Responsible Investment Report 2022

https://global.nomura-am.co.jp/

Responsible
Investment
Report2022

Nomura Asset Management

We create economic and social value
through the asset management businessThis is the philosophy of Nomura Asset Managemnt

03 Our Strengths in Responsible Investment
05 Cooperation with Overseas Offices
07 CEO Message
09 Investment Chain
11 Our Materiality
13 ESG Statement
18 PRI Assessment

19 Basic Policy for Responsible Investment
23 Towards Realizing a Monitoring Board
27 TCFD & NET ZERO GOAL BY 2050
41 Initiatives on Human Rights
45 Biodiversity
49 Sustainable Finance and ESG Product Governance

57 Basic Stance on Engagement
59 Engagement Process and Results
61 Engagement on Priority Topics
66 Review of Priority Topics
67 Engagement by Analysts

About Nomura Asset Management

86 Features of Integration
87 Equity Integration
89 ESG Scores for Japanese Equities
91 IMPACT INVESTING (GSE, JSEG, ASE)
99 Fixed Income Integration
101 Global Net-Zero Bond Product103 Global ESG Balance Fund Product
105 Fixed Income Engagement

68 Measuring the Effects of Engagement Activities
69 Global Equity Engagement
70 Global Equity Milestone Management
72 Engagement by Sustainalytics
73 Cooperation with Initiatives

About photos in this report : Photos for this report were taken with the room doors open and adequate ventilation, and the size ofthe photography crews was limited to avoid over-crowding

01

75 The Outline of Proxy Voting / System to Manage Conflicts of Interest
77 Proxy Voting Process for Japanese and Global Equities
78 Changes in Results of Exercise of Voting Rights for Japanese Companies
79 Overview of Proxy Voting Standards for Japanese Companies
80 Changes to Proxy Voting Standards for Japanese Companies
81 Disclosure of Proxy Voting Results (Reasons for voting for or against proposals)
83 Proxy Voting FAQ

107 Messages from the Responsible Investment Council
109 Results of Self-Evaluation of 2022 Stewardship Activities

111 Nomura Asset Management’sESG Communication Activities
112 Review of 2022, 2023 and Beyond

Responsible Investment Report 2022

02

Nomura Asset Management

Our Strengths in Responsible Investment

Long-term commitment to responsible investment

Global Approach and Diversity

Our company’s first strength is our long history of engaging in responsible investment. The rootsof 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 from 2014 to 2015.
Based on many discussions over the years, and always remaining conscious of our mandate from clients,
we have fostered a culture that is supportive of responsible investment, respects diverse opinions from alarge number of professionals, and values lively discussion.

Our company’s third strength is our global and highly-diverse investment and research framework.
Based on our global platform for responsible investment, we have built an ESG investment and researchframework made up of portfolio managers, corporate analysts and country specialists who manage
ESG products in our overseas offices. Our team includes a large number of portfolio managers, ESG
investment managers, corporate analysts, credit analysts and ESG specialists working in one of thelargest active management institutions in Japan, all of whom are committed to applying their analyticalabilities and insights to responsible investment.

2022

2021
Established NAM’smateriality
Joined Net Zero AssetManagers initiative(NZAM)

2020

History of Responsible Investment

Sustainability Development
Department and Net Zero Strategy
Department established

2016

Revised ESG Statement

Responsible Investment
Department established

Revised ESG Statement

Established AssetManagement

2017

Research Institute topromote ESG

Proxy voting results
disclosed individually

2019
Support for TCFD.
Strengthening ourcompany-wide efforts
to tackle climatechange.

2018

Malaysian Stewardship
Code adopted

2010

2004

UK Stewardship CodeManagement of SRI
Index Fund commenced

2001

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

2014
Japanese version of
the Stewardship Codeadoptedfrom UK FRC*

2011

Self-evaluation
disclosed

Formulated our ESG
Statement

Conflict of Interest
Management Policy
formulated andResponsible Investment
Council established
Stewardship Codes in
Singapore, Hong Kong andTaiwan adopted UK Officeacquired Tier1 evaluation

2015

adoptedESG Committee(now the Responsible
Investment Committee)
established
United Nationssupported Principles for
Responsible Investment(UN PRI) signed

TaiwanShanghaiLondonHong Kong

Frankfurt

Singapore

Dubai

Malaysia

New York

Seoul
Tokyo

ESG Committee
reorganized into
Responsible Investment
Committee
Proxy Voting Committee

Sydneyreorganized into
Stewardship Committee

Management ofgovernance fundcommenced

Proxy Voting Committee
established*UK FRC: Abbreviation for the Financial Reporting Council in the United Kingdom

Systematic and Continuous ESG-related Initiatives

Inclusive Discussions based on a Strong Organizational Platform

Our company’s second strength is our systematic and ongoing efforts for ESG-related issues
anticipating the needs and changes of the times. Examples of 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. We are also enhancing ESG from an organizational perspective.
For example, we established the Sustainability Development Department in order to advance business
operations with an emphasis on sustainability, while we created the Net Zero Strategy Department tobolster our efforts to address climate change.

Our company’s 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, theResponsible Investment Committee comprises members possessing abundant investment and researchexperience. The Committee held a total of 19 meetings in 2022. 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 in discussions
without limiting themselves to only monitoring conflicts of interest.

Organizational Structure for Responsible Investment
Oversight,
verification,
advice, etc.

Main activities
Dialogue with portfolio
companies (engagement)

Forming policies,
oversight ofinitiatives, etc.

Proxy Voting

Responsible
Investment Council

Reports on
activities, defineissues, etc.

Responsible
Investment Committee
Secretariat: Responsible
Investment Department

03

About Nomura Asset Management

Integration into investment
decisions (ESG integration)
Investment andresearch division

Collaborative/
public activities

Responsible Investment Committee Meetings January – December 2021
Responsible Investment
Committee

19

times

Regular 4 times
Ad hoc15 times

Responsible Investment
Council8

times

Regular 4 times
Ad hoc4 times

Responsible Investment Report 2022

04

t m ent G l

ob

al

Pl

a

m

Re

Cooperation With Overseas Offices

or

sp

tf

o

nv e sESG INTEGRATIONPROXY VOTINGENGAGEMENT

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 topromote 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 aswell as ESG-related issues (refer to Pages 13-17).

Asia
EuropeShanghaiAN

ESG specialist, ESG investment manager,
Engagement manager

AN

Hong Kong

PM

ESG

AN

Malaysia

PM

AN

PM

Singapore

Research professional (company analyst, credit analyst) Quantanalyst(quant analyst, financial engineer)

About Nomura Asset Management

ESG

AN

AN

Frankfurt

PM

05

Tokyo

PM

PM Portfolio Manager

USA

ESG

AN

PM

LondonFor proxy voting (excluding Japaneseequities), we generally decide to votein favor of or opposition to an issue inaccordance with our Global Basic Policyon Proxy Voting. However, if the portfolio
managers and analysts possessing a
deep understanding of local conditions
determine it to be necessary, we may,upon deliberation, make a decision thatdiffers from the basic policy on proxyvoting. The final decision is then sharedwith all offices, and proxy voting is thencarried out uniformly on a global basis(refer to Page 77).
In terms of integration, climate change
analysis tools are used to evaluate theclimate change risks and opportunities
for portfolio companies and for each fund(refer to Pages 29-39), and in addition to
sharing our ESG scores among all offices,
ESG data from external sources andother data are incorporated and used tomake 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 87-88).
Nomura Asset Management
Stewardship Code Signing Status

ESG

AN

PM

Tokyo

ESG INTEGRATION

We engage in constructive dialogue withcompanies about important financial
and non-financial risks and opportunities
in accordance with our basic policy
for engagement (refer to Pages 5768). Specifically, our ESG specialists,
ESG investment manager, engagement
managers, company analysts and country
specialists based in Japan and overseas
offices collaborate to engage with portfolio
companies.
We monitor the details of the engagementof managers in each country with target
companies using common milestone
management tools, which allows
information to be easily shared among ouroffices. With respect to climate change,
which is one of our key engagement
themes, we urge portfolio companies toreceive SBT approval, and by monitoring
the status of these efforts on a global level
we are able to check how much progresscompanies are making. Furthermore, ESG
officers in overseas offices can now easily
hold discussions with our ESG specialistsin Tokyo about engagement details. (Refer
to Pages 69-74)

PROXY VOTING

n

si

I
ble

WITH OURENGAGEMENTCOOPERATIONOVERSEAS
OFFICESNew YorkUK*

Dec. 2010

JAPANMay 2014

HONG KONG

Sep. 2016

SINGAPORE

Sep. 2016

TAIWAN

Dec. 2016

MALAYSIA

Apr. 2017* In March 2022, Nomura Asset Management UK
was approved by the Financial Reporting Council(FRC) as a signatory to the UK Stewardship Code2020.

Responsible Investment Report 2022

06

CEO Message

Striving to be an asset
management firm that makes
the world a better place.
Hiroyasu Koike
President & CEO
Nomura Asset Management Co., Ltd.

My message to everyone

As a responsible investor, we
work to solve social issues
facing the world, countries andregions
We will realize both social andeconomic value through theasset management business.
We aim to realize a sustainable
and prosperous society throughthe investment chain (virtuous
cycle of investment).

While the global turmoil caused by the pandemic’s onset in2020 is in the process of abating, we face prolonged turmoil
of a different form due to Russia’s invasion of Ukraine.
In recent years, we have become more aware of various
social issues facing society, including those many daily life
issues triggered by the pandemic, regional or country-based
issues, and those on a global scale. Moreover, in addition
to our awareness, we also realize that immediate action isrequired to address these issues.
For example, during the pandemic, issues related to the
distribution of vaccines to medium- and low-income nations
became a point of focus. We are involved in an initiative
related to the distribution of medicines that conducts
ongoing engagement with investee companies, and we haveobserved a certain level of success in improving vaccine
distribution to these countries. This once again highlighted
the importance of engagement with investee companies.
However, the sharp rise in energy prices caused by the
emergence of geopolitical risks has called attention to issues
like what to do about our dependence on fossil fuels andhow to build a sustainable society.
I believe we face the question of how to reduce our highlevel of dependence on fossil fuels over the medium- to long-07

About Nomura Asset Management

term. It is clear that we must further advance the transition to
renewable energy in order to address severe climate change
caused by greenhouse gas emissions.
Going forward, we expect a wide range of stakeholders
will advance efforts to reduce this long-term dependence on
fossil fuels.
As a responsible investor, we are working to address theglobal issue of climate change, both through investment intransition bonds*1 (bonds that finance the construction of
new renewable energy facilities), as well as via engagement(constructive dialogue) with investee companies, which
includes encouraging them to obtain approval from theSBT*2 Initiative to achieve a net-zero goal. Our goal is torealize both social and economic value through our asset
management business.
In order to realize this value, a proper understandingof ESG-related regulations is critical. Europe is the global
leader in terms of sustainability-related regulations. In order
to offer the best ESG products to our clients, we must
keep a close watch on global ESG regulatory trends and bealigned with those levels.
In addition to having an investment office in the UK, as
a Japanese asset management firm we are also certified

by FRC*3 under the UK Stewardship Code. On top of this,our UK office manages impact funds, and offers them tocustomers in both Europe and Japan as ESG products. We
are able to provide ESG products compliant with rigorous
standards by sharing the knowledge aligned with global
standards within the company.
Meanwhile, as a responsible investor, in addition toissues on a global scale, we must also take action tosolve social issues set forth in the SDGs that are closely
linked to our daily lives, including health and human rights
issues. The core idea to solving these social issues is theinvestment chain (virtuous cycle of investment). As an asset
management firm, we aim to realize a sustainable andprosperous society by connecting investors and companies
through investment. Companies that generate economic
profits are fully capable of contributing to a sustainable andprosperous society.
This is the core of our investment chain philosophy.
Creating a virtuous cycle of sustainable investment isnecessary in order to solve various social issues. In orderto support this virtuous cycle, engagement (constructive
dialogue) between asset management firms and investee
companies is essential. Based on this kind of dialogue, wewant to help companies realize what we view as desirable
management and enhance their corporate value, as well as
encourage them to undertake ESG/SDG-related initiatives.
When Nomura Group was founded more than 90 years
ago, one of the founding principles was “To enrich thenation through the securities business.” This principle is
proof of Nomura’s unwavering commitment to realize amore prosperous society, and it is present in Nomura AssetManagement’s efforts to solve social issues and thereby
realize a sustainable society.
Amid dramatic changes in the situations of our customers
and other stakeholders and in approaches to social
issues, Nomura Asset Management itself will endeavor toembrace change, provide the best ESG products, enhance
corporate value and build a sustainable society, not only
as a responsible institutional investor, but as an asset
management firm that strives to contribute to the world.

*1 B
 onds that support a company’s effort to achieve its decarbonization goals*2 G reenhouse gas (GHG) emission reduction targets with a scientific basis*3 F inancial Reporting Council: The UK body that regulates auditors, accountants
and actuaries, and sets the UK’s Stewardship CodeResponsible Investment Report 202208Realizing a desirable society
through the investment chain
NAM’s vision for society-Excerpt from Nomura Asset Management’s ESG StatementWe seek to realize a sustainable, prosperous society in which
the rich natural environment is preserved, diverse human capitalis utilized, economic development is driven by technologicalinnovation, human rights are respected, and well-being is
promoted. It is a society in which ESG issues are addressed
and the SDGs are achieved.

GOALS
1 Strengthening the Investment Chain
Realizing a Healthy Global
2 Environment
3 Human Rights are Respected

Realization of a Society in which

4 through GovernanceCorporate Value Improvement

Higher investment
returns

Enhancement ofcorporate value

NOMURAASSETMANAGEMENT

1 Appropriate Initiatives on

Prosperous
society
Clients

Portfolio
companies
ESG
INTEGRATION(individual investors,
pension funds, etc.)(practice desirable
management)

2
3

environmental /social issues
Value creation throughefficient use of capital
Exercise of corporate
governance functions

4 Appropriate information

disclosure and dialogue
with investors

ReportingFunding, monitoring

PROXY
VOTING
Portfolio
managers

Analysts

ESG
specialists

Oversight, verification,
advice, etc.

Responsible Investment
Committee
Responsible Investment
Council
Oversight, verification,

Forming policies,
oversight of initiatives, etc.

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

09

About Nomura Asset Management

Investment andresearch division

ENGAGEMENT

Responsible Investment Report 2022

10

Key issues (materiality) targeting therealization of the investment chain

Materiality selection process
In order to realize the virtuous cycle of investment(investment chain) that we are targeting, we
make a list of the issues we feel we should focus
on based on the environment surrounding ourcompany as well as our business activities.

STEP 1

List creation

Materiality
Provision of excellent products
and services that help clientsbuild wealth

Analysis

Selection

Promotion of responsible
investment

1

Strengthening
the Investment
Chain

Realization ofa society inwhich humanrights arerespected

Corporate Value
Improvement
through
Governance

STEP 4

Decision/announcement

Materiality map

Moreimportant

Importance to society

Extremely
important
ImportantMoreimportant

Extremely
important

Importance to NAM
Reducing the impact ofdemographic change
Closing the wealth gap

Handling of natural disasters
Handling of conflicts and politicalinstability

About Nomura Asset Management

2
Sustainability as a company

We decide and announce our materiality following
a suitability check by the Executive Management
Committee. We review and adjust our materiality,
as necessary, based on changes in theenvironment, progress in our businesses, reports
to the Board of Directors, and advice from theSustainability Advisory Board.

