sustainability

Sustainability
Report 2020

START

Introduction

Investment Management

Corporate Sustainability

Looking Beyond

Nikko AM Sustainability Report 2020
Introduction
3

Adapting quickly, responding well
A message from the Co-CEOs

4

Staying on track in volatile times
An interview with Yoichiro Iwama, Outside Director andChairman of the Board of Directors

Investment Management
6

New opportunities to act on ESG
A message from the Chief Investment Officer

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A history of ESG investment at Nikko AM
Our ESG investment approachAward-winning research
Japan Equity Team
Global Equity Team
Asian Equity Team (Ex. Japan)
Australian Equity TeamNew Zealand Equity and Bond Teams
Japan Fixed Income Team
Australian Fixed Income Team
Global Fixed Income Team
Asian Fixed Income Team (Ex. Japan)
US Investment Team
Portfolio Solutions Group
Proxy voting and engagement
Our engagement: case studies
Advancing the sustainable finance conversation

Nikko AM Sustainability Report 2020

Corporate Sustainability
36 Building on a solid foundation
A message from the Global Sustainability Advocate

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38
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44

Sustainability Q&A
Gender diversity and career advancement
Globalising corporate sustainability
Embedding sustainability in our culture
Digital transformation
Working Group initiatives

Looking Beyond
53 Charting the road ahead
55 External commitments
56 Contact information

sustainability

START

Sustainability
Report 2020

cover photo:
Global Sustainability Team2

Introduction

Investment Management

Corporate Sustainability

Looking Beyond

Adapting quickly, responding well
A message from the Co-CEOs
In 2020, our world changed profoundly and irrevocably.
Between the publication of our first Sustainability Report last
March and the release of this edition, the Covid-19 pandemic
upended daily life, business operations, and economies
across the globe; protests in numerous countries against
racial inequality brought unprecedented attention to the discrimination embedded in our societies; and the number ofdevastating extreme weather events continued to rise.
Sustainability is now more vital to our world than ever. At
Nikko Asset Management, it is of fundamental importance toour business and our identity.
Hideo Abe,
President and Co-CEO

Junichi Sayato,
Chairman and Co-CEO

A significant step weare taking is to set
a goal to raise thenumber of female
managers firmwide
to 30% by 2030

Nikko AM Sustainability Report 2020

Although the pandemic and the ensuing market volatility
posed many challenges, our entire firm adapted quickly andcontinues to respond with agility to the ever-changing situation. We have made it our highest priority to deliver consistent performance to our clients, while protecting our employees and acting sustainably. We have digitised more of ouroperations, turned increasingly to cloud-based solutions,and upgraded to the latest technologies — including thosefor videoconferencing and webinars — to better engage ourclients and support their investments.
Remote work has been key to minimising business disruptions and keeping our employees healthy and safe. With
more than 70% of our staff globally working from home,
we have decentralised a number of functions to ensure
our people are fully equipped to provide our clients withthe swift and efficient service they require, but with thesame high level of security Nikko AM has at its offices.
This work-from-home initiative has also helped us to further lower our environmental impact. Given that 80% of ourcarbon footprint comes from commuting and business trips,
we substantially reduced our emissions in 2020. In addition,
employees have reported that they appreciate the increased
flexibility in their schedules.

As we work more from home and see less of everyone, it has
become even more important to reaffirm our commitment
to diversity and inclusion, which we have worked very hard
to foster over the years. We continue to deepen our engagement with employees in various ways, one of which is women’s advancement within the firm. A significant step we aretaking is to set a goal to raise the number of female managers firmwide to 30% by 2030.
The pandemic has also provided us with the opportunity
to become more sustainable and to further promote digitalisation through our company events. As an example,
FOREWORD, a client event Nikko AM holds every year in
multiple global locations, was conducted entirely online.
Since it was a virtual event, a record number of clientsfrom many countries and regions were able to take part.
In our Sustainability Report for 2020, you will read about
many other efforts across the firm to promote sustainable investing, as well as to support the three core areasof focus of our sustainability activities: diversity & inclusion, reducing inequalities, and environment & climate. We are extremely proud of all that was accomplished last year, despite all of the challenges.
At Nikko AM, we remain firmly committed to realising
greater diversity at our company, supporting the vulnerable
in society, and doing everything we can to be goodstewards of our environment. We are convinced that eachchallenge we face is an opportunity to respond well.

•

Junichi Sayato

Hideo Abe3

Introduction

Investment Management

Corporate Sustainability

Looking Beyond

Staying on track in volatile times
An interview with Yoichiro Iwama,
Outside Director and Chairman of the Board of Directors
How have environmental, social, and governance (ESG)
considerations and sustainability evolved globally in thepast year? What progress has Nikko AM made in its ESG/
corporate sustainability initiatives?

Yoichiro Iwama,
Outside Director andChairman of the Board of Directors

In 2020, the world accelerated its efforts to work towards
a positive relationship between the economy and theenvironment. Japan played its part by pledging net zerocarbon dioxide emissions by 2050. Also, revisions to Japan’s
Stewardship Code actively encourage participants in theinvestment chain to incorporate ESG factors more widely andfully in their services as new sources of alpha.
At Nikko AM, we started to include sustainability goals in
our personnel evaluations in 2020. I believe that the change
has given Nikko AM employees around the world even more
motivation to work sustainably by showing them how manydifferent sustainability issues are embedded in the fabric of
their everyday lives. It has been a pleasure to see awarenessof the importance of sustainability grow even more strongly
throughout the firm.

… coordination
among Nikko AM’s
offices worldwide is
now even stronger
than before

Nikko AM Sustainability Report 2020

The COVID-19 pandemic brought great changes toworking styles in 2020. Some of the changes in the way
we do business seem to be here for good. What are yourthoughts on this?
The asset management industry should keep providing clients with high-quality services and strong investment performance, no matter how challenging the environment is. I
am pleased to say that Nikko AM continued to deliver investment solutions with a long-term horizon, even during theworst of the pandemic. The company demonstrated its ability to adapt and maintain smooth communication with clients and other stakeholders.

Furthermore, I get the sense that coordination among Nikko
AM’s offices worldwide is now even stronger than before. It
is true that we also found that there are some gaps between
offices in terms of initiatives and awareness, but that just shows
us how we can keep evolving further. Nikko AM will certainly
get even better at giving clients what they want as we continue
to enhance our ESG initiatives.
What should Nikko AM’s future goals be?
The mission of the asset management industry is to perform ina way that satisfies investors and clients. ESG investment andsustainability are an integral part of this, and they are essential
to asset managers who want to earn the trust of society as
good citizens. The close relationship between improvements
in long-term corporate value and ESG factors shows that ourinvestment departments hold the key to better performance,
given how involved they are with engagement activities.
The biggest task facing asset managers is the need to work
constantly to strengthen and enhance their asset management
capabilities. Nikko AM’s willingness to take on that task showsthat it is moving in the right direction, and translating thatwillingness into action is bound to deliver good results.
If we are to stay on the right track in hugely volatile times likethese, it is of the utmost importance to be sensitive to new
information and to embrace innovation. I remain committed tosupporting Nikko AM’s senior management as they make theongoing improvements needed to ensure that we continue tolead the industry in the sustainability and ESG space.

•4

Introduction

Investment Management

Corporate Sustainability

Looking Beyond

Management
Nikko AM Sustainability Report 20205

Introduction

Investment Management

Corporate Sustainability

Looking Beyond

New opportunities to act on ESG
A message from the Chief Investment Officer
At Nikko Asset Management, environmental, social, and governance (ESG) principles are a pillar of our corporate identity and have been integrated into our investment process.
In 1999 we launched Japan’s first socially responsible investment (SRI) fund, and for the past two decades we have madea concerted effort to link ESG factors with excess returns.

Hiroki Tsujimura,
Executive Vice President,
Global Head of Investment, andChief Investment Officer

The concepts of ESG and the UN’s Sustainable Development
Goals are both gaining a foothold in society. Throughour ongoing engagements with companies, we havenoticed that people are increasingly recognising that
there is a connection between societal value, economic
value, and corporate value creation. The COVID-19 pandemic has brought a greater sense of urgency for companies to integrate ESG into their business operations.
Firms that have identified risks and opportunities related
to the pandemic, and have responded with effective
action, are attracting positive attention in the market.
Our ESG Global Steering Committee, which counts
the heads of all our investment management teams
among its members, is the engine that drives our
ESG initiatives. The committee plans high-quality initiatives, based on information gathered from aroundthe world, that enable us to respond appropriately tothe ever-growing global interest in sustainability.
With Japan pledging to become carbon neutral
and the new US administration re-joining the Paris
Agreement, efforts to combat climate change are gaining new momentum everywhere. This has naturally
fuelled our own actions to address the environmental aspect of ESG at the core of our initiatives, but we arealso continuing to actively address other ESG issues.

The COVID-19 pandemic has broughta greater sense of urgency forcompanies to integrate ESG into theirbusiness operations

personnel development, labour productivity, and diversity; and we are seeing opportunities in this area. We arealso continuing to address the governance aspect of ESG byengaging with firms ahead of revisions to Japan’s Corporate
Governance Code. This includes discussions on board effectiveness; governance of group subsidiaries; capital efficiency, including cost of capital and cross-shareholdings;
and protecting the interests of minority shareholders.
I believe that the role played by asset managers in solving
ESG-related problems is taking on greater importance thanever before. We will continue to provide our clients with highquality financial services that fully meet their needs by actingin accordance with our Fiduciary and ESG Principles andfinding new and original ways to enhance our services.

•

The COVID-19 crisis has brought a new focus for companies to take action on social themes such as working styles,

Nikko AM Sustainability Report 20206

Introduction

Investment Management

Corporate Sustainability

Looking Beyond

A history of ESG investment at Nikko AM
Since the establishment of Japan’s first socially responsible investment (SRI) fund in 1999, we have put a priority on being environmentally friendly in our asset management operations. One of our environmental policies is toincrease green investments, and we implement environmentally friendly initiatives by providing SRI funds in Japan.
In October 2007, we signed the Principles for Responsible
Investment (PRI) to express our commitment to the conservation of the global environment and the development ofa sustainable society through asset management. We also
served as a co-chair of the UNPRI Japan Network from 2010
to 2014. More recently, we have continued to engage collaboratively by participating in initiatives such as the PRIPalm Oil Investor Working Group, which is an investor working group that promotes sustainable palm oil investment.
In August 2018, we became the first Asian-headquarteredasset manager to support all four areas under The Investor
Agenda, a platform aggregating investor initiatives relating to climate change. This includes signing and supporting the Global Investor Statement to Governments

on Climate Change, Climate Action 100+, and the Task
Force on Climate-related Financial Disclosures (TCFD).
We are also an active member of the Asia Investor
Group on Climate Change (AIGCC) Working Group.
In addition, we have posted on our website a report on
our activities based on the TCFD’s recommendations in the
period from January to December 2019. Please refer to thereport for details on climate-related financial information.
In Japan, since 2011, we have participated as a member of
the Principles for Financial Action for a Sustainable Society(also known as Principles for Financial Action for the 21stCentury) operated by the Ministry of the Environment. We
have also been a member of the TCFD Consortium since its
launch.

… we have put apriority on being
environmentallyfriendly in ourasset management
operations

In the months and years to come, we will continue toexpand our ESG efforts through further participation in various organisations, as well as through collaborative engagement.

•

Tokyo Midtown,
where Nikko AM is
headquartered.

Nikko AM Sustainability Report 20207

Introduction

Investment Management

Corporate Sustainability

Looking Beyond

Our ESG investment approach
Fiduciary and ESG principles are among our key guiding themes as an asset management company.
To make our group-wide commitment to these themes clear, we set out a Code of Conduct for
Fiduciary and ESG principles and established our ESG Global Steering Committee in 2016.

Nikko AM Tokyo Board of Directors
ReportOversight/
Resolution

Stewardship and Voting
Rights Policy Oversight Committee

ReportOversight/
Resolution

Stewardship and Proxy Voting
Committee… wemandate thateach investment
professional
undertakes
ESG training

ReportOversight/
Resolution

ESG Global Steering
Committee

ReportOversight/
Resolution

Investment Departments(Global)The ESG Global Steering Committee oversees the fulfilmentof ESG commitments and is chaired by the Global Head ofInvestment, who is also a member of the Global Executive
Committee (GEC). The steering committee is mandated by the
GEC and reports to the board of directors at least once every
quarter.
The ESG Global Steering Committee comprises leaders from
our investment teams worldwide, who are in charge of ESG
implementation in their individual investment processes. The
steering committee is responsible for evaluating the effectiveness of this implementation and improving our approachto ESG. It also drives our implementation of the six principlesof the United Nations-supported Principles for Responsible
Investment (PRI).
ESG specialists support the investment teams, primarily
through internal capacity building, with the aim of having all
investment professionals integrate ESG into their investment

Nikko AM Sustainability Report 2020

processes to the fullest extent. They also build relationships
with various ESG-focused organisations and regularly share
information with the ESG Global Steering Committee ondevelopments such as legal changes related to ESG in countries around the world. Furthermore, each of the regional
offices is required to present its ESG implementation activities
regularly to its respective board.
At our Japan operations, the ESG framework is supplemented
by our company’s stewardship and voting rights governance structure, consisting of the Stewardship and Proxy
Voting Committee (Voting Committee) and the Stewardshipand Voting Rights Policy Oversight Committee (OversightCommittee).
The Voting Committee is responsible for guidance related
to Nikko AM’s stewardship activities, including formulating
its stewardship policy, as well as amendments to the proxyvoting policy.

8Introduction•

Investment Management

Looking Beyond

Nikko AM’s Commitment to Responsible Investing

Principle 1

Principle 2

Principle 3

Nikko AM incorporates ESG issues ininvestment analysis and decision-making

Nikko AM is an active owner andincorporates ESG issues into its
ownership policies and practices

Nikko AM seeks appropriate
disclosure on ESG issues by theentities in which it invests

Principle 4

Principle 5

Principle 6

Nikko AM promotes the acceptanceand implementation of the Principles
within the investment industry

Nikko AM collaborates toenhance effectiveness in
implementing the Principles

Nikko AM reports its activities
and progress towards
implementing the Principles

Comprised mainly of independent members of Nikko AM
Tokyo’s Board of Directors, the Oversight Committee is anindependent body with oversight authority. It is responsible for monitoring whether Nikko AM’s company engagement and proxy voting activities are in line with its policies
and truly meet investor interests at the firm’s Japanese operations. The Oversight Committee is also fully integrated into
our governance structure as it is required to report on its
activities and decisions to the board of directors.
We take multiple approaches to addressing ESG issues. Our
firmwide ESG policy sets out how we manage and govern
ourselves sustainably, and our Code of Ethics describes ourcore values, corporate social responsibility, and global citizenship. Where appropriate to the asset class, investment
strategy, and client requirements, certain investment teams
may maintain specific ESG policies and procedures pertaining to their investment philosophy and process.
In 2019, we developed our Position Statement on Climate
Change to reinforce our commitment and outline ourapproach to climate change. The statement addresses allareas of impact under The Investor Agenda.
We have a strong emphasis on internal training, and we
mandate that each investment professional undertakes ESG

Nikko AM Sustainability Report 2020

Corporate Sustainability

training. A total of more than 80 people have participatedin PRI Academy training sessions since we started providingthem in 2017.
Through our proxy voting process and engagement withthe companies we have invested in, we are an active owner.
And, as a long-term investor, we believe that active dialogue and engagement with the management team, whereappropriate, can improve ESG performance and sustainability, as well as help an investor to more fully understandthese efforts.
We use external ESG research reports to augment our
research. Ratings can highlight companies deemed to behigh-risk. These companies would then undergo morein-depth analysis and debate within the team, as well as
through our ESG Global Steering Committee.
That said, we do not believe an organisation’s commitment
to do the right thing can be so easily captured by a rating
alone. Ultimately, we believe that thorough research, vigorous debate, and direct engagement with companies to get
a first-hand appreciation of the issues are still the best ways
to evaluate ESG factors and judge their impact on an investment outcome.

•9

Introduction

Investment Management

Corporate Sustainability

Looking Beyond

Award-winning research
How investing in employees can create shareholder value
In Japan, a country that struggles with social issues such as an ageing and shrinking
population, it is important from both an economic and social perspective to improve labour
productivity by utilising human capital more efficiently.
human capital investment efficiency positively affects shareholder value, and that this relationship is more apparent incompanies with low labour productivity. In other words, theresults imply that companies that can efficiently create economic value by providing employment have the potential to
add shareholder value subsequently.
We asked the authors about their thinking behind this study.
What inspired you to choose this research topic?

