Responsible
Investment
Report 2021

Resp
Inve

We create economic
and social value throughthe asset managementbusiness
This is the philosophy of Nomura Asset Management

ABOUT

NOMURA ASSETMANAGEMENT
03 Introducing Nomura Asset Management
05 Responsible Investment Strengths
07 Framework for Collaboration with Overseas Offices
09 CEO Message
11 Investment Chain
13 Materiality
15 ESG Statement
19 Basic Policy for Responsible Investment
23 TCFD & NET ZERO GOAL BY 2050

R

ENGAGEMENT
42 Our Idea of Constructive Dialogue with Portfolio Companies
43 Engagement Target Companies and Results
44 Milestone Management
45 Engagement on Priority Topics
50 Review of Priority Topics
51 Enhancing ESG Engagement
53 Global Equity Engagement
56 Engagement by Sustainalytics
57 Cooperation with Initiatives

Contributing to a carbon-free society by Japanese

33 companies Decarbonization Japan

35 Nomura Asset Management’s Initiatives on Human Rights
39 Biodiversity
About photos in this report : Photos for this report were taken with the room doors open and adequate ventilation, and the size of the photographycrews was limited to avoid over-crowding.

01

Responsible Investment Report 2021

ponsible
estment
61 Proxy Voting Process / System to Manage Conflicts of
63 Proxy Voting Process for Japanese and Global Companies
64 Changes in Results of Exercise of Voting Rights for Japanesecompanies

65 Overview of Proxy Voting Standards for Japanese Companies
65 Overview of Proxy Voting Standards Revisions
67 Supporting an effective transition to a monitoring board
68 Disclosure of proxy voting results
69 Proxy Voting FAQ

71 Equity Integration
74 Efforts to Advance ESG Integration
75 ESG Scores for Japanese Equities
77 Impact Investing
79 Global Sustainable Equity Strategy
81 Japan Sustainable Equity Strategy
83 Development of ESG Integration in Fixed Income Investment
85 Global ESG Balance Fund
88 Fixed Income Engagement

ESG Integration

89 Messages from the Responsible Investment Council
91 Results of Self-Evaluation of 2021 Stewardship Activities
93 ESG Communication Activities
94 Review of 2021, 2022 and Beyond

Proxy Voting

InterestESG
INTEGRATIONEngagement

PROXY
VOTING

About Nomura Asset Management

Report 2021

02

Nomura Asset
Established in December 1959, Nomura Asset Management is a global asset management firm with business
operations in Japan, North America, Latin America, Asia, and Europe. We meet the asset management
needs of a diverse range of clients, from individual investors to institutional clients including large pension
funds and institutional investors. As a responsible investor entrusted with our clients’ assets, in addition toproviding investment returns, we proactively work to create medium-to long-term sustainability, including for
ESG (environmental, social, and governance) issues.
It’s all about the client.
Based on this philosophy, our offices collaborate to meet the expectations of our clients around the world.

NAM’s Strengths by the Numbers(As of December 2021)

Assets under management

Established(Asset Management Division)

1959

68.5

1,406

Market share in thedomestic publicly-offeredinvestment trust market *2

Average years of experienceamong employees involved
in investment and researchrelated operations¥

World’s 6th largest ETF AUM
Domestic market share *1

trillion

26.8

43.5

% No. 1%

Employees inhead office/branch offices

employees

13.1

*3

*1 Prepared by Nomura Asset Management based on NRI Fundmark/DL data.
*2 Prepared by Nomura Asset Management based on The Investment Trusts association, Japan data.
*3 Calculated by an investment and research manager at Nomura Asset Management.

Ratio of AUM by Asset Class
Institutional Investors

Alternative

26%

Equity

11%

54%

Japan

Europe22%

55%

Multi-Asset/
Balanced

1%

Assets Under
Management(overall)Fixed Income

34%
Individual
Investors

74%

03

Responsible Investment Report 2021

USA

by Asset Class

9%
Asia

8%
Other

6%

by Region

Management
2017

AUM reach¥40 trillion

2007

1987

AUM reach¥60 trillion

AUM reach¥50 trillion

2015

2000

2020

AUM reach¥30 trillion

AUM reach¥20 trillion
About Nomura Asset Management

AUM reach¥10 trillion

1974
AUM reach¥1 trillion

1960

1970

December 1960 Investment trust
Launched the Company’s first openend
stock investment trust (“Open No. 1”)
January 1961 Investment trust
Launched a bond investment trust
September 1969 Investment trust
Launched Nomura Capital Fund of Japan
Began US pension fund management(Japanese stock investment products in the US)
February 1972 Investment trust

1976

2000

1980s

2010

2020

1990s

January 1980 Investment trust
Launched the Medium-Term Japanese
Government Bond Fund, the first of its kindin JapanAugust 1980 Investment trust
Began management of Japan’s first index fund

April 1995 ETF
Launched the Nikkei 300 Stock Index Listed
Fund, the first ETF in Japan

1984

1996

Established London branch office

March 1986 Investment trust

Launched the Long-Term Government Bond
Fund (Nickname: “Top”)

May 1992 Investment trust
Launched MMF

Established Sydney branch office

April 1998 Investment trust
Launched MRF

1988

Established Singapore branch office
Established Hong Kong branch officeOpened New York Representative Office

2000s

2010s

June/July 2001 ETF
Launched and listed the Nikkei 225 ETF and
the TOPIX index ETF

2011

October 2005 Investment trust

Launched the East Japan Revival Support
Bond Fund (redeemed in May 2016)

August 2007 ETF
Launched and listed the Gold-Price-Linked ETF,
Japan’s first ETF using index-linked bonds
March 2008 ETF<NEXTFUNDS> Launched and listed 17
TOPIX-17 ETF series ETFs

September 2008 ETF

Launched and listed the Tokyo Stock
Exchange REIT Index ETF

May 2011 Investment trust

2014

Opened Taiwan office through a joint venture

2015

October 2020 Investment Trust
Created a donation scheme to support
regional revitalization through ESG funds incollaboration with regional financial institutions
August 2021 Investment Trust
Launched an investment trust that invests
in Japanese companies contributing todecarbonization

Formed business partnership with American
Century Investments (ACI)May 2018 ETF
Launched and Listed the Japan Empowering
Women ETF

ESG Integration

Launched the Nomura Global 6 Assets
Diversified Fund, a balanced fund soldthrough Japan Post

Opened Shanghai representative office2020sProxy Voting

Launched Japan’s first foreign securities
investment fund following the abolishment of
the 50% limit on foreign securities holdings

1990

Engagement

1960~1970s

1980

October 2018 Investment trust

Launched the ACI Advanced Medical Impact Fund

November 2019 Investment trust

Announced Japan’s first fund merger

Opening/establishment of overseas office
NAM product04

Long-term commitment to responsible
investment

1

The first strength is our long history of engaging in responsible investment.
The roots of the current Responsible Investment Committee lie in the Proxy
Voting Committee established in 2001. Subsequently, the ESG Committee
was established in 2011. The ESG Committee became the Responsible
Investment Committee as part of a reorganization and an integration from2014 to 2015. Based on many discussions over the years, and always
remaining conscious of our mandate from clients, we have fostered a culturethat is supportive of responsible investment, respects diverse opinions froma large number of professionals, and values lively discussion.
UK Stewardship CodeadoptedManagement of SRI Index Fund commenced
Management of governance fund commenced
Proxy Voting Committee
established

2004

2010

2011

2001

NomuraAsset Management

Our
Strengths in
Responsible
Investment

2

ESG Committee (now the
Responsible Investment
Committee) established
United Nations-supported
Principles for Responsible
Investment (UN PRI) signed

Systematic and Continuous ESGrelated Initiatives
The second strength is our systematic and continuous effort for ESGrelated issues anticipating the needs and changes of the times. Examplesof our efforts include the establishment of the Responsible Investment
Committee as the highest decision-making body for responsible investment
and the Responsible Investment Council which supervises the Committee,
the establishment of policies including the ESG Statement, engagement
and proxy voting in order to realize desirable management, as well as
providing information to stakeholders through disclosure materials such as
the Responsible Investment Report and the TCFD Report.

Global Approach and Diversity

3

The third strength is our global and highly-diverse investment andresearch framework. Based on our global platform for responsible
investment, we have built an ESG investment and research framework
made up of portfolio managers, corporate analysts and country
specialists who manage ESG products in our overseas offices. A large
number of portfolio managers, corporate analysts, credit analysts
and ESG specialists working in one of the largest active management
institutions in Japan are committed to applying their analytical abilities
and insights to responsible investment.

Inclusive Discussions based on aStrong Organizational Platform

405

Responsible Investment Report 2021

The fourth strength is our emphasis on having “exhaustive discussions”
that incorporate diverse opinions under a strong organizational platform.
The Responsible Investment Council was established as a body to oversee
discussions by the Responsible Investment Committee in real time. It manages
conflicts of interest with highly-independent outside directors and outside
experts accounting for a majority of its members. In addition, the Responsible
Investment Committee comprises members possessing abundant investment
and research experience. The Committee held a total of 15 meetings in 2021.
During discussions by the Committee about agenda proposals and ESG
themes, matters can often be complicated. Members of the Responsible
Investment Council also sit in on Committee meetings and actively participate indiscussions without limiting themselves to only monitoring conflicts of interest.

History of Responsible Investment

2019
Proxy voting results
disclosed individually
Malaysian Stewardship
Code adopted

Responsible Investment
Group and ESG specialists
established
Stewardship Committee
integrated into Responsible
Investment Committee

2014

2017

2015

2018
Self-evaluation
disclosed

2016

Established AssetManagement
Research Institute topromote ESG

Support for TCFD.
Strengthening ourcompany-wide efforts totackle climate change.
Formulated our ESG
Statement

Responsible Investment Department
established
Conflict of Interest Management
Policy formulated and Responsible
Investment Council established
Stewardship Codes in Singapore,
Hong Kong and Taiwan adopted
UK Office acquired Tier1 evaluationfrom UK FRC*

Japanese version of the
Stewardship Code adopted
ESG Committee reorganized
into Responsible Investment
Committee
Proxy Voting Committee
reorganized into Stewardship
Committee

2021

2020

Established NAM’smateriality
Joined Net Zero AssetManagers initiative(NZAM)
Revised ESG Statement*UK FRC: Abbreviation for the Financial Reporting Council in the United Kingdom

Oversight,
verification,
advice, etc.

Main activities
Dialogue with portfolio
companies (engagement)

Forming policies,
oversight ofinitiatives, etc.

Proxy Voting

Responsible Investment
Committee

Responsible Investment
Council

Integration into investment
decisions (ESG integration)

Reports on
activities,
define issues, etc.
Investment andresearch division

Collaborative/
public activities

About Nomura Asset Management

Organizational Structure for Responsible Investment

Secretariat: Responsible
Investment Department

Engagement

LondonFrankfurt
Dubai

Seoul

New York

ShanghaiHong Kong
MalaysiaTokyo
TaiwanSingapore

Proxy Voting

SydneyResponsible Investment Committee Meetings January – December 2020

Responsible Investment
Committee

times

Regular 4times Ad hoc 11times

4

times

ESG Integration

15

Responsible Investment
Council

Regular 4times

06

Nomura Asset Management
Global Platform andCoordination on Responsible
Investment
Engagement

ESG Integration

Proxy Voting

Proxy Voting

Cooperation With Overseas Offices
At Nomura Asset Management, we work globally to strengthen our ESG
initiatives based on our global platform for responsible investment.
By utilizing this common platform, we are not only able to promote ESG
initiatives at each office, but offices can also share detailed information
with one another.
Our ESG Statement is shared globally, and allows for a common
understanding of the goals behind our ESG-related activities as well as
ESG-related issues (refer to Pages 15-18).

Engagement
We engage in constructive dialogue with companies about important financial
and non-financial risks and opportunities in accordance with our basic policy
for engagement (refer to Pages 41). Specifically, our ESG specialists, ESG
investment manager, company analysts, and country specialists based inJapan and overseas offices collaborate to engage with portfolio companies.
We monitor the details of the engagement of managers in each country
with target companies using common milestone management tools, whichallows information to be easily shared among our offices. For example,
ESG specialists in Tokyo discuss the details of engagements with Japanbased pharmaceutical companies in which portfolio managers in the UK
office participate, as well as the details of portfolio company engagements
conducted by ESG investment professionals in Singapore and portfolio
managers in Hong Kong (refer to Pages 55-60).

07

Responsible Investment Report 2021

For proxy voting (excluding Japanese equities),
we generally decide to agree or oppose anissue in accordance with our Global Basic
Policy on Proxy Voting. However, if theportfolio managers and analysts possessing
a deep understanding of local conditions
determine it to be necessary, we may, upondeliberation, make a decision that differs fromthe basic policy on proxy voting. The final
decision is then shared with all offices, andproxy voting is then carried out uniformly on a
global basis (refer to Page 63).

ESG Integration
In terms of integration, climate change
analysis tools are used to evaluate theclimate change risks and opportunities foreach fund (refer to Pages 25-31), and in
addition to sharing our ESG scores among
all offices, ESG data from external sourcesand other data are incorporated and used
to make investment decisions. The details of
engagement with companies whose stocks
our funds hold are shared with portfolio
managers and utilized in discussions about
whether to continue holding the stocks inquestion (refer to Pages 72-74,83-84,88).

Europe
USA

Japan

About Nomura Asset Management

Asia

Engagement

Proxy Voting

Basic policy forengagement

Integration
Proxy voting
guidelines
Sharing ESG scores
Unified exercise of
voting rights

ESG Integration

Cooperation withinitiatives

Proxy Voting

ESG Integration

Engagement

08CEO MESSAGE

Striving to be an asset
management firm that makes theworld a better place.
In 2021, people were forced to live
within many constraints due tooutbreaks of new COVID-19 variants.
However, despite this environment,
the widespread use of teleworking
and progress in digital transformation(DX) have led to a new way of living in
the midst of the COVID-19 pandemic.
While some people are enjoying
prosperous lifestyles brought about
by technological innovations centeredon digitalization as well as advancesin medical technology, other people
are suffering from poverty and thedeterioration of living conditions due
to climate change. Indeed, there are a
growing number of issues that must
be resolved on a global scale. Perhaps
this time living during the COVID-19
pandemic has been an opportunity to
refocus our attention on the problems
our world faces. There are manysocietal issues requiring solutions,
namely those represented by ESG(Environment, Society, Governance)
and the United Nations Sustainable
Development Goals (SDGs).
As a responsible investor, throughthe asset management business we
proactively contribute to achieving
the goal of solving social issues
raised in the SDGs, such as theglobal issue of climate change, as
well as health and human rights
issues that are closely intertwinedwith our everyday lives. Nomura
Asset Management has identified
key issues (materiality) and we haveestablished four goals aimed atsolving social issues. These four
goals include strengthening theinvestment chain, realizing a healthy

09

Responsible Investment Report 2021

global environment, corporate value
improvement through governance,
and the realization of a society inwhich human rights are respected.
The core idea underlying these four
goals is the investment chain(virtuous cycle of investment).
Through the investment chain, we
aim to utilize our role as an asset
management firm to realize asustainable and prosperous society
by linking investors and companies
through investment. Companies thatgenerate economic benefits are wellpositioned to contribute to therealization of a sustainable andprosperous society. This is the coreof our investment chain philosophy.
Engagement, which is dialogue
between an asset managementcompany and its portfolio companies,
is essential in order to realize this kindof society. By deepening thisengagement, we will support
companies’ growth and improvement
in corporate value through theimplementation of “desirable
management,” while assisting
company efforts with respect to ESG
and the SDGs. In the fall of 2021 weestablished the Engagement
Department to promote this effort.
The Engagement Department is a hubthat centrally manages engagement,
proxy voting, and investment, thereby
bolstering effective dialogue withcompanies, which will ultimately
contribute to improved investment
performance. Through these efforts,
we realize both social value andeconomic value as a responsible
investor. In generating social value, it

is important that we clarify how wewill advance ESG initiatives.
We revised our ESG Statement at
the end of 2021. We identified climatechange, natural capital, human rights,
diversity and inclusion, and value
creation to realize well-being withinsociety as high priority ESG issues,and have committed to enhancing ourefforts in these areas. To tackle climatechange, we are advancing efforts
aimed at realizing a decarbonizedsociety. In August 2021, we joined The
Net Zero Asset Managers initiative(NZAM), which has the goal of net zero
greenhouse gas emissions by 2050.
Specifically, through engagement wewill urge companies to switch fromfossil fuels to renewable energy. In
addition, we will seek to manage andreduce greenhouse gas emissions
within corporate supply chains, work
to firmly entrench decarbonization
within corporate activities, while at thesame time monitoring greenhouse gas
emissions. Based on these efforts,
we believe that we can carry out
actionable engagement with the aimof achieving net zero greenhouse gas
emissions. In fact, we are providing
products reflecting this approach andincorporating this philosophy into ourinvestment process.
With respect to diversity andinclusion, it goes without saying that
Nomura Asset Management will
create and provide added value
through our diverse human resources
and work styles, and I hope thatthrough engagement our portfolio
companies will also understand andpromote diversity and inclusion. In a

Hiroyasu Koike
About Nomura Asset Management

President & CEO
Nomura Asset Management Co., Ltd.

Engagement

management business is providing
products that satisfy customers’ needs
and delivering the highest level of
performance and service. Through thisbusiness, I truly believe that it is ourduty as a responsible investor tocreate not only economic value but
also social value. As an asset
management firm striving to make theworld a better place , Nomura AssetManagement will continue working torealize a sustainable and prosperous
society through the virtuous cycle ofinvestment.

ESG Integration

selling a target ESG fund to
customers. Depending on theamount of the fund sold, we donate a
portion of the trust fee we receive to
SDG-related projects carried out by
local government-affiliatedorganizations. We are doing this byutilizing the corporate version of thehometown tax payment system.
Our aim is to work with regional
financial institutions to growmomentum for regional revitalization
by solving social issues through asset
management. The essence of the asset

Proxy Voting

prosperous society, diversity andinclusion should be present in bothprinciple and practice. We believethat building such a society requires
companies to generate both
economic and social value by taking
action on diversity and inclusion.
Furthermore, we are advancing
the Kokorozashi Project targeting
regional revitalization in Japan, which
is a part of “strengthening theinvestment chain” in our materiality.
In this project, we have financial
institutions in each region of Japan* Diversity & Inclusion: A state in which people with diverse values can be accepted regardless of gender, nationality, race, age, etc.
* Well-being: A state in which all people seek happiness and lead a healthy life.

10

INVESTMENT
MATERIALITY
Nomura Asset Management’s investment chain and materiality
Nomura Asset Management aims to be the Japanese asset management firm of choice for clientsaround the world. In accordance with our corporate principles, we will continue to proactively work
to solve key issues (materiality) in order to realize a virtuous cycle of investment (investment chain).

Higher investment
returns

NomuraAsset
Management
Clients(individual investors,
pension funds, etc.)
ReportingFunding, monitoring

Oversight, verification,
advice, etc.

Responsible Investment
Committee
Responsible Investment
Council

Forming policies,
oversight of initiatives, etc.

Oversight, verification,
advice, etc.
Reports on activities,
define issues, etc.

11

Responsible Investment Report 2021

CHAIN &1 Strengthening the Investment Chain
FOUR
GOALS

Enhancement ofcorporate value

2 Realizing a Healthy Global Environmentof a Society in which Human
3 Realization
Rights are Respected
Value Improvement through4 Corporate
Governance
Please refer to MATERIALITY for details

P. 13

Prosperous
society

ESG
Integration

Portfolio
companies

creation through2 Valueefficient use of capital(practice desirable
management)

3 governance functions

Exercise of corporate

Appropriate information disclosure

4 and dialogue with investors

Portfolio
managers

Analysts

Engagement

Proxy
VotingAbout Nomura Asset Management

Appropriate Initiatives on

1 environmental /social issues

ESG
specialists

Proxy Voting

Engagement

ESG Integration

Investment andresearch division

12

MATERIALITY
Important issue

Provision of excellent
products and services that
help clients build wealth
Promotion of responsible
investment

1
Strengthening theInvestment Chain

Enhancement of investment
capabilities and client
convenience throughdigitalization
Promotion of financial literacy
education

Support for regional
revitalization

2
Realizing a
Healthy Global
Environment
Left

Deputy Head of Corporate Unit
Senior Managing Director

Achieving a decarbonizedsociety

Preservation of Natural
CapitalRiyo Azechi
Right

Promotion of diversity andinclusion

Head of Sustainability Development Dept.

Mizue Oshima
Nomura AssetManagement’s
sustainability initiatives
On April 1, 2022, Nomura Asset Management
established the Sustainability Development
Department with the aim of further promoting
business operations with an emphasis on
sustainability as an asset manager as well as
to strengthen communication both internallyand externally. We officially announced ourmateriality in our Responsible Investment
Report 2020, and we are advancing internal
discussions aimed at solving our materiality
and are working towards setting andannouncing KPI. Going forward, we willcontinue to strive to realize a sustainable andprosperous society by helping our clientsbuild assets as a responsible institutional
investor and accelerating our efforts toresolve our materiality as a company.

13

Responsible Investment Report 2021

3
Realization of aSociety in Which
Human Rights are
Respected

Creation of environments inwhich employees are excited
to work

Realization of a healthy andlong-lived society

4
Corporate Value
Improvement
through
Governance

Sufficient display of corporate
governance functions

Enhancement of internal
control system
Strengthen and enhance thesystem for managing conflictsof interestAs an institutional investor

As an operating company

Key initiatives

We will respond to clients’ various asset
management needs, and provide excellent
investment performanceIn addition to traditional assets, expand investment in areas such as ESG and alternative
investments, and further improve asset allocation capabilities
D evelopment and provision of products and services for customers at various life stages

Through stewardship activities, we willcontinue to support portfolio companies’
corporate value enhancement and social
value creation

 nhancement of ESG integration to incorporate non-financial information into theEinvestment processProactive promotion of ESG engagement based on ESG perspectives and important topics

We will utilize cutting-edge technologies tothe maximum extent possible and provide
clients with even more investment
opportunities and added value nhancement of UI/UX for digital content and utilization of DX to cultivate newEbusiness domains
Development of investment methods utilizing AI, alternative data, and other means

In order to get clients familiar withinvestment trusts, we will promote financial
literacy education and work to broaden therange of investors

Enhancement of education/training that will lead to the promotion of wealth-building

We will work with regional financial
institutions to create strong movement forregional revitalization originating fromregional financial institutions

 artner with regional financial institutions to launch donation schemes utilizing theP
corporate version of the hometown tax systemH olding ESG forums with regional financial institutions to discuss regional revitalizationand consider ESG

Targeting the shift to a sustainabledecarbonized society, we will use
engagement and other means toencourage portfolio companies to combat
climate change, and aim to achieve carbon
neutrality for Nomura Asset Management
as well nhancement of the level of investment with respect to climate change risks andEopportunities
U se of engagement with portfolio companies to have them incorporate climate change
initiatives into their management strategies
R eduction of Nomura Asset Management’s CO 2 emissions, with the aim of achievingcarbon neutrality

We will demand that portfolio companies havemanagement strategies that take thesustainability of natural capital into account,and promote initiatives within Nomura AssetManagement to preserve natural capital se of engagement with portfolio companies to have them incorporate initiatives aimed
U
at the coexistence of natural capital and their business into their management strategies

We will promote diversity and inclusion in
portfolio companies as well as within
Nomura Asset Management, in order tocontinuously create added value by
allowing diverse human resources todisplay their abilities and individuality

Promotion of diversity and inclusion through engagement with portfolio companies
Establishment and management of Japan Empowering Women Select Index ETF

We will promote the sufficient functioningof corporate governance in order for
portfolio companies, as well as Nomura
Asset Management itself, to achieve thecorporate philosophies and managementtargets established by each eveloping and managing investment strategies that focus on the performance ofD
companies that are good places to workR ealization of decent work through engagement with portfolio companies
Correction of long working hours
 trengthen communication with management to promote flexible work styles andS
increase employee engagement (willingness to contribute to the company)
 ontribution to medical research through the creation and provision of investment fundsC
in collaboration with strategic partner ACI
Joint engagement with initiatives aiming to improve access to healthcare
Education targeting improvements in health literacy
Understanding employees’ health status and conduct mental health checks
Implementation of measures to prevent communicable diseases
Engagement with portfolio companies with the aim of enhancing corporate governanceDisciplined proxy voting in accordance with the proxy voting guidelines
Adoption of a monitoring model as a Company with Audit & Supervisory Committee
Appointments of independent outside directors possessing expertise in specialized fields
Creation of various committees
Construction of an internal control system based on three lines of defense
Monitoring of market risk, credit risk, operational risk, etc., by various committees
Enhancement of the conduct risk management system
Construction of a robust crisis management system reation of the Fund Management Council and the Responsible Investment Council, andC
appointment of independent outside experts as members of both councils
Ensure independence of decision-making and personnel in investing and research

ESG Integration

We will work to strengthen and enhance
our internal control system and conflict ofinterest management framework in order toprotect our clients’ assets and earn theirunwavering trust

Introduction of job-grade personnel system
Development and appointment of diverse professional human resources
Support for balancing work and raising children

Proxy Voting

In advance of the era of 100-year
lifespans, we aim not only to help clients
extend the longevity of their assets, butalso realize a society in which people live
long, healthy lives

Utilization of environmentally-friendly and socially-friendly products

Engagement

Our portfolio companies as well as Nomura
Asset Management itself will improve
productivity and create high value-added
services by creating a high-quality work
environment

About Nomura Asset Management

Goal

14

ESG STATEMENTIn December 2021, we revised our
ESG Statement, recognizing thatnearly two years have passed since
the ESG Statement was formulated
and that the global economy and thecircumstances surrounding ESG arechanging faster than expected,
requiring us to deepen its content.
However, there has been no change
to the objective of the ESG
Statement, which is to communicate
to stakeholders the course of actionof our ESG-related activities andhow we will address environmental
and social risks, and also to show
how we will strive to realize asustainable environment and society.
We recognize that efforts to solve
ESG issues are important in order tosupport a virtuous cycle in theinvestment chain. We feel that an
important factor for sustainablecorporate value improvement is for acompany to appropriately manage

High Priority ESG issues

While the importance of each ESG issue differs depending on the specific characteristicsof the business in question, we identify the following as common ESG issues that are
particularly important across many businesses.

Climate Change

15

Natural Capital

Responsible Investment Report 2021

Human Rights

Diversity andInclusion

risks related to ESG issues, view
solutions to ESG issues as new
business opportunities, andappropriately reflect them inmanagement strategies. We also
think that doing this is indispensable
for increasing investment returns. As
a responsible investor, we encourage
our portfolio companies to practicewhat we view as desirable
management, and we ourselves will
also operate with a focus on ESG.

Value Creation to
Realize Well-Being
Within Society

Corporate
governanceHigh Priority ESG issues*See page 94 for other initiatives in which Nomura Asset Management participates.

ESG

nvironment

Climate Change

The Paris Agreement, which was concluded in 2015, stipulates that efforts shallbe made to limit the increase in the global average temperature to 1.5˚C since
before the Industrial Revolution based on scientific evidence. To achieve thisgoal, it is necessary to reach net zero global greenhouse gas emissions by
2050. We believe that companies must address climate change issues from theperspective of both risk management and the pursuit of business opportunities
in order to achieve sustainable improvement of corporate value.

CDP

Signature Timing:June 2015

Signature Timing:November 2021

TCFD (Farm Animal Investment Risk and Return)

Signature Timing: March 2019

A private-sector led task force launched in December 2015 by the Financial Stability
Board (FSB) that encourages enhanced information disclosure related to climate change.

Climate Action 100 +Signature Timing:December 2019

About Nomura Asset Management

Established in 2000. This is a global project in which institutional investors around theworld encourage companies to disclose their strategies to combat climate change aswell as their specific greenhouse gas emissions. Current areas of focus include climatechange, water and forests.

An investor initiative in which institutional investors collaborate (group engagement)
to encourage the world’s largest corporate greenhouse gas emitters to disclose
information related to climate change. The initiative was established in December 2017,
and the action period was set at five years.
Signature Timing:August 2021

A global initiative established in December 2020 comprising asset managers which aim
for net-zero emissions of greenhouse gases (GHGs) from portfolio companies by 2050,
in line with the goals of the Paris Agreement.

PCAF (Partnership for Carbon Accounting Financials)

Signature Timing:August 2021

FAIRR (Farm Animal Investment Risk and Return)

Signature Timing:June 2019

A livestock industry-related institutional investor initiative launched in 2015 by Jeremy
Coller, the founder of Coller Capital (U.K.). The initiative educates people about
livestock industry risks, including the impact on the environment, as well as food safety(antibiotics) issues.

ESG Integration

Companies benefit from biodiversity through the utilization of forests, water sources,and other natural capital in their business activities. We believe that companies must
exercise proper risk management in relation to activities that could negatively impact
natural capital and biodiversity, as well as pursue business opportunities that solve
social issues, such as the preservation of natural capital and biodiversity.

Proxy Voting

An international initiative established in the Netherlands in 2015 to create a standard
method for measuring and disclosing greenhouse gas emissions. The PCAF Japan
Coalition was established in November 2021, and Nomura Asset Management has
been a member since its establishment.

Natural Capital

Engagement

NZAM (Net Zero Asset Managers initiative)

Signed as Nomura Group

16

ESG

ocial

Human Rights

Corporate business activities involve a large number of people including
employees and local residents, which is even broader when the supply chain isconsidered. Companies are expected to exercise proper risk management toensure that their activities do not infringe upon human rights. We believe thatcompanies must exercise human rights due diligence and other forms of proper
human rights risk management in order to achieve sustainable improvement ofcorporate value.

UNGC (The United Nations Global Compact)

Signature Timing:June 2015

Non-binding action principles advocated by then UN Secretary-General, Kofi Annan, at
the Davos Forum in 1999. It encourages businesses and groups worldwide to takeactions in the areas of human rights, labor, the environment and preventing corruption.

Diversity andInclusion

We believe that companies must build a workforce made up of people withdiverse values without regard to factors such as gender, nationality, race, or age
to create a corporate culture that embraces diversity and inclusion. Furthermore,companies must ensure that their employees are able to engage in rewarding
work at their respective workplaces to contribute to business activities at their fullpotential, with no risk of discrimination in relation to their work or advancement.

30% Club Japan (Investor Group)

Signature Timing:December 2019

A group of asset owners and asset managers that engages in constructive dialogue
with the boards of directors and senior management of portfolio companies, with theaim of highlighting the importance of gender diversity within senior management andrealizing such gender diversity.

Women in ETFs

Signature Timing:April 2022

“Women in ETFs” advocates for the goal of bringing together people from the ETF
industry around the world to actively promote equality, diversity and inclusiveness. Its
mission is to develop and sponsor human resources, recognize women’s achievementsin the ETF industry, and advance and grow the ETF community.

Well-Being

Well-being refers to a state in which all people can seek happiness and live
healthy lives. Well-being in society is realized by solving social issues in a variety
of fields. Specific examples include health and safety, education andintelligence, and regional revitalization. In our view, the development andprovision of products and services that contribute to addressing these social
issues represent important business opportunities for companies, and could
lead to sustainable improvement of corporate value.

Access to Medicine Index (Access to Medicine Foundation)

Signature Timing:July 2019

Founded in 2003 by Dutch entrepreneur Wim Leereveld. The organization encourages
the pharmaceutical industry to do more to help low- and middle-income countries who
have limited access to medicine. Signatories support the foundation’s index.