We will respond to clients’ various asset management needs, andprovide excellent investment performance

Realizing ahealthy global
environment

In light of Nomura Group’s Management Visionand our corporate principles, we select topics formateriality after repeated internal discussions on
the importance and impact of candidate issues
and the efforts to solve them.

STEP 3

Objectives

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

We determine candidate issues for materiality
through hearings with internal departments, whileconsidering the degree of impact on our businessactivities and the amount of impact on society.

STEP 2

11

Goal

Solving social problems through investment

Nomura Asset Management announced its materiality in the
Responsible Investment Report 2020. After engaging in deep
internal discussions aimed at solving our materiality and basedon advice from the Sustainability Advisory Board, in 2022 weestablished and announced KPI, and further promoted business
operations with an emphasis on sustainability as an asset
management firm. We will continue to ascertain our progress
and accelerate our efforts aimed at achieving our goals, as we
strive to realize a sustainable and prosperous society.

Materiality

3

4

Realizing a
Healthy Global
Environment

Realization ofa Society in
Which Human
Rights are
Respected

Corporate Value
Improvement
through
GovernanceTargeting the shift to a sustainabledecarbonized society, we will use engagement
and other means to encourage portfolio
companies to combat climate change.

Key initiativesIn addition to traditional assets, expand investment in areas such as ESG andalternative investments, and further improve asset allocation capabilities
Development and provision of products and services for customers at various life stages
Enhancementof ESG integration to incorporate non-financial information into theinvestment processProactive promotion of ESG engagement based on ESG perspectives andimportant topics
Enhancementof the level of investment with respect to climate change risks
and opportunitiesUseof engagement with portfolio companies to have them incorporate climatechange initiatives into their management strategies

We will demand that portfolio companies
have management strategies that take thesustainability of natural capital into account.

Useof engagement with portfolio companies to have them incorporate initiatives
aimed at the coexistence of natural capital and their business into their
management strategies

We will promote DEI&B in portfolio companies,
in order to continuously create added value by
allowing diverse human resources to display
their abilities and individualityPromotionof diversity and inclusion through engagement with portfolio companies
Establishment and management of Japan Empowering Women Select Index ETF

Our portfolio companies will improve
productivity and create high value-added
services by creating a high-quality work
environmentDeveloping
and managing investment strategies that focus on the performance ofcompanies that are good places to work
Realization of decent work through engagement with portfolio companies

We will promote the thorough functioning ofcorporate governance in order for portfolio
companies to achieve their established corporate
philosophies and management targets

 ngagement with portfolio companies with the aim of enhancing corporateEgovernanceDisciplined proxy voting in accordance with the proxy voting guidelines

Enhancement of investment
capabilities and client
convenience throughdigitalization

We will utilize cutting-edge technologies to the maximum
extent possible and provide clients with even more investment
opportunities and added value

Promotion of financial andeconomics education

In order to familiarize potential customers with investment
trusts, we will promote financial and economic education andwork to expand the investor base nhancement of education/training that will lead to the promotion of wealthEbuilding

Support for regional
revitalization

We will work with regional financial institutions to create astrong movement for regional revitalization originating fromregional financial institutions

 artner with regional financial institutions to launch donation schemes utilizing theP
corporate version of the hometown tax system
Holding ESG forums with regional financial institutions to discuss regional
revitalization and consider ESG

Strive to achieve carbon neutrality with the aim oftransitioning to a sustainable, decarbonized society
Reductionof Nomura Asset Management’s CO2 emissions, with the aim ofachieving carbon neutrality

Achieving a decarbonizedsociety
Preservation of Natural Capital
Promotion of DEI&B (Diversity
Equity Inclusion & Belonging)Development of investment methods utilizing AI, alternative data, and other means

Advance efforts to conserve natural capital

Utilization of environmentally-friendly and socially-friendly products

We will promote DEI&B within Nomura Asset Management, inorder to continuously create added value by allowing diverse
human resources to display their abilities and individualityIntroduction of job-grade personnel system
Development and appointment of diverse professional
human resourcesSupport for balancing work and childcare/nursing care

Continuous
implementation of training
and workshops to raiseawareness of DEI&B


Correctionof long working hours
S trengthen communication with management topromote flexible work styles and increase employee
engagement (willingness to contribute to thecompany)
Education targeting improvements in health literacy

Understanding
employees’ health status
and conduct mental
health checks
Implementation of
measures to prevent
communicable diseases

Creating environments where
employees can work withwell-being

We will aim to realize high productivity and create highvalue-added services by developing a work environment that
promotes employee well-being.

Sufficient display ofcorporate governancefunctions

We will promote the sufficient functioning of corporate
governance in order to achieve our corporate philosophiesand management targets.

Enhancement of internal
control systems

 nhancement of UI/UX for digital content and utilization of DX to cultivate newEbusiness domains

We will work to strengthen and enhance our internal
control systems and conflict of interest management
framework in order to protect our clients’ assets and earn
their unwavering trust doption of a monitoring model as a Company with Audit & Supervisory Committees
AAppointments of independent outside directors possessing expertise in
specialized fields
Creation of various committees
Constructionof 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 trengthening the conflict of interest management systemSCreation of the Fund Management Council and the Responsible Investment Council, andappointment of independent outside experts as members of both councils
Ensure independence of decision-making and personnel in investing and research

Responsible Investment Report 2022

12

ESG
STATEMENTIn both December 2021 and December 2022 we revised
our ESG Statement which we originally formulated in March
2019. These revisions were made because the global
economy and the circumstances surrounding ESG havebeen changing faster than expected, and due to the factthat we felt it was necessary to properly reflect our stanceconcerning stakeholder engagement and other matters into
our ESG Statement.
Nomura Asset Management seeks to realize a sustainable,
prosperous society in which the rich natural environmentis preserved, human capital possessing diverse values are
utilized, economic development is driven by technologicalinnovation, human rights are respected, and well-being is

promoted. It is a society in which ESG issues are addressed
and the SDGs are achieved. In addition, we recognize thatefforts to solve ESG issues in order to realize this kind ofsociety are important for supporting a virtuous cycle in
the investment chain. We believe that a critical factor forboth sustainable corporate value improvement and higher
investment returns is for a company to appropriately manage
risks related to ESG issues, view solutions to ESG issues as
new business opportunities, and properly incorporate theminto management strategies. Furthermore, as a responsible
investor, we encourage our portfolio companies to practicewhat we view as desirable management, while we ourselves
will also continue to operate with a focus on ESG.

High Priority ESG issues
While the importance of each ESG issue differs depending on the specific characteristics of the business in question,
we identify the following 6 issues as common ESG issues that are particularly important across many businesses.

Climate Change

Human Rights

Value Creation
to Realize WellBeing WithinSociety

Natural Capital

Diversity Equity
Inclusion &Belonging (DEI&B)

Corporate
governancePrinciples for Responsible Investment PRI
Signature Timing March 2011

Core ESG

PRI (Principles for Responsible Investment) are a set ofprinciples formulated in April 2006 that require investors toincorporate ESG into actual investment analysis and decisionmaking processes.

Initiatives

Signed as Nomura Group

Climate Change

Climate Action 100+

The Paris Agreement, which was concluded in 2015, stipulates that efforts
shall be made to limit the increase in the global average temperature to 1.5˚Csince before the Industrial Revolution based on scientific evidence. To achieve
this goal, 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.

Signature Timing:December 2019

An investor initiative in which institutional investors collaborate(group engagement) to encourage the world’s largest corporate
greenhouse gas emitters to disclose information related toclimate change and respond accordingly.

PCAF
CDP

(Partnership for Carbon
Accounting Financials)

Signature Timing:June 2015
Signature Timing:November 2021

Signature Timing:g:August 2021
Signature Timing:March 2022

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

TCFD(Task Force on Climate - Related
Financial Disclosures)

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 wasestablished in November 2021, and Nomura Asset Management
has been a member since its establishment.

NZAM(Net Zero Asset Managers initiative)
Signature Timing:August 2021

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.

13

About Nomura Asset Management

A global initiative established in December 2020 comprisingasset managers which aim for net-zero emissions of greenhousegases (GHGs) from portfolio companies by 2050,in line with thegoals of the Paris Agreement.

Natural CapitalCompanies benefit from biodiversity throughthe utilization of forests, water sources, andother natural capital in their business activities.
We believe that companies must exercise
proper risk management in relation to activities
that could negatively impact natural capitaland biodiversity, as well as pursue business
opportunities that solve social issues, suchas the preservation of natural capital andbiodiversity.

FAIRR(Farm Animal Investment Risk and Return)
Signature Timing:June 2019

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

Responsible Investment Report 2022

14

Human Rights

Corporate governanceCorporate business activities involve a large number of people
including employees and local residents, which is evenbroader when the supply chain is considered. Companies are
expected to exercise proper risk management to ensure that
their activities do not infringe upon human rights. We believethat companies must exercise human rights due diligenceand other forms of proper human rights risk management inorder to achieve sustainable improvement of corporate value.

Corporate governance is a structure for transparent, fair,timely and decisive decision-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 achievesustainable improvement of corporate value.

UNGC(The United Nations Global
Compact)
Signature Timing:June 2015

Non-binding action principles advocated by then UN SecretaryGeneral, Kofi Annan, at the Davos Forum in 1999. It encourages
businesses and groups worldwide to take actions in the areas ofhuman rights, labor, the environment and preventing corruption.

ICGN(The International Corporate
Governance Network)
Signature Timing:December 2018

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

Diversity Equity Inclusion & Belonging (DEI&B)
In order to realize sustainable improvement in corporate value, we believe that it is necessary for companies’ human capital to becomprised of people with diverse values without regard to factors such as gender, nationality, race or age, and for companies tocreate a corporate culture that provides equal opportunities to employees and that welcomes diversity and inclusion. In addition,
we feel that it is critical for companies to foster a sense of unity under which senior management and employees share a senseof purpose to sustainably improve corporate value.

30% Club Japan(Investor Group)

Women in ETFs

Signature Timing:December 2019

Signature Timing:April 2022

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

ACGA

Signature Timing:November 2019

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

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

Other ESG Related Initiatives

Well-Being

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 accessto medicine. Signatories support the foundation’s index.

15

About Nomura Asset Management

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 thefood and beverage industry to improve the dietary habits of adults
and children around the world.

(Japan Stewardship Initiative)

Signature Timing:December 2018

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

Well-being refers to a state in which all people can seek happiness and live healthy lives. Well-being in society is realized bysolving social issues in a variety of fields. Specific examples include health and safety, education and intelligence, and regional
revitalization. In our view, the development and provision 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.

JSI(The Asian Corporate Governance
Association)

GRESB

Principles for Financial
Action for the 21stCentury

Environment Programme–Finance Initiative
UNEP FI

Signature Timing:March 2021

Signature Timing:January 2012

Signature Timing:January 2019

Measures the environmental, social, andgovernance (ESG) of individual companies
and investment funds in the real estate
sector. GRESB was launched in 2009,
mainly by European pension funds, as asource of information to use when selecting
investments and during dialogue withportfolio companies and investment funds.

Formulated in October 2011 based on a
proposal by the Ministry of the Environment’s
Central Environmental Council as action
guidelines for financial institutions that wish
to fulfill their responsibilities and roles as
required for the formation of a sustainable
society.

UNEP FI is a partnership establishedbetween the United Nations Environment
Program (UNEP) and financial institutions
worldwide.
Since its establishment in 1992, UNEP FI has
been cooperating with financial institutions
and regulatory authorities to promote a shift
to a financial system that integrates economic
development with ESG considerations.

GRESB® and the related logo are trademarks
owned by GRESB BV and are used with permission

Responsible Investment Report 2022

16

Results of the 2021 PRI Assessment
With respect to our responsible investment efforts in January– December 2020, under the new assessment methodology weobtained the highest score of “Five Stars” for a total of six modules,
including our overall policy and five (5) out of 10 direct modules.

Our Activities
Stewardship Activities

Business Opportunities

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

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

Investment Decisions

Monitoring

We assess our portfolio companies’ initiatives toaddress ESG issues based on our own standards fromthe perspectives of both risks and opportunities andincorporate the results in our investment decisions. If
we assess a company’s initiatives as insufficient, or if
we determine that the issues cannot be solved throughengagement, it may result in divestment or exclusion from
our investment universe.

Nomura Asset Management Co., Ltd. (NAM), the core company within the Investment Management
Division of Nomura Group, received the highest rating of “Five Stars” in six Modules in the 2021
Principles for Responsible Investment assessment. This assessment involved NAM’s initiatives in 2020
spanning a total of 15 modules.
The Principles for Responsible Investment (PRI) were formulated in 2006 to encourage theincorporation of environmental, social, and governance (ESG) factors into the actual investment analyses
and decision-making processes of investors. NAM became a PRI signatory in March 2011. The PRI
secretariat assesses the implementation status of responsible investment on a five-star scale for each
module based on reports that PRI signatories submit. NAM received the highest rating of “Five Stars”
in Investment & Stewardship Policy, three modules for Direct Listed Equity, and two modules for Direct
Fixed Income. The scores for each of these modules also greatly exceeded the respective median values.

2021 PRI Assessment results

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. Specifically, we
monitor greenhouse gas emissions and other factors.

Module score

We recognize that business activities that take into
account social value creation are important elements
for realizing a sustainable and prosperous society.
We strive to contribute to asset formation by offering
investment products and services that help toaddress ESG issues and through efforts to expand theinvestment base through measures such as financial
education. (For details, please refer to Pages 11-12.)

We participate in international initiatives and actively
embrace accepted standards and norms. Throughthese initiatives, we conduct engagement jointlywith other institutional investors and share bestpractices by actively cooperating with a wide range ofstakeholders.

AUM coverage

94

60

Active quantitative

100

65

<10%

100

71

<10%

Passive9035>=10 and <=50%

Active quantitative

89

61

<10%

89

54

>=10 and <=50%

Investment trusts

89

60

<10%

Passive8957>=10 and <=50%

Listed equity

incorporation

Active fundamental

DirectInitiatives

Star score

Investment & Stewardship Policy

Active fundamental

Our Business Activities

Modulemedianvoting

SSA

-

92

50

>=10 and <=50%

Corporate

-

91

62

<10%

Long/short credit

-

0

29

<10%

Passive

-

67

57

<10%

Active

-

74

67

<10%

Passive

-

68

43

<10%

Active

-

75

57

<10%

Fixed income

Governance and Disclosure to Promote ESG
within a proactive framework. We have also 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 toensure their appropriateness and validity. In addition, inorder to properly fulfill our accountability, we will actively
work on information disclosure regarding the abovementioned “our activities”.

Hedge funds

Listed equity
Indirect

At Nomura Asset Management, important decisions on
management execution including this Statement are
made by the Executive Management Committee, which
consists of senior executives, to whom the proper
authority has been delegated by the board of directors.
We have established the Investment Policy Committee
and the Responsible Investment Committee as thehighest decision-making bodies in investment decisions
and responsible investment to address ESG issues

Fixed income*In the PRI Assessment Report, Nomura Asset Management was assessed on a total of 15 modules. Please refer to the reports listed below for more informationon all assessments, including indirect modules.