… companies thatcan efficiently create
economic value by
providing employment
have the potential to
add shareholder value
subsequently

Nikko AM Sustainability Report 2020

Yasushi Ishikawa, Ph.D.

Kyoji Hasegawa

Yasushi Ishikawa, Ph.D., Head of Equity Fund Management
Department, Head of Alternative Fund Management
Department and Joint Head of Global Multi Asset, and Kyoji
Hasegawa, Quantitative Analyst in the Technology FundManagement Department, co-authored an award-winning
paper on this topic titled Efficiency of Japanese Corporate
Investment in Human Capital and Shareholder Value.
Dr Yasushi Ishikawa and Kyoji Hasegawa conducted a study
examining the relationship between human capital investment efficiency and shareholder value. They found that highKonosuke Matsushita, the founder of Panasonic, famously
said, “A company is its people”. Management guru Peter
Drucker wrote something similar. That said, there has been
little empirical research on the relationship between humancapital and shareholder value.
Academic studies in recent years have found that the stock
prices of companies that increased investments tended tounderperform. This has led to more attention on the quality of these investments rather than the amount being
invested. In addition, with regard to corporate value, investing in intangible assets such as human resources has gained
importance over capital expenditure on tangible assets.
Focusing on these two points, we decided to examine how
the efficiency of human capital investment affects shareholder value.

10Introduction

What do the results of the study imply from an ESG
perspective?
The conclusion of this study was that the way companies
invest in human capital affects their stock prices, and that
this effect is especially conspicuous in companies with low
labour productivity. It implies that companies that invest in
human capital efficiently can generate economic value forinvestors in the form of excess returns.
The concept of Creating Shared Value (CSV) introduced byProfessor Michael Porter of Harvard is a combination of economic value and social value. Human capital investment efficiency is closely linked to job creation, and thus relates tothe “S” in ESG. In other words, our results suggest that ESG
investment can indeed produce alpha.
Dr Ishikawa, you are the co-lead of the Women’s Working
Group at Nikko AM. Does this study give you any insights
on the advancement of women at Japanese companies?
Our study showed the positive effect efficient human capital has on corporate performance and shareholder value,
but we didn’t distinguish between the performance of men
and women. That said, in Japan, where the labour population is shrinking, it goes without saying that the labour participation rate of women is important. Ever since former
Prime Minister Shinzo Abe’s second administration pushed
for women’s advancement as a growth strategy, the labour

Investment Management

Corporate Sustainability

participation rate of women has increased. However, a closer
look reveals that much of the increase is in part-time positions, and that many industries have low ratios of female
managers. Establishing an environment that supports working mothers and providing opportunities for women to progress within organisations will directly result in more efficientinvestment in human capital, in my view.
How do you think this research will be applied going
forward?
If the link between human resource allocation and shareholder value is broadly acknowledged by companies, humancapital investment efficiency could be used as a common
language in dialogues between companies and institutional
investors like ourselves. As an asset manager, it is especiallyencouraging that engagement with the management ofcompanies with low labour productivity, as a way to improvetheir human capital investment efficiency, may lead to alpha.
In fact, at Nikko AM, we have started company engagements focused on human capital investment efficiency from
September 2020. If more companies start focusing on theefficiency of human capital, it will be a factor that contributes
positively to the labour productivity of Japan as a whole.

Looking Beyond

Establishing anenvironment that
supports working
mothers and providing
opportunities for
women to progresswithin organisations
will directly resultin more efficientinvestment in humancapital•The paper, which was awarded the Securities Journalists Journal Prize for FY2019 can be accessed by visiting: www.saa.or.jp/english/publications/2020_ishikawa_hasegawa.pdf

Nikko AM Sustainability Report 202011

Introduction

Investment Management

Corporate Sustainability

Looking Beyond

JAPAN EQUITY TEAM

Showing non-financial value
An increasing proportion of the value of companies comes from their intangible assets —such as human capital, technologies, intellectual property, and brand value. This is making
it ever more important to assess companies’ intangible assets and integrate these into theirfinancial value.

In light of the drastic work style changes that took placein 2020 as a result of the COVID-19 pandemic, we believethat efforts to enhance human capital will influence thecompetitiveness of corporates. Also, as governments,
including Japan’s, have committed to reducing carbon
emissions, it is becoming increasingly relevant to assess
environmental opportunities and risks, especially thoserelated to climate change.
As a growing number of companies seek to disclose their initiatives (including ESG) to promote sustainability, through

Nikko AM Sustainability Report 2020means such as integrated reports, we have observed that, inrecent years, they are becoming more aware of the connection between sustainability, future profits, and impact on corporate value. We are therefore constantly looking for ways toenhance our methods for assessing non-financial information based on our Creating Shared Value (CSV) evaluations,which provide us with a unique tool for comprehensively
assessing firms.
written by Hiroki Wakita, Equity Analyst

12Introduction

Investment Management

Corporate Sustainability

Looking Beyond

JAPAN EQUITY TEAM

Our approach to ESG
Our philosophy
To generate new growth, companies today must have astrong approach to ESG. By investing in the stocks of suchcompanies, we believe that excess returns can be achieved
over the medium to long term. The Japan Equity team aims
to generate alpha by selecting companies with superior ESG
practices through a stock selection process that combines
both negative and positive screening, and an optimisation
process that incorporates thorough risk management.
ESG implementation
When we conduct a historical comparison between leading ESG indices and the TOPIX (Tokyo Stock Price Index), it
is apparent that ESG indices do not always outperform themarket. This implies that investing in companies with superior ESG ratings on its own is insufficient for outperformance.
Instead, a well-conceived approach is necessary when implementing ESG considerations. As with any investment, appropriate stock selection and portfolio management are crucial to improve performance and control risk within an ESG
strategy.
The Japan Equity team believes that a superior ESG
investment process should:
pursue alpha through a combination of financial and nonfinancial information, including ESG factors••

on ESG factors that lead to future earnings and• focusstrengthen competitivenessinvolve consistent engagement with corporate manage• mentteams
CSV evaluations of individual stocks: Positive screening
All active Japan equity investment strategies incorporate
Creating Shared Value (CSV) evaluations, which take ESG
factors into consideration. It is a comprehensive score thatwas developed by applying the CSV theory proposed byProfessor Michael Porter of Harvard University. The scoreassesses how companies balance their engagement of ESG
issues with the pursuit of profitability and competitiveness,in order to create value for both society and shareholders.
Our analyst research has incorporated CSV evaluations since2013.
Approach to firms with governance risk: Negative
screening
Firms that have been involved in criminal conduct, fraud,
and/or accounting fraud, or that have caused environmental
or social problems, are classified as having governance risk.
The Japan Equity team excludes firms with perceptible corporate governance risk from its investment universe, while
also seeking to promote better governance by engaging
with the firms it invests in.

… [companies]
are becoming
more aware of theconnection between
sustainability, future
profits, and impact on
corporate value•

Operational flow for handling firms with governance risk
• Analysts estimate impact on corporate results, summarise
related news, and convey this to portfolio managers• Governance specialists analyse from a governance perspective

Emergence ofgovernance risk

Follow-up researchby analysts

Meetings by portfolio
managers, analysts andgovernance specialists• Initial ABC assessment* of firm with governance risk
• Client-facing departments informed where necessary

Initialassessment• If situation is serious from an enterprise value perspective, theinvestment team to discuss necessity of selling out of stock

Engagement with firms,
actions taken with individual
firms• Engagement with firm, mainly

undertaken by governance specialists;
analysts also attend, if necessary*ABC assessment (scoring of firms on governance risk)
A: Not deemed a governance risk firm (don’t oppose director appointment proposals) B: Deemed a governance risk firm (oppose director appointment proposals) C: Deemed a governance risk firm and holding of stock not recommended from corporate ethics perspective

Nikko AM Sustainability Report 2020

• Firm to be continuously evaluated based on how engagement develops
Monitoring of firms withcorporate governance risk

Upward revisionof evaluation• Monitoring to continue until measures are

implemented to prevent reoccurrence, and a decision
is made that governance risk has diminished13

Introduction

Investment Management

Corporate Sustainability

Looking Beyond

GLOBAL EQUITY TEAM

Purpose-led Future Quality
A sustainable businessmodel must look after
all stakeholders ingood times and bad

Retrospectively, 2020 will be seen as a watershed year. COVID-19 has highlighted the structural,social, and environmental inequalities within society, and it is now widely recognised that
wealth can no longer be sustained without ensuring the welfare of citizens and the naturalenvironment. Friedman’s doctrine of maximising profits has reached its natural end and, as
policymakers try to rebalance the mistakes of the past, the need for corporates to provide
solutions will only intensify.
The good news is that many management teams and companies have been aware of these issues for many years andhave already directed resources towards solving these problems. These companies will be well positioned to benefit
from this shift in attitudes and capital — and many form thecore of our Future Quality portfolios.

The Global Equity team has been paying close attention to
how our investments have behaved over the last several
months. Clearly, for the vast majority, sales and profits areunder significant stress as demand across most industries has
collapsed. However, a crisis also provides opportunities for afirm to enhance their reputation and help win market shareas the world exits the crisis. The firms we have invested in are
behaving in the right way — by supporting their stakeholders.
Here are a few examples:
AIA, the Asian life insurer, provided free COVID-19 insurance
for millions of customers, employees, and representatives
across its region. It has donated thousands of items of personal protection equipment, implemented initiatives to expedite approval for all COVID-19 health-related issues, and cancelled deductibles. It has also funded clinics and provided fullrisk protection policies for employees in many hospitals acrossthe region.

Doing the right thing in times of crisis:
A COVID-19 special feature

Any securities mentioned herein are for illustration purposes onlyand should not be construed as a recommendation for investment.

Nikko AM Sustainability Report 2020

A sustainable business model must look after all stakeholders in good times and bad. The quality of a company goes far
beyond just balance sheet strength and profitability. The way
companies behave also helps mark them out as long-term
winners. Companies that do the right thing in times of stress
are to be valued.

Progressive Corp, the US auto and home insurer, returned
USD 1 billion in premiums to customers to reflect the fact thatmost customers are not using their vehicle as frequently. It’s
providing customers who cannot afford to renew or pay theirpremiums with relief by continuing coverage through thisperiod. Agents are being supported with grants and, while themajority of employees can work from home, those who can’t
are also being supported.
Unilever, the global consumer goods firm, donated over EUR
100 million in the form of soap, sanitisers, and food. It is also providing EUR 500 million in cash relief to customers and suppliers
to help them manage their business through this crisis. And for
14

Introduction

Investment Management

its employees, Unilever is offering three months of protection to
the entire workforce as a result of this disruption

$100m
Sony
coronavirus
relief fundPhilips, the European healthcare company, donated a range ofdiagnostic imaging, patient monitoring, and respiratory equipment through the Philips Foundation. It has also provided financial
support for the purchase of personal protective equipment in Italy.
And while it has been busy ramping up production of ventilatorsand continuous positive airway pressure equipment, the company
is ensuring fair access to these products for developing countries.
Sony established a USD 100 million coronavirus relief fund tohelp in three specific areas: 1) financial assistance for healthcare

Our approach to ESG

Our philosophy
Society cannot solve the problems that it faces today without the private sector making a significant contribution. It is
the Global Equity team’s view that businesses with solutions toenvironmental and social problems that provide value acrossall their stakeholder groups, will position themselves to be
tomorrow’s winners.

Corporate Sustainability

workers and first responders; 2) specific projects and technologies to assist delivery of remote schooling; and 3) financial support for artists in the entertainment sector affected by the closure of the industry and loss of income. For Sony to achieve its
purpose to “fill the world with emotion, through the power ofcreativity and technology”, the creative industries — those that
attract customers to Sony’s many products and platforms —need to flourish. The pandemic has undoubtedly hit the creative industries particularly hard, so Sony’s management has
been proactive in providing support for what is a crucial part oftheir value chain.
written by the Global Equity TeamESG implementation
As long-term investors, we focus on companies that not only
behave appropriately but can actively provide solutions to thesocial and environmental problems we face. However, for thisto be done sustainably, we believe it also needs to be done
profitably.

Profits are essential for companies but the purpose of a business is far more than simply the generation of profit. The best
businesses already understand this and, with purpose, consistOur investment philosophy focuses on purpose-led Future
Quality businesses — those that can attain and sustain some of ently provide value to all their stakeholders.
the best returns on capital available in the market.
Our search for Future Quality focuses on researching and
We believe the market will increasingly allocate capital to com- investing in some of tomorrow’s most profitable companies
available in global markets. Given the scale of the challenges
panies solving society’s major challenges and that these comfaced across the world today, we are finding an ever-increasing
panies will be best placed to sustain high returns, while creatnumber of companies that can form part of the solution rather
ing value for all their stakeholders.
than be part of the problem, which is critical for both futurefinancial returns and the wellbeing of future generations.

•

Looking Beyond

GLOBAL EQUITY TEAM

Profits are essential
for companies but
the purpose of abusiness is far morethan simply thegeneration of profit•

Purpose-led Future Quality

Multi-stakeholder model

Consumers

Nikko AM Sustainability Report 2020

Customer

Strong financial performance

Growth

Employees

PlanetCashflowSociety

Shareholders

Return on capital

LONG
TERM
VALUE
Any securities mentioned herein are for illustration purposes onlyand should not be construed as a recommendation for investment.

15

Introduction

Investment Management

Corporate Sustainability

Looking Beyond

ASIAN EQUITY TEAM
(EX. JAPAN)

Evaluating a major transaction
In November 2019, the Asian Equity team voted against a major related-party transaction by one of thelargest REITs in Singapore. The key reason for this decision was that the funding structure for the transaction
was sub-optimal, with equity being issued at a greater discount to market price than necessary.
We calculated that a more favourable outcome for unitholders could be achieved with fewer equity units issued at a higher price. Our analysis
differed from the company management’s recommendation as well as research by ISS, our proxy service provider.
In addition to casting our votes through ISS’s portal, we also attended the REIT’s extraordinary general meeting, where we spoke about ourrationale for rejecting the transaction. While the transaction was eventually passed by a large majority, we believe that our actions were in line with
applying our high standards of governance with regard to transaction structures by Asian REITs.
written by Lai Yeu Huan, Portfolio Manager

Our approach to ESG… [we are] focusedon applying rigorous
fundamental research
to identify companies
that are capable ofsustainable highreturns and/or positive
fundamental change

Our philosophy
The Asian Equity team sees the Asian region as being comprised ofdiverse growth markets, where fundamental drivers can lead to substantial and rapid change. As such, our investment process is focusedon applying rigorous fundamental research to identify companies
that are capable of sustainable high returns and/or positive fundamental change. We believe that investing in companies with thesecharacteristics will deliver superior performance over the long term.
Within this process, ESG is a key pillar of our assessment of the sustainable returns and fundamental change characteristics of the companies we research. As a result, we focus on ESG issues that are material to shareholder returns, for the foreseeable future.
ESG implementation
As ESG research is integrated into our fundamental research process,it is undertaken by our team of analysts and portfolio managers, and
it is considered together with input from external ESG research anddata providers.

•Once the issues are identified, we evaluate the ESG performance ofthe companies with regard to each issue. We assess how firms are
mitigating risks and accessing ESG-related opportunities. This evaluation then feeds into our overall rating of sustainable returns andfundamental change for the company. We also apply an ESG flag tocompanies we deem to be not investible, whether due to unacceptable risks or poor ESG performance with no evidence of improvement.
Finally, we identify key issues for continuing engagement with thecompanies we cover. These include outstanding ESG issues thatcompanies are in the process of resolving or opportunities that are
being developed. If appropriate, we will suggest options that bestenhance shareholder returns.

•

Robust, tried-and-tested investment process
1.
Opportunity set definition
Screening universe by liquidity
and market capitalisation

Nikko AM Sustainability Report 2020

Our ESG evaluation process starts with identifying the key issues thatwill be material for shareholder returns for each company we cover.
These issues could be risks to returns, which include potentially disruptive events, and risks that lead to a gradual erosion of shareholder
returns. The issues also include ESG opportunities, which could resultin a material enhancement of shareholder returns.

