ESG integration for Investment Products
Consideration of ESG factors in the course of investment process
In principle, Sumitomo Mitsui DS Asset Management (SMDAM) invites all of fund managers and analysts engaged with active investment management products to take into account ESG factors, which are material to corporate sustainability, in the course of the investment process*.
*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.
- When we entertain doubts about sustainability of corporations due to outcome of our internal ESG research or acknowledgement of any 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. Such a decision is made by Responsible Investment Officer after deliberation at ESG Meeting. Meanwhile, fund managers and analysts in cooperation with Responsible Investment Section conduct engagements and exercise voting rights to prompt corporations to appropriately address critical issues.
- We take ESG factors into consideration as a material element to evaluate sustainability when we make investment decisions. In particular, we incorporate analysis and evaluation of ESG factors into security selection process to the extent suitable for characteristics of each investment product so that we are able to deliver stable return in the long run.
- We continuously monitor ESG related indicators including greenhouse gas emissions at a portfolio level. Measuring results is evaluated and reflected to investment process going forward if necessary.
- We continuously enhance various ESG integration methods including security screening, engagement activity and the extent of ESG evaluation taken into account in portfolio construction. With these efforts, we will try to increase a number of products for which ESG factors are deeply integrated. We will also monitor and improve effectiveness of ESG integration.
Evaluation of ESG factors
A number of corporations our analysts conduct proprietary evaluation analysis on their ESG factors through interviews and engagements exceeds six hundred. Meanwhile, we can access to ESG evaluation provided by third party such as ESG consulting firms, which enable us to cover more than 11,000 corporations/issuers world-wide. Combined with our own ESG evaluation, fund managers utilize these dataset to assess sustainability of corporations for the products they manage.