Access to Nutrition Initiative

Signature Timing:May 2021

Founded in 2013 by Dutch businesswoman Inge Kauer. Using proprietary analytical
tools, the Initiative evaluates the level of response by the food and beverage industry
to the two global nutritional issues of overnutrition and undernutrition, and urges
the food and beverage industry to improve the dietary habits of adults and children
around the world.

17

Responsible Investment Report 2021

ESG

overnance

Corporate
governanceCorporate governance is a structure for transparent, fair, timely and decisivedecision-making by companies. From this perspective, the board of directors is
responsible for the supervision of management, while nominations,compensation, and audits are the means to ensure the board fulfills its role. We
believe that companies must strengthen corporate governance so that their
management can properly manage various risks including the ESG issues
mentioned above, while pursuing business opportunities to achieve sustainableimprovement of corporate value.

ICGN (The International Corporate Governance Network)

Signature Timing:December 2018

Established in 1995 to promote effective corporate governance standards and foster
responsible investment to advance efficient markets and sustainable economies worldwide.

Signature Timing:December 2018

Established in 1999 to engage in research and provide corporate support and education
related to corporate governance in order to promote corporate governance in Asia.

JSI (Japan Stewardship Initiative)

Signature Timing:November 2019

Aims to identify practical issues between asset owners and asset managers andto support efficient transmission of information aimed at advancing and deepening
stewardship activities.

About Nomura Asset Management

ACGA (The Asian Corporate Governance Association)

Our Activities
Investment Decisions

Through our activities, including proxyvoting and constructive dialogue(engagement), we encourage themanagement of portfolio companies
to manage risks and pursue business
opportunities that are associated with ESG
issues and also to disclose information inaccordance with relevant global initiatives.

We place particular focus on the realizationof well-being within society when viewing
business opportunities associated with ESG
issues. We encourage portfolio companies
to properly incorporate the realizationof well-being within society into their
management strategies and to quantify
outcomes and disclose them along with therelevant targets.

We assess our portfolio companies’ initiatives
to address ESG issues based on our own
standards from the perspectives of both risks
and opportunities and incorporate the resultsin our investment decisions. If we assess acompany’s initiatives as insufficient, or if wedetermine that the issues cannot be solved
through engagement, it may result in divestment
or exclusion from our investment universe.

Monitoring

Our Business Activities

lnitiatives

We conduct monitoring based on global
initiatives, including the Task Force on
Climate-related Financial Disclosures(TCFD), in order to ascertain the status of
ESG issues in our investment portfolio.

We recognize that business activities thattake into account social value creation areimportant elements for realizing a sustainable
and prosperous society. We strive tocontribute to asset formation by offering
investment products and services that help
to address ESG issues and through efforts
to expand the investment base throughmeasures such as financial education.

We participate in international initiatives
and actively embrace accepted standards
and norms. Through these initiatives, we
conduct engagement jointly with otherinstitutional investors and share bestpractices by actively cooperating with awide range of stakeholders.

Proxy Voting

Business Opportunities

Engagement

Stewardship Activities

Governance and Disclosure to Promote ESG
bodies in investment decisions and responsible investment toaddress ESG issues within a proactive framework. We havealso established the Conflict of Interest Management Policy
as well as a Responsible Investment Council and a FundBusiness Operation Council, which have oversight for our
responsible investment activities and products to ensure theirappropriateness and validity.

ESG Integration

At Nomura Asset Management, important decisions on
management execution including this Statement are madeby the Executive Management Committee, which consistsof senior executives, to whom the proper authority has beendelegated by the board of directors. We have establishedthe Investment Policy Committee and the Responsible
Investment Committee as the highest decision-making

18

BASIC POLICY FORRESPONSIBLE
INVESTMENTOn December 30, 2021, Nomura Asset Management revised the “Basic Policy on Responsible Investment
in Management” at the Responsible Investment Committee. The policy defines the concept and specificapproaches to responsible investment, and includes details regarding the “appropriate management
practices” expected of investee companies and the engagement and voting rights to achieve this.
http://www.nomura-am.co.jp/special/esg/responsibility_investment/basicpolicy.html

19

Responsible Investment Report 2021

BASIC POLICY FORRESPONSIBLE INVESTMENT
Concrete Actions

1
2
3
4
5
6

Understanding Investee Companies

7

Organization and Actions

Approach to Investee Companies
Reflection in investment decisions
Control Conflicts of Interests
Collaboration and Outside Activities
About Nomura Asset ManagementInformation Disclosure andAccountability

In order for investee companies toenhance corporate value andachieve sustainable growth,
stipulate theEngagement“Ideal Form of Business
Management of
Investee Companies” *and encourage investee companies to realize it.

Reflect the status of engagement in proxy voting.

Proxy Voting

Stipulate “Basic Principles of Engagement”
and “Global Proxy Voting Policy”
and give encouragement to investee companies
from a fair and consistent posture.

Basic Principles of Engagement/ Global Proxy Voting Policy
https://global.nomura-am.co.jp/responsibility-investment/pdf/basic_policy.pdf

P. 21

ESG Integration*Ideal Form of Business Management of Investee Companies

201

Proper Efforts on
Environmental andSocial Issues

We believe that making proper efforts on global environmental
and social issues from the perspectives of risk management
and the pursuit of business opportunities will lead to increasein corporate value and sustainable growth. We also see such
efforts as a prerequisite for a company to be accepted as amember of the society. Examples of issues that we consider
are particularly important and efforts on them that investee
companies need to make are as follows:
1 Identification of key issues (materiality) :Identification of key issues by the management,
r esponses to and disclosure of risks that are identified as key
issues (e.g., data security, product liability, etc., as well as
those listed in 2 through 6 ),
d isclosure of business opportunities that are identified as key
issues;BASIC POLICY ONRESPONSIBLE
INVESTMENT
Ideal Formof Business
Managementof Investee Companies

2 Climate change: erification of business portfolio and promotion of technologicalVinnovation to respond to the climate change issue,
information disclosure based on the final report published by
the Task Force on Climate-related Financial Disclosures (TCFD),w hich is consistent with the Paris Agreement, setting of a net
zero target for medium- to long-term greenhouse gas (GHG)
emissionsa pproval of or commitment to science based targets (SBTs)
m easurement of GHG emissions and absorption including
Scope 3 under the international standards for the accounting
and reporting of GHG emissions
a nd introduction of internal carbon pricing;

3 Natural capital:
Developmentof measures and goals for prevention of deforestation
marine pollution, or air pollution, sustainable use of water
resources, timber,or marine products, reduction of waste, and promotion of recycling;

4 Human rights:
 evelopment of a policy on human rights at investee companies
Dthat is consistent with international norms,
human rights due diligence or audits including supply chainorrective action and relief mechanism
a nd disclosure of due diligence results;

5 Diversity and inclusion:
 etting a medium- to long-term target for the percentage ofS
women among board members,senior executives, or managers, a personnel system to prevent
employees from leaving employment due to a life event
non-discriminatory development of human resources
a nd creation of a corporate culture that embraces diversity andinclusion;

6 Value creation to realize a well-being society: management plan that incorporates the perspective of theAresolution of social issues (including research and development
and market strategies),measurement and disclosure of progress toward the resolutionof social issues; andCooperation with stakeholders, such as
7 participation in initiatives that are related to theissues listed above.

21

Responsible Investment Report 2021

2

Value Creation through Capital Efficiency

NAM believes that in order for investee companies toenhance corporate value and achieve sustainable growth, it
is necessary for investees to create value that exceeds thecost of capital over the medium to long term by utilizing

capital efficiently under proper risk management andconstructing a business portfolio that has a high growthpotential and is efficient. To this end, we consider that thefollowing efforts are particularly important:

1 To formulate a growth strategy and an investment plan to create value that exceeds the cost of capital and to conduct proper progress management;
2 To verify the business portfolio against the growth strategy and replace businesses in the portfolio as necessary;
3 To sell assets that do not contribute to the creation of value that exceeds the cost of capital and, in particular, to reduce cross-shareholdings;
To implement group governance to enable the optimal allocation of management resources, etc.; If there is a listed company within the group,

4 to regularly verify the reasonableness of maintaining a listed company within the group; to properly manage the conflict of interest with generalshareholders; and to support the listed company’s efforts to strengthen corporate governance;

5 To properly manage the risks associated with businesses, etc.;
6 To implement a capital structure and shareholder returns that reflect 1 through 5 above;

3

Adequate Performance of Corporate Governance Function

We believe that it is necessary for a company to havesufficiently functioning corporate governance as aprerequisite for value creation through the efficientutilization of capital and proper efforts on environmental
and social issues. We postulate the appropriate corporate
governance to realize this as follows:

About Nomura Asset Management

7 To properly disclose information about 1 through 6 above.

The board consists of an adequate number of qualified and diverse members who have the ability and experience for supervising the

1 execution of management on behalf of shareholders and functions effectively. If there is a concern about the conflict of interest with
The audit committee, audit and supervisory committee or the board of auditors consists of qualified members who are capable of auditing

2 directors’ operations on behalf of shareholders and functions effectively.

Committees relating to nomination and compensation have been established, each of which consists of qualified and independent members

Engagement

minority shareholders due to, for example, the existence of a controlling shareholder, the level of supervision, including the management of
the conflict of interest with the controlling shareholder, is particularly high.

3 and adequately fulfills the necessary roles and responsibilities in 4 and 5 below.

Standards and processes to determine whether the replacement of senior executives is required have been established, and a succession

4 plan in case of such replacement has been formulated.

Compensation of senior executives is appropriate as their incentive and commitment for value creation through the efficient utilization of

5 capital and proper efforts on environmental and social issues.

6 Executive compensation is appropriate in terms of management incentive and commitment aimed at enhancing corporate value.

The company has not introduced anti-takeover measures. In our view, anti-takeover measures limit the rights of shareholders to buy and sell shares

8 freely and unnecessary for listed companies unless there is a risk of significant impairment of corporate value and common interest of shareholders.

Adequate information disclosure and a dialogue with investors

NAM believes that companies need to uphold theiraccountability through timely and proper public disclosure of thematters stated in 1 through 3. above in order for us to precisely
grasp the state of investee companies and that they also need toengage in dialogues actively with investors to properly reflect
investors’ opinions in their business management.

If the companies are found to have engaged in any
activity that is materially harmful to corporate value, we will
request sufficient disclosure and explanations on
investigations of cause, clarification of where responsibility
lies, and the formulation and dissemination of effective
recurrence countermeasures.

ESG Integration

4

Proxy Voting

7 Corporate governance systems are in place to ensure sufficient internal control in terms of compliance and internal auditing.

22

TCFD &NET ZERO GOAL
BY 2050
2021: A Year of Real Progress toward Nomura Asset Management’s
2050 Net Zero Goal
During 2021, Nomura AssetManagement undertook two major
initiatives related to climate-relatedrisks and opportunities, and webegan making steady progress
towards achieving net-zerogreenhouse gas (GHG) emissions by

2050 for both our own company’s
operations and our investments. One
set of actions we took was joining
world-leading initiatives such as the
Net Zero Asset Managers initiative(NZAM) and the Partnership for
Carbon Accounting Financials(PCAF), which are essential toachieving net-zero by 2050. The
other effort we undertook was
setting our own 2050 Net Zero Goal
and 2030 Interim Target for GHG
emissions.

Joining Initiatives Critical to Achieving Net Zero by 2050
In August 2021, we joined NZAM, a
global initiative led by asset
managers aiming to achieve net-zero
GHG emissions from their investment
portfolios by 2050, in line with thegoals of the Paris Agreement. We
support the Paris Agreement’s
shared long-term goal of addressing
climate change, and decided to join
NZAM to demonstrate a commitment
to achieving the Paris Agreement’s
goals. As a responsible institutional
investor, we will comply with thecommitments required of NZAM
member institutions, including
cooperation with clients (asset
owners) as well as setting andreviewing interim targets, and we will
work with NZAM with the aim ofachieving net zero by 2050.

23

Responsible Investment Report 2021

Also in August 2021, we joined
PCAF, a global initiative by financial
institutions to measure and disclose
GHG emissions financed by theirloans and investments. Under PCAF,
financial institutions around theworld are working together todevelop methodologies formeasuring and disclosing GHG
emissions in their loan andinvestment portfolios. As a part ofour ESG integration effort tointegrate the analyses andassessments of our portfolio
companies’ climate-related risks andopportunities, in recent years wehave been assessing the GHG
emissions of our entire equities andcorporate bond portfolios based on
the Task Force on Climate-related

Financial Disclosures (TCFD)
Recommendations, and disclosing
the details in our Responsible
Investment Reports. In addition, we
measure the GHG emissions ofindividual funds and refer to the datafor various purposes, such as when
making investment decisions. The
assessment of financed emissions
remains challenging, particularly for
asset classes other than equities
and corporate bonds. Going forward,
we will collaborate with PCAF toovercome these challenges.
Furthermore, PCAF launched a
PCAF Japan coalition in November
2021, and we joined this coalition asa founding member. With support
from the PCAF global office, under
the PCAF Japan coalition memberinstitutions and the financial sector

GHG emissions in their loan and

by engaging in dialogue with thewill share experiences, knowledge

investment portfolios. We havemanagement at portfolio companies

and challenges with one another, as

identified the realization of a healthy

to promote efforts to tackle climate

well as advance cooperation, aiming

global environment as a key issuechange. We believe that ourto promote efforts to have a wider
range of Japanese financial
institutions measure and disclose(materiality). As such, we areworking to support a decarbonizedsociety through the investment chain

decisions to join NZAM and PCAF
are consistent with these efforts.

Establishing the 2050 Net Zero Goal and 2030 Interim Target
2021, in just the two months to
October 2021, we announced our
2050 Net Zero Goal and the 2030
Interim Target for GHG emissions.
These quick actions were based oursense of urgency to show our firm
commitment as a responsible
institutional investor to achieving net
zero by 2050 ahead of Glasgow
COP26 held from October 31, 2021.
We are engaged in a number ofstrategic initiatives to achieve netzero GHG emissions by 2050,
including measuring the level of GHG
emissions as well as GHG
absorption in our investment
portfolio, strengthening stewardship
activities and collaboration withstakeholders, and developing
financial products. To this end, we
have set our “2030 Interim Targets”

for the equity and corporate bondinvestment portfolios that wecurrently measure and disclose the
GHG emissions. In setting theambitious target of 55% by 2030, we
have employed an incremental
approach to weighting individualcompanies in our portfolio in
consideration of SBT commitments
and approvals, scenario analyses,
Institutional Shareholder Services’(ISS’s) temperature scores, as wellas policy goals of various countries.
In order to achieve our 2030 Interim
Target, we are also performing
ongoing examinations of portfolio
companies’ management
commitments to achieving net zeroand their specific targets.

Measurement of
GHG Emissions in
Investment Portfolios

In addition to Scope 1 and Scope 2 GHG emissions, we measure Scope 3 emissions to theextent possible, which are highly material in the context of portfolio companies. Estimatesby ESG rating agencies are used in cases where a portfolio company does not disclose
GHG emissions. Portfolio emission measurements are conducted in accordance with thestandards published by the PCAF, which we joined in August 2021.

Measurement of
GHG Absorption in
Investment Portfolios

Measurements of GHG absorption in our investment portfolios include direct removal ofemissions left over after reduction measures, such as through afforestation and Carbon
dioxide Capture, Utilization and Storage (CCUS), as well as carbon offsetting, avoided
emissions, REDD+*, and other measures.

Financial ProductDevelopment

We are developing financial products that contribute to the realization of a decarbonizedsociety in accordance with the 2050 Net Zero Goal and 2030 Interim Target.

Partnership with
Asset Owners

We share our 2050 Net Zero Goal, 2030 Interim Target, and results of portfolio climate risk/
opportunity analyses with asset owners in order to coordinate efforts toward realizing net
zero emissions by 2050 or sooner.

Strengthening
Stewardship Activities
and Collaboration with
Stakeholders

We are enhancing our stewardship strategies including engagement and proxy voting thatare consistent with our 2050 Net Zero Goal and 2030 Interim Target. Additionally, we arestrengthening collaboration with stakeholders and offering government policy proposals insupport of these efforts.

Highly-Transparent
Disclosure

We are working to increase the transparency of our disclosure, including regular disclosureof portfolio climate-related risk/opportunities analyses and progress toward our 2050 Net
Zero Goal and 2030 Interim Target within our Responsible Investment Report.

ESG Integration

Details

Proxy Voting

Initiative

Engagement

Our Initiatives toward Achieving the 2050 Net Zero Goal and 2030 Interim Target

About Nomura Asset Management

As part of their commitment,
signatories to NZAM are expected to
set an interim target for the
proportion of assets undermanagement that, as of 2030, aremanaged in line with the attainmentof net-zero GHG emissions by 2050.
Given this expectation, in October
2021, we set a 2050 Net Zero Goal
and 2030 Interim Target for GHG
emissions from our investment
portfolios. We support the initiatives
aimed at achieving a decarbonizedsociety, and aim to achieve net-zero
GHG emissions from our investment
portfolios by 2050. We have also set
a 2030 interim target of 55% of ourportfolio assets to be managed inalignment with the achievement of
net-zero emissions by 2050. Despite
having only joined NZAM in August* Climate change initiative aimed at reducing emissions and increasing absorption by addressing deforestation in developing countries.

24

Disclosure Based on the TCFD Recommendations
Governance e recognize that climate-related risks and opportunities have important impacts on our business and our medium- toWlong-term management targets, and we have therefore established an appropriate governance. The data compiled by
the Responsible Investment Department, which acts as the TCFD Secretariat, including carbon indicators, scenario
analyses, ESG scores and other climate-related risks and opportunities, are ultimately reported to the Board of
Directors via the Executive Management Committee. The Board of Directors is then able to appropriately monitor our
climate-related risks and opportunities.
 he analytical data related to climate-related risks and opportunities compiled by the TCFD Secretariat areTshared with portfolio managers and analysts. These data are then utilized in company analysis, engagement, andinvestment decision-making. These data are also regularly reported to the Responsible Investment Committee,
which comprises officers in the Investment and Research Division, where they are used to evaluate a portfolio’s
climate-related risks and opportunities. For example, at the Responsible Investment Committee meeting in March,
the analytical data from the portfolio at end of the previous year are reported, and in July the important themes forclimate change-related engagement are decided. Additionally, the chair of the Responsible Investment Committee
reports the evaluation results to the Executive Management Committee, which allows members of senior
management to utilize these reported details to make management decisions.

Strategy e recognize a wide range of short-, medium- and long-term climate-related risks and opportunities. In termsWof transition risks, we are closely watching carbon pricing, the stranding of assets, and changes in consumer
behavior and preferences. For physical risks, we are focusing on abnormal weather, which is increasing in recent
years. Meanwhile, with respect to opportunities, we are paying close attention to products and services related torenewable energy and energy efficiency and conservation, electricity storage, hydrogen, ammonia, CCUS, carbon
recycling, as well as disaster prevention and mitigation. In addition, in line with our long-term strategy aiming torealize a decarbonized society, we are focusing on transition finance to support companies that are working to
reduce GHG emissions. In principle, we do not divest from (and thereby lose the chance for engagement with)portfolio companies with high levels of GHG emissions. Instead, by continuing to hold on to such companies, we
use engagement as a means to encourage these portfolio companies to take measures to combat climate change.
 e carefully analyze the impacts that climate-related risks and opportunities do and will have on our businesses,
W
strategies, financial plans, and portfolios. For example, in addition to ISS’s analysis method, we perform financial
analysis and transition risk analysis using carbon pricing in our ESG scores.
 lease refer to Page 28 for information on the scenario analysis we performed for our four-asset integratedP
portfolios.

Analysis of Carbon Metrics in Investment Portfolios
We analyze climate-related risks andopportunities for the four company-wide
portfolios we manage: Japaneseequities; global equities; Japanesebonds and global bonds. We perform
analyses in accordance with assessment
and disclosure methods including those
set forth in The Global GHG Accounting
and Reporting Standard for the Financial
Industry published by the PCAF which
we are a member of, as well as data andanalysis methods from ISS. For equities
benchmarks, we used TOPIX forJapanese equities and MSCI ACWI
ex-Japan for global equities. For
domestic bonds, we used NOMURA-BPI(overall) (only corporate bonds), while for
global bonds we used the Bloomberg
Barclays Global Aggregate Index (only
corporate bonds). Bonds only included
corporate bonds, and did not include
government or other public bonds.
The analysis revealed that the total
carbon emissions (Scope 1 andScope 2) of our Japanese equities
portfolio and Japanese bonds
portfolio are less than the total carbon
emissions of portfolios of the same

25

Responsible Investment Report 2021

Total Carbon Emissions
Absolute GHG emissions associated with a portfolio
Unit: tCO 2e(CO 2 equivalent)
GHG emissions from portfolio companies are Scope 1,2 and 3
Total Carbon Emissions =current value of investment
Portfolio companies’ EVIC

issuer’s Scope 1
and Scope 2 GHG
emissions

Carbon Footprint
Total carbon emissions for a portfolio normalized by the market value of the portfolio
Unit: tCO 2e/US$ million (investment amount)
Portfolio companies’ GHG emissions in total carbon emissions are Scope 1 and 2
Carbon Footprint =Total Carbon Emissions
market capitalization of portfolio

Carbon Intensity
Volume of carbon emissions per million dollars of revenue (carbon efficiency of aportfolio)
Unit: tCO 2e/US$ million (revenues)
Portfolio companies’ GHG emissions in total carbon emissions are Scope 1 and 2
Carbon Intensity =Total Carbon Emissions
current value of investment
issuer’s EVICthe revenues of
portfolio companies

Weighted Average Carbon Intensity
Portfolio’s exposure to carbon-intensive companies and metric recommended byTCFD
Unit: tCO 2e/US$ million (revenues)
Portfolio companies’ GHG emissions are Scope 1 and 2
Weighted Average =Carbon Intensity

current value
ofinvestment
market capitalizationof portfolio

issuer’s GHG emissions
the revenues of portfolio
companies

Risk
Management

When it comes to a portfolio company’s climate-related risks, instead of looking only at carbon metrics forthe company alone, we believe it is important to discern and analyze carbon metrics throughout the entire life
cycle of a company’s products and services as well as throughout the supply chain. Furthermore, we refer to
GHG absorption in our analysis of climate-related risks.
We manage portfolio risk using ISS’s analysis methods for transition risk and physical risk. In addition, we
identify and manage portfolio companies’ transition risks and physical risks using our own corporate analysis
and ESG scores, as well as through engagement.
Such risk management analysis outcomes are integrated into the comprehensive risk management process.
As such, they are shared within the Investment and Research Division, and are reported to both the Executive
Management Committee and the Board of Directors after being monitored by the Responsible Investment
Committee.

Metrics andTargets

In order to evaluate climate-related risks and opportunities in accordance with our own strategies and risk
management process, we measure four carbon metrics recommended by the TCFD (total carbon emissions,carbon footprint, carbon intensity, and weighted average carbon intensity) and perform scenario analyses as wellas transition risk analysis and physical risk analysis for each portfolio.
To analyze total carbon emissions, we use Scope 1 and Scope 2 emissions disclosed by companies (if a company does
not provide disclosure, we use ISS’s estimates) as well as ISS estimates for Scope 3 emissions. Meanwhile, for carbon
footprint, carbon intensity and weighted average carbon intensity, we use only Scope 1 and Scope 2 emissions.
About Nomura Asset Management

We have established a 2050 Net Zero Goal as well as a 2030 Interim Target. Under the 2050 Net Zero Goal,
we will work to achieve net-zero GHG emissions both from our own business operations as well as for assets
under management (our investment portfolio). Under the 2030 Interim Target, we will work to ensure that,by 2030, 55% of our investment portfolio assets are being managed in alignment with achieving net-zeroemissions by 2050. We will verify and report on our track record with regard to these targets in accordancewith the methodology recognized and endorsed by NZAM.

Total Carbon Emissions(Million tCO 2e)

Scope 1

Scope 220

Engagement

18.0
15

16.2
5.3
5.2

10

5

12.7

11.0

1.9
0
NAM’s
Japanese
equities
portfolio

Japanese
equities
benchmarkNAM’sglobalequities
portfolio

Scope 3
(Million tCO 2e)

1.8

0.3
1.5

Globalequities
benchmark

0.3
NAM’s
Japanesebonds
portfolio

0.6 0.1
0.5
Japanesebonds
BM

1.5 0.3
1.2

NAM’sJapanesebonds
portfolio

0.8 0.1

0.7

Globalbonds
BM

NAM’s portfolio

BM% of BM

Japanese
equities

228.0

200.6

114%

Global equities

9.7

11.3

85%

Japanesebonds
Globalbonds
Japanese
equities

1.2

1.8

68%

4.3

4.4

97%

244.2

218.6

112%

Global equities

11.6

13.2

88%

Japanese
bonds

1.5

2.4

65%

Global bonds

5.8

5.2

111%

ESG Integration

Total of Scope 1, 2, and 3(Million tCO 2e)

0.3
1.6

Proxy Voting

monetary amount and comprising thesame stocks and weightings as thebenchmarks, while the opposite istrue for our global equities portfolio
and global bonds portfolio. For global
equities and global bonds, total
carbon emissions exceeded that of
the benchmark. We believe this is dueto the fact that the weightings ofhigh-emitting companies such as
Energy, Materials and Utilities inemerging countries including India
and China are higher than theweightings in the benchmark. In termsof the ratio of total carbon emissions
accounted for by each industry, there
is a high ratio from Energy, Materials
and Utilities, as well as relatively highratios from Industrials depending on
the asset class, and the same trend isseen in the industry ratios forweighted average carbon intensity.
Going forward, through engagement
as well as cooperation with climatechange-related initiatives, we willcontinue to encourage portfolio
companies to undertake initiatives
targeting a decarbonized society.

*E VIC is Enterprise Value Including Cash, and refers to corporate value including cash.
EVIC = Market capitalization of shares (ordinary shares, class shares such as preferred shares) + debt (book value) + non-controlling shareholders’ interests (book value).

26

Ratio of Total Carbon Emissions by Industry
EnergyFinancials

Materials
Industrials
Information Technology

Consumer Discretionary
Consumer Staples
Health Care
Communication Services
Utilities
Real Estate
Other

NAM’s Japaneseequities portfolio
NAM’s global
equities portfolio
NAM’s Japanesebonds portfolio
NAM’s global
bonds portfolio

0%

20%

40%

60%

80%

100%

*Industries whose composition ratio of the Global Industry Classification Standard (GICS) is less than 1% are not included in industry classifications.

Carbon Footprint(tCO 2 e/US$ million)
300
271.3
200
151.7

136.4

100
60.2

66.8

NAM’s Japaneseequities portfolio

Japanese
equities
benchmark

49.3

47.5

NAM’s global
equities
portfolio

Global equities
benchmark73.0

0
NAM’s Japanesebonds portfolio

Japanesebonds BM

NAM’s Japanesebonds portfolio

Globalbonds BM

Weighted Average Carbon Intensity and Ratio by Industry
EnergyFinancials

Materials
Industrials
Information Technology

NAM’s Japaneseequities portfolio

Consumer Discretionary
Consumer Staples
Health Care
Communication Services
Utilities
Real Estate
Other

83.3

Japanese equities
benchmark89.7

NAM’s global
equities portfolio

172.8

Global equities
benchmark(tCO 2 e/US$ million) 0

159.2
50

100

NAM’s Japanesebonds portfolio

150

200

240.8

Japanesebonds BM

419.9

NAM’s Japanesebonds portfolio

280.3

Globalbonds BM(tCO 2 e/US$ million) 0

250

242.2
100

200

300

400

500

Scenario Analysis
For total carbon emissions of our fourasset integrated portfolio, we useddata from ISS, and performed
scenario analyses based on the three
scenarios in the World Energy Outlook
2019 issued by the International
Energy Agency (IEA). For the total
carbon emissions used in our
scenario analyses, in light of the27

Responsible Investment Report 2021

specific characteristics of transition
risk in each sector, we used only
Scope 1 emissions for the utilities
companies, only Scope 3 emissions
for fossil fuel-producing companies,
and both Scope 1 and Scope 2
emissions for all other companies.
The scenario analysis confirmedthat our four-asset integrated

portfolio is likely to reach the total
carbon emissions permitted in the
Sustainable Development Scenario
around 2040. This is evidence of the
improvement in the investment
portfolio since the end of 2020, when
we found that the portfolio was likely
to reach the total carbon emissions
permitted in the SustainableDevelopment Scenario around 2035.
We feel that the portfolio’s emissions
were greatly impacted by the factthat our global equities and global

1

Sustainable Development Scenario (SDS)

2Stated Policies Scenario (STEPS)

3

Current Policies Scenario (CPS)bonds portfolios include
comparatively high weightings ofstocks and bonds in the Energy,
Materials, and Utilities sectors,
centered on emerging countries anddeveloping countries, where GHG
emissions are high in conjunction
with economic growth. Our analysis
also hints at the importance ofcontinuing to call for measures toaddress climate change across themarket, as our investment portfolios
include many passive investments,
mainly in Japanese equities.

The 1.5°C scenario aligned with the target of the Paris Agreement,
which is to work to limit global warming to well below 2°C, preferably to
1.5°C, compared to pre-industrial levels.

A scenario which assumes that governments carry out policy initiatives
they have already announced, on the assumption that countries will
execute existing policy frameworks and ambitions. Under this scenario,
the earth’s temperature is projected to rise approximately 2.7°C by theend of this century.

A scenario under which countries continue, but make no changes to,their current policies. Under this scenario, the earth’s temperature is
projected to rise approximately 3.2°C by the end of this century.

SDS

(%)

STEPS

CPS

About Nomura Asset Management

Comparison of NAM’s four-asset integrated portfolio’s total carbon emissions andcarbon budget under each scenario
Portfolio

250
200
150
100
50
0
2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050

*On the graph’s y-axis, the 2020 carbon budget for SDS is set at 100%.

attained SBT approval ratio as wellas the temperature scores developedby the CDP and the WWF. We areutilizing ISS’s analytical tools tomonitor GHG reduction targets ofportfolio companies in the investment
portfolio (including SBT approval).
SBT commitments and acquisition of
SBT approval by portfolio companies
shows that they have set GHG
reduction targets based on scientificgrounds, and this is objective proofof our investment portfolio’s move todecarbonize and an important
stepping stone towards realizing adecarbonized society. Therefore,
through engagement and othermeans, we will encourage portfolio
companies to proactively commit to
SBTs and obtain approval.

Proxy Voting

As one of the methodologies forchecking the progress made on the2050 Net Zero Goal and the 2030
Interim Target for portfolio assets,
NZAM, of which we are a signatory,
has given examples of the Science
Based Targets initiative for Financial
Institutions (also referred to as “SBTifor FI”). Under the SBTi for FI,
financial institutions will monitor theratio of portfolio companies that have

Engagement

Status of GHG Reductions by Portfolio Companies

Status of Portfolio Companies’ GHG Reduction Targets in Four-Asset Integrated Portfolio
26

No Target

24

Ambitious Target
7

Committed SBT

27

Approved SBT(Weighting in portfolio)

ESG Integration

14

Non-Ambitious Target

0%

5%

10%

15%

20%

25%

30%

28

Transition Risk Analysis
It is important to analyze climate-supply chain as well as GHG

or gas drilling in the arctic, oil sands

related transition risk in detail due toabsorption as disclosed bydevelopment, etc.), along with using

the fact that this risk is highly

companies.

the carbon risk rating, which is ISS’sdependent on GHG emissions whichhave a relatively high correlation withboth stock price performance andcorporate value. We feel it is key toanalyze GHG emissions throughout
the entire life cycle of a company’s
products and services, and on a
supplementary basis we use GHG
emissions throughout the global

analysis method involves using ISS
data to analyze the power generation
exposure and future GHG emissions(risk of stranded assets) on anenergy generation basis in theportfolio, and the ratio of problematic
resource development (shale oil/gas
development and fracking, crude oil

The specific transition risk

proprietary transition risk
assessment. Furthermore, theenvironment score within our
proprietary ESG score includes
evaluations of climate-relatedtransition risk, and we use carbon
pricing to analyze its financial impact
by transition and GHG emissions.

