Strategic CSR Activities and MaterialityJAPANESE

With the establishment of the Corporate Governance Code, Japanese companies are increasingly being called upon to identify issues surrounding sustainability, including social and environmental issues, and appropriately address them as management themes. SuMi TRUST Group regards sustainability issues as a concept that shares the same meaning as environment, society and governance (ESG), advocated by the Principles for Responsible Investment (PRI). With the cooperation of external experts, SuMi TRUST Group has identifi ed priority issues (Materiality) from the long-term perspective of investors. Furthermore, through internal engagements, SuMi TRUST Group has strengthened its responses toward these issues on the working level and has established a system for addressing them as management issues for creating shared value.

Five Steps Toward Creating Shared Value Starting with the Identification of Materiality

STEP1 Selecting Items for Identifying ESG Materiality from the Long-term Perspective of Investors

We emphasize the views of ESG investors who take into account the interests of various stakeholders to pursue corporate value from a long-term perspective. Based on reporting guidelines such as GRI and SASB, we select bank materiality items emphasized by ESG research companies*1 that provide information to investors. We then select 28 items for identifying materiality, taking into consideration case studies from the world's most innovative banks, such as ESG risks of Sumitomo Mitsui Trust Holdings ("SuMi TRUST Holdings") and ESG risks unique to Japan*2.
*1 MSCI, FTSE, Sustainalytics, Robeco SAM, etc.
*2 "Risk Landscape in Japan: The Second Survey" The University of Tokyo

Selecting 28 items for identifying materiality

STEP2 Calculating the Points for the 28 Items through Interviews with Internal Related Parties and External Offi cers and Experts

We asked the related parties and experts to grade the 28 items for identifying materiality from two perspectives on a fi ve-point scale.
(First perspective)
We asked the departments comprising the ESG Risk Management Project Team (see page 85) and all eight external directors and external corporate auditors ("external offi cers") of SuMi TRUST Holdings and Sumitomo Mitsui Trust Bank, Limited ("SuMi TRUST Bank") to grade in points the degree of infl uence of each item on the mediumto long-term corporate value of SuMi TRUST Group.
(Second perspective)
We asked 18 external experts and external offi cers to grade in points the degree of SuMi TRUST Group's infl uence on society (stakeholders).
We calculated the average point score of all the items.

Grading the items in points based on interviews

STEP3 Compiling a Materiality Map and Sharing ESG Issues on the Management Level

We plotted the average point score of the 28 items for identifying materiality calculated in STEP 2 on the materiality map (scatter diagram) illustrating the relationship between the "degree of importance on the medium- to longterm corporate value of SuMi TRUST Holdings" and the "degree of SuMi TRUST Holdings' infl uence on society (stakeholders)." We then confi rmed SuMi TRUST Group's materiality, which had been assessed from the two different perspectives. The items plotted in "the range with the highest materiality" are considered to be the ESG issues requiring the greatest emphasis. The issues are resolved at the Executive Committee and subsequently reported to the Board of Directors.

The range with the highest materiality

STEP4-1 Implementation of Internal Engagement

The CSR Promotion Offi ce, Corporate Planning Department selects current issues regarding items with high materiality, based on feedback from ESG research companies on SuMi TRUST Holdings' assessments, opinions of institutional investors and other factors, and it compiles a discussion paper. Based on the paper, we undertake internal engagement*1 with departments that usually do not interact directly with investors*2.
*1 Internal engagement means to indicate ESG issues from the standpoint of investors and conduct dialogue (engagement) on necessary measures and content of information disclosures.
*2 Corporate Administration Department, Human Resources Department, Risk Management Department, Compliance Department and Customer Satisfaction Promotion Department

STEP4-2 Putting into Practice Content of the Engagement

The departments subject to internal engagement will utilize the content of the dialogue regarding the items determined to be necessary for dialogue from the perspective of creating shared value in improving their business. The CSR Promotion Offi ce will utilize the content to upgrade the disclosure of nonfi nancial information such as CSR reports. IR departments will utilize such disclosed information for their dialogue with external investors.

Putting into Practice Content of the Engagement

STEP5 Initiatives toward Increased Long-term Corporate Value

The identifi ed materiality will be regarded as corresponding to "the environmental and social issues over sustainability to be addressed by the Board of Directors," prescribed in Article 3-4 of the Basic Policy on Corporate Governance of SuMi TRUST Group, as well as being put into practice through internal engagements. Multi-faceted discussions will be conducted at the Board of Directors' meetings, mainly on themes with especially high materiality, and the direction to be taken by SuMi TRUST Group will be determined.

External Experts Interviewed (in Alphabetical Order)

Themes discussed at the management level

Sumitomo Mitsui Trust Group's Materiality Map

Sumitomo Mitsui Trust Group's Materiality Map

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