Toray Industries, Inc. Syndicated |
March 2020 Nippon Paper Industries Co., Ltd. Direct | September 2020 DIC Corporation Direct |
March 2020 Subaru Corporation Syndicated | September 2020 Rengo Co., Ltd. Syndicated |
March 2020 Sumitomo Forestry Co., Ltd. Direct | December 2020 Ricoh Leasing Company, Ltd. Direct |
March 2020 Toyo Aluminum K. K. Direct | December 2020 Sumitomo Dainippon Pharma Co., Ltd. Direct |
Sustainability Linked Loan
SuMi TRUST Bank is also working on sustainability linked loans, which are not based on comprehensive KPIs like Positive Impact Finance, but rather on a mechanism that enables SuMi TRUST Bank to set ambitious Sustainability Performance Targets (SPTs) on specific themes with the borrower company, and to vary the interest rate depend-ing on the achievement of the targets.
The SPTs are selected after thorough consultation with clients from the following categories: energy efficiency (energy conservation and renewable energy), water con-sumption, sustainable procurement, circular economy (recycling rate), biodiversity, and global ESG evaluation. Then, a third-party organization such as a rating agencyevaluates the appropriateness of the established SPTs in light of the overall corporate CSR strategies of the bor-rower company.
Execution date
Assessment date/application date
S u m i t o m o M i t s u i Tr u s t H o l d i n g s , I n c .
Sustainability Report 2020/2021
2. Initiatives in the Asset Management Business
(1) Initiatives of Sumitomo Mitsui Trust Asset Management
S u m i t o m o M i t s u i Tr u s t H o l d i n g s , I n c . Sustainability Report 2020/2021
May 2006
Total assets under management ¥70 trillion (as of end-September 2020)
¥22.4 trillion (as of end-September 2020)
* Asset under management for funds conducting ESG integration
ESG issues reside in non-financial domains and do not manifest themselves in financial reporting, but they can have a considerable impact on corporate value over time. Based on this thinking, SMTAM considers the actions taken to address such issues to be integral to stewardship activities, alongside engagement and the exercise of voting rights. Through these activities, SMTAM aims to maximize returns for its clients and contribute to the achievement of the SDGs by actively fulfilling its role as an asset manager in the investment chain.
Through engagement, the exercise of voting rights, and other activities, SMTAM encourages investee companies to grow sustainably by addressing ESG issues. Its main ESG activities currently revolve around four topics: (1) climate change; (2) water resources and marine pollution; (3) backing governance reforms; and (4) promoting ESG information disclosure. SMTAM shares its awareness of these ESG issues with companies and promotes efforts that contribute to their improve-ment by encouraging companies to draw up and disclose time horizon-based measures. It also applies ESG integration (incorporation of ESG factors) to all of its actively managed products for domestic and foreign stocks and bonds. This maximizes medium- to long-term investment returns for clients, minimizes downside risks, and encourages the realization of a sustainable society.
As a signatory to the PRI, SMTAM engages investee companies to help resolve ESG issues and enhance their corporate value over the medium to long term based on the values expressed in the UN Global Compact and the SDGs, while at the same time focusing on ESG investment activities. In carrying out these activities, SMTAM has established 12 materialities to systematize the evaluation items. In addition, for in-house managed active products, fixed-income passive products, and individually designated passive products, SMTAM will suspend new and additional purchases of securities issued by companies involved in the manufacture of inhumane weapons, as listed below, and may sell existing holdings depending on the results of engagement.
* Inhumane weapons: Cluster bombs, anti-personnel landmines, biological weapons, chemical weapons
SMTAM will engage in dialogue and express opinions that will contribute to the enhancement of corporate value over the medium to long term through the resolution of ESG issues of investee companies, positioning it as an opportunity to call for best practices from companies. In addition to top-down activities based on four important themes, such as climate change and encouraging governance reform, SMTAM will also conduct systematic, bottom-up activities based on the 12 materialities. On top of SMTAM's own engagement activities, the company will also participate in and collaborate with global initiatives for agendas related to greenhouse gases, palm oil, forest conservation, healthcare access, and diversity (promotion of women).
Strategy and governance (comprehensive assessment): A+ (six years in a row), Integration status of listed equity into responsible investment: A+, Active ownership in listed equity: A+, Engagement: A+, Exercise of voting rights: A+, Fixed income investment (e.g., government bonds): A+, Fixed income investment (e.g., corporate bonds): A+
For details, please refer to the 2020/2021 Stewardship Report. URL:https://www.sumitrust-am.com/file/02/ss_report.pdf
Stewardship Report
PlanetPeople
Prosperity
(2) Initiatives of Nikko Asset Management
Total assets under management ¥26 trillion (as of end-September 2020)
October 2007
¥10 trillion (as of end-September 2020)
* Balance of investment products and accounts where ESG principles are integrated into the investment decision-making process
As an asset management company, Nikko AM's mission is to always act in the best interests of its clients. For that reason, it places utmost importance on fiduciary and ESG principles in its corporate philosophy and corporate activities. Guided by the belief that reflecting ESG in investment practices enhances the long-term value of corporations and contributes to sustainable economic growth, Nikko AM strives to incorporate ESG principles into numerous investment decision-making processes so that it can fulfill its fiduciary duties.
Nikko AM's ESG Global Steering Committee meets quarterly to discuss the incorporation of ESG investment, meth-ods for implementation, and new approaches. The Committee comprises leaders from investment teams worldwide, while multiple observers also attend the Committee meetings, which are run by Nikko AM's ESG specialists. The ESG specialists mainly support the investment teams in their ESG activities, formulate ESG policies, examine and assist the company's participation in various ESG-related initiatives, and coordinate joint engagements.
Nikko AM believes that appropriately incorporating ESG into investment processes is key to achieving excess returns over the medium to long term. All of its active domestic equity investment strategies incorporate Creating Shared Value (CSV) evaluations, which also take ESG factors into consideration. The evaluation score is based on the application of the CSV theory and assesses how companies balance their engagement of ESG issues with the pursuit of profitability and competitiveness, in order to create value for both society and shareholders. Through continuous engagement with companies, Nikko AM's analysts actively evaluate how proactive they are in addressing ESG issues.
S u m i t o m o M i t s u i Tr u s t H o l d i n g s , I n c .
Principle 1: Nikko AM will incorporate ESG issues into investment analysis and decision-making processes. Principle 2: Nikko AM will be active owners and incorporate ESG issues into ownership policies and practices. Principle 3: Nikko AM will seek appropriate disclosures on ESG issues by the entities in which it invests.
Principle 4: Nikko AM will promote acceptance and implementation of the Principles within the asset management industry. Principle 5: Nikko AM will work together to enhance effectiveness in implementing the Principles.
Principle 6: Nikko AM will report on activities and progress towards implementing the Principles.
Nikko AM's engagement involves exchanging opinions not only on the business continuity and financial strategies of investee companies, but also on management policies, business strategies, shareholder returns, ESG issues, and other matters referred to in disclosed non-financial information, from a long-term perspective and in line with the company's growth phase. Nikko AM's engagement activities cover a wide range of stakeholders, from senior management to finance, corporate planning, and business managers. In addition, for companies that are particularly reluctant to provide informa-tion, Nikko AM proposes meetings with senior management to increase the effectiveness of engagement. Nikko AM is working to achieve closer engagement with investee companies, with the aim of sharing the exact situation in which the companies find themselves and supporting the creation of corporate value over the medium to long term.
Sustainability Report 2020/2021
Comprehensive assessment: A+ (seven years in a row), (Integration status into responsible investment: A+, Active owner-ship: A+, (Engagement: A+, Exercise of voting rights: A+), Fixed income investment: A+)
For details, please refer to the 2019 Sustainability Report and the 2019 Nikko Asset Management TCFD Report.
2019 Sustainability Report
URL:https://sustainability.nikkoam.com/files/pdf/annual-report/nikko_am_2019_sustainability_report_en.pdf
Nikko Asset Management TCFD Report
URL:https://sustainability.nikkoam.com/files/pdf/esg/tcfd_eng.pdf
Sustainability Report
TCFD Report
3. Consulting Business Initiatives
Sustainability Management Consulting
There is no shortage of economic, social, and environ-mental problems that affect us, such as the spread of COVID-19, the escalation of climate change, and the wid-ening disparity of wealth. As such, there is a growing call for companies, which play a leading role in the economy, to incorporate sustainability-conscious management and play a proactive role in solving issues.
SuMi TRUST Bank defines sustainability management as "the establishment of a value creation process that bal-ances the creation of value for stakeholders and the cre-ation of value for oneself in the three aspects of economy, society, and environment, and the complete integrationof such process into management." In line with this, we are promoting sustainability management consulting by leveraging our strength in combining the perspectives of ESG institutional investors, which we have accumu-lated over many years through our Asset Management Operations, with those of leading sustainability manage-ment practitioners. More specifically, we have assembled a project team of experienced ESG consultants, gov-ernance specialists, and environmental specialists with expertise to meet the needs of each client and provide deeply informed advice.
Sustainability Management Implementation Support | The Sustainability Management Implementation Support service is designed to support clients in creating a roadmap for accelerating sustainability management based on the existing implementation system, status of initiatives, and information disclosure, as well as solidifying the internal mindset. |
Sustainability Policy Promotion Support | The Sustainability Policy Promotion Support service helps clients develop their value creation process and enhance their impact management and materiality management, which are an essential part of promoting sustainability management. |
Sustainability Management Disclosure Support | The Sustainability Management Disclosure Support service aids clients in improving information disclosure with a focus on integrated reports as a means of communicating sustainability management to stakeholders in an easy-to-understand and concrete manner. |
Sustainability Management Dialogue Support | The Sustainability Management Dialogue Support service assists clients in enhancing dialogue with investors, who have become increasingly interested in sustainability management and are beginning to incorporate ESG factors into their engagement and exercise of voting rights. |
Sustainability Management Implementation Support
• Insufficient understanding of global trends (assuming sustainability does not suit Japanese culture).
• Sustainability being viewed as "corporate social responsibility" and not integrated into core strategic issues.
• Incomplete instructions and information sharing with employees caused by vague motives for promotion of sustainability. Lack of a sense of conviction among employees preventing the progress of initiatives in the field.
• Insufficient involvement of the board of directors and lack of awareness among management. Department in charge not given enough authority to promote sustainability.
• Lack of balanced dialogue with a variety of stakeholders, including NGOs (inadequate response to negative external criticism).
SuMi TRUST Bank's view of obstacles to sustainability management
Provide a simple diagnosis of issues in client initia-tives based on reporting documents, evaluation status by ESG assessment organizations, etc.
Examine issues in depth with client (secretariat) based on the simple diagnosis sheet to better understand problems.
Propose a roadmap for accelerating the client's sustainability manage-ment system and discuss details.
Promote understanding of the roadmap among promotion departments (including the director in charge) and finalize the proposal.
Provide explanations at board meetings, execu-tive committee meet-ings, etc., to support decision-making at the management level.
Governance Consulting
Corporate governance reforms in Japan have strengthened governance by both companies and investors through the introduction and revision of the Stewardship Code and the Corporate Governance Code. Based on the revised Codes and various guidelines and guidance, companies are now expected to implement more advanced initiatives to strengthen gover-nance. The Group's Stock Transfer Agency Services Business offers solutions for strengthening governance based on our Governance Survey and Executive Compensation Survey, which leverage the industry's leading client base.
The Governance Survey, now in its fourth year, received the participation of approximately 1,650 companies, which makes it Japan's largest. More than 40% of all listed compa-nies in Japan participated in the Governance Survey, and the distribution of the participating companies is similar to the distribution of all listed companies. The Survey is supervised by Professor Kunio Ito and provides data that is compared to governance INDEX data, which is indexed to substantive progress. The Executive Compensation Survey, conducted in collaboration with Deloitte Tohmatsu Consulting, is also in its fourth year and is also the largest in the Group views gover-nance consulting as an opportunity for close communicationand interaction with the management of client companies, and thus continues active dialogues with them. This enables us to capture a wide range of management challenges that gobeyond the governance challenges facing the management team and provide further solutions. Examples of the kinds of total solutions that benefit from Group strengths include M&A advice, business succession support, real estate brokerage and effective utilization, support for introducing and chang-ing corporate pension schemes, and wealth management. Japan in terms of company participation, with approximately 18,000 executive compensation data points broken down by company attribute. In addition to compensation levels, the Survey intensively reviews compensation decision policies and the practical operation of the compensation system and com-pensation committee. Building on the data in the Governance Survey and the Executive Compensation Survey, the Group is able to partner with client companies to identify their specific challenges, deliver optimal solutions, and provide continuous and multifaceted support aimed at enhancing governance.
Number of participating
S u m i t o m o M i t s u i Tr u s t H o l d i n g s , I n c .
055
Sustainability Report 2020/2021
The Group views governance consulting as an opportunity for close communication and interaction with the manage-ment of client companies, and thus continues active dia-logues with them. This enables us to capture a wide range of management challenges that go beyond the governance challenges facing the management team and provide fur-
ther solutions.
Examples of the kinds of total solutions that benefit from Group strengths include M&A advice, business succession support, real estate brokerage and effective utilization, support for introducing and changing corporate pension schemes, and wealth management.
Planet
-Consideration for the Environment
Without a healthy planet to provide the clean air, fresh water, agriculture, forests and fisheries on which hu-man life depends, societies cannot succeed and com-panies cannot create long-term value.
057 The Group's Approach to Planet (Environmental Issues)
058 Climate Change
068 Natural Capital (Biodiversity Issues)
077 Environmentally Friendly Property
From the World Economic Forum White Paper "Measuring Stakeholder Capitalism"
085 Environmental Burden Reduction Measures
The Group's Approach to Planet (Environmental Issues)
With regard to the three elements of a sustainable society, namely the economy, society, and the environment, the spread of COVID-19 demonstrated how social dysfunction can cause immeasurable damage to the economy, while also highlight-ing how global environmental issues such as climate change can undermine the very foundation of society's existence. This implies that an economy can function only in a healthy society, and that society must stay within the limits of the environ-ment. Based on this perspective, we have established an environmental policy that considers global environmental issues in relation to the economy, and we are accelerating our various environmental initiatives.
Sumitomo Mitsui Trust Holdings Environmental Policy
1. Provision of Products and Services | 4. | Regulatory Compliance |
We will strive to reduce environmental risks and enhance envi- | We will comply with the laws, regulations, rules, and agree- | |
ronmental value for the society as a whole by providing financial | ments concerning the preservation of the environment. | |
products and services that contribute to the preservation of the | 5. | Monitoring |
global environment and the realization of a sustainable society. | We will strive to ensure the continuous improvement of our | |
2. Environmental Burden Reduction | environmental activities by setting and periodically reviewing | |
We will strive to preserve the environment and realize a sus- | and revising environmental objectives and targets. | |
tainable society through efforts toward energy conservation, | 6. | Education & Training |
resource conservation, and resource recycling based on the | We strive to ensure group-wide awareness of compliance with | |
recognition of the burden imposed on the environment by | the Environmental Policy and to provide appropriate environ- | |
the consumption of resources and the discharge of wastes in- | mental education. | |
volved in our business activities. | ||
7. | Information Disclosure | |
3. Pollution Prevention | ||
We will strive to promote activities to preserve the environ- | ||
We will strive to ensure continuous verification and improve- | ment through communications with external organizations by | |
ment of our environmental activities and make efforts to pre- | publicly disclosing the Environmental Policy. | |
vent pollution. |
S u m i t o m o M i t s u i Tr u s t H o l d i n g s , I n c .
057
*The Action Guidelines for Mitigating Climate Change (see page 58) and the Action Guidelines for Preserving Biodiversity (see page 69) are specific guidelines that were drawn up based on this Environmental Policy.
Materiality | Risk/Opportunity | Key Stakeholders | Main Responses |
Pursuing sustainability-themed business opportunities | Opportunity | Clients, communities | Maximization of positive impact through business (e.g., development of innovative financial products that contribute to solving environmental issues, and engagement that encourages positive behavioral change among borrowers and investees) |
Considering impacts on society and the business environment of companies to whom we extend investments and loans | Risk | Clients, communities, NPOs | Minimization of negative impact through business (e.g., investment and loan operations in line with policies for specific sectors and ESG guide-lines, engagement that encourages the reduction of negative environ-mental impacts of borrowers and investees) |
Climate change | Risk/Opportunity | Clients, shareholders/ investors, governments, international organizations, employees, NPOs | Development of climate-conscious governance, finalization of strategies, enhancement of risk management, establishment of metrics and goals, information disclosure in line with TCFD, and pursuit of business oppor-tunities |
Sustainability Report 2020/2021
Related Materiality
Impact Materiality
Highly Relevant SDGs
Climate Change
For more information on our initiatives to comply with TCFD (Task Force on Climate-related Financial Disclosures) recommendations, please see the 2020/2021 TCFD Report URL:https://www.smth.jp/en/csr/report/2020/TCFD-E-all.pdf
Climate change is the most serious environmental issue in the world today-it is already affecting people's lives and economic activity in a number of ways as a result of abnormal weather, rising sea levels, and other phenom-ena. Moreover, the negative impacts of climate change are affecting developing countries and vulnerable people the most, which in turn is creating additional problems for societies, such as inequality and poverty.
At the same time, measures taken to ease or adapt toclimate change are leading to improvements in ecosys-tem services through the enrichment of natural capital, while the migration of social systems driven by investment promotion and technological innovation is generating economic growth. Global sustainability now hinges on how quickly societies can achieve net zero CO2 emissions.