Power Generation Exposure Analysis (Portfolio, Benchmark, SDS)
The graph below compares thepower generation exposure of ourportfolios, the benchmarks, and the
SDS on a power generation volume
basis. The SDS, based on IEA
forecasts, shows the power
generation exposure that is likely tolimit the temperature increase in
2030 and 2050 to less than 1.5°C
above pre-industrial levels. The
power generation exposure of both

our Japanese equities and global
equities portfolios are almost thesame as the benchmarks.
Meanwhile, the ratio of fossil fuelpower generation in our Japanesebonds portfolio is slightly higher thanthe benchmark, while the ratio offossil fuel power generation in our
global bonds portfolio is lower thanthe benchmark. Also, the fossil fuelpower generation exposure in all

Fossil Fuels

Renewables

NAM’s Japaneseequities portfolio

80

9

12

Japanese equities
benchmark

80

8

12

NAM’s global
equities portfolio

58

Global equities
benchmark59

NAM’s Japanesebonds portfolio

21

20
12

28
56

37

2°C scenario in 2030

7

11

12

46

Globalbonds BM

0%

22

74

NAM’s Japanesebonds portfolio

2°C scenario in 2050

2077Japanesebonds BM

29

Nuclearasset classes are higher comparedto the power generation exposure in
2030 and 2050 under the SDS.
By increasing the ratio ofrenewable energy in our portfolios
through engagement with portfolio
companies, we will strive to reduce
the transition risk from fossil fuels,
as well as reduce the total carbon
emissions and weighted averagecarbon intensities of our portfolios.

26
24

10

9

14

19
53

84

20%

Responsible Investment Report 2021

40%

60%

80%

100%

Climate-related Risk and Opportunity Evaluation in our ESG Score
In the climate-related portion of ourusing GHG absorption. Previously,

absorption allows for transition risk

environment score within our ESG

transition risk assessments wereassessments that better reflect thescore for Japanese equities, we use

generally performed based on thetrue situations at companies.

carbon pricing to analyze transition
risk, and assess climate-related risk

amount of GHG emissions, but using
carbon pricing as well as GHG

COLUMN

01

Using Carbon Pricing to Analyze Financial Impact

COLUMN

02

Reflect in climate-related transition risk
assessment in environment score within
ESG score
GHG Emissions

Shareholders’equity Cash flow

Scope 1
Scope 2
Scope 3×Economic
value of GHG
emissions

CarbonpriceComparison

Cost

the market price (EUA in EU ETS, etc.), internal carbon
pricing levels in portfolio companies, and reports frominternational organizations such as the World Bank.

Inclusion of GHG absorption in Assessments of GHG Emissions
and Transition Risk

Nomura Asset Management ESG Score
Environmental Score E2: Climate Change

GHG Emissions

GHG absorption

Before change of our ESG
scores’ methodology, only
evaluated GHG emissions

Newly deduct GHG
absorption

GHG
absorption

The amount of GHG directly
absorbed, fixed and isolated fromthe atmosphere through forests,
CCUS, etc.

Avoidedemissions

The amount contributed to GHG
emission reductions as a resultof technologies, products, andinitiatives, including energy-saving
products and renewable energy, etc.

Emission
offsets

The amount of a company’s GHG
emissions that it offsets using
credits created via GHG removals
and avoided emissions as
discussed above

ESG Integration

 valuation of whether a company discloses GHG
Eemissions, as well as the change in emissions over timeA nalysis of transition risk using carbon pricing(Multiply GHG emissions by the price of carbon todetermine cost)

RemovalProxy Voting

Net-zero GHG emissions to mitigate climate change refers
to the GHG emissions minus the amount of GHG absorption
equaling zero. Consequently, it is necessary for a company
to utilize the amount of GHG absorption to account for theemissions that remain after a company has done all it canto reduce its emissions. Due to the fact that a company’s
actions to avoid and remove GHG emissions reduce its net
GHG emissions and thereby can lower its climate-relatedrisk, we feel that reflecting GHG absorption in a company’s
ESG score is consistent from the standpoint of assessing
corporate value. GHG absorption deducted from a company’s
GHG emissions can be up to maximum of 20% of ISS’s GHG
emissions data (total of Scope 1, Scope 2 and Scope 3).
Data on such GHG absorption can be used as an impact
metric in climate-related opportunity analyses as well as in
impact investing.
Given the fact that avoided emissions and carbon offsets
are included in our definition of GHG absorption, we are notusing the GHG absorption data in our 2050 Net Zero Goal orour 2030 Interim Target.

Engagement

From 2022, we will be including GHG absorption in the climaterelated portion of the environmental score in our ESG score.
This change was based on the growing number of companies
that are actively working on and disclosing GHG absorption,and the calls by companies for investors to incorporate
assessments of GHG absorption in their evaluations.
Specifically, in the environment score, we are deducting
GHG absorption disclosed by a company from its GHG
emissions in both: 1) our assessments of whether thecompany discloses its GHG emissions and the change inemissions over time; and 2) our financial impact analysis
using carbon pricing. In our ESG score, in our definition of
GHG absorption, we include: 1) the amount of GHG directly
removed from the atmosphere, including by forests andCCUS; 2) avoided emissions which contribute to a reductionin emissions, such as through a company’s technology,
products, or initiatives; and 3) offset emissions via carbon
offsets. We collect data on a company’s GHG absorption fromits disclosed reports and other information, and store the datain our own database.

About Nomura Asset Management

Transition risk analyses are generally based on the amountof GHG emissions, but we use carbon pricing to analyzefinancial impact in the evaluation of climaterelated transition
risk in the environment score within our ESG score. For
example, if a carbon tax or emissions trading scheme isintroduced, a portfolio company’s GHG emissions becomea cost. From the standpoint of the impact on corporate
value, a more accurate transition risk analysis can be
performed if the ratio of this cost to shareholders’ equity or
cash flow is analyzed.
For GHG emissions, we used data disclosed bycompanies for Scope 1 and Scope 2 emissions, and for
Scope 3 emissions we used ISS’s estimates. In addition,
the carbon price used to replace GHG emissions witheconomic value is periodically reviewed referencing

30Physical Risk Analysis
In recent years, hurricanes,

important. In analyzing the physicalcompanies from abnormal weather

cyclones, heavy rains, floods, heatrisks of portfolio companies, instemming from climate change. For

waves, forest fires, and droughts,

addition to ISS’s risk analysis andJapanese companies, if necessary,

which are thought to be impacted byclimate change, are frequently
occurring around the world. The
impact of these events on thebusinesses and assets held byportfolio companies can no longer
be ignored, and analyzing physicalrisks is becoming increasingly

physical risk score by industry andregion, we utilize the portfolio’s Valueat Risk (potential negative impact ofphysical risk on the value of aportfolio) calculated as the potential
value lost through 2050 due todamage incurred by the businessassets owned by portfolio

we use disclosure materials andcompany websites to research theregions of offices, factories, andimportant owned assets, and we
also check hazard maps and othermaterials published by local
governments in order to supplement
our analysis of physical risk.

Physical Risk Analysis by Sector and Region
We utilize ISS data to analyze
physical risks by industry and region.
The graph below shows thepercentage of Value at Risk related
to physical risk in each sector

through 2050 for our Japaneseequities, global equities, Japanesebonds, and global bonds portfolios.
The higher the ratio, the greater the
potential negative impact of physicalrisk on the value of companies inthat industry. We calculate the Valueat Risk of each portfolio, but it isused internally and not disclosed inthis report.

Value at Risk by Sector
EnergyMaterials
Industrials
Consumer Discretionary
Consumer Staples
Health Care
Financials
Information Technology
Communication Services
Utilities
Real Estate

NAM’s Japaneseequities portfolio
NAM’s global
equities portfolio
NAM’s Japanesebonds portfolio
NAM’s Japanesebonds portfolio

0

20

40

60

80

Portfolio Value at Risk (% change)
NAM’s Japaneseequities portfolio

NAM’s global equities
portfolio

NAM’s Japanese bonds
portfolio

NAM’s Japanese bonds
portfolio

2.1%

0.9%

1.8%

0.6%

The Physical Risk By Region
The map to the right shows thephysical risk by region for our fourasset integrated portfolio. Along withthe ratio by industry, we use thismap as a reference when
considering industry and regional
allocations. These analyses enable
us to identify sectors and regionswith relatively high physical risk.

31

Responsible Investment Report 2021

None,

Light,

Moderate,

High,

Highest100(%)

Climate Change-Related Engagement with Portfolio Companies
Through engagement with portfolio companies, we are advancing the following initiatives in order to reduce climaterelated risk in our portfolios and promote investment in climate-related opportunities.

Nomura Asset Management
 ctive involvement in climate change countermeasures,A
cooperation with other investors and stakeholders, andsharing of best practices through climate-related
initiatives we have joined, such as PRI, TCFD, Climate
Action 100+, NZAM and PCAF nhance climate change-related ESG integration,E
including climate-related risk/opportunity analysis forthe investment portfolio
 evelop financial analysis/corporate valuation methods
Dusing carbon pricing and GHG absorption

 nhance the transparency of our efforts towards
Eclimate change through TCFD disclosure in our
Responsible Investment Report upport of the TCFD, climate-related financial dataS
disclosure based on the TCFD Recommendations,
including scenario analysis and GHG reduction targets
 isclose Scope 3 and GHG absorption that enableD
GHG emissions to be assessed in the life cycle ofproducts and services and throughout the supply
chain, urge GHG reductions by suppliers, customers,
and other business partners.
Introduce internal carbon pricing (ICP)
Incorporate climate change countermeasures andexternal evaluations related to climate change into KPI
for executive compensation
 btain approval of science-based targets (SBT) orO
commit to them
 rovide information to CDP, join initiatives such as
P
RE100/EP100/EV100, etc.

Please refer to Page 47 for actual examples of climate change-related engagement.

representing all of Nomura Group,
became a signatory of the CDP. With
this, Nomura Asset Management
became one of the CDP’ssignatories, but in November 2021
we became a signatory on astandalone basis. We areresponsible for the responses toquestions for the asset manager on
Nomura Holdings’ CDP
questionnaire. Nomura Holdings was
selected as a member of the CDP’s“Climate Change A List” in both
FY2020 and FY2021, recognizing
Nomura Holdings as a globally
excellent company with respect toinitiatives to combat climate change
and for its disclosure of related data.

ESG Integration

Consortium in October 2019 toengage with portfolio companies
and actively encourage them tosupport the TCFD, disclose climaterelated financial data, and integrate
climate-related risks andopportunities into their management
strategies. The TCFD Consortium
released the amended Green
Investment Guidance 2.0 in October
2021. Furthermore, in December
2019, we joined Climate Action100+,and through this initiative wecollaborate with other institutional
investors to encourage portfolio
companies to take action to combat
climate change, while we also joined
NZAM and PCAF in August 2021.
In June 2015, Nomura Holdings,

Proxy Voting

In March 2019, we pledged our
support for the TCFD, and startingwith our Responsible Investment
Report 2019 we have been providing
disclosure in line with the TCFD
Recommendations, and also offering
detailed disclosure and reports on
GHG emissions monitoring forindividual funds, covering ourCompany-wide Japanese equities,
global equities, Japanese bonds,
and global bonds portfolios. We
have also been a member of the
TCFD Consortium since its
establishment in May 2019, and weare a member of the GIG
Supporters, a group of investors thatutilize the Green Investment
Guidance formulated by the TCFD

Engagement

Cooperation with Climate Change Initiatives

About Nomura Asset Management

 evelop climate change-related financial products thatD
contribute to realizing a decarbonized society
consistent with our 2050 Net Zero Goal and 2030
Interim Target

Portfolio Companies

32

In addition to increasing the level of sophistication of our investingwith respect to climate change-related risks and opportunities
via TCFD initiatives, through engagement we aim to contributeto the realization of a decarbonized society by having portfolio
companies incorporate climate change countermeasures into their
management strategies.
At the Leaders Summit on Climate
held by the United States in April
2021, key countries and territories
set a goal of achieving net zero
greenhouse gas emissions, andthereby a decarbonized society, by2050. Countries and territories will
advance efforts to decarbonize as a
growth strategy over the medium tolong term, but in order to realize adecarbonized society, it is necessary
not only to expand clean energy andutilize hydrogen/electric
technologies, but also to improve
technological capabilities for energy

savings and energy efficiency. In
August 2021, we joined the Net Zero
Asset Managers initiative (NZAM)
and announced our goal of reducing
GHG emissions of assets undermanagement to net zero by 2050.
Many companies in Japanpossess advanced technologies,
even compared to other leading
companies in the world. Especiallyfrom the viewpoint of energy-saving
and reducing power consumption,
Japanese companies’ technologies
are playing a central role inadvancing global decarbonization

efforts. Based on the desire to not
simply participate in NZAM but also
to actually solve social issues
through investment, NAM
established the “Decarbonization
Japan” investment trust whichinvests only in Japanese equities
that will contribute todecarbonization. By backing thesecompanies, we believe we canactively support the realization of adecarbonized society both in Japanand around the world.

Greenhouse Gas Emissions Reduction Rate (Weighted Average)
(%)

0.0

The amount of greenhouse gas
emissions reduction is the annual
reduction rate found by comparing
the latest emissions results withISS ESG’s 2050 emission forecast
required to achieve the 1.5°C effort
target consistent with the Paris
Agreement scenario.

-0.5
-1.0
-1.5
-2.0
Decarbonization
Japan

33

Responsible Investment Report 2021

TOPIX

This fund has two distinctive features.

The fund narrows down the list ofresources based on our proprietary

The first is that it invests in companies

candidate companies for investment to

ESG score. Furthermore, we make athat will contribute to the realization of athose companies that are expected toqualitative assessment of a company’s

decarbonized society. The fund invests

contribute to a decarbonized society,environmental efforts (such as whether

not only in companies that engage intaking into consideration whether or

it has made a carbon neutrality

decarbonization-related businesses, butalso in companies that directly contributeto decarbonization through their own
business activities, such as declaring agoal of carbon neutrality.
The second distinctive feature is that
Nomura Asset Management, which
manages the fund, has established therate of reduction of GHG emissions byportfolio companies as a key
performance indicator (KPI), andmonitors the companies held in thefund via measurements and othermeans. Specifically, we monitor theefforts of portfolio companies toward
decarbonization through climatechange engagement conducted by our
corporate analysts, ESG specialists,
and the Engagement Department, andmake use of the findings. In addition to
GHG emissions, going forward we willcomprehensively understand how
companies are contributing todecarbonization by also incorporating
avoided/removed GHG emissions as
KPI. By setting and monitoring such
KPI, we will be able to measure theimpact generated by the fund, which
will also allow us to manage the fund inline with our impact investment strategy.

not a company has businesses that
contribute to the realization of adecarbonized society as well as other
ESG activities. Specifically, we evaluate
a company’s earnings outlook withrespect to matters related to items
regarding decarbonization in the SDGs
(for roughly the next 10 years) as well
as a company’s business mix,technologies, know-how, personnel
and other allocation of management

declaration), including an evaluation of
the pace of improvements it is making.
In addition, we conduct ongoingengagement with portfolio companies,
and both share our understanding of
their efforts aiming for a decarbonizedsociety and conduct engagement tosupport such efforts. We believe thatinvestment through this fund allows us
to provide both social value andeconomic value.

Number of Patent Applications for CO2 Emissions
Reduction-Related Technologies in Key Countries(No.)

20,00015,000Japan

10,000USA

5,000

Germany
Korea

0
2010

2011

2012

2013

2014

2015

2016

2017

2018 (year)

Source : Prepared by Nomura Asset Management using data from Astamuse

Engagement

2009

China
FranceNetherlands
Switzerland

About Nomura Asset Management

Period: 2009-2018, annual

Patent Competitiveness Rankings by Country/Territory
Energy-related sectors

Transportation/manufacturing-related sectors
Automobiles/ Semiconductors/
Storage
information
Ocean vessels
batteries
communications

Home/office-related sectors

Food/agriculture,
forestry, andfisheries

Carbonrecycling

Housing/buildings
Next-gen solar

Lifestyle

Fuel/ammonia

Hydrogen

No.1

China

USA

Japan

Japan

Japan

Korea

Japan

China

China

China

No.2

Japan

China

China

China

USA

China

USA

USA

Japan

USA

No.3

USA

Japan

USA

USA

China

Japan

Korea

Japan

USA

Japan

No.4

Germany

Germany

Korea

Korea

Korea

USA

China

Korea

Korea

France

No.5

Korea

UnitedKingdom

Germany

Germany

TaiwanGermany

FranceFranceGermany

Germany

Proxy Voting

Offshore windpower*C omparison of sum total of patent assets in 2010-2019 in each field and country.
Total patent assets is an indicator calculated based on factors including the number of patents cited/viewed, patent exclusivity (number of claims for invalidation
trials, etc.), the number of years remaining on a patent, and other factors.
Source : Prepared by Nomura Asset Management using data from Astamuse
ESG Integration

34

Nomura Asset Management’s
Initiatives on Human Rights
Human rights issues have become an
important element in investment
activity. For companies, countries, aswell as various types of projects,
goods and services are delivered tousers and end consumers after
procurement, production and transportof materials. As this value chain
crosses national borders andintersects with differing regulations
and practices, there is a risk of humanrights issues that cannot be seen fromthe surface. Once a human rights
issue arises, it leads to a loss of trust

35

Responsible Investment Report 2021

from the community, the company’s
employees, business partners, and its
customers. This is because reputation
risk, such as the deterioration of acompany’s image in society, increases,
and the company may have to pay alarge cost (cost and time to restore its
reputation) to resolve the human rights
issue. In addition, if the problem
remains unresolved over a long periodof time, the adverse impact on thecompany’s corporate value itself willgrow. Our mission is to protect theassets our clients entrust with us fromrisks related to human rights issues byraising awareness of such humanrights issues among our portfolio
companies and having themproactively advance relevant initiatives.
We carefully assess human rights
risks for our portfolio stocks and use
human rights risk assessments in
our engagement and in ESG
integration to fulfill our role as a
responsible investor engaging in
broad investment activity on a global
basis.

Nomura Asset Management’s Human Rights Risk Monitoring Process
Our research centers on items

and continuously monitors therelated to human rights respect andhuman rights risks of companies in
our investment universe, as we seek
to reduce the risk of human rights
infringements at the investment
portfolio level. We research theefforts of companies in ourinvestment universe regarding humanrights, including if they haveformulated a human rights policy andthe status of compliance with thatpolicy, as well as research any actual
misconduct related to human rights
if it exists and the level of damage
resulting from such misconduct. We
also research whether companies
have formulated programs to addresshuman rights at the voluntary
disclosure level, the status ofoperation of such programs, and theresults of human rights monitoring.

compliance set forth in international
norms related to human rights, suchas the OECD Guidelines forMultinational Enterprises and the
Ruggie Principles which wereapproved by the U.N. Commission
on Human Rights. In addition, we
also regularly research companies
that have been flagged for
involvement in human rights issues
based on the outcomes ofinvestigations by human rights NGOs
or by international organizations. This
research centers on sectors withcomplicated supply chains andsectors that produce products withhistorically large human rights risks inthe production area or the area
where raw materials are procured.
This group of sectors includes theIndustries Focused With
Human Rights Risks

SectorFoods/Daily
goods/Retail

A gricultural pro ducts(Especially palm oil,cocoa, fruits, tobacco)

ICT

Electronicequipment
components

Automobiles

Automobile parts
Tires

Apparel(cotton and wool)

MiningPrecious metals
Non-precious metals

Tradingcompanies

All related items noted
to the left

TextilesGarment

food/daily goods/retail, ICT,
automobile, apparel, and mining
sectors, as well as trading companies
that handle these high-risk products.

Human Rights Risk Management at the Portfolio Levelstrong processes for human rights
risk management will see a reduction
in human rights risk not only inbusiness with existing customers,
but also in business with new
corporate customers. We also think
this will result in more positive
evaluations of the products andservices the company offers as wellas an increase in business
opportunities. We believe that byrepeating this human rights
management at the portfolio level,
we can gain a deep understanding ofsocial risk carried by companies in
our investment universe and reflect
this in our investment decisions oncompanies. We feel that this will also
advance our ESG integration related
to human rights risk.

Based on individual companies
 heck the status of compliance withC
international norms
H uman rights-related policies (childlabor, forced labor, wages, safety, etc.)
Human rights risk management
systems (monitoring, relief systems,
self-assessment, etc.)
Investigations of misconduct related tohuman rights violations
Status of compliance with human rights
monitoring policies of client companyof company being researched

Engagement(human rights high-risk companies)
Formulation of human rights policies/
programs
Introduction of human rights monitoring
Implementation and disclosure of selfassessment
Actions aimed at improvement

Integration into
investment(investment decision-making)
Buy
Sell
Continuous hold

ESG Integration

researched annually. We carry out
engagement if we hold a company
judged as having high human rights
risk in our investment universe. The
corporate analyst responsible forthat stock, ESG specialists, and ESG
engagement managers holddiscussions with the company aboutrisk factors (such as an inadequate
management system or insufficient
disclosure of information), anddiscuss an action plan to make
improvements. For companies thatare considered high risk in terms ofhuman rights but are continuing towork on solving problems, wemonitor the progress of their efforts
through periodic engagement. Also,
after a certain period of engagement,
those companies for which we can
expect improvement will be

Human rights risk
monitoring of companies

Proxy Voting

unflagged as human rights high-risk
companies, and will be subject tonormal monitoring.
In corporate transactions, where
human rights risk assessment has
become the norm, we believe thatcompanies that have established

Engagement

ESG investment managers examine
human rights risks (the survey items
mentioned in the section about thehuman rights monitoring process) at
the portfolio level throughout theyear, based on the human rights risk
monitoring data for each stock

About Nomura Asset Management

Nomura Asset Management broadly

36

Human Rights Due Diligence
Our ESG specialists and ESG investment

the disclosure that adequate humancomprehensive human rights due

managers determine potential humanrights management is being

diligence, so this is an area where therights risk levels for companies in our

implemented, or if a scandal isefforts of Japanese companies must

investment universe based on corporate

discovered, the company will be

be improved. In addition, only 18% of

disclosures, NGO reports and media

subject to monitoring, and we will

the companies that have a track

information. The main matters evaluatedare: 1) Whether there are any humanrights violations or misconduct towards
the supply chain or company
employees; 2) Whether human rights
due diligence is being performed; 3)Whether on-site audits of suppliers arebeing conducted; 4) Whether there arecorrective measures and a contact for
whistleblowing in place; 5) Whether
there is disclosure of human rights audit
results; and 6) Whether there is
procurement of raw materials andcommodities certified from theperspective of sustainability, including
human rights. If we cannot confirm indemand improvements throughperiodic engagement.
In human rights due diligence in
2021, we covered large-cap stocks insectors with a high level of humanrights risk. We did not find any major
human rights violations or misconduct
for the Japanese companies wecovered. We also found that roughly
half of the companies had a trackrecord of performing on-site audits ofsuppliers. However, only about 30%of the stocks in our human rights due
diligence universe disclose
information about the outcomes ofthese audits and carry out

record of procuring commodities(such as palm oil and coffee beans)using certification systems meetingsustainability requirements, including
compliance with human rights, andwe found that this is also an area
where efforts by Japanese companies
are lagging. As an asset manager
aiming to eliminate human rights
violations, we will actively carry out
engagement in order to have portfolio
companies build human rights
management systems in fields where
efforts have been slow.

Human Rights Due Diligence Results
Stocks subject todisclosure checks

Sectors with highrisk of human rights
issues (MSCI Japan)
Foods/Daily goods/
RetailICT

Human rights/labor misconduct

94%
Hotline/corrective measures

57%

51%

Disclosure of audit results/
human rights DD report

Sustainable commodity
certification
Yes

Yes

43%
No

49%
No

67%

Yes

MiningYes

33%
No misconduct No
found

ApparelOn-site audits of suppliers

Yes

6%

Automobiles

Trading companies

Human Rights Due Diligence

Misconduct
found

18%

28%
Not
relevant

No

72%

42%

No

40%

*DD:Due Diligence

Human rights risk issue

Engagement Case Study

Need to make efforts toimprove the rights andthe health and safetyof workers, as well as
the living conditions for
immigrant laborers

Nomura AssetManagement /Sustainalytics

Status of milestone
management

Engagement
period

8months

Malaysianhealthcare
equipment/
goods company(2 interviews)

37

Responsible Investment Report 2021

 eed to disclose policies
N
concerning workers’ rights, andboth monitor and report on thestatus of compliance with theprinciples for workers’ rights

 .S. Customs and Border Protection (CBP)U
announced a suspension of imports to the
U.S. based on information that the company’s
products are manufactured using forced labor.
What is the schedule for review by CBP?

 as publicly disclosed policies onHhuman rights and ethical activity
as well as policy on internal
whistleblowing. Since 2020, in
order to investigate labor issues,
an appointed independent
consultant has been auditing
labor practices and monitoring
the progress on improvements
on a quarterly basis.

In 2019, introduced a zero cost hiring policy (nohiring commissions paid by workers to agents).
Also confirmed a major improvement in theforced labor index items of the International Labor
Organization (ILO). Planning to complete corrective
measures for forced labor indicators, such as
agents holding workers’ ID cards, deception aboutsalary information, and workers’ living environment.
A review by CBP is expected after the verification
work by an independent consultant is completed.

Human Rights Engagement
Having direct dialogue with portfolio

instability and unstable human rights

regions, we strive to engage from acompanies about human rights

policies can pose unforeseen risks toneutral standpoint, obtain all relevant

issues and urging them to makebusinesses. In recent years, there haveinformation, and reflect the findings inimprovements for such problems isbeen cases both among Western

our investment decisions. Especially in

one of our responsibilities as ancompanies and Japanese companies

the case of human rights issues whereasset management firm. Humanrights is an important engagement
theme for both the Japanese andoverseas companies we invest in.
Risks related to human rights issues
can be managed to some extent by
establishing a management system.
However, industries and companies
with complex supply chains andoperations in areas with politicalof being suspected of involvement inproduction activities in areas where
there are suspicions of child labor orforced labor in the development of a
global business or supply chain
development, as well as companies
deciding to withdraw from a businessdue to influence from a heavy-handed
government regime. Even for humanrights issues occurring in these various

it is difficult to grasp accurate
information and make judgments due
to different claims by all of the involved
stakeholders, we encourage thecompany we are engaging with toimprove relationships based on
dialogue with stakeholders and toprovide information to investors on acontinual basis.

Example of Global Equity
Engagement (Milestone Management)

Examples of Engagement(Milestone Management)
Japanese retail company

Japanese retail company

Engagement
overview

Building a human rights
management system for the supply
chain for the company’s own brandproducts and implementing humanrights due diligence.

Company
response

Disclosure of a policy for taking
human rights into consideration in
the supply chain, and disclosureof the implementation statusof a program in the company’s
factories to consider humanrights. Commitment to disclosureof information about the statusof human rights consideration at
suppliers

Goal

Disclosure of information on supply
chain human rights countermeasuresand implementation of human rights
due diligence

Milestone management status

ESG issues

ESG issues

Human capital/human rights
risk management system

Engagement
overview

Disclosure of information on
measures to reduce the risk of
raw material (cotton) procurementfrom regions that are developing
into international human rights
problem areas

Engagement
overview

Need human capital/humanrights risk management including
the supply chain. Disclosureof detailed information aboutsubcontractors

Company
response

Planning for a company teamto perform on-site human rights
audits up to the upstream part ofthe supply chain. Committed to
conducting audits up to cotton
growers and disclosing information
on progress and results of audits
in a timely manner

Company
response

Engaged in human resource
development, employee training,and health/safety management.
Planning to establish asustainability initiative covering
all suppliers in 2023. Planningto disclose detailed information
about subcontractors in 2022

Goal

Disclosure on human rights audit
program further upstream of the
raw material procurement process

Goal

Establish human capital andhuman rights risk management
system, including the supply chain

Milestone management status
Date of most recent
interviewDec. 2021

8 months

44

6 months

2 interviews

5
4

3

3

2

2

2

1

1

1

Share a2 recognition of
the issues

3

Formulatecountermeasures

4

Implement
countermeasures hat is the status of theW
Workers Representative
Committee and the role ofthe Hostel Management
Committee?

3

5 Conclusion

 sked the company to continue to carryA
out employee health/safety training andeducation and training about the grievancemechanism, and to release data on accidents
and data on grievance mechanism

 epresentatives from each factoryR
and for each nationality and gender
elected to the Workers Representative
Committee. Engagement sessions
with independent directors are held
quarterly to strengthen cooperation.
The Hostel Management Committee is
responsible for ensuring that employee
housing facilities are in compliance.

 o further strengthen social
T
contribution activities, set goals
such as acquiring ISO45001
certification by FY2024,
improvement of its performanceon internal and external social
compliance audits, and linking
compensation with safety andhealth KPI.

ESG Integration

 ompliance with all ILO
C
forced labor indicators
was verified, and CBPlifted the import ban in
September 2021.

5

3 interviews

Proxy Voting

Communicate
the issue(s)5Nov. 2021

Period13 months

1

Date of most recent
interview

Feb. 2022

PeriodPeriodProgress
statusMilestone management status
Engagement

Date of most recent
interview

3 interviews

Hong Kong capital goods company

Human rights risk
management system

About Nomura Asset Management

ESG issues

Human rights risk
management system

38

Initiatives and Partnerships to Protect Natural Capital and Biodiversity
The Kunming Declaration, announced
at the 15th Conference of the Parties
to the Convention on Biological
Diversity (COP 15) held in October
2021, states that unprecedented
crises, such as biodiversity loss andmarine pollution, are threatening boththe planet and society. At the second
part of this same meeting scheduled
to be held again in Kunming in 2022,
the parties are expected to adopt new
targets for biodiversity protection. At
the 2021 U.N. Climate Change
Conference (COP 26) held in Glasgow
in October-November 2021, in addition
to accelerating measures to address
climate change, the parties announced
critical pledges of ending deforestationby protecting and restoring forests,
and reducing emissions of methane(which has a greenhouse effect 20
times stronger than CO2 ) by 30%
compared to 2020 levels by 2030.
Healthy biodiversity is essential forthe development of society. Nomura
Asset Management recognizes theimportance of issues related to natural
capital in our ESG Statement, and isparticipating in global initiatives asboth an institutional investor and acompany. We are also advancing
efforts aimed at protecting natural
capital in collaboration with otherasset management institutions. In

39

Responsible Investment Report 2021

terms of global initiatives, we leverage
our collaboration with Farm Animal
Investment Risk and Return (FAIRR)
to engage with food-relatedcompanies, and we engage with palm
oil companies and the companies intheir supply chains through an
initiative to end deforestation (refer toPage 57). We encourage companies
to take action to protect and restore
biodiversity, and we share insights
and best practices for engagementtargeting biodiversity protection.
In our collaborative engagementwith Sustainalytics, we carry out
engagement on many individual
topics related to biodiversity. We areencouraging food-related companies
to transition to a sustainable global
food system, including themanagement of natural capital suchas land and water, and the reductionof food waste. In addition, for clean
technology companies related toelectric vehicles and solar or wind
power generation facilities, we
continue to support the promotion ofa circular economy through theprocurement of sustainable raw
materials (including by suppliers),
increasing the rate of recycling, andkeeping waste out of landfills.
Furthermore, we carry out
engagement with respect to water

management and monitor water
resource risk management for multiindustry companies operating in
Brazil’s Tietê River Basin and inSouth Africa’s Vaal River Basin. By
doing so, we are encouraging theformulation of business strategies
targeting risk reduction.

