Statement on principal adverse impacts of investment decisions on sustainability factors
Nikko Asset Management Luxembourg S.A. (LEI: 549300FGDQCC2A0R2432)
Summary
Nikko Asset Management Luxembourg S.A. (“NAML”) considers principal adverse impacts of its investment decisions on sustainability factors (“PAIs”). The present statement is
the consolidated statement on principal adverse impacts on sustainability factors of NAML, covers the reference period from 1st of January 2023 to 31st December 2023 and isbeing disclosed in line with Regulation 2019/2088 on sustainability‐related disclosures in the financial services sector (“SFDR”).
NAML observed large discrepancies in terms of data coverage which ranged from 4% (emissions to water) to 99.8% (GHG intensity of investee countries). All PAIs were integrated
in sustainable investment risk management or monitoring processes and in some cases used within binding risk limits or processes of NAML Article 8 or 9 Sub‐Funds.
PAIs were prioritized by NAML whenever they corresponded to environmental and social characteristics promoted by a product, if their impact was severe or repeated and ifthey contradicted NAML internal policies or external commitments. Their monitoring was performed by NAML Risk Management Function (in addition to the monitoring that may
be performed as part of the investment process). Potential findings and recommended actions were reported to NAML ESG & Stewardship Oversight Committee, NAML ComEx
and NAML Board.
Although the Engagement and Stewardship Strategy of Nikko Asset Management Co., Ltd. and its subsidiaries (hereafter collectively referred to as “Nikko AM” or the “Group”)
and NAML Engagement Policy require ESG to be integrated in proxy voting and engagement processes, they do not specifically refer to SFDR PAIs. The management of these
indicators for NAML Article 8 or 9 Sub‐Funds is the responsibility of its investment managers. Each investment manager retains the ability to consider principal adverse impacts
as defined within the prospectuses of the Sub‐Funds by taking relevant actions where required, including when exercising voting rights.
Nikko AM adheres to the following international standards that may be monitored through PAIs:
 Net Zero Asset Managers initiative (GHG ‐ greenhouse gas ‐ emissions and Carbon Footprint)
 Task force on Climate Related Financial Disclosures (GHG emissions, Carbon Footprint and GHG Intensity of Investee Companies)

1Description of the principal adverse impacts on sustainability factors
Indicators applicable to investments in investee companies
Adverse sustainability indicator

Impact[2023]

MetricImpact [2022]

Explanation

Actions taken, and actions
planned and targets set for the
next reference period

Climate and other environment related indicators
Greenhousegas emissions

1. GHG emissions

Scope 1 GHG emissions

13,823 TCO2e

20,831 TCO2e

Scope 2 GHG emissions

14,465 TCO2e

15,632 TCO2e

2

Data or proxies were collected Integrated in the sustainable
for 79.9% of the holdings.
investment risk management or
Impact figure was scaled back monitoring process. Can be used
to 100%.
within binding risk limits/processesof some Article 8 or 9 Sub‐Funds.
During 2023, some products havebeen upgraded in Article 8 sub‐funds with this PAI used to measure
the attainment of each of theenvironmental or social
characteristics.
As of April 2024, NAML has elected
not to consider adverse impacts ofinvestment decisions onsustainability factors at its entity
level. This PAI will however keep
being monitored within article 8 or
9 products.
Data or proxies were collected Integrated in the sustainable
for 79.9% of the holdings.
investment risk management or
Impact figure was scaled back monitoring process. Can be used
to 100%.
within binding risk limits/processesof some Article 8 or 9 Sub‐Funds.
During 2023, some products havebeen upgraded in Article 8 sub‐funds with this PAI used to measure
the attainment of each of theenvironmental or social
characteristics.

2. Carbon footprint

Scope 3 GHG emissions

388,481 TCO2e

Total GHG emissions

415,888 TCO2e

Carbon footprint

84.15 TCO2e/EURminvested3

As of April 2024, NAML has elected
not to consider adverse impacts ofinvestment decisions onsustainability factors at its entity
level. This PAI will however keep
being monitored within article 8 or
9 products.
430,225 TCO2e Data or proxies were collected Integrated in the sustainable
for 79.7% of the holdings.
investment risk management or
Impact figure was scaled back monitoring process. Can be used
to 100%.
within binding risk limits/processesof some Article 8 or 9 Sub‐Funds.
As of April 2024, NAML has elected
not to consider adverse impacts ofinvestment decisions onsustainability factors at its entity
level. This PAI will however keep
being monitored within article 8 or
9 products.
466,687 TCO2e Data or proxies were collected Integrated in the sustainable
for 79.7% of the holdings.
investment risk management or
Impact figure was scaled back monitoring process. Used within
to 100%.
binding risk limits/processes for
Article 8 or 9 Sub‐Funds.
As of April 2024, NAML has elected
not to consider adverse impacts ofinvestment decisions onsustainability factors at its entity
level. This PAI will however keep
being monitored within article 8 or
9 products.
94.37 TCO2e
Data or proxies were collected Integrated in the sustainable/ EURm invested for 79.7% of the holdings.
investment risk management or
Impact figure was scaled back monitoring process. Can be used
to 100%.
within binding risk limits/processes
We are making amendsof some Article 8 or 9 Sub‐Funds.
following the discovery of acalculation error in the carbon During 2023, some products havefootprint metric covering year been upgraded in Article 8 sub‐n‐1. A missing decimal point
funds with this PAI used to measure
led to the disclosure of a
the attainment of each of the
carbon footprint of 9.44
environmental or social
TCO2e/EURm invested
characteristics.
instead of 94.37
As of April 2024, NAML has elected
TCO2e/EURm. In addition, a
not to consider adverse impacts oftypo occurred in the unit
investment decisions on
disclosed which should have sustainability factors at its entity
been EURm invested instead level. This PAI will however keepof EURb Sales.
being monitored within article 8 or
9 products.
3. GHG intensity of investee
companies

GHG intensity of investee
companies

378 TCO2e/EURm Sales

399 TCO2e/EURm Sales

4. Exposure to companies
active in the fossil fuelsectorShare of investments in companies
active in the fossil fuel sector

1.08%

0.93%

4

Data or proxies were collected Integrated in the sustainable
for 84.5% of the holdings.
investment risk management or
Impact figure was scaled back monitoring process. Can be used
to 100%.
within binding risk limits/processesof some Article 8 or 9 Sub‐Funds.
During 2023, some products havebeen upgraded in Article 8 sub‐funds with this PAI used to measure
the attainment of each of theenvironmental or social
characteristics.
As of April 2024, NAML has elected
not to consider adverse impacts ofinvestment decisions onsustainability factors at its entity
level. This PAI will however keep
being monitored within article 8 or
9 products.
Data was collected for 91.7% Integrated in the sustainableof the holdings. Impact figure investment risk management or
was scaled back to 100%.
monitoring process. Used withinbinding risk limits/processes forcertain Sub‐Funds.