The pursuit of societies resilient to climate change will like-ly lead to the construction of sustainable societies through the eradication of poverty and reduction of inequality.
Action Guidelines for Mitigating Climate Change
1. Implementation of Measures and Support to Help Mitigate Climate Change
In addition to actively taking measures to reduce greenhouse gas emissions in our own business operations, we are making efforts, as a corporate citizen, to support activities that mitigate and adapt to climate change.
2. Provision of Products and Services
We are working on developing and providing products and ser-vices that help mitigate climate change. Our financial functions are being leveraged to promote energy conservation and en-courage the use of renewable energy.
3. Collaboration with Stakeholders
We engage in dialogue and cooperation with our stakeholders as we work to mitigate climate change.
4. Education and Training
We will ensure that these guidelines are fully implemented at Group companies, and will actively conduct education and train-ing to mitigate climate change.
5. Information Disclosure
We will actively disclose information related to our efforts to mit-igate climate change.
Challenges for Achieving the Goals
• Constructing carbon-free societies well before 2050 by realizing net zero CO2 emissions
• Visualizing risks and opportunities arising from the rapid migration of social systems
• Constructing business models that transcend sectors to combat climate change
• Expanding financial transactions that contribute to climate change adaption and mitigation
Target SDGs for Climate Change Initiatives
KPIs for Solving the Challenges
2019/2020 results
Initiatives for Solving the Challenges
• Provide solutions for the construction of societies with net zero carbon emissions by leveraging banking, trust, and real estate functions.
• Provide capital through investments and loans to promote renewable energy and energy conservation.
• Provide financial products that meet the investment needs of investors with a strong interest in climate change.
• Promote climate change measures in real estate markets and cities with financial and environmental performance evaluations.
• Promote the dissemination of finance that takes its impact on climate change seriously in accordance with the Principles for Responsible Banking.
• As a responsible institutional investor, promote steward-ship activities related to climate change.
• Make improvements to the disclosure of information related to climate change.
2020/2021 targets
*1 From the first project in March 2019 until September 2020 *2 Increase over the last year
*3 Target for SuMi Trust Bank
Aiming to Limit Temperature Increase to 1.5°C
Paris Agreement and Special Report on Global Warming of 1.5°C
Under the Paris Agreement that came into force in November 2016, signatory nations aim to "hold the increase in the global average temperature to well below 2°C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5°C above pre-indus-trial levels," in order to ensure sustainability. The world isnow taking further steps in an attempt to transition from a low-carbon society to one with net zero carbon emissions.
In October 2018, the Intergovernmental Panel on Climate Change (IPCC) published its Special Report on Global Warming of 1.5°C. The report highlights the need to reduce greenhouse gas emissions to net zero as soon as possible in order to secure sustainability and eradi-cate poverty.
If current temperature rise continues
(scaled to average for 1850-1900)
Change in average global temperature (°C)
Limit global warming as soon as possible
As of 2017
Temperature changes owing to human activities
If temperature increase is kept below 1.5°C (scope of uncertainty)
Observed temperature changes
Limit global warmingas much as possible
Source: IPCC Special Report on Global Warming of 1.5°C; corrections to frequently asked questions
Key points in Special Report
• The global average temperature has already increased by 1°C when compared to pre-industrial levels, and at the current pace of emissions, global warming is likely to reach 1.5°C by 2040.
• The harmful effects of the current 1°C temperature increase are serious, but will increase in severity when the temperature increase reaches 1.5°C and become significantly harmful at 2°C.
• Global warming is significantly affecting ecosystems and humans owing to abnormal weather conditions, rising sea levels, and other phenomena.
• Many more countermeasures will be required if our response to global warming is slow.
• Aiming to limit the temperature increase to 1.5°C will also have a positive impact on meeting the objectives of the SDGs.
In 2019, following the publication of the Special Report on Global Warming of 1.5°C, the IPCC published its Special Report on Climate Change and Land and Special Report on the Ocean and Cryosphere in a Changing Climate, which indicate that the impacts of climate change are even more serious than previously thought. In response,at the UN Climate Summit held in September 2019, the Secretary-General of the UN called on member countries to commit to limiting the temperature increase to 1.5°C, and 65 countries vowed to achieve net zero greenhouse gas emissions by 2050.
2018 1.5°C Special Report
2019 Special Report on the Ocean and Cryosphere in a Changing Climate
Special Report on Climate Change and Land
• Compared to before the Industrial Revolution, global temperatures rose by an average of 0.87°C and land temperatures by an average of 1.53°C between 2006 and 2015.
• Climate change is affecting livelihoods, biodiversity, human health, infrastructure, food systems and more, exacerbating existing risks in those areas.
• The land-related climate adaptation and mitigation response op-tions face barriers and can make only limited contributions.
• Sustainable land and forest management can reverse the negative impact of climate change on land degradation.
IPCC Special Report on the Ocean and Cryosphere in a Changing Climate
• The global ocean has warmed unabated since 1970, the rate of ocean warming has more than doubled since 1993, and marine heatwaves have doubled in frequency since 1982 and are increasing in intensity.
• By absorbing more CO2, the ocean has undergone increasing sur-face acidification, which is adversely affecting ecosystems.
• Due to a combination of the disappearance of the Greenland and Antarctic ice sheets and the thermal expansion of the ocean, histor-ically rare (once-per-century) extreme sea level rises are expected to start occurring more than once a year in the tropics.
Sustainable Finance
SuMi TRUST Bank has set a new long-term target for sus-tainable finance in the banking sector (loans to corporate clients): ¥5.0 trillion in cumulative loans over the 10-year period from fiscal 2021 through 2030, including ¥3.0 tril-lion in environment-related fields. The Bank will aim to solve climate change and other environmental and social issues and help realize a sustainable society together with clients by actively supplying funds to environmental and social fields.
Sustainable financeCategory Environmental (green) fields
Type
Green financeSocial finance
Examples of sustainable finance
Businesses that adapt to, or mitigate, climate change. For example, renewable energy, energy efficiency improvement, and green buildings.
Employment creation, poverty reduction, nurturing of startup firms, regional revitalization, basic infrastructure like public transport and water supply, and essential services such as hospitals and schools.
Finance based on assessments of ESG/SDGsPositive impact financeSustainability-linked loans
Transition financeBusinesses that help society transition to net-zero carbon emissions.Businesses that help society adapt to a rapidly aging population.
Other
Other businesses that help solve environmental problems and social issues.
Positive Impact Finance
SuMi TRUST Bank is working on Positive Impact Finance (PIF), which considers not only the relationship with cli-ents but also the relationship between clients and society, and helps transition to a sustainable society by ensuring an optimal relationship (see pages 50-51). In addition to reducing CO2 emissions from their own activities, many
Example of Climate Change-Related KPIs in Positive Impact Finance
companies are aiming to contribute to climate change mitigation and adaptation throughout the supply chain, for example in their product procurement and use. SuMi TRUST Bank supports client initiatives by identifying these impacts, setting KPIs for reducing negative impacts and increasing positive impacts, and monitoring them.
Client
Theme
Fuji Oil Holdings Inc.
• Employment, Climate, Biodiversity and Ecosystem Services, and Inclusive and Healthy Economy
• Climate change
• Supply chain improvement activities and RSPO initiatives aimed at NDPE (No Deforestation, No Peatland development, No Exploitation) in the sourcing process
• Energy used and CO2 emitted in the manufac-turing process
J.Front Retailing Co., Ltd.
• Climate changeSumitomo Metal Mining Co., Ltd.
• Climate change
• Promotion of copper mining projects, promo-tion of nickel mining projects and improve-ment in productivity
• Recovery and stable supply of nonferrous metals through the development of technolo-gies to separate, fix, and transform impurities extracted from the mines and produced in the smelting processes into useful materials
• Demonstration and commercialization of recycling technology for automotive secondary batteries
• Creation of new products and businesses that contribute to society by utilizing the company's strengths
• Aim for zero greenhouse gas (GHG) emissions (Scope 1, 2)
Content
• Reduce Scope 1 & 2 greenhouse gas emis-sions resulting from company activities
• Reduce Scope 3 emissions by promoting the Supplier Code of Conduct
KPI metrics and goals
• Traceability scores for palm oil all the way back to the oil extraction plant (target: 100%)
• Number of incidents registered in the grievance mechanism
Environmental Vision 2030 (reviewed CO2 emission reduction targets in April 2020)
• Scope 1 & 2: 40% reduction by 2030 (compared to 2016)
• Scope 3 (Category 1): 18% reduction by 2030 (compared to 2016)
• 40% reduction in CO2 emissions by 2030 (compared to 2017)
• Zero CO2 emissions by 2050 (compared to 2017)
• 100% adoption of Supplier Code of Conduct by 2030
• 40% reduction in Scope 3 emissions by 2030 compared to FY2017
• Aim for early achievement of 300,000 tons/year of copper and 150,000 tons/year of nickel production as a world leader in non-ferrous metals
• Commercialize recycling technology for automotive lithium-ion batteries by 2022
• R&D and commercialization of new functional materials in the energy, automotive, and information and communications fields, commercialization of NiO for fuel cells, and maintain leading global market share in the expanding cathode electrode mate-rials market
• (KPI for the anticipated impact of achieving the above KPIs) GHG reduction contribution from low-carbon footprint products by 2030: over 600 kilotons-CO2
• Formulate a plan for achieving zero emissions in the second half of this century by 2030
• Total GHG emissions in 2030Total GHG emissions in FY2013
• Reduce GHG emissions per unit of production by over 26% in 2030 (compared to FY2013)
Client
Theme
Ricoh Leasing Company, Ltd.
• Mitigation of climate change
• Curb global warming by reducing CO2 emis-sions from business activities
• Reduce environmental impact by expanding environment-related business areasSumitomo Dainippon Pharma Co., Ltd.
• Environmental initiatives
Nippon Paper Industries Co., Ltd.
• Initiatives to address climate change
• Transition to non-fossil fuels
• Promote energy conservation in manufacturing and distribution processes
• CO2 absorption and stabilization through appropriate management of company-owned forests
Toyo Aluminum K. K.
• Climate changeSumitomo Forestry Co., Ltd.
• Sustainability and biodiver-sity-conscious sourcingSubaru Corporation
• Mitigation of climate change
• Reduce Scope 1 and 2 greenhouse gas emis-sions resulting from company activities
• Improve fuel efficiency, incorporate electric technology and switch to electric and hybrid vehicles, and reduce CO2 emissions from vehicles manufactured and sold
Sumitomo Rubber Industries, Ltd.
• Greening
• Mitigation of climate change
Mitsui Chemical, Inc.
• Realization of a symbiotic society in har-mony with the environmentToray Industries, Inc.
• Acceleration of climate change measures
• Realization of a world where global green-house gas emissions and absorption are equalRengo Co., Ltd.
• Climate changeDIC Corporation
• Climate change response
• Achieve CO2 emission reduction targets through production activities by promoting energy conservation and low carbon emissions (Scope 1, 2)
Content
• Reduce greenhouse gas emissions
• Reduce CO2 emissions across the entire Group by developing initiatives such as energy visu-alization and rolling it out horizontally in a way that meets the requirements of each facility
• Forest management that balances global warming countermeasures and biodiversity conservation
• Expand the use of sustainable forest resources and create a biodiversity-conscious environment
• Global warming prevention and biodiversity conservation
• Development of environmentally friendly products
• Reduction of greenhouse gas emissions and conservation of energy and resources through the use of natural energy and non-fossil raw materials, and by making products lighter and more durable
• Reduction of greenhouse gas emissions and chemical emissions through promotion of energy conservation, fuel conversion, and creation of innovative process technologies
• Promote the Green New Deal to save energy and utilize new energy sources to reduce CO2 emissions
• Expand the use of renewable energies by proactively introducing solar power genera-tion, biomass boilers, and other equipment to diversify energy sources, effectively use resources, and prevent global warming
KPI metrics and goals
• Reduce CO2 emissions from business activities (Scope 1 & 2) to 774 t-CO2 in FY2022 (30% reduction from FY2015), 410 t-CO2 in FY2030 (63% reduction from FY2015), and zero in 2050
• Realize a decarbonized society through promoting energy cre-ation and energy conservation
• 35% reduction in greenhouse gas (GHG) emissions (Scope 1 & 2) by FY2030 (compared to FY2017)
• 10% reduction in greenhouse gas emissions by FY2020 (com-pared to FY2013)
• Long-term targets are under consideration and are expected to be disclosed by May 2021
Reduction of CO2 emissions from business activities
• 30% reduction in CO2 emissions in FY2031 (compared to FY2013)
• Raise domestic and overseas forest certified area to 221,467 ha by FY2021
• Reach company-made tree sapling planted area of 7,920 ha and supplied volume of 7.26 million trees by FY2021
• Achieve chips and pellets for main fuel use handling volume of 1,363,930 tons by FY2021
• Raise percentage of sustainable timber and timber products handled to 100% by FY2021
• Achieve company-made seedling unit sales of 500,000 in FY2021
Based on the Environmental Action Plan, consider and implement all possible measures from a company-wide perspective, including energy conservation and the introduction of renewable energy sources, while taking into account external factors such as techno-logical innovation, markets, and regulations
• 30% reduction of CO2 emissions in FY2030 (compared to FY2016)
• Raise electric and hybrid vehicle sales to over 40% of global sales by 2030
• Establish a method for calculating the amount of CO2 absorbed by tree planting as a KPI, then set a target
• Reduce global lifecycle CO2 emissions per tire by at least 14% in FY2022 compared to FY2005
• Raise sales ratio of Blue Value® products to at least 30% in FY2025
• Number of Blue Value® RoseValue® products newly certified
• Blue Value® product-related investment, R&D expenses
• Greenhouse gas emissions reduction rate by FY2030: at least 25.4% (compared to FY2005)
• Energy consumption rate reduction target: Maintain a five-year average reduction rate of at least 1%
• Increase CO2 emissions reduction contribution to the value chain by 8 times by FY2030 (compared to FY2013) through expanding the supply of Green Innovation products
• Reduce GHG emissions per unit of operating revenue by 30% by FY2030 (compared to FY2013)
• 26% reduction in CO2 emissions (Scope 1 & 2) by FY2030 (com-pared to FY2013)
• Increase the ratio of renewable energy sources to 25% by FY2030
• 30% reduction in CO2 emissions in FY2030 (compared to FY2013)
Climate-Related Green Finance
Utilizing Trust Functions to Provide Green Finance Investment Opportunities to Investors
SuMi TRUST Bank has been promoting initiatives to con-nect the investment needs of investors managing environ-mentally friendly funds with the demand for funds for proj-ects that contribute to the mitigation of climate change through trusts. In 2018, we launched the Green Trust, a jointly operated designated money trust that is used to raise funds for the new acquisition of green buildings*1 and the refinancing of existing debts. In the same year, we also started issuing and selling the trust beneficiary rights backed by project finance receivables of renewable energy power generation projects. From then on, we have continued to provide high quality investment opportuni-ties by facilitating investor access to green projects.
The Green Trusts we have launched to date comply with the Green Bond Principles and received the highest possi-ble rating of "Green 1" in the Japan Credit Rating Agency
Green Bonds
In September 2018, SuMi TRUST Bank issued its first euro-denominated green bond for overseas markets. The 2-year floating-rate green bond targeting mainly ESG investors and asset managers in Europe raised €500 million. The proceeds from the green bond have been fully allocated to loans for 16 renewable energy projects involving wind power and solar power, contributing to a reduction of 169,595 tons*3 of CO2 per year (as of the end
(JCR) Green Bond Evaluation. Loans from the Green Trust also comply with the Green Loan Principles and received the highest possible rating of "Green 1" in JCR Green Loan Evaluation. As for the Green Trust launched in October 2019, the funds are used to fund green buildings that have been awarded the CASBEE S rank, with SuMi Trust Bank supporting the acquisition of certification.
SuMi TRUST Bank has set a new long-term target for sustainable finance*2 to be achieved by FY2030, and will actively provide funding for green projects from its bank-ing account and further promote financial intermediation utilizing its trust function.
*1 Eco friendly real estate with good environmental performance and good manage-ment that has acquired external certification by CASBEE for Real Estate or a similar rating system
*2 For more information on long-term targets for sustainable finance, please refer to page 60
of March 2020). The status of the appropriation of funds from the proceeds of the green bond issuance and the environmental improvement results are disclosed on the website of SuMi TRUST Holdings*4 and have been certi-fied by a third-party certification body.
*3 Figure calculated by multiplying the CO2 reduction effects of the projects by SuMi
TRUST Bank's loan ratio
*4 For details,https://www.smth.jp/en/csr/greenbond/index.html
Environmental Improvement Impact of Projects Financed with Proceeds from the Green Bond Issuance
Category
Renewable energyWind power generation
Solar power generation
Subcategory
Canada, Belgium
Total
Country
Japan
Number of projects
3
13 16
Annual power output (MWh)
2,665,500
314,011 2,979,511
Solar Power Generation Project Loans for Infrastructure Investment Corporations
In November 2019, Sumitomo Mitsui Trust Bank, Limited (SMTB) originated a loan of approximately ¥27.9 billion to an infrastructure fund that mainly invests in renewable energy power generation facilities, and the funds will be used to finance the acquisition of a large-scale solar power generation plant. Through this acquisition, the infrastruc-ture fund is expected to become one of the largest listed infrastructure funds in Japan with total assets of approxi-mately ¥58.8 billion. This loan is a syndicated loan involv-ing a total of 13 financial institutions, including regional
Annual CO2 reduction (metric tons)Company contribution
494,988
145,499 640,487
51,929
117,666 169,595
financial institutions, and is the largest loan that a listed infrastructure fund has ever received in Japan. The land (superficies) and power generation equipment included in the large-scale solar power plant acquisition funded by this loan is under a trust beneficiary right scheme with SuMi TRUST Bank as the trustee. This is the first time for SuMi TRUST Bank to be the trustee of a property with superficies. SuMi TRUST Bank will actively support the listed infrastructure fund market, mainly through financing, for the development and expansion of renewable energy.