Natural capital risk
management for stocks(on an individual stock basis)

Water resources
Waste volume
Disclosure regarding forest/soil
resource protection
Disclosure regarding river andmarine resource protection
Disclosure concerning pollution(forest/soil, river, marine, air) prevention

Engagement
 ormulate biodiversity riskFmanagement policy
Introduce biodiversity monitoring stablishment and disclosure ofEmeasurement standards
Actions towards improvement

Integration into investment
Buy
Sell
Continuous hold

Nomura Asset Management’s Biodiversity Monitoring
and Risk Management Process
specialists and corporate analysts

consumer discretionary, and materials

the environment, it also has a tremendous

utilize information disclosed by

sectors. For example, we look at thenegative impact on the economy andcompanies, media reports, external

status of procurement of commodities

people’s health. In order for companies todatabases, and other sources ofthat have been certified by third

raise their level of sustainability, they must
protect biodiversity and work onsustainable use, including understanding
their level of dependence on nature forbusiness continuity and the impact of
their company’s operations and the
supply chain on nature. If biodiversityrelated issues become apparent not only
in a portfolio company, but in thatcompany’s supply chain, there can be asignificant impact on corporate value
through, for example, higher raw material
procurement costs, or reputational risks,such as deterioration of corporate image.
In this way, a company that can manage
biodiversity risk and link the protection of
the environment and natural capital to its
business strategy will see an
improvement in the public’s opinion of its
products and services, resulting in ahigher likelihood of increased long-term
term corporate value.
To help companies increase theirlong-term corporate value, we
continuously monitor a wide range of
biodiversity risks for the stocks in ourinvestment universe, and we aim to
reduce biodiversity risk at theinvestment portfolio level. In
collaboration with each other, ESG

information to regularly research
natural capital-related information andwaste-related information on stocks in
our investment universe. Issues
covered by this researched include
water resources, waste volume,
disclosures related to the protection offorest and soil resources, disclosuresrelated to the protection of river andmarine resources, and relation tohigh-biodiversity-risk commodities. We
check whether or not companies areundertaking initiatives towards
sustainable production andprocurement, especially companies
where sales are highly dependent oncommodities which have a large
impact on biodiversity, such ascompanies in the consumer staples,parties, including the Roundtable on
Sustainable Palm Oil (RSPO) and theForest Stewardship Council (FSC).
Based on such monitoring data,
portfolio managers, ESG specialists,
corporate analysts, and ESG investment
managers work together to engage withportfolio companies with the objective ofmanaging biodiversity risk. Throughperiodic dialogue, we encouragecompanies to recognize biodiversity
risks, take proactive measures, anddisclose information, and we thenmonitor progress on these efforts.
Through this type of dialogue, we assess
both biodiversity risks and opportunities,
and ultimately incorporate these into ourinvestment decisions.

Deforestation in the
supply chainFirst
interview

Forest commodities exposure by sector
Woodproducts

Palm oilLivestock
Soybeans
products

Naturalrubber

Cocoa

CoffeeConsumer
discretionary/services
Consumer staples
Capital goods/services
Materials
Real estate*A ggregation of companies in MSCI Japan with high sales exposure for each commodity.
Risk in each GICS sector shown.
Source: Prepared by Nomura Asset Management based on CDP data and other ESG data

Nomura Asset Management

Swiss food company

 e want you to describe your monitoringWsystems and tools to guarantee thatthe soft commodity supply chain is not
associated with deforestation.

 e use satellite image data, supply chainWmapping and other tools to monitor
that our supply chain is not involved in
deforestation.

 hat are the criteria for selecting newWsuppliers? If these criteria are appropriate,
you will be able to address some of thedeforestation issues.

 ll new suppliers must agree to provideA
information, dialogue and audits related tothe operating permit area ow do you respond if there is aH
deforestation warning or if deforestation
is found in the palm oil supply chain?

(One interview)

 e immediately start the verification
Wprocess, and if deforestation is confirmed,
the supplier will be immediately
suspended. After that, they will correct the
problem, and if they are able to prove thatno more deforestation will occur we canrevive the relationship with the supplier.
 s of 2020, we have assessed that 90%Aof our purchases of the primary soft
commodities that carry deforestation risk
do not involve deforestation

 lease provide a status updateP
on your verification process, etc.
for deforestation in the supply
chain confirmed by satellite
image data.

ESG Integration

Example of Engagement

Engagement
periodLow

Proxy Voting

Status of milestone
management

Risk
High

Engagement

Biodiversity risk
issuesExamples of Biodiversity Risk Monitoring

About Nomura Asset Management

The loss of biodiversity not only affects

 here is increasing need forTenhanced supply chain transparency,
streamlining of monitoring andreporting systems and cooperation
among stakeholders.
40

ENGAGEMENT
We engage in constructive dialogue with companies regarding
important financial and non-financial risks and opportunities

Basic stance on engagement
Engage in dialogue with a cordial and constructive attitude
Work to understand non-financial information, including companies’ efforts to address ESG issues,and the strategies and philosophies behind them
Listen to the views of portfolio companies on the efficient use of capital,and communicate our thoughts
When a serious scandal or accident has occurred,promote sound management by hearing the causes and measures to prevent recurrence

41

Responsible Investment Report 2021

Our Idea of Constructive Dialogue with Portfolio Companies
We have established a basic policy
for engagement as part of our
responsible investment policy
formulated by the Responsible
Investment Committee, the highest
decision-making body for
responsible investment. Here, we
provide an overview of this policy.
We believe that engagement, or
constructive dialogue with portfolio
companies, starts with a thoroughunderstanding of the target company
and its business environment as wellas its future. We also view

engagement as one of the mostpowerful means to fulfill ourstewardship responsibility.
The definition of our engagement
is to “exert an influence oncompanies based on a deep
understanding of them so that they
will be able to enhance theircorporate value and achievesustainable growth by operating indesirable ways.” Merely seeking
improvements from companies with
ESG issues is not engagement. We
believe that an important role ofengagement is also to directly
communicate our support andapproval as an investor to companies
that operate in desirable ways. We
value our basic stance on
engagement (lower part of theprevious page).
We are convinced that supporting
the enhancement of the corporate
value and sustainable growth ofcompanies through ongoingengagement activities will contribute to
the medium- to long-term growth ofassets entrusted to us by our clients.

In accordance with our responsible investment policy, we have divided engagement topics into five categories: 1 Businessstrategy; 2 Financial strategy; 3 Environmental and social issues; 4 Corporate governance; and 5 Disclosure and dialogue.

About Nomura Asset Management

Engagement Process

Engagement

Portfolio
companies

Enhancement ofcorporate value
Increasing earnings

Proxy Voting

Business strategy

Disclosure/
dialogue

Financial strategy

Senior management

Initiatives onenvironmental/social
issues (ES)

Sustainability
improvement

Corporate
governance (G)Election

Higher investment returns

ESG Integration

Directors(Board of Directors) /Auditors

Institutional investors

42

Engagement Target Companies and Results
With respect to Japanese equities, the approximately 2,400 Japanese companies
whose shares we hold (as of December 31, 2021) are all targets for engagement.

Total number of contacts withportfolio companies
Approximately

6,500

Engagement meetings
Total number of engagement topics(total number of companies)

1,690

topics (765 companies)

2021

Japanese companies, January – December 2021

Ratio

Of these,number of 1-on1 dialogues atcompany

Approximately

2,400
43

Of these,number of
dialogues withexecutives andabove

Approximately

1,000

Responsible Investment Report 2021

Ratio by
topic

Numberof topics

Business strategy

19%

315

Financial strategy

14%

232

ESG-related
meetings

68%

1,143

16%
12%
32%
8%

271
201
535
136

Environmental
SocialGovernance
Proxy voting-related

Total

1,690

Milestone Management
In order to manage our progress on

Discoveryof subsequent
topics andissuesengagement, we carry out“milestone management,” setting thefinancial strategy are directly linked
with corporate value, but in manycases it is difficult to establish clear
goals. Therefore, in addition to setting
goals for the discussed topics
themselves (Pattern 1 below), we alsoestablish goals for 3 4 ESG and 5

Performance
review Policy
review

A

P

PDCA Cycle
by Milestone
Management

CT

Milestone
management(Keep records/
progress evaluation)

Recognition of topics
and issues
Selection of target
companies

LAN

D

C

Engagement ESG
evaluation

O

HECK

2

disclosure and dialogue after
discussing 1 business strategy and2

financial strategy (Pattern 2 below).

Milestone
StatusStatus of Milestone Management(as of December 31, 2021)(number of topics)

In 2021, we carried out engagement
across 1,690 topics. Currently, we aremanaging milestones for a total of 270
topics (106 companies). Of these, 13
topics are already at “Step 5:
Conclusion.” (refer to Pages 45-49).

Communicate issues to portfolio company

137

Company shares a recognition of the issues

78

Company formulates countermeasures

37

Company implements countermeasures

5

Conclusion

13

About Nomura Asset Management

period for individual engagement
topics at three years. By managing
PDCA (Plan, Do, Check, Action)
progress using a fixed timeline, we
can efficiently formulate a dialogue
schedule for subsequent phases andevaluate the results. To measure
results, we check whether acompany has advanced to the nextstage, in other words whether or not
the improvement process for anissue is ongoing.
Milestone management requires
setting goals, but goals cannot beestablished for all engagement. In
particular, 1 business strategy andEngagement

Pattern 1

Businessstrategy1(Hold discussions
on individual topics
and set goals forthese same topics)2

Financial
strategy

3I nitiatives on environmental andsocial issues (ES)Discuss with company and share the issue recognition

Pattern 2

Insufficient explanation

Progress to milestone management

4 C orporate governance (G)ESG IntegrationI nitiatives on environmental andsocial issues (ES)Communicate opinions as a shareholder

Worried about commitment

Set goals for topics discussed

3

Communicate opinions as a shareholder

2 Financial strategy

Discuss with company and share the issue recognition

Worried about sustainability

D isclosure/
dialogue

Progress to milestone management

1 Business strategy(Hold discussions
on 1 2 businessstrategy and financial
strategy, and set
goals for 3 ~ 5 )5Proxy Voting

Set goals for topics discussed

4 C orporate governance (G)5 D isclosure/ dialogue

44Milestone status(progress)

Engagement on
Priority Topics
We carried out engagement in line with the nine key themes
established by the Responsible Investment Committee. Here,
we introduce some examples of engagement in 2021 in linewith NAM’s unique milestone management.

5

Conclusion

4

Company implements
measures to address
issues3Company formulates
measures to address
issues2Company shares arecognition of theissues1

Communicate issues
to company

Financial

1

Rational Explanation of Financial Strategy
Ask companies to explain their use of cash on hand, shareholder return policy, etc.

Status of Milestone
Management

Examples of engagement
Company

Food

Interviewee
Representative Director andPresident, others

Goal
Accountability related
to Long-term Vision

Company

Construction
Industry

Interviewee
Senior Managing Executive
Officer and CFO, others

Goal
Accountability forthe direction of the(shareholder) return policy our explanation has improved,Y
but the relationship between thebusiness domain and customers’
needs is unclear.

May 2021

19months
5

4 interviews

Nomura Asset Management

4

Company A3 e invested capital in a partnerW
for new business. We will enhance
our explanation about the businessdomain in our integrated report.

 iven the asset turnoverGrate, financial ratio, andrevenue outlook, equity
capital seems excessive.

 e appreciate your efforts toWstrengthen risk management. If
you can control risk, you should be
able to reduce your equity capital.

 he explanation is not sufficient.
T
Please indicate the outlook forthe inflow and outflow of funds
during the period covered by themedium-term management plan.

Company B

Responsible Investment Report 2021

1

Most recent
interview

May 2021

36 months

7 interviews

Nomura Asset Management

 e anticipate an increase inWorders, so it is not excessive.

2

 e changed our integrated reportW
to make it a story that starts withaddressing health-related social issues.
We are aiming for a repositioning.

*

5
4
3

 e will consider it in the nextWmedium-term management plan.
(Announced medium-term plan)* The period is the number of months from start of interviews until December 2021

45

 e determinedW
that accountability
improved significantly.

PeriodB ou made a large investment, butYyour accountability towards yourvision is insufficient. This is leading
to a stagnating share price.

PeriodA

Completion:

 e acknowledge that theWcurrent explanation is abstract.
We want to improve it.

21Governance2

Strengthen Commitment to Capital Efficiency
Demand commitment to capital efficiency through executive compensation

Status of Milestone
Management

Examples of engagement
Company

Food

Interviewee
Director and Senior
Managing Executive
Officer, others

Goal
Executive compensation
with capital efficiency
indicators as KPIs

 inking executiveLcompensation tosales and operating
income, does not fit
the current stage.

PeriodC ou have used cash flow on investments toYreduce interest-bearing debt, but the latterhas come to an end. You are now moving
to a stage where investment results andthe efficient use of funds are expected.

5

2 interviews

Nomura Asset Management

4

Company C

3 ou are right. CapitalYefficiency has also cometo be emphasized inbusiness management.

 e are studying this forW
the next medium-term
management plan. We
also want to reflect ESG.

2

 dopted ROE andA
ESG initiatives as
KPIs for executive
compensation.

1

Completion:

Goal
Introductionof executive
compensation basedon business issues

 ue to the complexity of the businessDstructure, it is important to manage capitalefficiency. How about including it in the
KPIs for executive compensation?

 o show management’sTcommitment, we want it tobe reflected in executive
compensation.

40 months
5

5 interviews

Nomura Asset Management

4

Company D3

 e are also listening to theWopinions of outside directors.
The current compensation
structure may not reflect thecharacteristics of the business.

 isclosure of the costDof capital expected bymanagement. Aiming
for capital efficiency thatexceeds this.

2

 dopted ROIC asAa KPI for executive
compensation.

1

About Nomura Asset Management

Interviewee
Director and Senior
Managing Executive
Officer, others

June 2021

PeriodD

June 2021

22 months

Company

TextilesCompletion:

Governance

Reduction of Cross-Shareholdings
Ask for a reduction in line with the Corporate Governance Code.

Status of Milestone
Management

Examples of engagement
Company

Interviewee

Nomura Asset Management

Senior Managing
Executive Officer andDirector, others

Goal
Disclosure ofsignificance of crossshareholdings as well
as reduction targets

 our disclosure of the reduction ofYcross-shareholdings and the purposeof holding them is insufficient, and theholdings are still increasing.

Completion:

June 2021

13 months
5

3 interviews

4Company E

3 he outside director youTmentioned advised us that thecross-shareholdings constitutea management risk.

 e plan to reduce theWholdings while allocating
the proceeds to business
investments.

 e announced the targetW
reduction amount and thetiming in the medium-term
management plan.

2
1

Proxy Voting

Construction
Industry

 e want you to disclose the significance of crossW
shareholdings and reduction targets. There are outside
directors who have experience with reducing crossshareholdings, so why not get some advice from them?

PeriodE

Engagement

3

CompanyF

Goal
Executivecompensation linked
to capital efficiency

Most recent
interviewNov 2021

2 months

1 interviews

Nomura Asset Management
Company F

*

5
4
3

 e are discussing this internally.
W
Our initial target was 5%, but
we then started to think that thiswas the absolute minimum.

 he Compensation
T
Committee is currently
discussing this. We will
provide feedback.

2
1

ESG Integration

Interviewee
Managing Executive
Officer and Director,
others our KPI for executive compensation is recurringY
profit. This does not incentivize the effective use ofcapital (including cross-shareholdings). We think it
would be more appropriate to link compensation toa capital efficiency indicator like ROE.

PeriodWarehouse/
Transport Industry

 ou are slow to reduceYcross-shareholdings
and this is leading to a
decline in ROE.

46

1 Communicate issues
to company

2 Company sharesa recognition of
the issues

3 Company formulates
measures to address
issues4 Company implements
measures to address
issues5 Conclusion

Environmental

4

Becoming a TCFD (climate change)
signatory, subsequent actions
Disclose data in accordance with the TCFD regarding climate change impacts and countermeasures

Examples of engagement
Company

Interviewee
Sustainability Dept. Head,othersGoal
Support for TCFD
Recommendations

 his is anTimportantissue in termsof competition.

It’s great that you agreed to this.
However, the scenario analysis is
not in line with TCFD. (Asked for
scenario analysis in line with the
Recommendations, and started new
milestone management)

Nomura Asset Management

Status of Milestone
Management

PeriodG

Rubber Products

 our specific businessYcharacteristics make therisks of climate change
significant. Pleaseconsider supporting the
TCFD Recommendations.

Completion:

October 2021

17months
5

2 interviews

4Company G3

 e started to set
Wtargets for total
greenhouse gas(GHG) emissions.

 e recognize the importance ofW
this, but we have not reached
an internal consensus regarding
preparing the related data.

 e agreed with theW
TCFD, and provided
disclosure in line with the
Recommendations.

2
1Company

H

Interviewee
Representative Director andPresident, others

Goal he total amount is the focus of attention for achievingTthe goals of the Paris Agreement. Considering yourbusiness characteristics, can you also disclose theamount of contribution to reductions?

Most recent
interview
PeriodChemicals our GHG emissions reduction target isY
only on an intensity basis (per unit of sales).
Is it possible for you to set and disclose areduction target for total emissions?

April 2021

19months*

5

2 interviews

Nomura Asset Management

4

Company H3

 e are actively working to reduceWemissions, but it is inevitable that
total emissions will increase as
sales (=production) increases.

Setting and disclosing
total reduction
targets or reduction
contribution amounts
for GHG emissions2

 e understand what is being asked of us.
W
However, our corporate culture is suchthat we do not set goals that we cannot
achieve with certainty, so we need to
study this internally.

1

Business

5

Business Strategy amid New Circumstances
Business strategy and supply chain management in the age of COVID-19. Reconsider materiality (level of importance)

Examples of engagement
Company

Electrical
EquipmentInterviewee
Representative Director andPresident, others

Goal
Establishing a
structure to shift tobeing a service-based
company e want toWcheck on the
progress going
forward on aregular basis.

Status of Milestone
Management
PeriodI egarding the sales platform in particular, you need to switch fromR
the conventional system of selling goods to a system of providing
services and solutions. Shouldn’t you consider strengthening yourtraining program, devising creative sales methods, incentivizing sales
personnel, and utilizing external resources (if necessary)?

Dec. 2021

18 months*

3 interviews

Nomura Asset Management

Most recent
interview

Company I

543

 e are aiming to shift from being aWmanufacturer to being a service company amid
major changes in demand and the industry
structure due to the COVID-19 pandemic.

2

 e are making progress on skill-shifting inWJapan, but things are still centered on sales
overseas. We recognize that we need to revise
the organization and acquire external resources.

1

Completion:

July 2021

Company

Service Industry

Interviewee
Representative Director andPresident, others

Goal
Quantifying
contributions tosolving social issues
and setting/disclosing
targets

 ur business characteristics are such thatO
you can contribute to solving social issues in
the age of COVID-19. Can you quantify yourcontributions and show your targets?

 our M&A and new business track records areYgood. If these lead to contributions to social
issues, it is possible for you to show reproducibility
and attract funds for impact investment.

12 months

2 interviews

Nomura Asset Management
Company J

543

 e view non-financial business as theWdriver, or the foundation, of our business.
It has a natural strength, but we were notable to put it into words.

* The period is the number of months from start of interviews until December 2021

47

PeriodJ

Responsible Investment Report 2021

 et and disclosed
S
goals for solvingsocial issues in linewith the business.

2
1

Social6

Human Resources amid New CircumstancesWork style reform amid the age of COVID-19. Consideration of human rights and workers

Status of Milestone
Management

Examples of engagement
Company

MachineryInterviewee
Director, Representative
Executive Officer andVice President ou have made progress on environmentalYinitiatives, but there is room for
improvement on social issues, especiallywith respect to human rights risks.

 ou are expected to manage human rights risks
Yat your customers. Inadequate efforts can affectbusiness. You need to formulate a policy andconduct due diligence.

Nomura Asset Management

Most recent
interview
PeriodK

Jan. 2021

11months*

5

1 interview

4Company KGoal3

 e manage the supply chain,W
but we have just started
managing human rights.

Formulation of humanrights policy andperforming humanrights due diligence2
1Company

RetailInterviewee
Director, others

We see that disclosure has
improved, but disclosure of humanrights risks is insufficient. Given thenature of your business, these are risk
factors that receive a lot of attention.

 e are expectingW
improvements. We would like
you to conduct human rights
due diligence and disclose
the results.

Most recent
interviewDec. 2021

1month*5

1 interview

Nomura Asset Management

4

Company L

Goal
Implementation anddisclosure of humanrights due diligence3

 e reviewed ourWmateriality andexpanded the content/
descriptions about risk.

2

 e recognize this as an issue.
W
We have created a suppliermanagement system.

1

About Nomura Asset Management

 ur integrated reports areOheavily focused on business
opportunities. Disclosure
related to risks is insufficient.

PeriodL

SocialDiversity
Focus on gender. Medium- to long-term increase in percentage of women in managerial positions, etc.

Status of Milestone
Management

Examples of engagement
Company

Electrical
Equipment

Representative Director andPresident, others

Feb. 2021

25 months

3 interviews

Nomura Asset Management
Company M

Goal

*

5
4
3

Instructed thedepartment in charge
to link it with SDGs
and quantify it.

Setting targets forpromoting the active
participation of women

Most recent
interview2In addition to creating the Diversity Promotion
Department and appointing a woman as the department
head, we are also working to target talented women andon developing them along with their superiors.

1

Proxy Voting

Interviewee ou have not announced
YThe number of years of continuous service
any targets for social issues for women is close to that of men. The issue
such as promoting the active might be increasing the number of womenparticipation of women.
who aim to rise into managerial positions.

PeriodM

Engagement

7

Completion:

Dec. 2021

Company

Electronics

Representative Director andPresident, others

Goal
Formulating andpublicly disclosing
medium- to longterm targets forsocial issues such as
women managers

 o show management’s longTterm commitment, please
disclose some medium- tolong-term targets.

5 interviews

Nomura Asset Management
Company N e recognize that bothWthe hiring stage andretention after joining
the company are issues.

27months
5
4
3

 he rate of returning to work afterT
childbirth is high and no M-shapephenomenon has occurred. We are
strategically working on this, bothfrom the organizational design sideand the talent management side.

 isclosed targets forD
the ratio of women in
managerial positions.

2
1

ESG Integration

Interviewee ou have not set targets for environmental orYsocial issues other than climate change. In
particular, promoting the active participationof women is an issue, is it not?

PeriodN48

1 Communicate issues
to company

2 Company sharesa recognition of
the issues

3 Company formulates
measures to address
issues4 Company implements
measures to address
issues5 Conclusion

Governance8

Redefine the Board of Directors
Enhance effectiveness. Support the full-fledged transition to a monitoring board.

Status of Milestone
Management

Examples of engagement
Company

Interviewee
Senior Managing
Executive Officer
and Director, others

Goal
Establishment ofNomination andCompensation Committee

Company

RetailInterviewee
Director and Senior Managing
Executive Officer, Outside
Director, others

Goal
Increasing the numberof outside directors withmanagement experience,or establishing Nomination
and Compensation
Committees

You need to have a forum for outside
directors to have discussions focusedon nominations and compensation.

June 2021

39months
5

5 interviews

Nomura Asset Management

4

Company O
The company president provides
explanations to the Audit andSupervisory Committee, and theCommittee gives its opinions tothe board of directors.

3
2

The current process is working,Transitioned to a “company
but we are aware of whatwith committees” structure,
institutional investors wantand established both a
us to do. We are continuing
Nominating Committee and a
discussions within the company. Compensation Committee.

The function of supervisingYour efforts tomanagement (such as supervisingstrengthen governancenominations and compensation) isare late/slow. We
weak. There are no outside directors would like to meet with
with management experience.
outside director(s).

We want outside directors to supervise
the senior management team throughnominations and compensation. If there
are not enough people, please bring inpeople with management experience.

1

Most recent
interview
PeriodPSupervisory functions centered on
nominations and compensation areimportant, but you don’t have a nominationor compensation committee.

PeriodO

Transport
equipment

Completion:

Jan. 2021

39months*

5

4 interviews

Nomura Asset Management

4

Company P

3

It is difficult because we are an
owner-operator company, but
we have reduced the numberof internal directors in order toseparate execution.

2(Comment by outside director) I was appointed
with the expectation that I would provide advice
to senior management. There are few outside
directors, so even if the company were toestablish nomination/compensation committees,
they wouldn’t function well.

1

Disclosure/dialogue

9

Risk Management
Reconsideration of materiality (important management issues). Disclosure of risk information based on materiality.

Status of Milestone
Management

Examples of engagement
Company

Pharmaceuticals

Interviewee
Representative Director andPresident, others

Goal
Integrated report thatsummarizes risks andopportunities

 he linkage betweenTbusiness and ESG
is unclear in the
integrated report.

It is important toclassify key issues interms of risks as well
as opportunities.

Confirmationthat risks andopportunities havebeen classified.

PeriodQ

37months
5

5 interviews

Nomura Asset Management

4

Company Q3 e believe that ESG can lead to businessW
opportunities. We are aware that the relevance of ESG
issues is weak because we discussed them after weformulated the medium-term management plan.

2

 eviewed key issues in conjunction
Rwith the formulation of the new
medium-term management plan. The
Integrated Report was also renewed.

1

Company

RetailInterviewee
Director and Managing
Executive Officer, others

GoalClassification anddisclosure of risk factors

 ou have had a series of scandals, and risks haveYbecome apparent. The risks disclosed in the
integrated report are not given levels of priority,and their relevance to the business is unclear.

 he way you organizeTyour risks is still
inadequate.

Company R

Responsible Investment Report 2021

*

5
4
3

( Renewed
the Integrated
Report) e have provided feedback about whatW
you pointed out. We are strengthening
the group’s risk management system,and this is being discussed by the boardof directors, but we are aware that it is
not sufficient, including our disclosure.

* The period is the number of months from start of interviews until December 2021

49

Feb202125 months

2 interviews

Nomura Asset Management

 e understand that weWneed to attach relative
weightings to each risk
factor. We are closely
examining them.

Most recent
interview
PeriodR

Completion:

August 2021

2
1

Review of Priority Topics
We believe that a mutual
understanding of ESG issues andthe promotion of proper initiatives
are indispensable elements forincreasing corporate value andachieving sustainable growth.
Through engagement activities, we

3

Rational explanation offinancial strategy

Integrate Business Strategy
and Sustainability

Ask companies to explain their use of cashon hand, shareholder return policy, etc.

Accountability for business strategy that
integrates sustainability. This includes
targets for sales of products that
contribute to sustainability, etc.

2

Governance

GovernanceRedefine the Board of
Directors

Strengthen commitment tocapital efficiency

Improving effectiveness. Encourage a fullfledged transition to monitoring boards.
(Discuss together with the revision of proxyvoting standards)

4

Demand commitment to capitalefficiency through executive
compensation

Governance

Environmental

Reduction ofcross-shareholdings

Climate Change

Ask for a reduction in line with the
Corporate Governance Code

6

Companies are expected to set GHG
reduction targets aiming for netzero, attain SBT certification, disclose
Scope 3 emissions and amount of GHG
absorption, etc.

Environmental

SocialNatural Capital

Diversity

Work to preserve biodiversity, water
resources, etc.

8

Focus on gender. Medium- to longterm increase in the ratio of women in
managerial positions, etc.

SocialESG,Disclosure/dialogue

Human Rights Risks

Disclosure of Materiality
and Risk Information

Ask companies to formulate humanrights policies and perform human rights
due diligence as demanded by the publicboth in Japan and overseas.

10

Reconsideration of materiality

ESG Integration

9

Business

Proxy Voting

7

FinancialEngagement

5with global initiatives.
Based on this approach, we have
newly set 10 priority themes forengagement, with the approval of
the Responsible Investment
Committee (July 2021).

About Nomura Asset Management

1

continually urge portfolio
companies’ senior management tomanage risks, and pursue business
opportunities, related to ESG issues.
We will also continue to actively
communicate the importance of
information disclosure in accordance(important management issues)

Disclosure of risk data based on materiality

50

Engagement Department
Enhancing ESG Engagement51

Nomura Asset Management createdthe Engagement Department inNovember 2021. This department
was established in order to enhance
the understanding of the businessenvironment surrounding portfolio
companies and deepen constructiveand “purposeful dialogue”(engagement) that contributes tosustainable growth, as well as tofurther reflect the outcomes ofengagement in investment decisions
and proxy voting.
For asset managers like us,
engagement with portfolio companies
is absolutely essential in order tounderstand a company’s businesssituation and its ability to create value
over the medium to long term. It isalso now widely understood thatmanagement under appropriate
governance systems can contributeto a company’s sustainable growth. Inorder to create an investment chain(virtuous cycle of investment), asset
management companies are
expected to link ultimate beneficiaries
with portfolio companies and support
companies that can contribute to aprosperous society. I believe thatengagement is an important means

responsibility to the best of ourabilities, I want for the Engagement
Department to further enhance

for achieving that.
Introduced in 2014 and 2015, theStewardship Code and the
Corporate Governance Codedemand that asset managers
engage in constructive dialogue
based on a deep understanding of
portfolio companies, and thatcompanies actively and aggressively
address ESG (Environment, Society,and Governance) issues. We havebeen diligently advancing similar
initiatives for many years. However,as the economy and market
environment change, so do theideals of investors and portfolio
companies. When the demands ofdifferent stakeholders are notuniform, we must determine what
options are the best for fiduciaries
and society. In order to fulfill our

engagement, which is constructive
and purposeful dialogue withportfolio companies.
The Engagement Department will
act as a locus of collaboration
between our ESG specialists(horizontal axis) who are well-versed
in ESG issues for which initiatives at
global standards are required, ourcorporate analysts (vertical axis) who
conduct sector research and analyze
and make recommendations for
portfolio companies, and our credit
analysts (vertical axis) who haveexpertise in bond issuance which is amajor means that companies use toraise funds. I believe thisconcentration of expertise will further
deepen our understanding of portfolio
companies. (Refer to our engagement
system on Page 52).

Responsible Investment Report 2021

Senior Managing Director
Chief Investment Officer (Equities)

Yuichi Murao

Through dialogue with portfolio
companies based on such anunderstanding, we are able tocommunicate the “desirable
management” that we expect of them,and let them know what actions wewant them to take. This will likely help
improve corporate value as companies
tackle and solve ESG issues. I feel that
our efforts have become more effective
based on the collaborative
engagement activities that we havebeen carrying out for nearly half a year
now. By reflecting the results ofengagement in investment decisions
and proxy voting, not only will we see
an improvement in corporate value,
but as a responsible investor thatinvests in a variety of assets including
stocks and bonds, Nomura AssetManagement will aim to contribute tosustainable economic growth and therealization of a prosperous society byenhancing our stewardship activities.