2.
Idea generation
Mispriced stock screening
Analysts’ generation of ideas

3.
Detailed fundamental research
Sustainability of returns
Positive fundamental changeInternal stock ranking

4.
Portfolio construction
Ranking-based weight guidelines
Portfolio manager discretion
Sell discipline

5.
Ongoing risk monitoring and management
Independent risk monitoring
Testing of stated process16

Introduction
AUSTRALIANEQUITY TEAM

Investment Management

Corporate Sustainability

Looking Beyond

Highlighting carbon risk
While the Australian Equity Team integrates ESG risks into our fundamental valuations, we are also very awarethat high carbon output specifically represents an increasing risk to investment. There is currently no carbon
tax in the Australian market, but the risk that carbon emissions will be taxed or otherwise penalised is high.
To ensure that portfolio managers are aware of the magnitude of this risk when comparing stocks, we take into consideration long-term earnings with a carbon tax levied on scope 1 emissions for all of the stocks under our coverage. We calculate this based on a carbon price of both
USD 10 per ton and USD 20 per ton and include this impact in our primary stock selection tool.
This sensitivity analysis has led to portfolio managers deciding not to invest in stocks, since this would greatly increase the carbon risk of theportfolio. As this is a large risk, and one that is attracting increasing attention from our clients and investors generally, we have chosen to
manage this risk at the portfolio level.
written by Craig Young, Portfolio Manager

Our approach to ESG

Assessing the intrinsic
value of an investment
can reveal profit
opportunities

Our philosophy
The Nikko AM Australian Equity team has a long history of investing based on fundamental research. All stocks have an intrinsic valuethat can be accurately assessed with expert and diligent research.
In the short term, the market price frequently reflects factors otherthan this intrinsic value. Assessing the intrinsic value of an investment can reveal profit opportunities, as the market price will invariably move towards the intrinsic value. This thinking lies at the core of
the Nikko AM Australian equity investment approach.
Investing in a responsible manner — where material issues including
environmental, social, and governance (ESG) issues are considered— is a part of our duty to clients. Engagement with the companies
held in our portfolios is an important component of the investment
process, with the aim of improving the outcome for investors, as wellas increasing the value of companies by addressing ESG issues.
ESG implementation
ESG factors often have a long-term impact that is overlooked by themarket even though ESG risks can affect the long-term profitabilityof a company. Not only are direct ESG issues a concern, but society’s
views and the consequent consumer, corporate, and government
reactions also need to be considered.

Nikko AM Sustainability Report 2020

As long-term, fundamental investors, the Nikko AM Australian Equity
team considers ESG factors as having the same level of importanceas more traditional factors, such as market structure, innovation,and industry growth. Any material ESG issues are incorporated into
valuations, using the same methods for more traditional factors.
This way, the impact is neither under- nor over-stated. It is important to note that we do not exclude particular asset types, industry sectors, or securities wholly on moral or ethical grounds, unless
this is expressly built into the product’s investment strategy or client
agreement.
Engagement with companies is a key part of the research process.
Developing a superior understanding of companies to peers is a key
method of producing higher returns. As shareholders, we have thecapacity to influence better corporate behaviour. For companies
held in our portfolios, this engagement is used to influence corporate practice to address ESG issues and to improve disclosure of ESG
information.

•

17

Introduction
NEW ZEALAND EQUITY
AND BOND TEAMS

Investment Management

Corporate Sustainability

Looking Beyond

The value of doing the right thing
New Zealand has seen many companies actively improve their ESG performance without
significant pressure exerted by the investment community. This is due to the industry sectors in
the investment universe not having mining or extraction industries, as well as a legal frameworkthat supports a rising minimum wage rate and the enforcement of modern-day slavery legislation.

New Zealand’s government is also a strong advocate for protecting the environment and eradicating poverty, and it iscommitted to reducing inequity in the areas of health, education, and employment for underprivileged parts of thecommunity.

… putting staff firstwill further increase
reputation andprofitability…

An example of a New Zealand company doing its part isFisher & Paykel Healthcare. Nikko AM New Zealand has
invested in Fisher & Paykel Healthcare for a number of years.
We know its business, understand its strategy, and respect its
approach to balancing stakeholder interests.
Fisher & Paykel Healthcare’s hospital products, such as its
innovative respiratory humidification systems for critically illpatients, have played an enormous role in combating COVID19 globally, and have consequently driven profitability. The
firm openly states its commitment to innovation, doing theright thing, and doing what is best for the patient, but it is
its care for its staff that caught our attention. In essence,the company has rewarded the huge effort of its workforce

during the coronavirus pandemic with both new initiatives
and the extension of existing programmes. These included:
discretionary bonuses, which were approximately• paying
double what they usually receive. This also included addi-•••

tional discretionary bonuses in countries where bonuses
are legally mandated
providing food parcels to workers, given both the hours
worked and potential health risk of being out in foodmarkets
encouraging staff to simply take whatever paid leave they
deemed necessary to recover from post-COVID-19 peaks,in addition to normal leave entitlements
paying for private health assessments and treatment, transportation, and home leave when COVID-19 risks emerged

We believe that the way Fisher & Paykel Healthcare is beingsocially responsible in putting staff first will further increase
its reputation and profitability.
written by the New Zealand Equity Team•

Fisher & Paykel Healthcare — Beliefs

We believe in doing what is best for the patient.

We believe our people are our strength.
© Fisher & Paykel Healthcare

Nikko AM Sustainability Report 2020

We believe the commitment to doing the rightthing is what our customers will find compelling.

We believe lessons learned are the cornerstonesof innovation.

We believe that empathy, effectivenessand efficiency are essential to our success.

We believe in the need to be relentless inthe pursuit of healthcare innovation.

Any securities
mentioned herein are
for illustration purposes
only and should not
be construed as arecommendation forinvestment.

18

Introduction

Investment Management

Corporate Sustainability

Looking Beyond
NEW ZEALAND EQUITY
AND BOND TEAMS

Our approach to ESG
Our philosophy
Nikko AM New Zealand’s equity and bond teams have aunited voice on ESG issues. We are primarily medium- tolong-term investors with a fundamentally driven bottomup approach. We seek to understand how industry andcompany ESG factors may impact investments and, ultimately, client portfolios. The ESG risks and opportunities
faced by a company form an important element in understanding investments but cannot be managed in isolation.
The quality of a management team, for example, must also
be carefully assessed.
We use our extensive experience to help us understandand evaluate the materiality of ESG factors. A specificunderstanding of ESG analysis can help us build a picture of the risks and opportunities faced by a company.
However, there is no set formula for quantifying the importance of each ESG factor or adjusting how we value eachcompany.
ESG implementation
On a quarterly basis, we screen the investments we hold
across all portfolios — together with investments on watch
or under active assessment — using the MSCI ESG Researchtool. This process assists the team by adding another layerof scrutiny to our knowledge of companies. Many debt
issuers are also listed on the NZX and, therefore, also captured during this screening.

Nikko AM Sustainability Report 2020

The outcome of this process is that companies are rated on ascale from AAA to CCC relative to the standards and performance of their industry peers. We engage with these companies in an effort to raise the bar in relatively weak areas or
areas where ongoing improvement is beneficial to stakeholders. These areas could be identified by the MSCI research or
our own research. A rating of BB or less does not necessarily make a company un-investable from our perspective but
does necessitate active company engagement on the main
issues underlying the relatively poor rating.
A higher MSCI rating does not alone dictate a higher investment weight. The primary driver of a company’s weight inour portfolios will still be determined by the relevant portfolio manager, given a range of both quantitative and qualitative factors. The current MSCI rating is explicitly assessed asa quantitative factor consistent with our established investment process. Companies that have higher ratings or are
actively improving their ESG standards will ultimately be recognised by market participants, so our process is likely tohighlight these opportunities.
The team regards voting as an integral part of being a
responsible steward of capital. Analysis of a company’s corporate governance structure helps to form our view of thequality of a management team. We exercise proxy voting
rights independently and solely in the interests of our clientsand beneficiaries. When we exercise voting rights againstcompany resolutions, it is our policy to write to investee companies to explain our reasons in an endeavour to advancethe company’s development.

The team regards voting
as an integral part ofbeing a responsible
steward of capital•

19

Introduction
JAPAN FIXEDINCOME TEAM

Investment Management

Corporate Sustainability

Looking Beyond

Approach to ESG bonds
The Japan Fixed Income team believes that ESG bonds (such as green bonds and sustainability
bonds) contribute to performance. We regard the contribution they make as a clear investment
criterion, which we integrate into our analyses of issuers’ creditworthiness, alongside regularbonds. When selecting ESG bond issuances, we engage with issuers to learn how they plan to use
the bond financing, as well as the benefits they expect to see from the bonds, and focus on the
securities that are likely to generate high returns.
An increasing number of Japanese companies have started to issue ESG bonds that are also hybrid bonds (subordinated bonds
with equity attributes) in order to make ESG contributions while also strengthening their financial positions. We actively invest
in such bonds in view of the positive synergies they bring to issuers’ fundamentals. We also intend to stimulate further market
growth by encouraging companies that currently have no plans to issue such bonds to consider doing so based on the nature of
their businesses and the attributes of the assets they hold.
written by Akihiko Yoshino, Group Manager of Credit Research

Our approach to ESG

An increasing numberof Japanese companies
have started to issue
ESG bonds that arealso hybrid bonds …

Our philosophy
In order to pursue excellent performance in domestic bondmanagement, it is critical to evaluate creditworthiness by analysing both quantitative risks, such as debt repayment ability,and qualitative risks that cannot be captured by financial analysis. The environmental, social, and governance (ESG) viewpoint
is positioned as an important factor in qualitative risk analysis.
In the Japan Fixed Income team, credit analysts who analysecreditworthiness perform both fundamental analysis and ESG
factor analysis of individual issuers. ESG is incorporated into
the investment process by comprehensively evaluating both•

A framework that catches momentum change

the fundamentals and ESG of the industry/issuer and reflecting it in investment decisions.
ESG implementation
We have set out eight items (two items related to the environment, and three items each related to society and governance)
in analysing ESG factors. Credit analysts are required to evaluate
these ESG factors alongside fundamentals in the issuer report. In
addition, we share ESG views within our team at monthly meetings attended by fund managers and credit analysts. We believethat frequent conversations on ESG support a process that allows
us to promptly reflect a change in circumstances that negatively
affects creditworthiness, including ESG events.

•

Catch signs of fundamental changes in early stages
Contact with issuers

Continued company visits

Access to unlisted issuers

Fixed point observation of fundamentals

Fixed point observation of ESG factors

Share findings with the teamEvaluate creditworthinessNews flow

Fund managers
Review of investment principle

Proactive investment decisions

Nikko AM Sustainability Report 2020

*This chart is for illustrative purposes only

20

Introduction

Investment Management

Corporate Sustainability

Looking Beyond

AUSTRALIAN FIXEDINCOME TEAM

Monitoring ESG scores in our investment universe
ESG factors are an important consideration in our portfolio construction process to ensure thatour portfolios do not face unnecessary volatility. This has led the Australian Fixed Income teamto build tools that allow us to quickly summarise and display our ESG scores and informationfrom our data provider.
With this information, we can identify industry laggards and question why certain issuers are rated the way they are. For example,
the chart below shows MSCI’s governance scores across all financials in the Australian index. Interestingly, JPM (BB rated) has a far
lower governance score than Wells Fargo (CCC) despite being two notches better in rating. This type of sector-level display allows
our team to hone in on important details and ensure that investments are acceptable under our 5-point ESG scoring system.
written by Chris Rands, Portfolio Manager•

A Financials – MSCI Governance
CCC

B

BB

BBB

A

AA

AAA

NA

ESG Ratings and data provided by:

Our approach to ESG
Our philosophy
For the Australian Fixed Income team, credit is a key pillar of alphageneration across all portfolios that we manage. Our process
focuses on using credit to add stable income to portfolios, whichmeans we endeavour to avoid shocks by avoiding “losers” in thecredit markets. ESG is an important consideration in this respect
as weak ESG practices lead to heightened risks, due to poor business practices, consumer blowback, and weak governance. As
a result, ESG is essential to determining our investable universe
with respect to credit.
ESG implementation
We implement ESG across our portfolios by first using a negative
screen, removing issuers that we believe do not exhibit robust
ESG practices. In order to do this, we assess each company acrossNikko AM Sustainability Report 2020

environmental, social, and governance factors, predominantly
focusing on the issue that is most relevant to the industry thecompany operates in. A score is set for each issuer for all three
ESG factors, and this is based on MSCI’s ESG ratings data, industry-wide risks, rating reports, issuer/management meetings,
and additional analysis conducted by the credit team. Eachcompany is assigned a rating from 1 to 5, with 5 representing
best-in-class ESG practices and 1 meaning avoid.
Those securities that score a 1 in the ranking process will be
excluded from portfolios based solely on ESG considerations.
Historically, we have also excluded any issuer rated CCC by
MSCI. We believe this process works as credit makes up lessthan 10% of the Australian composite investment universe,
meaning we screen out only a small percentage (less than0.5%) while also ensuring the exposures that make it into thefund are responsible ESG investments.

… credit is a key pillarof alpha generation
across all portfolios that
we manage•21

Introduction
GLOBAL FIXEDINCOME TEAM

Investment Management

Corporate Sustainability

Looking Beyond

Incorporating ESG in Global Fixed Income
As we emerge from the COVID-19-induced recession, the planned recovery will be for a moresustainable global economy. As a result, one of the key themes the Global Fixed Income teamhas recently observed within credit markets has been the significant growth of green andsustainable issuance.
The Global Fixed Income team enhanced its capability by integrating its dedicated data scientist into the team to help withwider ESG implementation. Through data and machine learning research, we have been able to create a quantitative ESG scoring template that helps to ensure that bonds we are buying for our portfolios comply with ESG considerations.
Our commitment to sustainability
Earlier this year we purchased a Sustainable Development Bond issued by Enel, an Italian energy company that is active inelectricity generation and distribution, as well as in the distribution of natural gas. The bond is linked to the UN’s Sustainable
Development Goal 7 — Affordable and clean energy. When the bond came to market, Enel attached a written statement, notingthat if it did not reach its goal of “installed renewable energy percentage of 55% of total consolidated installed capacity by
December 31st 2021”, the bond will see an interest rate hike of 25 basis points. This helped to provide us with added assurance
that Enel intends to meet its goals.

By incorporating all
material factors
in our investment
conclusions, ESG
factors are consistently
and comprehensively
incorporated into theinvestment process

The Chañares plant in Chile has an
installed capacity of 40 MW and cangenerate up to 94 GWh per year.
© Enel GroupNikko AM Sustainability Report 2020

This compelling SDG-aligned bond fit well into the Global Credit portfolio from a credit point of view, as it showed the company’s intention to connect its business strategy with sustainability. However, more prominence came from its strong ranking from
our internal ESG scoring framework. This is conducted by analysts confirming their findings within the “ESG” section of the credit
template and providing an ESG commentary snapshot of the credit name. By incorporating all material factors in our investment
conclusions, ESG factors are consistently and comprehensively incorporated into the investment process. The purchase supports Nikko AM’s desire to be a participant in the evolution of sustainable fixed-income instruments.
written by the Global Fixed Income team

Any securities
mentioned herein are
for illustration purposes
only and should not
be construed as arecommendation forinvestment.

22

Introduction

Investment Management

Corporate Sustainability

Looking Beyond
GLOBAL FIXEDINCOME TEAM

Our approach to ESG
Our philosophy
The Global Fixed Income team believes in employing a consistent investment process that incorporates quantitativeand qualitative inputs to generate ideas and construct highconviction portfolios, where we get suitably rewarded forthe risk we undertake. At Nikko AM, we see ourselves as capital allocators and we intend to continue our efforts to provide the capital needed for issuers to implement a sustainable transition programme. As investors, we have a unique
opportunity to identify risks, engage with issuers and build
relationships that can influence positive sustainable change.
We believe it is our responsibility to create innovative products and strategic partnerships across the capital market
structure to establish pathways for meaningful flows into
sustainable investments.
ESG implementation
ESG is considered across all our products. In the investment
process, ESG is applied at the screening and research stage
and at the portfolio construction stage. The scale andmanner that ESG is integrated depends on investor-specificproduct expectations.