Renewable Energy Finance
SuMi TRUST Bank promotes the adoption of largescale proj-ects such as wind and solar power generation through proj-ect finance and it has set up renewable energy funds and manages for the purpose of investing exclusively in large-scale renewable energy projects.
In project finance, both offshore and onshore wind power generation projects overseas are increasingly largescale endeavors. In Japan, the number of mega-solar projects to which we provide project finance has further increased. The total potential generation capacity of projects where SuMi TRUST Bank has been involved in supplying project finance comes to 17,321MW. These projects, with annual power out-put of 45,294GWh, reduced annual CO2 emissions by 20.47
million metric tons.
Total potential generation capacity of projects supported by renewable energy funds came to 341MW, with annual power output of 390GWh and annual CO2 emission reduc-tions of 210,000 metric tons.
In financing for installations, Sumitomo Mitsui Trust Panasonic Finance Co., Ltd. mainly provides support for mega-solar projects. Since the feed-in-tariff (FIT) system was introduced, it has supported 30 mega-solar installations with total potential generation capacity of 52MW.
Contributions to CO2 Reduction via Renewable Energy Finance Subtotals may not Add up to Totals due to Rounding
Category of power generation Solar
Wind Offshore wind Biomass Other Total
Number of projects 118
Potential capacity
(MW) 4,664
Annual output CO2 reduction effect (GWh/year)
7,550
30 21
5,213 6,832
11,054 22,991
9 1 179
492 120 17,321
3,655 44 45,294
(10,000t/year)
Eligibility inclusion: Project financing involving SuMi TRUST Bank (inside and outside Japan)
386
463 1,007
190 2 2,047
Capacity calculations: Numerical values of potential generation capacity, gigawatt hours of output per year, and CO2 reduction effect cover all projects in each category.
Renewable Energy Funds and Investment Products for Investors
SuMi TRUST Bank established and operates funds that invest in renewable energy power generation projects. In addition, SuMi TRUST Bank launched a domestic renewable energy business investment fund for institutional investors.
As of September 2020, these funds have supplied equity funding for 26 mega-solar power generation projects and 1 wind power generation projects with total potential gener-
Renewable Energy Fund Scheme
Generation project PJ 1
Nonrecourse loans | Investment from an anonymous partnership (1) |
Generation project PJ 2
Nonrecourse loans | Investment from an anonymous partnership (2) |
N-REIF No. 1 Investment
Limited Partnership
Calculation Method for CO2 Reduction Effect
Annual CO2 reduction (CO2 metric tons per year) = annual power output (kWh/year) x emission coefficient (CO2 metric tons/kWh)
• As a general rule, we use the forecast value for annual pow-er output.
• As a general rule for domestic projects, we use the most recently calculated emission coefficient of each electrici-ty supplier in the electricity supply system of the region where each project is located.
• As a general rule for overseas projects, we use the Interna-tional Energy Agency (IEA) calculation tools provided at the GHG protocol website to calculate reduction equivalents.
ation capacity of 341MW. Of the ¥132.8 billion in aggregate equity investment directed into these projects, our funds supplied total equity investment of ¥21.6 billion. These proj-ects generate annual power output of 390GWh, commensu-rate to CO2 emission reduction of over 210,000 metric tons.
*For CO2 emission reduction calculations, we use the emission coefficient of each electricity supplier in the electricity supply system of the region where each project is located.
Investment from an anonymous partnership (1)Investment from an anonymous partnership (2)
Limited liabilitySumitomo Mitsui Trust Bank, Limited
• We contribute by providing equity-like funding for the spread of renewable energy projects.
Investment from an anonymous partnership (3)
…
Unlimited liability
Sumitomo Mitsui Trust Investment Co., Ltd.
ITOCHU ENEX Co., Ltd.
• We are building up an investment track record in solar and wind power generation, and plan to broaden the scope of our renewable energy investments.
The first fund of the Domestic Renewable Energy Business Investment Fund for Institutional Investors was established as a trust in April 2018 with an AUM of ¥12.7 billion (¥11.5 bil-lion from external investors). The fund completed its invest-ment phase in April 2020 following investment in seven proj-ects and has moved into the management phase. The total
Characteristics of Trust Account Renewable Energy
Brown No. 1
power generation capacity of all the projects included in the first fund is 119 MW, with annual power output reaching 138 GW, commensurate to CO2 emission reduction of over 820,000 metric tons. We are currently considering the estab-lishment of a second fund.
• Managed assets include anonymous partnership investments in already-operating domestic solar power gen-eration projects (no development risks)
• Benefits from stable cash flow based on the feed-in tariff (FIT) system whereby renewable energy is purchased at a fixed price
• Projects that take steps to address global warming also contribute to the SDGs, ESG, and regional revitalization
Micro-Power Generation in Water Supply Systems
Sumitomo Mitsui Trust Panasonic Finance proposes ideas for adopting micro-power generation systems in water supply systems across Japan, and promotes global warming mitiga-tion measures and the use of natural energy in the regions.
In Japan's water supply systems, there is an enormous amount of energy that can be used from unutilized ver-tical drops in non-pressure flow pipes, surplus pressure in pumped supply pipes, and reduced pressure from pres-sure-reducing valves. The Group borrows water facilities
Characteristics of micro-power generation systems
from local governments to deliver a business financing scheme with no upfront investment costs by installing power generation systems under a leasing system.
As of November 2020, the highly efficient power genera-tion systems used in this scheme have been installed at 32 water facilities (including those scheduled to be installed) across Japan to produce a total 1,009kW of power. We expect annual power generation to reach 7,113MWh and annual CO2 emissions to be reduced by 3,912t-CO2.
High efficiency: Efficient power generation system developed with inverter controls Low cost: System configuration uses general-purpose pumps, low-cost magnets, and standardized parts
Compactness: Power generator and control device are stacked on top of each other to minimize installation space
Lease contracts
Small and Mid-Sized Power Generation in Rivers
Schematic Diagram
Sumitomo Mitsui Trust Panasonic
Finance
Japan's river systems have the potential to generate 8.9 million kW of electricity through the installation of small or mid-sized generators according to the results of a Ministry of the Environment survey. Sumitomo Mitsui Trust Panasonic
Schematic Diagram of Collaboration with Regional Banks
O&M provider
Provides lease
Project contrac | tor |
Design firm
Small and Mid-Sized Hydropower Potential, Actual Adoption Capacity
Potential aggregate output
Maximum aggregate potential in Japan*1
Potential with FIT system*1
Approved for installation post-FIT adoption*2
Installations post-FIT adoption*2
8.9GW
4.32GW 1.3GW
500MW
*1 Ministry of the Environment: FY2019 Report on the Commissioned Work for the
Development and Publication of Basic Zoning Information on Renewable Energy
*2 Agency for Natural Resources and Energy Procurement Price Estimation Committee
Materials
Characteristics of leasing system
(advantages for local governments)
• No upfront investment costs on project launch
• Power provider manages and maintains the system
• Stable lease revenue and receipt of property tax
Finance is helping to revitalize regional communities through joint initiatives with regional banks aiming to use each region's untapped hydropower potential.
Hydropower generation could be a source of renewable energy for Japan, which is blessed with many high-flow, steep-slope rivers. In cases where the feed-in-tariff (FIT) system is used, the maximum aggregate potential from installing small and mid-sized hydropower generators is estimated at 4,320MW.
Small and mid-sized power generators approved for installation since the FIT system's introduction have total output of 1.3GW, and of those, the ones in use have 500MW, indicating there is still scope for new installations.
It is possible to install hydropower generators that factor in the environment such as run-of-the-river small and mid-sized hydropower generators that use the shape of rivers or existing agricultural water supply channels and do not require building large dams.
Biomass Gas Generation
We support adoption of biomass gas generation facilities that convert food waste and other organic waste into biogas for electricity generation.
At a biomass gas power generator, organic waste-such as food waste, livestock urine and manure, and organic sludge from sewage and wastewater-is fermented and combustible gases, mainly methane, are extracted and used
Merits
• Curtails volume of waste produced, reduces waste disposal costs
• Earns income from reselling electricity via the FIT system
as fuel to generate electricity. Under the Food Recycling Law, the recovery of heat from food waste is recognized as a form of recycling provided certain conditions are met, and the power generated can be resold at a fixed price using the FIT scheme. The value of biomass gas systems is in improv-ing overall energy efficiency through the effective use of both electricity and heat.
• Curtails putrid odors due to fermentation, reduces release of bad smells to nearby areas
• Byproducts like post-fermentation, digested slurry can be recycled as a liquid fertilizer
• Food waste, food residues
Wastes eligible for usage
• Livestock urine and manure
• Organic sludge, etc. from sewage and wastewater
Mega-Solar Projects Using Leases
Using leases to fund solar facility installations keeps the upfront investment costs for mega-solar project construction at zero, and projects can earn stable income by using the feed-in-tariff (FIT) sys-tem to wholesale at a fixed price the electricity it generates to the power supply grid. Leases are thus an effective method of financing for mega-solar projects that ensures business plan soundness.
In addition to new projects, Sumitomo Mitsui Trust Panasonic Finance also provides lease-based financing options for fully opera-tional projects that have been put up for sale to investors (secondary transactions). And it also started a leasing and installment plan sup-port service for offshore floating mega-solar power plants.
The Group will continue to fuse its extensive know-how honed thus far with financial services to offer schemes that best meet the needs of increasingly sophisticated renewable energy projects.
Onsite Self-Consumption Solar Power Generation
We launched a service to supply renewable energy for self-consumption through solar power equipment installed on-site (on grounds or roof).
Sumitomo Mitsui Trust Panasonic Finance formed a partnership with an experienced solar power equipment manufacturer to help compa-nies develop an optimal investment plan based on their power utiliza-tion performance and to reduce their initial costs through subsidies. This venture helps companies reduce their own CO2 emissions and their "scope 3" greenhouse gas emissions, meets the needs of those participating in the SBT and RE100 initiatives, and contributes to the Japanese government's Low Carbon and Decarbonization initiatives.
Financing for ESCO Service Adoption
Sumitomo Mitsui Trust Panasonic Finance collaborates with energy service companies (ESCOs) to provide comprehensive energy conservation services from installation of energy-sav-ing equipment to maintenance and management.
ESCOs provide comprehensive services for energy saving and guarantee a level of energy savings. Through the use of
Outline of ESCO Concept
Prior to adoption of ESCO project
Proposal, capital investment plan, funding plan
Guarantee
Client profits |
Savings that go to ESCO vendor as fees |
Interest |
Initial investment |
Energy consumption or lighting, heating, and water utility expenses |
Repayment
After start of ESCO project
*Case where a client adopts a shared model, one form of an ESCO project
leases, aging facilities can be replaced at zero upfront cost and, in cases where certain conditions are met, subsidies can be utilized. ESCOs propose ideas that both help preserve the environment via energy conservation while reducing the costs of utilities such as water, lighting, and heating as well as operating and maintenance costs.
Example: ESCO Proposal for a General Hospital
Energy conservation menu
Heat source: Construct hybrid heat source system, install high-efficiency steam boiler
Air conditioning: Improve air conditioning control system, install variable air volume controls, install inverters
Lighting: Install LED lighting
Monitoring: Add energy management functions
Energy conservation subsidy (initial) ¥176,591,000
Projected boost to earnings (annual)
Lower water, lighting, and heating costs ¥80,468,000
Fees paid for ESCO project ¥77,598,000
Annual boost to earnings ¥2,870,000
Reduction to environmental impacts (annual)
CO2 reductions: 1,459t-CO2 (down 19.0%)
Electricity use reductions: 172,473kWh (down 7.7%)
Gas use reductions: 598,102(down 44.7%)
Water use reductions: 9,892m3 (down 41.9%)
(environmental impacts are estimates)
One-Stop Services for Energy-Saving Investment: Subsidy-Eligible Leases
We offer one-stop services that support all processes from planning for energy-saving investments to asset operation.
• Our one-stop service menu ranges from energy-saving assessments, examinations to identify energy-saving mea-sures, equipment selection, subsidy applications, and securing financing to maintenance services.
• The use of leasing means energy-saving equipment can be
Flow Chart Mapping Out the Use of Subsidies
National government/local public authority
Stages in the Subsidy Application Process
Examination of energy-saving primary proposalEnergy-saving assessment Energy-data provision
6-12 months before public application announcement
Examination of optimal energy-saving secondary proposal
3-6 months before public application announcement
installed with no upfront investment costs.
• Securing subsidies lowers upfront investment costs, enabling recipients to benefit even more from energy savings and cost reductions.
• We offer tailored proposals through partnerships with manufacturers and installers.
Main subsidy systems
• Subsidy for businesses that promote net zero energy build-ings (ZEB) and decarbonization at institutional facilities
• Subsidy for businesses accelerating the introduction of energy-efficient natural refrigerant equipment for the pur-pose of eliminating harmful CFCs and enabling the early realization of a low-carbon society
• Eco-Lease promotion project
*Certain conditions must be met to be eligible to apply for subsidies *Subsidy systems are subject to change
Management Board, etc. decide on energy-saving investment
1-3 months before public application announcement
Preparations to apply for subsidies
1 month before public application announcement
Subsidy application
1 month to 2 weeks before public application announcement (through public application period)
Support for CO2 Reduction of Buildings
Consulting to Support Applications for "CASBEE for Real Estate" Certification
CASBEE for Real Estate is an environmental performance evaluation system developed with the aim of increasing the stock of buildings with superior environmental performance in real estate market and promoting its use among investors for investment decision-making. There is extensive use of
Evaluation Categories in CASBEE for Real Estate
Energy/
Greenhouse gases
the system, especially among REITs and real estate compa-nies, and SuMi TRUST Bank has consulting businesses that support property owners applying for the CASBEE for Real Estate certification.
Construction-Phase Support for Environmental Considerations
Improving energy efficiency is the most important theme in the environmental performance of buildings. SuMi TRUST Bank in its construction consulting business provides advisory services on how to improve in a comprehensive manner the environmental performance of buildings in ways such as installing energy-saving systems, taking into account landscapes and ecosystems, extending building life spans, and adopting recycling systems.
There are some projects we advised that have been recognized and awarded subsidies by the "leading projects" program for sustainable buildings (formerly known as "leading projects for promoting CO2 reduction" program for housing and buildings), sponsored by the Ministry of Land, Infrastructure, Transport and Tourism (MLIT), and the "net zero energy building" experimental pilot program, sponsored by the Ministry of Economy, Trade, and Industry (METI).
An example of a building where we provide construction-phase support for environmental considerations
HIROSHIMA ORIZURU TOWER (major renovation)
(Selected as a "leading project for promoting CO2 reduction" for housing and buildings by the Japanese
Ministry of Land, Infrastructure and Transport)
Home Renovation Loans for Smart Houses
Homes have advanced so that they can wisely use electricity generated onsite; through our home renovation loans, we support remodeling homes into "smart houses."
A smart house can efficiently generate and store its own power supplies by combining solar PV panels, storage bat-tery units, and household fuel cells. Energy-saving functions that enable dwellers to control electricity consumption to match their lifestyles and weather conditions have improved. From 2019 there will be a huge influx of household solar power generation equipment for which the surplus electric-ity purchasing scheme has ended, therefore the conversion of existing homes into "smart houses" will become a key topic in addressing global warming.
With the liberalization of retail sales of electricity and gas
to households in Japan, energy and telecommunication sec-tor companies are increasingly partnering to provide bundled services such as combined sales of telecom or broadcast with electricity generated from various sources. There has also been progress in developing products that have multiple functions of housing, home appliances, and vehicles.
Since the system for purchasing surplus electricity from solar panels was established, Sumitomo Mitsui Trust Panasonic Finance has contributed to the adoption and spread of house-hold solar panels with its solar loans. The cumulative sum of solar loans it has executed as of September 2019 is ¥74 bil-lion. Through our partnerships with equipment vendors and installers, we support remodeling homes into "smart houses" with our renovation loans.
A smart house
Natural Capital (Biodiversity Issues)
The global environment is the foundation for sustaining the life of various living creatures. It comprises of natural capital, such as water, air, soil, as well as marine and terrestrial fauna and flora that are grown in such resources under the blessings of the sun. Humans also depend on natural capital and have utilized it to build social systems and develop the economy. In this process, however, humans have also caused significant consequences.
Natural capital is not inexhaustible. Supplies may be exhausted sooner or later unless we accurately track and manage our dependence and impacts on natural capital. This is closely interlinked with humans' day-to-day activities. For this rea-son, all SDGs are connected with natural capital. Primarily from the perspective of corporate activities, the Group focuses on natural capital in Japan, where we lay our business foundation, as well as natural capital outside Japan, where we rely on highly for the procurement of raw materials and parts. We have selected goals that contribute to proper dependence on and management of such natural capital.
What is Natural Capital?
Natural capital is made up of diverse living creatures and the water, soil, and air that sustain them. These are the foundation sustaining life on earth and conserving them needs to be prioritized ahead of everything else. The way we live depends on natural capital and the ecosystem services they provide. We thus feel continued wise use of natural resources which constitute natural capital over the long run goes beyond mere environmental conservation. It must extend to putting communities on a solid social foundation to enable sustainable economic development.