Overview of Companies with which We Engage
Nomura Asset Management holds

Engagement Department, which wasmanaging progress. We are also

constructive dialogue (engagement)

established in the fall of 2021, is

supporting the improvement of thecentered on approximately 300

working to develop even closer

corporate value of portfolio

companies, taking importance into

cooperation with corporate analysts,

companies towards what we

consideration based on the value ofour holdings in a company and ourownership ratio, combining both ouractively-managed funds and our
passive funds. The companies that
we engage with, including those that
the Investment Department asks us
to engage with and portfolio
companies that wish to havedialogue with us, have a combined
market capitalization of just under
80% of the total market capitalizationof the Tokyo Stock Exchange. In
FY2021, we carried out engagementwith almost all of the target
companies. We also set milestones(see Page 44) for target companies
and told portfolio companies what
we see as their key issues. The

ESG specialists, credit analysts, andequities and bond portfolio
managers, and to make engagement
themes more advanced along withconsider “desirable management,”
as well as focusing on spreadingawareness of the best practices
which serve as good examples.
1

Portfolio companies
Approx. 2,400 companies

Creditresearch
Responsible
investment
research

2

Investment
Dept.
Company
research3

Key stocks

Engagement with key stocks
Newly establish for companies
without milestones

4

Engagement Department

Establish milestones

5
Desirable management
Best practices

Relationship Between Engagement, Proxy Voting
and Investment Decisions

Engagement, proxy voting,and investment decisions

Engagement System

Companies in investment universe
Invest/sell

Climate change (TCFD)
ESG
Human rights
specialists
research all Hiversity
companies

Engagement/milestone management

Select target companies/Milestone management/Escalation

Corporate analysts Responsible
Investment
Credit analyst
Department

Policy/supervision

ReportingResponsible Investment Committee
Proxy voting

Redefine the Board of
Directors etc.

Business/Financial Strategies
A

B

C

Corporate analysts andcredit analysts

Corporate analysts and credit analysts research and hold dialogue withindividual companies about their business/financial strategies and ESG,
and ESG specialists dig deep on key ESG themes across all companies.
The Engagement Department monitors to make sure that there are nocontradictions or gaps in our stance, and continually communicates withall parties involved.

ESG Integration

Engagement
Department

Engagement Department
Portfolio
managers

research and carry out engagement.
In addition, ESG specialists who haveabundant and global knowledge
about ESG themes support efforts toimprove corporate value by digging
deeper into ESG initiatives at portfolio
companies for each theme. By
having analysts and ESG specialists,
who together possess a deep
understanding of companies’
financial situations as well as their
ESG initiatives, work together, we
believe that we can boost synergies,
and that this more advanced level ofengagement will lead to
improvements in corporate value.

Proxy Voting

and no improvements are expected,
the Investment Policy Committee may
decide on a company-wide course ofaction such as divestment. In addition,
the Responsible Investment
Committee may reflect this in proxyvoting, such as opposing director
appointment proposals, as necessary.
We are also strengthening thecollaborative relationship between
corporate analysts, credit analysts
and ESG specialists. Analysts not
only encourage portfolio companies
to transform themselves on an
individual industry and company
basis, but also conduct ESG

Engagement

In our engagement program, theEngagement Department manages
milestones, and the details of that arereflected in investment decisions via
portfolio managers and in proxyvoting via the Responsible Investment
Department. We also believe that thiscontributes to the virtuous cycle of theinvestment chain.
If we have communicated to acompany through engagement that its
efforts towards desirable management
are inadequate and we have urged
them to take action, yet still thecompany has not taken adequate
action for a considerable period of time

About Nomura Asset Management

Priority issues

52

Global Equity Engagement
Global Equity Engagement
We continue to enhance ourengagement activities for global
equities as well. There are many global
ESG issues for companies, andcollaboration with overseas investment
teams is essential not only forengagement with overseas companies
but also for engagement withJapanese companies. Because global
equities encompass a large number oftarget countries and companies, weare leveraging the expertise of ourinvestment teams around the globe, as

well as utilizing outside resources, tooptimize our engagement activities.
In 2021 our overseas offices
conducted engagement on a total of
628 topics (the total number ofengagements was 213). We divide
engagement topics into a total of six
topics: business strategy, financial
strategy, environment, social,corporate governance and disclosure/
dialogue. The investment managers
and analysts in each office decide theengagement topics and carry out

engagement with companies.
Our engagement partner overseas
is Sustainalytics, and we either
conduct collaborative engagementwith Sustainalytics or fully outsource
engagement to Sustainalytics (Refer
to Page 56). In addition, we also
make use of collaborative initiatives
such as the Access to Medicine
Foundation to carry out engagement
alongside other asset management
firms on specific topics (For details,
please refer to Pages 57-60).

Example of Engagement by Overseas Office
In 2021, the UK office began a projectto engage with companies that have
not yet had their GHG emission
reductions targets approved by the
Science Based Targets Initiative(SBTi) or committed to doing so. Suchtargets align a company’s objectives
for the pathway of their emissions withwhat is required to meet the Paris
Agreement – limiting global warming
to well below 2°C, preferably to 1.5°C,
compared to pre-industrial levels. The
initial stage of the project was focusedon analysing portfolio companies’
GHG emission reduction targets anddetermining, which companies either
have not had targets approved by the
SBTi or committed to working
towards doing so. The next stage
involved engaging with all thosecompanies to understand theirreasons for not having such targets,
what the challenges they were facing
and whether they were considering/working towards SBTi validated
science-based targets. The SBTi
validation of GHG emission reduction
targets is considered the gold
standard within the investmentcommunity and provides investors

with an opportunity for a more directcomparison between peers andacross sectors. Nomura AssetManagement announced its own
commitment to the Net Zero AssetManagers initiative in Nov 2021
(participated in Aug 2021) and coreto the impact we believe we can haveas a firm will be engaging withcompanies and using our influence
to push them towards committing
and then in due course having theirtargets being validated by the
Science Based Targets Initiative.

Engagement
topic mix

Engagement
region mix

Engagements with Global Equities

Total number of engagement
topics by overseas offices

628

topics (213 engagements)
2021

Engagements by
Sustainalytics* (2021)

319
2021

*Target universe: MSCI ACWI ex Japan

53

Responsible Investment Report 2021

Ratio

Business strategy
Financial strategy
Environmental
SocialGovernance
Disclosure/dialogue
Total number of topics

9%
3%
26%
24%
18%
21%

Numberof topics

55
18
161
149
111
134
628

Ratio

Numberof topics

Europe14%
North America
11%
Asia and Emerging
75%
Total number of topics

86
68
474
628

Engagement and Milestone Management
Since the middle of 2020, in global
equity engagement we have been
sharing our awareness of ESG issues
with companies, setting specificgoals, and carrying out milestone
management until the goals areachieved. In addition to theengagement and milestone

management that we conduct on ourown, we also perform milestone
management for collaborative
engagement with Sustainalytics. As
with milestone management forJapanese companies, milestones are
divided into five stages with an
engagement period of three years. By

establishing clear goals and having a
set timeline, and then evaluating theengagement process, we are able toeffectively implement PDCA (Plan, Do,
Check, Act). The ESG issues focusedon during engagement and the goals
established vary greatly depending on
the company.

Global Equity Milestone Management

P

D

LAN

A

HECK

CT

Milestone
management

Engagement
ESG evaluation

Performance
review
Policy review(Keep records/
progress evaluation)

Examples of Milestone Management*(Refer to Page 55)
1

2

3

4

Company
Company
Communicate
Company
formulates
shares aissues torecognition of plan to address executes plan
portfolio
issuesthe issues
company

5Conclusion

Number ofmeetings

PeriodUS Electric
Utilities
company

2

3months

Collaborative
engagement by
Nomura AssetManagement andSustainalytics

Hong Kong
insurancecompany

2

13months

Engagement
outsourced to
Sustainalytics

Germany
Automobiles

230months

Engagement

Nomura Asset Management’s Global
Equity Engagement

Engagement by
Nomura AssetManagement offices

About Nomura Asset Management

Recognition of topics
and issues Selection oftarget companies

C

O

Discovery ofsubsequent
topics andissuesProxy Voting* 1: Communicate issues; 2: Share recognition; 3: Formulate countermeasures; 4) Implement countermeasures; 5) Conclusion

COLUMN

Introduction of members supporting
engagement activities overseas

Portfolio andteam assistantDiana FrattaliMoreno

Global Utilities
and ESG Analyst

DanielaDorelova

ESG Integration

Diana and Daniela based in the London officeundertake the mammoth task of collating,checking and maintaining the central recordsof quarterly engagement data submitted by thevarious global equity teams. This data forms partof the quarterly Responsible Investment reports
which are published on the NAMUK website andis also available on the interactive database on the
NAMUK website which was launched in 2021.

54

Global Equity Engagement
Examples of Global Equity Engagement (Milestone Management)
South Korean auto components company

Swiss food company
ESG issues

Protection of natural capital, elimination of
deforestation in the supply chain

ESG issues

Diversification of directors and ensuring
director independence, protection ofminority shareholders’ interests

Engagement
overview

Monitoring system and traceability inthe supply chain, initiatives to prevent
deforestation

Engagement
overview

Policy and process for selecting directors,
initiatives aimed at ensuring diversity andindependence in the board of directors
Bolster communication with shareholders,Shareholder return policy

Company
response

Appointed independent directors elected byshareholders, and strengthened engagementwith shareholders
Appointed an independent woman director
in 2021
Promoted the hiring of women on a companywide basis

Goals

Ensure diversity and independence ofboard of directors
Bolster governance aimed at protecting
minority shareholders’ interests

Company
response

Using satellite image data and supply chain
mapping, etc., to monitor that the supply
chain is not involved in deforestation
As of 2020, assessed that 90% of thepurchases of key soft commodities thatcarry the risk of deforestation do not involve
deforestation
Respond to instances of deforestation
occurring in the supply chain, and curb
future deforestation

Goals

Most recent
interview

Most recent
interviewFirst
interview

PeriodPeriodAugust 2021

5

Milestone
progress

Milestone
progress

4
3

Engagement
overview

Company
response

Goals

5

2 interviews

4
3

2

2

1

1

Hong Kong insurance company
ESG issues

Dec. 2021

9months*

Australian material company

Establishment and enhanced disclosure of
KPI related to ESG risks, improvement of thedirector nomination process and bolsteringof gender diversity
Improve gender diversity in the Board of
Directors

ESG issues

Climate change risk management system,
ensure safety of tailings storage facilities

Engagement
overview

Analysis of climate change scenarios anddisclosure related to plans for reducing
Scope 3 emissions
Strengthen risk management aimed atpreventing accidents at tailings storage facilities

Company
response

Formulated climate transition action plan andannounced commitments, including Scope 3
Tied executive compensation to climatechange indicators.
Strengthened risk management of tailings
storage facilities as well as community
engagement

Goals

Disclosure of GHG emissions reduction plan(including Scope 3)
Ensure safety of tailings storage facilities

Enhance disclosure of ESG risk-related KPIAppointed an independent woman director
in 2021
Plans to disclose KPI related to ESG risks
and integrate into the compensation scheme
Diversity in the board of directors, disclosureof KPI related to ESG risks

Completion:

Most recent
interview

Milestone status (progress)

Dec. 2021

PeriodPeriodMilestone
progress

October 2021

13 months*
5

2 interviews

Milestone
progress

4
3

1 Communicate issues

4
3
2

1

1

2 Share recognition

Responsible Investment Report 2021

5

2 interviews

2

3 Formulate countermeasures* The period is the number of months from the start of interviews to December 2021.

55

8 months

4 Implement countermeasures

5 Conclusion

Engagement by Sustainalytics
In global equity engagement, Nomura
Asset Management’s overseas
offices also actively engage portfolio
companies, but due to the broad
scope of coverage for global equities,
we partner with Sustainalytics tocarry out collaborative engagementEwith as well as outsource engagement
to Sustainalytics. Sustainalytics
provides Global Standards
Engagement, in which companies are
selected for engagement based on
violations of international norms suchas the United Nations’ Global

S G

Compact, Material Risk Engagement
covering companies with critical ESG
risks, and Thematic Engagement,
which focuses on solutions to
specific topics, such as localized
water and responsible cleantech
from a global perspective.

E

Global Standards
Engagement

S G

Material Risk
Engagement
Target companies

Engagement Policy

Target companies

Companies that severely
or systematically violate
the United Nations’Global Compact or otherinternational norms

Encourages companies withfinanciallymaterial ESG issues toconstruct strategies to handle ESG
risks and opportunities with the aim ofincreasing long-term corporate value

Companies with particularlyhigh ESG risk in theirindustry

Thematic Engagement
S

E

E

Engagement related toFeeding the future

Engagement related toLocalized water
Target companies

Engagement Policy

Target companies

Agriculture,
agrochemicals,
packaging food, foodretail companies

To enhance water security for all andreduce risks to businesses, promote a
better understanding of water issues
and encourage the development ofregional goals.

Companies with
operations in the Tietê
and Vaal river basins andare highly dependent on
the local water situationE

S

Engagement

Engagement Policy
Efforts to help the food industry transition
to a sustainable world food system,
including managing natural capital such as
land and water, reducing food waste, andresponding to changing consumer trends.

About Nomura Asset Management

Engagement Policy
Encourage companies to resolve severe
incidents as well as build a strategy
aimed at preventing future recurrences
and improving ESG practices

S

Engagement related to
Responsible cleantech

Engagement related toChild Labour In Cocoa
Target companies

Engagement Policy

Target companies

Solar power generationequipment, wind power
generation equipment,
battery-powered
electric vehicles

Aiming to improve the problem of child laboron cocoa plantations, encourages companies
to promote access to education and otherchildren’s rights, with the aim of solving poverty
which is at the root of the child labor problem

Cocoa and chocolatecompanies,
companies in related
supply chainsS

G

Engagement related toModern slavery
Target companies
Companies in appareland constructionindustries

G

Engagement related to The
Governance of SDGs

Engagement related toTomorrow’s Board
Engagement Policy
Encourages companies to have directors
with the appropriate abilities to deal with
important ESG issues and to display thenecessary commitment

Target companies
Companies in extractives,
financial , and healthcare
sectors which haveespecially large ESG
issues and opportunities

Engagement Policy

Target companies

Encourages companies to define meaningful SDGs
strategies that align with their business plans. Aims toinfluence these companies to produce positive outcomes inline with the 2030 SDG agenda.

Consumer goods,
financial, and Informationand communications
technology companies

ESG Integration

Engagement Policy
Encourage companies to adopt a multidimensional strategy that encompasses
structural root causes, rigorous monitoring,
and a continuous improvement approachto address the key risks of modern slavery.

Proxy Voting

Engagement Policy
Encourage an appropriate response toenvironmental and social risks in theiroperations and supply chain, and a productlife cycle approach to promote moresustainable production of cleantech solutions.

56

Cooperation with Initiatives
1
Commitment tono-deforestation together
with other financial
institutions

2021 marked the first full year ofcontinuous collaboration with investee
companies towards achieving zerodeforestation. Throughout this period
we have seen the engagement activity
and the number of productive
discussions picking up significantly,
with the addition of new companies
and investors to the project.
In phase two of this initiative theinvestor group, with the help of oursatellite monitoring partner –Satelligence – expanded the reach of
the project to cover palm oil
plantations and mills in Indonesia. The
conversations we are having withcompanies has also started to include
other key soft commodities
depending on the relevance of thosefor different companies. As part ofthat expansion, a further 21
companies were identified to engage
with on the topic of achieving zerodeforestation. From the list ofcompanies added, 3 belong to Group

Global Utilities and
ESG Analyst

DanielaDorelova

57

Responsible Investment Report 2021

A, which are companies that atpresent show a lack of traceability
efforts and/ or do not disclose their
supplier lists and 18 in Group B,
which are companies that provide
disclosures of existing supply chains
already, however have beenconnected to cases of deforestationin the recent year based on satellite
imagery and artificial intelligence data.
Nomura Asset Management(NAM) committed to take the lead on
two of those supplementarycompanies. The first engagement we
led took place at the end of 3Q21
and resulted in a constructive
conversation with a European
Consumer Staples company. All
flagged deforestation cases are
currently being investigated on the
ground by an NGO the company ispartnering with and the investor
group is awaiting an update in due
course. The second engagement

NAM is co-leading with anotherasset manager has been scheduled
for early 1Q22.
We are proud to announce that inJune 2021, ACTIAM, the organiserof this collaborative engagement
was recognised by theEnvironmental Finance Sustainable
Investment Awards for ESG
engagement of the year.
Looking ahead, the investor groupis planning to further expand the listof companies, as well as carryingout follow ups on some of the initialconversations we had withparticipating companies. In addition,
part of the investors involved in thisengagement project towards no
deforestation, including NAM, arecurrently exploring opportunities touse other innovative technologies inour collaboration with investee
companies to address the growing
importance of biodiversity loss.

Satellite image example of deforestation:
Red boundaries is the deforested area.
Left is Image before deforestation activity begun. Right is Image after deforestation activity begun.

Report pubslished every two years

2
Commitment to access to
medicine

Engagement

WHO (World Health Organization) targets for vaccine supplyA

Prioritise and fulfil COVAX and AVAT contracts as a matter of urgency
B

Proxy Voting

Provide full transparency on the overall monthly production of COVID-19
vaccines and clear monthly schedules for supplies to COVAX, AVAT,
and lower income countries.
C

Actively engage and work with countries that have high coverageand that have contracted high volumes of vaccines to allow for theprioritisation of COVAX and AVAT contracts
D

Commit to share know-how more rapidly, facilitate technology transfer,and provide transparent non-exclusive voluntary licenses.

ESG Integration

investment management industry has
a huge opportunity to have a more apositive impact, and see it of utmost
important that we do what we can incontinuing to engage with companies,
our network and Access to Medicine
to support a more equitable approachand have invested considerable time
into this over the year.
In the first quarter of the year
Nomura Asset Management co-signed
an Access to Medicine statement
supporting a fair and equitable
response to the Coronavirus pandemic.
The spread of new COVID strains has
made it even more urgent to launch
rapid vaccination programmes covering
as many people as possible, including
in low- and middle-income countries,
and the statement represented further

the fallout from the pandemic.
In the third quarter we engaged
extensively with one of thepharmaceutical companies that we
believe to have been the most
responsible with regards to its COVID
vaccine, which had at that date been
priced at cost in developed markets andwill be produced on a not for profit basis
in lower income countries indefinitely.
The company has also performed far
better than peers with regards tosupporting access to its vaccine in lower
income countries. We engaged with thecompany to better understand both
limitations on supporting even greater
access and internal perceptions withregards to expectations of theirinvestors. We strongly reiterated to thecompany that we believe its approach to
not making a profit on vaccines andsupporting access is the right thing to
do and increases our view of the longterm sustainability of the busines
In the fourth quarter we worked
with peers and Access to Medicine todevelop a further open letter to vaccine
manufacturers (to be published in early2022) supporting the WHO’s policy on
vaccine supply (see below). We
recommend that vaccine access goals
should be incorporated into
management compensation andaligned with these goals.

About Nomura Asset Management

The level of vaccination rates in poorer
nations has been extremely slow
relative to richer nations, and theactions of certain companies withregards to the roles they have playedin supporting access has been
disappointing. We believe thatprioritising access to vaccines overnear-term profits is not only the rightthing to do, but the most sustainablelong-term approach for thesebusinesses. This will help lower therisk that new variants develop,
prolonging the pandemic, and also
lowers the risk that vaccine developers
face a change in societal perspectivewith regards to their role in tackling the
pandemic. We strongly believe thecommitment from Nomura AssetManagement to continue to work with
Access to Medicine to achieve more
equitable outcomes. As co-leads of theAccess to Medicine investor
collaboration with one of the leading
vaccine manufacturers globally, we also
engaged with the company directly to
discuss vaccine efforts and strategies
for ensuring access.
In the second quarter we again
worked with Access to Medicine and our
Responsible Investor peers to engage
with pharmaceutical companies directly
involved in the Coronavirus pandemic
response. Following on from thestatement supporting a fair andequitable response to the Coronavirus
pandemic that was signed in 1Q21,
individual company specific letters weredrafted and distributed that addressed
the specific roles we expect thecompanies to play. In total we engaged
with 8 companies. Over the quarter the
WHO publically called for the price of
one of our investee company’s
treatments – used to treat black fungus– to be lowered in India for patients
suffering from Coronavirus. We engaged
with the company to both better
understand its licensing agreements in
India and the levers it can pull to support
access, reiterating our expectations totake a responsible approach to tackling58

Cooperation with Initiatives
Report pubslished every two years

3
Access to Nutrition
Initiative

In May 2021, Nomura AssetManagement became the firstJapanese asset management firm tosign the Investor Expectations on
Nutrition, Diets and Healthdeveloped by Access to Nutrition
Initiative (ATNI).
About one in 10 people in the world
are exposed to severe food insecurity,
while at the same time, one in threepeople are overweight or obese. The“double burden of malnutrition”
comprising undernutrition that hinders
growth and overnutrition that causes
lifestyle-related diseases is an issue

October
2021

companies to urge them to enhancetheir governance, strategy anddisclosure with respect to nutrition,with the aim of solving malnutrition,
obesity and chronic disease problems
related to diets, as well as utilize suchinformation in making investment
decisions. Nomura Asset Management
decided to serve as co-chair forengagement with one Japanese foodcompany. At the first meeting held in
the third quarter of 2021, constructive
discussions about company’s nutrition
strategy took place.
Food companies and their supply
chains are not only involved withnutritional issues, but also
environmental issues such as
biodiversity as well as human rights
issues. By working with international
initiatives such as ATNI and FAIRR, andengaging with food companies andcompanies in their supply chain on awide range of social and environmental
issues, we aim to realize a society witha healthy longevity and a sustainable
food system, as well as to support
the sustainable improvement in valueof our portfolio companies.

Sponsored and took the stage at the ATNI Global Index 2021
Japanese Launch Event

Prior to the Tokyo Nutrition Summit
held in December 2021, Nomura AssetManagement sponsored the ATNI
Global Index 2021 Japanese Launch
Event in October 2021 with ATNI and
Neural. At the event, together with theother participants comprising Japanesecompanies, institutional investors
supporting the Investor Pledge,
government officials and others, weconsidered the results of the Global
Index 2021 study, and discussed topics
including the issues and opportunities
facing companies in the effort toadvance healthy dietary lifestyles, andabout the making the international
nutritional standards consistent withJapan’s specific circumstances.

59

the entire world is facing. Malnutrition
is a serious problem that not only
affects human life and health, but also
has a major impact on the economy
and society, including a decline inproductivity and an increase in medical
expenses. Although Goal 2 and Goal 3of the SDGs aim to eliminate all formsof malnutrition and ensure healthy lives
for all by 2030, progress towards
achieving nutrition-related goals has
been slow. Further cooperation in the
nutrition domain is needed.
ATNI is an independent non-profit
organization, and performs globallyconsistent analyses of initiatives
related to improving accessibility tohighly-nutritious foods and beverages
in the food and beverage industry.
Financial institutions are expected
to play a growing role in the effort tosolve nutritional issues, and the total
assets of asset management firms that
support the ATNI Investor Pledge are
rapidly increasing. As of December
2021, 76 asset managers with total
investment assets of US$16.6 trillion
utilize ATNI’s index reports to jointly
engage with food and beverage

Responsible Investment Report 2021

October 2021
Responsible Investment Department
members spoke at the ATNI Global
Index 2021 Japanese Launch Event,and talked about topics including
nutritional issues and opportunities
facing Japanese companies.

The Investor Expectations on Nutrition, Diets and Healthdeveloped by Access to Nutrition Initiative (ATNI)The ATNI Investor Expectations encourages corporate actionsin the following fields.

Governance

Lobbying

Adopt the five principles of responsible
lobbying activities (legitimacy, transparency,
consistency, accountability and opportunity),
declare that lobbying activities will be limited
to promoting the health and diet of citizens

Formally disclose nutritional strategy andtargets, data on revenues from healthy
products and other related information

Company nameATNI Index score

1

Nestlé

6.7

2

Unilever6.3

3

FrieslandCampina

5.9

4Danone

5.8

5

Arla

5.1

6

Mars

4.8

7

PepsiCo

4.5

8

Kellogg

4.3

9

Grupo Bimbo

4.2

9

Mondelēz

4.2

11

The Coca-Cola Company

3.4

12

General Mills, Inc.

3.1

12

Meiji

3.1

14

Ajinomoto3.0

14Campbell Soup Company

3.0

16

Ferrero2.9

17

ConAgra Brands

2.3

18

BRF

1.7

19

Keurig Dr Pepper

1.5

19

The Kraft Heinz Company

1.5

21

Suntory

1.1

21

Yili

1.1

23

Lactalis

0.9

23

Mengniu

0.9

25

Tingyi

0.7

Source : A ccess to Nutrition Initiative Global Index 2021

November
2021

Took the stage at Tokyo Nutrition for
Growth Summit official side event
sponsored by ATNIAt the Nutrition for Growth Summit 2021, in light of the factthat the “double burden of malnutrition” which includes
undernutrition that hinders growth and overnutrition thatcauses lifestyle-related diseases is a problem in bothdeveloping and developed countries, along with the factthat an increasing number of people are suffering frommalnutrition due to the COVID-19 pandemic, leaders fromnational governments and international organizations
held discussions, shared their thoughts of the direction of
future actions, and announced stronger commitments. The
Summit’s concluding statement summarized the Tokyo
Compact on Global Nutrition for Growth, and highlighted away forward with respect to the five thematic areas to end
malnutrition by 2030: health, food, resilience, accountability
and financing. Nomura Asset Management, along with otherinstitutional investors, has signed the Tokyo Nutrition for
Growth Summit Investor Pledge and announced that it will
utilize ATNI’s Investor Expectations to tackle nutrition issues
as a responsible investor.

ESG Integration

November 2021 A portfolio manager from the U.K. office took center
stage at an official side event of the Tokyo Nutrition for Growth Summit,
and engaged in a discussion with other institutional investors about thecontributions to nutritional issues expected of institutional investors.

Investor Pledge presented through ATNI
at the Tokyo Nutrition Summit 2021
hosted by the Japanese government.
Proxy Voting

At an official side event at the Tokyo Nutrition for Growth Summit
held in November 2021, we participated in a panel discussion
with other institutional investors and discussed the contribution
to nutritional issues expected of institutional investors.

December
2021

Engagement

Transparency

Define healthy products in accordancewith the nutrient profiling system (NPS), set
comprehensive nutritional strategies including
SMART (Specific, Measurable, Achievable,
Relevant, and Time-bound) targets that
improve affordability and accessibility.

Ranking

About Nomura Asset Management

Strategy

Introduce management systems that ensure
the delivery of a comprehensive nutrition
strategy. For example, assigning responsibility
to the CEO and at the senior managementlevel, and link remuneration to the delivery of
the strategy, etc.

Access to Nutrition Initiative
Global Index 2021 Rankings

60PROXY VOTING
We exercise voting rights with an emphasison the effectiveness of our actions through a disciplined androbust decision making process

Characteristics of the Proxy Voting Process
Discipline

Robustness

Comprehensive
discussions

Conflict of interest
management

Judgments on proposals
are made in accordancewith the proxy voting
guidelines

A robust decisionmaking process
centered on the
Responsible Investment
Committee

The Responsible
Investment Committee
itself decides toagree with or oppose
proposals, rather thansimply ratifying thesecretariat’s proposal

Real-time monitoringby the Responsible
Investment Council

Refer to Page 5~6 for more information about the Responsible Investment Committee

61

Responsible Investment Report 2021

Proxy Voting Process
profits to shareholders throughcorporate governance of portfolio

dividends and share buybacks.

companies. The basic structure ofcorporate governance is that
directors and auditors are elected ata shareholders’ meeting, anddirectors (the board of directors) andauditors supervise senior
management through nominations,compensation matters, and audits.
Accordingly, the following three
aspects are particularly important inproxy voting: the election of directors(nomination), executive compensation(compensation) and the election ofauditors (audit). In addition, theappropriation of surplus is importantwhen it comes to Japanesecompanies because Japanesecompanies are often criticized forretaining a large amount of cash anddeposits and being unwilling to return

Moreover, proposals submitted byshareholders have also been
increasing in recent years. Due todifferences in legal systems, it iseasier to make shareholder proposals
in Japan than in Europe and theUnited States, and these proposals
can often have a direct impact on the
management of companies.
Accordingly, these proposals must be
considered carefully.
We regard proxy voting as part ofour engagement with portfolio
companies, and we make judgments
on proposals by all portfolio
companies in accordance with ourown proxy voting guidelines.
The four points noted in the lower
part of the previous page are the uniqueaspects of our proxy voting process.

Basic Corporate Governance
Structure
Shareholders’ meeting
Election

Directors (Board of
Directors) / Auditors
Oversight(nomination,compensation, audit)

Senior management

About Nomura Asset Management

In proxy voting, we focus on the

System to Manage Conflicts of Interest

Nomura Asset Management’s System toManage Conflicts of Interest

As required, the Responsible
Investment Council recommends
improvements to the Executive
Management Committee and/or the
Responsible Investment Committee,
and reports on this to the Board of
Directors and the Audit andSupervisory Committee.
Furthermore, members of the
Responsible Investment Council
attend Responsible Investment
Committee meetings, and are able
to immediately state their opinions.

Responsible Investment Committee

Proxy Voting

Officer and persons in independent
positions in our company, including
independent outside directors. This
Responsible Investment Council
monitors the Responsible Investment
Committee’s decisions as well as its
overall management. This council
monitors stewardship activities,
especially proxy voting involving
conflicts of interest, to make sure thatdecisions are made that do not
adversely affect the interests of clientsas a result of conflicts of interest.

Engagement

Members of the Responsible
Investment Committee, the highest
decision-making body, include, in
principle, only persons involved ininvestment and research decisionmaking, while people in a position witha conflict of interest or people with thepossibility of acting on behalf of such
persons are excluded. In addition,
under the Audit and Supervisory
Committee, we have established a
Responsible Investment Council
comprising only the Chief Conflict

Responsible Investment Council
Chair

Members

CCO*

Independent outside directors and others

Responsible Investment
Department

ESG Integration

Secretariat

Attend*Chief Conflict Officer

62

Proxy Voting Process for Japanese Equities
The proxy voting process is as shown in the figure below. The process for proposals that can be judged in accordancewith the proxy voting guidelines (proposals that do not require qualitative judgment) is different than the process for otherproposals (that do require qualitative judgment).
Proposal judging process
MembersRole(as of December 2021)

Secretariat

Responsible
Investment
Committee

Responsible
Investment
Council

Responsible Investment
Department

Five people involved indecision-making for investment
and research(The Responsible Investment Council
members participate in Responsible
Investment Committee meetings)

One (1) Chief Conflict Officer
Outside directors: 2
Outside experts: 1

Process of
formulating
proxy voting
guidelines

Qualitative
judgment notnecessary

Qualitative
judgment isnecessary

Qualitative
judgment isnecessary*

No conflictsof interest

There is a
conflict ofinterest

Decidewhether toagree oropposeDecidewhether toagree oropposePreparation of proposals

Holds deliberations andmakes decisions based on thesecretariat’s proposals Makes
revisions to the secretariat’s
proposals as required
Reviews from the perspectiveof conflicts of interest
Advises the Executive
Management Committee and/or the Responsible Investment
Committee to make improvements
as required and reports to theBoard of Directors and the Audit
and Supervisory Committee

Formulation of
the guidelines*This includes proposals of group affiliates.

