Our company started assessing companies on their ESG in 2009, and established Responsible Investment Section (former Stewardship Enhancement Section) in 2016 to conduct ESG assessments of companies.
The Essence of ESG Assessment
- The objective is to assess a company’s capabilities to respond to environmental and social changes (E and S), and its management structure and efforts (G) to make these sustainable.
- Efforts to improve the ESG assessment enhance a company’s sustainability.
- An ESG assessment is established through specialized and continuous research and continuous dialogue with the company based on an understanding of its corporate management from a long-term perspective.
Characteristics of the Company’s ESG Investment
- It does not screen particular companies and it is not theme-based investment.
- It is not limited to investment in companies with superior ESG assessment results.
In view of the above, the company aims to increase medium- to long-term earnings by investing not only in companies with superior ESG assessment but also in companies where an improvement in ESG assessment can be expected in the future, by identifying changes in their efforts at ESG based on our company’s analysts’ dialogue with the company in question.
The company aims to achieve substantial investment results from a long-term perspective by identifying changes in companies at an early stage.
General classifications in SRI investments
GSIA (Global Sustainable Investment Alliance) classifications
- Negative screening
- Exclusion of certain sectors and companies due to their religious ethics and environmental damage
- International norms screening
- Exclusion of companies that fail to meet standards based on international norms
- Positive screening/Best-in-class
- Investment only in companies with superior ESG
- Sustainability-themed investment
- Establishment of specific social or environmental themes such as an “ecology fund” or “water fund,” etc., and investment in relevant companies
- Impact community investment
- Investment in projects that contribute to community development such as “green bonds,” etc.
- ESG integration
- Adding financial information to existing investment decisions and incorporating ESG information as a non-financial factor in decision-making
- Engagement and exercise of voting rights
- Indicating the company’s involvement with companies in which it invests. Engagement with companies to urge them to take a specific action or adopt a specific policy from the shareholder’s point of view
The Company’s Views on Expansion of ESG Management
The company believes that ESG-focused management will spread particularly among companies to which the following two criteria apply.
- Companies with already high ESG assessment that work to increase their corporate value by leveraging the effects of ESG
- While the scope for improvement of the ESG assessment may be small, we believe that companies which continually make efforts can be expected to achieve relatively steady growth in corporate value.
- Companies that make serious efforts in the future to improve their ESG assessment
- We believe these are companies where more substantial results can be expected through future management reform, even if the current assessment is poor.
- *The above is an impression only, and the actual circumstances may differ.