During 2023, some products havebeen upgraded in Article 8 sub‐funds with this PAI used to measure
the attainment of each of theenvironmental or social
characteristics.
As of April 2024, NAML has elected
not to consider adverse impacts ofinvestment decisions onsustainability factors at its entity
level. This PAI will however keep
being monitored within article 8 or
9 products.
5. Share of non‐renewableenergy consumption andproduction

Share of non‐renewable energy
consumption and non‐renewableenergy production of investee
companies from non‐renewableenergy sources compared torenewable energy sources,
expressed as a percentage of totalenergy sources

82.66%

6. Energy consumption
intensity per high impact
climate sector

Energy consumption in GWh per
0.49 GWh
million EUR of revenue of investee /EURm sales
companies, per high impact climate
sector5

87.86%

Data was collected for 52.4%of the holdings. Impact figure
was scaled back to 100%.

Integrated in the sustainable
investment risk management ormonitoring process. Can be usedwithin binding risk limits/processesof some Article 8 or 9 Sub‐Funds.
As of April 2024, NAML has elected
not to consider adverse impacts ofinvestment decisions onsustainability factors at its entity
level. This PAI will however keep
being monitored within article 8 or
9 products.

1.24 GWh/EURm sales

Data was collected for 58.3%
of the holdings. Impact figure
was scaled back to 100%.

Integrated in the sustainable
investment risk management ormonitoring process. Can be usedwithin binding risk limits/processesof some Article 8 or 9 Sub‐Funds.
As of April 2024, NAML has elected
not to consider adverse impacts ofinvestment decisions onsustainability factors at its entity
level. This PAI will however keep

being monitored within article 8 or
9 products.
Biodiversity

7. Activities negatively
affecting biodiversity‐
sensitive areas

Share of investments in investee
companies with sites/operations
located in or near to biodiversity‐
sensitive areas where activities of
those investee companies
negatively affect those areas

Water

8. Emissions to water

Waste

9. Hazardous waste andradioactive waste ratio

0.00%

0.00%

Data was collected for 91.7%of the holdings The data
should however not be
considered as highly reliable
as the ESG data service
provider used doesn’t clearlystate whether the companies
reviewed did confirm there
was no adverse impact orwhether they simply didn’t
disclose an adverse impact.
reports. Impact figure wasscaled back to 100%.

Integrated in the sustainable
investment risk management ormonitoring process. Used withinbinding risk limits/processes forcertain Sub‐Funds.
As of April 2024, NAML has elected
not to consider adverse impacts ofinvestment decisions onsustainability factors at its entity
level. This PAI will however keep
being monitored within article 8 or
9 products.

Tonnes of emissions to water
15.87 T
generated by investee companies/$m invested
per million EUR invested, expressed
as a weighted average

45.40 T/$m invested

Data was collected for 4% of
the holdings. Impact figure
was scaled back to 100%.

Integrated in the sustainable
investment risk management ormonitoring process. Used withinbinding risk limits/processes forcertain Sub‐Funds.
As of April 2024, NAML has elected
not to consider adverse impacts ofinvestment decisions onsustainability factors at its entity
level. This PAI will however keep
being monitored within article 8 or
9 products.

Tonnes of hazardous waste and1.23 T
radioactive waste generated by/$m invested
investee companies per million EUR
invested, expressed as a weighted
average0.25 T/$m invested

Data was collected for 25.1%of the holdings. Impact figure
was scaled back to 100%.

Integrated in the sustainable
investment risk management ormonitoring process. Can be usedwithin binding risk limits/processesof some Article 8 or 9 Sub‐Funds.
As of April 2024, NAML has elected
not to consider adverse impacts ofinvestment decisions on

6

sustainability factors at its entity
level. This PAI will however keep
being monitored within article 8 or
9 products.

Indicators for social and employee, respect for human rights, anti-corruption and anti-bribery matters
Social andemployeematters

10. Violations of UN Global
Compact principles andOECD Guidelines forMultinational Enterprises

Share of investments in investee
companies that have been involvedin violations of the UNGC principles
or OECD Guidelines forMultinational Enterprises

0.00%

0.00%

Data was collected for 91.7%of the holdings. Impact figure
was scaled back to 100%.

Integrated in the sustainable
investment risk management ormonitoring process. Can be usedwithin binding risk limits/processesof some Article 8 or 9 Sub‐Funds.
During 2023, some products havebeen upgraded in Article 8 sub‐funds with this PAI used to measure
the attainment of each of theenvironmental or social
characteristics.
As of April 2024, NAML has elected
not to consider adverse impacts ofinvestment decisions onsustainability factors at its entity
level. This PAI will however keep
being monitored within article 8 or
9 products.

11. Lack of processes andcompliance mechanisms
to monitor compliancewith UN Global Compact
principles and OECD
Guidelines forMultinational Enterprises

Share of investments in investee
79.85%
companies without policies tomonitor compliance with the UNGC
principles or OECD Guidelines forMultinational Enterprises orgrievance /complaints handlingmechanisms to address violations of
the UNGC principles or OECD
Guidelines for Multinational
Enterprises

87.72%

Data was collected for 91.7%of the holdings. Impact figure
was scaled back to 100%.

Integrated in the sustainable
investment risk management ormonitoring process. Can be usedwithin binding risk limits/processesof some Article 8 or 9 Sub‐Funds.
During 2023, some products havebeen upgraded in Article 8 sub‐funds with this PAI used to measure
the attainment of each of theenvironmental or social
characteristics.

7

As of April 2024, NAML has elected
not to consider adverse impacts ofinvestment decisions onsustainability factors at its entity
level. This PAI will however keep
being monitored within article 8 or
9 products.
12. Unadjusted gender pay
gap

Average unadjusted gender pay gap ‐7.44%
of investee companies‐4.27%

Data was collected for 6.5% of Integrated in the sustainable
the holdings. Impact figure
investment risk management or
was scaled back to 100%.
monitoring process. Can be usedwithin binding risk limits/processesof some Article 8 or 9 Sub‐Funds.
As of April 2024, NAML has elected
not to consider adverse impacts ofinvestment decisions onsustainability factors at its entity
level. This PAI will however keep
being monitored within article 8 or
9 products.