[Reference materials (English only)]

17

About Nomura Asset Management

PRI Assessment Report 2021 https://www.nomura-am.co.jp/news/Assessment_Report_2021.pdf
PRI Public Transparency Report 2021 https://www.nomura-am.co.jp/news/Public_Transparency_Report_2021.pdf

Responsible Investment Report 2022

18

RESPONSIBLE
INVESTMENT

BASIC POLICY FOR RESPONSIBLE INVESTMENT

On November 1, 2022, the Responsible Investment Committee revised items related to “1. Proper Efforts
on Environmental and Social Issues” and “3. Adequate Performance of Corporate Governance Function”
within the “Basic Policy for Responsible Investment.”The basic policy for responsible investment defines
our concept and specific approaches to responsible investment, and includes details regarding the"appropriate management practices" expected of investee companies and the engagement and voting
rights to achieve this.
Reference

BASIC POLICYFOR RESPONSIBLE
INVESTMENT
Concrete Actions

http://www.nomura-am.co.jp/special/esg/responsibility_investment/basicpolicy.html

16

Understanding Investee
Companies
Approach to Investee
Companies
Reflection in investment
decisionsControl Conflicts ofInterests
Collaboration and Outside
Activities
Information Disclosure andAccountability

7

Organization and Actions

2
3
4
5

19

About Nomura Asset Management

In order for investee companies to enhance corporate
value and achieve sustainable growth, stipulate the“Ideal Form of Business Management of
Investee Companies” *and encourage investee companies to realize it.
Stipulate “Basic Principles of Engagement” and “Global
Proxy Voting Policy” and give encouragement to investee
companies from a fair and consistent posture. Reflect thestatus of engagement in proxy voting.
Basic Principles of Engagement/ Global Proxy Voting Policy
https://global.nomura-am.co.jp/responsibility-investment/pdf/basic_policy.pdf*Ideal Form of Business Management of Investee Companies

P.21~22

Responsible Investment Report 2022

20

RESPONSIBLE
INVESTMENT
Ideal Form of Business
Management of Investee
Companies

1

1

Basic Policy

2

Key issues (materiality):

3

Proper Efforts on
Environmental andSocial Issues
We believe that making proper
efforts on global environmental andsocial issues from the perspectivesof risk management and the pursuitof business opportunities will leadto increase in corporate value andsustainable growth. We also see
such efforts as a prerequisite for
a company to be accepted as amember of the society. Examples ofissues that we consider particularly
important and efforts that portfolio
companies need to make areshown on the right.

About Nomura Asset Management

Identification of key issues by the management,
responses to and disclosure of risks that are identified as key issues (e.g., data security, productliability, etc., as well as those listed in 3 through 7),
disclosure of business opportunities that are identified as key issues;

Climate change:
Verification of business portfolio and promotion of technological innovation to respond to the climatechange issue,
information disclosure based on the final report published by the Task Force on Climate-related
Financial Disclosures (TCFD), which is consistent with the Paris Agreement,setting of a net zero target for medium- to long-term greenhouse gas (GHG) emissions,approval of or commitment to science based targets (SBTs)
measurement of ghg emissions and absorption including Scope3 under the international standards
for the accounting and reporting of ghg emissions
and introduction of internal carbon pricing;

4

Natural capital:

5

Human rights:
Development of a policy on human rights at investee companies that is consistent with international
norms,
human rights due diligence or audits including supply chain,corrective action and relief mechanismand disclosure of due diligence results;

Diversity and inclusion:

7

Well-being:

Setting a medium- to long-term target for the percentage of women among board members, senior
executives, or managers,a personnel system to prevent employees from leaving employment due to a life event, creation of acorporate culture that embraces diversity and inclusion,
strategy to bring out the best of human resources with diverse values

A management plan (including R&D and marketing strategies) that turns the resolution of social
issues, such as health and safety, education and intelligence, and regional revitalization, intobusiness opportunities
measurement and disclosure of progress toward the resolution of social issues,and
personnel systems and employee engagement to realize well-being in the company

Cooperation with stakeholders, such as participation in initiatives that are
related to the issues listed above.

To formulate a growth strategy and an investment plan to create value thatexceeds the cost of capital and to conduct proper progress management;

2

To verify the business portfolio against the growth strategy and replacebusinesses in the portfolio as necessary;

3

To sell assets that do not contribute to the creation of value that exceeds thecost of capital and, in particular, to reduce cross-shareholdings;

Value Creation through
Capital Efficiency

4

NAM believes that in order for investee
companies to enhance corporate
value and achieve sustainable growth,
it is necessary for investees to create
value that exceeds the cost of capitalover the medium to long term by
utilizing capital efficiently under properrisk management and constructing
a business portfolio that has a highgrowth potential and is efficient. To thisend, we consider that the following
efforts are particularly important:563Adequate Performanceof Corporate GovernanceFunction
We believe that it is necessary for acompany to have sufficiently functioning
corporate governance as a prerequisite
for value creation through the efficientutilization of capital and proper efforts
on environmental and social issues.
We believe that the appropriate
corporate governance format to realize
this is as shown on the right.

Development of 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;

6

8
21

Establishment of a basic policy regarding the company’s efforts on ESG issues
establishment of a system to promote and oversee those efforts

2

1

4

Adequate information
disclosure and a dialogue
with investors

7
1
2
3
4
5
6

To implement group governance to enable the optimal allocation ofmanagement resources, etc.;
If there is a listed company within the group, to regularly verify thereasonableness of maintaining a listed company within the group; to properly
manage the conflict of interest with general shareholders; and to support thelisted company’s efforts to strengthen corporate governance;
To properly manage the risks associated with businesses, etc.;
To implement a capital structure and shareholder returns that reflect 1 through5 above; andTo 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 to supervise the execution of management
and any conflict of interest with the management, controlling shareholder, or
any other parties on behalf of shareholders and functions effectively.
The audit committee, audit and supervisory committee or the board ofauditors consists of qualified members who are capable of auditing 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 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 plan in case ofsuch replacement has been formulated.
Compensation of senior executives is appropriate as their incentive andcommitment for value creation through the efficient utilization of capital andproper efforts on environmental and social issues.
The board makes appropriate judgment in the best interest of minority
shareholders on any transaction involving a conflict of interest or fight forcontrol of the company.
In our view, as anti-takeover measures limit the rights of shareholders to buy
and sell shares freely, they are unnecessary unless there is a risk that such atransaction or fight will significantly impair corporate value and the common
interest of shareholders.

7

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

8

Comply with laws and regulations, and properly respond to the Corporate
Governance CodeNAM believes that companies need to uphold their accountability through timely
and proper public disclosure of the matters stated in 1. through 3. above in orderfor us to precisely grasp the state of investee companies and that they alsoneed to engage 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 materiallyharmful to corporate value, we will request sufficient disclosure and explanations
on investigations of cause, clarification of where responsibility lies, and theformulation and dissemination of effective recurrence countermeasures.

Responsible Investment Report 2022

22

Japanese companies’ boards of directors have undergone changes since theenactment of the CG Code
Number of independent outside directors

Corporate Governance

About Corporate Governance“Corporate governance” means a structure for transparent, fair, timely anddecisive decision-making by companies, with due attention to the needs
and perspectives of shareholders and also customers, employees and local
communities.
(From Japan’s Corporate Governance Code)
The Corporate Governance (CG) Code defined CG as
above and was launched in June 2015. At the time, many
companies struggled to secure two independent outside
directors, but today the majority of companies have morethan one-third independent outside directors, and it is notuncommon for companies to have a majority of independent
outside directors. In addition, more than 80% of companies
did not have nomination and compensation committees,
but today more than 80% of companies do. Since the CG
Code defines CG as a “mechanism for decision-making”, thebolstering of these systems is an outcome of the CG Code.
If the system (mechanism) is a formal requirement, therequirement for effectiveness is “transparency, fairness,
promptness, and decisiveness.” For decision-making to betransparent, it is necessary to clarify who is responsiblefor decision-making. Specifically, it is a requirement thatthe management (especially chairperson and president),
who are the decision makers, fulfill their accountability atthe board of directors meetings and take responsibility foroutcomes. In addition, in order to be fair, it is a requirementthat decision-making contribute to improvement in corporate
value. If these requirements are met and authority is23

appropriately delegated to the management team (centeredon chairperson and president), swift and decisive decisionmaking will be possible.
As shown in the figure below, such decision-making canbe organized along a PDCA cycle. While it is important forthe management team to have the PDCA cycle function
autonomously, especially at the “Check” stage, independent
outside directors play a central role, adding an element ofheteronomous management supervision, which contributes
to transparency and fairness. Traditionally, in Japan, amanagement board that emphasizes “Do” has been themainstream, but we believe they should shift to beinga monitoring board with “Check” as the main role. The
CG Code stipulates that the roles and responsibilities of
independent outside directors include “Monitoring of the
management through important decision-making at theboard including the appointment and dismissal of the senior
management,” so these can be said to be in alignment.
Concerning a monitoring board, the delegation of authority
tends to attract attention, but it should be understood asa mechanism that makes the PDCA function as a series ofprocesses centered on “Check.”P

D

Senior management is accountable
at the board of directors meetings
for management strategy and othermatters, and discussions take placeso that the content contributes to theenhancement of corporate value.
( transparency, fairness)

Delegate authority to senior
management for decision-makingaligned with the management
strategy, etc. The board of directors
ascertains the situation based onreports received from senior
management, and discusses theneed for “Act.” ( timely, decisive)

Pla n

About Nomura Asset Management

Do

C

Ch

eck

Evaluate the outcomes ofdecision-making, and reflectin the nominations of senior
management (= whether tokeep in office or replace)and compensation( transparency, fairness)

2022

2015

Towards Realizing a
Monitoring BoardA

A ct
Provide feedback to senior
management on theevaluation results andrevise the management
strategy, etc. ( timely,
decisive)

Ratio of independent outside directors

2022

2015

0

1

2

3

4

5+people

2015

12.3%

38.6%

36.3%

8.2%

2.8%

1.8%

2022

0.1%

0.7%

14.4%

37.8%

26.3%

20.7%

Majority

One-third

Other

2015

1.5%

14.6%

83.9%

2022

12.1%

80.4%

7.5%

Status of Nomination and Compensation
Committees

2022

2015

Either has been
established

Neither have been
established

2015

13.4%

86.3%

2022

86.6%

13.7%

(Source) Prepared by Nomura Asset Management based on data from the Japan Associationof Corporate Directors.
(Note) Covers companies listed on the Tokyo Stock Exchange First Section or the Tokyo Stock
Exchange Prime Market.

Nomura Asset Management supports the transition to a monitoring board
Advisory board

Management board
Main roles andresponsibilities

Member composition

Management
decision-making

Centered on insidedirectors(management team)

Main roles andresponsibilities

Member composition

Management decisionmaking, advice tomanagement teamCentered on insidedirectors (managementteam), but there are alsoa minority of outside
directors

Monitoring board
Main roles andresponsibilities

Supervision ofmanagement teamMember composition

Centered on outside
directors

We expectcompanies totransit to thisResponsible Investment Report 2022

24

Nomura Asset Management’s initiatives

Proxy Voting
Handling of proxy voting standards

If a board satisfies all the below requirements, we determine it to be a monitoring board (we consider approximately 120 constituent
companies in the TOPIX index to have a monitoring board)

Monitoring board requirements *1
1 A majority of the directors are outside directors
2 with outside directors comprising a majority

Has nomination committee and compensation committee

3 are outside directors

Nomination and compensation committee chairpersons

4

Boards of directors structures have been gettingstronger, but not strong enough to be considered amonitoring board.
Through proxy voting standards, we support atransition to a monitoring board.

The ratio of women directors is at least 10%

5 The company has not introduced a takeover defense plan
The company does not hold strategic shareholdings inexcess6 (for financial institutions: less than 25% of net assets; fornon-financial companies: less than 10% of invested capital)

7 auditors, director’s term in office is one year

If the company is a company with a board of corporate

8 board of directors is an outside director

If there are controlling shareholders, the chair of the*1 We view the above requirements as the bare minimum for being a monitoring board.

If we determine the company to have amonitoring board

We will respect the board of directors’supervisory function.
We will ease standards related to executive
compensation(becomes easier to vote in favor of proposals).
Payment of compensation increases/bonuses
when business performance is struggling
Stock compensation to outside directors, etc.
not linked to business performance
We will ease business performancestandards*2 related to director appointments(same as above).

We will not oppose on the reasoning that thecompany’s board does not fall under the
category of a monitoring board.
We will ease standards for executiver
remuneration and retirement bonus for
directors and auditors, if efforts to bring thestructure closer to a monitoring board(establishment of remuneration governance,etc.) are observed.
*2 Standard to vote in opposition of re-appointment ofchairperson and president, etc. who have been in the position
for the most recent three or more consecutive fiscal years, if
return on equity (ROE) has been in question and efforts for
management improvement have not been demonstrated.

The effectiveness of the supervisory function is what is important, and through proxy voting and engagement
we urge companies to increase effectiveness. So as not to end up encouraging merely perfunctorytransitions, our proxy voting standards include the following.
Show the requirements for determining whether or not a board falls under the category of amonitoring board
If the board does fall under the category of a monitoring board, we will ease the requirementsfor voting in favor of company proposals related to business performance standards and somestandards related to executive compensation.
We will not oppose company proposals on the reasoning that the company’s board does not fallunder the category of a monitoring board.
Even if the board does not fall under the category of a monitoring board, we will ease therequirements for voting in favor of company proposals related to executive compensation forcompanies establishing compensation governance as an initiative aimed at transitioning to amonitoring board.
If outside directors failed to fully fulfill their expected roles, we will vote against the re-election ofoutside directors

About Nomura Asset Management

Engagement

Desirable monitoring board and undesirable monitoring board
Desirable
Supervision(nomination/compensation)

Independent
outside director

Management
decision-making

Chairperson
and PresidentManagement’s
PDCA cycle
functions

Debate with management team about management strategy, etc. (management team is accountable)
Evaluate management team based on management strategy, etc., and reflect in nominations and compensation. Also,
provide feedback on evaluation details to management team.
Nomination: Establish standards and process for periodically determining the necessity for replacing members of senior management, formulate a successor
plan to prepare for such replacements.
Compensation: Management team incentives/commitments aimed at enhancing corporate value

Provide advice to management team as needed during the supervision process.

If not determined to be a monitoring board

In order to support effective transitions

25

What is important for a monitoring board is
the supervision of management, especiallychairperson and president, who are the top
management, but there are some cases where it
is not functioning in the desired manner. We areworking to have companies realize a desirable
monitoring board.

Nomura Asset Management’s initiatives

Undesirable 1 = Advisory board
AdviceIndependent outside
director

Supervision does not
function

Chairperson, CEO,executive officer

Management
decision-making

Biased advice

Management
decision-making

Independent outside
directors participate indecision-making
Supervision ofchairperson andpresident does not
function

Undesirable 2 = Cannot break away from a management board
Independent
outside director+ Chairperson+
President

Supervision

Executive officer,
department head

Examples of engagement aimed at establishing a monitoring board

Redefining the board of
directors

Progress

Conclusion
Company implements
countermeasures
Company formulates
countermeasures

Period56

Retail sector
12

24

36

NAM’s Concerns
Even though business performance has been struggling, there are
few outside directors and there are no members with corporate
management experience. There is no nomination or compensationcommittee. Strengthening corporate governance is an urgent task.

Company shares arecognition of issues

monthsCommunication ofissues to company

Conclusion / June 2022 / 6 meetings
Interviewees / Representative Director and CEO, outside
directors, others

Goal
The company increased the number of outside directors withmanagement experience.