Decidewhether toagree oropposeReference

Opinions from multiple proxy voting advisory firms

Proxy Voting Process for Global Equities
For proxy voting (excluding Japaneseequities), we generally decide to votefor or against a proposal inaccordance with our Global Basic
Policy on Proxy Voting. However, if
the investment managers and analysts
possessing a deep understanding of
local conditions determine it to benecessary, we may, upon deliberation,
make a decision that differs from thebasic policy on proxy voting. The final
decision is then shared with all offices,and proxy voting is then carried out
uniformly on a global basis.

Global Basic Policy for Proxy Voting
Share

EuropeDiscuss

Asia

Discuss

Considering local circumstances,make decision different from thepolicy if necessary

Discuss
Share final decision

Globally-uniform proxy voting

63

Responsible Investment Report 2021

Tokyo

DiscussUSA

Changes in Results of Exercise of Voting Rights forJapanese companies (Calendar year)
Total Company proposals
The ratio of votes against is shown inthe chart below.
Number of
See details on the right.

Proposals on company organizational structure(Ratio of votes against, same as below)

Our ratio of votes against proposals increased in 2021. The main reason for this was ourvotes against outside directors and auditors with long tenures from November 2021 onward.

proposals

23,894
8.2%

7.6%

2019

2020

8.3%

2020

2020

1,811

12.8%

13.3%

2021

2019

2020

2021

The ratio of votes against decreased in 2021. The main reason for this is the progress inthe development of compensation governance.

28.6%

Payment of
retirement benefits
to retiring executives

Number of
proposals

1,087

24.0%

23.7%

83.8%

2020

2021

2019

85.5%

2020

9.8%

2021

2019

Number of
proposals

123

78.0%

2021

Proposals on capital policies(excluding proposals on articles of incorporation)

The application of the criteria to the appropriation of surplus was suspended from June
2020 to May 2021 (see pages 65-66), which led to a decrease in the ratio of opposition in2020 and 2021. In addition, in 2021, there were many proposals related to reorganizationand other capital policies. Please see also the examples of reasons for approval anddisapproval on page 68.

1,500

Organizational
restructuringrelated* 2

4.7%

7.9%

3.3%

Number of
proposals

61

Engagement

Number of
proposals

Appropriation of
surplus

About Nomura Asset Management

174

2019

2019

16.4%

6.8%

Executivecompensation* 1

Number of
proposals

12.7%

5.8%

18,429Number of
proposals

Proposals on executive compensation

The ratio of votes for is shown in thechart below.

16.6%

5.3%

Election anddismissal of
auditorNumber of
proposals

2021

Shareholders’proposals

Total

Election anddismissal of
directors

9.8%

4.5%
0.6%
2019

2020

2021

98.7%

100%

Number of
proposals

57

2020

Proposals on othercapital policies* 3

96.5%

2021
Number of
proposals

100

9.0%
6.8%
3.1%

Reference

Results of Proxy Voting for Global
Companies
January-December 2021
Company Shareholders’proposals
proposals

2019

2020

2021

2019

403

20,761

Votes against

2,587

167

2,754

Total

22,945570

23,515

Ratio of votes
against

11.3%

29.3%

11.7%

Proposals on
articles ofincorporation
3.2%

Number of
proposals

630

3%
1.7%

2019

2020

2021

* In addition to the above, in 2021 we voted on 91
proposals related to the election and dismissal of
accounting auditors, and five other proposals. We voted
against 0% and 40% of these proposals, respectively.
*1 Revisions of executive compensation amounts, issuanceof stock options, introduction/revision of performancelinked compensation plans, executive bonuses, etc.
*2 M
 ergers, business transfers/assumptions, shareexchanges, stock transfers, company splits, etc.
*3 Share buybacks, reduction in statutory reserves, capitalincreases via third-party allotment, capital reductions,share mergers, issuance of class shares, etc.

ESG Integration

20,3582021

Proposals on articles of incorporation

Total

Votes for2020

Proxy Voting

Introduction, update
and abolition of
takeover defense
measures201964Overview of Proxy Voting Standards
for Japanese Companies
Here, we explain our Proxy VotingStandards for Japanese Companies(the “Proxy Voting Standards”).
Please refer to our website fordetails. Since June 2020, theapplication of some standards had
been suspended due to the impactsof the COVID-19 pandemic, but weresumed the application of standards
from January 2022. The situation
surrounding COVID-19 remains

unclear, and is having a considerable
impact on the business performanceof portfolio companies. For
companies and industries for which
the impact of COVID-19 is particularly
large and the application of businessperformance standards is notconsidered appropriate, we conduct
deliberations on an individual basis
and made decisions flexibly.

Proxy voting standards and overview

Reflect engagement status

Stringent judgment on
corporate actions andresponsibility for outcomes

Composition of (Board of)
Directors

Independence of outside
directors

Proxy Voting Guidelines Structure
Global Basic
Policy for Proxy
VotingProxy Voting Standards
for Japanese companies

Application
to Japanesecompanies

Effectiveness of outside
directors

Appropriate compensation
governanceAppropriate incentives

Overview of Proxy Voting Standards
Revisions (November 2021)
The highlights of this revision include
the addition of a new item to reflect
the outcomes of engagement inproxy voting, and the setting ofdifferent standards for return on
equity (ROE) depending on whether
a company’s board falls into thecategory of a monitoring board ornot. With the former, we are aiming
to realize desirable management aspresented on Page 21-22. Regarding

the latter, before the revision, even if
ROE was stagnating, if management
improvement efforts were being
made (judged by the trends forordinary profit and net income), we
did not use the ROE as a reason tovote against proposals. However,following the revision, we will limit
this to cases in which the company’sboard falls into the category of amonitoring board.

Effective utilization offinancial assets
Proxy voting standards and overview

Added new items to reflect
engagement outcomes in proxyvotingChange to businessperformance standards

Raised the minimum level forthe number of outside directors
For proposals on disposition of
surplus, changed the definitionof net financial assets*

For proposals to change
articles of incorporation, addedclassifications that we will votein favor of

65

Responsible Investment Report 2021

In the following cases, we will oppose a company’s proposal

Judgment made and the responsibility taken to deliver
business results by the management and the board of
directors will be scrutinized and rigorously judged.

If minority shareholders’ interests are not protected in M&A, etc.
If actions that significantly damage shareholder value (misconduct, etc.)
are foundIf ROE is slumping. In the case of a monitoring board, if ROE isstagnating and there is no effort being made to improve management

A certain number of outside directors is necessary
to supervise the management team. Particularly in
a company where there is a controlling shareholder(such as a listed subsidiary), there are concerns about
a conflict of interest with the controlling shareholder,
therefore a higher level of supervision is required.

 he number of outside directors falls short of the minimum level
T
Refer to “Overview of proxy voting standards revisions” below for theminimum level

In order to supervise senior management, outside directors
are required to have a certain degree of independence.
In order to prioritize effectiveness, we ensure that thestandards for independence are not too stringent.

If the tenure of office is 12 years or moreW hen the notification as an independent director is not confirmed
If the director has been employed by a company in which the company
is a major shareholder

Outside directors are required to effectively supervise
management.

 ttendance at board meetings is less than 75%
AW hen it is clear that they have not fulfilled their expected roles, such as
the selection and dismissal of senior management or the supervisionof conflicts of interest between the company and its management,
controlling shareholders, etc

Because the process for determining executive
compensation must be transparent, there must be
appropriate supervision (compensation governance).

If there is a proposal concerning executive officer compensation
or executive officer retirement bonuses above a certain level (for acompany that does not have compensation governance in place)

Although stock compensation is important as amanagement incentive, it can be counterproductive if
not properly designed.

 he stock compensation is designed so as to encourage the management
Tteam to be short-term oriented
The persons to whom the stock compensation is given are not appropriate
The stock compensation could lead to excessive dilution

It is essential that financial assets are utilized effectively
to enhance corporate value.

 inancial assets are not utilized effectively, and shareholder returns
F(dividends and share buybacks) are not appropriate

Before revision

About Nomura Asset Management

We will reflect the outcome of engagement aimed atrealizing desirable management (Refer to Page 21-22)

If a portfolio company has not made adequate efforts and improvements
are not expected despite the fact that during engagement we pointed
out that efforts to realize desirable management were insufficient andurged action, and if we determine that this is hindering the improvementof corporate value and sustainable growth, or is likely to hinder themover the medium to long term

After revision

 or a company which does not have a controlling shareholder: Two or 1/3,
F
whichever is greater
For a company with a controlling shareholder: A majority

Net financial assets = cash and deposits + long- andshort-term held securities – interest bearing debt

Net financial assets = cash and deposits + long- and short-term held
securities/deposits paid – interest bearing debt
We will vote in favor of the following proposals for changes to articles
of incorporation, both from the company and from shareholders. Also,with respect to shareholder proposals, we will vote against proposals
if there are items that apply to the articles of incorporation
Proposals related to the formulation and disclosure of basic policy
regarding ESG issues
For companies with listed subsidiaries, proposals related to initiatives in orderto ensure the effectiveness of the listed subsidiaries’ governance system
Proposals which make it possible to hold a virtual-only general meeting*We will vote against dividend disposition proposals if the ratio of the net financial assets to total assets/sales exceeds 30%,
and the shareholder equity ratio, ROE, and shareholder return ratio satisfy certain requirements.

ESG Integration

 or a company which has a board of corporate auditors
Fand which does not have controlling shareholders: Two or
20%, whichever is greater
For other companies: Two or 1/3, whichever is greater

Proxy Voting

We will vote against director election proposals in the following cases
We will vote against director election proposals in the(If board falls under the category of a monitoring board)
R OE has been below the lower of either 5% or the 25th percentile in thefollowing case
ROE has been below the lower of either 5% or the median industry for three consecutive fiscal years,
A nd, the company has not been making an effort to improve management
value in the industry for three consecutive fiscal years,
And, the company has not made an effort to improve(If board does not fall under the category of a monitoring board)If ROE has been below the lower of either 5% or the 25th percentile in the
management
industry for three consecutive fiscal years

Engagement

We will vote against director election proposals in the following cases
D espite the fact that during engagement we pointed out that efforts
towards realizing desirable management are inadequate and urged action,
If the portfolio company is not making adequate efforts and improvements
are not expected,
A nd, this is determined to be hindering the enhancement of corporate
value and sustainable growth, or that it is likely to hinder them over the
medium to long term

66

Supporting an effective transition to a monitoring board
The Thinking Behind It
A monitoring board is a board of

the function of supervising theother executive bodies (management

directors whose main role andmanagement team on behalf of ancommittee, executive committee,

responsibility is to supervise
management. Traditionally, the boardof directors of Japanese companies
have mostly been management
boards, but today, as the number ofboards with outside directors isincreasing, and those with outside
directors are adding even more
outside directors, this is now aturning point for companies tochoose whether to transition to anadvisory board or a monitoringboard. For publicly-listed companies,

unspecified number of shareholders
is absolutely necessary, and theboard of directors is responsible forthis. We expect the board of
directors of a Japanese company tobe responsible for the supervisory
function as a monitoring board.
Some companies have introduced
an executive officer system toseparate supervision and execution,
but if the board of directors is amanagement board, the board of
directors will rank higher than theetc.), and high-ranking executive
officers usually serve concurrently as
directors. On the other hand, aboard of directors which has
transitioned to become a monitoringboard oversees the executive
bodies, so the hierarchicalrelationship with executive bodies nolonger exists. There is also no rankhierarchy between directors andexecutive officers, as they each playdifferent roles.

Advisory board

Management board
Main roles andresponsibilities

Member composition

Management
decisionmaking

Centered on insidedirectors (management
team)

Main roles andresponsibilities

Member composition

Management
decisionmaking, advice tomanagement teamCentered on inside directors(management team), butthere are also a minority ofoutside directors

Monitoring board
Main roles andresponsibilities

Member composition

Supervision of management
team

Centered on outside
directors

We expectcompanies
to transition
to thisIn order to support effective transitions
The effectiveness of the supervisory function is what is important, and through proxy voting and engagement weurge companies to increase effectiveness. So as not to end up encouraging merely perfunctory transitions, ourproxy voting standards include the following.
Show the requirements for determining whether or not a board falls under the category of a monitoring board
If the board does fall under the category of a monitoring board, we will ease the requirements for voting in favorof company proposals related to business performance standards and some standards related to executive
compensation.
We will not oppose company proposals on the reasoning that the company’s board does not fall under the
category of a monitoring board.
Even if the board does not fall under the category of a monitoring board, we will ease the requirements for voting
in favor of company proposals related to executive compensation for companies establishing compensation
governance as an initiative aimed at transitioning to a monitoring board.

Monitoring board
requirements
If a board satisfies all eight of therequirements listed on the right, we
determine it to be a monitoringboard. We view these requirements
as the bare minimum for being amonitoring board.

67

Responsible Investment Report 2021

1 A majority of the directors are outside directors
2 Has nomination committee and compensation committee with outside directors comprising a majority
3 Nomination and compensation committee chairpersons are outside directors
4 There is at least one woman director
5 The company has not introduced a takeover defense plan
6 The company does not hold strategic shareholdings in excess (less than 10% of invested capital)
7 If the company is a company with a board of corporate auditors, director’s term in office is one year
8 If there are controlling shareholders, the chair of the board of directors is an outside director

Disclosure of proxy voting results(Reasons for voting for or against proposals)
Since the October – December 2019the reasons for those proposals we

Here, we introduce some specificquarter, we have been disclosing thefeel require special explanation. This

examples of disclosure with respectreasons that we voted for or against
all proposals, and we have been
providing detailed explanations ofis an effort to further increase
visibility with respect to appropriate
proxy voting.

to proposals we feel require special
explanation.

Proposals we made voting decisions on that differ from our proxy voting standards
We sometimes make decisions that differ from our proxy voting standards based on engagement with a company.
GSM type

Proposer

Proposal classification

Voting result

Reason for proxy voting result

Ordinary
GSM

Company

Executive compensation

Voted for

Although it did not satisfy our standards regarding the period of stockcompensation, we voted in favor of the proposal based on the fact that it would
meet our standards for payments to senior management and we confirmed theneed to make payments to employees.

Ordinary
GSM

Company

Introduction/change/
abolishment of takeover
defense plan

Voted forWe voted in favor of the takeover defense plan, determining that it is possible thatthe acquirer did not properly disclose information about the purpose of holding alarge number of shares in the process of making a large-scale purchase.

There were a variety of proposals, but there were a large number of proposals related to M&A and capital policy.
GSM type
Ordinary
GSM

ProposerCompany

Proposal classification
Organizational
restructuring-related

Voting result

Reason for proxy voting result*

Voted
against

Proposal related to a share transfer. We voted against the proposal, judging
there to be a large conflict of interest with minority shareholders and decidingthat the company had not fulfilled its accountability with respect to the fact thatthe financial terms were unfavorable.

Company

Proposal related to othercapital policy

Voted forSpecial
GSM

Company

Proposal related to othercapital policy

Voted for

Proposal concerning the issuance of preferred shares via third-party allotment.
There were concerns about conflicts of interest and efforts to protect the interestsof minority shareholders, but we voted in favor of the proposal based on thereasonableness of the management decision.

Company

Proposal related to othercapital policy

VotedagainstSpecial
GSM

Company

Introduction/update/abolishment of takeover
defense plan

Voted
against

Proposal related to the gratis allotment of stock acquisition rights in accordance with atakeover defense plan. This takeover defense plan would restrict the shareholders’ rightto freely buy and sell shares, and the Board of Directors did not provide a sufficientreason to justify the move, so we opposed it in accordance with our standards.

*We have omitted the sections that refer to individual company names.

Proposals involving the possibility of a conflict of interest

Proxy Voting

Special
GSM

Proposal related to a share exchange and third-party allotment. If this proposal went
through, the company would become a listed subsidiary of a major shareholder, so
there were concerns about a conflict of interest with minority shareholders, and we
judged that the efforts to protect the interests of minority shareholders were insufficient,and that the company had not fulfilled accountability for the financial terms of the deal.
Therefore, and we voted against the proposal in accordance with our standards.

Engagement

Special
GSM

Proposal about the issuance of class shares via third party allotment. The funds
would be used to secure working capital and repay interest-bearing debt, and it was
unclear whether this would contribute to improving corporate value. In addition, control
rights would be affected if these shares were converted to common stock. Despite
this, there were concerns about inadequate efforts to protect the interests of minority
shareholders, but we voted in favor of the proposal considering the current situation inwhich business performance is sluggish due to the impacts of the COVID-19 pandemic.

About Nomura Asset Management

Proposals we determined to require special accountability

Here, we present our proxy voting results on proposals by Nomura Holdings, our parent company. Proposals by Nomura
Holdings and other Group affiliates are not shown in a table, but are written about in detail in the opening text.

Reasons for voting results on Group companies’ proposals(8604) Nomura Holdings
ESG Integration

Proposal No. 1: Appointment of 12 directors (four inside directors, eight outside directors)
Result: We voted for all proposals.
Reason for voting result: Our standards were satisfied.
We held thorough discussions about violating the antitrust law in Europe and losses
related to client transactions in the U.S., but due to the fact that the punishmentsfrom the government institutions for the former had not been finalized, and there
was no finding of maliciousness for the latter, we decided that at the current point intime these are not acts* that significantly damage shareholder value.
*A cts that are problematic due to being misconduct, violations of laws, regulations or tradingexchange rules, or problematic from the standpoint of ESG efforts or being a good social citizen.

68Proxy Voting FAQ
Q Can engagement have an impact on proxy voting?
We carry out engagement
and proxy voting so that
portfolio companies implement
desirable management (including
efforts on ESG issues)*, and toencourage them to improve corporate
value and realize sustainable growth.
We reflect the opinions of portfolio
companies and information about
portfolio companies obtained throughA

engagement in our revisions of our
proxy voting standards. Additionally,
we take the information we attainthrough engagement into
consideration to make highly-effective
decisions when actually carrying out
proxy voting.
In addition, following this mostrecent revision, we may vote against a
director election proposal if, despite

our indicating through engagement toa portfolio company that its efforts torealize desirable management are
inadequate and our urging the portfolio
company to take corresponding action
over the medium to long term, theportfolio company has not taken
adequate steps and improvement is
not expected.

Relationship between engagement and proxy voting
Engagement

Reflect efforts towards realizing
desirable management

Formulation of proxy voting
standards

Decisions that differ from our
proxy voting standards

We may vote against director
election proposals if efforts torealize desirable management(including initiatives targeting ESG
issues)* are inadequate.

Information and opinions obtained
through engagement are valuable
for formulating proxy voting
standards.

Our decisions may differ fromthe proxy voting standards if we
can identify actions targeting
improvement, or in cases ofcircumstances we did not
anticipate at the time the proxyvoting standards were formulated.

Example: Through engagement,
we found that some Japanesecompanies are making progress onenhancing the function of supervisingsenior management both in formand substance. Based on this, we
decided that the time had cometo introduce voting standards thatwould support the transition to amonitoring board.

Example: For stock compensationthat did not satisfy our standards, we
voted in favor of a proposal due tothe fact that, through engagement,
we found that the payment tosenior management did satisfy ourstandards, and although it did notsatisfy our standards, we confirmed
the need for the payment toemployees.

*1 R efer to Page 21-22 for information about
desirable management

COLUMN

69

Annual Schedule of a Proxy Voting Representative
June, followed by March and May, areWe exercise our voting rights for more
the months in which the largest
than 1,900 portfolio companies in
numbers of Japanese companies holdthese three months. Below, we discuss
their general shareholders’ meetings.
the approximate annual schedule forproxy voting, focusing on this periodwith a high concentration ofshareholders’ meetings.

1

2

3

Revisions to Proxy Voting
Guidelines

Engagement to inform companies
about the revisions to our Proxy
Voting Guidelines

Engagement in anticipation of thegeneral shareholders’ meeting.

July – OctoberNovember – January

February – May

As soon as the busy season for shareholders’meetings ends, we start reviewing our
Proxy Voting Guidelines. Taking into
consideration the actual conditions ofJapanese companies, which we have learned
through engagement and proxy voting, we
make revisions to reflect changes in laws
and regulations, such as revisions to the
Corporate Governance Code.

We conduct engagement mainly with theportfolio companies that we think will besignificantly impacted by the revisions to our
Proxy Voting Guidelines. We communicate
our views and encourage them to strengthen
their corporate governance. In addition toindividual meetings with portfolio companies,
we also explain our views at seminars.

As the busy season approaches, we ramp up
engagement with an eye towards shareholders’meetings. This is the time when companies
are finalizing the proposals they will make atshareholders’ meetings (the proposals havealready been finalized in some cases), so
portfolio companies tend to be most interested
in the prospects for individual proposals.
However, we try to keep these discussions
focused on strengthening corporate
governance over the medium to long term.

Responsible Investment Report 2021

It seems like you vote against company proposals only a small percentage of the

Q time. Can you comment on that?
Proposals concerning theelection of directors are themost common type of proposal, andtherefore have a large impact on our
opposition ratio. Taking the continuityof the board of directors into
consideration*1, we limit our opposition
to candidates who are responsible forindividual cases in the election of
directors. This is the reason why our
opposition rate looks relatively low (seediagram on the right). We opposed 6%
of director appointment proposals(April – June 2021), but we opposed
one or more candidates in the director
appointment proposals for 33% ofcompanies (same period), so we donot view our opposition percentage as
being particularly low.
Meanwhile, there are few proposals
concerning executive compensation and*1 U nder the Companies Act, a minimum of three directors is necessary in order to hold a Board of Directors meeting.

Guideline for Director Election
Proposals
Applicable to reason*2 for opposition

Persons subject toopposition

Judgments on
individual proposals

All candidates

If proposal we
opposed is rejected

Board of Directors
meetings cannot beheld due to absenceof directors

Board of Directors
meetings can beheld with otherdirectors

Opposition ratio
will riseUndermines theability of the Boardof Directors tocontinuefunctioningOpposition ratio
will declineEnsures the abilityof the Board of
Directors tocontinuefunctioning

We chose this*2 Shortage of outside directors, low ROE, etc.

Q What about proxy voting with respect to group affiliates?
Committee will discuss the proposal
referencing the opinions of multiple
proxy voting advisory firms.
Members of the Responsible
Investment Council attend the
Responsible Investment Committee
meeting and participate in the

Jun.
Proxy Voting

Aug.

Sep.

Oct.

1

Dec.

Jan.

2

Feb.

Mar.

Apr.

May.

Jun.

Jun.

3
Proxy Voting

Annualschedule

Nov.

deliberations. Also, following theconclusion of the Responsible
Investment Committee meeting, theResponsible Investment Council
holds a meeting where it closely
examines the issue from theperspective of conflict of interest.

4
5
6

Engagement

As with other portfolio
companies, we makedecisions about whether to support
or oppose proposals for groupaffiliates based on our guidelines. As
a proposal with a conflict of interest,
the Responsible Investment

A

About Nomura Asset Management

capital policy, and therefore their overall
impact is small, but our opposition ratio
to these types of proposals seems to berelatively high. The effectiveness ofcorporate governance comes into
question particularly for proposals related
to M&A and financing, so we carefully
discuss these issues, including theimpact that a rejection of the proposal
would have, and we vote against the
proposal if we decide that it will not
contribute to the interests of minority
shareholders. We aim to combine proxyvoting with engagement to appeal toportfolio companies, and encouragethem to establish desirable corporate
governance systems and enhance theircorporate value. We position proxyvoting as one means of accomplishing
this, and we do not feel that our
opposition rate indicates our stance.

A

6

6

6

4

5

6

Period when most generalshareholders’ meetings are held

Engagement to strengthen
corporate

Disclosure of proxy voting results

All year, particularly November – MarchJanuary/April/July/October

We explain our proxy voting philosophy
and let portfolio companies explain to us
how they are working to strengthen theircorporate governance, and we then talk withthem about their efforts.

After the end of each quarter, we disclose
the results of our proxy voting, and thereasons behind our voting activities, on our
corporate website.

ESG Integration

March – June,
This is a period when we need to accurately
judge a large number of proposals. We exercise
voting rights for roughly 100 companies per
day during the peak period in June, so it also
happens to be the period when we most wantcompanies to provide information disclosuresthat are clear and easy to understand.

70

ESG
INTEGRATION
Features of Integration

EquityInvestment

71

When evaluating the ESG
characteristics of portfolio companies,
we focus not only on potential risks
but also on opportunities to generate
future earnings. Although each equity
Fixed Income
strategy integrates ESG considerations Investment
into its investment philosophy andprocess in a different way, a common
ESG evaluation platform is shared by
all strategies.

Responsible Investment Report 2021

We select and model ESG factors thatare material for credit investment
based on a variety of research. In
addition to this ESG factor model
integration, qualitative evaluations bycredit analysts are also consideredwithin the investment process toimprove the portfolio’s risk-adjusted
return and sustainability.

Integrating ESG factors into thethe analysis of a company’s

the Americas, as well as companies

investment process is critical, as we
believe financial performance andfundamentals (financial information
used to evaluate a company), we

in Asia and emerging countries. In
addition to global themes such as

ESG efforts (non-financial

conduct our own ESG assessment

climate change and human rights,

information) are closely related andfor both equity investing and fixed

we assess specific material ESG

influence one another. At Nomura
Asset Management, we utilize
proprietary ESG evaluations of
portfolio companies when making
investment decisions. In order toeffectively incorporate ESG
considerations and other nonfinancial information into theinvestment process to supplement

income investing. This integration of
ESG factors into the investment
process not only helps reduce
downside risk, but is also an essential
component to improve returns.
ESG assessment is not limited toJapanese companies, as the scopealso includes companies indeveloped countries in Europe andconsiderations for individual
industries and companies, and utilize
information from multiple externalsources to create our proprietary
ESG scores. These ratings are madeavailable to all portfolio managers for
integration into the investment
decision-making process.

Equity Integration
Equity Integration Approachthemselves in the future as financial
information such as corporate profits
and growth.
“Business risk evaluation” aims toascertain the stability and sustainabilityof future profits based on whether or not
the company is able to accumulate
intangible assets, and to determine
whether or not future profits will fluctuate
sharply due to changes in the business

Investors’ Basic Philosophy
on Corporate Value
Accumulation of future earnings /cash flows

Nonfinancial
capitalTime
Passageof timePresent

FutureProxy Voting

Present

Past

Engagement

Corporatevalue

environment. In other words, this“business risk evaluation” is looking at
how to evaluate the discount rate when
discounting future cash flows to thepresent value. To put it another way, thevaluation of intangible assets is an
important aspect of determining whether
the valuation (relative price metric for thestock price) of the investment target
company is too high or too low.

About Nomura Asset Management

Financialinformation
Nonfinancial
capitalCorporate
value

Passageof timeFinancialinformation

Discounted
present value“Continuity between financial and non-financial” andthe “Impact on long-term profits/cash flow generation”
are of the upmost importance.

ESG Integration

Corporate value is essentially thediscounted present value of future free
cash flows. The business assets thatgenerate future free cash flow include
not only fixed assets such as
production facilities, but also various
types of intangible assets (capital) notfound in financial statements, including
human capital, natural capital andsocial capital. Evaluating such capital,
or business assets including nonfinancial information, is necessary inorder to analyze corporate value. We
believe that, in addition to financial data,
reflecting non-financial data in company
evaluations, and making investment
decisions based on these evaluations,is essential in order to increase theadded value of our investments.
There are two aspects to evaluatingintangible assets that do not appear in
a company’s financial information. The
first is evaluating the profits that
intangible assets can bring, or a“growth evaluation,” and the other is a“business risk evaluation” related to
the risks to which a company’s profits
are exposed.
For “growth evaluation”, thebusiness impact of climate change,
supply chain resilience, intellectual
property, R&D capabilities andorganizational strength, quality ofhuman resources and diversity areamong the sources of competitivenessthat help differentiate a company fromits peers. These factors manifest

72

Equity Investment Process
An in-house proprietary ESG score,
which is jointly produced by corporate
analysts and ESG specialists, isutilized for ESG integration into ourequity investments. The ESG score
includes environmental, social,governance, and SDG-related
considerations, and is a quantified
representation of our analysis andevaluation of risks, opportunities, andother factors. These scores serve as
an important piece of information
utilized by investment decision makers
within the investment process/platforms for each investment product(see diagram below). While individual
stocks in the portfolio are bought andsold according to their investment
ratings, the same score serves as acommon language for discussion
among corporate analysts, ESG
specialists, and portfolio managers,
allowing for more effective ESG
integration into operations. If
additional ESG research is deemednecessary, the Engagement
Department takes the lead in
conducting the necessary
engagement activities incollaboration with corporate analysts
and ESG specialists.
Our ESG evaluation framework isalso applied to our global equities
investment. In addition to global
themes such as climate change andhuman rights, we assess specificmaterial ESG considerations forindividual industries and companies

and utilize information from multiple
external sources to create ourproprietary ESG ratings. These
ratings are made available to all
portfolio managers for incorporation
into the investment decision-making
process. For example, at ourSingapore Office, country specialists(CS) are assigned to cover eachcountry in this diverse region, andthe main source of added value is thebottom up research conducted bymeeting with companies (2387meetings in 2021). Investment ratings
are assigned to individual stocks
based on the fundamental researchcarried out by CSs as well as the
ESG evaluation. The portfolio isconstructed based on these ratings.

Strategy platform

Portfolio

Team

FinancialanalysisTeam

Engagement Department

Select target companis/Milestone management/Escalation

Corporate analysts
Credit analysts

ESG
evaluation

ESG specialists
Team

Nomura AssetManagement

ESG score
Team73

Responsible Investment Report 2021

Efforts to Advance ESG Integrationassessments. When selecting, buying
or selling a stock, the portfolio manager
checks ESG information through adatabase that centrally manages avariety of ESG data in-house prior to
making an investment decision. In
addition, each investment manager
controls the ESG risks andopportunities in the portfolio based on
the ESG integration policy of the fundfor which they are responsible. For
example, the carbon footprint of aportfolio is a very important indicator for
asset owners aiming for net zero. Whenselecting a stock, we check the carbon
footprint of the company in question
and always strive to keep the carbon
footprint of the portfolio lower than thebenchmark. In fact, there have beencases where we have chosen to invest
in a different company in the same
industry with the same investment
grade, if that other company is actively
working towards net zero.
Meanwhile, coordination withengagement activities is also an
important element of ESG integration.

The reaction of top management during
engagement meetings and the status of
milestone achievements are also
important signals for managers
evaluating “opportunities.” Therefore,
many of our investment managers
attend meetings with top executives,
where they discuss ESG issues.
By accumulating more experienceand case studies of gathering
information to make proper decisions
on ESG-related risks and opportunities,
performing ESG evaluations ofindividual companies, managing
portfolios, and carrying out
engagement, we are able to selectstrong companies that can continuously
grow amid the rapid changes in society
for our customers.

About Nomura Asset Management

Issues such as climate change,
human rights problems, and diversity
have already become common
issues that need to be addressed
globally and over the long term, andthey also have a major impact on our
portfolio management. Ourinvestment teams manage portfolios
based on a stock selection processthat takes various ESG factors into
consideration (qualitative andquantitative decisions about ESG).
When assessing a company as aninvestment target, managers ofactively-managed portfolios must
consistently ask “Is this a company
that controls ESG risks andopportunities and can continue togrow in five or 10 years?” andmanage the portfolio by examining
portfolio companies from a longterm perspective.
In our investment process, inaddition to ESG specialists, ESG
investment managers and investment
teams including portfolio managers are
partially responsible for ESG

Engagement

Portfolio Manager’s ESG Viewpoint

Geographic risks andopportunities

 tatus of production and sales in regions withS
enhanced regulations
Changes in the supply chain structure

Growth of environmental/social
solutions businesses

Profitability of environmental/social solutions
businesses
Current customer and market development
strategy
Growth targets
Assessment of R&D

ESG track record

Environmental performance (CO2 emissions,stranded asset exposure, eco-friendly
procurement ratio, etc.)
Social performance (employee turnover rate,
diversity, safety indicators, actions on humanrights, etc.)
Governance (governance structure,compensation, misconduct/scandals, etc.)