13. Board gender diversity

Average ratio of female to maleboard members in investee
companies, expressed as apercentage of all board members

29.24%

Data was collected for 83.9%of the holdings and only
covers Q3 and Q4 2022.
Impact figure was scaled backto 100%.

30.04%

8

Integrated in the sustainable
investment risk management ormonitoring process. Can be usedwithin binding risk limits/processesof some Article 8 or 9 Sub‐Funds.
During 2023, some products havebeen upgraded in Article 8 sub‐funds with this PAI used to measure
the attainment of each of theenvironmental or social
characteristics.
As of April 2024, NAML has elected
not to consider adverse impacts ofinvestment decisions onsustainability factors at its entity
level. This PAI will however keep

being monitored within article 8 or
9 products.
14. Exposure to controversial
weapons (anti‐personnel
mines, cluster munitions,chemical weapons andbiological weapons)

Share of investments in investee
0.00%
companies involved in the
manufacture or selling ofcontroversial weapons (anti‐
personnel mines, cluster munitions,chemical weapons, biologicalweapons)

0.00%

Data was collected for 91.7%of the holdings. Impact figure
was scaled back to 100%.

Exclusion.
During 2023, some products havebeen upgraded in Article 8 sub‐funds with this PAI used to measure
the attainment of each of theenvironmental or social
characteristics.
As of April 2024, NAML has elected
not to consider adverse impacts ofinvestment decisions onsustainability factors at its entity
level. This PAI will however keep
being monitored within article 8 or
9 products.

Indicators applicable to investments in sovereigns and supranationals
Adverse sustainability indicator
Environmental 15. GHG intensity

Impact[2023]

Impact[2022]

Explanation

441.36 TCO2e/$m GDP
Nominal547.02 TCO2e/$m GDP
NominalData was collected for 99.8%of the holdings. Impact figure
was scaled back to 100%.

Metric
GHG intensity of investee countries

9

Actions taken, and actions
planned and targets set for the
next reference period
Integrated in the sustainable
investment risk management ormonitoring process. Can be usedwithin binding risk limits/processesof some Article 8 or 9 Sub‐Funds.
As of April 2024, NAML has elected
not to consider adverse impacts ofinvestment decisions onsustainability factors at its entity
level. This PAI will however keep
being monitored within article 8 or
9 products.

Social16. Investee countries subject Number of investee countries
0.09%
to social violations
subject to social violations (absolute
number and relative number
divided by all investee countries), as
referred to in international treaties
and conventions, United Nations
principles and, where applicable,
national law

0.37%

Data was collected for 99.3%of the holdings. Impact figure
was scaled back to 100%.

Integrated in the sustainable
investment risk management ormonitoring process. Can be usedwithin binding risk limits/processesof some Article 8 or 9 Sub‐Funds.
As of April 2024, NAML has elected
not to consider adverse impacts ofinvestment decisions onsustainability factors at its entity
level. This PAI will however keep
being monitored within article 8 or
9 products.

Other indicators for principal adverse impacts on sustainability factors
Environmental 4. Investments in companies
without carbon emission
reduction initiatives

Share of investments in investee
25.71%
companies without carbon emission
reduction initiatives aimed ataligning with the Paris Agreement

22.17%

Data was collected for 91.7%of the holdings. Impact figure
was scaled back to 100%.

Integrated in the sustainable
investment risk management ormonitoring process. Can be usedwithin binding risk limits/processesof some Article 8 or 9 Sub‐Funds.
During 2023, some products havebeen upgraded in Article 8 sub‐funds with this PAI used to measure
the attainment of each of theenvironmental or social
characteristics.
As of April 2024, NAML has elected
not to consider adverse impacts ofinvestment decisions onsustainability factors at its entity
level. This PAI will however keep
being monitored within article 8 or
9 products.

SocialShare of investments in entities
without a human rights policy

55.35%

Data was collected for 91.7%of the holdings. Impact figure
was scaled back to 100%.

Integrated in the sustainable
investment risk management ormonitoring process. Can be usedwithin binding risk limits/processesof some Article 8 or 9 Sub‐Funds.

9 Lack of a human rights
policy56.99%

10

As of April 2024, NAML has elected
not to consider adverse impacts ofinvestment decisions onsustainability factors at its entity
level. This PAI will however keep
being monitored within article 8 or
9 products.

Descrip on of policies to iden fy and priori se principal adverse impacts on sustainability factors (PAIs)
Identification of principal adverse sustainability impacts and indicators
NAML shall systematically consider principal adverse impacts of investment decisions on sustainability factors. The approach through which this impact will be assessed shall take
into account nature and scale of the relevant product activities as further defined below.
NAML will be monitoring the following principal adverse impacts of investment decisions on sustainability factors through the indicators that are described in Appendix I ofCommission Delegated Regulation 2022/1288 as well as third‐party developed indicators that may be based on third party vendors and NAM own research.
Whenever coverage obtained through third party vendors or investee company is insufficient NAML may define proxies or use third party proxies to the extent it considers thatit provides a fair representation of the relevant PAIs.
Prioritization of PAIs
The indicators retained and prioritized by NAML in order to assess the PAIs of investment decisions will depend on:the specific environmental and social characteristics promoted by the productthe severity of the adverse impact on the sustainability factor
the probability of re‐occurrence of the adverse impact
the coverage ratio (indicators which can be assessed a large number of companies may be favored amongst those that lacks comparability)

As a general rule, PAIs indicators will more specifically prioritized in line with:

NAML Sustainability Risk Policy
NAML Engagement Policy
NAM external commitments as further described under: https://sustainability.nikkoam.com/investment‐management.
11

Governance and actions on PAIs
NAML Risk Management Function is in charge of monitoring PAIs and reports its findings to NAML ESG & Stewardship Oversight Committee, NAML ComEx and NAML Board on aregular basis.
NAML will engage with the relevant investment manager whenever it considers that a PAIs may have a material impact of the product sustainability risk level, is not coherent
with the defined PAI prioritization or creates a risk that is not in line with the defined Product Risk Profile.
NAML will more specifically take actions by:







engaging with investment managers to assess how material PAIs are affecting product sustainability risk
ensuring that NAML product strategies have integrated sustainability investment risk in their investment process, have respected the environmental or social
characteristics promoted and their sustainable investment objectives
ensuring that the NAML engagement policy has been implemented as required
ensuring that PAIs level and evolution are coherent with NAM external commitments
seeking to reinforce product specific ESG policies
supporting the development of products that have promote environmental or social characteristics or have a sustainable investment objective.