Responsible Investment Report 2022

26

Progress in 2022 Towards Achieving
our 2050 Net Zero Goal

Establishment of the Net Zero Strategy Department
to Achieve the 2050 Net Zero Goal

2022 was a year in which we made progress on initiatives
aimed at achieving our 2050 Net Zero Goal for greenhousegas (“GHG”) emissions in three main areas.
First, our measurement and disclosure of investment
portfolio emissions (“Financed Emissions”) were recognized
as being disclosed in accordance with The Global GHG
Accounting and Reporting Standard for the Financial
Industry, which is the standard under the Partnership for
Carbon Accounting Financials (“PCAF”), and our status waschanged from “Committed” to “Disclosed.” The disclosuresin this Responsible Investment Report 2022 are inaccordance with the PCAF Standard for financed emissions
for sovereign debt released in December 2022, and we have
newly measured and disclosed financed emissions for ourcompany-wide sovereign bond portfolio.
Second, we submitted our 2050 Net Zero Goal and 2030
Interim Target to the Net Zero Asset Managers initiative(NZAM) and both were approved. In setting our 2030
Interim Target, we used the Science Based Targets initiativefor Financial Institutions, which is a financial institution
version of the Science Based Targets (SBT) and one of themethodologies recommended by NZAM, and establishedan SBT portfolio coverage ratio of 55% as our 2030 Interim
Target. A 55% SBT portfolio coverage ratio refers to 55% (byweight) of the portfolio companies in our investment portfolio
having attained SBT approval.
Third, in December 2022 we newly established the
Net Zero Strategy Department within the Investment andResearch Unit in order to achieve our 2050 Net Zero
Goal with certainty. The Net Zero Strategy Department is
discussed in detail in the following section.

On December 1, 2022, we established the Net Zero Strategy
Department with the aim of securing our commitment todecarbonization and to steadily advancing our efforts aimed
at achieving our 2050 Net Zero Goal. The mission of the Net
Zero Strategy Department is to strategically utilize internaland external management resources to gather informationand expertise related to net zero, as well as formulate andpromote an effective action plan aimed at achieving our
2050 Net Zero Goal and 2030 Interim Target.

Expand the asset classes for which wemeasure and disclose GHG emissions in ourinvestment portfolios to include assets otherthan listed equities and corporate bonds
Strengthen the management of climate-relatedrisks and opportunities by expanding themonitoring of carbon metrics, scenario
analysis, transition/physical risk analysis, andclimate-related opportunity metrics, among
other metrics
Develop appropriate climate-related risk/
opportunity assessment methodologies toaccelerate the provision of funds for
decarbonizing society, and increase the level ofsophistication of climate-related ESG
integration

Specifically, the Net Zero Strategy Department will
advance the following initiatives.
In addition to working together with Nomura Holdings,
our holding company, to contribute to achieving the net
zero goal for Nomura Group overall, we will continue toaddress ESG issues while working to secure our place as
the Japanese asset manager preferred by clients globally asa responsible institutional investor.

Utilize the above initiatives for climate-related
stewardship activities and the development ofdecarbonization funds
Enhance the transparency of our efforts bystrengthening climate-related disclosure basedon TCFD (Task Force on Climate-related
Financial Disclosures) recommendations andour NZAM commitment, and by proactively
reporting to external evaluation organizations.
Strengthen collaboration with climate-related
initiatives and contribute to global efforts toachieve net zero

Net Zero Strategy Department
In recent years, as countries around the world set net-zero targets based on the
Paris Agreement, a rapidly growing number of companies are also setting theirown net-zero targets. In addition, companies’ climate-related disclosures arebeing promoted in response to the TCFD recommendations, ISSB climate-related
disclosure standards, and climate-related disclosure legislation in various countries.
In particular, GHG emissions, which are a key metric in climate-related disclosures,
have a carbon price attached to them through carbon taxes, emissions trading andother systems, which makes them easy to incorporate into quantitative corporate
evaluations.
As the momentum for decarbonization increases around the world, asset
managers like us are being strongly urged by clients and various other stakeholders
to reduce their own GHG emissions, including the emissions of their investment
portfolios, to net zero by 2050, and to carry out advanced levels of ESG
integration and engagement in order to efficiently invest the funds necessary
for decarbonization. In order to answer such requests, the Net Zero Strategy
Department will strategically promote initiatives to achieve our net zero goal andcontribute to the decarbonization of society.

27

About Nomura Asset Management

Managing Director, Head of Net
Zero Strategy Department

Teppei Yamaga

Responsible Investment Report 2022

28

Disclosure Based on the TCFD Recommendations
GovernanceWe recognize that climate-related risks and opportunities
have important impacts on our business and our
medium- to long-term management targets, and we havetherefore established an appropriate governance. The
data compiled by the Responsible Investment
Department, which acts as the TCFD Secretariat,
including carbon metrics, scenario analyses, ESG scoresand other climate-related risks and opportunities, areultimately 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.
The analytical data related to climate-related risks andopportunities compiled by the TCFD Secretariat areshared 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 Unit, where they are used to evaluate a
portfolio’s climate-related risks and opportunities. For
example, at the Responsible Investment Committee
meeting in March every year, the analytical data from theportfolio at end of the previous year are reported, and in
July the important themes for climate change-related
engagement are decided. Additionally, the chair of the
Responsible Investment Committee reports theevaluation results to the Executive Management
Committee, which allows members of senior
management to utilize these reported
details to make management
decisions.

Strategy
We recognize a wide range of short-, medium- andlong-term climate-related risks and opportunities. In termsof transition risks, we are closely watching carbon pricing,the stranding of assets, and changes in consumer
behavior and preferences. For physical risks, we arefocusing on abnormal weather, which is increasing inrecent years. Meanwhile, with respect to opportunities, weare paying close attention to products and services related
to renewable energy and energy efficiency andconservation, electricity storage, hydrogen, ammonia,
CCUS, carbon recycling, as well as disaster prevention
and mitigation. In addition, in line with our long-term
strategy aiming to realize a decarbonized society, we arefocusing on transition finance to support companies thatare working to reduce GHG emissions. In principle, we do
not divest from (and thereby lose the chance forengagement with) portfolio companies with high levels of
GHG emissions. Instead, by continuing to hold on to suchcompanies, we use engagement as a means to encouragethese portfolio companies to take measures to combat
climate change.
In addition to Institutional Shareholder Services’ (ISS)
analysis methodology for climate-related risk andopportunities, we are carefully analyzing the impact thatclimate-related risks and opportunities have on
our business, strategy, financial plans,
and portfolio. This includes ourfinancial analysis and transition risk
analysis using internal carbon pricein our ESG scores for Japaneseequities.
Please refer to Page 32-33 for
information on the scenario
analysis we performed for ourfour-asset integrated portfolios.

Analysis of Carbon Metrics in Investment Portfolios
In this section, we analyze climate-related risks andopportunities for the four company-wide portfolios we manage:
Japanese equities; global equities; Japanese bonds 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 and analysis methods from ISS.
For equities benchmarks, we used TOPIX for Japaneseequities 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 theBloomberg Barclays Global Aggregate Index (only corporate
bonds). Bonds only included corporate bonds, and did notinclude sovereign or other public bonds.
Please refer to Pages 38-39 for the results of our analysis of
our sovereign bond portfolio emissions (financed emissions).

The analysis revealed that the total carbon emissions (Scope
1 and Scope 2) of our Japanese equities portfolio are less than
the total carbon emissions of portfolios of the same monetaryamount and comprising the same stocks and weightings as thebenchmarks.
Also, for global equities, domestic bonds and global bonds,
the emissions of our portfolios and the benchmarks wereroughly the same.
In terms of the ratio of total carbon emissions accounted forby each industry, there is a high ratio from Energy, Materials
and Utilities, as well as relatively high ratios from Industrials
depending on the asset class, and the same trend is seen in theindustry ratios for weighted average carbon intensity. Throughengagement as well as cooperation with climate change-related
initiatives, we will continue to encourage portfolio companies toundertake initiatives targeting a decarbonized society.

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

current value of investment
Portfolio companies’
EVIC

Total Carbon
Emissions =issuer’s Scope
1 and Scope 2
GHG emissions

Carbon Footprint

Risk Management
When it comes to a portfolio company’s climate-relatedrisks, instead of looking only at carbon metrics for thecompany alone, we believe it is important to discern andanalyze carbon metrics throughout the entire life cycle ofa company’s products and services as well as throughout
the supply chain. Furthermore, we refer to GHG removal
and avoided emissions, etc. in our analysis of climaterelated 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 andResearch Unit, and are reported to both the
Executive Management Committee and theBoard of Directors after being
monitored by the Responsible
Investment Committee.

29

About Nomura Asset Management

Metrics and Targets
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 well astransition risk analysis and physical risk analysis for equities
and corporate bonds portfolios.
To analyze total carbon emissions, we use Scope 1 and Scope
2 emissions disclosed by companies (if a company does notprovide 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.
We have established a 2050 Net Zero Goal as well as a2030 Interim Target. Under the 2050 Net Zero Goal, we
will work to achieve net-zero GHG emissions bothfrom 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 ourinvestment portfolio assets are being
approved by SBTi. We will verify andreport on our track record with regard
to these targets in accordance withthe methodology recognizedand endorsed by NZAM.

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 ofrevenue (carbon efficiency of aportfolio)
Unit: tCO 2e/US$ million (revenues)
Portfolio companies’ GHG emissions in total
carbon emissions are Scope 1 and 2

CarbonIntensity =Total Carbon Emissions
the revenuesof portfolio
issuer’s EVIC *companies

current value of investment

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

current value ofinvestment
market capitalizationof portfolio

issuer’s GHG emissions
the revenues of portfolio
companies*EVIC 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).

Responsible Investment Report 202230

Total Carbon Emissions

Weighted Average Carbon Intensity and Ratio by Industry(Million tCO 2e)

Scope 1

Scope 2

EnergyFinancials

20

18.1
15

15.9

Materials
Industrials
Information Technology

NAM’s Japaneseequities portfolio

5.1

77.7

Japanese
equities
benchmark4.9
10Consumer Discretionary
Consumer Staples
Health Care
Communication Services
Utilities
Real Estate
Other

86.1

NAM’s global
equities portfolio

5

13.0

11.0

Global equities
benchmark1.90
NAM’s Japaneseequities portfolio

Japanese
equities
benchmark0.3
1.6

NAM’s global
equities portfolio

NAM’s portfolio

1.9

BM

1.0 0.1

0.8 0.1
0.7
0.7
NAM’s
Japanese bonds
Japanese bondsBM
portfolio
0.7 0.1% of BM

0.9
NAM’s Japanesebonds portfolio

1.1

NAM’s portfolio

BM% of BM

95%

1.8

2.3

80%

13.9

89%

Global bonds

4.9

3.0

162%

199.9

212.4

94%

Japanese
bonds

2.6

3.1

82%

14.3

15.8

90%

Global bonds

5.9

4.2

142%

194.3

(Million tCO 2 e)Globalequities

12.4

Total of Scope 1, 2,
and 3

Japanese
equities
Globalequities(tCO 2 e/US$ million)

0.1
1.1
Global bonds
BM

Japanese
bonds

184.0

(Million tCO 2 e)

0.3
1.6

Globalequities
benchmarkJapanese
equities

Scope 3

Materials
Industrials
Information Technology

0

50

100

150

200

250

441.5

Japanesebonds BM

495.0

NAM’s
Japanese bonds
portfolio

233.3

Globalbonds BM

191.7

(tCO 2 e/US$ million)

0

100

200

300

400

500

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

1

NAM’s Japaneseequities portfolio
NAM’s global
equities portfolio
NAM’s Japanesebonds portfolio
NAM’s global
bonds portfolio
0%

157.3

NAM’s
Japanese bonds
portfolio

Ratio of Total Carbon Emissions by Industry
EnergyFinancials

169.5

20%

40%

60%

80%

100%

Carbon Footprint

2

3

Sustainable Development
Scenario (SDS)

Announced Pledges Scenario(APS)

Stated Policies Scenario(STEPS)

Scenario aligned with the goal of theParis Agreement adopted at COP21
held in December 2015, which is tolimit global warming to well below
2°C compared to pre-industrial levels
and pursue efforts to limit warming to
1.5°C. Under this scenario, theearth’s temperature is projected torise approximately 1.5°C by the endof this century.

A scenario which assumes thatcountries carry out the pledges they
have made, including their Nationally
Determined Contributions (“NDCs”)
submitted under Article 4 of the Paris
Agreement and their long-term net zero
goals, both fully and on time. Under this
scenario, the earth’s temperature is
projected to rise approximately 2.1°C by
the end of this century.

A scenario which assumes thatcountries carry out policy initiatives
their governments have alreadyannounced, on the assumption thatcountries will keep ambitions andgoals of the policies they are currently
implementing. Under this scenario,
the earth’s temperature is expected torise approximately 2.6°C by the end of
this century.

(tCO 2 e/US$ million)
400

385.4
337.0

300

200

100

111.8
75.5

126.9

85.9
59.7

59.4

NAM’s global
equities
portfolio

Global equities
benchmark0
NAM’s Japaneseequities portfolio

31

Japanese
equities
benchmark

About Nomura Asset Management

NAM’s
Japanese bonds
portfolio

Japanesebonds BM

NAM’s
Japanese bonds
portfolio

Globalbonds BMFor total carbon emissions of our four asset integrated
portfolio, we used data from ISS, and performed scenario
analyses based on the three scenarios in the World Energy
Outlook 2021 issued by the International Energy Agency (IEA).
For the total carbon emissions used in our scenario analyses,
in light of the specific characteristics of transition risk ineach 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 allother companies.
The scenario analysis confirmed that our four-asset
integrated portfolio is likely to reach the total carbon emissions
permitted in the SDS around 2043. This is evidence of the
improvement in the investment portfolio since the end of 2021,

when we found that the portfolio was likely to reach the total
carbon emissions permitted in the Sustainable Development
Scenario around 2040.
We feel that the portfolio’s emissions were greatly impacted
by the fact that our global equities and global bonds portfolios
include comparatively high weightings of stocks and bondsin the Energy, Materials, and Utilities sectors, centered on
emerging countries and developing countries, where GHG
emissions are high in conjunction with economic growth. Our
analysis also hints at the importance of continuing to call formeasures to address climate change across the market, as
our investment portfolios include many passive investments,
mainly in Japanese equities.

Responsible Investment Report 2022

32

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

APS

STEPS

Transition Risk Analysis

Portfolio

It is important to analyze climate-related transition risk indetail due to the fact that this risk is highly dependent on
GHG emissions which have a relatively high correlation withboth stock price performance and enterprise value. We feel
it is key to analyze 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 supply chain as well as GHG absorption as disclosed
by companies.
The specific transition risk analysis method involves using
ISS data to analyze the power generation exposure and

(%)

120

100

80

future GHG emissions (risk of stranded assets) on an energy
generation basis in the portfolio, and the ratio of problematic
resource development (shale oil/gas development andfracking, crude oil or gas drilling in the arctic, oil sands
development, etc.), along with using the carbon risk rating,which is ISS’s proprietary transition risk assessment.
Furthermore, the environment score within our proprietary
ESG score includes evaluations of climate-related transition
risk, and we use internal carbon price to analyze its financial
impact by transition and GHG emissions.

60

Power Generation Exposure Analysis (Portfolio, Benchmark, SDS)
40

20

0
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 2022 carbon budget for SDS is set at 100%.