•

For example, our Global Green Bond strategy strictly invests
in green bonds from global AAA-rated sovereigns, supranationals and agencies (SSAs) with the strongest sustainability credentials, such as the World Bank, the European
Investment Bank, and KfW.
Another example is our Global Credit strategy. While mostof our experienced analysts work with a best practice list
for corporate governance, built on many years of experience in credit investing, it sometimes is more challenging toensure that the environmental and social aspects of a business align with every one of our investors’ wishes. However,
we take guidance and strive to do our best to make surethey meet the standards set out by the UN PRI. Corporate
governance assesses mostly general management quality, which has a direct impact on the company’s performance, while environmental and social analyses tend to capture risks and opportunities linked to a specific industry or
region. The investment team works hard to deliver a portfolio that is accountable to the ethical and social values of anincreasing number of institutional clients. European asset
owners, in particular, require that their values are reflectedin their portfolios, alongside their performance goals.

•

Four steps of our ESG implementation framework
ESG considerations
Top down

1.
Market assessment

Alpha opportunities

2.
Investment themes

3.
Screening and research

4.
Portfolio construction

Bottom up
Risk management

Nikko AM Sustainability Report 202023

Introduction
ASIAN FIXED INCOME
TEAM (EX. JAPAN)

Investment Management

Corporate Sustainability

Looking Beyond

ESG gains traction in Asian Fixed Income
The topic of ESG and its application in the Asian fixed income context has been rapidly gaining
traction over the past few years. The acknowledgement of its growing relevance — by both theinvestor and the corporate community — has been swift.
While the Asian Fixed Income team has long incorporated the qualitative aspects of ESG within our investment considerations, data
providers’ increasing coverage of ESG data on Asian corporates and issuers’ improving disclosures standards are enabling moremeaningful ESG analysis and tracking of companies. With increased awareness among corporate issuers, companies’ management
teams are now more readily willing and equipped to hold deeper discussions on ESG issues with the investor community. We view
this development positively. As corporate disclosures continue to improve through pressure from investor engagements and regulation, it remains early days for ESG in Asian fixed income, with more positive developments in store in the years ahead.
written by Tat Wei Kho, Head of Credit Research

Case Study: An Indonesian energy company
ESG issues: Environment, greenhouse gas emissions… corporate
disclosures continue
to improve throughpressure from investor
engagements andregulation

Our analysis
The company is engaged in coal mining activities, which
exposes it to transition risks. In recognition of climate change
concerns, the company has implemented a group-wide environmental and risk management policy that encompasses
all levels of management including the board of directors.
In addition to improved disclosures and a commitment to
reduce the intensity of its operations’ greenhouse gas emissions, the company’s management has also been directing
a greater amount of its resources towards diversifying thecompany’s business away from coal-related revenues.

OutcomeWe view the company’s proactive steps towards climatechange mitigation favourably, as they help to address longterm concerns that will impact the sustainability of its business. We will continue to track the company’s environmental
and risk mitigation efforts through regular engagement withthe management.

JakartaIndonesia

Nikko AM Sustainability Report 202024

Introduction•

Investment Management

Corporate Sustainability

Looking Beyond
ASIAN FIXED INCOME
TEAM (EX. JAPAN)

ESG integration in our investment process
Proprietary FVT framework

Top-down macro research
Fundamental, valuation, technical• Yield curve positioning• Duration positioning• Government vs corporate bonds• Country and sector allocation

Risk identification
Macro reviews

Portfolio construction

Risk evaluation and mitigation
Risk monitoring

Credit reviews
Fundamental, valuation, technical
Bottom-up credit research• ESG constitutes part of the Internal Credit Rating process• Qualitative factors in the Internal Credit Rating• Credit outlook• Credit recommendation

Escalation procedure

Our approach to ESG
Our philosophy
Our Investment philosophy is premised on capital preservation, investing for the long-term, and value discipline. Our
Asian Fixed Income team believes that markets are dynamic,
often prone to economic “noise” and not always perfectly
efficient. Therefore, outperformance can be achieved byapplying a systematic approach to top-down macro andbottom-up credit research. Our team believes that all threefactors of ESG — environmental, social, and governance —are inherent to long-term value creation, are core factors
behind sustainable investment, and should be considered
in investment decisions. The team applies this consistentinvestment philosophy across client portfolios.
ESG implementation
Our proprietary Fundamental, Valuation, and Technical (FVT)
Framework, which is applied to our top-down and bottomup research, is the foundation on which we construct highconviction portfolios that seek to deliver returns throughmultiple sources of alpha. With regard to our robust credit
research, the most important output from our team of dedicated credit analysts is the Internal Credit Rating (ICR) model.

Nikko AM Sustainability Report 2020

The ICR process is the first pillar of our bottom-up credit
research and enables the credit research team to assess
quantitative and qualitative aspects of each issuer, independently of external credit rating agencies. ESG risks andopportunities are assessed and scored as part of this qualitative assessment within the ICR. Considering ESG factors is an
important way to identify potential downside risks that may
impact the borrower’s credit profile.
At Nikko AM, ESG factors are an important aspect of theteam’s credit analysis and an integrated part of the team’s
investment process. The investment team researches andscores companies, taking into account both qualitative andquantitative factors. ESG factors are identified by their materiality and potential impact on companies’ credit profiles. The
ESG factors of individual companies are determined by leveraging our research team’s keen knowledge through bottomup fundamental analysis. Their ESG scores are then incorporated into our overall credit score, which will influence thefinal credit rating of a company. The credit rating of the company will help to determine the appropriate risk premium toapply to the bond valuations to justify an investment.

•

25

Introduction

US INVESTMENT TEAM

Investment Management

Corporate Sustainability

Looking Beyond

Agricultural land as an emerging asset class
Agricultural land is a critical asset class that sits at the intersection of climate change andsustainability, population dynamics, and changing food trends. Food security in more andmore countries is being challenged by the effects of climate change, and there is a mismatch
between population size and resource availability.
As the gradual change in climate puts pressure on the land available for farming, there is also a growing population and middle
class that demands more food and specialty crops. It is becoming a growing challenge to meet demand as land, water, andother natural resources become increasingly stressed. Given this situation, farmers will need to use technology and innovation
to meet demand for food and also increase sustainable farming practices that improve the precision with which inputs areused to reduce waste and environmental load. The US investment team sees this as an opportunity to invest in sustainableagriculture.
written by Lawrence Prager, Chief Investment Officer and Country Head, Nikko AM Americas

The US investment
team sees …
an opportunity toinvest in sustainableagriculture

Circular irrigatedfields Colorado, USA

Nikko AM Sustainability Report 202026

Introduction

Investment Management

Corporate Sustainability

Looking Beyond

US INVESTMENT TEAM•

How we implement our ESG philosophy

We gain an understanding of
the short- and long-term risks
on the business environment
for each thematic fund.

We aim to manage ESG
concerns through proxy voting
and engagement with thecompanies in our portfolios.

We look for new opportunities
for our investors in ESG-related
fields, such as climate change
and the energy transition.

Our approach to ESG
Our philosophy
On the US investment team, we believe that the three corefactors behind sustainable, responsible investing — environmental, social, and governance (ESG) — are inherent
to long-term value creation. We view ESG analysis as both
return-enhancing and risk-mitigating, so incorporating thisappropriately in the investment process (when ESG factors
are material to investor value) is consistent with our fiduciary
duty. Sustainability means managing the challenges and risksfacing all organisations to meet the needs of the present,
without compromising future generations. We firmly believe
it is our responsibility to consider ESG factors when making
investment decisions on behalf of our clients.
ESG implementation
Implementation of this philosophy takes three forms.
First, the US investment team works with sub-advisers fornon-discretionary investment advice to understand theshort- and long-term risks on the business environment
for each thematic fund, in order to help us make informed

Nikko AM Sustainability Report 2020

strategic decisions. Each sub-adviser has their own dedicatedapproach to analysing companies based on ESG. Duringmonthly and ad hoc conversations with our sub-advisers, we
discuss the potential risks to the investment strategies as wellas the opportunities that may arise from the changing environment. The use of third-party scoring metrics helps us to
identify potential risks in the portfolios.
Second, ESG oversight is implemented through proxy voting
and engagement with companies in the portfolios. The
investment team executes proxy ballot votes that decideboard oversight, executive compensation, disclosures, andcompany policies to strengthen company governance. Whenengaging with each of these companies, the investment
team focuses on their approach to managing ESG concerns.
Third, we look for opportunities for our investors to benefit by helping to create new investment ideas. Recently, we
have made it our aim to generate alpha by identifying therisks and opportunities that surround climate change and theenergy transition.

•

27

Introduction
PORTFOLIOSOLUTIONS GROUP

Investment Management

Corporate Sustainability

Looking Beyond

Dedicated ESG evaluations forexternal managers
In 2020, the Portfolio Solutions Group (PSG) implemented a dedicated ESG
evaluation for external managers. Since this was our first time conducting theseevaluations formally, we held extensive internal discussions to determine the best
possible approach and the most suitable questions to ask. Going forward, we willcontinue monitoring various laws, guidance, and market trends to review and refine
our ESG evaluation framework.
It is not only companies but also asset managers that are increasingly being rated by investors and investment
consultants on how they approach ESG in portfolio management. We will continuously work to improve our ESG
evaluation framework to ensure we are meeting our clients’ needs.
written by Naoyuki Murota, Portfolio Manager

We embrace
ESG as a means
to better manage
investment risk

Nikko AM Sustainability Report 2020•

How the PSG evaluates and scores managers on ESG

Company

PeopleCompany-wide ESG philosophy and process

Dedicated ESG team/specialist resources

Level of commitment of the manager to ESG

Skill set of ESG professionals

Research

Investment process

Robustness of ESG data sources

Level and consistency of integration
into investment processes

Value-add of ESG-related research

ESG risk management and controls

28Introduction

Investment Management

Corporate Sustainability

PORTFOLIOSOLUTIONS GROUP

Our approach to ESG
Our philosophy
The Portfolio Solutions Group evaluates, selects, and monitors external managers at Nikko AM. We believe that investingby considering ESG factors is inherent to long-term corporate
value creation and realising sustainable economic growth. We
embrace ESG as a means to better manage investment risk,
deliver better quality long-term investment returns, do goodin our communities, and be good stewards of our environment. We uphold a high standard in integrating ESG considerations into our investment process.
When evaluating managers’ ESG approach, we combine discretionary assessment and quantitative scoring to achieve
consistency and rigour across asset classes and strategies. We
are constantly updating our ESG framework as industry bestpractices continue to mature.
ESG implementation
In our investment manager due diligence framework, we evaluate and score investment managers across four categories:
investment considerations
operational considerations
level of transparency
ESG factors

•
•
•
•

Each assessment category is individually important, but not
sufficient on its own in helping us to understand the manager’s idiosyncrasies, strengths, and weaknesses. By skilfully
amalgamating information from all four categories, we canbetter assess the investment manager in a complete mannerand better manage the associated risk partnering with the
manager, therefore delivering desirable investment outcomesto our clients.
At the initial due diligence stage, we send the manager our
dedicated ESG questionnaire. We review their answers andother relevant policies, documentation, and past practices toassess their ESG integration across both their investment andoperational processes. We supplement this questionnairebased information gathering process with additional discussions with the investment managers, and we conduct further
checks whenever necessary.

Nikko AM Sustainability Report 2020

Looking Beyond

We evaluate the managers on ESG according to four pillars:company: overall ESG philosophy and policy, and its level ofcommitment to ESG integration
people: the ability and stability of the investment professionals in charge of ESG at the investment manager
process: the consistency and repeatability of the investment
manager’s investment process in integrating ESG factors, aswell as the degree of integration
research: the ESG research ability, quality, and unique valueadd of the investment manager

•
•
•
•

Four pillars of the ESG assessment framework
An ESG score, aggregated across these four evaluation pillars, is given to the investment manager or strategy withadditional assessment insights written whenever appropriate. The ESG score is independently assigned, separate fromthe investment and operational assessment categories. Thisis because we consider ESG a unique element in our manager
evaluation. We use the ESG score as additional information in
our total assessment of managers.
The share of global investors that have applied ESG criteria has been increasing dramatically. However, there are also
several challenges in ESG investment. For example, there are
too many ESG rating and scoring providers with no clarity on
the underlying methodology, and with no clear-cut criteria
about factors such as what makes a company ESG investable, the quality of ESG data, and the potential for “greenwashing”. Legislators and regulators have started stepping up to
deal with these challenges but it may take time to solve these
problems. We intend to keep monitoring any improvementsin the situation.
We believe ESG investment should be aimed at contributing
to a better environment, society, and workplace, and at generating better quality long-term investment returns. Although
there are several challenges in ESG investment, we evaluate
external mangers for whether they manage their portfolios tocarry out these missions.

•29Introduction

Investment Management

Corporate Sustainability

Looking Beyond

Proxy voting and engagement
The Nikko Asset Management Group Proxy Voting Policy establishes our group-wide approachto proxy voting decisions. One objective of the policy is to underscore our focus on ESG inproxy voting decisions that are undertaken by Nikko AM and all of its overseas investment
management subsidiaries. Another objective is to make it clear that proxy voting by each of theinvestment management teams in the group is based on the same approach.
The policy expresses our basic approach to proxy voting decisions, company engagement, and matters such as conflicts ofinterest. Additionally, each overseas investment management subsidiary within the group may also stipulate its own detailed
proxy voting criteria, and disclose its own proxy voting results.

•

Global voting results 2020
From Jan 2020 to Dec 2020

Number ofmeetings

RegionThe policy expresses
our basic approachto proxy voting
decisions, company
engagement, andmatters such asconflicts of interest•

Votes withmanagement(%)

Number of
resolutions

APAC (ex. Japan)

2,466

20,824

90%

10%

EMEA

1,141

18,075

91%

9%

Japan

2,390

23,562

88%

12%

Latin America

237

2,020

91%

9%

North America

1,036

11,417

92%

8%

TOTAL

7,270

75,89890%

10%Reasons for voting against management, 2020

Routine/Business

541

Reorg. and mergers

525

Non-salary comp.

1,234

Director related

4,009

Capitalisation

800

Anti-takeover related

117
0

Nikko AM Sustainability Report 2020

Votes against
management
(%)

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

30

Introduction

Investment Management

Corporate Sustainability

Looking Beyond

Examples of engagement
Under our proxy voting policy, Nikko AM’s head officehas in place Guidelines on Exercising Voting Rights, whichgive details about proxy voting criteria, and Standards for
Exercising Voting Rights on Japanese Stocks, which include
numerical criteria for proxy voting on Japanese equities. Allof these documents are disclosed on our website.
We make specific proxy voting decisions based on the rules
mentioned above, and we incorporate the results of ourengagement activities in our overall assessments. Below aresome examples of our Japan investment team’s engagement activities with companies before and after exercising
our voting rights, as well as the results of our proxy voting in
2020.
Example 1
Engagement on a proposed appointment of an outside
director prior to a general meeting of shareholders
Before our investee company’s 2020 annual general meeting (AGM) of shareholders, we discussed with management
its proposal to appoint an outside director. Given that thecandidate was from the top management of a major lender
to the company, we expressed our concern about the independence of the candidate. The company’s management
responded that they intended to bring an experienced director with financial and accounting knowledge onto the boardof directors and they wanted a candidate who currently heldan active management position. In light of this explanation, we comprehensively considered matters including thefollowing: (1) the candidate was currently not an executive
officer, (2) the investee company’s finances were sound andit was not at a high risk of having to be highly dependent on

Nikko AM Sustainability Report 2020

its lenders, and (3) the possibility for the candidate to bringsignificant knowledge and experience to the role given theirposition as a member of a bank’s top management. Based on
those considerations, we voted in favour of the proposal.
Example 2
Engagement following an AGM regarding our vote against
a proposed director appointment
We voted against an investee company’s proposed director
appointment at its June 2019 annual general meeting. After
the AGM, we held an investor relations interview to explain
the reasoning and background behind our opposition to the
proposal. Specific points included the fact that the company’s dividend payout ratio was low despite its extensive cash
reserves, and our views on management’s information disclosure and communication with its stakeholders.
Example 3
Our perspective on a proposed anti-takeover defense
measureThe management of an investee company was intending topropose an anti-takeover defense measure at its next AGM.
We communicated our concerns that the measure could be
used to protect the firm’s management, and that it could
damage shareholder value. Furthermore, we believed thatthe measure was not designed well enough to stop it frombeing used arbitrarily and we informed management that wewould vote against this proposal. The anti-takeover defense
measure was proposed as initially planned, but the company
indicated it would take Nikko AM’s opinion on board andwould reflect it in future considerations.

