Our Materiality

Our view on the issue

To achieve net-zero greenhouse gas (GHG) emissions by 2050, a growing number of large companies are demanding their suppliers to reduce their emissions. Responding to such demands has become an urgent issue for companies such as parts manufacturers and other industrials. On the other hand, the shift to renewable energy has adverse effects such as price increases and environmental damage and the capacity to increase renewable energy is not unlimited. Therefore, technological innovation is essential to achieve the 2050 GHG net zero target. In addition to reducing GHG emissions, it is equally important to conserve the forest and marine environment and increase carbon dioxide absorption.

Our Efforts

• As we support the international community's efforts to achieve net-zero GHG emissions by 2050 as well as the Paris Agreement, a common long-term global goal related to climate change, in March 2022 we became a signatory of the Net Zero Asset Managers Initiative, a global initiative of asset managers aimed at achieving this goal.
• We will encourage investee companies to obtain SBT (Science Based Targets) certification, which is granted to companies with long-term plans consistent with requirements of the Paris Agreement, and to improve their CDP climate change scores, while considering divestment as an option for sectors with high GHG emissions. Meanwhile, we will participate even more actively in collaborative engagements organized by domestic and international initiatives.
• Our analysts will develop GHG emission forecasts for the companies within their coverage and these forecast will be taken into account within the investment process.

Our view on the issue

The increase in the world's population and changes in dietary habits are considered as indirect causes of environmental destruction. We believe that the enhancement of food sustainability and the reduction of environmental impact driven by the circular economy are the key to passing on the rich global environment to the next generation.

Our Efforts

• Through engagement activities, we will facilitate investee companies in their efforts to reduce their environmental impact by various means such as effective use of resources and contribution to the circular economy.
• In particular, we will encourage companies in the value chain ranging from agriculture, forestry and fisheries to retail and dining out to reduce food loss and enhance food sustainability.
• In January 2024, we registered as one of the "TNFD Early Adopters" under the TNFD and received approval in February. As a responsible institutional investor, we support efforts to disclose information on "natural capital" related to investee companies in line with TNFD's disclosure recommendations, working towards the achievement of Japan's national strategy of being nature-positive by 2030. Through these efforts, we aim to enhance corporate value.

Our view on the issue

As we observe more countries are moving towards legalizing the human rights due diligence by companies, Japanese companies have been slow to respond, and some companies with global supply chains have not been able to fully grasp the actual situation. In some cases, this is an imminent issue that requires restructuring of the supply chain and other necessary actions promptly.

Our Efforts

• In October 2021, we formulated our Human Rights Policy to explicate our views regarding human rights and to address human rights issues more comprehensively.
• Based on this policy, we have been encouraging investee companies to appropriately manage human rights risks in their supply chains through ongoing human rights due diligence.  
• To effectively gain insights into domestic and international trends in a timely manner, we have signed the human rights related initiative “PRI Advance” and have been participating in its collaborative engagement activities.  

Click here for more about our approach on Human Rights Issues.

Our view on the issue

We believe the recruitment and development of highly skilled staff account for a company's competitiveness to a great extent. In addition, as the liquidity of labor market increases, it is important for companies to improve the work environment and increase their employees’ engagement so that each employee can demonstrate his or her abilities and fulfil their potential.

Our Efforts

• We will encourage investee companies to have a human resource strategy consistent with their medium to long-term business strategy in place which guides activities to recruit and develop human resources.
• We will also encourage investee companies to make their workplace more attractive to unleash employees’ capabilities.

Our view on the issue

It has been a long-standing agenda for the Japanese stock market to raise its P/E ratio to the level of markets in major countries. To this end, we believe it is essential to raise management's awareness of the need to enhance corporate value as well as to have a corporate governance that encourages the risk-taking necessary for medium- to long-term growth.

Our Efforts

• To enhance the effectiveness of corporate governance, we will encourage investee companies to diversify their board of directors in terms of not only visible attributes but also expertise and skills.
• We recently updated our standard of exercising voting rights where we make our decisions on the election of directors taking into account not only Return on Equity (ROE) but Total Shareholder Return (TSR) standard aiming to raise investee companies’ awareness of enhancing corporate value and to encourage the implementation of specific strategies.