The graph below compares the power generation exposureof our portfolios, 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 to limit thetemperature increase in 2030 and 2050 to less than 1.5°C
above pre-industrial levels. The power generation exposureof both our Japanese equities and Japanese bonds portfolios
are almost the same as the benchmarks. Meanwhile, theratio of fossil fuel power generation in our global equities andStatus of GHG Reductions by Portfolio Companies
As one of the methodologies for checking the progress
made on the 2050 Net Zero Goal and the 2030 Interim Target
for portfolio assets, NZAM, of which we are a signatory,
recommends the Science Based Targets initiative for Financial
Institutions (also referred to as “SBTi for FI”). Under the SBTi
for FI, financial institutions will monitor the ratio of portfolio
companies whose targets have been approved by SBTi (SBT
portfolio coverage ratio) as well as the temperature ratings
developed by the CDP and the WWF. We are utilizing ISS’sanalytical tools to monitor GHG reduction targets of portfolio
companies in the investment portfolio (including SBT approval).

Fossil Fuels

As of the end of 2022, the SBT portfolio coverage ratio for
our four-asset integrated portfolio was 36.4%, which was higher
than 27.0% in 2021.
SBT commitments and SBT approvals of portfolio companies
show that they have set GHG reduction targets based on
scientific grounds, and this is objective proof of our investment
portfolio’s move to decarbonize and an important steppingstone towards realizing a decarbonized society. Therefore,
through engagement and other means, we will encourage
portfolio companies to proactively commit to SBTs and obtainapproval.

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

No Target
Non-Ambitious Target
Ambitious Target

84

5

11

Japanese equities
benchmark

85

4

11

NAM’s global
equities portfolio

44

Global equities
benchmark25

22

NAM’s Japanesebonds portfolio

83

5

12

Japanesebonds BM

82

6

12

44

29
54

37

SDS in 2030

27
23

22

10

53

10.8

Approved SBT

33

18

14.7

Committed SBT(Weighting in portfolio)

38
53

Globalbonds BM

20.1

Renewables

NAM’s Japaneseequities portfolio

NAM’s Japanesebonds portfolio

18.0

Nuclearglobal bonds portfolios are lower than the benchmarks. Also,
the fossil fuel power generation exposure in all asset classes
are higher compared to the power generation exposure in
2030 and 2050 under the SDS.
By increasing the ratio of renewable 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
average carbon intensities of our portfolios.

SDS in 2050

36.4
0%

About Nomura Asset Management

10%

20%

30%

40%

0%

7

9

84

20%

40%

60%

80%

100%

Responsible Investment Report 2022

34

Climate-related Risk and Opportunity Evaluation in our ESG Scores
Within environmental and climate change category of ourown ESG scores for Japanese equities, in order to properly
evaluate portfolio companies, we assess climate-relatedrisks that reflect GHG absorption and conduct quantitative

Climate-related Risk Evaluations Using Internal Carbon Price and
GHG Absorption
In the past, transition risk assessments were generally
based on the amount of GHG emissions, but using
internal carbon price and the amount of GHG
absorption allows transition risk evaluations to reflect
a company’s real situation more accurately.
From 2021, we use internal carbon price to analyzefinancial impact in the evaluation of climate relatedtransition risk in the environment score within our
ESG score. For example, if a carbon tax or emissions
trading system is introduced, a portfolio company’s
GHG emissions become a cost. From the standpointof the impact on enterprise value, a more accuratetransition risk analysis can be performed if the ratioof this cost to shareholders’ equity or cash flow
is analyzed. For GHG emissions, we used data
disclosed by companies for Scope 1 and Scope 2
emissions (if a company does not provide disclosure,
we use ISS’s estimates), and for Scope 3 emissions
we used ISS’s estimates. In addition, internal carbon
price used to replace GHG emissions with economic
value is periodically reviewed referencing the market
price (EUA in EU ETS, etc.), internal carbon pricelevels in portfolio companies, and reports frominternational organizations such as the World Bank.
From 2022, we have included GHG absorption in
the climate change category of the environmental
score in our ESG score. Specifically, in theenvironmental score, we are deducting GHG
absorption disclosed by a company from its GHG
emissions in both: 1) our assessments of whether
the company discloses its GHG emissions and thechange in emissions over time; and 2) our financial
impact analysis using internal carbon price. In our

Quantitative Evaluations of Climate-related Opportunities Using
Avoided Emissions and Internal Carbon Priceassessments of climate-related opportunities including
avoided emissions and removals (“avoided emissions, etc.”)
by utilizing our internal carbon price.

ESG score, in our definition of GHG absorption, we
include: 1) the amount of GHG directly removed fromthe atmosphere, including by forests and CCUS; 2)avoided emissions which contribute to a reduction inemissions, such as through a company’s technology,
products, or initiatives; and 3) GHG emissions offset
by carbon credits. We collect data on a company’s
GHG absorption from its disclosed reports and otherinformation, and build our own database.
Net-zero GHG emissions to mitigate climate change
refers to the GHG emissions minus the amount of
GHG absorption equaling zero. Consequently, it isnecessary for a company to utilize the amount of
GHG absorption to account for the emissions thatremain after a company has done all it can to 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-related risk, we feel that reflecting GHG
absorption in a company’s ESG score is consistentfrom the standpoint of assessing enterprise 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 andScope 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 andcarbon offsets are included in our definition of GHG
absorption, we are not using the GHG absorption
data in our 2050 Net Zero Goal or our 2030 Interim
Target.

In 2023, we have started to quantitatively include avoided
emissions, etc. in the opportunity evaluation categoryof the environmental score for Japanese equities. In thisevaluation, we measure the ratio (impact) of the economic
value, calculated by multiplying the amount of avoided
emissions, etc. disclosed by the company by the internalcarbon price that we use when evaluating companies,
to the company’s operating profit. There is a positive
correlation between a company’s avoided emissions, etc.
and the amount of net sales and other business metrics,

and we believe that this is one optimal metric to evaluate
climate-related opportunities that will lead to both areduction in society’s overall emissions as well as anincrease in enterprise value. An increasing number ofcompanies are disclosing their avoided emissions, etc.,
so through this new quantitative evaluation of climaterelated opportunities we hope to encourage companies
to disclose their avoided emissions, etc. and makefurther efforts to achieve net zero, as well as promote
related dialogue.

Physical Risk Analysis
In recent years, hurricanes, cyclones, heavy rains, floods, heatwaves, forest fires, and droughts, which are thought to be
impacted by climate change, are frequently occurring aroundthe world. The impact of these events on the businesses andassets held by portfolio companies can no longer be ignored,
and analyzing physical risks is becoming increasingly important.
In analyzing the physical risks of portfolio companies, inaddition to ISS’s risk analysis and physical risk score byindustry and region, we utilize the portfolio’s Value at Risk
(potential negative impact of physical risk on the value of aportfolio) calculated as the potential value lost through 2050
due to damage incurred by the business assets owned by
portfolio companies from abnormal weather stemming fromclimate change. For Japanese companies, if necessary, we
use disclosure materials and company websites to research
the regions of offices, factories, and important owned assets,
and we also check hazard maps and other materials publishedby local governments in order to supplement our analysis ofphysical risk.

Physical Risk Analysis by Sector and Region
We utilize ISS data to analyze physical risks by industry andregion. The graph below shows the percentage of Value at
Risk related to physical risk in each sector through 2050 for ourJapanese equities, global equities, Japanese bonds, and global

bonds portfolios. The higher the ratio, the greater the potential
negative impact of physical risk on the value of companies inthat industry. We calculate the Value at Risk of each portfolio,
but it is used internally and not disclosed in this report.

Value at Risk by Sector

Industrials
Consumer Discretionary
Consumer Staples
Information Technology
Communication Services
Utilities

EnergyMaterials
Financials

Health Care
Real Estate

NAM’s Japaneseequities portfolio
NAM’s global
equities portfolio
NAM’s Japanesebonds portfolio
NAM’s global
bonds portfolio
0%

20%

40%

60%

80%

100%

Portfolio Value at Risk (%)

35

About Nomura Asset Management

NAM’s Japanese equities portfolio

NAM’s global equities portfolio

NAM’s Japanese bonds portfolio

NAM’s global bonds portfolio

2.1%

0.9%

2.7%

0.6%

Responsible Investment Report 2022

36

The Physical Risk By Region

Analysis of Sovereign Debt Portfolio Emissions (Financed Emissions)and regional allocations. These analyses enable us to identify
sectors and regions with relatively high physical risk.

The below map shows the physical risk by region for our four
asset integrated portfolio. Along with the ratio by industry,
we use this map as a reference when considering industry

HighestHigh

Moderate

Light

None

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

Active involvement in climate change
countermeasures, cooperation withother investors and stakeholders, andsharing of best practices throughclimate-related initiatives we havejoined, such as PRI, TCFD, Climate
Action 100+, NZAM and PCAF
Enhance climate change-related ESG
integration,including climate-related
risk/opportunity analysis for theinvestment portfolio
Develop financial analysis/corporate
valuation methods using internalcarbon price and GHG absorption
Develop climate change-related
financial products that contribute torealizing a decarbonized society
consistent with our 2050 Net Zero Goal
and 2030 Interim Target
Enhance the transparency of our efforts
towards climate change through TCFD
disclosure in our Responsible
Investment Report

NomuraPortfolio
AssetManagement Companies

Climate-related financial disclosure basedon the TCFD Recommendations including
scenario analysis and GHG reduction
targets
Disclose Scope 3 and GHG absorptionthat enable GHG emissions to beassessed in the life cycle of products andservices and throughout the supply chain,encourage GHG reductions by suppliers,
customers and other business partners.
Introduction of internal carbon price anddisclosure of price level by portfolio
companies
Incorporate climate change
countermeasures and external
evaluations related to climate change into
KPI for executive compensation
Obtain approval of science-based targets(SBT) or commit to them
Respond to CDP questionnaires, join
initiatives such as RE100/EP100/EV100,
etc.
Obtain verification and assurance of GHG
emissions and GHG absorption data

In December 2022, the Second Edition of the PCAF’s The
Global GHG Accounting and Reporting Standard for the
Finance Industry was released. In this Second Edition, thesovereign debt asset class was added to the methodologies
for measuring and disclosing GHG emissions for investment
and loan portfolios. Following the release of the new Standard,
we measured the emissions of our investment portfolio
for both domestic and overseas sovereign debt held as ofDecember 31, 2022.
The methodology for measuring sovereign debt portfolio
emissions is different from the methodology for measuring
portfolio emissions for listed equities and corporate
bonds. Specifically, the definitions for emission scopes
and the computation of investment ratios (attribution
factor) used in measurements are different. Regarding
supply chain emissions for countries, which form the basefor measurements, Scope 1 is defined as the domestic
GHG emissions from sources located within the country
territory, Scope 2 is defined as energy-related imported
GHG emissions, and Scope 3 is defined as GHG emissions
attributable to non-energy imports from another country.
In addition to these, financial institutions are being urged
to measure consumption-based emissions. In computing
the attribution factor, which is the ratio of investment in theinvestee, unlike the ratio of the amount invested to EVIC which
is used for measuring GHG emissions for listed equities andcorporate bond portfolios, in measuring the sovereign debt
portfolio emissions, the ratio of the invested amount (exposure

Sovereign debt portfolio
emissionsto sovereign bond) to PPP (Purchase Power Parity)-adjusted
GDP is used.
For measuring Scope 1 emissions, we mainly use GHG
data(Annex 1 countries) from the UNFCCC (United Nations
Framework Convention on Climate Change), while formeasuring Scope 2 and Scope 3 emissions we mainly use theOECD’s CO2, and we measure consumption emissions using
CO2 data only. The UNFCCC’s Scope 1 data for non-Annex
1 countries contains considerable variation in the timing ofeach country’s most recent data, so these data have not beenreflected in the measurement results noted on the graphs,
but we are separately monitoring the measurement results for
non-Annex 1 countries, including the most recent data that
we can capture, and these data are included in the notes asreference data.
Our sovereign bond portfolio includes large amounts of U.S.
and Japanese sovereign bonds, and thus our sovereign bondportfolio’s emissions are greatly impacted by the emissionsof these countries. Data for emerging countries are not yet
sufficiently released, and for the current measurements there
are areas that we cannot completely supplement. However, if
data accessibility further improves going forward, it will enable
us to improve the quality of the data we disclose. The role thatany one country should play in the decarbonization of society
is becoming more important. We will continue to proactively
advocate for the realization of a decarbonized society bymonitoring the financed emissions of our sovereign bondportfolio and through engagement.

Book value of amountinvestedBook value of amountinvested
PPP-adjusted GDP

GHG or CO2 emissions

Sovereign debt portfolio
Production emissions intensity

Sovereign debt portfolio
Production emissions =intensity

Book value of amount invested
Book value of portfolio

Production emissions
PPP-adjusted GDP

Sovereign debt portfolio
Consumption emissions intensity

Sovereign debt portfolio
Consumption emissions =intensity

Book value of amount invested
Book value of portfolio

Consumption
emissions
Population

Definition of scopes and consumption emissions for measuring sovereign debt portfolio emissions
scope 1

Domestic GHG emissions from sources located within the country territory

scope 2

GHG emissions occurring as a consequence of the domestic use of grid-supplied electricity,heat, steam and/or cooling which is imported from another territory

scope 3Emissions attributable to nonenergy imports as a result of activities taking place within the
country territory

Consumption emissions

GHG emissions on a consumption basis within the country (scope 1 + scope 2 + scope 3 –exported emissions)

Please refer to Page 63, 71 for actual examples of climate change-related engagement.

37

About Nomura Asset Management

Responsible Investment Report 2022

38

Sovereign bond portfolio emissions (Units: ktCO2e (in the case of GHG), ktCO2 (if CO2 only)

Cooperation with Climate Change-related Initiatives

Scope 1 (GHG, excluding LULUCF)

12,607

Scope 1 (GHG, including LULUCF)

11,496

Scope 2 (CO2 only)46

Scope 3 (CO2 only)

4,905

Consumption emissions(CO2 only, excluding LULUCF)
Consumption emissions(CO2 only, including LULUCF)

13,062
11,8700

5,000

10,00015,000*LULUCF: Land Use, Land Use Change and Forestry*Production emissions Scope 1 use 2020 UNFCCC Annex 1 country’s GHG data and 2021 PPP-adjusted GDP announced by the World Bank.
*Scope 2 and Scope 3 use the OECD’s CO2 data for 2018 and 2021 PPP-adjusted GDP announced by the World Bank.
*For consumption emissions, Scope 1 emissions use 2020 UNFCCC Annex 1 country CO2 data, while Scope 2, Scope 3 and exported emissions use the OECD’s CO2
data for 2018 and 2021 PPP-adjusted GDP announced by the World Bank.
*When measured including the most recent data released by each UNFCCC Non-Annex 1 country, Scope 1 emissions were 13,222ktCO2e (GHG, excluding LULUCF) and12,057ktCO2e (GHG, including LULUCF), while consumption emissions were 13,507ktCO2 (CO2 only, excluding LULUCF) and 12,269ktCO2 (CO2 only, including LULUCF).