•31Introduction

Investment Management

Corporate Sustainability

Looking Beyond

Our engagement
Our portfolio managers and research analysts endeavour to enhance corporate value byinteracting with independent directors, management, and investor relations representativesof the companies we invest in.

By continuing toemphasise real
corporate value in ourcommunication withinvestee companies,
we strive to increase
their corporate value
and maximise client
returns

Our discussions with investee companies are conducted witha long-term perspective that takes into account the growthphase of the company. These discussions do not merely
cover the firms’ corporate earnings and financial strategies,
but also other matters mentioned in the non-financial information they disclose, including their management policies,
business strategies, shareholder returns, and ESG issues.
Fund managers and analysts use the details of these engagement activities within their investment process, as part of anassessment of corporate value that ultimately informs theirinvestment decisions.

Ownership Group. This group currently includes three analysts
who facilitate engagement in passive fund management. We
believe that this helps us to meet the requirements in Principle
4 of Japan’s Stewardship Code. The establishment of this groupenabled us to add investee companies that are managed passively to the number of companies we engage.
We have worked to achieve closer engagement with investee companies in order to share an accurate understandingof their current situation and help them to generate mediumand long-term corporate value. In FY2020, Nikko AM engaged
with 1,264 companies on 4,553 matters.

In March 2017, we established a business unit within ourJapan Equity Fund Management Department called the Active

Spotlight
Unwavering Focus despite COVID-19 — Kozue Saito, Equity Analyst

Kozue Saito

In order to grow medium- and longterm returns on the assets customers

Nikko AM Sustainability Report 2020

entrust to us, our intention whenengaging with investee companies isto help them enhance their corporate
value and achieve sustainable growth.
Our focus on this task has not beenchanged by the COVID-19 crisis. In May
2020, we set up a contact window for
conveying messages and inquiries toinvestee companies in order to keep
track of their situations and maintainengagement with them. Given thateach company is on its own journey

towards enhancing corporate value
in a sustainable way, we recently
started engaging with independent
directors to deepen our understandingof each company’s governance, as
well as to make our engagement withfirms more genuine and constructive.
By continuing to emphasise real
corporate value in our communication
with investee companies, we strive
to increase their corporate value andmaximise client returns.

32

Introduction

Investment Management

Corporate Sustainability

Looking Beyond

Case studies
CASE 1

CASE 2

CASE 3A multinational mining company listed in Australia

PRI Palm Oil Investor Working GroupAn American education technology company

ESG issues
Community Engagement
Ethical conduct

ESG issues
Climate change
Biodiversity
Human and labour rights

Background
In May 2020, the company blasted a section of aniron ore mine, which demolished two 40,000-yearold Aboriginal rock shelters that were culturally andhistorically significant. The incident caused public
outcry and resulted in an Australian parliamentary enquiry. It became a catalyst for rapid change
in Western Australia’s outdated legislation, which
was in process prior to the incident. The event
highlighted the company’s systematic failures inengagement with traditional owners over the last
five years, and resulted in the eventual resignationof the CEO and two other senior executives.
Our analysis
There is inherent human rights and community engagement risk for mining companies inAustralia, so it is important to analyse the company’s risk management system and structure.
Through our engagement, we exchanged opinions on the handling of the incident with the chairman of the board and on the CEO’s lack of engagement with shareholders.
OutcomeThis case will bring greater scrutiny around heritage site destruction in the future and how community engagement is handled by other companies in the same industry. Due to this case, we held
several engagements, not only with the affectedcompany, but with other mining companies, independent experts, and our clients. This has highlighted the importance of a sound and effective
risk management system. From this case, we havelearned how to better identify and communicate
these matters in our future engagements.

Nikko AM Sustainability Report 2020

Background
PRI created an Investor Working Group (IWG)
on Sustainable Palm Oil to unify investor voices
in support of sustainable palm oil practices.
Previously, engagement was focused on palm
oil producers, but the initiative has widened toinclude consumer groups and buyers of palmoil. The PRI Palm Oil IWG has organised sustainability meetings with palm oil producers, traders, refiners, financers, and consumer goods
companies over the years.
Our analysis
We have participated in the IWG’s coordinatedengagements since 2019 to explore where wecan support and collaborate with other investors
concerned about sustainability issues, especiallygiven our presence in the region. Recently, there
has been a notable increase in the presence ofother Asian asset managers and we are excitedby the increased visibility of the initiative. In
2020, one of our portfolio managers spoke on apanel with representatives from MSCI and PRI on
ESG risks in palm oil and stewardship.
Outcome
Our involvement in the PRI Palm Oil IWG is led
by our Asian Equity Team, so any informationor knowledge gleaned through discussions canbe applied directly to our investment decisions
without delay. We always seek to elevate thecollaborative engagement undertaken by the
IWG through our close and frequent engagements with senior management of palm oil
producers, traders, and other industry players.

ESG issues
Governance
Proxy voting
Board composition
BackgroundThe company’s board members received
low approval from shareholders in 2019,
but it did not address the issue of plurality
votes or classified board structure.
A plurality vote means that the winningcandidate only needs to get more votes
than a competing candidate. If a director runs unopposed, he or she only needs
one vote to be elected. Implementing amajority vote for directors would meanthat the director is only elected if theyreceive a majority of the shares voted. The
company has not adopted a majority votestandard for director elections, despite
the proposal receiving support from amajority of voters at the 2018 annual
meeting.
Our analysis
Nikko AM’s voting policies generally support the majority-of-votes-cast standard
for election of directors and the declassification of the board, meaning that thedirectors would be up for re-election
annually. This would give shareholders theability to address any potential issues withthe board immediately. Right now, thecompany’s board members have a threeyear term and only three or four directors
are up for re-election at a time. We didconsider that a classified board structure
could be used to protect new emerging

technology companies from activists or atakeover.
In June 2020, prior to the annual meeting, the US Investment team had a meeting with the firm’s investor relations team
to discuss the proxy items. The management admitted that they were busy withother issues in 2020 but aim to address
the board issues in 2021.
OutcomeA substantial number of “withhold” votes
will not prevent a candidate from getting
elected, because of the plurality vote, but
this can sometimes influence future decisions by the board of directors. The proxyadviser has recommended for the last fiveannual meetings to withhold votes fromthe board, indicating that the company
has continued to neglect shareholder
concerns. While it appears the company
is starting to engage with its shareholders and taking a step in the right direction,
we felt it had not done enough to deserve
our approval of the candidate up for reelection.

•

33

Introduction

Investment Management

Corporate Sustainability

Looking Beyond

Advancing the sustainablefinance conversation
Responsible Investor Conference 2020
In 2020, Nikko AM participated in the Responsible Investor
Conference for the second year in a row. This ESG-focused
event brings together institutional investors, asset managers,
NGOs, data providers, and corporates to discuss the future ofsustainable finance. Our investment professionals spoke at the
RI Digital Festival Summer, RI Digital Japan, and RI Digital USA
editions of the conference, which was held virtually as a resultof COVID-19.
Panel discussion on digital platform

Empirical researchincreasingly showsconnections between
diversity andcorporate value …

The RI Digital Festival Summer was held from 15–19 June andattracted over 4,500 participants, a five-fold increase from2019. Nikko AM hosted a virtual booth to introduce participants to the firm’s investment capabilities and sustainability activities. In addition, Global Equity Portfolio Manager
Greig Bryson spoke on a panel discussion titled “Responsible
Investment in pharma, bio-tech, and healthcare”.
“The panel discussion was very much in line with our Global
Equity team’s Future Quality approach to investment,” Grieg
commented. “With panellists Clare Griffin of GlaxoSmithKline
and Damiano de Felice from Access to Medicine, we wereable to have an active conversation on how industry, investors, and the non-profit sector can better engage to improve
patient outcomes.”
The digital event in Japan took place from 28–29 October.
The Head of Equity Fund Management in Japan participatedin a panel discussion titled “Deep dive: A focus on the ‘S’ –good workplace diversity and inclusion as a boost to corporate success”. He shared that human resource evaluations
should be a priority in assessing the “social” component of
ESG and noted a correlation between enhancing employee
satisfaction and labour productivity.
Asked whether diversity and inclusion efforts can contributeto investment performance, he responded, “We believe that

Nikko AM Sustainability Report 2020

companies that cannot promote diversity have no future.
Empirical research increasingly shows connections between
diversity and corporate value, which we aim to demonstrate
through engagement in the years ahead.”
Building on the momentum from the RI Digital Festival
Summer and RI Digital Japan events, we also participated in
the RI Digital USA held from 2–3 December. Head Portfolio
Manager for Global Core Strategies Steve Williams spoke on apanel discussion titled “New approaches to ramp up investment in sustainable infrastructure”.
“The panel discussion on sustainable infrastructure aligned
nicely with our Global Green Bond strategy’s core focus onproviding clients with sustainable returns that contribute toachieving the objectives of the Paris Agreement,” Steve said .
“While 2020 has been a difficult year, it has proven that when
there is a collective will and the needed capital, great things
can be achieved. In this sense, I am optimistic about the
future of sustainability.”
With this year’s online format increasing accessibility andallowing for a greater number of attendees, the Responsible
Investor Conference heightened awareness about ESG
investing and allowed industry players to share information
about their socially responsible investment endeavours.
As asset managers, we see growth in our business increasingly linked to ESG. We look forward to continued participation in such forums, which are a valuable opportunity to not
only share our investment capabilities, but also to collaborate with members of the investment management industry
in promoting and implementing best ESG practices. We lookforward to further advancing the sustainable finance conversation while engaging with stakeholders across various
industries.

•

34

Introduction

Nikko AM Sustainability Report 2020

Investment Management

Corporate Sustainability

Looking Beyond

35

Introduction

Investment Management

Corporate Sustainability

Looking Beyond

Building on a solid foundation
A message from the Global Sustainability Advocate
In last year’s Sustainability Report, we first announced our three core areas of sustainability
at Nikko Asset Management: diversity & inclusion (D&I), reducing inequalities, andenvironment & climate. Throughout 2020, we built on that solid foundation and set evenhigher goals for ourselves.

Stefanie Drews,
Senior Corporate
Managing Director,
Global Executive
Committee Member

The team’s passion forsustainability is alreadymore fully energising
everything we do

Nikko AM Sustainability Report 2020

The Global Sustainability Department was created last June
to take the lead on all of our sustainability activities. It is
responsible for implementing and overseeing corporate
sustainability initiatives, supporting working groups andtheir activities at offices around the world, and ensuringthat sustainability is woven into every aspect of the firm’s
objectives. The team’s passion for sustainability is alreadymore fully energising everything we do.
The coronavirus pandemic has not stalled our efforts toachieve greater sustainability. Rather, it has presented us
with the imperative to do more — and driven us to further
action.
In one of last year’s most exciting developments, we established the Global Racial Equality Working Group, our firstglobal working group, to better support our initiatives into
reducing inequalities. It is a diverse group with the missionof promoting deeper understanding of racial issues andending discrimination both within the firm and in our communities. Working group members will also propose internal policies that could be introduced to support greater
racial equality.
In the area of D&I, we are committed to fostering a work
environment that supports all employees who care for children or elderly parents, and those who have similar responsibilities, by offering flexible schedules across all offices.
Hiring and advancement decisions are made with transparency, based on competency and merit. And, globally, we
encourage women to take on managerial and leadershiproles. In our Asia ex-Japan offices, in particular, 36% of thedepartment head roles are held by women. We look to further this through new initiatives to expand our female talentpipeline.
With regard to environment & climate, we offset 6,275 tonnesof CO2 last year — equal to our emissions across the firm
globally — through participation in the India Solar Project, as
well as through renewable wind energy generation in otherparts of Asia, including China.
For the future, our focus is on further reducing ouremissions. Our efforts in this area include plans to switch
to renewable energy sources in our offices, the continued
promotion of remote meetings and conferences to avoid
unnecessary air travel, and a search for other offsetting
solutions to help us become carbon negative. With
offices in the UK already operating 100% on renewableenergy, and more employees, clients, and otherstakeholders holding a favourable view of increasing
the use of videoconferencing, we are well on the way.

6,275tof CO2 offset
last year

In the face of a global pandemic, we have stepped up ourefforts to keep sustainability a central part of what we do. We
are confident that greater sustainability can be achieved at
our firm, in our communities, and for our world.

•

36

Introduction

Investment Management

Corporate Sustainability

Looking Beyond

Sustainability Q&A
Stefanie speaks about leading a more sustainable life
What aspects of sustainability are you most passionate
about?

combined. It also harms nature in other significant ways, suchas by endangering species and destroying their habitats.

I care deeply about sustainability, and the concept is central
to how I live and work. But some specific aspects really moveme to action.

Environmental movements generally focus on fossil fuels,
but we need to do so much more. Reducing the productionof methane from livestock would have a much faster impact,because methane has a global warming potential 86 times
greater than CO2.

I am passionate about being responsible for the environment,
specifically, supporting ways to fight global warming andincrease biodiversity. I am passionate about reducing inequality, particularly racism, sexism, and disability-based discrimination. I am passionate about the protection of rights for all,including those who are often overlooked, such as refugees.
I am also not afraid to ask the difficult questions about ourown sustainability. One I regularly need to ask is, are we truly
making an impact or just ticking a box to feel good about
ourselves? Addressing sustainability directly and honestly isvery hard work.
How have you made your lifestyle more sustainable?
I have made many changes over the years. As a family, we
have significantly reduced the use of our car; we recycle
aggressively, including clothes and all household goods;
we only minimally use air conditioning in the summer
and heating in the winter; and we are careful about ourwater usage. But the biggest lifestyle change we made was
becoming vegan. Today, we abstain from eating all animal
products.
A few years ago, my daughter did a lot of research into theimpact of animal agriculture on the planet and decided
to become vegan, then my sons and I joined her. This isimportant, not just for our health, but mainly because animal
agriculture is the single most environmentally destructive
industry in the world today. According to the World HealthOrganization, it is responsible for emitting more greenhousegas than the exhaust from all of the world’s vehicles

Nikko AM Sustainability Report 2020

Becoming vegan was hard for the first few weeks, but now it ispart of our lifestyle and it feels right.
Which aspects of sustainability areeasiest to achieve?

… part of sustainability
is about accepting
a certain level of
discomfort for agreater purpose …

Anything that is in your control is the easiest to achieve. It
is fully within your control to stop eating animal products
and go vegan — bearing in mind that part of sustainability
is about accepting a certain level of discomfort for a greater
purpose. But that is a personal choice, and where others are
involved, I simply share the facts, set my own example, andstep back.
What is harder to achieve is a goal that needs the supportof those around you. One example is realising true genderequality at work. Policy directives alone are not enough,bottom up support is critical too. It is therefore not just myjob to implement policies, but also to ensure all those aroundme understand the positive contribution that, in this instance,
gender equality makes towards a more creative, sustainable,
fair and successful workplace.
For issues that require broader support — such as equal pay
and equal promotion of women — it is my job to ensure
others understand the positive contribution they could makeand how they could contribute to making our workplace
more sustainable. It’s easiest to find buy-in that way.

•

Stefanie with her 19-year-old
rescue dog, which she saved fromeuthanisation and adopted 10 years
ago.

37

Introduction

Investment Management

Corporate Sustainability

Looking Beyond

Gender diversity and career advancement
Perspectives from female investment professionals

Lisa Edmundson is a portfolio specialist with our Global Equity team,
based in Edinburgh. She is a motherto two children and likes the challenge of a half-marathon.

Yii Hui Wong is a portfolio manager
with expertise in China and RMB
bonds, based in Singapore with our
Asian Fixed Income team. She has
diverse interests, including sports,
baking, and reading.

With a far greater number of men than women in the investment industry, asset managers
are looking for ways to increase gender diversity. But how do the women who currently
work in the context of this male-skewed sector feel about their careers and their treatmentin the workplace?
“The asset management industry is one that is relatively morenumbers-driven,” says Yii Hui Wong from Singapore. “If you
produce results and your clients are happy with your performance, there is little reason why gender should hinder yourcareer.”This is affirmed by Yukiko Hanai in Japan who adds, “I do not
feel that my career has ever been hindered, nor has there
been a difference in treatment or pay, because I am female.”
Four of Nikko AM’s female investment professionals from different regions share their thoughts on how they have seen
the industry changing and what more needs to be done toimprove gender diversity.
What progress have you seen made in the industry as awhole, or at firms you have worked with, in terms of theadvancement of women?