Five elements of natural capital
Biodiversity
Fauna
FloraWater
Soil
Air
Supporting services
Nutrient salts cycle, soil formation, primary production, etc.
Provisioning services
Food, fresh water, wood, fiber, fuel, etc.
Four categories of ecosystem services
KPIs for Solving the Challenges
Promotion of activities through proposals and seminars for clients Examination of green infrastructure finance Promotion of forestry trust
2019/2020
Target SDGs for Natural Capital Initiatives
Challenges for Achieving the Goals
• Deepening understanding of the importance of natural capital
• Establishing approaches for tracking companies' depen-dence and impact on natural capital
• Visualization of natural capital risks that lead to damaging corporate value
• Expanding financial transactions that contribute to solving companies' challenges related to natural capital
Initiatives for Solving the Challenges
• Appeal the importance of natural capital through various opportunities, such as through proposals and seminars for clients and education programs for schools.
• Contribute to establishing methodologies for appropriately managing dependence and impacts on natural capital, such as natural capital protocols.
• Identify natural capital risks that have serious impacts on the continuation of overseas procurement, businesses, and projects, and incorporate them into investment and loan pro-cesses from the ESG perspective.
• Taking into account that land is the foundation of natural capital in terrestrial ecosystems, strive to restore ecosystems that are suitable for various areas, ranging from mountainous regions to cities, and contribute to the formation of ecological networks.
• Promote investments, loans, and trusts related to natural capital.
2020/2021
Promotion of activities through proposals and seminars for clients Enhancement of information disclosure Enhancement of policies for specific sectors
Also refer to Natural Capital, a separately published version of this report.
URL:https://www.smth.jp/en/csr/report/2020/NC-E-all.pdf
Natural Capital Finance Alliance (formerly the Natural Capital Declaration)
SuMi TRUST Holdings became a signatory to the Natural Capital Declaration (NCD) proposed by the United Nations Environment Programme Finance Initiative (UNEP FI) at the United Nations Conference on Sustainable Development "Rio+20" held in Rio de Janeiro in June 2012. SuMi TRUST Holdings is the only financial institution in Japan to have
signed the declaration when it originally promulgated. The initiatives of NCD signatories have been expanded through NCD's reorganization into Natural Capital Finance Alliance (NCFA).
Commitment of Financial Institutions under the Natural Capital Finance Alliance (Excerpt) | We will support the development of methodologies that can integrate natural capital considerations into the decision-making processes for all financial products and services including loans, invest-ment, and insurance policies.
|
Sumitomo Mitsui Trust Holdings Action Guidelines for Preserving Biodiversity
1. Implementing Measures and Providing Support for Biodiversity Preservation
We will strive to actively protect rare and native species. In our role as a corporate citizen, we will work to support activities for the preservation of biodiversity.
2. Providing Products and Services
We will endeavor to develop and provide products and services that contribute to the preservation of biodiversity, by conduct-ing appropriate economic and social evaluations of the ecosys-tem and encouraging the sustainable use of living resources through our financial functions.
Major Initiatives in the Group's Business to Date
3. Collaboration with Stakeholders
We will engage in dialogue and cooperation with our stake-holders while working to preserve biodiversity.
4. Education and Training
We will ensure thorough implementation of these action guide-lines at all Group companies and will work to provide education and training aimed at the preservation of biodiversity.
5. Information Disclosure
We will actively disclose information about our efforts to pre-serve biodiversity.
2000 SuMi TRUST Bank is entrusted with the Keidanren Nature Conservation Fund, a charitable trust from the Keidanren Nature Conservation Council
2008 SuMi TRUST Holdings signs the Leadership Declaration of the Business and Biodiversity Initiative
SuMi TRUST Holdings establishes the Basic Policy for Addressing Biodiversity Issues (currently Action Guidelines for Preserving Biodiversity)
SuMi TRUST Bank translates the TEEB (The Economics of Ecosystems and Biodiversity) Interim Report
2010 Asset management company develops Ikimonogatari, a Japanese equity investment trust specializing in biodiversity
2012 SuMi TRUST Holdings signs the Natural Capital Declaration (now the Natural Capital Finance Alliance) proposed by UNEP FI at the United Nations Conference on Sustainable Development (Rio+20)
2013 SuMi TRUST Bank develops environmental rating loans with natural capital evaluation; SuMi TRUST Bank forms the the Natural Capital Study Group
2016 SuMi TRUST Bank signs the Equator Principles
2018 Asset management company joins Farm Animal Investment Risk & Return, an engagement organization working primarily with the fisheries and livestock industries
2019 SuMi TRUST Bank develops Positive Impact Finance (PIF)
2020 SuMi TRUST Bank establishes financing policies for specific sectors; SuMi TRUST Bank is entrusted with a forestry trust by Okayama Prefecture's Nishiawakura Village; Asset management company participates in working group TNFD (Task force for Nature-related Financial Disclosures)
S u m i t o m o M i t s u i Tr u s t H o l d i n g s , I n c .
Sustainability Report 2020/2021
Business and Biodiversity Initiative: Our Initiatives as a Leadership Declaration Signatory SuMi TRUST Holdings signed a leadership declaration under the Business and Biodiversity Initiative "Biodiversity in Good Company" at the ninth meeting of the Conference of the Parties (COP 9) to the Convention on Biological Diversity held in May 2008 in Germany. Since then, we have continued to carry out activities in line with the principles of the declaration, which was led by the German government.
S u m i t o m o M i t s u i Tr u s t H o l d i n g s , I n c . Sustainability Report 2020/2021
Declaration | Initiatives in 2019-2020 |
1. Analyzing corporate activities with regard to their impacts on biological diversity | We provided environmental rating loans with natural capital evaluation and Positive Impact Finance (PIF) solutions that comprehensively analyzes economic, social, and environmental impact of corporate activities, and also analyzed investee initiatives during our asset management company engagements. |
2. Including the protection of biological diversity within their envi-ronmental management system | In our Sustainability promotion system, we draw up a plan for each fiscal year on efforts related to natural capital and review their performance semiannually. |
3. Appointing a person in the company responsible for steering all activities in the biodiversity sector and reporting to the Management Board | The head of the Sustainability Management Department steers all activities and reports to the Executive Committee. |
4. Defining realistic, measurable objectives that are monitored and adjusted every two to three years | We set targets based on the challenges for achieving SDG goals (see page 68) |
5. Publishing activities and achievements in the biodiversity sector in the company's annual, environmental, and/or corporate social responsibility report | We published the Natural Capital Report (this report) |
6. Informing suppliers about the company's biodiversity objectives and integrating suppliers accordingly and step by step | We continue to pay attention to procurement of copier paper and office supplies linked to illegal logging in tropical rain forests, which has large detrimental impacts on biodiversity. In the asset management business, we also engaged as an investor in tropical rainforests. In the PIF solutions business, we continued to set and monitor nature-related KPIs with our borrowers. |
7. Exploring the potential for cooperation with scientific institutions, nongovernmental organizations (NGOs) and/ or governmental institutions with the aim of deepening dialogue and continu-ously improving the corporate management system vis-a-vis the biodiversity domain | We became a signatory to the Principles for Positive Impact Finance of the United Nations Environment Programme Finance Initiative (UNEP FI) and actively partic-ipated in initiatives aimed at establishing and enhancing methods for evaluating natural capital impacts. |
Stakeholder Comments
As an excellent company in the Business and Biodiversity Initiative "Biodiversity in Good Company"
and services that help conserve biodiversity and business activities that are linked to the Sustainable Development Goals (SDGs). This kind of integrated thinking is essential for sustainable economic transformation and tangible improvements in the financial sector. We are proud that Sumitomo Mitsui Trust Holdings, Inc. is a member of the Business and Biodiversity Initiative "Biodiversity in Good Company."
As a founding member of the Business and Biodiversity Initiative "Biodiversity in Good Company," Sumitomo Mitsui Trust Holdings, Inc. has been an early advocate of the importance of biodiversity in the economy. Especially recently, the importance of nature is becoming more recognized by the financial sector. When the Action Guidelines for the Conservation of Biodiversity were formulated in 2011, Sumitomo Mitsui Trust Holdings, Inc. was one of the first financial institutions in Japan to incorporate biodiversity into its business activities. Since then, they have continued to work tirelessly to develop products
Natural Capital Products and Services
Evaluating Supply Chain Impacts on Natural Capital
Natural Capital Evaluation
Natural capital evaluation is a service that calculates natural capital dependence arising from corporate activities and esti-mates the degree of impact for each procured item and for each country and region, tracing back through supply chain.
Example of output from a Natural Capital Evaluation Tool
Breakdown of water usage volume in each region by sector
Ratio of land usage area by region
5%10%
GHG* emissions volume is likewise calculated by sector and region.
* GHG stands for greenhouse gases
Benefits of Natural Capital Evaluation
(1) Gaining quantitative risk data related to the supply chain that can be used for management judgments
Can obtain previously hidden risk data related to environmental impacts and the use of resources that are essential to global supply chain management
(2) Obtaining quantitative data on environmental impacts that can be used for information disclosure
Can use the data for scope 3 responses to surveys such as the Carbon Disclosure Project (CDP) survey and for disclosures in integrated corporate reports
Initiatives for Loans
Environmental Rating Loans with Evaluation of Natural Capital Preservation
The sustainable use of natural capital as resources is vital for a company to continue its business. There is a growing aware-ness that natural capital-related procurement risk manage-ment across the global supply chain is an indispensable part of management strategy. In April 2013, SuMi TRUST Bank launched its Environmental Rating Loans with Evaluation of
Environmental rating loans
Evaluation items for environmental rating
Strategy and environmental management
Climate change/global warming mitigation efforts | Introduction |
Resource recycling/pollution countermeasures | of qualitative |
evaluation | |
Environmental friendliness of products and environmental business | related to |
Environmentally friendly properties | natural capital |
Biodiversity |
Terms of loan decided based on environmental rating
Natural Capital Preservation, which embed the concept of evaluating impacts on natural capital and a company's initia-tives into the environmental-rating evaluation process that assesses its environmental measures. This is the world's first attempt to incorporate natural capital evaluation into loan criteria, and the Bank's efforts have been cited in Japanese government environmental white papers and European Commission reports as an example of leading-edge practice.
Natural capital evaluation (optional) Five elements of natural capital Fauna Flora Water Soil Air Three items targeted in natural capital evaluation Water usage volumeLand usage areaGHG emissions volume Reporting on environmental burden and risk information in upstream supply chains |
Note: "Optional" refers to ESCHER calculations provided by PwC Sustainability LLC that are not available without loan products.
S u m i t o m o M i t s u i Tr u s t H o l d i n g s , I n c .
Sustainability Report 2020/2021
Establish Policies for Specific Sectors
SuMi TRUST Bank has established policies for specific sec-tors that promote businesses that have a large impact on society, and prohibits or restricts investments and loans to companies and projects that have a negative impact on society, while sharing awareness of environmental
Positive Impact Finance
SuMi TRUST Bank is working on Positive Impact Finance (PIF), which considers not only the relationship with clients but also the relationship between clients and society, and helps transition to a sustainable society by ensuring an optimal relationship (see pages 50-51). Many companies
Examples of Natural Capital-related KPIs set as a part of PIF
and social issues and contributing to building a sustain-able society through engagement with loan clients. With regard to natural capital, we have developed policies relating to forests and palm oil (see page 46).
have some level of exposure to natural capital in their sup-ply chain. SuMi TRUST Bank supports client initiatives by identifying these impacts, setting KPIs for reducing neg-ative impacts and increasing positive impacts, and moni-toring them.
Client | Theme | Description | KPI (metrics and goals) |
Fuji Oil Group headquarters | Biodiversity and ecosystem services |
|
|
Sumitomo Forestry Co., Ltd. | Sourcing that considers sustainability and biodiversity |
|
|
Nippon Paper Industries Co., Ltd. | Sourcing that considers sustainability and biodiversity |
|
|
Sumitomo Rubber Industries, Ltd. | Greening |
|
|
Toray Industries, Inc. | Providing clean water and air | Realizing a world where everyone has access to clean water and air and the natural environment is restored. |
|
Sumitomo Dainippon Pharma Co., Ltd. | Biodiversity conservation |
|
|
Adoption of the Equator Principles in Project Finance SuMi TRUST Bank has adopted the Equator Principles, a guideline for private-sector financial institutions, in its decision-making process for risk management in loans such as project financing. SuMi TRUST Bank understands that financing for large-scale projects such as mining development, oil and gas development, power plants, petrochemical plants, and infrastructure development
may indirectly have a negative impact on natural capi-tal. In addition, we believe that it is our responsibility as a sound financial institution to avoid or reduce the risk of deterioration in the value of our loan portfolio in the event that a project is discontinued due to environmental or social issues (see pages 47-48).
Initiatives for Loans
Sumitomo Mitsui Trust Asset Management (SMTAM) established its ESG investment policy in September 2019 and iden-tified ESG materiality in the policy. Based on this policy, we have established 12 new ESG themes with the aim of further advancing our top-down engagement activities.
Themes Closely Related to Natural Capital
The expansion of corporate economic activities is linked to negative impacts on natural capital and biodiversity, andthe challenge is to shift to economic activities that take natural capital and biodiversity into consideration. In particular, food shortages, water shortages, and the biodiversity crisis are global issues, and reducing food waste, securing water resources, and protecting nature are material issues for corporate sustainability.
Among the various forms of environmental destruction and pollution, deforestation and marine plastic waste issues are as material as climate change. Deforestation caused by illegal logging and agricultural land development for food reduces CO2 absorption, raising concerns over the negative effects on climate change and biodiversity. In addition, the marine plastic waste issue is a material issue with wide ranging significance, affecting efforts such as marine pollution prevention, biodiversity, and the realization of a recycling-oriented economy. We believe that it is essential to strengthen initiatives in all industries with supply chain exposure.
SMTAM selects target companies for each ESG theme from its investee companies using a top-down approach. It then sets long-term targets by ESG theme as well as interim targets by backcasting in accordance with the ESG issues and the level of ESG management of each com-pany, and promotes engagement activities. In addition, we manage the progress of engagement in four stages by ESG theme, and monitor the implementation of measures all the way through to issue resolution. By combining this top-down engagement approach with a business-ori-ented bottom-up engagement approach, we carry out constructive engagement activities that are unique toSMTAM and promote medium- to long-term sustainable growth that balances corporate value with social and envi-ronmental value for investee companies.
To make this engagement more efficient, SMTAM par-ticipates as a lead manager in three major working groups (palm oil, water resources, and forest resources) organized by the Principles for Responsible Investment (PRI). Additionally, we participate in the Sustainable Protein Supply Chains pro-gram, a joint engagement program developed by fishery and livestock industry-focused engagement organization FAIRR.
initiative
Top-down engagement ESG 12 topics
New
See page 19 of SMTAM's "Stewardship Report 2020/2021" for details.
Discussions with the Brazilian government and the Central Bank of Brazil on the development and management of rainforests in the Amazon basin
In June 2020, as part of the activities of the Forest Conservation Engagement Working Group of the PRI (Principles for Responsible Investment), to which asset management company Sumitomo Mitsui Trust Asset Management (SMTAM) is a signatory, and CERES, an environmental NGO, we submitted an open letter to the Brazilian government requesting that it effectively disclose information on the conservation and management of the Amazon forest and its development status, and began engagement activities with the Brazilian government. As an asset manager, SuMi TRUST Asset Management is the only company in Japan that has supported the project from the beginning, and is working as one of the lead managers of the project. In July 2020, we held a total of four meetings with the Vice President of Brazil and the Governor of the Central Bank of Brazil. In addition to the meetings held through the working group, we also had individual discussions with the Governor of the Central Bank of Brazil as well as the Brazilian Ambassador to Japan. At this meeting, SuMi TRUST Asset Management President Hishida conveyed our unique approach, which differs from European companies that have suggested the possibility of suspending investments and loans, and we had a meaningful exchange of opinions based on the history of economic exchange between Japan and Brazil.
The Amazon and Amazon biome, which covers 60% of the country's land area, is a prominent tropical rainforest area, and environ-mental conservation in this region is required to address climate change and maintain biodiversity. Currently, investors are increasingly concerned about the rapid progress of deforestation due to the administration's policy of promoting liberalization of development in the Amazon basin, specifically advocating liberalization and deregulation of agricultural development. Through this discussion, SuMi TRUST Asset Management argued that increasing the transparency and verifiability of the country's policies will enhance the effective-ness and credibility of its policies, and received a positive response from Brazil.
SuMi TRUST Asset Management will continue discussions with the Brazilian government and its ambassador to Japan, and will support and monitor the efforts of the government to balance environmental conservation and economic development in the Amazon basin while carefully considering the government's initiatives. In addition, a new PRI working group will be formed to continue discus-sions with the Brazilian government, and SuMi TRUST Asset Management will continue its discussions with the Brazilian government as a core member of the group.
Initiatives in the Real Estate Business
Construction Consulting on How to Foster Biodiversity and Ecosystems
Through the use of CASBEE for Real Estate*1 and JHEP*2 together, the environmental per-formance of properties can be improved across many dimensions, helping to increase overall property value.
At SuMi TRUST Bank, biodiversity consider-ations are included in our menu of construction consulting services.
*1 CASBEE for Real Estate: The comprehensive assessment system for built environment efficiency (CASBEE) certification is an environmen-tal performance evaluation system for buildings being developed and promoted in Japan under the guidance of the Ministry of Land, Infrastructure, Transport and Tourism (MLIT). SuMi TRUST Bank is involved in the establishment of criteria.