Breakdown of consumption emissions (CO2 only, excluding LULUCF / including LULUCF).
(ktCO2)(ktCO2)

excluding LULUCF

18,000

4,905

15,000including LULUCF

18,00015,000
4,905
13,062

12,00012,000-2,170
10,326

11,870-2,170

46

9,000

9,000

6,000

6,000

3,000

3,000

9,135

46

Scope 1

Scope 2In March 2019, we pledged our support for the TCFD, andstarting with our Responsible Investment Report 2019
we have been providing disclosure in line with the TCFD
Recommendations, and also offering detailed disclosureand reports on GHG emissions monitoring for individual
funds, covering our company-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 we are a member of the
GIG Supporters, a group of investors that utilize the Green
Investment Guidance formulated by the TCFD Consortiumin October 2019 to engage with portfolio companies andactively encourage them to support the TCFD, disclose
climate-related financial data, and integrate climate-relatedrisks and opportunities into their management strategies.
The TCFD Consortium released the amended Green
Investment Guidance 2.0 in October 2021. While utilizing theGreen Investment Guidance, we actively encourage investee
companies to endorse the TCFD, disclose climate-related
financial information, and integrate climate-related risks andopportunities into their management strategies throughengagement. Furthermore, in December 2019, we joined
Climate Action100+, and through this initiative we collaborate
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, 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 ona standalone basis. We are responsible for the responses toquestions for the asset manager on Nomura Holdings’ CDP
questionnaire.
Furthermore, in September 2022, Nomura Holdings, incollaboration with 6 leading companies (Nomura Holdings,
Inc. being the chair) and 73 member companies, establishedthe “GX Business Working Group” as a part of the GX(=Green Transformation) League’s important initiative todevelop rules for market creation. For the realization of acarbon neutral society, the GX Business Working Group aims
to establish an appropriate framework to properly evaluate
Japanese companies’ opportunities and their contribution toclimate change (emission reductions based on the products
and services they provide to the market). In addition, throughthe discussion with leaders and members of the working
group, the GX Business Working Group intends to develop a
guideline and take initiative on climate-related opportunities.
As a member of Nomura Group, Nomura Asset Management
will proactively contribute to the GX Business Working
Group’s activities and discussions.

00
Scope 1

Scope 2

Scope 3exported consumption
emissionsemissions*When measured including the most recent data released by each UNFCCC NonAnnex 1 country, Scope 1 emissions (CO2, excluding LULUCF) were 10,786ktCO2,
while consumption emissions (CO2 only, excluding LULUCF) were 13,507ktCO2.

exported consumption
emissionsemissions

Scope 3

*When measured including the most recent data released by each UNFCCC NonAnnex 1 country, Scope 1 emissions (CO2, including LULUCF) were 9,537ktCO2,
while consumption emissions (CO2 only, including LULUCF) were 12,269ktCO2.

*For countries for which Scope 1 data cannot be obtained, even if Scope 2 and Scope 3 data are available, Scope 2 and Scope 3 are excluded from the final calculation of
the consumption emissions. Therefore, the values for (Scope 1 + Scope 2 + Scope 3 – exported emissions) and consumption emissions do not match.

Sovereign Bond Portfolio Emissions Intensity (Carbon Intensity)(Units: tCO2e/US$ million (GDP))
Production emissions intensity(GHG: excluding LULUCF)

202.8

Production emissions intensity(GHG: including LULUCF)

184.9
0

50

100

150

200

250

*Scope 1 data above are used for production emissions. For GDP, 2021 PPP-adjusted GDP announced by the World Bank is used.
*When measured including the most recent data released by each UNFCCC Non-Annex 1 country, the above values are 212.7tCO2e/US$ million (GDP) (excluding LULUCF)
and 193.9tCO2e/US$ million (GDP) (including LULUCF).
(Units: tCO2e/capita (population))
Consumption emissions intensity(CO2 only, excluding LULUCF)
Consumption emissions intensity(CO2 only, including LULUCF)

11.9
10.7

2
0
4
6
8
10
12
*Consumption emissions are defined the same as above. For populations, 2021 World Bank data are used.
*When measured including the most recent data released by each UNFCCC Non-Annex 1 country, the above values are 12.1tCO2/capita (population) (excluding LULUCF)
and 10.9tCO2e/capita (population) (including LULUCF).

39

About Nomura Asset Management

Responsible Investment Report 2022

40

41

Initiatives on Human Rights

Nomura Asset Management’s Human
Rights Risk Monitoring Process

Nomura Group has prescribed the respect for human rights
in the Nomura Group Code of Conduct, and is a signatoryof the UN Global Compact based on its respect for the
Universal Declaration of Human Rights, the OECD Guidelines
for Multinational Enterprises, the ILO International Labour
Standards, and the UN Guiding Principles on Business andHuman Rights.
As legal and regulatory frameworks related to human rights
become more robust in countries around the world, humanrights issues have become an important factor in investment
activity.
For companies, countries, and various types of projects,
goods and services are delivered to users and end consumers
after procurement, production and transport of materials.
As this value chain crosses national borders and intersects
with differing regulations and practices, there is a risk ofhuman rights issues that cannot be seen from the surface.
Once a human rights issue arises, it can adversely affects
the community, the company’s employees, and business
partners, and leads to a loss of trust from its customers.
This is because reputation risk, such as the deterioration of
a company’s image in society, increases, and the company
may have to pay a large cost (cost and time to restore its
reputation) to resolve the human rights issue.
In addition, if the problem remains unresolved over along period of time, the adverse impact on the company’s
corporate value itself will grow.
Our mission is to protect the assets our clients entrustwith us from risks related to human rights issues by raisingawareness of such human rights issues among our investee
companies and having them proactively 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
globally.

Nomura Asset Management broadly and continuously
monitors the human rights risks of companies in ourinvestment universe, as we seek to reduce the risk of humanrights infringements at the investment portfolio level.
We research whether the companies in our investment
universe have been involved in actual human rights-related
misconduct and, if so, we examine the level of damage
resulting from such conduct. We also check whether or
not companies have formulated human rights policies that
conform to international standards as well as research
the status of a company’s human rights due diligence andmechanisms for handling grievances.
In addition, we also regularly research companies that havebeen flagged for involvement in human rights issues based on
the outcomes of investigations by human rights NGOs or byinternational organizations.
This research centers on sectors with complicated supply
chains and sectors that produce products with historically large
human rights risks in production or raw material procurement.
This group of sectors includes sectors related to food/agriculture products, automobiles, ICT, apparel, and resource
related sectors.

About Nomura Asset Management

SectorMajor industries/products

Food/agriculture products

Food, Daily goods ,Food retails

Automobiles

Finished cars, Automobile parts,
Tires

ICT

Electric products, Electronic
components, Semiconductor
manufacturing equipments

ApparelTextiles, Shoes, Clothing retailResource related

Mining/Petroleum, Steel,
Trading companies

Human Rights Risk Management at the Portfolio Level
ESG specialists examine human rights risks (the survey items
mentioned in the section about the human rights monitoringprocess) at the portfolio level throughout the year, basedon the human rights risk monitoring data for each stock
researched annually.
We carry out engagement if we hold a company judged ashaving high human rights risk in our investment universe.
The corporate analyst responsible for that stock, ESG
specialists, and ESG engagement managers hold discussions
with the company about risk factors (such as an inadequate
management system or insufficient disclosure of information),and formulate an action plan to make improvements.
For companies that are considered high risk in terms ofhuman rights but are continuing to work on solving problems,
we monitor the progress of their efforts through periodic
engagement.
Also, after a certain period of engagement, thosecompanies for which we can expect improvement will be
Human rights risk monitoring of companies

unflagged as human rights high-risk companies, and will be
subject to normal monitoring.
In corporate transactions, where human rights risk
assessment has become the norm in recent years, we believethat companies that have established strong processes forhuman rights risk management will see a reduction in humanrights risk not only in business with existing customers, butalso in business with new corporate customers. We also think
this will result in more positive evaluations of the products andservices the company offers as well as an increase in business
opportunities.
We believe that by repeating this human rights risk
management at the portfolio level, we can gain a deep
understanding of social risk carried by companies in ourinvestment universe and reflect this in our investment
decisions on companies. We feel that this will also advance
our ESG integration related to human rights risk.

Engagement(based on individual companies)(human rights high-risk companies)

Human rights-related policies ( child labor, forcedlabor, wages, safety, etc)
Check the status of compliance with international
norms
Human rights risk management systems(monitoring, relief systems, self-assessment, etc.)
Investigations of misconduct related to humanrights violations

Formulation of human rights policies
Implementation and disclosure of humanrights due diligence
Building a remedy mechanism
Actions aimed at improvement

Human Rights Due Diligence and its
results
Our ESG specialists and ESG investment managers determine
potential human rights risk levels for companies in ourinvestment universe based on corporate disclosures, NGO
reports and media information.
Our assessment focuses on the following six main issues:
1) Whether the company has a human rights policy that
conforms to international standards; 2) Whether the company
is performing human rights due diligence; 3) Whether thecompany is conducting surveys of suppliers; 4) Whether thecompany discloses the results of supplier surveys; 5) Whether
on-site investigations of suppliers are performed; and 6)
Whether there are corrective measures and a contact for
whistleblowing in place.
If we cannot confirm in the disclosure that adequate humanrights management is being implemented, or if a scandal is
discovered, the company will be subject to engagement, andwe will demand improvements through periodic engagement.
Human rights due diligence in 2022 also targeted large-cap
stocks in sectors with a high level of human rights risk.
The majority of Japanese companies we assessed
had already formulated human rights policies conforming
to international norms, while approximately 87% of thecompanies are carrying out human rights due diligence. These
mark an improvement in companies’ efforts.
Although a large number of companies conduct humanrights surveys of suppliers and disclose the results of thosesurveys, only around 60% of companies are carrying out
on-site investigations of suppliers, so we expect further
improvement.

Integration into investment(investment decision-making)

Buy
Sell
Continuous holdAs an asset manager aiming to eliminate human rights
violations, we will actively carry out engagement in order tohave investee companies establish human rights management
systems in fields where efforts have been slow.
Status of human rights initiatives and disclosure
Stocks subject to disclosure checks

Sectors with high risk of human rights issues
Food/agriculture Automobiles
products

ICT

ApparelResource
relatedHuman rights policies conforming tointernational norms

Implementation of Human Rights Due
Diligence

No

No

13%

7%
Yes

Yes

93%
Surveys of suppliers

87%
Disclosure of supplier survey results
No

No

30%

10%

Yes

Yes

70%

90%
On-site audits of suppliersNo

Consultation contacts for suppliers to use
No

39%

21%
Yes

61%

Yes

79%

Responsible Investment Report 2022

42

Human Rights Engagement
Having direct dialogue with portfolio companies abouthuman rights issues and urging them to make improvements
for such problems is one of our responsibilities as an asset
management firm.
The topic of human rights is an important engagement
theme for both the Japanese and overseas companies weinvest in.
Risks related to human rights issues can be managed tosome extent by establishing a management system.
However, industries and companies with complex supply
chains and operations in areas with political instability andunstable human rights policies can pose unforeseen risks tobusinesses.
In recent years, there have been cases both among Westernand Japanese companies of being suspected of involvementin production activities in areas where there are suspicionsof child labor or forced labor in the development of a global
business or supply chain development, as well as companies
deciding to withdraw from a business due to influence from aheavy-handed government regime.
Even for human rights issues occurring in these various
regions, we strive to engage from a neutral standpoint,
obtain all relevant information, and reflect the findings in ourinvestment decisions.
Especially in the case of human rights issues where it isdifficult to grasp accurate information and make judgments
due to different claims by all of the involved stakeholders, we
encourage the company we are engaging with to improve
relationships based on dialogue with stakeholders and toprovide information to investors on a continual basis.

Example of Engagement (Global Equity )Human Rights Risks
Need to work on protecting the community’s culture, rebuilding
the relationship and managing human rights risks
Milestone management status

Period of engagement

Nomura Asset Management became a member of the Advisory Committee for “Advance”,
the PRI’s collaborative initiative for human rights and social issues
In 2022, Nomura Asset Management became a member of the Advisory Committee for “Advance”,
the PRI’s collaborative initiative for human rights and social issues, and we have taken a leadingrole in both building the collaborative engagement framework and in carrying out dialogue withcompanies.
The collaborative engagement under the Advance initiative targets 25 companies selected from themetals and mining sector and 15 companies picked from the renewable energy sector. In addition
to the high level of human rights risks in both of these sectors, demand for minerals and renewableenergy is expected to increase amid the transition to clean energy, so we believe that encouraging
companies to address human rights risks is critical.

Nomura Asset Management / Sustainalytics

Following the incident involving the destruction of cultural heritageof indigenous peoples, please tell us how you are improving yourgovernance structure with respect to risk management for cultural
heritage.

Please tell us the status of your amendments to your Communities
and Social Performance Commitments Disclosure Report.

Example of Japanese Equity Engagement(Milestone Management)

Progress

Company implements
countermeasures
Company formulates
countermeasures

PeriodCompany shares arecognition of issues

23months

Machinery
0

12

24

Communication ofissues to company

NAM’s concerns

Goal

The company is behind on efforts to address the S (social issues) in
ESG. Human rights risks are especially important topic intheir business,but no progress has been made on addressing them.

Perform human rights due diligence and disclose results

Initially
NAM

Overview

International initiatives are evaluating automakers’ humanrights risks. As a supplier, action to address this is urgently needed.
Company

We manage our supply chain, but we have not yet

started to look at human rights cross-sectionally across all suppliers.

* The period is the number of months from the start of interviews to December 2022.

43

About Nomura Asset Management

24

36

Australian material company

The incident was the result of our excessive focus on the legal
process, our lack of attentiveness to the feelings of people in thecommunity, our insufficient systems for responsibility and reportingon cultural heritage, and the lack of communication during the
COVID-19 pandemic. We have already improved our organizational
and accountability systems, and are operating with an emphasis
on cultural heritage. In addition to grasping accurate information on
cultural heritage throughout the company, we are providing more
useful and easy-to-understand data to mine development andplanning departments and other teams throughout the company. We
have integrated comprehensive risk assessment of cultural heritage
into the strategy decision-making process.

Please discuss the efforts you are making to improve relationships
with indigenous peoples.

Most recent interview / Jan. 2022 / 2 interviews
Interviewee / Senior Executive Vice President, Chief
Financial Officer

36

6 interviews

We created a department dedicated to communities and social
performance. In light of changes in expectations from stakeholders
and other factors, we are in the process of formulating new standards
while incorporating opinions received from outside consultants. The
new standards avoid ambiguous language and define requirements
more clearly.
We are also bolstering cultural awareness training in order to deepen
employees’ understanding and their awareness of cultural heritage.

Conclusion

Human Rights Risks

12

21months

We are engaged in open communication with indigenous groups withthe aim of improving relationships. We have started to jointly design
projects with indigenous groups, so we have begun incorporating
their input into our decision-making. We have received positive
feedback from indigenous groups, including with respect to theprocess of rethinking the development of Aboriginal heritage areas.

Most recently
Senior management understands that this is an issue, but it will taketime to address it. We plan to continually ask senior management totake action.

In addition to agreeing on the terms of compensation
for damages, we want you to prevent therecurrence of incidents in the future by improving
communication with indigenous communities andhaving departments dedicated to working with
communities participate in the business decisionmaking process.

We will increase the number of employees andsenior management members that belong toindigenous groups in order to increase theirinvolvement in business decision-making as well as
to foster a culture of inclusivity and mutual respect.

Responsible Investment Report 2022

44

Example of Engagement (Global equity)

Biodiversity Risks

Deforestation in the supply chain

Status of milestone
management

Engagement period

Nomura AssetManagement

Please explain your procurement
policy and the governance system
for it, as well as your supply chain
monitoring system, etc.

Initiatives and Partnerships toProtect Natural Capital and Biodiversity
At the United Nations Biodiversity Conference (COP15) held inMontreal in December 2022, the global community adopted
the Kunming-Montreal Global Biodiversity Framework, a new
set of global biodiversity goals to be achieved by 2030.
This Global Biodiversity Framework features 23 action
targets to be completed by 2030 in order to achieve theshared vision of living in harmony with nature by 2050.
These targets include: effective conservation andmanagement of at least 30% of the world’s lands and oceans(30 by 30); reducing the risk posed by both excess nutrients
lost to the environment as well as pesticides and chemicals;and ensuring the sustainable management of areas used for
agriculture, aquaculture, fisheries and forestry. The COP15
agreement also includes financial support to be provided bydeveloped countries to developing countries.
Healthy biodiversity is essential for the advancementof society, and there are high expectations on financial
institutions to play a role in preventing biodiversity loss and inpreserving and restoring natural capital.