Yukiko Hanai is an analyst with ourJapan Equity team. She is enjoying
being the mother of a toddler.

Linda Luo is a credit analyst
for our Australian Fixed Income
team and she lives in Sydney.
She has many interests, and iscurrently into pottery.

Nikko AM Sustainability Report 2020

Lisa Edmundson (Scotland): In my 25 years or so in theindustry, the workplace has evolved to become a morediverse place from both a gender and cultural perspective.
This change has been gradual, but initiatives to narrow pay
gaps, encourage return-to-work schemes, and promote flexible working have helped. It has been positive, but there ismore that can be achieved through other initiatives.
Yii Hui Wong (Singapore): I think it has been acknowledged
that, besides sales, women can also perform well within
investments, in areas such as research, quantitative finance,
dealing, and portfolio management. Firms are generally more

open to female candidates now, and are increasingly considering them for managerial roles. During meetings, views fromwomen are seen in the same light as men. Personally, I haven’t
encountered a situation where I was prevented from giving
my view when I wanted to. Women themselves are becoming more proactive in helping other women and sharing theirexperiences, which then helps encourage other women to
move forward.
Yukiko Hanai (Japan): For the industry as a whole, thenumber of female analysts seems to be increasing both on
the sell and buy sides. However, the number of fund managers has not increased much. Progress for women is especially significant in foreign-affiliated companies, but I feel thatefforts to advance women vary among companies. At Nikko
AM, there has been an increase in the number of female
employees in middle office and back office positions, but not
in investment management since the time I joined the company in 2002. It could be that the number of female candidates for investment professional roles has not increased.
Linda Luo (Australia): There was already a big push foradvancement of women across all industries when I graduated from university, but this has definitely picked up over mytenure in the finance industry where a greater focus and commitment have been placed on achieving gender diversity targets. The other encouraging sign is the increasing number ofindustry leaders actively promoting and engaging in gender
parity discussions.

38Introduction

How can the industry do better at attracting and retaining
female talent?
Lisa: Attracting the best talent is crucial to any industry.
Integral to this is the cultural shift to greater all-round inclusivity and diversity. An important way for firms to do this is
to ensure that they are providing an environment that can
attract the best young talent. Equal opportunity and rewards
based on skill and professional qualities can help, but workplaces need to continue to build on the progress made so far
in areas like diversity, pay gaps, personal development, andflexible working conditions.
Yii Hui: Work–life balance is important and this can only beachieved if management is setting the example. Women withchildren or who are taking care of parents have a hard time
juggling home and career if they constantly need to work
long hours in the office. The flexibility to work from homefrom time to time is a good start, while the attitudes andactions of supervisors in reducing the need for face-time will
help to set the tone.
Hiring practices are key. There should be a conscious effort totry to place suitable candidates of different genders in frontof decision makers. This helps to feature female employees
in different roles across the firm. Through channels such associal media, we can let other women know that the industry has female participants who are active in their roles — andenjoying themselves in their roles.
Yukiko: In Japan, raising awareness that the doors are open
for female candidates can help to increase the number ofwomen joining the industry. I feel that many investment professionals really enjoy their jobs. It is important to let people
know that this is an interesting and intellectually stimulating
field that is also enjoyable.

Nikko AM Sustainability Report 2020

Investment Management

Corporate Sustainability

Looking Beyond

It may be difficult to understand what analysts do because
many people don’t know about their day-to-day work andtraining is mainly done on the job. So, making it clear thatinvestment firms can offer them a clear educational andcareer development path would remove any anxiety young
people might have about successfully pursuing a career ininvestment management.
Women in the investment management industry should
partner with universities to give them a platform to share
their expertise. And investment education from a young age
would also be a good way to increase the number of female
investment professionals over the long term.
Linda: An enormous amount of effort and resources havealready been funnelled into attracting female talent over thelast decade, so I think we need to widen our focus on retaining them and engaging with all of our young talent.
I believe we need to try and understand what motivates bothyoung women and men and highlight to them the benefitsof working in the asset management industry. Other thanthe monetary aspect, we need to showcase how diverse
the industry is, and that they can find purpose and make an
impact. Engaging with younger employees in these ways will
help rebrand the industry and should naturally attract more
female talent.

… workplaces needto continue to buildon the progress
made so far in areas
like diversity, pay gaps,
personal development,
and flexible working
conditions

Another key aspect we need to focus on is ensuring young
talent has access to senior leaders, who can then provide sponsorship or mentorship to these less-experienced
employees as they navigate through the challenges of theirearly careers. I was fortunate enough to have mentors early
in my career who guided and helped with my development,
which led to me feeling more engaged and motivated.

•

39

Introduction

Investment Management

Corporate Sustainability

Looking Beyond

Globalising corporate sustainability
Nikko AM creates the Global Sustainability TeamAs corporate sustainability gained momentum at Nikko AM, the firm formed its own global
sustainability team in May 2020. This is a testament to the firm’s commitment to drive
sustainability in everyday business operations.
Singapore Sustainability Working Group

Establishing a
global sustainability
function has
been critical tosetting the firm’s
sustainability
strategy…

Global Sustainability Team

Nikko AM Sustainability Report 2020

The global sustainability function is helmed by two global
co-heads, one based in Japan and the other in Singapore.
In addition to the co-heads, the team consists of five members who are called sustainability advocates. Based in bothour Tokyo and Asia offices, the advocates execute global
corporate sustainability initiatives and support working
group activities.
The team reports to global sustainability advocate Stefanie
Drews and the co-CEOs, and it also provides quarterly
updates to the Global Sustainability Advisory Council. On
the council are the chairman of the board of directors,
regional CEOs, an external adviser, and representatives
from senior management, investment management, andglobal human resources.
Establishing a global sustainability function has been critical to setting the firm’s sustainability strategy and ensuring that global initiatives are well-coordinated and effectively implemented. The global sustainability team aligns
local initiatives with the firm’s focus on diversity & inclusion, reducing inequalities, and environment & climate. It
actively encourages inter-office idea sharing, promotes
awareness of sustainable practices, and, most importantly,
inspires colleagues to make a difference wherever they are.
The global team also provides central funding to support
local initiatives, so that worthy causes do not have to bepassed over due to resource constraints.
Prior to the creation of the global team, the firm alreadyhad a strong network of working groups at all offices.

These on-the-ground voluntary working groups grew organically from individuals’ passion to make sustainability a wayof life, at work and at home.
A total of 12 working groups from Japan, Australia, UK, New
Zealand, Singapore, and the US join the global network inbimonthly meetings to share ideas and help solve challenges
they face in implementing initiatives. The newest group is
the Global Racial Equality Working Group, formed in October.
This most recent addition is truly global, with participantsfrom all regions, spanning different cultures and races.
Daisuke Kono, Global Co-Head of Sustainability, says, “If welook across the firm, about 10% of our colleagues are volunteering in various working groups, not counting those who
provide additional support during implementation. With the
new structure, we combine global direction with an on-theground network to really propel corporate sustainability to a
globally connected function.”
The move to make corporate sustainability a global function
underscores Nikko AM’s commitment to embed sustainability as a core value in the way we operate as a global investment manager.
Joyce Koh, Global Co-Head of Sustainability, observes, “TheNikko AM team has the intrinsic desire to do good and to dowhat’s right. The way all working groups collaborate — andwith each being self-motivated to make a difference in theirregion — really inspires me in this journey.”•40

Introduction

Investment Management

Corporate Sustainability

Embedding sustainability in our culture
A conversation with Taka Miyawaki, Global Head of HR
Starting last year, the Human Resources (HR) department at Nikko AM has led an initiative
to include sustainability in each employee’s annual goal-setting exercise. The Global
Sustainability team had a virtual chat with Taka Miyawaki, our global head of HR, to learn why
these sustainability goals were introduced and to hear his views on sustainability at our firm.
“The simple aim of adding a sustainability goal to the 2020 performance management exercise was to introduce a greaterawareness of sustainability to employees’ day-to-day performance,” Taka explained. “It is important for each and every one of
us to understand that through our performance we can contribute to the firm in making sustainable improvements in our workplace. This will enable us to achieve our business goals, maintainour branding, and serve our customers in a sustainable manner.”
Depending on each employee’s function, they had to set a goal
specifying how they wanted to implement sustainable practices
in their role at the firm. These could range from developing ESGrelated products or enhancing ESG-related reporting in clientmaterials to promoting the work-from-home initiative, encouraging digitalisation in business processes, or reducing paper usage
at client events.
According to Taka, setting a sustainability goal not only gave ourstaff the opportunity to think about how they could practise sustainability daily in their jobs, but it also sparked in-depth discussions with their managers on how this could be achieved at the
departmental level.
When asked if employees or managers faced any challenges
during the goal-setting process, Taka said: “Actually, we foundthat everyone was receptive, and staff took the new requirement
seriously. Not everyone immediately understood how theseobjectives could be measured, and it was more challenging tosome departments than others in defining their sustainability
goals. The HR department’s role is to continuously engage staff
to become more involved with the concept of sustainability, andNikko AM Sustainability Report 2020

Looking Beyond… through our
performance we cancontribute to the firmin making sustainableimprovements in our
workplace

we aim to encourage and guide managers and staff to havemore conversations around their sustainability objectives.”
Taka sees the goal-setting exercise as the start of a multiyear process of weaving sustainability into
our culture.
“As sustainability becomes inherent to ourwork culture, our plan next year is for thesustainability goal to be embedded in each
employee’s business-as-usual or growthgoals. We want to truly assimilate sustainable
practices into our day-to-day performance,”
he said.
As for his long-term vision for the firm onother aspects of sustainability, diversity is
critically important.
“Nikko AM’s global footprint and diverse
workforce are among our core strengths,” hestated. “Diversity and sustainability are key toour business. With our collaborative culture, I believe that if
everyone takes small steps and raises their voices together,
we can achieve our goals.”•

Taka Miyawaki,
Global Head of HR

41

Introduction

Investment Management

Corporate Sustainability

Looking Beyond

Digital transformation
Rapid acceleration in response to the pandemic
Over the years, we have seen an increase in the use of digital technologies in almost every
aspect of the investment industry, but nothing nearly as dramatic as what we witnessed in2020. The adoption of digital platforms to help to reduce the need for face-to-face interaction
was greatly accelerated by the COVID-19 pandemic. As lockdowns were imposed in mostof the cities where we operate and safe distancing measures became necessary, our Global
Technology Division, along with others, responded by digitising more of our operations andupgrading to the latest technologies.

Office of the future… addressing these
digital challenges
demanded adiverse talent pooland an inclusive
work culture …

In our Tokyo office, plans were already underway before thepandemic to reconfigure some of the physical space to prepare us for the future. Some areas have been designated as“activity-based working zones” where employees do not havea fixed desk and, instead, can choose the best location for thetype of work they are doing. A digital studio was also built toenhance our in-house photography and filming capabilities,
and individual videoconferencing booths were set up withstate-of-the-art equipment.
In addition to these changes, further steps were taken to
ensure the safety of employees at Nikko AM globally witha virtual town hall meeting. The global town hall in 2020
marked our first use of a new digital events platform, which
was later used for our external events. This allows for events
to be held sustainably and safely, by eliminating travel andthe risk of the spread of the coronavirus.
Rising to the challenge
In tandem with this project to create an office of the future— which would better facilitate business while ensuring thesafety of employees — we sought to better engage our clients and support their investments in the face of various
challenges.

Nikko AM Sustainability Report 2020

Navigating a complex digital transformation journey in acompressed timeframe was not easy. Over the past several years, digital transformation in investment management has been driven by the rise of machine learning andAI, the demand for greater personalisation in investing, anda broader appreciation for ESG. Adapting to these changes
has been stressful, but it was nothing in comparison to
the stress and time pressure that the pandemic put on ourorganisation.
We found that addressing these digital challenges
demanded a diverse talent pool and an inclusive work culture. It also called for supportive leadership with great agility,
as there was little opportunity to stress test digital platforms
with carefully planned pilots.
Optimising remote engagement with clients
When we were no longer able to hold regular face-to-facemeetings with clients, we quickly pivoted to the use of
already established modes of teleconferencing and videoconferencing, while also striving to add other digital platforms used by different clients. The videoconferencing
booths in Tokyo immediately became an asset in communications with clients.

42

Introduction

For interaction with bigger groups, webinars became thenorm and, for the first time, annual events were conducted
through virtual platforms.
For both Tokyo and the Asia ex-Japan region, our flagshipannual investment forum, FOREWORD, was held virtually
and allowed for larger-than-ever participation. In Tokyo,
130 institutional clients attended. The Asia event saw arecord number of participants with guests from Indonesia,
Brunei, Cambodia, Hong Kong, South Korea, Malaysia, thePhilippines, Thailand, Taiwan, Maldives, China, Singapore, andJapan. The immersive platform we used allowed clients to
ask questions to speakers on the various panels, respond topolls, download materials, watch videos, view speakers’ profiles, and even use a carbon calculator to see the amount of
CO2 emissions that was reduced by attending the event virtually instead of travelling to it in person.

Nikko AM Sustainability Report 2020

Investment Management

Corporate Sustainability

The beauty of virtual platforms is that they connect people
over great distances while greatly reducing their carbon footprint. Most people acknowledge that it could never totallyreplace actual face-to-face interaction, but it certainly raises
the question of whether virtual events could become thenorm, rather than an exception, in a post-pandemic world as
we pursue sustainability.
This is a question that we must continue to ponder anddebate in order to strike the right balance between socialand environmental sustainability. Nikko AM is committed toinvesting the resources required to further equip the firm
digitally — so we can continue to connect with clients andstaff most effectively and make the necessary changes tocontribute to the good of the environment.

•

Looking Beyond

The beauty of virtual
platforms is that they
connect people overgreat distances while
greatly reducing
their carbon
footprint

43

Introduction

Investment Management

Corporate Sustainability

Looking Beyond

Striving for a society where everyone shines
Working group initiatives – Japan
Japan Women’s Group

Apart from looking toincrease the numberof female employees,
managers, andexecutives, we also
aim to build a larger
support network

Promoting women’s participation in the workplace is an importantpart of our D&I efforts. One of the ways we do this is through theJapan Women’s Group, which was informally established in 2015
and officially launched in January 2018. As one of their first activities, members prepared and conducted a company-wide survey tobetter understand the status of women in our workplace. Based on
the results of the survey, the group established three goals:
1 increase awareness of the value of more women in theworkplace2 engage and motivate our female employees
3 expand our support systems

LGBT Working GroupWe have worked diligently towards accomplishing these aims.
Our efforts to increase awareness of the value of women’s active
participation in our workplace have been well received. We haveheld seminars for employees at every level of the firm, inviting
senior-level executives and HR managers from companies thatare committed to diversity and inclusion (D&I).
Education and discussion have also been foundational to ourefforts to engage and motivate our female employees. We haveinvited women in leadership positions to participate in our Lunch
and Learn series, where they spoke about their experiences in
the workplace, including the barriers they have faced and theirgoals for the future. Many male employees have also taken partin these Lunch and Learn sessions, giving them a chance toreevaluate their own work styles. Over the years, we have also
held many training sessions to help our female employees gain
more relevant experience, become more confident at work, andbroaden their expectations about what is possible.
In order to expand the company’s support systems, we worked
together with the HR Department to formulate targets for D&I.
Apart from looking to increase the number of female employees,
managers, and executives, we also aim to build a larger support

Nikko AM Sustainability Report 2020

network where we have more women in senior management
positions mentoring the growing number of female employees.
Together with the HR Department, we presented these targets tomanagement along with points on the kind of systemic support
that would be necessary to facilitate positive movement, as well
as how we could better support employees who are trying tobalance work with childcare or elderly care.

Executive Director Maho Nakada speaking during the LGBT Ally Summit

Launched in March 2017, the LGBT Working Group was the first of
Nikko AM’s D&I efforts. We began by assessing the company’s internal policies in Japan and found they lacked protections for LGBT
employees. Working closely with the HR Department, we reformed
these policies by adding “LGBT” to the anti-discrimination clauseand enabling employees in Japan in same-sex relationships toreceive the same benefits as those in opposite-sex marriages.
In addition to efforts to change internal policies, we also strive tohelp raise awareness of LGBT issues in Japanese society at large.
In November 2020, for example, Nikko AM announced its support for the movement to recognise marriage equality in Japan.
We did this by signing the American Chamber of Commerce inJapan’s Viewpoint on Marriage Equality, which recommends thatJapan extend “the right to marry to LGBT couples”, becoming thefirst Japanese asset manager to do so.