*2 JHEP: Japan Habitat Evaluation and Certification Program is a system is a system developed by the Ecosystem Conservation Society-Japan to quantitatively evaluate and certify efforts to contribute to the conserva-tion and restoration of biodiversity.
CASBEE for Real Estate
(CASBEE: the comprehensive assessment system for built environment efficiency)
Key focus points for evaluation certification
• Better energy efficiency and environmental sustainability
• Better intellectual and labor productivity, better indoor environments
Evaluation items in CASBEE for Real Estate
1 Energy/greenhouse gases
2 Water
3 Use of resources/safety
4 Biodiversity/sustainable site
5 Indoor environment
Increases Overall Property Value
A building's environmental performance is evaluated on many dimensions such as energy savings, global warming mitigation mea-sures, biodiversity, durability, and resource efficiency.
The value of buildings decline with age but the biodiversity value increases every year as the ecosystem surrounding it forms. These offsetting lifecycle patterns can maintain the combined value of the building and site together as a whole. Ecological networks can be created through the connection of local communities, neighboring buildings and green nature reserves.
JHEP
(JHEP: Japan Habitat Evaluation and
Certification Program)
Key focus points for evaluation certification
• Improve natural value of biodiversi-ty versus pre-project situation
• Habitat well suited to native flora/ fauna
JHEP certification requirements for new evaluations
1 No net loss in natural value of biodiversity
2 Quality of biodiversity exceeds the minimum specified level
3 No use of specified foreign invasive species
Forestry Trust
SuMi TRUST Bank developed a forestry trust scheme as a means to solve social problems in forestry management and maintenance-such as the lack of personnel, inher-itance issues, abandonment, and forests with unknown owners-and was entrusted to manage an individually owned forest in Okayama Prefecture's Nishiawakura Village as the first commercial trust in Japan in August 2020. We will entrust management activities to forestry entities on behalf of the owner, manage revenues, and distribute dividends from earnings gained through the periodic thinning of forests and other sources.
The forestry trust is an SDG initiative unique to trust banks that promotes the restoration of forestry and the revitalization of local communities.
Initiatives in Okayama Prefecture's Nishiawakura Village
The 100-year Vision of Forest Initiative
Approximately 95% of Nishiawakura Village is forest, of which 85% is planted cedar and cypress. Based on the understanding that revitalization of the forestry indus-try is necessary for the creation of a sustainable village,Nishiawakura Village launched the 100-year Vision of Forest initiative to pass on the trees planted by prede-cessors 50 years ago to future generations 100 years from now.
100-year Forest of Nishiawakura
Today's forest
50 years from now
Year 1
25 years
50 years
75 years
100 years
In the region that once thrived on the forestry industry, saplings were planted for the future generation roughly 50 years ago.
The dense concentration of planted saplings grew quickly to become tower-ing tall trees.
The density of the forest will be thinned out to some degree so that more sunlight can reach the forest floor.
Owing to the thick tree trunks and well-extended roots, the forest will retain moisture to allow under-growth to thrive. Slowly but surely, birds will begin to make their home in the forest.
In the wellestablished hillside forest, creeks will form naturally and flow through the trees. Wildlife will also make its home here.
Source: 100-year Vision of Forest, Nishiawakura village office website
Building a Supply Chain for Wood
We have established a system whereby the village takes custody of the forest from the owner and carries out thin-ning and work road maintenance. With the help of local ventures, we are building a supply chain spanning produc-tion to sales by creating an environment where thinned wood can be processed and turned into products.
In addition, we are promoting the introduction of renewable energy that utilizes forest resources, such as biomass boilers and small hydroelectric power genera-tors, to encourage the circulation of local resources and the economy.
Forestry Trust Business
To address the presence of landowners who live in urban areas but own forests in Nishiawakura Village, as well as forests whose owners are unknown, we have developed a forestry trust scheme that consolidates and enhances the efficiency of forestry operations.
Forestry Trust Scheme
Forest Owner
(settlor)
Individuals who own forests in Nishiawakura Village
Forestry TrustBeneficial rights and dividends
SuMi TRUST
Bank (trustee)
Smart Precision Forestry Initiatives
To further improve the productivity of the forestry industry, SuMi TRUST Bank is supporting the realization of smart precision forestry utilizing drones and ICT in collaboration with Shinshu University and other organizations. In addi-Under the forestry trust, the forest owner (settlor) entrusts SuMi TRUST Bank (trustee) with all aspects of for-est business management and administration, including forest planning and operation, management of business revenue, and distribution of dividends to the forest owner.
Grant management licenseOperating revenue
Hyakumori Corporation
A company specializ-ing in forest manage-ment that carries out forestry operations in Nishiawakura Village.
Nishiawakura
Village, Okayama Prefecture
tion, to revitalize the forestry industry, we are working with related parties to improve the entire supply chain in order to boost efficiency and add value not only upstream, but also midstream and downstream.
UpstreamConsolidation and expansion of raw wood production
• New forest management system
• Maintenance of forest land register
• Financial support
• High performance machine imple-mentation
• Priority road network development
• Increase shipment lot size
MidstreamImprovement in processing productivity
• Scale and streamline lumber and plywood mills
• Implementation support for high performance processing machines
• Implementation support for facilities that improve distribution efficiency
DownstreamExpand demand for and promote the use of wood
• Improve environment to encourage the use of wood
• Capture demand for imported materials
• Promote biomass utilization
• Capture demand for alternative materials
• Implement measures to promote mid- and high-rise wooden buildings
• Promote exports
ICT-driven Smart Precision Forestry
Environmentally Friendly Property
Also refer to Environmentally Friendly Property, a separately published version of this report.
URL: XXXXXXXXXXXX
The amount of CO2 emitted from the construction and operation of buildings is said to account for approximately 40% of all CO2 emissions in Japan, including indirect emissions. In addition, as humans spend a long time indoors, the indoor environment affects the health and productivity of the occupants. Given the significant impact of real estate property on the three aspects of the environment, society, and the economy, integrated initiatives for achieving the SDGs are thought to be highly beneficial for improving the sustainability of the three aspects.
The Group aims to promote and increase properties that give consideration to the environment, such as cities and buildings with high energy and resource efficiency and buildings that contribute to improving production efficiency. We will advance initiatives that contribute to increasing property values through features such as high environmental performance that reduce risk and enhance income.
Challenges for Achieving the goals | Initiatives for Solving the Challenges |
• Making the environmental performance of properties | • Support acquisition of environmental performance cer- |
visible | tifications, such as CASBEE for Real Estate and CASBEE |
• Making the added value of environmentally friendly | for Urban Development. |
properties visible | • Support the realization of environmentally friendly con- |
• Increasing awareness in the real estate market about the | struction through construction consulting and assistance |
added value of environmentally friendly properties | to help subsidy applicants qualify. |
• Expanding corporate initiatives toward creating added | • Promote and raise awareness of environmentally friendly |
value | properties through committees and lectures. |
• Create businesses that contribute to promoting envi- | |
ronmentally friendly properties, including green finance | |
and environmentally friendly property funds. |
KPIs for Solving the Challenges (Aggregate total so far: 200 certifications)
Promotion and awareness-raising of environmentally friendly properties
(Articles, lectures, etc.)
At least 10 activities a year
Target SDGs for Environmentally Friendly Property Initiatives
Environment
(Energy, water, resources, biodiversity, etc.)
Society
(Indoor environment, health/comfort, safety/security, etc.)
Economy
(Property value, corporate value, etc.)
Main Initiatives as a Pioneer in Environmentally Friendly Property
[Inception] A commemorative paper entitled "A Note on Environmental Value Added for Real Estate" for the 10th anniversary of Tokyo Association of Real Estate Appraisers received grand prize in 2005 (see page 83) | [Initiatives related to CASBEE]
|
[Organizing Study Groups]
| [Initiatives related to Real Estate Appraisal and Evaluation]
|
[Initiatives linked to UNEP]
| [Initiatives with National and Local Authorities]
|
Business Lineup for Environmentally Friendly Property
1. Consulting to Support Applications for "CASBEE for Real Estate" Certification
Initiatives Related to CASBEE for Real Estate
CASBEE for Real Estate is a system developed in 2012 for the purpose of promoting widespread use of environmental building performance evaluations in the real estate market. While maintaining consistency with CASBEE® certifications for buildings (new construction and existing buildings), CASBEE for Real Estate sharply narrows down evaluation items and takes into account consistency with environmen-tal performance items that are focused on overseas.
CASBEE for Real Estate can be also used for GRESB assessment (see page 77), so use of this track is spreading,
Table
Evaluation Items in CASBEE for Real Estate (In the Case of Office Buildings)
Target setting and monitoring/energy saving standards/O&M*3 system, usage and emissions intensity (calculated values), usage and emissions intensity (actual values), natural energy forms
especially among REITs and real estate companies that are sensitive to sustainability concerns.
It consists of evaluation items that help show initiatives related to the SDGs (Sustainable Development Goals) and ESG (environmental, social, and governance) issues.
SuMi TRUST Bank is a participant in developing CASBEE for Real Estate as an organizer of the subcommittee for CASBEE property appraisal, which is sponsored by the Institute for Building Environment and Energy Conservation.
Target setting and monitoring/O&M system, water usage volume (calculated values), water usage volume (results)
Conforms to new earthquake resistance standards, high earthquake resistance/seismic isolation and vibration damping, etc., usage of recycled materials, service life of structure materials, necessary renewal interval for main equipment functions, higher self-sufficiency ratio (electricity, etc.), operation and maintenance
No use of invasive alien species, enhancement of biodiversity, soil environment quality/regeneration of brownfields, public transportation access, measures in preparation for natural disaster risks
Attainment of building sanitation and environmental management standards, use of daylight, natural ventilation function, view
*1 Underlined items are prerequisites (they must be met to pass an evaluation).
*2 Items in red are related to universal metrics the United Nations Environment Programme's Sustainable Buildings and Climate Initiative (UNEP SBCI) is studying. *3 O&M: operation and maintenance
Consulting to Support Applications for CASBEE for Real Estate Certification
SuMi TRUST Bank engages in consulting services to support applications for the CASBEE for Real Estate certification.
CASBEE accredited professionals with the proper qual-ification support the selection of real estate applying for certification while also evaluating the environmental per-formance of real estate and supporting the submission of applications for certification to certifying bodies.
Problem Discovery and Proposals for Improvement via CASBEE for Real Estate
SuMi TRUST Bank offers proposals on initiatives that work in concert with CASBEE for Real Estate evalu- ations to identify problems and sug- gest improvements aimed at bol- stering environmental performance.
We will continue to provide ser-
vices that use the CASBEE systemin our business promoting environmentally friendly property.
To help with corporate initiatives aimed at solving sustainability issues, SuMi TRUST Bank offers consulting to support applications for CASBEE for Real Estate certification.
Number of CASBEE for Real Estate certified properties (as of end-september 2020): 377
Of these, the number of properties that SuMi TRUST Bank provided consulting services to: 203 (Of these, 182 are listed real estate investment corporations (J-REITs), 11 are private J-REITs, 4 are corporations, 4 are special purpose companies, etc., and 2 are life insurance companies.)
A CASBEE evaluation sheet
Number of CASBEE for Real Estate certified properties
(as of end-September 2020)
Examples: Consulting to Support Applications for CASBEE for Real Estate Certification
Owners
Isetan Mitsukoshi Holdings
Invesco Office J-REIT, Inc.
Japan Retail Fund Investment Corporation
Daiwa House REIT Investment Corporation
ORIX JREIT Inc.
Activia Properties Inc.
Industrial & Infrastructure Fund Investment Corporation
Heiwa Real Estate REIT, Inc.
Isetan Shinjuku Main StoreAqua Dojima Eastmozo wonder cityACROSSMALL ShinkamagayaFelicita Sanjo KiyamachiA-FLAG BIJUTSUKAN DORIIIF Noda Logistics CenterHF SAKURADORI BUILDING
Premier Investment Corporation GranparkJapan Prime Realty Investment Corporation
AEON REIT Investment Corporation
GLP J-REIT
Global One Real Estate Investment Corp.
JPR Musashikosugi Bldg.
AEON MALL Tamadaira woodsGLP YokohamaShinagawa Seaside West Tower
mozo wonder city
Property
HF SAKURADORI BUILDING
ACROSSMALL Shinkamagaya
IIF Noda Logistics Center
GranparkShinagawa Seaside West Tower
Rank Certification date
S
S
S
S
S
S
2016/3/4 2020/1/31 2020/2/28 2020/2/28 2020/3/4 2020/3/19 2020/3/26 2020/5/29
Isetan Shinjuku Main Store
SS
S
SS
S
S
2020/6/30 2020/7/31 2020/8/31 2020/9/30
2020/6/30
Aqua Dojima East
Felicita Sanjo Kiyamachi
A-FLAG BIJUTSUKAN DORI
AEON MALL Tamadaira woodsJPR Musashikosugi Bldg.
GLP Yokohama
2. Consulting Services to Support Applications for CASBEE-Wellness Office Certification
What is CASBEE-Wellness Office?
Given the spread of ESG investment in the real estate market and the needs for health & productivity management and reforms aimed at improving intellectual productivity, a new office model assessment system was launched in June 2019.
SuMi TRUST Bank has been involved in the development of CASBEE-Wellness Office through an MLIT study group tasked with promoting ESG investment and the Smart Wellness Office Research Committee. The Bank carries out evaluations using CASBEE-Wellness Office, and offers support services such as evaluation, certification application advisory and review handling services.
Case Study A
Assessment Components under CASBEE-WO
CategoryBasic performanceOperational management
ProgramAssessment componentHealth, comfort
Space, interior, sound, light, air & ventilation, refreshment, exercise
User-friendlinessMobility & communication, telecommunicationsSafety
Disaster readiness, countermea-sures for harmful substances, water quality, security
Maintenance Maintenance Satisfaction
Satisfaction Exercise program
Round-Cross Roppongi is an office building owned by ORIX JREIT Inc. The fourth and fifth floors are serviced offices operated by ORIX. For this project, a CASBEE-Wellness Office evaluation was conducted for the entire building's common areas and facilities, along with the sections dedicated to the serviced offices, and was successfully certified. In addition to the wide variety of seating arrangements and meeting spaces to meet the demands of different work situations, the building was recognized for its care-ful management regarding disinfection and air quality control, which have become increasingly important recently.
Round-Cross Roppongi
3. Consulting to Support Applications for "CASBEE for Urban Development" Certification
CASBEE® (Comprehensive Assessment System for Built Environment Efficiency) is a system for evaluating the envi-ronmental performance of buildings and urban develop-ment, which is being developed and promoted in Japan under the leadership of the Ministry of Land, Infrastructure, Transport and Tourism. It is comprised of tools, such as CASBEE for Buildings and CASBEE for Real Estate.
Among CASBEE®'s various tools, CASBEE for Urban Development is an environmental performance evalua-tion for assessing the overall development of housing and commercial areas (urban development).
Case Study B
LIST GARDEN nococo-town
It evaluates environmental quality from the three aspects of the environment, society, and the economy as well as reduction in the environmental footprint.
It consists of evaluation items that help show initiatives related to the SDGs (Sustainable Development Goals) and ESG (environmental, social, and governance) issues.
SuMi TRUST Bank carries out environmental perfor-mance evaluations using CASBEE for Urban Development, and offers support services such as certification applica-tion advisory and review handling services.
In July 2018, LIST GARDEN nococo-town, a large eco-town in Totsuka, Yokohama City, became the first ever recipient of the highest rank certification ("S" rank) for CASBEE for Urban Development.
CASBEE for Urban Development's certification results are made public. They are introduced in mediums such as magazines and exhibited in model rooms, and help show that the eco-town offers quality housing, promotes the neighborhood's vitalization, and proactively contrib-utes to the local community.
4. Construction-Phase Support for Environmental Considerations
The first bank in Japan to develop a land trust product in the 1980s, SuMi TRUST Bank has been involved in manag-ing and developing many buildings and condominiums, and it provides construction consulting services based on knowhow from such projects.
We offer advice relating to factoring in environmentalconsiderations in our menu of construction consulting ser-vices such as on the installation of energy-saving systems in buildings, ways to take into account landscapes and ecosystems, extension of building life spans, and adop-tion of recycling systems.
Examples: Construction-Phase Support for Environmental Considerations
Company NameLocationClarionChuo Labour BankKanagawa Prefecture OfficeSaitama PrefectureTokyoAEON MALLTokyoFUJI
Ehime PrefectureCommercial facility
Ito-Yokado
Toyo Seikan Group HoldingsKanagawa Prefecture Commercial facilityTokyo
Daikin Industries Osaka PrefectureOffice, R&D facility*1
Hiroshima Mazda
Hiroshima Prefecture deck, product sales and dining facilities*1
Anritsu
Kanagawa Prefecture Office*2
Shimane Bank
Shimane PrefectureUse
Headquarters office and research centerCentral branchCommercial facilityOffice*1
Office, observationCentral branch*1
10 floors above ground, 1 rooftop floor
1 basement floor, 9 floors above ground,
2 rooftop floors
1 basement floor, 7 floors above ground, 1 rooftop floor
5 floors above ground
3 floors above ground
4 floors above ground
2 basement floors, 21 floors above ground, 1 rooftop floor
1 basement floor, 6 floors above ground
2 basement floors, 14 floors above ground Approx. 11,500 m2
7 floors above ground
1 basement floor, 13 floors above ground
*1 Selected for the MLIT-led "leading projects" program for sustainable buildings. *2 Selected for the METI-led "net zero energy building" experimental pilot program.