45

About Nomura Asset Management

Nomura Asset Management recognizes the importanceof issues related to natural capital in its ESG Statement,
participates in international initiatives as both an institutional
investor and a company itself, and collaborates with otherasset managers to promote initiatives aimed at protecting
natural capital.
At COP15, together with PRI signatories, we endorsed aninvestor statement calling on governments to adopt the Global
Biodiversity Framework and collaborate to address climatechange and biodiversity protection and restoration.
In terms of other global initiatives, we leverage ourcollaboration with Farm Animal Investment Risk and Return(FAIRR) to engage with food-related companies, and weengage with palm oil companies and the companies in their
supply chains through initiatives to end deforestation P.73 .
We encourage companies to take action to protect
and restore biodiversity, and we share insights and bestpractices regarding engagement targeting biodiversity
protection.

Please discuss the status of yourgrievance handling, particularly
the status of cases discovered bysatellite imagery.

In our collaborative engagement with Sustainalyticswe
carry out engagement on many individual topics
related to biodiversity. We are encouraging food-relatedcompanies to transition to a sustainable global food system,
including the management of natural capital such as land
and water, and the reduction of food waste.
In addition, for clean technology companies related toelectric vehicles and solar or wind power generation facilities,
we continue to support the promotion of a circular economy
through the procurement of sustainable raw materials(including by suppliers), increasing the rate of recycling, andkeeping waste out of landfills.
Furthermore, we carry out engagement with respect towater management for multi-industry companies operatingin Brazil’s Tietê River Basin and in South Africa’s Vaal River
Basin. More specifically, we are encouraging the formulation ofbusiness strategies targeting the enforcement of appropriate
strategies and countermeasures on water resources.

15 months
Twointerviews

12

24

36

US consumer staple
company

We have an internal Palm ESG
team (12 members) in charge ofdemanding that suppliers have
NDPE policies, grievance handlingsystems, etc. We have confirmed
that, as of July 2021, 100% of ourpalm oil is RSPO certified.

We are appropriately investigating
and rectifying grievances inline with our forestry grievancehandling process. If deforestation
discovered via satellite images isconfirmed in parts of our supply
chain following an investigation by
a NPO specializing in commodities
research, and we will work to
rectify this.

P.72

Do your KPIs for commodity
procurement include items related
to sustainability, and not only
costs?

Please provide a status
update on your grievancehandling status, etc.
for deforestation in the
supply chain confirmed bysatellite image data.

RSPO certification is included in
our procurement policy, and we arepaying an RSPO premium (costs
have increased).

We disclose information
about all palm oil-related
grievances through a palm
oil grievance tracking
system as we work to
improve transparency.

Responsible Investment Report 2022

46

Nomura Asset Management’s Biodiversity Monitoring and
Risk Management Process
The loss of biodiversity not only affects the environment, italso has a tremendous negative impact on the economy andpeople’s health.
In order for companies to raise their level of sustainability,
they must protect biodiversity and work on sustainable use,
including understanding their level of dependence on naturefor business continuity and the impact of their company’s
operations and its supply chain on nature.
If biodiversity-related issues become apparent not only
in a portfolio company, but in that company’s supply chain,
there can be a significant 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 their long-term corporate
value, we continuously monitor a wide range of biodiversity

Figure 1

Examples of Biodiversity Risk Monitoringrisks for the stocks in our investment universe, and we aim
to reduce biodiversity risk at the investment portfolio level.
The bar graph below shows the results of measuring
forestry risk in our domestic equity portfolios using CDP
forests rating data. The analysis shows that 16.5% (ona market capitalization basis) of our portfolio stocks are
subject to a rating, with a high level of exposure to forestry
risk in the consumer discretionary sector and the consumer
staples sector (Figure 1).
We also analyze which commodities these sectors’
forestry risks are actually caused by, and utilize thisinformation (Table 1).
For monitoring the risk of individual stocks, ESG
specialists and company analysts work in collaboration toutilize information disclosed by companies, media reports,
external databases, and other sources of information toregularly research natural capital-related information andwaste-related information on stocks in our investment
universe (Table 2).
Issues covered by this research include water resources,
waste volume, disclosures related to the protection of forest

Table 1

Examples of Biodiversity Risk Monitoringand soil resources, disclosures related to the protection ofriver and marine resources, and relation to high-biodiversityrisk commodities.
We check whether or not companies are undertaking
initiatives towards sustainable production and procurement,
especially companies where sales are highly dependent
on commodities which have a large impact on biodiversity,
such as companies in the consumer staples, consumer
discretionary, and materials sectors. For example, we lookat the status of procurement of commodities that havebeen certified by third parties, including the Roundtable on
Sustainable Palm Oil (RSPO) and the Forest StewardshipCouncil (FSC).
Based on such monitoring data, portfolio managers,
ESG specialists, company analysts, and ESG investment
managers work together to engage with portfolio companies
with the objective of managing biodiversity risk.
Through periodic dialogue, we encourage companies torecognize biodiversity risks, take proactive measures, anddisclose information, and we then monitor progress on these
efforts.

Table 2Natural capital risk monitoring for stocks

Example of Engagement (Japanese company)

Biodiversity Risks

Protection of marine resources

Status of milestone
management

10 months
First
interview

Engagement period

Low

Risk

6.0%
Low

Forestry commodities exposure by sector
Woodproducts

Palmoil

Livestock
NaturalSoybeans
products
rubber

Cocoa

Please explain how you will use thefunds procured through theissuance of blue bonds.

While the industry generally
uses blue bonds to financemarine pollution prevention andsustainable seafood resources,
we are looking to invest in landbased aquaculture. In land-based
aquaculture, fish excrement
and leftover feed are completely
processed and discharged from theseawater, so there is no pollution.

Natural capital risk monitoring of companies

Coffee5.0%
Consumer
Discretionary

36

Japanese food company

MediumHigh

24

Nomura AssetManagement(on an individual stock basis)
7.0%

12

Water
resources

4.0%

Waste
volumeDisclosure
regardingforest/soil
resource
protection

Disclosure
regardingriver andmarineresource
protection

Consumer Staples

Disclosure
concerning
pollution(forest/soil, river,marine, air)prevention

Please talk about the potential ofland-based aquaculture, and whether
it will lead to significant business
opportunities.

3.0%
Industrials

No companies in the world haveturned it into a significant business
opportunity, but we have studied
examples of failure. Rather than
expecting price increases, wewould like to focus on reducing
costs to generate profits. Ocean
areas where aquaculture ispossible are decreasing, andmarine aquaculture cannot keep up
with demand. Salmon is efficientin terms of the amount of feed
required to achieve gains in edible
meat.

2.0%
Healthcare

Engagement

1.0%
Materials

0.0%
Ene
Co

mm

rg y

a
unic

tion

rv
Se

ice

y
e
ials
nar
car
anc
alth
retio
Fin
He
isc
rD
e
um
ons

s

C

Util

itie

s
I

st
ndu
C

rials

u
ons

m

ta
er S

ple

s

te
Ma

t
rials
sta
al E
Re

e

* For our domestic equity portfolios, data has been compiled for each GICS sector based on CDP data.
Prepared by Nomura Asset Management

Real Estate

Formulate risk
management
policy* Aggregation 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

Introduce
monitoring

Establishment
anddisclosure ofmeasurement
standards

Actions
towards
improvement

Integration into investment
Buy47

About Nomura Asset Management

Sell

Ongoing holding

You endorsed the TCFD last year.
Are you having internal discussions
about SBT?

We will keep a close watch
on the progress of theland-based aquaculturebusiness which will help toprotect marine resources
and achieve sustainability
for marine resources.

We are discussing SBT internally,
but it is difficult. We first wantto make progress on our efforts
through Scope 2.

Going forward, we will
strive for “responsible
aquaculture” by achieving
stable production while
reducing the impact
aquaculture has on thesurrounding environment.

Responsible Investment Report 202248

Changes can also be seen in the philosophy regarding
the fiduciary duty that asset managers are required tofulfill. For example, looking at stewardship responsibilities,
thus far the so-called “double code” (Stewardship Codeand Corporate Governance Code) has been the underlying
premise. Responsibility for a company’s sustainability,
and the sustainability of society connected to it, lies withthe company, and the Corporate Governance Code wasestablished as the code of conduct covering the company’sboard of directors, which has the responsibility to oversee
the company’s sustainability posture. The Stewardship
Code was established as a code of conduct for institutional
investors to follow when examining a company’s boardof directors, but the main objective of the Stewardship
Code was to enhance corporate value, and in form it was
decoupled from societal sustainability.
In the UK Stewardship Code, which was revised in 2020,
the benefits to the ultimate beneficiaries were amended
to also include sustainable environmental, social andeconomic benefits.

In the investment chain approach, there are ultimate
beneficiaries behind investors, which include individuals
as well as overall society, so it is made clear that they areconnected to investors. However, in the approach embracedby the 2020 revised version of the UK Stewardship Code,this has changed, and institutional investors also have a
responsibility to society and individuals which are bothclosely connected to companies and investors. Behindthese changes, there has been a strong push aroundthe world for the concept of “a vision for society” when it
comes to investment. For example, in December 2019 the“European Green Deal” (the European Commission's 2050
climate neutrality goal) was launched. In its introduction, theEuropean Green Deal advocates for a new growth strategy
that aims to transform the EU into a fair and prosperous
society, with a resource-efficient and competitive economy
where there are no net emissions of greenhouse gases
by 2050 and where economic growth is decoupled fromresource use. The European Commission announced aninvestment plan totaling 1 trillion euros over 10 years in orderto realize the goals of the European Green Deal.

Stewardship is the responsible allocation, management
and oversight of capital to create long-term value forclients and beneficiaries leading to sustainable benefits forthe economy,
the environment and society.

It is a new growth strategy that aims to transform the
EU into a fair and prosperous society, with a modern,resource-efficient and competitive economy where there
are no net emissions of greenhouse gases in 2050 andwhere economic growth is decoupled from resource use.
It also aims to protect, conserve and enhance the EU’s
natural capital, and protect the health and well-being of
citizens from environment-related risks and impacts. At thesame time, this transition must be just and inclusive.

Introduction of the UK Stewardship Code 2020

An excerpt from the introductionin the European Green Deal

Sustainable Finance and
ESG Product Governance
Sustainable Finance Trends
With the global expansion of ESG investing and sustainablefinance in recent years, countries around the world aretightening regulations related to ESG investments. As
investors’ interest in ESG increases year by year, investment
behavior that is presented as environmentally and sociallyconscious despite lacking substance (commonly referred
to as “ESG washing”) is being spotted and called out.
In particular, Europe is leading the movement towardtightening regulations. A major example of this is the
SFDR (Sustainable Finance Disclosure Regulation) that theEuropean Commission put into effect in March 2021.

49

About Nomura Asset Management

The SFDR is a disclosure rule that defines “sustainability”
according to certain criteria and requires the disclosure of
supporting information to demonstrate the extent to whicha financial product takes sustainability into consideration.
Within the SFDR, regulations are being introduced toencourage disclosure and regular reporting not only on
an individual product basis but also on a company-widebasis, and asset managers’ stance on sustainability is being
robustly questioned.

Originally, the EU in 2018 announced a 10-point action
plan to achieve sustainable growth, and the European
Green Deal comprised a part of that. Regulations, including
the SFDR, have been bolstered to create investment flows
to transform society as a whole. If we think of the current
ESG regulations as mere tools for regulatory complianceand fail to recognize the grand goal behind them, we may
lose the trust of customers and society who will view ourefforts as “unintentional” investment.
This movement has also expanded to countries andregions outside of Europe. For example, in the ASEAN region,an initiative called the Corporate Governance Scorecard

was launched in 2011 with the aim of reforming corporate
governance in each country. Since 2017, these countries
have been steadily bolstering their environmental and social
initiatives, such as creating standards for green bonds
and social bonds, formulating a roadmap for sustainable
capital markets, and establishing an ASEAN Taxonomy forsustainable finance. Japan also announced a green growthstrategy in December 2020. Indeed, countries throughout
the world are now advancing various initiatives to attract
investment funds into their own country with the purposeof building a sustainable society. We have entered an era ofcompetition for capturing sustainable investment funds.

Responsible Investment Report 2022

50

Our ESG Product Governance Initiatives
To earn and keep our clients’ trust, we believe we must beable to comply with global ESG regulations and provide
high-quality investment products with accountability. For
that reason, we not only manage ESG investment quality,
but also continuously engage in ESG product governanceinitiatives, including those related to information disclosure.
Our ESG investments are not limited to investments wemanage internally, but also includes funds managed bythird-party asset managers, and we are bolstering ourgovernance efforts targeting these funds as well. (Pleaserefer to “Overall ESG Product Governance System for theInvestment Side” on Page 52 for more information on ouroverall product governance structure).
Our ESG Committee is the body responsible for
quality control for ESG investments for which we makeinvestment decisions internally. In addition to checking
the ESG processes of Japan-domiciled funds, when it
comes to overseas-domiciled funds (funds compliant with
the European Commission’s UCITS Directive), the ESG
Committee is responsible for complying with the SFDR andother overseas regulations, sorting out the issues regarding
ESG investment policies to ensure such complianceand identifying matters to disclose, among other issues.
In addition, for our Europe-domiciled funds, we haveestablished a Responsible Investment Oversight Committee(RIOC) in our UK European base to strengthen supervisory
functions in Europe, including dealing with local regulatory
authorities.
Meanwhile, the ESG Investment Process Evaluation
Meeting, which evaluates ESG investments by third-party
asset managers, regularly monitors and evaluates theinternal structures, engagement policies, ESG investment
processes and other aspects of these third-party asset

management firms.
In addition, we are revising our prospectuses and reports
to provide more details about our methodologies for utilizing
ESG, and we have bolstered disclosure by describing how
ESG considerations have contributed to the growth of trust
assets and which ESG issues have been assessed as beingof high importance. In individual disclosure reports, we
include information about the investment philosophy andframework, engagement, ESG officers and other matters, as
we work to make ESG more accessible to our customers.
In order to fulfill our fiduciary responsibility, when using
a third-party asset manager we believe we should check
and understand that asset manager’s investment system,
investment strategy, investment performance, and otherspecifics in the same way as we do for investments wemanage internally, at an appropriate frequency and levelof depth. In addition, in order to conduct more in-depth
corporate research and analysis, we believe we should
properly verify ESG evaluators and data providers in orderto ensure the accuracy and quality of ESG evaluations
and individual data. Therefore, in the same way as for inhouse investments, we are improving the quality of funds
by performing due diligence on, and enhancing disclosure
about, funds managed by third-party asset managers andfunds based on indices provided by ESG index providers.
(Please refer to Pages 53-54 for more information about
ESG index providers, and refer to Pages 55-56 for more
information about third-party asset managers.)
ESG investing is transitioning to an era in which investments
will be stringently selected. We will continue to monitor
ESG-related regulations and developments, pursue true
ESG investment, and continue to enhance our information
disclosure to help investors make investment decisions.