Specific care will also be taken to understand and report PAIs of events that are likely to cause an irremediable impact on a specific sustainability factor.

Engagement policies
NAML has established and keeps up to date an Engagement Policy as referred to in Article 3g of Directive 2007/36/EC of the European Parliament and of the Council. This policy
is part of the more general framework of the Nikko Asset Management Group Engagement and Stewardship Strategy.
NAML Engagement Policy
Pursuant to the Luxembourg law, NAML has developed and publicly disclosed an engagement policy that describes how it integrates shareholder engagement in its investment
strategy. This policy describes how NAML (i) monitors investee companies on relevant matters, including strategy, financial and non‐financial performance, risk, capital structure,social and environmental impact and corporate governance. (ii) conducts dialogues with investee companies, (iii) exercises voting rights and other rights attached to shares, (iv)
cooperates with other shareholders, (v) communicates with relevant stakeholders of the investee companies and (vi) manages actual and potential conflicts of interests in relation
to its engagement. The NAML engagement policy sets out 12 principles which aim at describing the above‐mentioned points.

12

NAML has delegated the exercise of voting rights to the Investment Managers of the managed Funds, and it ensures that the exercise of voting rights is done in accordance with
the investment objectives and policies of the relevant Sub‐Funds. The Investment Managers notably expect from the investee companies that they ensure strong environmental
and social performance and disclosures.
The portfolio managers of the Investment Managers consider the investee company’s management strategy, financial standing and market environment when voting on
resolutions relating to the issuing of capital. Specifically on climate change the portfolio managers analysis will consider the physical, liability and transition risks associated withthe changing climate.
Nikko AM Group Engagement and Stewardship Strategy
At the level of Nikko Asset Management Group, the Engagement and Stewardship Strategy outlines our global corporate engagement approach and should be read in conjunction
with Nikko AM’s Commitment to Responsible Investing. We believe that the environmental, social, and governance (“ESG”) factors are inherent to long‐term value creation.
Incorporating them in the investment process is consistent with the Nikko AM’s fiduciary duty.
Nikko AM became an UN Principles for Responsible Investment signatory in 2007 and is dedicated to all six Principles, where consistent with its fiduciary responsibilities. In 2016,
Nikko AM established an ESG Steering Committee which governs the fulfilment of ESG commitments. This Committee is responsible for evaluating effectiveness and maximizing
Nikko AM’s approach to ESG and the Principles.
Adverse impact sustainability indicators
The NAML Engagement Policy and the Nikko AM’s Engagement and Stewardship Strategy do not specifically cover the indicators for adverse impacts. The management of these
indicators for our article 8 or 9 funds is the responsibility of the Investment Managers. Each investment manager retains the ability to consider principal adverse impacts as
defined within the prospectuses of the Funds. The Investment Managers review the indicators for adverse impact on an ongoing basis, before investing in a specific investee, andpost investment. They will take relevant actions where required, including when exercising voting rights.
Engagement policy for Nikko AM Global Green Bond Fund (Article 9 fund)Engagement is considered by the Investment Manager as a long‐term and pro‐active activity rather than just a short‐term reactive one. It is critical to the investment review anddue diligence process and can be conducted pre‐and post‐investment. As part of the Investment Manager sustainability assessment a clear framework was designed to drive
engagement activity with issuers.
Through that process in place, the Investment Manager identifies and flags bonds that require an enhanced due diligence to be conducted to ensure the bond remains fully
suitable with the sustainable objective of the portfolio. This can include engagements to encourage additional transparency on the bond proceeds allocation, request clarifications
and/or stronger commitments in terms of the issuer sustainability strategy.
Engagement is also used to remediate to third party vendor data limitations by actively asking issuers for enhanced information disclosure.
13

Collaborative engagement initiatives with other investors, to address specific sustainability challenges or concerns with an issuer, are also part of the engagement strategy.
Adverse impact sustainability indicators are reviewed by the PM Team to ensure investments are performing in line with the depicted proceed uses. A specific focus is performedon the following indicators:











Scope 1, Scope 2 and Total GHG emissions
Carbon Footprint
GHG Intensity
Amount of non‐renewable energy consumption and non‐renewable energy production
Violations of the UN Global Compact principles or the OECD Guidelines for Multinational Enterprises
Absence of policies to monitor compliance with the UN Global Compact principles or the OECD Guidelines for Multinational Enterprises
Water consumed and reclaimed
Water recycled and reused
Investments not certified as green
Bonds not certified as green

Principle adverse impacts on sustainability factors (“PAIs") are taken into account by the PM Team in two ways:

The PAIs indicators are reviewed to assess whether they are coherent with the sustainable investment objective of the relevant bond issue (ensuring for example for a specificbond that the share of recycled water or renewable energy production has increased over time/as proceeds were invested);
The PAIs indicators are also reviewed to assess whether they are not harming other sustainability factors in a way that is significant with regards to the benefits achieved andthe mitigating measures that could have been taken.

