ESG integration for Investment Products

Incorporation of ESG factors in the course of investment process

In accordance with its basic policy on ESG investment, Sumitomo Mitsui DS Asset Management, in principle (*), invites all of fund managers and analysts engaged with active investment management products to take into account ESG, which is an important factor for the sustainability of the companies in which they invest.
*This principle may not apply to passive investment management products and others such as long/short products that are technically difficult to accord with the principle.

  1. Investment restrictions/engagement (responses to investee companies with sustainability issues/concerns)
    When we entertain doubts about sustainability of corporations identified in the outcome of our internal ESG research or acknowledgement of any investee company's misconducts, we will examine materiality of the incident and difficulty to recover through various means such as interviews and decide to add to negative list if necessary.
    In addition, we will use the exercise of voting rights and other means to address issues and concerns and encourage improvements.
  2. Sustainability considerations in investment decisions
    We take ESG factors into consideration as a material element to evaluate sustainability when making investment decisions. In particular, we incorporate analysis and evaluation of ESG factors into the security selection process to the extent suitable for characteristics of each investment product so that we are able to deliver stable return in the medium- to long-term.
  3. Measurement and Response to Sustainability Indicators
    We continuously monitor ESG related indicators including greenhouse gas emissions at a portfolio level. Measuring results is evaluated and reflected into the investment process going forward if necessary.
  4. Risk Monitoring and Reporting
    To ensure the effectiveness of investment, ESG-related monitoring indicators are established and monitored by the Risk Management Department. We also strive to disclose appropriate ESG information from the perspective of investor protection.
  5. Sophistication and expansion of methods to consider sustainability
    We continuously enhance various ESG integration methods including security screening, engagement activity and the extent of ESG evaluation considered in portfolio construction. With these efforts, we will try to increase the number of products with deeply integrated ESG elements and monitor and improve the effectiveness of ESG integration.

Evaluation of ESG factors

We have developed and utilized multiple ESG evaluation methods, taking into account the asset class, the attributes of the company, the availability of ESG data, and the materiality.
In addition, we leverage ESG-related data provided by external ESG vendors to complement in-house ESG information. A broader range of information enables us to create a framework for multifaceted analysis of the ESG characteristics of each portfolio.
Evaluation items and evaluation weights are determined primarily by the Responsible Investment Section and are reviewed regularly to ensure the effectiveness of the evaluation method.