The environment surrounding companies is currently undergoing major changes. Corporate activities that emphasize social and environmental considerations are attracting the attention of institutional investors, especially in the capital markets of Europe and the U.S., and have come to occupy a significant position as factors in deciding where to invest. In Japan, too, the Japanese version of the Stewardship Code, a set of principles for responsible institutional investors to encourage sustainable growth by corporations through investment and dialogue, was introduced in February 2014. Institutional investors are now called upon to have an accurate understanding of the status of portfolio companies' response to risks involving social and environmental problems. In concert with this, the revised version of the "Japan Revitalization Strategy" announced by the government in June includes the planned establishment of the "Corporate Governance Code," which is a guideline for governance of listed companies. The draft of the code now being considered calls on companies to implement appropriate responses to issues involving sustainability, such as social and environmental problems. This revision is very much based on the awareness that "Creating Shared Value" is indispensable for each company in order to achieve sustainable growth and increase corporate value in the medium- to long-term; that is, each company must create social value by addressing social needs and problems while creating economic value such as through the pursuit of their own profitability and growth potential.
Sumitomo Mitsui Trust Group ("SuMi TRUST Group") developed a full-fl edged ESG investment fund in 2003 and began offering it to corporate pension funds. We continued to refi ne our management methods for a long time afterward, and ESG investment has since become one of our fortes. In light of these results, we launched an "ESG integration" in April 2015, integrating ESG into the active management of all Japanese equities. The explosive expansion of ESG investment in the US and Europe is due to an accelerated move to integrate ESG into not only themed investing, but also management of existing funds. The policy of SuMi TRUST Group is to seek to improve long-term investment returns through ESG integration and to combine this with dialogue (engagement) with companies in order to fulfi ll our responsibilities as an institution that has adopted the Stewardship Code.
Meanwhile, we need to strengthen our own ESG activities. Therefore, in FY2015, we worked to rebuild our foundation by identifying priority issues (Materiality) from the dual viewpoints of the corporate value of SuMi TRUST Group and degree of infl uence on society. Furthermore, in order to promote ESG internally, we have adopted the approach behind the Stewardship Code to start a new "internal engagement" in which CSR departments act as "pseudo-ESG investors" and engage in dialogue with departments in charge of operations with high materiality. We will apply the "recognition" we have gained through these efforts to our management and hope to link them with more extensive disclosure of non-fi nancial information.
CSR is not a form of social contribution. Nor is it advertising for the company. SuMi TRUST Group has always sought to fuse CSR with its core business, but we still have a long way to go toward realizing a true "sustainability bank" that contributes to the formation of a sustainable society while increasing our own corporate value. We will redouble our efforts to pursue ESG in a way that strikes the right balance between both defense (handling risk) and offense (business). We look forward to your warm and continued support and cooperation in these endeavors.
Sumitomo Mitsui Trust Holdings, Inc.
- Chairman Hitoshi Tsunekage
- President Kunitaro Kitamura
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