The information on these principal adverse impacts on sustainability factors will be disclosed in the audited annual report of Nikko AM Global Umbrella Fund.
Engagement policy for Nikko AM Global Equity Fund (Article 8 fund)
The Sub‐Fund’s strategy involves portfolio managers, analysts and Sustainable Investment staff engaging with issuers as part of the investment process, both before and during
the period of investment. This engagement would cover investee companies’ alignment with the Investment Manager’s Future Quality, good governance criteria andenvironmental and social characteristics. Should a company, a4t any point, not fulfil the Investment Manager’s Future Quality criteria, the Investment Manager would engage
with management. The Investment Manager will seek commitments from companies to address any concerns raised by the portfolio managers. Subsequently, the Investment
Manager monitors these issues and company progress. All engagements are recorded within the Investment Manager’s research platform.
The environmental and social characteristics of the Nikko AM Global Equity Fund involve managing targets and limits that are set against several principle adverse impact onsustainability factors (“PAIs”) and ensuring that:
14




The Sub‐Fund carbon intensity remains at least 20% lower than the MSCI ACWI Total Net Return Index carbon intensity.
No investments are made in companies exposed to controversial weapons, contravening to the UN Global Compact Principles or to the Organization for Economic Co‐
operation and Development Guidelines for Multinational Enterprises

In addition, the Sub‐Fund will not invest in securities that belong to the tobacco GICs sector.
The following PAIs are used to measure the attainment of each of the environmental or social characteristics promoted by the Sub‐Fund:

Scope 1 Greenhouse gas (‘GHG’) emissions
Scope 2 GHG emissions
Violations of UN Global Compact principles and OECD Guidelines
Share of investments in investee companies involved in the manufacture or selling of controversial weapons

Engagement policy for Nikko AM ARK Positive Change Innovation Fund (Article 8 fund)
The investment manager will focus on innovative technologies and companies that are likely to have a positive impact on the environment and our society by assessing how they
could accelerate progress towards the United Nations Sustainable Development Goals (‘UN SDGs’) categorized into four categories: economic convergence, healthy economic
growth, environmental action and infrastructure for the future.
Engagement is not specifically performed in the context of Nikko AM ARK Positive Change Innovation Fund environmental or social investment strategy.
The extent to which environmental or social characteristics of the Sub‐Fund were met and the UN SDGs to which the selected companies and technologies have aimed tocontribute to will be disclosed in the audited annual report of Nikko AM Global Umbrella Fund.
Engagement policy for Nikko AM Global Unconstrained Bond (Article 8 fund)The portfolio management team (“PM team”)sees the value of engagement. Most of the Nikko AM Global Unconstrained Bond Fund assets are invested in sovereign,supranational and agencies issuers and while the PM team maintains an active dialogue, this engagement is used as a mean of building insight and market intelligence rather thanas a form of influence that might change the behaviour of these issuers. Similarly given the relatively small exposure to corporate bonds and emerging markets the PM team hasa pragmatic view on the practical limits to its influence. Again, as in the case with sovereign issuers, active dialogue with the companies whose bonds are held is maintained, butinvestments are shaped to avoid situations where the PM team might end up in corporate actions which would draw in a disproportionate resource and time.
In the selection of its investments, the Sub‐Fund seeks to exclude certain investments based on sustainability indicators and Principal Adverse Impacts on sustainability factors(“PAI”), including:•Share of investments in companies active in the fossil fuel sector
15

•
•
•

Share of investments in investee companies without policies to monitor compliance with the UN Global Compact principles or the OECD Guidelines for Multinational
Enterprises or grievance /complaints handling mechanisms to address violations of the UN Global Compact principles or the OECD Guidelines for Multinational
Enterprises
Violations of UN Global Compact principles and OECD Guidelines
Share of investments in investee companies involved in the manufacture or selling of controversial weapons

In addition, the portfolio management and independent control teams will review existing positions against those negative screens at least on a monthly basis. Positions that are
no longer compliant with the negative screens will either immediately be disposed of or will be disposed of if following engagement with the company the issue isn’t resolved
during the course of the next quarter.
Engagement policy for Nikko AM Japan Value (Article 8 fund)
The Sub‐Fund’s strategy involves the investment manager engaging with issuers as part of the investment process, both before and during the period of investment. This
engagement will in particular be performed:• in the context of the absence of carbon emission reduction initiatives for companies that have a GHG intensity which exceeds the Sub‐Fund’s benchmark GHG intensity• as part of the investment manager good governance policy
The environmental and social characteristics of the Nikko AM Japan Value Fund involve managing targets and limits that are set against several principle adverse impact onsustainability factors (“PAIs”) and ensuring a portfolio composed of companies that either have a GHG intensity lower than the Sub‐Fund’s benchmark GHG intensity or have
GHG reduction intiatives in place.
Prior to investing and monthly thereafter, the GHG intensity of companies will be reviewed to identify companies that have higher GHG emissions than the Sub‐Funds
benchmark. Those companies will then be reviewed to assess whether they have implemented carbon emission reduction initiatives (through third party data service or own
research). The companies that have not implemented such initiatives will be subject to engagement by the investment manager. This engagement may be performed prior to or
after the investment. This process will be performed by the investment manager and independently monitored.
The following PAIs are used to measure the attainment of each of the environmental or social characteristics promoted by the Sub‐Fund:

•
•
•
•
•
•
•

Scope 1 Greenhouse gas (‘GHG’) emissions
Scope 2 GHG emissions
Carbon footprint
GHG Intensity
Lack of carbon reduction initiatives
Violations of UN Global Compact principles and OECD Guidelines
Share of investments in investee companies involved in the manufacture or selling of controversial weapons16•

Average ratio of female to male board members

Engagement policy for Nikko AM Asia ex-Japan (Article 8 fund)
The Sub‐Fund’s strategy involves portfolio managers and analysts engaging with investee companies as part of the investment process. Should the company not fulfil theInvestment Manager’s criteria, or should further information be required, the Investment Manager will engage with the investee company. Subsequently, the Investment Manager
monitors these issues and the company’s progress. All engagements are recorded within the Investment Manager’s engagement log.
Through the Investment Manager’s engagement process, the Investment Manager engages investee companies on the following where material:•••

ESG topics
Controversies that might arise post‐investment
PAI indicators as part of PAI monitoring process

The following PAIs are used to measure the attainment of each of the environmental or social characteristics promoted by the Sub‐Fund:••GHG Intensity
Share of investments in investee companies involved in the manufacture or selling of controversial weapons

References to international standards
The Group places fiduciary and ESG principles as guiding themes behind our corporate values and actions. To support this, Nikko AM adheres to a range of responsible businessconduct codes and internationally recognised standards.
NAML is a European subsidiary of Nikko AM, to which the SFDR applies, and adheres to local Regulations as well as Group codes or standards as applicable.
Given their global nature, which is not intended to fit into a regional framework, it is not possible to link all the codes or standards to which the Group adheres to the PAIs
defined by the SFDR. To the extent applicable, the below section will outline the codes and standards with a clear link to the PAIs which includes:The Net Zero Asset Managers initiative
Task force on Climate Related Financial Disclosures