As interest in environmental issues has grown, so has the number of properties applying for CASBEE® certification or providing notification of self-evaluation in the past sev-eral years. In addition, some projects have been selected by the Ministry of Land, Infrastructure, Transport and
Case Study C
HIROSHIMA ORIZURU TOWER
Number of Floors
Approx. 19,000 m2
Approx. 6,000 m2
Approx. 10,000 m2
Approx. 150,000 m2
Approx. 140,000 m2
Approx. 29,000 m2
Approx. 72,400 m2
Approx. 48,000 m2
Approx. 28,000 m2
Approx. 12,000 m2
Tourism (MLIT) for the "leading projects" program for sus-tainable buildings and by the Ministry of Economy, Trade, and Industry (METI) for the "net zero energy building" experimental pilot program.
Situated adjacent to the Atomic Bomb Dome (Hiroshima Peace Memorial), this office build-ing underwent full-scale renovations. The existing framework was reused and the building enlarged to accommodate a higher level of earthquake resistance. A large canopy, louvers, and a "spiral slope" walking ramp were also built into the newly expanded sections. The building reduces its CO2 footprint by utilizing various energy-saving features, including solar shading and cross ventilation. Visitors to the building can access the HIROSHIMA HILL observation deck under the giant canopy on the roof, enjoy numerous activities in ORIZURU Square, and learn about its CO2 reduction initiatives.
The ORIZURU TOWER was selected for the MLIT's leading projects program for promot-ing CO2 reduction in housing and buildings.
Floor Area
Target Rank
A
(certification completed)A (self-evaluation)B+ (notification)A
(certification completed)
B+
(certification completed)
B+ (notification)
S
(certification completed)S (self-evaluation)A (notification)S (self-evaluation)S (self-evaluation)
5. Making the Value of Smart Towns and Cities Visible, Supporting Concept Formulation
Developing smart towns and cities that adopt next-gen-eration "smart community*" social systems at the local level is an important step from the standpoint of regional development. In the past few years, these towns and cities have combined a series of complex reforms from changes to citizen lifestyles and local transportation systems to the introduction of area energy networks, including the recapture of heat and unused energy, to go together with effective use of electricity.
*See METI's website for details.
To realize smart towns and cities, it is necessary to cre-ate economic value added commensurate with higher costs while establishing clear targets from the basic plan-ning stage onward for environmental, social, and gover-nance (ESG) issues for the city or town.
SuMi TRUST Bank supports projects for smart towns and cities on many fronts such as devising frameworks that link various initiatives on environmental contributions etc. to economic value added and formulating project concepts. Through our provision of financial functions such as home mortgages, we also help projects get executed.
Concept Diagram for Making the Value of Smart Towns Visible
Town Goals
Initiatives to Achieve GoalsCreation of Environmentally
Friendly Property Value
Securing district landscape, sunlight and ventilation
Reduce utility costs
Solar power cells, fuel cells
Reduce operation and management costs
High-efficiency facilities, home energy management systems (HEMS)
Create safe, comfortable and healthy living environment
Storage batteries, emergency-use power generators
Reduce risks from disasters and blackoutsSecurity
(district-wide, individual buildings)
Lower interest rates on home mortgages
Fujisawa Sustainable Smart Town
The "Fujisawa Sustainable Smart Town" is a project currently being carried out by Panasonic Corporation at the former site of Panasonic's Fujisawa factory.
Panasonic Corporation, Fujisawa City, and eleven partner companies, including SuMi TRUST Bank, are collaborating to promote the project, which marked the town's opening in spring 2014.
SuMi TRUST Bank is participating in various ways, such as design-ing smart town evaluation indicators (environmentally friendly property values) and creating project-specific product plans for environmentally friendly housing loans.
This project is also praised for its community-wide comprehensive CO2 reduction efforts together with town management. It was selected for subsidies under the MLIT-led "leading projects" program for sus-tainable buildings (formerly known as the 2013 No.1 "leading projects for promoting CO2 reduction" program for housing and buildings).
Delivering Value
Added Value of Environmentally Friendly Property 1 -Added Value Derives from Property Profitability
It is often said environmental friendly property "costs more than usual and is difficult to invest in," but price theory in real estate investment suggests such buildings are able to generate added value equal to or greater than their additional cost.
From the perspective of profitability (how much and how long do properties generate steady profits), a prop-erty's price derives from net income (revenue minus costs) divided by the real estate capitalization rate. The greater gross income including rents is, and the lower the costs of utilities, maintenance, and building management are, the higher net income is, and so the higher the valuation of a property. In addition, stable properties with less income fluctuation risk are awarded higher valuations as investors require a lower yield from them.
Environmentally friendly property can earn highernet income by reducing utility expenses via energy sav-ings and maintenance and operating expenses via the enhanced durability of parts and materials. Furthermore, such buildings can also generate higher gross income on higher rents stemming from higher productivity enabled by their enhanced office environments and the cachet boost from their environmental credentials.
Furthermore, environmentally friendly property is less exposed to future environment-related tax hikes or tougher regulations, so the capitalization rate for such buildings factors in less environmental risk. A lower depreciation rate resulting from a longer life span as well as enhanced appeal as environmentally friendly can also lower the capitalization rate.
For the reasons above, SuMi TRUST Bank believes that environmentally friendly property will realize added value.
Conceptual Diagram of Environmental Added Value (1) Prices Focused on the "Profitability" of Real Estate
Prices focused on the "profitability" of real estate
The price of real estate*= the net income generated by real estate the real estate capitalization rate
* In the case of direct capitalization
Environmentally conscious measures
Energy conservation design
Benefits of environmentally conscious measures
Reduction of utilities and other costs
Avoidance of toxic substances Preservation and creation of biological environments Longer building lifespans, recycling of building materials etc.
Increase in rental income and sales
Reduction of the depreciation ratio
Reduction of risk of declining income
Becoming a landmark
etc.
Environmental Risk | Environmental Added Value |
Depreciation Ratio | |
Environmental Risk | |
Market Risk | Depreciation Ratio |
Business Risk | Market Risk |
Business Risk | |
Other Risks | |
Other Risks | |
General Financial Asset Yield | General Financial Asset Yield |
Conceptual Diagram of Environmental Added Value (2) Reflection in Net Income
Ordinary real estate cost Gross income from real estate
Conceptual Diagram of Environmental Added Value (3) Reflection in Capitalization Rate
Risk premium on
environmentally friendly property
(before depreciation)
Real estate capitalization rate
Ordinary risk premium on real estate
extended property
Net income of
environmentally
friendly property
fluctuates less due to
future tax raises and
tighter regulations
Lowers depreciation
ratio through
lifespan
Improves image
through environ-
ment-consciousnessSource: Partial revision of "A Note on Environmental Value Added for Real Estate," a commemorative paper written by Masato Ito in 2005 for the 10th anniversary of Tokyo Association of Real Estate Appraisers
Added Value of Environmentally Friendly Property 2 -Helping to Make Added Value Visible
Study on Economic Impact of Buildings with CASBEE Evaluations
Given the paucity of research in Japan showing a correla-tion between the environmental performance of buildings and economic benefits, SuMi TRUST Bank implemented a study into the economic impact of buildings with CASBEE® evaluations as the leader of a working group examining economic benefits under the aegis of the Japan Sustainable Building Consortium's Smart
Wellness Office Research Committee. The study analyzed buildings with CASBEE® certification and non-evaluated buildings and found average market rents in build-ings with CASBEE certifications or appli-cations were about 3.6% higher. This sug-
Correlation between CASBEE Score and Market Rents (Single Regression Analysis)
(Estimated rent: yen per 3.3 m2)
Source: Data is from a fiscal year 2014 report issued by Japan Sustainable Building Consortium's Smart Wellness
Office Research Committee.
gests each point in the CASBEE scoring system (adjusted so 100 points is the maximum score) equates to a market rent 0.5% higher than the average. These results were announced at symposiums, the Architecture Institute of Japan convention, and other events.
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
40.0
50.0
60.0
70.0
80.0
(Scores of building population)
90.0
Comparison of Average Rents: Yen per 3.3 m2
25,000 20,000 15,000 10,000 5,000
0
Tokyo's 23 wards Yokohama Nagoya Osaka | |||||||
24,701 | 15,553 | 13,961 | 11,286 | 12,980 | 9,660 | 14,976 | 8,707 |
CASBEE | Total Tokyo | CASBEE | Total | CASBEE | Total | CASBEE | Total |
buildings | 23-ward | buildings | urban | buildings | urban | buildings | urban |
sample | sample | sample | sample |
Source: Data is from a fiscal year 2014 report issued by Japan Sustainable Building Consortium's Smart Wellness Office Research Committee.
Summary of Multiple Regression Analysis Results for CASBEE Buildings
CASBEE evaluations, etc.
Sample size
CASBEE flag (whether or not buildings have CASBEE evaluations) CASBEE rank (five-level evaluation rankings)
517
517
CASBEE score (evaluation score with a maximum score of 100) Service performance (Q2) score
183
183
Intellectual productivity evaluation
100.0
Coefficients
564.160
263.525
78.974
1702.667
180
Differential in average rent
+3.64%
+1.70%
+0.46%
+9.9%
319.318
+1.86%
Source: Data is from a fiscal year 2014 report issued by Japan Sustainable Building Consortium's Smart Wellness Office Research Committee.
Environmental Burden Reduction Measures
Through its natural resources, CO2 emissions, waste gen-eration from the use of energy, paper and the like in its business activities, the Group impacts natural capital and the environment, and it works to reduce environmental impacts that arise from its business activities and recog-nizes reducing negative impacts on society is an important matter. The Group also factors in environmental and social consideration by investee and lendee companies into its decision-making processes for loans and investment. With the aim of realizing smaller environmental impacts on social as a whole, we promote both initiatives to reduce direct environmental impacts from our business activities and initiatives to reduce indirect environmental impacts from investee and lendee companies in our portfolios.
SDGs have established goals and targets relating to a host of environmental issues. Our initiatives aimed atresponding to environmental issues arising from the Group's business activities are linked to the 17 SDG goals: reduc-tion of waste, including chemical substances such as PCBs, CFCs, and generic waste such as paper waste, and properly managing, recycling and disposing of waste (Goal 3); effi-cient use of water (Goal 6); use of renewable energy gener-ated by solar panels newly installed on four branch offices since 2013 (Goal 7); certification of the head office building under the "CASBEE* for Real Estate" system (Goal 11); CSR procurement that guards against buying paper from sources deemed at risk for human rights and environmental abuses from tropical rainforest logging (Goal 12, Goal 15); and energy conservation activities aimed mainly at reduc-ing electricity use (Goal 13). Every year, SuMi TRUST Bank provides e-learning on environmental management for all employees to deepen their understanding.
1. Initiatives to Reduce Environment Impacts
EMS Integrated with Framework for Operational Efficiencies The Group operates environmental management systems (EMS) based on a framework that promotes operational efficiencies via initiatives for reducing the environmen-tal impacts of its business activities. Through common activities relating to time (labor productivity), materials (resource productivity), and costs (efficiency), our aim is the simultaneous attainment of the goals of operational efficiency, environmental burden reduction, and cost reduction. For each activity aimed at achieving gains in operational efficiency mainly via reforms to operational flows and reorganizing shifts to reduce overtime hours, we seek to operate systems to harvest benefits from those activities such as lower paper consumption and less elec-tricity consumption from the use of lighting and air-condi-tioning during overtime hours.
We target the following to reduce our environmental impacts: (1) reducing electricity consumption (CO2 emis-sions), (2) reducing paper consumption, (3) reducing waste disposal volume, and (4) promoting green procurement (CSR procurement). We implement the promotion of operational efficiency at all branches, which are all work-ing to promote awareness on reducing environmental impacts. All branches and departments are currently pro-moting operational efficiency and making every effort to raise awareness about reducing environmental impacts. For problems that our stand-alone initiatives are unlikely to deliver a solution, we are stepping up our supply chain management efforts in the area of CSR procurement, for example by requesting suppliers to change their materials.
Examples of Initiatives Aimed at Concurrent Achievement of Greater Operational Efficiency, Lower Environmental Burden, and Lower Costs
Initiative example
Paperless meetings
Lighter work load (e.g. prepar-ing copies, replacing materials) and fewer work hours; prevent information leaks
Even out work allocation and manage time to reduce over-time (encourage people to leave work at a set time, create leave-work-early days)
Effects from greater efficiency
Less overtime means more self-initiated activities during off hours
Spend less on purchasing paper, reduce waste disposal costsLess overtime trims personnel costs and lowers electricity costs (reduced use of lighting and air-conditioning)
Effects from lower costs
Effects from lower eco-burden
Conserve environment on lower paper use, less waste disposalHelp mitigate global warming via reduced electricity use
2. Initiatives to Achieve Zero CO2 Emissions
Targeting 50% reduction in CO2 emissions at SuMi TRUST Bank by FY2030 and zero emissions by FY2050
Establishment of Medium- and Long-Term Targets for CO2 Emissions Reduction
With the aim of contributing to the mitigation of climate change, the Group has established medium- to long-term reduction targets for CO2 emissions generated from the head office, computer centers, branch offices, and other office buildings due to the business activities of the Group's core company, SuMi TRUST Bank.
The aim of the Paris Agreement is to hold the increase in the global average temperature to well below 2°C above pre-industrial levels and to pursue efforts to limit the increase to 1.5°C. In Japan and elsewhere, global ini-tiatives are currently being implemented in an effort to achieve this goal mainly by aiming to realize net-zero CO2 emissions by fiscal 2050.
As a signatory to the PRB and PRI, the SuMi TRUST Group engages in sustainable finance and ESG investment practices and we therefore have a responsibility to help solve environmental problems through business activities and reduce our environmental footprint as stated in our Sustainability Policy.
As for our medium- and long-term targets, not only will we aim to achieve the global common goal of zero emis-sions by fiscal 2050, we have also set our sights on a 50% reduction in emissions by the milestone year of fiscal 2030 (compared to 2019). In setting this goal, we reference the Science Based Targets initiative-the global standard of reduction targets for working towards the goal of the Paris Agreement-which calls for companies to reduce their emissions by at least 4.2% per year in order to limit global warming to 1.5°C.
Initiatives for Achieving FY2030 Target
Around 80% of SuMi TRUST Bank's CO2 emissions derive from purchased electricity, while some 10% is generated by the combustion of utility gas through in-house power generation. Accordingly, it aims to halve its emissions mainly by adopting electricity-related measures.
The Bank will aim to reach this goal through its own independent efforts to conserve energy use and by con-tributing to the initiatives of broader society; for example, by promoting the use of renewable energy.
(1) Saving Energy by Streamlining Operations and
Using More Efficient Equipment
SuMi TRUST Bank expects to achieve a reduction of roughly 10% by streamlining operations (mainly by curbing overtime), installing more efficient equipment (upgrading servers and air conditioners, switching to cloud computing, etc.) at its computer center, and reducing floor space in the Head Office building and branches. When deciding on equipment upgrades, we will also evaluate the degree of improvement in energy efficiency in terms of CO2 emis-sions reduction and promote systematic reduction measures.
(2) Contributing to a Lower Electric Power Emission
Coefficient through Increased Uptake of Renewable Energy The greater uptake of renewable energy for Japan's electric power encourages the decarbonization of electricity and can therefore lower the country's overall electric power emission coefficient. The SuMi TRUST Group contributes to the greater adoption of renewable energy by leveraging its trust and finance functions, which ultimately leads to a reduction in CO2 emissions at SuMi TRUST Bank. The implementation of this initiative in soci-ety at large will likely cut emissions by around 10%.
(3) Adoption of Renewable Energy by SuMi TRUST Bank By switching the power we purchase to renewable energy sourc-es, we expect to reduce CO2 emissions by at least 30%.
CO2 Emissions since SuMi TRUST Bank's Establishment and Future Targets
SuMi TRUST Bank's Approach to Reducing CO2 Emissions The Group is striving to reduce its environmental impacts in the form of both inputs such as electricity and gas used for business activities and outputs like CO2 emitted as a result of those activities. As SuMi TRUST Bank is subject to the Act on the Rational Use of Energy, we calculate the volume of energy consumption and CO2 emissions at all of our offices across Japan using a common system. Since fiscal 2015 our total energy consumption for business activities has steadily declined every year, representing a 20.0% reduction over the last five years. In fiscal 2019, total electricity consumption at all sites in Japan came to 54 million kWh, down 2.2% from 56 million kWh the previous year. City gas consumption was 1.8 million m3, almost unchanged from the previous year. The reduction in electricity consumption is due to the promotion of energy saving at our large office buildings and the impact of branch mergers. At the Fuchu Building, where energy consumption is the highest among the Group's facilities, we achieved significant results by diligently switching off air con-ditioners when employees left the building and by raising awareness about such efforts by providing feedback to each department in the form of data on electricity use.
As for CO2 emissions-the driver of global warming-we succeeded in lowering our annual emissions to 31,327 t-CO2
Energy Consumption and CO2 Emissions (Domestic Offices)
Energy use
Total energy consumption (heat amount)
Total energy consumption (crude oil equivalent) Energy consumption intensity
Electric power
Utility gas
CO2 emissions Greenhouse gas emissions Adjusted greenhouse gas emissions Emissions intensity
Adjusted emissions intensity Scope 1 emissions
Scope 2 emissions
GJ kk/m2 thousand kWh thousand m3
in fiscal 2019, a 38.1% reduction compared to the peak of 50,605 t-CO2 recorded in fiscal 2013. Both scope 1 and scope 2 emissions have decreased significantly, declining 11.6% and 30.7%, respectively, from fiscal 2015. Even though total floor area has decreased due to the discontinued use of some large buildings and the merger of branches, emissions intensity per floor space in fiscal 2019 came to 0.085 t-CO2/m2, which rep-resents a 17.5% reduction compared to fiscal 2015.