ESG Integration

Current and future segment mix
Assessment of M&A strategy

Proxy Voting

Business risks andopportunities

Chief Senior Portfolio Manager

Masaaki Tezuka
74

ESG Score Content

contribute to the achievement ofenvironment. With respect to matters

SDGs, as well as the management

such as the TCFD, we analyze and

The following is an overview of ESG

resources that contribute to this.

evaluate based on a company’s

scoring. The assessment comprises

Meanwhile, for risks, our evaluations

integrated report and materials

four items each with a weighting ofemphasize items that can beposted on its website. With respect

25%. These four items are
Environment, Social, Governance,
and SDGs. There are a total of
approximately 100 evaluation items,with a good balance between risks
and opportunities. In terms ofopportunities, we evaluate items
including management’s vision andcommitment with respect to ESG
issues (ability to explain, plan, andexecute initiatives, as well as pastachievements), along with the future
growth potential of companies thatquantitatively analyzed, such aswhether or not a company has
provided disclosure and/or obtained
certification, as well as the data
disclosed and trends for such data.
For “Environment,” we look atwhether a company is managing
transition risks and physical risks
related to climate change andincorporating such risks into its
business strategy. We also look atwhether the company’s management
has expressed a commitment to theto evaluating natural capital andother environmental assessments,
we evaluate items such as thoserelated to waste management,
conservation of river and marine
resources, and biodiversity (including
preventing marine pollution).
For “Social” factors, our evaluation
is divided into looking at a company’s
internal and external risks as well as
measures to address such risks. The
former includes assessments such as
those related to employees’ human

ESG Scores forJapanese Equities
At Nomura Asset Management, our analysts and ESG specialists collaborate tocompute proprietary ESG scores which represent Japanese companies’ true ESG
abilities. ESG and other non-financial information are extremely important inpredicting corporate value based on future cash flows. Researching, analyzing, andthen scoring a portfolio company’s non-financial information makes it possible tomeasure corporate value while taking ESG into account, and we believe doing soleads to higher added value of our investments.

rights and the utilization of humancapital, while the latter relates to theissues surrounding the quality of
products and services as well as
supply chain management. Recently,
much attention around the world has
been given to human rights initiatives.
For Japanese companies in particular,
we emphasize the evaluation of supply
chain management at business sites
both in Japan and overseas.
In “Governance,” we evaluate multiple
items to make sure that companies have
put appropriate structures/systems inplace, such as the composition of theboard, outside director independence,
and whether nomination andcompensation committees have been
established. Meanwhile, we also
75

Responsible Investment Report 2021

evaluate qualitative issues such as
dialogue with top management andsuccessor planning. The uniquestrengths of our corporate analysts, whohave been studying and analyzing
companies extensively for many years,
are reflected in our evaluations.
In “SDGs”, we proactively evaluate
a company’s stance vis-à-vis working
on future opportunities. We evaluate
whether a company considers
solutions to SDG issues as business
opportunities and appropriately
incorporates them into its businessstrategies. In doing so, rather thansimply looking at whether or not acompany has businesses that enable
it to contribute to the achievement ofeach goal, we conduct extensive

research and forecast future sales
mixes capable of contributing to
SDGs goals, and look at whether or
not a company has excellent humanand technological resources todifferentiate itself from industry peers.
To determine ESG scores, corporate
analysts who have frequent contact withcompanies and know the companies
they cover inside and out collaborate
with ESG specialists who analyze ESG
from a cross-industry perspective. They
work together, identifying items where
one or the other possess particularexpertise. Ultimately, the Responsible
Investment Department is responsible
for the final scores, which are thenshared with the related departments.

ESG Scoring Revision
With respect to Japanese equities,

we regularly revise our scoring forin 2022. Making revisions

portfolio companies’ ESG-related

Japanese equities to allow us toperiodically allows company

disclosure has improved andalways conduct appropriate

evaluations through ESG scores tocompanies’ ESG initiatives havebecome more advanced. As a result,evaluations. Following on from 2021,
we have made some minor revisions

be even more effective. Please refer
to Page 30 for details.

New ESG Scoring Framework
score
Main category

Sub-category

Sub-items

E

E1:E nvironmental strategy, senior
management’s initiatives

Environmental E2:climate change
25% of total

S

Social
25% of total

Governance
25% of total

opportunity

E3:N atural capital, otherenvironmental issues

risk

S1:S ocial strategy, senior
management’s initiatives

opportunity

S2:Working environment, humanrisk
capital
S3:Human rights, other social
risk
issues
G1:Top management (evaluation ofopportunity
senior management)
G2:Evaluation of board of directors

risk

G3:Other governance items

risk

SDGs
25% of total

SDGs
opportunity

risk

Evaluate individual subitems in line with thetheme of the larger
grouping
Reflect importance(materiality) in score,taking industry
characteristics into
account for eachcompany.

opportunity

E

S

G

Environmental

Socia

Governance

E1

S1

G1

opportunity

opportunity

opportunity

E

S

G

Environmental

SocialGovernance

E2/E3

S2/S3

G2/G3

risk

risk

risk

minus

risk

:Evaluation mainly by ESG specialists

Note: S ub-items are individually evaluated in accordance with sub-category themes.
Importance (materiality) is reflected in scores, taking into account the specific characteristics of the industry for each company.

About Nomura Asset Management

G

opportunity :Evaluation mainly by analysts

plus

Utilizing ESG Scores
Research division

Reflect in corporate value
assessment Discoverstocks to recommend

Investment division

portfolios, but also for client
reporting and our ESG investment
management.

More advanced ESG
integration

Engagement

ESG scores generated byquantification of non-financial
information are used not only forinvestment decisions and new
product development in investment

Reflect in investments
and decision-making
ESG monitoring of funds
managedEngagement Department
Ressponsible Investment
Department

Identify ESG issues
Use in engagement

ESG scores are determined not only based on disclosed data but also using information on futurerisks and opportunities. By using this ESG score, we can compare the strengths and weaknessesof portfolio companies’ ESG efforts, and use the scores in engagement such as discussing future
course of action.

Utilizing ESG score data ininvestment activity

ESG scores are posted on an internal research-sharing system. The materials used by investmentcommittees and others to evaluate investment value for individual companies contain usual
financial indicators as well as ESG scores and ESG comments by the analysts in charge. Thesescores are actively utilized in making investment decisions.

Utilizing ESG scores in portfolio
construction and monitoring

When building and reviewing portfolios, we check scores for individual companies, use them tomake comparisons with industry peers and see how a company’s score has changed, as well as
to check the ESG quality of the portfolio. Investment managers can also use the items comprising
the ESG scores of individual companies as a standalone data. Additionally, by regularlycomparing the portfolio’s overall ESG score to the benchmark, they can use ESG scores to check
ESG risk bias and other factors.

ESG Integration

Utilizing ESG score data inengagement

Proxy Voting

Internal information platform(research information)

76

IMPACT INVESTING
77

Responsible Investment Report 2021

What is impact investing?
At Nomura Asset Management, we

Impact investment is generally

believe that impact investing is notdefined as investment that aims tolimited to simply having an impact on

create environmental and/or social

the environment or society, and wefeel it is important for the impact togenerate earnings and cash flows,which will ultimately be returned toasset owners and otherstakeholders. In carrying out impact
investing, we extensively analyze theimpact that a portfolio company hason the environment and society, as
well as the portfolio company’s
earnings/cash flows generated. At
the same time, we engage with theportfolio company to help it set KPI
and targets that generate impact, as
well as proactively support businessactivities aimed at achieving them.

impact and an economic return on
investment at the same time. As
opposed to the conventional twodimensional evaluation of risk andreturn, impact investment requires theadvanced skill of three-dimensional
evaluation covering risk, return andimpact. Impact investing is defined as
one category of ESG investment andsustainable investment given the factthat it is expected to bring about
environmental and social
improvements.
The United Nations SDGs areoften used as a framework for
impact investing. Adopted by the

Our Impact Investment Process
Our ESG Statement is the starting
point for our approach to impact
investing. The statement identifies
issues such as climate change,
natural capital, and social
responsibility (human rights, diversity
and inclusion, value creation torealize well-being within society) as
key topics. Through internal
discussions on the above, we have
set impact goals which we aim toachieve through our impact

Environment

investment. These goals target
urgent issues facing the world
including climate change, natural
capital depletion, access tohealthcare, social responsibility (forexample, financial services andaccess to drinking water). We thenestablish indicators to measure thedegree of improvement for eachestablished impact goal. For
example, for the impact goal
“Eliminate Communicable Disease,”

Goal

Mitigate climate change

Indicator Atmospheric CO 2 level

ExamplesGoal

Society itigate the Obesity Epidemic/M
Eliminate Communicable Disease

Indicator WHO’s mortality rate for illnesses

and communicable diseases

Social issues
that should be
solvedEstablish impact goals andmonitoring indicators

NomuraAsset Management

Portfolio company

Impact investment
Engagement

United Nations in 2015, the SDGs
set forth 17 goals and 169 targets.
The SDGs indicate the enormous
needs of the global market andeffective risk management methods
that lead to returns on investments
in portfolio companies, and areviewed as useful indicators formeasuring the impacts on theenvironment and society.
Proactive impact investing andaccompanying engagement activities
create outputs and outcomes fromthe business activities of portfolio
companies, as well as impact on theenvironment and society related to
SDGs, etc., and return both economic
value and social value to asset owners
and other stakeholders.

Individual investors

Clients/business partners

Employees

more detailed CPI (Company
Performance Indicator) are then set.
Carrying out detailed and continuous
monitoring of the established CPI
allows us to not only appraise eachcompany’s impact, but also measure
the extent of the improvement of theoverall portfolio and the impact itself.
Moreover, we are encouraging
companies’ efforts to solve issues
by engaging with portfolio
companies based on what we learn

SDGs
7.3

Double the improvement in energy efficiency

End the epidemics of AIDS, tuberculosis,
malaria and neglected tropical diseases andcombat other communicable diseases
Reduce premature mortality from noncommunicable diseases through prevention
and treatment

Identify SDGs topics

from monitoring. By repeating thisprocess, we will be able to continue
to generate impacts that solve
social issues while also pursuingeconomic returns.
Our impact investment fund isconstructed based on the so-called“outside-in” concept, in which social
issues are applied to portfolio
companies, and is shared within ourdomestic and overseas impact
investment strategies.

Secure clean energy
Carbon emissions
reductions

Continuous dialogue
utilizing monitoring
indicators and KPI

 tatus of development
Sand widespread useof drugs combatting
the three maincommunicable diseases
Increase in R&D spending

Continuous dialogue
utilizing monitoring
indicators and KPI

Establish CPI for
individual companies

Engagement withportfolio companies

ESG Integration

Identify investment field Select/Define portfolio companies

Pension funds, etc.

Increase global percentage of renewable energy

SDGs
3.4

Business activities
Inputs (investment)

Environment/Society = Stakeholders

SDGs
7.2

SDGs
3.3

Economic returns
Socialreturns

Proxy Voting

Medicine-related businessesCompanies related to the healthcare
value chain

Returns

Engagement

Renewable energy developers
Manufacturers possessing technologies
EV/OEM manufacturers
Highly-efficient office building
construction and management

Investment

Impacts
Outcomes
Outputs

About Nomura Asset Management

we can evaluate the global progressby monitoring indicators such asmortality rates for HIV, tuberculosis,
malaria, and other illnesses
published by World HealthOrganization (WHO). Additionally, we
specify further segmented areas ofinvestment linked to these indicators,
and then select companies to invest
in in that area. Companies includedin the investment universe are linked
with the 17 goals of the SDGs, andReturns78

GSE
Global Sustainable Equity Strategy

US Obesity Related Death Rates(Deaths per 100,000)
Heart Disease (LHS – CDC Data)
Diabetes (RHS – CDC Data)(people)300(people)
27

250

25

200

23

150

21

100

19
17

50
’00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19(year)

Source: P repared by Nomura Asset Management using CDC(Centers for
Disease Control and Prevention)

Global Number of People with Diabetes and Annual Deaths
Global Diabetes Sufferers (LHS)
Global Disease Deaths (RHS)(millions)
600
550
500
450
400
350
300
250
200
150
100

(millions)
7.0
6.5
6.0
5.5
5.0
4.5
4.0
3.5
3.0

’95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 (year)

Source: P repared by Nomura Asset Management using IDF(International
Diabetes Federation)

Nomura Global Sustainable Equity Strategy(GSE)
Lead portfolio manager

Alex Rowe

Nomura Asset Management’s UK
Office manages the Equity Strategy
Nomura Global Sustainable Equity
Fund based on the concept of
impact investing. This fund not only
encourages companies to tackle thekey challenges facing the world
today, but also imparts social impact
on a variety stakeholders byencouraging them to address thesustainability of their businesses.
The key is establishing impact goals
and measuring their impact. By
establishing monitorable indicators
related to the impact goals, we canmeasure the degree of improvementin each country or region

79

Responsible Investment Report 2021

(developed or emerging), and at the
global level. Also, we measure avariety of social impacts from the
CPI of individual companies linked
to the actual portfolio.
In addition to monitoring CPI for
individual companies, throughengagement we support the actionsof portfolio companies to achieve
our impact goals. In engagement toachieve impact, in addition todialogue with portfolio companies,
we support the achievement ofbetter outcomes by enabling
coordination between portfolio
companies that want to incorporate
the leading ESG-related outcomesof other companies into their own
ESG initiatives. In this way, we
promote corporate action toward
the achievement of the impact goals
we have established by engaging
with portfolio companies in a variety
of ways through CPI monitoring byinvestment managers.
Furthermore, we announce andshare with stakeholders theoutcomes of this strategy in our
Impact Report. We believe that wewill be able to reach our impact
goals by working with multiple
stakeholders to solve and share themany challenges facing society.

GSE individual company’s CPI

We are at the heart of an ecosystem
in which there are multiple avenues
to support better outcomes be thatthrough collaboration with our
responsible investment peers,
supporting intercompany
collaboration or working together
with NGOs and the media, how webehave as professionals or
supporting the next generation of
impact investors. Engaging for
impact is one very important avenue
through which we can support better
outcomes and over the year weundertook 41 engagements withportfolio companies.

Investment
Perspective

Can expect an improvement in qualityof life by providing diabetes treatment

Alignmentwith SDGs

Good Health and Well-being

SDGs 3

Individualcompany’s
CPI

ImpactNumber of patients that received thecompany’s treatment for diabetes
32.8mm(2020)

N umber of patients that received treatment for diabetes
Period : 2017-2020(10 thousand people)
3,400
3,300

3,280

3,200
3,100
2,920

2,900
2,800
2,700

2,770

2,600
2,500
2017

2018

2019

2020

(year)The Global Sustainable Equity Fund Investee
Company Impact

Engagement
ThemesThe Global Sustainable Equity strategy’s portfolio
companies have achieved the following environmental andsocial impacts through their business activities (FY2020).

Count

49%

20

Eliminate Communicable
Disease12%

5

Global Access to Clean
Drinking Water

5%2

Mitigate Natural Capital
Depletion

5%

2

Global Access to Basic
Financial Services

3%

1

Mitigate the Obesity
Epidemic

2%

1

Other Sustainability

24%

10

Total

Mitigate Climate Change

Environment

Energy generation output
by wind power generationequipment
Supplied 56TWhof renewable energy

Mitigate Natural Capital Depletion
Reduced the use of

157,000 tonsof raw material consumption

41
Eliminate Communicable Disease/
Mitigate the Obesity Epidemic
Provided obesity-related
treatment to

Global Sustainable
Equity Fund Impact
Report 2020
Nomura Global Sustainable
Equity Strategy
https://www.nomura-am.co.jp/special/esg/
library/impact-report.html

32.8 million

patients in 2020

Social infrastructure maintenanceand productivity enhancement
Provided 7billion litersof clean water through filterrelated products in 2020

ESG Integration

Society

Proxy Voting%

Mitigate Climate Change

Engagement

Topic

About Nomura Asset Management

3,000

3,000

IMPACT INVESTING

Engaging for Impact

80

Concept of “Japan Sustainable Equity
Strategy” investment
Profit growth = Investment return (vertical axis)
Large

Active funds

Small

Large

ESG
investment/
impactinvestment

Impact investment (social value creation) =Solving social issues (horizontal axis)

companiesthat createsocial value

Small

JSEG

Right

Shintaro Harada
MiddleJapan Sustainable Equity Growth Strategy

81

Portfolio Manager

Main Portfolio Manager

Jun Takahashi
Left

Portfolio Manager

Kodai Sasaki

We began managing this strategy inusual investment returns, seeks toin companies that, in addition to2016 based on the philosophy ofcompanies addressing social issues
through their core businesses. In the2010s, a wide range of stakeholders
started to become aware of the needfor sustainability with respect to theenvironment and society. Also, theoutbreak of the COVID-19 pandemic
from the start of 2020 brought abouta significant change in our way of
thinking. Specifically, it made us
think even more intensely about of
how we can address the wideranging issues we face.
As a part of this, “impact investing”
is attracting attention as aninvestment method for addressing theenvironmental and social problems
that we face. This is an investment
method that, in asset management
products, in addition to earning theaddress issues in society through thelong-term holding of shares ofcompanies engaged in businessactivities with an eye towards
addressing social issues. One
illustrative example is the 17 SDGs
(Sustainable Development Goals) that
the United Nations aims to achieve, inwhich companies and otherstakeholders address social issues
through business activities. This
strategy shares the same philosophy.
Because ESG issues involve many
topics to be addressed over the
medium to long term, we believe thatinvesting in companies on thepremise of long-term ownership willallow us to make investments that
seek both excess returns and aim toaddress ESG issues. Utilizing ourown ESG cores, this strategy invests

passing our fundamentals evaluation,
we view as being able to createsocial value to contribute toachieving the SDGs. On top of thetwo dimensions of risk and returnused in conventional equity
investment, we are able to add athird dimension of impact creation(addressing social issues) to ourevaluation process.
Furthermore, we believe thatsharing portfolio companies’ outcomes
and broad and cumulative impacts isan essential process expected byinvestors looking for us to addresssocial issues. Going forward, we want
to help build a prosperous society byaddressing social issues throughimpact investing.

Responsible Investment Report 2021

Impact from JSEG Portfolio Companies

Investment
Perspective

Development of drugs for the three maincommunicable diseases (tuberculosis,
HIV, malaria) and contribution towidespread access to drugs that
combat HIV in developing countries

Alignmentwith SDGs

End the epidemics of AIDS,
tuberculosis, malaria andneglected tropical diseases, andcombat hepatitis, waterborne
infectious diseases and othercommunicable diseases.

SDGs3.3

JSE portfolio companies have achieved the following
environmental and social impacts through their businessactivities (FY2020)

CO 2

Mitigate Climate Change
Contributed to the
reduction ofIndividualcompany’s
CPI

Status of development andwidespread use of drugs to treat thethree main communicable diseases,
increase in R&D investment

ImpactR&D investment amount: ¥54.2 billion(18.2% of FY2020 sales)

Environment

81.09 million tonsof CO 2 by selling productswith strong environmental
performance
Sold approximately

83,000 EV traction

motors, which strongly curb
greenhouse gas emissions

R&D Expenses Period: FY2018-FY2020

Mitigate Natural Capital Depletion(¥100mn)

269,000m3 of
ecosystem-friendly
certified lumber

550
500

Reduced plastic packaging,etc. by 122,000tons
by reusing plastic bottles,
switching away from using
plastic bottles, increasing theconcentration of, and using
film containers for, detergentsand other products.

450
400
2018

2019

2020

(year)

Source: P repared by Nomura Asset Management fromcompany reports

Eliminate Communicable Disease

Period: January 2020 – December 2021
Number of people affected (left axis)
Number of deaths (right axis)(10,000 people)
35,000(10,000 people)
600

30,000500

25,000400

20,000300

15,000200

10,000100

0020/2 20/6 20/10 21/2 21/6 21/10
20/4 20/8 20/12 20/4 20/8 21/12
Source: P repared by Nomura Asset Management from
Our World in Data

12 million people
Invested¥323.4 billion

in R&D costs to promote
development of new drugs
Improving Living Standards
Used disinfectant to provide
drinking water for

1.1 million people

Maintaining Social Infrastructure
and Improving Productivity
Provided intermediary

Nomura Asset Management
Japan Sustainable Equity
Growth Strategy

https://www.nomura-am.co.jp/special/esg/
library/impact-report.html

services to 405 small- andmedium- sized enterprises
facing business succession
problems due to the aging
of executives and otherissues, thereby helping to
avoid ¥376.7 billion
in economic losses.

ESG Integration

JSEG Impact Report
2021

Proxy Voting

5,000Society

Provided 30 million
tablets of antifilarial
medicine for neglected
tropical diseases to

Engagement

 lobal number of people affected asGwell as deaths from COVID-19

About Nomura Asset Management

In order to prevent
deforestation, procured

600

IMPACT INVESTING

JSEG individualcompany’s CPI

82

ESG + R
Scoreo

ESG Score

Sc

E Sc

S

re

ore

R ScoreG S cor e

ESG

Resiliency

Environment
GHG Emissions
Waste Intensity
Natural Capital etc.

Climate Resiliency
Energy Security etc.

Social
Product Safety
Social License
Human Capital etc.

Supply Chain Resiliency
Service Reliability etc.

Governance
Sustainability Strategy
Governance Quality
Regulatory Scrutiny etc.

Cyber Security
Logistics Management etc.

Investment Department, Fixed Income Group
Head of Sustainable Investment, Fixed Income

Jason Mortimer

Development of ESG Integration in Fixed
Income Investment
Identifying new and emerging Sustainability issues for ESG integration
From the start of our Fixed Income
sustainable investment journey,
Nomura Asset Management has
been committed to using ESG data
and analysis to improve riskadjusted-returns for our investors.
Our Fixed Income ESG integration
approach is guided by two
considerations that are mostappropriate for Fixed Income
investors: 1) Avoid downside risk,

83

Responsible Investment Report 2021

and 2) Incorporate price-material
ESG data exclusively. We believethat focusing on the material ESG
factors most likely to influence
investment returns in an objective
and systematic way is key toconsistently and accurately pricing
the full spectrum of non-financial
risks increasingly present in fixedincome markets.
To remain on the cutting edge,

and capture potential investmentalpha opportunities, we incorporate
new and emerging sustainability
issues in our ESG research andinvestment integration with aforward-looking bias. By identifying
and focusing on these potential ESG
risks, we can better position our
portfolios to avoid these risks when
they materialize.

Lessons from the pandemic: Bond Investors should
consider both Sustainability and Resiliency
Our Fixed Income ESG research andintegration approach evolved in
response to the COVID pandemic
from the early stages of 2020. For
example, we observed directly how
the pandemic revealed criticalweaknesses in global supply chains,
and these types of risks were notcaptured from previous assessments.
Further broadening our perspective,
we identified supply chain security,
energy security, cyber security, andlogistics bottlenecks as increasingly
impactful ESG issues for investors toconsider under the umbrella of what
we call “Resilient Investment”.

Issuer based
Quantitative Data

Cyber Security
Performance Assessment

Management 0−10
Exposure 0−10

Upgrading NAM’s proprietary Fixed Income ESG
Process to incorporate new data and sources of risk
as Climate Resiliency and Energy
Security, Supply Chain Resiliency,
Cybersecurity Performance andLogistics Quality in our ESG
assessment of corporate andSovereign debt issuers as well. In ourview, a more comprehensive view of
the non-financial drivers of corporate
and sovereign risk can contribute tobetter risk-adjusted returns.

About Nomura Asset Management

We believe “Resiliency” of investments
is an increasingly important topic forinvestors to consider as a compliment
to Sustainability. NAM credit ESG
scores is built upon our own unique
database of ESG factors and industryspecific factor weights, which can be
flexibly upgraded by incorporating
new and meaningful data sources.
Recently, NAM has integrated“Resiliency” performance factors such

Industry Research +Proprietary Research

Industry based Cyber
Security Materiality

Cyber Risk
Score

ernance
G ov

m ent

ESG+R
Score

on

al

ir

ci

En

v

ESG Investments
Portfolio Allocation

Proxy Voting

Fixed Income ESG+R Score
Low
(1)

25%

Low-Med Med-High
(2)
(3)

25%

25%

High
(4)

25%

Credit Investments
ESG Engagement

ESG Integration

systematically influences capital
allocation decisions across NAM’s
global corporate credit investment
strategies.
We also seek to use theseCybersecurity performance insights
in our fixed income investor
engagement. With a comprehensive
analysis of specific cyber weakness
and comparative performance, we
can provide actionable feedback tocompanies for better addressing
their corporate cybersecurity risks.
We believe that when companies
know that investors are
systematically integrating
cybersecurity into the investment
process, and are given transparency
into what they can do to improve,
then they will be incentivized toinvest to reduce cyber risks to theirbusiness and society at large.

So

As one example, Cybersecurity is anincreasingly material risk to both
corporate operations and national
critical functions such as power
generation and healthcare, where
system security is only as strong as
the weakest link. For example, we
now incorporate a quantitative
measure of corporate Cybersecurity
performance into NAM’s Credit ESG
scoring model for nearly every
Japanese and major global company.
We combine these cyber risk
ratings with NAM’s proprietary
framework for industry-specific cyberrisk materiality. This “Materialityadjusted Cybersecurity Performance
Score” directly integrates into the NAM
Credit ESG model’s assessment ofGovernance risk. This way, we canincorporate cybersecurity performance
into the overall ESG credit analysis that

Engagement

NAM’s approach to integrating corporatecybersecurity risk in the credit investment process84

Global ESG Balance FundTaking ESG into consideration, theBond Mother Fund and the USD ESG

Global ESG Balance Fund engages in

Emerging Government Bond Motherdiversified investment in three assets:
fixed income, equities, and REITs.
As distinctive examples of NAM’s
ESG bond products , the Global ESG
Balance Fund includes the USD ESG
Developed Countries Corporate

Fund. These funds were developedin 2020 as investment strategies thatinvest in bonds issued by companies
and emerging countries that are
tackling environmental issues.

Investment Process
We have incorporated into theinvestment process a mechanism bywhich we score the environmental
efforts of companies and countries,and exclude issuers with low scores(negative screening). We select bonds
to invest in by considering qualitativeevaluation and fundamental analysis
by credit analysts, as well as ESG
evaluation, creditworthiness and yield,
among other factors.

Developed country
corporate bonds

Utilizing fixedincome ESG
evaluations

Emerging country
government bonds
Small-cap equities
REIT

Developed
countries

Emerging
countries

U.S. dollar-denominated developed country
corporate bonds rated BBB or higher

U.S. dollar-denominated emerging market
government bonds rated B or higher

Evaluate companies from an ESG perspective

Evaluate countries and government-affiliatedinstitutions from an ESG perspective

Remove bond issuers with scores in thebottom 30% from the investment universe

Remove bond issuers with scores in thebottom 30% from the investment universe

Environmental score
Climate change risk score

Environmental score
Policy continuity score

Portfolio construction

US Dollar-Denominated ESG Developed Country Corporate Bonds
ESG evaluation is an increasingly
important element in global corporatebond investment from the perspectiveof controlling downside risk. We reduce
downside risk by integrating the ESG
evaluation calculated using our
proprietary quantitative model into our
traditional investment process using therelative value evaluation based on thefundamental analysis of the issuer.
We are also leveraging our
proprietary development strengths
to develop a variety of investment
methods. Because the evaluation
model uses various ESG-related
elements, we are able to carry out
investment focusing on various
factors, such as environment.
The USD ESG Developed
Countries Corporate Bond Mother
Fund, which is included in the Global
ESG Balance Fund, places anemphasis on efforts to addressenvironmental issues such as
greenhouse gas emissions reductions
and water resources conservation,and has reflected this emphasis in theinvestment process. We aim to reduce
downside risk by integrating this into

85

Responsible Investment Report 2021

our traditional investment process,and by investing in corporate bondsof companies that take environmental
problems into consideration, we strive
to support these companies’
businesses and contribute to solving
environmental problems.
In 2021, COP26 (the 26th
Conference of the Parties to the United
Nations Framework Convention on
Climate Change) was held in Glasgow,

Scotland, and the world’s attention
was focused on climate change. The
Paris Agreement adopted in 2015 calls
for keeping the global temperature rise
this century well below 2°C above
pre-industrial levels and pursuingefforts to limit this rise to 1.5°C. It issaid that society needs to achieve net
zero (effectively zero CO2 emissions)by 2050 in order to achieve this targetof limiting warming to 1.5°C.

Example of Using ESG Evaluation in Developed Country Corporate Bonds

NextEra Energy
NextEra Energy is headquartered in Florida, USA, and is one of the largest power companies
in the United States. In terms of environment, NextEra Energy engages in the power
generation business using renewable energy such as wind power and solar power generation,and is one of the leading companies in this industry. According to NextEra Energy’s 2021
ESG report, the company’s goal is to double its electricity generation by 2025 while reducing
its CO 2 emissions by 67% compared to 2005. Through its investment in renewable energy, in2020 the company had already reduced its CO 2 emissions by 57% compared to 2005, and issteadily making progress toward achieving its target. As efforts to reduce CO 2 emissions tocurb climate change attract attention worldwide, we will evaluate the value of businesses that
respond to these social demands from the perspective of ESG, and we believe that doing so
will enable us to curb the downside risk in corporate bond investing.

Senior Portfolio Manager

Portfolio Manager

Yuka Fudeno

Sohei Koizumi

Nanako Iwasaki

U.S. Dollar-Denominated ESG Emerging Market Government Bonds
risks and to reducing downside risks
particular to investment in emerging
markets, which is extremely
important in improving long-term
investment performance.
ESG evaluation is an absolutely
essential element in understanding
downside risk of an issuing country’s
creditworthiness, which is the crux ofemerging market fixed income investing.
Traditional fundamental analysis

Example of Using ESG Evaluation in Emerging Markets

Oman

Emerging market bond weightings
Country/territory% of net assets

1 Mexico
2 Indonesia
3 China
4 United Arab Emirates
5 Chile6 Brazil
7 Qatar
8 Columbia
9 Oman10 Peru

9.00%
8.90%
7.80%
6.80%
6.50%
6.40%
6.30%
5.90%
5.60%
5.60%

ESG Integration

Oman is a country located on the Arabian Peninsula. Oil and gas-related businesses
account for a large portion of its national revenue. Although Oman’s economy is highly
dependent on crude oil, in terms of ESG, the country is seen as the “Switzerland of the
Middle East,” and we value the fact that it pursues neutral diplomacy in the Middle East.
We also appreciate that Oman is working to realize economic growth taking environmental
changes into consideration, including the government’s effort to reform the economy sothat it is not dependent on crude oil and its goal of being ranked in the Top 20 (out of 180
countries, 110th as of 2020) in the environmental performance index (EPI) by country. In
the second half of 2021, a leading credit ratings agency announced an upgrade to Oman’s
rating outlook, pointing to the country’s structural reforms, alongside the improvement in
Oman’s finances due to the rise in crude oil prices.