44Introduction
The LGBT Working Group operates under the slogan “Creating a workplace where you can be yourself”. To help us make this a reality, we hostmany internal seminars with the goal of increasing the level of understanding of LGBT issues and the number of LGBT allies. We also often workwith LGBT Finance, a network of financial institutions in Tokyo that shareresources to support the larger community. Through this collaboration,
we have organised several events, including the LGBT Ally Summit, where
Executive Director Maho Nakada talked about the necessity of teaching children from a young age that we should not think differently about
those who are part of the LGBT community, but rather accept them.

Abilities Working Group

Investment Management

Corporate Sustainability

company was giving them the opportunity to learn a new skill
that is not directly related to their work.
We also hosted a unique seminar blending rakugo (traditional
Japanese storytelling) with the topic of elderly care, a pressing
theme in a rapidly ageing society. The discussion will be continued monthly in smaller interactive sessions.”
Nikko AM is also one of the founding companies of Abilities in
Finance, a group of companies in the financial industry in Tokyo
that work together and share resources to support initiatives that
help improve the lives of those with disabilities at our companies
and in society.

Environment Working GroupNikko AM’s Environmental Policy, created in 2010, stipulates that
our Tokyo office must prioritise environmental conservation andcontribute to the UN SDGs in our business operations. In February
2019, we established an internal Environment Working Group to
further promote these activities.
A sign-language teacher giving lessons over Zoom

Even before Nikko AM launched the D&I programme, we wereactively engaged in supporting special needs individuals. We havebeen a sponsor of the Japan Wheelchair Rugby team since 2013 andhave an athlete programme through which we sponsor athletes on
the team. Also, for many years, we have been committed to hiring
those with special needs for our workforce. Takahisa Yamaguchi is
one of those employees. In addition to winning bronze at the 2016
Summer Olympics, he also co-founded and co-leads our Abilities
Working Group.

The Environment Working Group aims to encourage environmental management through office activities such as energy andresource conservation. In 2020, an expert in environmental protection who works with the UN Environment Programme FinanceInitiative and the World Wildlife Fund Japan spoke at an internalseminar, giving employees an opportunity to learn from someone
at the forefront of the movement.

In addition, after the COVID-19 pandemic forced us to shift to telecommuting, we conducted a company-wide survey to gauge ourprogress on going paperless and learn how our reduced use of
The group focuses not only on physical disabilities, but also on mental planes, cars, and trains for travel and business trips has benefitted
the environment. This gave us an opportunity to reevaluate how
disabilities, and used 2020 to start conversations with employees
we are using resources and consider how the habits formed whileon mental health. In particular, we hosted a seminar on panic disorworking from home could continue when we return to the office.
der and depression, and invited the founder of an online community
Many respondents who had cut down on printing when working
where people with mental health conditions, or those supportingfrom home said that they would be able to conserve resources byfamily and friends with these conditions, can come together to shareprinting less, even when allowed to return to the office.
experiences and get expert advice. This seminar was valuable for
employees in Japan especially, as mental health is often not discussed
We believe that addressing environmental issues is important for
openly. They were also given the opportunity to ask candid, anonyus, both as a corporate citizen and as an asset manager. We intend
mous questions.
to fulfill our responsibility to be a good steward of the environment by continuing to examine our business practices and by
We hosted three sign-language lessons over Zoom with a sign-lanactively engaging in dialogue with our investee companies.
guage teacher. The event was well received by everyone who took
part, with employees expressing excitement over the fact that the•

Nikko AM Sustainability Report 2020

Looking Beyond… addressing
environmental
issues isimportant for us,
both as a corporate
citizen and as an
asset manager

Examples ofLunch and Learn sessions

Kathy Matsui, former Goldman
Sachs Chief Japan Equity
Strategist’s talk on Womenomics”

Rakugo performance on the topic
of elderly care

45

Introduction

Investment Management

Corporate Sustainability

Looking Beyond

Giving back in challenging times
Working group initiatives – Asia
In a yearthat made it easy
to feel isolated, [we]focused on bringing
staff together tooffer help to thewider community

As social distancing became the norm amid the COVID-19 outbreak, we stopped eatingout, travelling, and even going to the office. In a year that made it easy to feel isolated, theSingapore Sustainability Working Group focused on bringing staff together to offer help tothe wider community.
In May 2020, as the Singapore office went into its second
month of mostly working from home, the working groupkicked off a fundraiser for two causes: Daughters ofTomorrow and Free Food for All.
Daughters of Tomorrow supports low-income women, manyof whom lost jobs during the coronavirus pandemic. By providing jobs training and skills workshops, the organisation
aims to help these women attain financial independence andimprove social mobility for their families.
Free Food for All provides free food for the less fortunate,particularly the elderly, disabled, and financially distressed.
During the pandemic, it delivered sanitising kits with masks
and hand sanitiser to families in need, in addition to the foodaid it already provided.
Two private campaigns were set up on Giving.sg, an online platform, ensuring that all donations went directly to the chosenbeneficiaries. The charity drive ran from 21–30 May 2020, andemployees in the Singapore office generously contributed a
total of SGD 14,590. The firm then added SGD 5,000 to employees’ donations, bringing the total raised to SGD 19,590.
At the end of the year, the working group organised an“Adopt-A-Lego” initiative with ReadAble, an organisation
working to promote literacy by running reading and language classes for underprivileged children. Staff sponsored43 Lego sets as an education aid for children aged 3–11 years
old. They were distributed to children in time for Christmas. A
ReadAble core team member also joined us for a lunchtime

Nikko AM Sustainability Report 2020

Recipient of “Adopt-A-Lego” ini­tiative

Zoom talk to tell us about their initiatives and the community
they work with.
The group also worked to keep staff connected throughinternal initiatives. It launched a bi-monthly email newsletter to help everyone stay up to date on sustainability initiatives in the Singapore office and featured the sustainability
habits of various staff members. These included composting, upcycling and crafting, and even wildlife photography. The working group also ran a sustainability story contest, inviting staff to submit photos or videos of sustainable
habits they had picked up while in lockdown. These initiatives aimed to inspire others and spark conversations amongstaff, even while most of us were working remotely.

•46

Introduction

Investment Management

Corporate Sustainability

Looking Beyond

Charity begins at home
Working group initiatives – Europe
The year 2020 did not turn out as any of us expected. For the Nikko AM Europe Sustainability
Working Group, that meant a major change in plans as we redirected our efforts to morepressing causes. Our original intention to build on the environmental sustainability initiatives
we started in 2019 — many of which related to our office — could no longer be carried out
since the first UK lockdown was initiated in March and staff began working from home.
After observing that many of the worst effects of the pandemic and lockdown were felt by those already disadvantaged — despite government programmes aimed at alleviating some of the impact — the working group decided toconcentrate on raising awareness of the work of Trussell Trust,which supports a nationwide network of food banks. Statistics
published by the Trussell Trust showed that demand for emergency food parcels in April 2020 was 89% higher than in April
2019, and, between April and September, food banks in theorganisation’s network provided more than 1.2 million emergency food parcels.
The Global Equities team in Edinburgh volunteered at the
Edinburgh Food Project, a member of the Trussell Trust’s network, to help get food to people in desperate need. The teamalso held a Christmas drinks fundraising evening in aid of the
project, which raised GBP 825 and was matched by Nikko AM,
bringing the total to GBP 1,650.
At the end of November, the working group sent out a request
to support the Met Police’s Annual Christmas Tree Appeal, atoy drive held in association with The Childhood Trust thatmoved entirely online due to the COVID-19 pandemic. Staff
made 20 donations of toys or vouchers, each of which helped
make a child’s Christmas special — something that was especially needed during this difficult time.

Nikko AM Sustainability Report 2020

… the working groupdecided to concentrateon raising awarenessof the work of Trussell
Trust, which supports anationwide network offood banks

Members of the Global Equities team in Edinburgh volunteering at the
Edinburgh Food Project

While it was a challenging year on many levels, we remain
optimistic about our ability to make a difference. One of ourmost recent initiatives was to implement a payroll giving
scheme, which makes charitable giving more efficient for
both staff and their selected charities. Within a month ofgoing live, a number of staff members had signed up, withmany others expressing interest. The working group isaiming to receive a Gold Payroll Giving Quality Mark from theCharities Aid Foundation in 2021.

•

47

Introduction

Investment Management

Corporate Sustainability

Looking Beyond

Making an impact on the future
Working group initiatives – Australia
In Australia, Nikko AM has three sustainability working groups. Each of these focuses on one of
the key themes of diversity & inclusion (D&I), reducing inequalities, and environment & climate.

Diversity & inclusion

Nikko AM Australia
became a partnerof the Future IM/
Pact programme,
an initiative bornout of the need formore diversity ininvestment teams

In July 2018, Nikko AM Australia became a partner of the
Future IM/Pact programme, an initiative born out of theneed for more diversity in investment teams. Future IM/Pact’s
main goal is to grow the pipeline of female talent throughprogrammes that engage and encourage university students
to choose a career path in investment management.
As a result of our involvement in Future IM/Pact, our D&I
Working Group’s focus for 2020 was on increasing thenumber of engaged female candidates through three key initiatives: a virtual internship, an investment competition, andmentoring.
Together with Future IM/Pact and other industry partners of
the programme, Nikko AM Australia created a virtual internship that began in March 2020. The Virtual Internship walks
students through case studies, videos, and everyday scenarios of various sectors within investment management. We
created a Fixed Income module. Since the Virtual Internshipwas launched, a total of 16,477 students* have enrolled globally, with 170 Australian women completing the programme
as at September 2020. This has created a pool of engaged
local women who are ready for opportunities.
Five local female students, who completed the VirtualInternship, were selected to take part in three interactive sessions of a Fixed Income team-led Mentoring Circle.

A Reconciliation Australia activity

In September 2020, Future IM/Pact, along with Nikko AM
Australia and the programme’s other industry partners,
conducted a National Investment Competition for university
students for the second year running. The competition aims
to inspire diverse talent to consider a career in investment
management by showcasing the breadth of the industry andits impact on the economy, business, and society. The finalist
teams who chose the Nikko AM Australia Fixed Income casestudy were invited to attend a mentoring session with theteam.

*data as of 30 September 2020

Nikko AM Sustainability Report 2020

48

Introduction

Another one of the D&I working group’s activities is our participation in the Reconciliation Australia movement. We havepledged to promote and facilitate reconciliation by building
relationships, respect, and trust between the Australian community and Aboriginal and Torres Strait Islander peoples. The
working group will lead initiatives with the aim to create educational opportunities internally and making meaningful contributions to the community. Our vision for reconciliation is forall employees in Australia to acknowledge, honour, and celebrate the rich culture and heritage of Australia’s First Peoples.

Reducing inequalities
In 2020, the Nikko AM Australia offices in Sydney andMelbourne committed to “being philanthropic from home”
in an initiative led by the Philanthropy Working Group.
Individual employees have been generously runningschool charity drives, donating to those in need in theirlocal communities, and raiding their pantries to support
family, friends, and neighbours through charitable giving.
In Sydney, a successful Australian Football League footy tipping competition was held to raise funds for charity. Staff
members’ donations were matched by the managing director.
The offices in both Sydney and Melbourne participated in agingerbread house raffle at our Sydney office Christmas party,
raising funds for partner charities.
In 2020, more than AUD 1,000 was raised for Australia’s
partner charities: Orange Sky, which supports vulnerable Australians living on the streets, and the Alice Springs
Women’s Shelter, which supports domestic violence survivors
and their children.

Investment Management

Corporate Sustainability

Looking Beyond

Environment & climate
The members of the Nikko AM Environmental Awareness Team(NEAT) believe that we must use our knowledge to empower
employees. We share practical ways to ensure that each person
is equipped to make a difference to our world by making justsmall changes in their lives.
Global initiatives, such as Zero Waste Week, have been used
to demonstrate the results that are possible through collective efforts. In 2020, Zero Waste Week reported that
326 million participants (including Nikko AM staff ) avoiding creating 900 million kilograms of plastic waste.
Through NEAT’s initiatives over the past year, we have seen adramatic increase in staff engagement, greater openness to
discussions on environmental topics, and, most importantly,
increased action. Some of the actions we have taken include:
UNICEF Water Walk
Through staff participation, Nikko AM Australia raised AUD
1,444 for this initiative. Our contribution went towards the purchase of 140 buckets to help children in need transport andstore clean water.

We share practical ways
to ensure that each
person is equipped tomake a difference to ourworld by making justsmall changes in their
lives

Participation came in the form of walking 7km per day overseven days, walking 49km over one month, or throughdonations.
Sustainable Gifting
During the holiday season, we shared a “cheat sheet” for sustainable gifting, with suggestions for fun sustainable gift
options and alternatives to wrapping.
Real People, Real Stories
NEAT has paved the way for staff to openly share the ways
they are living more sustainably at home. The stories we haveshared include staff and their children composting, building
backyard worm farms, and growing their own vegetables.

•

Nikko AM Sustainability Report 2020

49

Introduction

Investment Management

Corporate Sustainability

Looking Beyond

Thinking out of the box to make a difference
Working group initiatives – New ZealandSustainability is not a separate consideration from business considerations. This is what our
New Zealand office learned while we were upgrading our servers. The server room is the part ofour business that consumes the most power by far, so it made sense — both commercially andenvironmentally — to ask questions about the impact of changing equipment.
What the team discovered was that the amount of power consumed more or less correlates with the number of physicalboxes in the server cabinet. Also, each box emits some heat,so increasing the number of boxes will require the coolingsystem to work much harder to cope.

our server power
consumption is
now about a third
to a half of what
it otherwise would
have been

The standard approach to improving equipment configuration, which is often to add to the existing configuration,
would have resulted in our having approximately 10 different
boxes and other pieces of equipment. This would have meanta vast uptick in power consumption in order to bring equipment up to standard.

During a difficult year of lockdowns, we received training
on modern slavery from Tear Fund. This brought home theunpalatable truth that people in wealthier, first-world countries can still be contributors to the problem through bothconsumer choices and how the internet is used. The training we received, and the steps the New Zealand office hastaken against modern slavery, reflect the fact that a numberof jurisdictions, including the UK and Australia, are requiringthat anti-slavery practices be included as part of their legal
framework.

•

Fortunately, at the New Zealand office, our Swedish IT specialist was able to solve the problem by compressing datathat is not being used. This technique, called hyper-converged infrastructure, is about 90% more energy efficientfrom a data storage perspective than a standard set up. More
importantly, our server power consumption is now abouta third to a half of what it otherwise would have been.
Other environmental gains for our office, and most other
Nikko AM offices, in 2020 were the unintended consequencesof COVID-19, such as significant reductions in both travel andthe amount of paper printed. The fact that we were able tooperate without these is challenging us to ask whether someof these reductions can be permanent going forward.