The three large buildings in the Tokyo metropolitan area-namely the head office, Fuchu, and Shiba buildings- are subject to the mandatory reductions in CO2 emissions prescribed under the Tokyo Metropolitan Government's Environmental Preservation Ordinance. We continue to steadily reduce our emissions, and over the five years of the second plan period (FY2015 to FY2019), we reduced emis-sions by 91,726 t-CO2, a substantial excess reduction of 60,348 t-CO2 over the mandatory reduction level of 31,378 t-CO2. We achieved the target for the second plan period without using our 47,540 t-CO2 worth of emission credits gained from overachieving targets in the first plan period (FY2010 to FY2014). For the third plan period (FY2020 to FY2024), the mandatory reduction targets will be stricter, but we will promote initiatives to achieve them.
FY2015
846,829
21,848
0.051
71,206
2,153
FY2015
t-CO2
43,816
t-CO2
43,470
t-CO2/m2
0.103
t-CO2/m2
0.102
t-CO2
5,002
t-CO2
FY2016
801,370
20,675
0.049
66,742
2,107
FY2016
40,833
40,393
0.098
0.097
4,907
38,813
FY2017
736,011
18,989
0.047
60,444
1,996
FY2017
37,068
36,240
0.093
0.091
4,575
35,925
FY2018
688,949
17,774
0.048
56,003
1,869
FY2018
33,504
32,864
0.090
0.088
4,362
32,493
FY2019
677,157
17,470
0.047
54,753
1,893
FY2019
31,327
30,840
0.085
0.084
4,421
29,142
26,906
Scope of calculations: Offices of SuMi TRUST Bank in Japan subject to the Act on the Rational Use of Energy. Group companies, including Sumitomo Mitsui Trust Asset Management, are tenants in some office buildings.
CO2 Emissions at Buildings Subject to Tokyo Metropolitan Ordinance on Environmental Preservation
FY2015 | FY2016 | FY2017 | FY2018 | FY2019 | Total | ||
Base emissions | t-CO2 | 51,733 | 52,511 | 41,123 | 41,123 | 41,123 | 227,613 |
Emissions upper limit | t-CO2 | 44,402 | 45,048 | 35,595 | 35,595 | 35,595 | 196,235 |
Mandatory reductions | t-CO2 | 7,331 | 7,463 | 5,528 | 5,528 | 5,528 | 31,378 |
CO2 emissions | t-CO2 | 31,735 | 30,550 | 24,926 | 24,806 | 23,870 | 135,887 |
Emission reductions | t-CO2 | 19,998 | 21,961 | 16,197 | 16,317 | 17,253 | 91,726 |
Excess reductions | t-CO2 | 12,667 | 14,498 | 10,669 | 10,789 | 11,725 | 60,348 |
Second Plan Period
The figures in the table show emission reductions at SuMi TRUST Bank's four office buildings (Fuchu Building, Shiba Building, Chofu Building, and Meguro Building), along with the head office building, all of which are subject to mandatory emission reductions under the Tokyo Cap-and-Trade Program prescribed in the Tokyo Metropolitan Ordinance on Environmental Preservation.
The Chofu Building and Meguro Building were excluded from these results starting in fiscal year 2017.
The mandatory reduction ratio is 6% for the head office and 17% for other buildings.
The head office is a multi-tenant building and reduction ratios for each tenant have not been set.
The Group carried over emission credits (from excess emission reductions in the first plan period) worth 47,540 t-CO2 to the second plan period. Emissions have been verified by a third-party assessment body.
Achievement Status of Medium- to Long-Term Targets through FY2020
Our Group has been promoting initiatives to reduce elec-tricity consumption in accordance with the medium- to long-term targets for FY2020 set by the Japanese Bankers Association as part of its initiatives for the banking indus-
Medium- to Long-Term Environmental Targets for SuMi TRUST Bank
try. As for the reduction target for electricity use per total floor area called for by the Japanese Bankers Association, as of FY2019 we have achieved a considerable decrease of 29.7% compared to FY2009.
CO2 reduction
(reduction of electricity consumption)Reduce electricity consumption rate (electricity consumption/total floor area) in fiscal year 2020 by 10.5% compared to fiscal year 2009.
(Sumitomo Mitsui Trust Bank)
Attainment Status of Medium- to Long-Term Environmental Targets Related to Electricity Use Intensity
Electricity use intensity
CO2 emissions intensity
kWh/m2 Compared to FY2009 t-CO2/m2 Compared to FY2009
Fiscal year 2009 figures were calculated from each intensity's pre-merger total.
FY2009
FY2016
213.31 - 0.087 -
FY2017
161.06 Down 24.5% 0.081 Down 6.9%
152.60 Down 28.5% 0.076 Down 12.7%
FY2018
FY2019
151.32 Down 29.1% 0.072 Down 17.1%
149.93 Down 29.7% 0.067 Down 22.9%
3. Other Initiatives to Reduce Our Environmental Impacts
We reduced the amount of paper we used in FY2019 by 30 recycled paper for copier machines and make every effort tons year on year (-4.2%) to 676 tons. We will continue to to reduce our total waste output and make efficient use of work on reducing our paper usage by promoting activities recycling to promote the establishment of a recycling-ori-that improve operational efficiency. The volume of waste paper output was reduced by 90 tons year on year and we continue to maintain a 100% waste paper recycling rate. Other waste output rose 16.3% year on year to 336 tons, but the recycling rate increased to 62%, the highest level in the last five years. We will continue purchasing 100%
Performance in Paper Use, Water Use, Waste Output and Recycling
ented society. Additionally, we will endeavor to carry out proper management and disposal of equipment and chem-ical substances imposed on business operators under laws such as the Act on Special Measures concerning Promotion of Proper Treatment of PCB Wastes and the Act on Rational Use and Proper Management of Fluorocarbons.
FY2016 | FY2017 | FY2018 | FY2019 | |||
Paper use | t | 726 | 712 | 738 | 706 | 676 |
Recycled paper | t | 526 | 596 | 566 | 568 | 531 |
Water use | thousand m3 | 166 | 166 | 139 | 127 | 122 |
Total waste output | t | 1,347 | 1,756 | 1,332 | 1,304 | 1,268 |
Paper output | t | 946 | 1,280 | 1,050 | 1,025 | 933 |
Recycled volume | t | 930 | 1,280 | 1,050 | 1,025 | 933 |
Recycled rate | % | 98 | 100 | 100 | 100 | 100 |
Other waste output | t | 401 | 477 | 282 | 289 | 336 |
Recycled volume | t | 124 | 132 | 115 | 137 | 207 |
Recycle rate | % | 31 | 28 | 41 | 47 | 62 |
Tabulation scope: Base buildings (excludes some branches in the case of water use)
4. CSR Procurement
FY2015
Goal 12 of the SDGs, "Responsible Consumption and Production," aims to ensure sustainable manufacturing and consumption patterns, and calls on consumers to engage in activities that lead to sustainable management and efficient use of natural resources, prevention of soil, air and water pollution, and waste reduction.
The Sumitomo Mitsui Trust Group strives to give pro-curement priority to goods and services that factor inconsideration for the environment and society based on its Basic Policy on the Social Responsibility of Sumitomo Mitsui Trust Group (Sustainability Policy). Through its cooperation with suppliers who care about the environ-ment and society and efforts to spread CSR procurement, the Group seeks to contribute to sustainable social devel-opment as a corporate group trusted by the public.
CSR Procurement Policy
Papers, stationery goods, fixtures and equipment used by SuMi TRUST Holdings in its businesses have been procured through a long supply chain that begins with the mining of resources and extends to its processing, manufactur-ing and sales. Throughout this process, it is a duty of con-sumers to procure products and services that have been designed not to pollute the environment or cause human rights issues. SuMi TRUST Group has formulated a CSR procurement policy to promote procurement that gives consideration to the environment and society.
1. Fair Transactions
We select suppliers through a fair and transparent method by taking comprehensive account of economic rationality, appropriate quality, delivery punctuality, compliance with social norms, consideration for social challenges and consideration for the environment.
We do not provide profits to or impose undue disadvantages on specific clients without due reason.
2. Compliance with Laws, Regulations, etc.
We respect laws and social norms in procurement and never violate them in any case. We are not involved with antisocial forces in any way and reject unjust demands.
3. Consideration for Social Challenges
We strive to conduct transactions with and procure products and services from suppliers who respect basic human rights, give consid-eration to industrial safety and health and avoid violations of human rights, such as unjust discrimination, forced labor and child labor.
4. Consideration for the Environment
We strive to conduct transactions with and procure products and services from suppliers who promote efforts to reduce the envi-ronmental burden and contribute to mitigating and easing envi-ronmental problems, including climate change and biodiversity problems.
5. Cooperation with Suppliers
We seek cooperation from and promote cooperative initiatives with suppliers in order to give consideration to social challenges and the environment across supply chains in our procurement activities.
Measures to Address Plastic Garbage
Ocean pollution caused by "marine plastic garbage" washed into from rivers and elsewhere is a global problem which has an enormous impact on marine ecosystems, and on industries such as fisheries and tourism. Waste materials have only increased with the pursuit of eco-nomic growth and lifestyle convenience. Our Group has established the "SuMi TRUST Group Zero Plastic Waste Declaration" as concrete action against this global marine pollution problem. SuMi TRUST Bank does not provide items such as shopping bags and straws with purchases at the convenience stores operated for employees in our large office buildings. We also display posters about gar-bage sorting in our office buildings, in a concerted effort to send a heads-up message for better garbage sorting.
In addition, to reduce the amount of plastic garbage generated by our clients, the entire Group is promoting the use of graphan, a pulp material that can be disposed of without separation, as the material for the win-dow portion of window envelopes used in busi-ness operations and for sending mail to clients.
Sustainable Use of Paper
SuMi TRUST Bank regards destruction of ecosystems and logging in tropical rainforests to supply raw materials for paper as a serious issue. Along with other corporate paper users that share its concern and the World Wide Fund for Nature Japan (WWF Japan), the Bank has established the Consortium for Sustainable Paper Use. With the aim of pro-moting the spread of sustainable paper use throughout society, member companies share how their initiatives are progressing and ask their suppliers to supply them paper products that are environmentally and socially sound. The consortium launched in 2013 with five member companies has grown to ten companies as of October 2019.
Consortium for the Sustainable Use of Paper
Rather than a group of companies that manufacture or sell paper, the consortium's members are companies and organizations that purchase and use printed material for product packaging or promo-tional materials, as well as copier paper, envelopes and other paper products. Participating companies are urged to formulate and carry out responsible procurement policies. By responsibly managing pro-curement of paper, companies whose position is nearer to consumers' seek to encourage more sustainable use of paper not only among consumers and consuming companies farther down the supply chain, but also among upstream businesses.
Consortium for Sustainable Paper Use Policies on Paper Procurement
• Prioritize use of recycled paper and reliable verification systems
• Do not use paper from sources that destroy forests with high pro-tection value
• Use paper that has been produced through appropriate proce-dures, from logging of raw wood in compli-ance with laws in the country of origin
• Do not procure products from business opera-tors connected to significant environmental or social problems
5. Initiatives at Group Companies
Nikko Asset Management calculated the company's CO2 emissions based on data on electricity, transportation, and business travel at its offices around the world, and con-firmed that the company's total CO2 emissions for FY2019 were 6,274.1 metric tons, 6.75 metric tons per employee, and 62.07 metric tons per billion yen in sales.
Based on these results, the company decided to partic-ipate in a carbon offset project to offset CO2 emissions. The funds that Nikko AM provided for offsetting CO2 emissions were used for solar power generation projects in India and wind power generation projects in China to enhance the energy mix. As a result, Nikko AM received a certification for achieving carbon neutrality in FY2019, as it did in FY2018. By participating in these projects, Nikko AM has been able to contribute to three of its priority areas: environment and climate, reducing inequalities, and diversity and inclusion, not only by providing stable energy, but also by creating sus-tainable jobs in the region, improv-
ing healthcare and sanitation, and enhancing educational opportuni-ties for local communities.
Furthermore, upon calculating CO2 emissions, the com-pany confirmed that over 70% of the CO2 emissions from its business operations were attributable to domestic and international air travel, as shown in the graph below. Taking this into consideration, Nikko AM introduced the carbon offset programs operated by each airline to its employees and suggested ways to reduce CO2 emissions during business trips, including by raising awareness of the fact that the amount of CO2 emitted varies depending on cabin class, as the amount of space allocated varies for each passenger.
In addition, 100% of the electricity used in Nikko AM's London and Edinburgh offices have come from renewable sources since 2019. Although Nikko AM plans to con-tinue offsetting its greenhouse gas emissions in FY2021 and beyond by participating in carbon offset projects, it believes that engaging in internally driven initiatives to reduce emissions is paramount.
Carbon Neutral
Organisation
Nikko Asset Group Breakdown of CO2 emissions
Nikko Asset Management's Three Environmental Policies
Increase green investors
1.5%
0.8%
As flows of funds through socially responsible funds (SRIs) are very significant for preservation of the environment, Nikko Asset Management strives to increase green investors.
Promote office activities such as energy and resource conservation
Airplane use
Lighting, heating, and water utility expenses
Company car use
Train use
Other
Nikko Asset Management strives to promote energy and resource conservation and recycling of waste and expand green procurement in offices. Nikko Asset Management also strives to prevent environmental pollution by complying with laws, regulations and other requirements related to the environment.
Develop information disclosure
Based on the recognition that it is extremely important from the perspective of the preservation of the environment that information disclosure related to the environment takes hold and develops as a social system, Nikko Asset Management develops information disclosure by actively disclosing information concerning its environment-related initiatives, including the environmental policies.
The Tokyo Head Office has been recording and analyz-ing environment-related indices for several years. In addi-tion to recycling rainwater and wastewater, the building
Environmental Performance of Nikko AM (Tokyo Head Office)
facilities at the Tokyo Head Office are actively monitored and energy use minimized through the use of natural light-ing, energy-efficient lighting, and solar power generation.
FY2015 | FY2016 | FY2017 | FY2018 | FY2019 | YoY Change | ||
Electricity consumption | thousand kWh | 1,071 | 1,029 | 1,057 | 1,092 | 1,007 | Down 7.8% |
Total energy consumption | GJ | 14,022 | 13,441 | 13,807 | 15,191 | 13,710 | Down 9.8% |
CO2 emissions* | t-CO2 | 671 | 643 | 670 | 723 | 654 | Down 9.5% |
Copy paper procurement amount per employee | Piece | 672 | 614 | 548 | 496 | 457 | Down 7.9% |
Stationery goods green procurement ratio | % | 50.6 | 65.0 | 58.8 | 54.5 | 13.6 | Down 75.0% |
Scope: Head Office Building (Tokyo Midtown Tower) |
Period covered: Each fiscal year (From April to March of the following year)
*CO2 emissions: Calculated using the formula for measuring specific greenhouse gas emissions provided by the Tokyo Metropolitan Government's Ordinance on Environmental Preservation.
Meanwhile, Sumitomo Mitsui Trust Panasonic Finance is taking steps to reduce power usage, copier paper, and gasoline. The company has achieved a more com-pact office by introducing open-plan workspaces where computers and projects are all networked and is reduc-ing electricity consumption and copier paper volume by drawing on the benefits of paperless meetings, online approval forms for workflow, and less overtime work. In FY2018, the company reduced electricity consumption by 4.7% year on year. Copier paper usage increased by 5.3% year on year, but this was due to the transfer of subsidiary operations, which accounted for 4.2% of the increase, and excluding that, the increase was limited to 1.2%. The com-pany started digitizing the processing of internal approval documents in FY2020 and will continue its initiatives to reduce copier paper usage.
Sumitomo Mitsui Trust Panasonic Finance has also been working to reduce its CO2 emissions from sales activities by encouraging its employees to switch from private company cars to public transport. In April 2018 it drafted internal guidelines on using vehicles for work with the aim of managing the health of its employees, ensuring safety, and streamlining sales activities. Not only does this initiative make effective use of traveling time, it aims to simultaneously achieve the social (health, safety) and envi-ronmental objectives of reducing CO2 emissions from cars used for sales by alleviating driver fatigue and preventing traffic accidents as a result of cutting out long-distance driving. By strictly observing a rail & rent-a-car policy, the company was able to slash its company car gasoline con-sumption by 19,000 kl (-21.3%) year on year. This equates to an CO2 emissions reduction of roughly 44.1 t-CO2.
Environmental Performance of Sumitomo Mitsui Trust Panasonic Finance
Electricity consumption Gasoline consumption Copier paper consumption
thousand kWh kthousand sheets
FY2015
FY2016
FY2017
FY2018
FY2019
YoY Change
1,007 127 16,590
1,008 118 17,464
982 117 17,508
984 89 17,567
938 70 18,499
Down 4.7%
Down 21.3%
Up 5.3%
S u m i t o m o M i t s u i Tr u s t H o l d i n g s , I n c .
091
Sustainability Report 2020/2021
People are at the center of global economic pros-perity, driving wealth creation, developing innovative products and services, and supporting the communi-ties in which they live and work.
