Management CommitmentJAPANESE
Bolstering Initiatives for ESG Priority Issues (Materiality) Contributes to Improving Corporate Value

ESG for the SuMi TRUST Group

Worldwide investment focused on environmental, social and governance (ESG) factors has surpassed ¥2,500 trillion. While ESG investment was slow to catch on in Japan, it has surged in the past few years, reaching ¥136 trillion in 2017. It is not an exaggeration to say that ESG investment has become a major player to put the planet on a sustainable footing.
ESG investors are by no means an undemanding group for companies. They have high expectations. They press companies on a wide array of themes from effective governance, building more diverse and sophisticated human capital, and developing sound corporate cultures with robust compliance awareness that are risk sensitive to sustainable usage of natural capital. Not only do ESG investors rigorously judge companies that do not meet certain standards through their exercise of voting rights, they also in some cases divest shares (recollect investment). Yet companies paying attention to ESG investor trends have started to think of them as reliable partners for increasing corporate value over the long term.
The SuMi TRUST Group has been a signatory to the Principles for Responsible Investment (PRI), which promotes ESG consideration in decision-making, since its launch in 2006, and this way of thinking has naturally been adopted into our management perspectives. ESG investors position themes which give impact on the value creation processes of companies as materiality (priority issues), and press companies to provide clear, concise disclosure on their materiality themes. The Group identified materiality (priority issues) in 2015, highlighting the themes the Board of Directors ought to pursue. We have also constructed a process for reflecting ESG investor evaluations into management through conducting “internal engagement” exercise where department responsible for Sustainable acts as “in-house ESG quasi-investors” and engages in constructive dialogue with departments responsible for matters relevant to high materiality themes. Moreover, along with the ESG/CSR report encompassing ESG information, from fiscal year 2017, we increased the sophistication of our annual report, a legally mandated publication, and started publishing the Integrated Report, which digs deep into linkages between financial data and materiality.

Fiscal Year 2017’s Materiality Reform

We believe ESG investors emphasize materiality because it is the foundation supporting the long-term earnings of companies. In fiscal year 2017, the Group advanced major reforms relating to three materiality themes. Through these, we are building earnings and client bases that support stable, sustainable growth.
The first is corporate governance reform. With the aim of sustainable growth and improving corporate value over the medium- to long-term, the Group established its “Basic Policy on Corporate Governance” in June 2015. We have worked toward ensuring management transparency and appropriateness by increasing the number of independent external directors and external Audit & Supervisory Board members on the Board of Directors, and through the functions of the Nominating and Compensation Committees and the Audit Committee, newly established as advisory bodies to the Board of Directors. After receiving approval at the General Meeting of Shareholders held in June 2017, we changed over to the “company with Three Committees” system of governance. We think these governance reforms will translate into speedier management.
The second is to further pursue client-oriented initiatives. The Group is among the driving forces in the financial sector in advancing fiduciary duties and conflict of interest management, and it works to put these into practice in a comprehensive manner across all Group operations. In fiscal year 2017, we further enhanced our conflict of interest management framework, and established the Conflicts of Interest Committee as an advisory body to SuMi TRUST Holdings. In connection with stewardship activities in our asset management businesses, we established the Stewardship Activities Advisory Committee as an advisory body to the Officer in charge of the Fiduciary Services Business.
The third is work style reform. The Group has to date worked on initiatives aimed at becoming the “No.1 financial group for human resource development” and the promotion of “diversity & inclusion (D&I)” but we recognize that promoting the creation of an environment that supports the diversity, health, and motivation of each and every employee is even more important today. In that vein, we launched the “Work Style Reform Headquarters” and established the “Work Style Reform Declaration.” We will continue to promote work style reform with the aim of realizing a virtuous circle, where we grow together with our clients, in which the added value provided to clients is increased through energetic work, and praise from clients inspires even greater motivation among employees.

Toward Creating a Sustainable Society

The Sustainable Development Goals (SDGs) adopted at the United Nations Sustainable Development Summit in September 2015 comprise 17 goals and 169 targets that bring together global-scale priority issues that should be addressed collectively around the world through 2030. A prerequisite to supporting sustainable growth at companies is putting the environment and society on a sound, sustainable footing, so the development of a universally shared set of priority issues aimed at sustainable development is of the utmost significance. On the flipside, enormous sums of money will be required to address the priority issues. We think the role of finance in supplying funds while involving various stakeholders in realizing SDGs will be critically important. Growing acceptance of this view is behind the explosive growth in ESG investment in the past several years.
We identify issues for our clients while finding linkages to SDGs, and we believe harnessing our unique functions as a trust bank and providing total solutions are important roles for the Group as we aim to be the “Best Partner” for our clients. We, the Group’s directors, officers and employees, are united in delivering value for our stakeholders and we ask for your continued support for our endeavors.

December 2017

  • Director, President
  • Tetsuo Ohkubo

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