Our view on the issue

There is no end to scandals such as inspection irregularities and quality falsification by Japanese companies. Among others, closed corporate culture is considered one of the root causes behind such scandals. Meanwhile, in today's rapidly changing business environment, it is necessary to respond quickly and flexibly to changes. We believe it is extremely important for companies to have not only hard aspects such as governance structures and written rules but also soft aspects such as business ethics and corporate culture so that companies can prevent such scandals and take advantage of opportunities brought by changes in their business environment.

Our Efforts

• Through engagement activities, we will encourage investee companies which committed scandals to create an open organizational culture so that they prevent negative impact and their employees can demonstrate their creativity.
• We will conduct research on ways to further incorporate soft aspects such as business ethics and corporate culture into our proprietary ESG evaluations to improve its effectiveness.

Our Efforts
Our company is implementing various initiatives to reduce the environmental impact of its business operations.

• We aim to achieve net zero GHG emissions (Scope 1 and 2) by 2030 by reducing office space, relocating to energy-efficient buildings, and switching to electricity derived from renewable energy.
• Although we have been promoting paperless workstyle through digitalization, we will promote the use of Forest Stewardship Council (FSC)-certified paper made from responsible wood resources for printed materials that are difficult to be paperless.

Our Efforts
As an asset manager, human capital is the foundation of all our business activities. Accordingly, improving the value of human capital is one of the most important management issues at the company.

• To facilitate human capital value improvement we have identified a framework consisting of three steps: improving the capabilities of each employee, demonstrating the capabilities of each employee, and demonstrating the collective team strength. We aim to raise each step to a higher level by investing in human resources development, improving wellbeing, and fostering an organizational culture of learning.
• Through these efforts, each of our executives and employees is expected to expand opportunities to play a more active role, resulting in the growth of the company. We believe this is the way to becoming "The Best Asset Management Firm for Your Better Quality of Life" management vision. For details, see the following pages.

Human Capital Management at Sumitomo Mitsui DS Asset Management

Our Efforts
We are engaged in social contribution activities as an asset management company and as a corporate citizen in local communities. In the future, we will focus even more on activities that involve employees in order to deepen their understanding of environmental and social issues.

• We are engaged with financial education activities that emphasize the importance of asset building from an early stage in life as Japan's population ages and the birthrate continues to decline.
• We will contribute a portion of the profits earned from specified investment trusts to several research institutions and other organizations engaged in activities that contribute to the resolution of environmental and social issues.
• Centering on “The QOL Donation Fund”, which is operated with money donated from our employees, we will encourage employee to participate in social contribution activities.

Our Efforts
While responding to changes in market conditions and diverse information disclosure requirements by domestic and foreign regulatory authorities, we will strive to improve the quality of our operations to meet renewed expectation from our customers. At the same time, we will redesign our business processes using digital technology to prevent employees from working long hours and maintain a work-life balance.

• We will promote operational efficiency through the use of IT tools, such as artificial intelligence (AI) and robotic process automation (RPA) in research work and the creation of a database of various information.
• From the viewpoint of improving operational efficiency and ensuring smooth compliance with regulations in the future, we outsourced in September 2021 a part of back office operations to the trust bank with expertise in fund operations. Meanwhile, we have retained our capabilities so as to deliver services helping us differentiate ourselves and meet unique customers’ requirements while aiming for even higher quality operations.
• With regard to ESG-related funds, we will further improve our information disclosure so as not to be suspected of "ESG wash."
• In particular, during the COVID-19 pandemic, we will work to revitalize internal communication to promote knowledge sharing and to prevent the working in silos that may cause clerical errors.

Our Efforts
To fulfill our fiduciary responsibility, we will strive to foster corporate culture in which every executive and employee has a high sense of ethics as a professional, a desire to contribute to society, and the ability to take on challenges to achieve their goals.

• In addition to the quarterly compliance training mandatory for all officers and employees, we will provide opportunities so that each department can discuss not only legal compliance but also business ethics and fiduciary responsibilities, in an effort to foster a high ethical awareness.
• We will conduct sustainability training to deepen the understanding and awareness of officers and employees about environmental and social issues.
• We will annually conduct an organizational culture survey to ascertain the awareness of executives and employees and the condition of the organization, and to help create a healthy and open organizational culture.