Note that the above isn’t an exhaustive list of the codes or standards that Nikko AM adheres to. In addition to the above, NAML uses UN Principles for Responsible Investment tomonitor how its Investment Managers have integrated sustainability risk in their investment process and certain Sub‐Funds or strategies have elected to report how they adhere
to those principles.
171. The Net Zero Asset Managers initiative (“NZAMi”)
PAIs that may be used to monitor the adherence to the above insternational standard

GHG emissions (Scope 1 GHG Emissions, Scope 2 GHG Emissions, Scope 3 GHG Emissions, Total GHG Emissions)
Carbon Footprint

Methodology and data used
Nikko AM recognises climate change as one of the greatest challenges the global community faces and considers it our fiduciary duty to address it in managing our clients' assets.
Nikko AM became a signatory to the Net Zero Asset Managers initiative in 2021. As part of this, the Group has committed to achieving net zero emissions across all investments
by 2050 as well as setting an interim target for the proportion of assets to be managed in line with the attainment of net zero emissions by 2050 or sooner
The Group has committed 43% of global assets under management (“AUM”) to be managed in line with net zero emissions. In scope AUM will be expected to reduce carbon
footprint (currently Scope 1 & 2 emissions per $mn invested) by 50% by 2030 against the baseline year of 2019. To the extent that it is possible, we will include material Scope 3
emissions when data becomes more readily available.
Nikko AM primary data source for this information is MSCI Inc. Although climate change considerations are integrated across asset classes, we are commencing our journey
towards net zero targets from our equity holdings, as this is the largest portion of our AUM and as the equity analysis methodologies have been more established, compared toother assets such as fixed income (especially sovereign debt). The data coverage also tends to be better for equities. Nikko AM monitors the recent developments in this space,
and will be looking to apply these methodologies and data as it becomes more widely applicable to incrementally add further AUM to our net zero targets.
Climate scenarios
IPCC scenarios are used as the basis of our target.
Progress towards NZAMi
For Nikko AM assets in scope of NZAMi, we have made progress towards our commitment since our initial target disclosures in October 2022. Nikko AM carbon footprint of ourcommitted portfolios was 65.2 tCO2e/USD million invested as of 31 December 2023. This represents a marginal decrease of 0.3% from 2022 and an overall ~23.0% reduction
from our 2019 baseline carbon footprint of 84.7 tCO2e/USD million invested. Nikko AM is still well positioned to meet our 2030 interim targets.
Japan Sustainable Investment Department has narrowed down, from over 2,000 companies, a climate‐focused engagement list consisting of 70 companies. Of these companies, the 60 chosen
account for 72% of the overall GHG emissions (Scope 1+2) across Japan equity, as of 31 December 2019, which makes up the largest portion of Nikko AM AUM. The remaining 10 were chosenbecause they are important companies with regard to their Scope 3 footprint. As part of the engagement plan, the team evaluates the companies’ corporate initiatives against NZAMi’s
recommended framework.

18

As part of the focused engagement, Nikko AM sent a letter to companies at whose general shareholders meetings we voted against shareholder proposals related to climatechange. The letter explained our reasons for opposing the proposals and actions Nikko AM would like to see from the companies in the future. The letter conveyed Nikko AM
intention to avoid situations in which votes in opposition of such shareholder proposals (votes in favour of companies) are interpreted as allowing companies to slow down theirdecarbonisation initiatives.
2. Task Force on Climate Related Financial Disclosures
PAIs that may be used to monitor the adherence to the above international standardGHG emissions (Scope 1 GHG Emissions, Scope 2 GHG Emissions, Scope 3 GHG Emissions, Total GHG Emissions)
Carbon Footprint
GHG Intensity of Investee Companies

Methodology and data used
The Financial Stability Board created the Task Force on Climate‐related Financial Disclosures (TCFD) to improve and increase reporting of climate‐related financial information.
Nikko AM is a signatory to this voluntary code and recognises the need to continually enhance and improve its efforts in relation to climate change.
In line with TCFD recommendations, we encourage our investee companies to take the following steps:
 Identify material climate change risks and opportunities in a range of scenarios, including sub‐2 degree scenarios, over appropriate time horizons
 Integrate material climate change risks and opportunities into their overall business strategy and risk management
 Disclose their management policies and processes toward the goals, and the resultant performances based on the above activities
In 2023, Nikko AM integrated in its report advanced climate analytics data. The outcomes of this work are published in Nikko AM Group's TCFD report.
Climate scenarios
Information on forward‐looking climate scenarios used within Nikko AM TCFD disclosures are available in Nikko AM Nikko AM Group's TCFD report.

Historical comparison

19

Indicators applicable to investments in investee companies
Adverse sustainability indicator

Impact[2023]

MetricImpact [2022]

Explanation

Actions taken, and actions
planned and targets set for the
next reference period

Climate and other environment related indicators
Greenhousegas emissions

1.

GHG emissions

Scope 1 GHG emissions

13,823 TCO2e

20,831 TCO2e

Data or proxies were collected During 2023, some products havefor 79.9% of the holdings,
been upgraded in Article 8 sub‐against 81% in 2022. The
funds with this PAI used to measure
coverage was reduced by 1.1 the attainment of each of thepercentage point.
environmental or social
Compared with 2022, thecharacteristics.
scope 1 GHG emissions fell by This PAI was integrated in the
33.6% in 2023.
sustainable investment risk
management or monitoring process
and used within binding risk
limits/processes of some Article 8 or
9 Sub‐Funds.

Scope 2 GHG emissions

14,465 TCO2e

15,632 TCO2e

Data or proxies were collected During 2023, some products havefor 79.9% of the holdings,
been upgraded in Article 8 sub‐against 81% in 2022. The
funds with this PAI used to measure
coverage was reduced by 1.1 the attainment of each of thepercentage point.
environmental or social
Compared with 2022, thecharacteristics.
scope 2 GHG emissions fell by This PAI was integrated in the
7.5% in 2023.
sustainable investment risk
management or monitoring process
and used within binding risk
limits/processes of some Article 8 or
9 Sub‐Funds.