Proxy Voting

Oman

and ESG evaluation complement one
another, and we believe that
integrating ESG evaluation into the
traditional investment process
reinforces our evaluation of an issuingcountry’s creditworthiness.
For example, countries working to
mitigate climate change will be viewed
positively by investors, and can enjoy
the benefits of being able to keep
financing costs down over the
medium to long term, while countries
that are not making adequate efforts
might suffer economic losses in the
future, including running the risk ofbeing subject to carbon taxes.
Taking ESG factors into
consideration allows us to reflect
issuing countries’ potential risks into
our creditworthiness evaluations.

Engagement

For our emerging market debt
strategies, we invest in U.S. dollar
denominated bonds issued by EM
governments and state-owned
enterprises.
When analyzing emerging
markets, evaluating them from a
broad perspective, such as theirlong-term environmental efforts andtheir political risks, leads to better
identification of a country’s potential

About Nomura Asset Management

Portfolio Manager

Note: Weights as of January 2022.

86

COLUMN

Creation of a Scheme to Donate to Regional Revitalization Efforts– Supporting hometowns through investment trusts -As a part of efforts to support
regional revitalization, Nomura
Asset Management has partneredwith regional financial institutions
to create a donation scheme
utilizing the Corporate Hometown
Tax system (a tax system that
supports regional revitalization),and made donations in many
prefectures throughout Japan.
We are proactively engaging in
ESG-related activities in order tocreate a sustainable society andsolve social issues, based on the“Drive Sustainability” concept thatis a point of focus for the entire
Nomura Group. Nomura AssetManagement considers regional
revitalization to be an important
ESG issue. Currently, regional
areas across Japan are working
with the national government towith regional financial institutions,have determined can contributeto regional revitalization efforts.
We have branded this project the“Kokorozashi” Project. In FY2021, weplanned to donate money to a totalof 47 projects in 33 prefectures.

Outline of donation scheme targeting regional revitalization

FY2020 donations

Total ofdevelop their own independent
initiatives for a sustainable
society leveraging their uniquecharacteristics and to solve
issues facing Japan, such as the
rapid decline in population and thesuper-aging of society. As a partof this movement, regional financial
institutions are leveraging theirexpertise and networks to contributeto regional revitalization efforts.
Under the donation scheme,
we will contribute a portion of therevenues from our ESG investment
products to SDG-related local
government projects throughout
Japan. We will make donations
once a year, based on the amountof sales of selected funds ateach regional financial institution.
The selected funds are the ESG
funds that we, in collaboration

27projects/

Regional Revitalization

19prefectures

SDG-related local
government projects

clients

FY2021 planned donations

Total of

Revenues

47 projects /InvestRegional financial
institution

33 prefectures

Corporate version of hometown
tax (“Furusato Nouzei”) system

Donation
Investment
instructions

Nomura AssetManagement

ESG fundRevenues

Management
fee

InvestGlobal equities / bonds / REITs“Kokorozashi” Project web page

ESG Invest

Regions where donations
were made using this scheme
Presentation ceremony (Tochigi Prefecture)

Certificate of appreciation(Ibaraki Prefecture)87

Certificate of appreciation(Kyoto Prefecture)

Responsible Investment Report 2021

 refectures where donationsP
were madeIn Japanese credit investment, we

We established the Engagement

proactively carry out dialogue (engagement)

Department in November 2021 inwith companies in our investment portfolios
in order to both maximize the investment
returns for assets we manage as well as tofulfill our stewardship responsibility as a
responsible investor.
In addition to meetings with issuers
when they issue corporate bonds and atother times, we also attend engagement
sessions between companies and ourequities investment teams. Collaboratingwith the equities investment teams not
only results in more opportunities toengage with the issuer’s management
team, but also allows us to communicate
to the company what we view as thedesirable approach, both from the equity
investment side as well as the fixedincome investment side. As a result, ourengagement has become more effective.
It is generally believed that, in therelationship with companies, fixedincome investment managers and equity
investment managers have different
perspectives and conflicting interests.
However, at Nomura Asset Management
the goal to improve medium- to longterm corporate value is shared by bothsides. As such, there are hardly any
instances of disagreement between theequity investment teams and the fixedincome investment teams. In addition,
the idea of improving corporate value,that both investment divisions share, isclose to the perspective of corporate
management, so it leads to constructive
dialogue with companies.

order to further raise the level of ourstewardship activities (Refer toP51-52). In addition to Japaneseequities portfolio managers,
corporate analysts, and ESG
specialists, fixed income portfolio
managers and credit analysts also
participate in the Engagement
Department’s initiatives.
The Engagement Department,with respect to companies in theJapanese fixed income investment’s
portfolio, holds discussions and set
goals that will lead to addressing
ESG issues and increasing corporate
value over the long term adding theperspective of fixed income
investment. On top of that, credit
analysts engage with issuers andalso carry out joint engagement withcorporate analysts and ESG
specialists as needed. The progresson engagement is shared internally,
and investment decisions arereflected in decision-making, thereby
making effective engagement in
fixed income investing possible.

Right

Senior Credit Analyst

Left

Credit Analyst

Toshihiko Suzuki
Ayaka Tamura

Fixed Income Engagement

01 issuance of ESG-labeled bonds

Example of dialogue regarding the02 Appropriate Financial Targets

Example of Dialogue about Setting

The company has a stable business model, as well
as extremely high financial improvement targets that it set hoping toplease ratings agencies and fixed income investors. A company setting
goals for improving financial metrics is usually desirable from a credit
investment perspective, but this company seemed to be considering arisky new investment to increase profitability in order to both improvefinancial metrics required by credit investors as well as shareholder
returns sought by equity investors. During engagement, we specifically
told the company what we discussed with our corporate analysts, thatfrom the standpoint of long-term improvement in corporate value, it
is important to set targets including both equity investors and fixedincome investors in discussions about appropriate financial metrics
levels that are commensurate with business risk, rather than focusing
on improving financial metrics alone. The manager of the company was
surprised that a credit analyst wanted the company to pursue longterm corporate value enhancement rather than short-term financial
improvement, and replied that they would tell senior management thatthey had received this type of opinion from an investor.

ESG Integration

We regularly held discussions related to bondissuances and other matters with managers of a company’s financedepartment, and had been talking to them about issuing ESG
labeled bonds (bonds that specify the purpose of the funds raised).
Subsequently, our corporate analysts and credit analysts gained an
opportunity to jointly engage with the issuer’s senior executives. At
the meeting, our credit analysts told the company’s senior executives
that issuing ESG labeled bonds is one means to communicate to themarket that you are tackling climate change, and also that it would
lead to an improvement in the evaluation of the company’s ESGrelated initiatives as well as an increase in its corporate value. Thisview was something we had discussed repeatedly with our corporate
analysts. Subsequently, the company issued ESG labeled bonds tofund its investment in renewable energy as part of its transition plan
towards being carbon-neutral by 2050. We believe this is an effective
example of how corporate analysts and credit analysts collaborate
to engage with the senior management of portfolio companies
following internal discussions.

Ex.

Proxy Voting

Example of Engagement

Ex.

Engagement

Strengthening Engagementin Japanese
Fixed Income Investing

About Nomura Asset Management

Distinctive Characteristics
of Fixed Income
Engagement88I would like Nomura Asset Management to pursue corporate
governance appropriate for an asset management company
I have been a member of the

I am also an outside director andwith its portfolio companies

Responsible Investment Council sincechair of the Audit and Supervisory

its establishment, during which time I

Committee, so I would also like to

In addition, Nomura Asset

have also attended Responsible

talk about company-wide efforts.

Management has set achieving

Investment Committee meetings.
Recently, there has been an increasein proposals related to corporate
restructurings and acquisitions. Bothdeal structures and interests among
involved parties have become
increasingly complex, but Responsible
Investment Committee members give
their opinions and hold serious
discussions on each proposed matter.
Even for matters involving conflicts ofinterest, the Responsible Investment
Committee stringently applies theproxy voting standards when making
decisions, under the supervision of the
Responsible Investment Council.

Since 2021, the Board of Directors
has narrowed its agenda items toimportant management issues, andthis has made meetings more
efficient and led to lively discussions.
The Audit and Supervisory
Committee regularly submits thefindings of audit activities to theBoard of Directors, and in 2021 theexecutive side began providing
written countermeasures to deal withissues identified in the findings. I
expect that Nomura AssetManagement will continue to pursue
corporate governance suitable for an
asset management firm that engages

diversity and inclusion as a key
issue, and is instituting various
measures to achieve its target ratioof women employees in managerial
positions. Incorporating diverse
opinions into the company’s
management is important, so I hopethat the company achieves this goal.

April 1973
January 1977
June 1978
January 2011
June 2015

Certified as an attorney (Dai-Ichi Tokyo Bar Association) Joined
Nishimura, Komatsu & Tomotsune (now Anderson Mori &Tomotsune)
Partner, Nishimura, Komatsu & Tomotsune
Harvard Law School (LL.M.)
Of Counsel, Anderson Mori & Tomotsune (present post)
Outside Director, Nomura Asset Management Co., Ltd. (present post)

regarding their business activities.

Akiko Kimura
Outside director

Appointed in 2016

Messages from the Responsible
Investment Council
April 1996
April 2002
October 2005
April 2006
April 2020
June 2020

Full-time Assistant, School of Commerce, Meiji University (AssistantProfessor from April 2000)
Member, Fund Management Committee, Pension Fund Association
for Local Government Officials
Professor, School of Commerce, Meiji University (current)
Visiting Professor, School of Business, University of Michigan
Member, Fund Management Committee, National Federation of
Mutual Aid Associations for Municipal Personnel (current)
Outside Director, Eisai Co., Ltd. (current)

The Responsible Investment Council istasked with managing conflicts of interestby verifying overall stewardship activities.
Like other members, I attend every
Responsible Investment Committee
meeting regardless of whether or not a
conflict of interest is being discussed. In
2021, the Responsible Investment
Committee held discussions on amending
the Basic Policy for Responsible
Investment, and the Responsible
Investment Council members, including
myself, proactively stated our opinions andwere satisfied with the outcome. I thinkthat both the Responsible Investment
Committee and the Responsible
Investment Council functioned very
effectively throughout the year.
As an academic, I study trends

Yumiko Miwa
Outside Expert

Appointed in 2020

among institutional investors both inJapan and overseas, and I find that ESG
is becoming increasingly important bothin terms of investment decisions anddialogue. The Corporate Governance
Code was revised in June 2021, andthe revised version includes specificlanguage about enhancing thefunctions of the Board of Directors,
promoting diversity in managerial
positions, and addressing issues
surrounding sustainability. In November
2020, Nomura Asset Management
introduced proxy voting standards that
promote the concept of a monitoringboard. These standards were developedin anticipation of the revision of the
Corporate Governance Code, and I am
encouraged to see such forward-looking

action. At COP 26 held in November
2021, significant progress was made on
corporate disclosure of ESG-related
information. Nomura Asset Management
is actively pursuing ESG initiatives as a
responsible investor, including
participating in collaborative engagementwith international organizations.
I would like to see Nomura AssetManagement become an ESG leader
in the asset management industry.

I would like Nomura Asset Management to be a leader in the domestic
and international asset management industry in the field of ESG
89

Responsible Investment Report 2021

Nomura Asset Management has a sincere and detailed approachto discussions. I look forward to their ambitious initiatives.
have been in the investment industry

Governance Code and the changes

member of the Responsible Investment

and also worked in equities investment

to the Tokyo Stock Exchange’s

Council in June 2021. At the firstfor many years. In light of mymarket segments, I think ESG has

Responsible Investment Committee

experience over the years, I feel that

become firmly established as an

meeting I attended, the committee
reviewed recent engagement activities
and discussed key topics. Over thesubsequent six months, agenda items
included revisions of the proxy voting
standards, decisions on individual
proposals, and revisions of Basic
Policy for Responsible Investment. I

the Responsible Investment
Committee has a serious approachand holds detailed discussions. The
Responsible Investment Council’s
main responsibility is to monitor
conflicts of interest. I believe this to besynonymous with monitoring whether
or not the Responsible Investment
Committee is following through with its
earnest approach.
ESG, which is gaining increasing
attention, is an important topic not
only for the Responsible Investment
Committee, but also for Nomura
Asset Management as a whole. After
another revision of the Corporate

issue that companies need toaddress. In October, Nomura AssetManagement established a 2050 Net
Zero goal, and then revised its ESG
Statement in December. To me,these actions show the willingness
not just of the Investment andResearch Division (which includes
the Responsible Investment
Committee), but also among senior
management, to actively engage in
ESG. As a member of the
Responsible Investment Council, I
look forward to observing andsupporting Nomura AssetManagement’s ambitious efforts.

Newly
appointed

Ryoji Maeda
Outside director

Appointed in 2021

April 1977
April 2002
December 2002

Joined Sumitomo Life Insurance Company
Executive Officer, CIO of Investment Headquarters, Sumitomo
Life Investment Co.,Ltd.
Operating officer, Sumitomo Mitsui Asset Management Co., Ltd.

June 2007

President and CEO, (Chairman of the company from April2014) , Sumitomo Mitsui Asset Management Co., Ltd.

April 2018

Permanent Audit & Supervisory Board Member, Allianz Global
Investors Japan Co., Ltd.

June 2021

Outside Director, Nomura Asset Management Co., Ltd.

Meetings held

The Responsible Investment Council
comprises only the Chief Conflict Officer andpersons in independent positions in Nomura
Asset Management, including independent
outside directors. Currently, the Responsible
Investment Council has four members: one
Chief Conflict Officer; two independent
outside directors; and one outside expert.

Since its establishment in September 2016,
the Responsible Investment Council has met
a total of 38 times through December 31,
2021. The Responsible Investment
Committee is attended by the members of
the Responsible Investment Council, who
promptly provide their opinions.

Positioning

About the Responsible
Investment Council
The Responsible Investment Council verifies
the appropriateness and validity of
stewardship activities, including theformulation of proxy voting guidelines, proxyvoting decisions, the formulation ofengagement policies and engagement
activities, thereby aiming to prevent adverse
impacts on clients’ interests due to conflictsof interest or other issues.

Proxy Voting

The Responsible Investment Council ispositioned under the Audit and Supervisory
Committee. As necessary, the Responsible
Investment Council recommends
improvements to the Executive
Management Committee and/ or the
Responsible Investment Committee, andreports such recommendations to theBoard of Directors and the Audit andSupervisory Committee (Refer to “System toManage Conflicts of Interest” on Page 62).

Engagement

Member composition

About Nomura Asset Management

I became an outside director and a

Organizational Structure for Responsible Investment
Board of Directors

Supervision/verification/ recommendations,etc.

Executive
Management
Committee

Dialogue with portfolio
companies (engagement)
Reports on activities, proposals of issues, etc.

Responsible Investment
Committee

Investment andresearch division

Secretariat: Responsible Investment
Department

Formulation of policies, supervision initiatives, etc.

Proxy voting
Integration into investment
decisions (ESG integration)

ESG Integration

Supervisory Committee

Main activities

Responsible Investment
CouncilCollaborative/public activities

90

Results of Self-Evaluation of2021 Stewardship Activities
We actively engaged in stewardship activities in order to encourage portfolio companies to increase theircorporate value and promote sustainable growth, and to increase medium- to long-term investment returns forclients and beneficiaries. To further enhance our activities, we performed a self-evaluation of our stewardship
activities in 2021 (January to December), the results of which are in this section. This self-evaluation corresponds
to the self-evaluation required by Guideline 7-4 of the Japan Stewardship Code rerevision on March 24, 2020.

1 Self-Evaluation Methodology
We distributed a questionnaire mainly
to members of the Responsible
Investment Committee, the highest
decision-making body for our
stewardship activities, and held
discussions based on the results of
the questionnaire. Members of the
Responsible Investment Council,
which monitors the Responsible
Investment Committee, particularly
with regards to matters related toconflicts of interest, also participatedin the questionnaire and in
subsequent discussions.

Questionnaire Overview

Target

Questionnairetiming

The following people responded according to the questions.
Responsible Investment Committee*1 members– 5
Responsible Investment Committee Secretariat members – 8
Responsible Investment Council*2 members – 4

December 2021

PeriodcoveredJanuary-December 2021

Response
formatSigned (not anonymous)
Multiple choice (4 choices)
Write comments freely

Total of 14 questions: Addressing each of the principles ofJapan’s Stewardship CodePrinciple 1(Formulate and publicly disclose policy):

2 questions

Principle 2(Manage conflicts of interest):

3 questions

Principle 3(Monitor portfolio companies):

1 questions

Principle 4(Engagement):

3 questions

Principle 5(Proxy voting):

3 questions

Principle 6(Report to clients and beneficiaries):

1 questions

Principle 7(Skills for engagement activities):

1 questions

Questionnaire

91

Responsible Investment Report 2021

2 Results of self-assessment (overall) trive for even more accessibleSand easy-to-understanddisclosure in order to promote
an understanding of ourstewardship activities among
various stakeholders.

 he Responsible Investment
T
Committee was able tohold effective and efficient
discussions about various
topics, including the basic
responsible investment policy.
 enior management tookS
aggressive actions, including
bolstering the personnel
involved in stewardship activities
and setting a net zero target forgreenhouse gas emissions byassets under management.
 e established theW
Engagement Department
on November 1 with theaim of further enhancing
stewardship activities.
 e shared information,W
particularly among analysts
and ESG specialists, andwere able to strengthen
coordination in the Investment
and Research Division.

 onsider a strategy to increaseCthe diversity of the Responsible
Investment Committee in order
to incorporate diverse opinions
into discussions.
Increase the awareness andlevel of understanding of the
Basic Policy for Responsible
Investment, which was revisedin December 2021, within theInvestment and Research
Division, which is responsible
for stewardship activities.
 stablish an implementationEsystem for stewardship
activities, centering on the
Engagement Department
created in November 2021.

3 Future Actions

ESG Integration*1 C omprises members from the investment andresearch functions*2 C omprises one Chief Conflict Officer, two
independent outside directors and one
outside expert*3 “ ESG” stands for Environment, Social, and(Corporate) Governance. Nomura AssetManagement emphasizes ESG issues as
issues that companies should address fromthe perspectives of social responsibility andsustainability.

Proxy Voting

 ased on the aboveB
discussions, deepen theawareness of issues among
members of the Investment
and Research Division, allocate
appropriate resources, andfurther strengthen stewardship
activities.

 e once again held discussions
W
regarding our policy related
to stewardship activities, andrevised our Basic Policy for
Responsible Investment on
December 30, 2021.

On the other hand, the following
were identified as points to be
improved in order to further
enhance the effectiveness of ourstewardship activities.

Engagement

 eepen discussion in theD
Responsible Investment
Committee about a new
stewardship activities policy inorder to respond to diversifying
ESG*3 issues and heightened
expectations.

Among our stewardship activities in
2021, the following were brought up
as particularly effective initiatives.

About Nomura Asset Management

More than 90% of respondents
indicated that stewardship activities
in our company were appropriate.
The Responsible Investment
Committee held discussions basedon the results of the questionnaireand comments received, and thefinal assessment was we weregenerally able to carry out
appropriate stewardship activities,
including our response to the points
identified in the previous year as
areas to be strengthened.

The Responsible Investment Committee will continue to discuss the points that need to be enhanced as
identified through this self-evaluation, and work to further bolster our stewardship activities.

92

Nomura Asset Management’s
ESG Communication Activities
Nomura Asset Management is also focusing

Main External Activities in 2021
Jan.
Feb.

on delivering information about ESG. NAM
employees give presentations and participate
as panelists at seminars to help people gaina better understanding of ESG. We
communicate our knowledge about ESG tovarious stakeholders.

Mar.

Apr.

May.
Examples of
Initiatives

Ex.

01

Collaboration with initiatives,
domestic and foreign public
institutions, etc.

Jun.

T he Japan Association of Finance for Sustainable
Development (JAFSUS) (the board of director)

Japan Stewardship Initiative (JSI) Steering Committee memberM ember of the Industry Advisory Panel (IAP) and Working
Group on the ASEAN Taxonomy established by the
ASEAN regulatory authority

The Global Steering Group for Impact Investment (GSG)

Jul.

Aug.

Japan National Advisory Board, Chair of IMM Working GroupC hair, Constructive Dialogue Promotion Working Group,
Committee on Financial and Capital Markets, Japan
Business Federation (Keidanren)C ommittee member, “Impact Investing Roundtable” co-Sep.

hosted by GSG and FSA

Examples of
Initiatives

Ex.

02

Internal Seminars in NAM

Oct.

In-house study session on the revision of our own ESG score

I nternal seminars about ESG (total of seven seminars

held online – topics included our engagement policy, key
themes, and proxy voting)Nov.

Seminar about advancing the way ESG data vendors are

utilized (for investment professionals in Japan and overseas)I nternal lecture by expert about human rights (Australian
university professor specializing in human rights)

H eld internal talk session (online) by NAM outside

director on the topic of “Why we now have hopes for
active participation by women”

Dec.

 ave presentation about Nomura Asset Management’s proxy voting at Listed Company Board
G
Member’s Governance ForumGave presentation about Nomura Asset Management’s proxy voting at meeting sponsored by ICJ
Participated in panel discussion about “Utilizing TCFD disclosure Towards Carbon Neutrality” at
TCFD ConsortiumG ave presentation and participated in panel discussion at the online seminar entitled “Changes inEnvironmental Management and Response Expected of Companies” organized by the Ministry of
the Environment
Gave presentation about Nomura Asset Management’s proxy voting standards at Japan Corporate
Governance Research InstituteParticipated in panel discussion about ESG corporate bonds at Euromoney conferenceGave presentation about Japanese companies’ corporate governance at Japan Federation of Bar
Associations’ public lecture
Gave presentation about Nomura Asset Management’s ESG approach at EM Investors AllianceParticipated in panel discussion entitled “Special Symposium – Sustainable Society under a Green
Recovery” at the Nikkei SDGs ForumGave report on “ESG-related Dialogue, Engagement Experience and Issues” at Trust Companies
Association of Japan’s ESG Study GroupParticipated in panel discussion entitled “Financing a Green and Inclusive Recovery” during an Asian
Impact webinar held by the Asian Development Bank
Gave presentation about “Responsible credit investment” during Fitch webinar event
Participated in panel discussion regarding the “Asia’s changing role in the global economy” at the Global
Borrowers Forum sponsored by Euromoney
Participated in panel discussion “Corporate Disclosure related to Climate Change” at the CFA Society
Japan’s 5th webinar lectureG ave presentation about ESG disclosure at outside workshop
Participated in panel discussion about “Creating Sustainable and Responsible Investment Portfolios” at
the Green Social Sustainable Bonds Series 4 by the Asian Development Bank
G ave presentation about “Promoting Social bonds for impact investments in Asia” seminar held by
the Asian Development BankP articipated in panel discussion about “Impact bonds” at the Euromoney Global Capital Japan Top
Credits roundtable ave presentation “ESG in Bond Investment: The Role of Fixed Income in Building a Sustainable andG
Resilient Society and Economy” at a CIO Conference webinar sponsored by a ESG data vendor
Nomura Asset Management’s CEO presented about NAM’s ESG initiatives at the Nikkei SDGs ForumParticipated in panel discussion about impact bonds at seminar sponsored by the Asian Development Bank
Panelist in Access to Medicine Initiative (ATMI) AMR (antimicrobial resistance) panel discussion
Participated in panel discussion about diversity at CFA Society Japan’s annual event
Gave presentation about impact bonds at the Impact Investing ForumP articipated in panel discussion sponsored by Euromoney about “Transition bonds, green bonds
and sustainability bonds: How best to unlock capital for climate”
Introduced NAM’s initiatives at the Access to Nutrition Initiative’s (ATNI) ATNI Global Index 2021 Japanese Launch Event
Participated in panel discussion about NAM’s ESG investing and ATNI’s expectations of Japanese companies
 articipated in panel discussion entitled “Gender Diversity as a Key Driver for Company Growth andP
Roles of Investors” at the Global Pension Symposium
Gave presentation about Nomura Asset Management’s Fixed Income ESG (emerging markets) at EM
Investors Alliance Members
Participated in panel discussion about proxy voting at the Osaka Kabukon
Participated in panel discussion "Health and Productivity Management: From the Perspective of ESG
Investors" at the 4th Well Aging Society Summit Asia-Japan (sponsored by METI and the Nikkei Shimbun)
Gave presentation about NAM’s ESG initiatives at Women in ETFs event
Participated in panel discussion at a sustainable bond workshop sponsored by the Asian Development
Bank and the Securities and Exchange Regulator of Cambodia
Participated in panel discussion on “Disclosure of Climate-related Risk based on TCFD – Transition
and Opportunities and Asset Management for Decarbonization” co-sponsored by Responsible
Investor and FTSE Russell
Gave presentation about Nomura Asset Management’s proxy voting at seminar sponsored by a trust bank

NAM’s Asset Management Research Center
In December 2020, we established the Asset Management Research Center as a
dedicated department specializing in responding to the increasingly sophisticatedasset management needs of investors. The Center’s role is to communicate
information based on our asset management-related insights and know-how in aneasy-to-understand manner. We are working to solve social issues by providing awide range of outlooks and solutions with an eye to the future. The “ESG Project”
is one of the Center’s main projects.

Main Projects
100-Year Lifespan ProjectGoal-Based Project“Tsumitate” Project – Gradual Investment
Investment Education Project
ESG Project
Digital Project
Capital Markets Research Project93

Responsible Investment Report 2021

ESG ProjectSpecific examples of the
training program

With growing interest in ESG investment, asset management firms
like us are receiving an increasing number of inquiries about ESG
The basics of ESG investing
investment, as well as requests to speak at seminars and holdDefinitions, history, assets underworkshops, among other things. Many people think that “ESG
management, etc.
investment is good for the world,” but in many cases they do nothave much detailed knowledge about it. In order for all people
The importance of ESG
investingto be able to utilize ESG investment, it is important to use easyKey environmental, social, andto-understand language to carefully explain the concept of ESG
governance issues, etc.
investment, the efforts and aims of asset management companies,
and other aspects of ESG investment to those people who are
ESG investing in action
not familiar with investing. To that end, we have developed ourAsset management firm’s
initiatives, etc.
own training program that allows people to learn about ESG
investment, and we are providing it mainly to financial institutions.
The content of the program is structured to allow people to
ESG investment returns
Academic and empirical analyses of
efficiently acquire basic knowledge related to ESG investment.
returns, etc.
Content includes ESG investment information gained through our
initiatives thus far, as well as answers to questions and feedback
that we have received at seminars. We are working to make
ESG investing keywords
ESG investment more widespread in Japan and to support theSDGs, regional revitalization, etc.
realization of a sustainable society from the finance side.

Review of2021

The world took further steps towards

decarbonization efforts among portfolio

decarbonization in 2021. Financial

companies on a company-wide level andinstitutions around the world accelerated

the consistency of our investment

the movement to unite around a range of

portfolio with the Paris Agreement. We

initiatives with the aim of realizing net

also began formulating an action planzero emissions by 2050. A new roadmap(including engagement with portfolio

in this effort was announced at COP26

companies) targeting net zeroheld in November 2021. However, it isgreenhouse gas emissions on an

clear that achieving the net zero target

individual investment portfolio basis.

by 2050 will be impossible simply byAdditionally, ahead of Tokyo Stockcontinuing to deal with the situation as it

Exchange’s restructuring of market

has been. In addition to corporate

segments in April 2022, we haveefforts, there are expectations for

introduced measures to further support

investors to play a role in tackling thiscorporate governance reform among

difficult problem.

Japanese companies. We continued

At Nomura Asset Management, we

encouraging Japanese companies to shift

have ramped up our efforts to help realize

their boards of directors to monitoring

global decarbonization efforts by 2050.

boards, and revised our proxy voting

In August 2021, we joined the Net Zerostandards to incorporate the outcomes ofAsset Managers initiative, while inengagement in our voting activity. Also, in

assets, enhancing the integration of

October 2021 we set and announced a

November 2021 we newly established theengagement outcomes into our2030 interim target for our 2050 net zeroEngagement Department. This

investment activity, and strengthening ourgoal. To this end, we began enhancing

department is expanding the scope ofengagement platform looking ahead tothe visibility of both the status ofengagement to include bonds and other2022 and beyond.

Toshiyuki Imamura

PRI assessment results

and Beyond
Over the last few years, we haverealize a sustainable society. The amountsignificantly improved our ability toof ESG investment has increased

address climate change. We have madedramatically in the last few years, andprogress developing climate-related data

countries are focusing on tightening ESG

and analytical methods, and we haveregulations and attracting investment

enhanced our ability to engage withmoney that truly contributes to sustainable

portfolio companies. In addition, last year

growth. Meanwhile, the primary mission of

we started monitoring related to humanasset management firms is to fulfill theirrights for portfolio companies, and we

fiduciary duty. This will come down tohave also strengthened our response to

tackling head-on and realizing thehuman rights issues. Biodiversity remains

expectations of end beneficiaries.

a difficult challenge, but one we think will
be overcome with time. We will continue

solved over very long periods of time. On

to encourage our portfolio companies tothe other hand, when it comes tomake improvements on ESG issues, build

individual investment strategies, there isstrong value chains, and thereby improvedemand for prompt results in relation totheir competitiveness.

A+

A

Status of integration into
responsible investment for
listed stocks

A+

A

Active ownership

A+

B

Engagement

A+-

Proxy voting

A+

-

SSA

A+

B

Corporate (NonBond
investment Financial)

A+

B

A+

B

Corporate(Financial)*T he publication of the PRI evaluation for 20202021 has been delayed. The plan is to announce
it around September 2022.

Nomura Asset Management Stewardship
Code Signing Status

UK*

Dec. 2010

decarbonization and other ESG issues.

Our ultimate aim is to continue

The values demanded of asset managers

discovering portfolio companies thatJAPAN

May 2014

have become increasingly diverse, andhave a high impact on society and

HONG KONG

Sep. 2016

over the past few years the domains inbuilding upon our achievements that lead

SINGAPORE

Sep. 2016

which asset managers are expected toto the resolution of social issues around

TAIWAN

Dec. 2016

play a role have expanded dramatically.

the world. Going forward, we will

MALAYSIA

Apr. 2017

Only those asset managers who are able

continue working to ensure that ourto adapt to such environmental changes

responsible investment initiatives yield

will be able to survive.

results with social impact.

*In March 2022, Nomura Asset Management
UK was approved by the Financial Reporting
Council (FRC) as a signatory to the UK
Stewardship Code 2020.

Signature Timing March 2011

Signature Timing January 2012

The financial principles toward theformation of a sustainable society

The UN PRI (United Nations’ Principles for Responsible
Investment) are a set of principles formulated in April
2006 that require investors to incorporate ESG into actual
investment analysis and decision-making processes.

(2Principles for Financial Action for the 21st Century)
Formulated in October 2011 based on a proposal by
the Ministry of the Environment’s Central Environmental
Council as action guidelines for financial institutions thatwish to fulfill their responsibilities and roles as required forthe formation of a sustainable society.

Signature Timing March 2021

ESG Integration

Other Related Initiatives that Nomura Asset Management has Joined

Principles for Responsible Investment PRIProxy Voting

Environmental and social issues are

Strategy and governanceEngagement

The world is now in a race for financing to

PRI
FY2019Median2020
evaluation

About Nomura Asset Management

2022

Head of the Responsible Investment Department

GRESB
Measures the environmental, social, and governance(ESG) of individual companies and investment funds
in the real estate sector. GRESB was launched in
2009, mainly by European pension funds, as a sourceof information to use when selecting investments
and during dialogue with portfolio companies andinvestment funds.
GRESB® and the related logo are trademarks owned by
GRESB BV and are used with permission

94https://global.nomura-am.co.jp/