From the World Economic Forum White Paper "Measuring Stakeholder Capitalism"
093 The Group's Approach to People (Social Issues)
094 Respect the Individual
113 Addressing Issues of a Super-Aged Society
The Group's Approach to People (Social Issues)
The sustainable society envisioned under the SDGs is based on the assumption that humans will play a central role. Thus, the 17 goals ultimately aim to achieve human happiness. In 1948 the World Health Organization (WHO) described the state of human happiness as "well-being" (a state of complete physical, mental, and social well-being) and the Organisation for Economic Co-operation and Development (OECD) has defined the conditions of well-being to be comprised of material components such as income, employment, and housing, as well as immaterial components that contribute to quality of life (QOL), including health, education, and social connections. Our initiatives on pursuing prosperity and those related to global environmental considerations are also sorted into those that create positive impacts that ultimately lead to the well-being of people from all walks of life, not just our clients and employees.
Definition of Well-Being by the OECD
Material conditions | Immaterial conditions (QOL) |
|
|
Related Materiality
Impact Materiality
Materiality | Risk/Opportunity | Main stakeholders | Key measures |
Pursuing sustainability-themed business opportunities | Opportunity | Clients, communities | Maximizing the positive impacts through business (e.g. development of innovative financial products that help solve social issues and engage-ment with companies to whom we extend investments and loans to actively encourage behavioral change) |
Considering impacts on society and the business environment of companies to whom we extend investments and loans | Risk | Clients, communities, NPOs | Minimizing the negative impacts through business (e.g. investments and loans in line with policies for specific sectors and ESG guidelines, and engagement with companies to whom we extend investments and loans to encourage the control of negative impacts, such as human rights issues) |
Population decline and issues of a super-aged society | Risk/ Opportunity | Clients, communities, business partners | Reviewing business operations from the perspective of the impact on the well-being of elderly clients, addressing dementia-related problems, and transferring assets between generations taking into account the viewpoint of child-rearing support |
S u m i t o m o M i t s u i Tr u s t H o l d i n g s , I n c .
093
Sustainability Report 2020/2021
Management Foundation Materiality
Materiality | Risk/Opportunity | Main stakeholders | Key measures |
Bolstering human resources and developing workplace environments | Risk/ Opportunity | Employees | Hiring and appointing diverse human resources, adopting appropriate performance evaluation and compensation packages, nurturing human resources, improving employee satisfaction levels, promoting employee health, and preserving employment and worker rights |
Relevant SDGs
Respect the Individual
Enhancing Human Capital to Increase Corporate Value
Human Resources Strategy
The Group's Codes of Conduct ("Value") state: "We will realize our organizational capabilities full of mutual trust and creativity through improvement by mutual learning and continuous personal transformation of various people who share the enthusiasm for trust." It is essential that we create more sophisticated human capital to raise corporate value and maximize the value we provide to stakeholders.
The Group categorizes individual human resources measures by function. We then apply a long-term inves-tor's perspective to processes that create more sophisti-cated human capital while activating synergies between each function. This approach is also conducive to the enhancement of information disclosure.
By enhancing our engagement with employees, the organization and individual employees can draw upon diversity and continue to contribute to mutual growth with the same expectations as a foundation for activity. In this way, we will seek to create new value even despite signifi-cant changes in the structure of Japanese society.
Personnel System and Management Principles
1. SuMi TRUST Bank respects individuals' diversity and promotes voluntary initiatives so as to exercise creativity and create value added in a broad range of fields.
2. SuMi TRUST Bank promotes friendly rivalry among employees to improve themselves as well as their autonomous growth in order to enhance its expertise and comprehensive capabilities as a trust bank.
3. SuMi TRUST Bank assigns the right person to the right job according to job capability in order to make the most of individuals' potential.
4. SuMi TRUST Bank gives fair and just evaluation and treatment to individuals according to their capability, role and achievement so that they can have motivation and feel a sense of satisfaction at achieving self-fulfillment and contributing to the Company.
Demonstration of the SuMi TRUST Group-wide value
Enhance Human Capital
Bolster human resources
"Human resources development policy (TRUST)"
Human resource assignment and OJT
Training and Off-JT
Strengthening: SuMiTRUST university
Enhancing leadership
Fair evaluations and treatment
Obtain and form a diverse pool of human resources
Diversity & inclusion
Basic Policy for Personnel Affairs Management
The SuMi TRUST Group provides a workplace in which individuals' diversity and creativity are fully utilized as value-added to the organi-zation and they can have dreams and pride and feel motivation when working. It also forms a group of personnel capable of providing comprehensive solutions by making full use of their advanced expertise and comprehensive capabilities and helps them to make suc-cessful achievements.
Diversity & Inclusion
Promoting Diversity & Inclusion
The Group has various functions and a diverse busi-ness portfolio, which is one of our strengths. Our human resources basic policy therefore calls for a workplace in which individuals' diversity and creativity are fully uti-lized to add value to the organization. As diversity pro-motion becomes a more widely recognized concept in society, SuMi TRUST Bank established the Diversity & Inclusion Office (D&I Office) within its Human Resources Department in October 2016 to accelerate the efforts to promote diversity and inclusion by correlating diversity promotion with a corporate culture that emphasizes diver-sity. The D&I Office comprises specialists from the Human Resources Department and members from business supervision departments. The Office promotes diversi-fied work styles for individual employees and implements measures that increase corporate value in a way that is tailored to each business unit's circumstances.
In addition, promoting diversity has become a major business trend and long-term investors emphasizing ESG are taking a greater interest. In response, SuMi TRUST Holdings also established the D&I Office within its Human Resources Department in October 2017 to promote diver-sity and inclusion throughout the Group.
*The SuMi TRUST Group's initiatives on diversity and inclusion
URL:https://www.smth.jp/en/about_us/management/human_resources/diversity_inclusion/index.html
Diversity & Inclusion Report No. 3 (published May 29, 2020)
URL:https://www.smth.jp/en/about_us/management/human_resources/pdf/E200529.pdf
1. Diversity & Inclusion Promotion Framework at SuMi TRUST Bank
SuMi TRUST Bank's initiatives for promoting diversity and inclusion focus on the empowerment of women, persons with disabilities, and global workforce, enhancement of
Organizational Chart for D&I Promotion at SuMi TRUST Bank
work-life balance, and encouragement of understanding human rights and the LGBTQ community.
D&I Committee
Members: Officers in charge of Human Resources Department, Corporate Planning Department, and IT & Business Process Planning Department/business supervision department managers/external experts
Check the PDCA cycle for promoting D&I/make recommendations on the improvement of operational efficiency and productivity
External stakeholders
• Make recommendations on D&I promotion measures
• Make recommendations on the reforms to work styles and business processes
D&I Office
Release information
Raise issues such as personnel composition at divisions, promoting participation and advancement, and business processes
Human Resources Department (Dedicated/concurrent personnel)
Planning & preparation
Instill D&I promotion/ foster inclusive climate
• Understand | • Release information on D&I promotion |
the needs | • Promote human resources measures |
• Consult | • Implement training and seminars |
Business supervision department concurrent personnel
Consider measures forbusiness strategies
Business supervision departments | ess supervision departments |
Implement business measures
Employees
D&I: Diversity & Inclusion
2. Initiatives for Promoting Women's Active Participation and Advancement
As the Group ensures "the right people are placed in the right positions based on their capabilities in order that all of our employees can realize their full potential," we place people in managerial positions based on their abilities regardless of gender.
Guided by its general business owner action plan based on the Act on Promotion of Women's Participation and Advancement in the Workplace, SuMi TRUST Bank aimed to have 300 female employees in managerial positions (section manager or higher) by the end of March 2020. This target was achieved ahead of schedule in October 2019 with 357 female employees appointed to such positions. And from April 2020, with the goal of increasing the number of women in decision-making positions, SuMi TRUST Bank formulated a new action plan to have more than 12% of female employees appointed to section manager or higher and more than 30% in charge of management operations by the end of March 2023.
Pipeline models have been formulated to facilitate the planned nurturing of employees in each business, while various types of training are being conducted with a view to future appointments of female employees to manage-ment positions as we set our sights on being the number one financial institution for both HR development and HR participation. Such training measures include seminars for women in leadership positions and training aimed at facil-itating self-determined career planning. Furthermore, we are widening the scope of activities for female employees by offering a broad range of appointments through which they can take up the challenge of working in different roles. In addition to training, we provide growth opportunities through job relocation and reassignment.
Human Resource Development in Consideration of Placing Female Employees in Managerial Positions Support for Women's Solid Career Formation
SuMi TRUST Bank carefully runs training sessions for female employees to coincide with the turning points of their careers so as to provide them with opportunities to inde-pendently consider their career development and build networks. In fiscal 2019 the Bank significantly overhauled its training program in order to further expand its support on career development for A-course employees who are hired as non-transferable workers. It ran a career design training course for employees who had been with the Bank for five years to help them chart a course for their own careers over the medium to long term with advice from external lecturers and senior employees. SuMi TRUST Bank is also undertak-ing initiatives to earnestly listen to the concerns of female employees-who are susceptible to the impacts of major life events-and to provide them with opportunities as early as possible so they can design their own career as part of their life planning. The Bank also organized a leadership training session with a female director as the keynote speaker for A-course employees one step away from being appointed a section manager. SuMi TRUST Bank supports the growth of female employees so they can set their sights on even higher management positions by sweeping away the con-cerns and pressures associated with becoming a managerand allowing them to demonstrate their capabilities in their own management style (see page 98 for information on the career course system).
Female Executives and Managers at SuMi TRUST Bank
(1) Directors and executive officers
(2) Women in general manager level positions
(3) Women in section manager level positions
(4) Women in section manager or higher positions ((2) + (3))
(5) Women responsible for man-agement operations
End of | End of | End of |
March | March | March |
2018 | 2019 | 2020 |
2 (2.8%)
2 (2.9%)
(5.7%)
6
(2.4%)
9
(3.7%)
(4.8%)
130
(11.3%)
134
(11.8%)
135
(11.7%)
136
(9.7%)
143
(10.3%)
147
(10.5%)
1,369
(22.6%)
1,423
(23.9%)
1,570
(25.8%)
*The number inside the parenthesis is the female employee ratio. Executive officers included in (1). Women in assistant manager or higher positions shown in (5), which also includes (4).
12
Use of Outside Networks and Dialogue with Directors and Officers
4
We send female employees to joint events with other com-panies to provide opportunities for them to broaden their perspectives through interaction with people from other businesses, as well as to make an objective reassessment of their careers. In addition to Company-hosted events and training, at branch offices and departments too, we adopt a bottom-up approach to furthering the participation of female employees by providing them with opportunities to think about their own careers through interaction with women from business affiliates.
Our executive officers are also actively involved in the nur-turing of female employees. To that end, we organize execu-tive seminars so that female employees can talk directly with executives, gain insights into management, and hear what executives expect of female employees. Some of the execu-tive seminars are held at lunchtime so as to make it easier for female employees raising young children to attend, whilst various opportunities are provided to aid their professional development.
Training for Directors, Officers, and Management
To promote a change in mindset throughout the manage-ment team-a key element in developing an environment in which women can thrive-SuMi TRUST Bank incorporates topics concerning unconscious bias and female health issues into manager training. In addition, the D&I Committee- which comprises the officers in charge of the Corporate Planning Department, Human Resources Department, and the IT & Business Process Planning Department-takes steps to deepen the understanding of executive officers regarding diversity and inclusion by, for example, organizing meetings at which young employees, female managers at Group com-panies, and external experts with experience of promoting diversity at other firms, have the chance to offer their own advice about the empowerment of women in the workplace.
3. Initiatives to Support Work-Life Balance
Career-Building Support to Weather Life Events
A System of Workplace Reassignments and Leave to Accompany Spouses on Overseas Transfers
In fiscal 2016, SuMi TRUST Bank instituted a system so that A-course employees (who are not subject to new work-place assignments accompanied by relocation) can change their workplace location in the event of spouse's reloca-tion. Furthermore, since July 2017, employees have been allowed a leave of absence to accompany a spouse on an overseas transfer, regardless of whether that spouse works for the same company or a different company. Both male and female employees can apply to take advantage of the system. When a spouse is transferred overseas, it imposes a heavy burden on the family environment. This system came about from a desire to help our employees independently build their careers by offering them more than just a choice between career and family. Both domestic workplace reas-signments and leave to accompany spouses on overseas transfers are used as ways for employees to continue their careers despite life events.
Users
Domestic workplace | Leave to accompany spouses |
reassignments | on overseas transfers |
as of March 2020 | as of March 2020 |
150 | 18 |
4. Empowerment of Global Employees
SuMi TRUST Bank offers training every year to local-country employees working at its overseas branches and overseas subsidiaries and affiliates. Training is focused on deepening employees' understanding of the SuMi TRUST Group and its operations, and strengthening networks among participants and business lines. The training includes a management strategy briefing with an accompanying discussion as well as lectures on Japanese business culture and history, and business overviews.
5. Promoting Advancement of Disabled Persons
We aim to have even employees with disabilities thrive at work and find their jobs rewarding as members of the SuMi TRUST Group. Nikko Asset Management has been running the Athlete Employee Programme since 2013 and there-fore focuses on hiring wheelchair athletes. The employees that joined Nikko AM through this program established a working group for disabled employees and some of those employees are involved in creating a more comfortable working environment for all employees-one of the mis-sions of the SuMi TRUST Group.
Moreover, the number of places at SuMi TRUST Bank where disabled employees can work alongside their col-leagues is growing. Such positions include customer ser-vice at branch offices or administrative duties in the head
Work-Life Balance
SuMi TRUST Bank targets a 100% paternity leave ratio for male employees as an initiative for achieving diverse work-ing styles and a healthy work-life balance, one of the top-ics in its Declaration on Work Style Reform (see page 103). This initiative is being promoted throughout the Group for the purpose of fostering a culture in which male employ-ees assuming responsibility for some household duties is considered normal and so they can make new discoveries outside of the workplace and get a feel for how society is changing. The 100% target was achieved again in fiscal 2019 (it was last achieved in fiscal 2017). We are continuing to undertake activities geared towards entrenching the prac-tice of taking paternity leave as part of company culture; for instance, even after the 100% target has been attained, we are encouraging employees to take more days off work.
Also, as part of an action plan launched in April 2020 focus-ing on how employees can balance work with nursing care-a trend expected to increase in the future-we set a goal of achieving at least 60 evaluation points (considered a positive assessment) in an annual awareness survey on nursing care schemes and corporate culture. To further deepen employee understanding of nursing care, together with the employ-ees' union we jointly hosted an online nursing care seminar so employees all over Japan could easily participate, and we also organized a seminar just for management so they could learn how to more smoothly communicate with subordinates that need to take time off to look after their loved ones.
In addition, to encourage smooth communication with newly hired overseas recruits assigned to Japan, we've con-ducted cross-cultural communication training for managers in departments where those new employees are placed. By comparing the difference in culture and custom between Japan and other countries, trainees learn about cultural diver-sity, such as values and customs. This is an initiative to spread an approach to communication that avoids the intercultural misunderstandings and trouble that may occur on the job.
office. We also make sure to sit down for a discussion with such employees after they have started working in order to address any concerns or requests they might have. The issues raised from these meetings prove useful when developing a more comfortable workplace environment, in terms of both physical and mental perspectives. As of September 30, 2020, the employment rate of disabled persons stood at 2.28%.
Gaining & Shaping a Population of Diverse Human Resources
Bolstering Human Resource
The SuMi TRUST Group will maintain its workplace environment and bolster its human resources based on a development spirit consisting of "TRUST," for the growth and career development of the employees who will create our future.
The SuMi TRUST Group Human Resources Development Policy
Talent .................... Talent (individuality) can blossom Respect ................. Respect each individual Uniqueness .......... Develop true professionals
Support ................ Make mutual teaching and support our motto Try .......................... Praise small, daily challenges
Based on the "fiduciary spirit of TRUST," the SuMi TRUST Group aims to contribute to our clients and the continuous development of society through the growth of our employees, thereby maximizing the creation of shared value and becoming the corporate group that is chosen by society.
We have been advancing measures to be the "No. 1 finan-cial group for human resource development" with the aim of "bolstering human resources," which is one of the two wheels for raising the level of our group of personnel that provides comprehensive solutions (see p. 94). Today, however, as digitization and other advances are trans-forming business models at an ever-accelerating pace, we need to share more concrete guidelines within the Group and accelerate their promotion. It was for this rea-son that, in April 2018, we created our "Human Resources Development Policy" as the shared human resource development slogan within the SuMi TRUST Group.
Through our Human Resources Development Policy, we have initiated various measures in fiscal 2019 aimed at becoming the "No. 1 financial group for human resource success," where all kinds of people, from young to senior, regardless of gender or course, can flourish.
No. 1 in human resource development + No. 1 in human resource success
Career Course System Enabling Proactive Choice SuMi TRUST Bank has implemented a course-based system that promotes employee career formation. Employees are streamed into three courses, the G Course, the R Course, or the A Course, depending on their likelihood of being transferred and the nature of their work duties. There is also a system, applied to all courses, that places employ-ees into four work groups based on their demonstrated capabilities. By adopting this system, we encourage per-sonnel management based on ability, rather than age or gender. All employees regularly talk with their superiors on the status of career formation to be evaluated and receive feedback.
Course name | Residence and workplace relocation | Eligible business operations | Primary role |
G Course (General & Global)Nationwide relocation type | Possible | All operations |
|
R Cource (Retail & Region)Operation- and region-specific type | Possible within the specified area* | Operations for retail total solutions |
|
*Nationwide- and regional-types (Tokyo, Kinki and Chukyo areas)
A Course Region-specific type (Area) | None | All operations |
|
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Sumitomo Mitsui Trust Holdings Inc. published this content on 25 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 24 March 2021 15:34:06 UTC.