Scope 3 GHG emissions

388,481 TCO2e

430,225 TCO2e Data or proxies were collected No material strategic change
for 79.7% of the holdings,
between 2022 and 2023.
against 80.9% in 2022. The
This PAI was integrated in the
coverage was reduced by 1.2 sustainable investment risk
percentage point.
management or monitoring process
and used within binding risk

20

2. Carbon footprint

3. GHG intensity of investee
companies

Compared with 2022, thelimits/processes of some Article 8 orscope 3 GHG emissions fell by 9 Sub‐Funds.
9.7% in 2023.
466,687 TCO2e Data or proxies were collected No material change between 2022
for 79.7% of the holdings,
and 2023. No material strategic
against 80.9% in 2022. Thechange between 2022 and 2023.
coverage was reduced by 1.2 This PAI was integrated in thepercentage point.
sustainable investment risk
Compared with 2022, themanagement or monitoring process
total GHG emissions fell by
and used within binding risk
10.9% in 2023.
limits/processes of some Article 8 or
9 Sub‐Funds.

Total GHG emissions

415,888 TCO2e

Carbon footprint

0.00 TCO2e/EUR Invested

0.00 TCO2e/EUR Invested

84.15 TCO2e/EURm
Invested

94.37TCO2e /EURm Invested

378 TCO2e/EURm Sales

399 TCO2e/EURm Sales

GHG intensity of investee
companies

21

Data or proxies were collected During 2023, some products havefor 79.7% of the holdings,
been upgraded in Article 8 sub‐against 80.9% in 2022. The
funds with this PAI used to measure
coverage was reduced by 1.2 the attainment of each of thepercentage point.
environmental or social
Compared with 2022, thecharacteristics.
carbon footprint fell by 10.8% This PAI was integrated in thein 2023.
sustainable investment risk
management or monitoring process
and used within binding risk
limits/processes of some Article 8 or
9 Sub‐Funds.
Data or proxies were collected During 2023, some products havefor 84.5% of the holdings
been upgraded in Article 8 sub‐against 83% in 2022. The
funds with this PAI used to measure
coverage increased by 1.5
the attainment of each of thepercentage point.
environmental or social
Compared with 2022, thecharacteristics.
GHG intensity of investee
This PAI was integrated in thecompanies fell by 5.3% insustainable investment risk
2023.
management or monitoring process
and used within binding risk
limits/processes of some Article 8 or
9 Sub‐Funds.

4. Exposure to companies
active in the fossil fuelsectorShare of investments in companies
active in the fossil fuel sector

1.08%

0.93%

Data was collected for 91.7% During 2023, some products haveof the holdings, against 95.4% been upgraded in Article 8 sub‐in 2022. The coverage wasfunds with this PAI used to measure
reduced by 3.7 percentage
the attainment of each of thepoint.
environmental or social
Compared with 2022, thecharacteristics.
share of investments inThis PAI was integrated in thecompanies active in the fossil sustainable investment risk
fuel sector increased by 16.1% management or monitoring process
in 2023.
and used within binding risk
limits/processes of some Article 8 or
9 Sub‐Funds.

5. Share of non‐renewableenergy consumption andproduction

Share of non‐renewable energy
consumption and non‐renewableenergy production of investee
companies from non‐renewableenergy sources compared torenewable energy sources,
expressed as a percentage of totalenergy sources

82.66%

87.86%

Data was collected for 52.4%of the holdings, against 63.1%
in 2022. The coverage was
reduced by 10.7 percentage
point.
Compared with 2022, theshare of non‐renewableenergy consumption andproduction fell by 5.9% in
2023.

No material strategic change
between 2022 and 2023.
This PAI was integrated in thesustainable investment risk
management or monitoring process
and used within binding risk
limits/processes of some Article 8 or
9 Sub‐Funds.

6. Energy consumption
intensity per high impact
climate sector

Energy consumption in GWh per
0.49 GWh
million EUR of revenue of investee /EURm sales
companies, per high impact climate
sector

1.24 GWh/EURm sales

Data was collected for 58.3%
of the holdings, against 65.8%
in 2022. The coverage was
reduced by 7.5 percentage
point.
Compared with 2022, theenergy consumption in GWh
per million EUR of revenue ofinvestee companies, per highimpact climate sector fell by
60.5% in 2023.

No material strategic change
between 2022 and 2023.
This PAI was integrated in thesustainable investment risk
management or monitoring process
and used within binding risk
limits/processes of some Article 8 or
9 Sub‐Funds.

22

Biodiversity

7. Activities negatively
affecting biodiversity‐
sensitive areas

Share of investments in investee
companies with sites/operations
located in or near to biodiversity‐
sensitive areas where activities of
those investee companies
negatively affect those areas

Water

8. Emissions to water

Waste

9. Hazardous waste andradioactive waste ratio

0.00%

0.00%

Data was collected for 91.7%of the holdings, against 95.4%
in 2022. The coverage was
reduced by 3.7 percentage
point.
No material change between
2022 and 2023.

No material strategic change
between 2022 and 2023.
This PAI was integrated in thesustainable investment risk
management or monitoring process
and used within binding risk
limits/processes of some Article 8 or
9 Sub‐Funds.

Tonnes of emissions to water
15.87 T
generated by investee companies/$m invested
per million EUR invested, expressed
as a weighted average

45.40 T/$m invested

Data was collected for 4% of
the holdings, against 12% in
2022. The coverage was
reduced by 8 percentage
point.
Compared with 2022, thetonnes of emissions to water
generated by investee
companies per million EUR
invested, expressed as aweighted average fell by 65%
in 2023.

No material strategic change
between 2022 and 2023.
This PAI was integrated in thesustainable investment risk
management or monitoring process
and used within binding risk
limits/processes of some Article 8 or
9 Sub‐Funds.

Tonnes of hazardous waste and1.23 T
radioactive waste generated by/$m invested
investee companies per million EUR
invested, expressed as a weighted
average0.25 T/$m invested

Data was collected for 25.1%of the holdings, against 21.8%
in 2022. The coverageincreased by 3.3 percentage
point.
Compared with 2022, thetonnes of hazardous waste
and radioactive waste
generated by investee
companies per million EUR
invested, expressed as aweighted average increasedby 392% in 2023.
The exposure to a company
that was a major issuer ofhazardous waste in the firstNo material strategic change
between 2022 and 2023.
This PAI was integrated in thesustainable investment risk
management or monitoring process
and used within binding risk
limits/processes of some Article 8 or
9 Sub‐Funds.

23

quarter, combined with a low
coverage rebased to 100%,
led to this increase despite
the disinvestment in
subsequent quarters.