Nikko AM Sustainability Report 2020

Reducing inequality

Marcus Rameke
working on improving
our server power
consumption

50

Introduction

Investment Management

Corporate Sustainability

Looking Beyond

Helping our neighbours in needWorking group initiatives – Americas
In 2020, the New York office focused on helping communities that had been hardest hit by the
COVID-19 crisis. In the first half of the year, we held two food drives and donated a total of over
22kg of food to the Bowery Mission Food Kitchen. We also had two beach cleanup sessions in
Brooklyn, where staff removed more than 11kg of garbage from local beaches and waterways.
In the second half of the year, as the weather grew colder, Nikko
AM Americas donated USD 4,000 to the New York Cares Coat
Drive in partnership with the Salvation Army. The New York
office’s donation provided 200 coats to communities that havebeen disproportionately affected by the pandemic. Since 1988,
New York Cares has donated more than two million coats. We
all feel strongly about this cause as each coat distributed represents a warm commute, protection from the cold, and one lessexpense for those having to choose between groceries or othernecessities and a warm coat.
Separately, Nikko AM Americas supported the Classical
Theatre of Harlem (CTH) with a USD 5,000 donation. Founded
in 1999, CTH puts on theatrical productions and provides theatre-based educational and literary programmes at little or no
cost to underserved communities in Harlem and surrounding areas. With diversity, equality, and inclusion as its corevalues, CTH attracts one of the most racially, generationally,and socio-economically diverse theatre audiences in New York
City. CTH engages with Harlem residents, businesses, schools,
and community-based organisations to directly benefit some
18,000 people each year. Our donation went towards funding
CTH’s digital production hub, Behind the Curtains, which willallow it to reach out to audiences throughout the country andaround the world, at a time when people are unable to attend
live theatrical performances.
We also supported the Neighborhood Youth Association
by participating as a Gold Investor for its 2020 event. The

In 2020, the New
York office focusedon helping
communities that
had been hardest hit
by the COVID-19 crisis

Donate Coats© New York Cares

Neighborhood Youth Association runs after-school programmes for youth aged 6 to 18. It aims to empower students to achieve on-time high school graduation and college
placement through mentoring, tutoring, and a holistic family
newyorkcares.org/coats
New York Cares Coat Drive
approach to break cycles of poverty and vulnerability.
2020 Sponsors

Nikko AM Sustainability Report 2020

2020 In-Kind Partners•

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Investment Management

Corporate Sustainability

Looking Beyond

BeyondNikko AM Sustainability Report 202052

Introduction

Investment Management

Corporate Sustainability

Looking Beyond

Looking beyond
Charting the road ahead
As an investment firm, we are committed to continually re-examining and re-evaluating
our processes to stay abreast of developments in the market and ensure that ESG is firmly
integrated. With respect to environmentally responsible investing (the “E” in ESG), we will adhere
to our Position Statement on Climate Change, further develop our internal capabilities, andextend our collaborative work with the investment community.
We will build on the insights we have gained during this pandemic and focus even more on social (“S”) themes such as greater
employee diversity and more flexible working style reform. In the area of governance (“G”), we will continue to engage with… we recognisethat a material
difference we canmake at Nikko AM is
to increase gender
diversity

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Investment Management

investee companies over the long term, helping them toenhance their corporate value, which in turn adds value toour investors.

For a greener environment

Forging ahead with our sustainability journey, we endeavour
to integrate the three pillars of diversity & inclusion, reducing inequality, and environment & climate at all of our offices
globally. This will help us to further strengthen the foundation we have built in partnership with all our stakeholders.

Corporate Sustainability

Protecting the environment where we live and work is key
to our well-being. We take a pragmatic approach to lowering
our carbon footprint and creating a greener future by further
enhancing our ability to work from home and reducing business travel when possible.

For a more inclusive community
In an industry that employs a much higher number of men
than women, we recognise that a material difference we canmake at Nikko AM is to increase gender diversity. We have set
a goal to increase the number of women in managerial positions to 30% from the current 18.4% firmwide by 2030. We
will work through Human Resources to enhance our ability
to do more for women in the hiring process and to level theplaying field in career development and progression. A highlight for 2021 is a programme we have implemented called
Power Chat that gives us greater opportunities to discuss
issues women face in their careers.

For greater equality
In 2020, we started an important conversation on racialequality through the formation of our Global Racial Equality
Working Group. This was a major step that we plan to complement with training in unconscious bias. We also aspire to
do our part for greater equality for the external community.
One initiative that our Tokyo office has already embarked on
is an internship programme to prepare students from refugee families for work, and we hope to expand this to ouroffices in other regions.

Nikko AM Sustainability Report 2020

Looking Beyond… we started
an importantconversation on racialequality through theformation of our Global
Racial Equality Working
Group

Water for Life in Cambodia

For broader environmental issues, we are exploring how we
can increase our engagement in programmes for reforestation and clean water. Regarding clean water, Nikko AM has
worked with the Singapore International Foundation to participate in Water for Life in Cambodia, a programme that also
reduces inequalities by giving poor families access to safe
drinking water. Our intention is to step up our involvement inthis initiative once the coronavirus pandemic is under control.
In an ever-evolving world, we acknowledge that we will needto keep striving to achieve the goals we have set. In each ofthese three core areas of focus, we will also continue to refine
our initiatives to ensure that we are making a difference forthe future.

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Corporate Sustainability

Looking Beyond

External commitments
Our participation in external initiatives
Where specific to an office, the office is indicated in parentheses.

DISCLOSURE INSIGHT ACTION

ClimateActionGlobal Investors Driving Business Transition

Asia Investor
Group on Climate Change(AIGCC)Japan Association of
Value Creating ERM(Nikko AM Tokyo)

CDP(Carbon, forests, water)
CDP Science Based Targets campaign

Principles for Financial
Action for the 21st Century(Nikko AM Tokyo)

Climate Action 100+

30% Club
Investor Work Group(Nikko AM Tokyo)

International Corporate
Governance Network (ICGN)ESG Research Australia(Nikko AM Australia)

ClimateActionGlobal Investors Driving Business Transition

United Nations-supported Principles for
Responsible Investment– Principles for Responsible Investment (PRI)– PRI Statement on ESG in Credit Ratings– PRI Palm Oil Investor Working Group

Task Force on Climate-related Financial
Disclosures (TCFD)

The Investor Agenda
Global Investor
Statement to Government
on Climate Change
Nikko AM Sustainability Report 2020

「 T CFD Co n s o r t i u m 」ロゴマーク

Future IM/Pact(Nikko AM Australia)
2019.09.10

TCFD Consortium

Stewardship Codes– Japan Stewardship Code (Nikko AM Tokyo)– Singapore Stewardship Principles (Nikko AM Asia)

Women’s Empowerment
Principles

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Corporate Sustainability

Looking Beyond

Contact information
Japan
Nikko Asset Management Co., Ltd.
Midtown Tower, 9-7-1 Akasaka, Minato-ku,
Tokyo, 107-6242, Japan
Tel: +81-(0)3-6447-6000
Fax: +81-(0)3-6447-6001
en.nikkoam.com/
Contact: corp-sustainability@nikkoam.com

New Zealand
Nikko Asset Management New Zealand Limited
Level 17, Vero Centre, 48 Shortland Street
Auckland 1010, New ZealandTel: +64-9-307-6363
Fax: +64-9-307-6399
www.nikkoam.co.nz/
Contact: NZenquiries@nikkoam.com

Luxembourg
Nikko Asset Management Luxembourg S.A.
Private Business Centre, 32 – 36 Boulevard
d’Avranches
L-1160, Luxembourg
emea.nikkoam.com/
Contact: EMEAenquiries@nikkoam.com

Nippon Institutional Securities Co., Ltd. (NIS)(Subsidiary of Nikko AM)
Midtown Tower, 9-7-1 Akasaka, Minato-ku,
Tokyo, 107-6242, Japan
Tel: +81-(0)3-6447-6080
www.ni-sec.com/en/

EMEA
Nikko Asset Management Europe Ltd
Level 5, City Tower, 40 Basinghall Street,
London, EC2V 5DE, U.K.
Tel: +44-(0)20-7796-9866emea.nikkoam.com/
Contact: EMEAenquiries@nikkoam.com

Americas
Nikko Asset Management Americas, Inc.
605 Third Avenue, 38th Floor, New York, NY 10158,
U.S.A.
Tel: +1-212-610-6100
Fax: +1-212-610-6140
americas.nikkoam.com/
Contact: USsalesinquiries@nikkoam.com

Singapore
Nikko Asset Management Asia Limited
12 Marina View, #18-02 Asia Square Tower 2,
Singapore 018961
Tel: +65-6500-5700
1-800-535-8025
Fax: +65-6534-5183
www.nikkoam.com.sg/
Contact: SGContactUs@nikkoam.com

Germany
Nikko Asset Management
Luxembourg S.A. (German Branch)
Tower 185, Friedrich-Ebert-Anlage 35-37,
60327 Frankfurt am Main, Germany
Tel: +49-(0)69-505047-301
www.nikkoam.deContact: EMEAenquiries@nikkoam.com

Hong Kong
Nikko Asset Management Hong Kong Limited
24/F Man Yee Building, 60-68 Des Voeux Road
Central,Hong Kong
Tel: +852-3940-3900
Fax: +852-3940-3904
www.nikkoam.com.hk/
Contact: HKinstibusinessdev@nikkoam.com

Nikko AM Sustainability Report 2020

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Corporate Sustainability

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Important information
This document is prepared by Nikko Asset Management
Co., Ltd. and/or its affiliates (Nikko AM) and is for distribution only under such circumstances as may be permitted
by applicable laws. This document does not constitute personal investment advice or a personal recommendationand it does not consider in any way the objectives, financial
situation, or needs of any recipients. All recipients are recommended to consult with their independent tax, financial, and legal advisers prior to any investment.

United Kingdom and rest of Europe: This document iscommunicated by Nikko Asset Management Europe Ltd,
which is authorised and regulated in the United Kingdom
by the Financial Conduct Authority (the FCA) (FRN 122084).
This document constitutes a financial promotion for the
purposes of the Financial Services and Markets Act 2000 (asamended) (FSMA) and the rules of the FCA in the United
Kingdom, and is directed at professional clients as definedin the FCA Handbook of Rules and Guidance.

This document is for information purposes only and is
not intended to be an offer, or a solicitation of an offer,to buy or sell any investments or participate in any trading strategy. Moreover, the information in this document
will not affect Nikko AM’s investment strategy in any way.
The information and opinions in this document have been
derived from or reached from sources believed in goodfaith to be reliable but have not been independently verified. Nikko AM makes no guarantee, representation, or warranty, express or implied, and accepts no responsibility or
liability for the accuracy or completeness of this document.
No reliance should be placed on any assumptions, forecasts, projections, estimates, or prospects contained within
this document. This document should not be regarded byrecipients as a substitute for the exercise of their own judgment. Opinions stated in this document may change without notice.

United States: This document may not be duplicated,
quoted, discussed, or otherwise shared without prior consent. Any offering or distribution of a Fund in the UnitedStates may only be conducted via a licensed and registered broker-dealer or a duly qualified entity. Nikko AssetManagement Americas, Inc. is a United States Registered
Investment Adviser.

In any investment, past performance is neither an indication nor guarantee of future performance and a loss of capital may occur. Estimates of future performance are basedon assumptions that may not be realised. Investors shouldbe able to withstand the loss of any principal investment.
The mention of individual securities, sectors, regions orcountries within this document does not imply a recommendation to buy or sell.
Nikko AM accepts no liability whatsoever for any loss ordamage of any kind arising out of the use of all or any partof this document, provided that nothing herein excludes or
restricts any liability of Nikko AM under applicable regulatory rules or requirements.
All information contained in this document is solely forthe attention and use of the intended recipients. Any use
beyond that intended by Nikko AM is strictly prohibited.
Japan: The information contained in this document pertaining specifically to the investment products is notdirected at persons in Japan nor is it intended for distribution to persons in Japan. Registration Number: Directorof the Kanto Local Finance Bureau (Financial Instruments
firms) No. 368 Member Associations: The Investment Trusts
Association, Japan/Japan Investment Advisers Association.

Nikko AM Sustainability Report 2020

Singapore: Nikko Asset Management Asia Limited (Co.
Reg. No. 198202562H) is regulated by the Monetary
Authority of Singapore.
Hong Kong: This document is for information to professional investors as defined in the Securities and Futures
Ordinance, and intermediaries only. The contents of thisdocument have not been reviewed by the Securities andFutures Commission or any regulatory authority in HongKong. Nikko Asset Management Hong Kong Limited is alicensed corporation in Hong Kong.
Australia: This document is issued in Australia by Nikko AM
Limited (ABN 99 003 376 252, AFSL 237563). It is for the useof wholesale clients, researchers, licensed financial advisers
and their authorised representatives only.
New Zealand: Nikko Asset Management New Zealand
Limited (Company No. 606057, FSP22562) is the licensed
Investment Manager of Nikko AM NZ Investment Scheme,
the Nikko AM NZ Wholesale Investment Scheme and the
Nikko AM KiwiSaver Scheme. This material is for information purposes only.
Kingdom of Bahrain: The document has not been
approved by the Central Bank of Bahrain, which takes noresponsibility for its contents. No offer to the public to purchase the Strategy will be made in the Kingdom of Bahrain
and this document is intended to be read by the addressee
only and must not be passed to, issued to, or shown to the
public generally.
Kuwait: This document is not for general circulation to the
public in Kuwait. The Strategy has not been licensed foroffering in Kuwait by the Kuwaiti Capital Markets Authority
or any other relevant Kuwaiti government agency. The
offering of the Strategy in Kuwait on the basis a private
placement or public offering is, therefore, restricted inaccordance with Decree Law No. 7 of 2010 and the bylaws
thereto (as amended). No private or public offering of theStrategy is being made in Kuwait, and no agreement relating to the sale of the Strategy will be concluded in Kuwait.
No marketing or solicitation or inducement activities arebeing used to offer or market the Strategy in Kuwait.
Kingdom of Saudi Arabia: This document is communicated by Nikko Asset Management Europe Ltd (Nikko
AME), which is authorised and regulated by the Financial
Services and Markets Act 2000 (as amended) (FSMA) andthe rules of the Financial Conduct Authority (the FCA) in
the United Kingdom (the FCA Rules). This document should
not be reproduced, redistributed, or sent directly or indirectly to any other party or published in full or in part forany purpose whatsoever without a prior written permission from Nikko AME.
This document does not constitute investment advice ora personal recommendation and does not consider in any
way the suitability or appropriateness of the subject matterfor the individual circumstances of any recipient. In providing a person with this document, Nikko AME is not treatingthat person as a client for the purposes of the FCA Rules
other than those relating to financial promotion and that
person will not therefore benefit from any protections thatwould be available to such clients.
Nikko AME and its associates and/or its or their officers,
directors, or employees may have or have had positions ormaterial interests, may at any time make purchases and/or sales as principal or agent, may provide or have provided corporate finance services to issuers or may provide
or have provided significant advice or investment services in any investments referred to in this document orin related investments. Relevant confidential information,
if any, known within any company in the Nikko AM groupor Sumitomo Mitsui Trust Holdings group and not available to Nikko AME because of regulations or internal procedure is not reflected in this document. The investments
mentioned in this document may not be eligible for sale insome states or countries, and they may not be suitable forall types of investors.
Oman: The information contained in this document neither
constitutes a public offer of securities in the Sultanate of
Oman as contemplated by the Commercial companies lawof Oman (Royal Decree 4/74) or the Capital Markets Law of
Oman (Royal Decree 80/98), nor does it constitute an offer tosell, or the solicitation of any offer to buy non-Omani securities in the Sultanate of Oman as contemplated by Article
139 of the Executive Regulations to the Capital Market
law (issued by Decision No. 1/2009). This document is notintended to lead to the conclusion of any contract of whatsoever nature within the territory of the Sultanate of Oman.

Qatar (excluding QFC): The Strategies are only being
offered to a limited number of investors who are willing and able to conduct an independent investigation of
the risks involved in an investment in such Strategies. The
document does not constitute an offer to the public andshould not be reproduced, redistributed, or sent directly or
indirectly to any other party or published in full or in partfor any purpose whatsoever without prior written permission from Nikko Asset Management Europe Ltd (Nikko
AME). No transaction will be concluded in your jurisdiction
and any inquiries regarding the Strategies should be madeto Nikko AME.
United Arab Emirates (excluding DIFC): This document
and the information contained herein do not constitute,and is not intended to constitute, a public offer of securities in the United Arab Emirates and accordingly should
not be construed as such. The Strategy is only being
offered to a limited number of investors in the UAE (a) who
are willing and able to conduct an independent investigation of the risks involved in an investment in such Strategy,and (b) upon their specific request.
The Strategy has not been approved by or licensed orregistered with the UAE Central Bank, the Securities andCommodities Authority or any other relevant licensing
authorities or governmental agencies in the UAE. This
document is for the use of the named addressee only andshould not be given or shown to any other person (otherthan employees, agents or consultants in connection withthe addressee’s consideration thereof ).
No transaction will be concluded in the UAE and any
inquiries regarding the Strategy should be made to Nikko
Asset Management Europe Ltd.
Republic of Korea: This document is being provided forgeneral information purposes only, and shall not, andunder no circumstances is to be construed as an offeringof financial investment products or services. Nikko AM is
not making any representation with respect to the eligibility of any person to acquire any financial investment product or service. The offering and sale of any financial investment product is subject to the applicable regulations of
the Republic of Korea. Any interests in a fund or collective
investment scheme shall be sold after such fund is registered under the private placement registration regime inaccordance with the applicable regulations of the Republicof Korea, and the offering of such registered fund shall be
conducted only through a locally licensed distributor.

57