Indicators for social and employee, respect for human rights, anti-corruption and anti-bribery matters
Social andemployeematters

10. Violations of UN Global
Compact principles andOECD Guidelines forMultinational Enterprises

Share of investments in investee
companies that have been involvedin violations of the UNGC principles
or OECD Guidelines forMultinational Enterprises

0.00%

0.00%

Data was collected for 91.7%of the holdings, against 95.4%
in 2022. The coverage was
reduced by 3.7 percentage
point.
No material change between
2022 and 2023.

During 2023, some products havebeen upgraded in Article 8 sub‐funds with this PAI used to measure
the attainment of each of theenvironmental or social
characteristics.
This PAI was integrated in thesustainable investment risk
management or monitoring process
and used within binding risk
limits/processes of some Article 8 or
9 Sub‐Funds.

11. Lack of processes andcompliance mechanisms
to monitor compliancewith UN Global Compact
principles and OECD
Guidelines forMultinational Enterprises

Share of investments in investee
79.85%
companies without policies tomonitor compliance with the UNGC
principles or OECD Guidelines forMultinational Enterprises orgrievance /complaints handlingmechanisms to address violations of
the UNGC principles or OECD
Guidelines for Multinational
Enterprises

87.72%

Data was collected for 91.7%of the holdings, against 89.5%
in 2022. The coverageincreased by 2.2 percentage
point.
Compared with 2022, theshare of investments ininvestee companies without
policies to monitor
compliance with the UNGC
principles or OECD Guidelines
for Multinational Enterprises
fell by 9.9% in 2023.

During 2023, some products havebeen upgraded in Article 8 sub‐funds with this PAI used to measure
the attainment of each of theenvironmental or social
characteristics.
This PAI was integrated in thesustainable investment risk
management or monitoring process
and used within binding risk
limits/processes of some Article 8 or
9 Sub‐Funds.

12. Unadjusted gender pay
gap

Average unadjusted gender pay gap ‐7.44%
of investee companies‐4.27%

Data was collected for 6.5% of No material strategic change
the holdings, against 5.9% in between 2022 and 2023.
2022. The coverage increased This PAI was integrated in theby 0.6 percentage point.
sustainable investment risk
management or monitoring process24Compared with 2022, theAverage unadjusted gender
pay gap of investee
companies increased by
74.3% in 2023.

and used within binding risk
limits/processes of some Article 8 or
9 Sub‐Funds.

13. Board gender diversity

Average ratio of female to maleboard members in investee
companies, expressed as apercentage of all board members

30.04%

29.24%

Data was collected for 83.9%of the holdings, against 88.8%
in 2022. The coverage was
reduced by 4.9 percentage
point.
Compared with 2022, theaverage ratio of female tomale board members ininvestee companies,
expressed as a percentage ofall board members increasedby 2.7% in 2023.

No material strategic change
between 2022 and 2023.
This PAI was integrated in thesustainable investment risk
management or monitoring process
and used within binding risk
limits/processes of some Article 8 or
9 Sub‐Funds.

14. Exposure to controversial
weapons (anti‐personnel
mines, cluster munitions,chemical weapons andbiological weapons)

Share of investments in investee
0.00%
companies involved in the
manufacture or selling ofcontroversial weapons (anti‐
personnel mines, cluster munitions,chemical weapons, biologicalweapons)

0.00%

Data was collected for 91.7%of the holdings, against 95.4%
in 2022. The coverage was
reduced by 3.7 percentage
point.
No material change between
2022 and 2023.

During 2023, some products havebeen upgraded in Article 8 sub‐funds with this PAI used to measure
the attainment of each of theenvironmental or social
characteristics.
This PAI was integrated in thesustainable investment risk
management or monitoring process
and used within binding risk
limits/processes of some Article 8 or
9 Sub‐Funds.

Indicators applicable to investments in sovereigns and supranationals
Adverse sustainability indicator
Environmental 15. GHG intensity

MetricImpact[2023]

Impact[2022]

GHG intensity of investee countries

441.36 TCO2e547.02 TCO2e

25

Explanation

Actions taken, and actions
planned and targets set for the
next reference period

Data was collected for 99.8% No material strategic changeof the holdings, against 90.6% between 2022 and 2023.

/$m GDP
NominalSocial16. Investee countries subject Number of investee countries
0.09%
to social violations
subject to social violations (absolute
number and relative number
divided by all investee countries), as
referred to in international treaties
and conventions, United Nations
principles and, where applicable,
national law/$m GDP
Nominalin 2022. The coverageincreased by 9.2 percentage
point.
Compared with 2022, theGHG intensity of investee
countries fell by 19.3% in
2023.

This PAI was integrated in thesustainable investment risk
management or monitoring process
and used within binding risk
limits/processes of some Article 8 or
9 Sub‐Funds.

0.37%

Data was collected for 99.3% No material strategic changeof the holdings, against 91% in between 2022 and 2023.
2022. The coverage increased This PAI was integrated in theby 8.3 percentage point.
sustainable investment risk
Compared with 2022, themanagement or monitoring process
percentage of investee
and used within binding risk
countries subject to social
limits/processes of some Article 8 orviolations fell by 411.1% in
9 Sub‐Funds.
2023.

Other indicators for principal adverse impacts on sustainability factors
Environmental 4.

Investments incompanies withoutcarbon emission
reduction initiatives

Share of investments in investee
25.71%
companies without carbon emission
reduction initiatives aimed ataligning with the Paris Agreement

22.17%

Data was collected for 91.7%of the holdings, against 95.4%
in 2022. The coverage was
reduced by 3.7 percentage
point.
Compared with 2022, theshare of investments ininvestee companies withoutcarbon emission reduction
initiatives aimed at aligningwith the Paris Agreement
increased by 16% in 2023.

During 2023, some products havebeen upgraded in Article 8 sub‐funds with this PAI used to measure
the attainment of each of theenvironmental or social
characteristics.
This PAI was integrated in thesustainable investment risk
management or monitoring process
and used within binding risk
limits/processes of some Article 8 or
9 Sub‐Funds.

SocialLack of a human rights
policyShare of investments in entities
without a human rights policy

55.35%

Data was collected for 91.7%of the holdings, against 95.3%
in 2022. The coverage was
reduced by 3.6 percentage
point.

No material strategic change
between 2022 and 2023.
This PAI was integrated in thesustainable investment risk
management or monitoring process
and used within binding risk

956.99%

26

Compared with 2022, theshare of investments inentities without a humanrights policy increased by 3%
in 2023.

27

limits/processes of some Article 8 or
9 Sub‐Funds.