Overall ESG Product Governance System for the Investment Side

Third-party asset managers

Company A

UK/European
officesCompany B

Responsible Investment
Oversight Committee

Europe-domiciled investment
products managed by third
party asset managers
Agreement andcompliance

ESG Committee

Confirmation of SFDR
compliance status

Definition and affirmation of
ESG funds

Sustainable investing definition

Follow countries’ regulatory
developments and maintainalignment

Items related to information
disclosure, etc.

Compliance/
reporting

Formulate guidelines tocomply with countries’
regulations (formulate minimum
requirements and investment
exclusion rules, etc. for SFDR
Article 8 and Article 9 funds, etc.)

Keep alignment
Information exchange
Monitoring

Please refer to the following link on our website for more information about our main ESG funds.
https://www.nomura-am.co.jp/special/esg/strategy/esglineup.html

Domestic
andoverseas
in-house

ESG product governance for
products managed in-house

Working with regulators
Monitoring

Compliance/
reportingInformationexchange

Supervision

In-house managed products (including overseas offices)

Third-party asset
management firms
Independent ESG productgovernance

About Nomura Asset Management

Investment Policy Committee

UCITS
AIF

Supervision for SFDR
correspondence of our in-house
Europe-domicile investment
products

Domestic publicly-offeredinvestment trusts (third-party)

51

Tokyo

Unique ESG productgovernanceIn August 2022 we clarified the above system-related initiatives as well as our definition of ESG funds.
Currently, among ESG investment techniques, we define “ESG funds” to be those funds that actively utilize ESG
integration, engagement/proxy voting, and that actively utilize other sustainable strategies.
Reference

Nomura Asset Management

Provision

Reporting

NAM third-party
managed productsSupervision/
approval

Advisory Fund Management
Department
ESG Investment Process Domestic
third-party
Evaluation Meeting

Responsible Investment Report 2022

52

ESG Index

ESG Product Governance for Index Funds
Nomura Asset Management is working to expand ESG
investment solutions by providing individual and institutional
investors with funds that track ESG indices. We are alsoendeavoring to improve the quality of these ESG index funds
by reviewing the ESG profiles of the adopted benchmark
indices and bolstering communication with index providers.

Reasons for Selection
The MSCI Japan Country ESG Leaders Index is one of MSCI’s standard ESG indices comprising stocks
with high ESG ratings, and is based on MSCI Japan as its parent index.

MSCI Japan Country
ESG Leaders Index

The index has stringent ESG criteria including negative screening in index construction and ESG rating
restrictions (it is limited to ESG scores of BB or higher). We determined that these criteria make it an ESG
index capable of meeting a wide range of demand for ESG investment both in Japan and overseas.
The key reasons for choosing this index for the ETF include the fact that MSCI’s ESG-related indices arewidely-adopted and well-known globally, and that the parent index, MSCI Japan, is comprised of large- andmid-cap stocks, which allows for more market liquidity.

Reasons for Selecting ESG Indices
In selecting ESG indices, we examine whether an index’s
methodology aligns with solving the particular ESG issues
that index seeks to address, whether the index will provide
an effective solution for beneficiaries, as well as compare
ESG Index

it to similar indices to determine if it is superior to them.
In addition to qualitative considerations, we also look atquantitative assessments of the ESG profiles of ESG indicesprior to selecting them.
Reasons for Selection

In 2004, when the Nomura Global SRI 100 and the Nomura World ESG Equity Index Fund (for defined
contribution pension plans) were established, corporate social responsibility (CSR) was already a social
requirement that international companies could no longer ignore. Under these circumstances, these funds
were established with the aim of bringing about a virtuous cycle in which companies and society develop
synergistically by focusing investments in companies that actively engage in CSR, making it Japan’s first
SRI-type global index fund.
FTSE4Good
Developed 100
Index

The current FTSE4Good Developed 100 Index started being calculated in June 2001 as a socially
responsible investment (SRI) index. The FTSE4Good Developed 100 Index was selected as the index forthese funds because, compared to other indices, it had a well-established global equities research platform
along with a high level of management efficiency resulting from the fact that it was comprised of a relatively
small number of stocks.
Since then, this index has continually incorporated new criteria and revised its existing standards, including
new criteria that have emerged in response to societal demands and regulations. Since September 2014 theindex has been calculated with its current ESG rating model that uses 14 topics.
Going forward, we hope and expect that this index will continue to properly incorporate the issues thatcompanies should consider from an ESG perspective, both in response to the changing times and based oncommunications with us.

Nomura Enterprise
Value Allocation
Index

MSCI Japan
Empowering Women(WIN) Select Index

Solactive Japan ESG
Core Index

In addition to incorporating ESG risk ratings in the negative screening and the weighting of constituent
stocks in the index construction process, this index considers the overall carbon intensity of its
constituents.
Another reason for selecting this index is that it uses ESG assessments provided by Sustainalytics, which
has a proven track record as an ESG assessment firm.

Due Diligence on ESG Index Providers
We regularly interview index providers to check on matters
including the status of their efforts to ensure index quality
and secure the transparency of ESG evaluations. Basedon the results of these interviews, we evaluate index
providers in cooperation with the Investment Department,
the Responsible Investment Department and other relevant

The Nomura Enterprise Value Allocation Index invests in companies that are highly profitable and haveappropriate shareholder return policies. We have decided to commercialize an ETF that we can promote toa wide range of investors, including both individuals and institutions, based on our belief that this index can
provide returns exceeding the TOPIX index over the medium- to long-term.
We collaborated with MSCI (which has a strong presence in ESG-related indices) to consider developing
new indices and financial products amid growing interest in promoting women’s active participation in theworkplace within Japan, as represented by the enactment in 2016 of the Act on Promotion of Women’sParticipation and Advancement in the Workplace.
Centered on Japanese companies that take a positive stance towards gender diversity initiatives, we
believe we can expect returns exceeding the TOPIX index in the medium- to long-term by consideringfactors such as companies’ growth potential (sales, capital investment), and we decided to create an ETF
that we could promote to a wide range of investors with a strong interest in ESG investment.

Based on the S&P 500 index, which is a popular index of U.S. equities, the S&P 500 ESG Index was
expected to improve ESG characteristics without significantly changing the risk-return profile, and wedetermined that it would be the index most accepted by investors. We therefore decided to create an
investment product based on this index.

departments, and report the results to the ESG Committee.
Through the evaluation of ESG providers, we learn about
the relative strengths and issues for each provider. Also, we
consult with the index providers and request improvements,
as necessary.

Status of efforts to secure ESG index quality
Status of ensuring transparency and independence in computing ESG index

Main Interview
Content

Efforts for ensuring specialized ESG assessment data as well as initiatives incollecting ESG assessment data

Nomura Asset Management has developed new indices and financial products in collaboration with Nomura
Securities in response to the growing demand for investment in companies that place an emphasis on
shareholder returns and ROE.

We looked into developing financial products that address the strong demand in Japan for investing both in
U.S. stocks as well as in ESG.
S&P 500 ESG Index

The Solactive Japan ESG Core Index has an excellent risk-return profile because it adds ESG factors to agroup of sectors expected to grow over the medium- to long-term. We decided that this index would allow
us to provide a new opportunity for investing in Japanese stocks incorporating ESG elements.

Communication with ESG Index Providers
We regularly communicate with ESG index providers
regarding matters such as whether their ESG indices aremaintaining methodologies aligned with addressing ESG
issues, as well as whether they are appropriately reflecting

market structural changes in their indices. In addition,
in response to consultations about ESG indices, wecommunicate our opinions, request improvements, or urge
them to enhance index quality, as needed.

Check ESG index quality
Compare andstudy candidate
indices

Checkperformance/
ESG profile

Check the index provider’s efforts with respect to the
ESG index (regular/irregular basis)
Response to consultations concerning ESG index(irregular basis)
Establish/
listing criteria

Due diligence on index provider’s philosophy and efforts with respect to ESG index

By also listing the S&P 500 (Unhedged) ETF and S&P500 (Hedged) ETF along with the above ETF, wedetermined that we would be able to promote these ETFs to investors as a series of S&P500-linked ETFs.
Before establishment

53

About Nomura Asset Management

At time of establishment

After establishment

Responsible Investment Report 2022

54

Governance of Third-Party Asset Managers’ ESG Products
Overview and Qualitative Assessment of Third-Party Funds
At Nomura Asset Management, we collaborate with thirdparty asset managers both in Japan and overseas to provide
investors in Japan with third-party funds in a wide range ofasset classes. The Advisory Fund Management Department
and other departments specializing in third-party investment are
responsible for managing third-party funds. The Advisory FundManagement Department, which primarily handles traditional
assets, collaborates with more than 100 asset management
firms to provide third-party funds (net assets totaling
approximately ¥6 trillion as of December 31, 2022) to investors.
These assets are broadly diversified in different asset classes,
including equities, fixed income, and FOFs (funds of funds).

Qualitative Evaluation of ESG Funds

When we outsource investments to a third-party asset
manager, we carefully examine the investment capabilities
and operational execution capacity of that asset management
firm before selecting them. In addition, in order to ensure thequality of a fund after we select it, we collaborate with Nomura
Fiduciary Research & Consulting (NFRC) to continuously
monitor the asset management firm, its investment system,
investment processes, performance, and other matters as apart of an annual third-party fund qualitative assessment. If we
identify any serious issues in a third-party fund’s management,
we demand that the asset manager make improvements to its
investment operations. This is part of our effort to maintain andimprove the quality of these third-party funds.

Management of Third-Party Funds
NFRC

We conduct ESG-specific qualitative evaluations of ESG funds.
If an evaluation reveals a serious issue in the management of
an ESG fund, we will ask the third-party asset management
firm to improve its management in the same way as wewould for any other third-party funds. Qualitative evaluationsof ESG funds are led by the Advisory Fund Management
Department, which is responsible for managing third-party
funds, and starting from 2022 the Advisory Fund Management
Department has been strengthening collaboration with the
Responsible Investment Department and other ESG-related
departments as part of an effort to build a framework underwhich a wide range of relevant internal parties participatein evaluating third-party funds, as part of our progress onbolstering our evaluation system.
The evaluations are performed based on the seveninvestment styles identified by the Global Sustainable
Investment Alliance (GSIA). These are: corporate engagement
and shareholder action, ESG integration, negative screening,

positive screening, norms-based screening, sustainablethemed investment and impact investing. From 2022, among
the ESG efforts subject to evaluation, we added third-party
asset managers’ response to climate change and other ESG
issues as well as cooperation with various initiatives.
The ESG fund evaluations we carried out in 2022 confirmedthat all ESG funds are being appropriately managed. It isparticularly noteworthy that we found that each fund isproactively addressing the issue of climate change.
From 2023 onward, disclosure rules related to ESG
investment in countries around the world are expected
to become more stringent, while ESG investment
methodologies will become more rigorous and advanced. We
will closely monitor the situation surrounding ESG investment
and incorporate any necessary assessment items as wework to improve and expand our evaluations of third-party
managed ESG funds as we maintain and improve the qualityof ESG funds.

Nomura Asset Management
Provideinformation

Qualitative Evaluation Process for ESG Funds
Advisory Fund Management Dept.

Sub-contract

Gatekeeper

Product
structuring

Fundmanagement

Related departments

Disseminate
information

Provision of
investment
products

Needs

Relateddepartments
Investors

Third-party asset
managerManagementof fund

Expansion of matters to check/evaluate

Partner

Advisory FundManagement
Dept.

In 2018, we added questions about ESG (responsible
investment) to our annual qualitative evaluations ofthird-party funds, and began monitoring ESG, including
engagement activities and proxy voting processes. From
2021 onwards, with the aim of confirming the extent of
ESG integration into the investment process, we haveadded questions about ESG research systems, specificinvestment processes, and other related matters as apart of enhancing assessments.

55

About Nomura Asset Management

In addition, based on the importance of ESG issues aswell as our fiduciary duty, in 2021 we began monitoring
the funds that fall under our definition of “ESG funds”
under a framework separate from our annual qualitative
assessments of third-party funds. We define ESG
funds as funds that actively utilize ESG integration,
engagement/proxy voting, and other sustainablestrategies. As of December 2022, 11 of the third-party
funds we offer are ESG funds.

Discussion

Proposals

ESG
questionnaire

Send

ESG Evaluations of Third-Party Funds

Meeting
members

Collect

ESG evaluation

ESG Investment
Process
Evaluation
Meeting

Inquiries, Additionalquestions

Product
Committee

Requests for
improvement, etc.

Third-party
asset manager

Responsible Investment Report 2022

56

Our Idea of Constructive
Dialogue with Portfolio
Companies
We have established a basic policy forengagement as part of our responsible
investment policy formulated by the
Responsible Investment Committee,
the highest decision-making body for
responsible investment.
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 most powerful means tofulfill our stewardship responsibility.

ENGAGEMENT
We engage in constructive dialogue
with companies to promote theircontinued value creation andsustainable growth

Basic stance on engagement

57

Engagement

Engage in dialogue with acordial and constructive
attitudeWork to understand nonfinancial 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 andmeasures to prevent recurrence

Responsible Investment Report 2022

58

Policy/priority topics
Individual engagement

The Responsible Investment
Committee decides thefollowing:Basic Policy for Responsible
Investment P.19-22
Priority engagement topics(next page)

Portfolio companies:
2,400

Target companies:
Top 300 companies interms of amount heldand shareholding ratio(+additional companies)

Top companies in terms of amount
held: Mainly large companies
Top companies in terms ofshareholding ratio: Mainly small- andmedium-sized companies
Additional companies:

act

A

R
 eview by the
Responsible
Investment
Committee

Review Basic Policy for
Responsible Investment(principles of desirable
management) and priority topics

Milestone
ManagementR eview engagement
methodology and topics
Escalation (as necessary)

Engagement byanalysts and ESG
specialists

Review by the
Engagement
Department

Engagement with outside directors

Review by the
Engagement
Department(Decided by the Engagement Department)
Companies requested by Investment Dept.
Companies researched by analysts
Companies with ESG issues
Companies desiring dialogue with shareholders

Reflect in investment decisions
Reflect in proxy voting

Decide engagement topics for each company

Engagement policy and priority topics
 rom quantitative growth/diversification ofFbusiness lines to enhancement of capital efficiency
Enhancement of diversity
Strengthening of management’s oversight function
Consideration of stakeholders
Internal transformation
Timely response to changes in external
environment

Moving away from inward orientation

Narrow down by companies (vertical axis) x
priority topics (horizontal axis)

Top 300 companies in terms of amount held andshareholding ratio +additional companies
Company ompanies: Mainly handled by analysts
CPriority topics: Primarily handled by ESG
specialists

A

B

C

Climate Change
Priority Topics

We organize Japanese companies’ issues as noted to theright. In accordance with this, the Responsible Investment
Committee determines the priority engagement topics eachyear in July. On Pages 61-65, we introduce some examples(see box below) of engagement aligned with the priority
topics set in July 2021.
Please refer to Page 66 for a discussion about the mostrecent priority topics.

Decide topics
and milestone
management goals
for each target
companyCdoD

ch eckThe Responsible Investment Committee decides the Basic
Policy on Responsible Investment in Management P.19-22
as well as the priority topics for engagement, and theInvestment and Research Division carries out engagement
activities in accordance with the committee’s decisions.
Analysts in the Corporate Research Department and ESG
specialists in the Responsible Investment Department are
directly in charge of engagement, but the Engagement
Department established in November 2021 supervises
overall engagement activities. Investment managers, who
also belong to the Engagement Department, communicate
engagement expectations to portfolio companies, ascertain
each company’s situation, and incorporate their findings
into investment decisions. In engagement with individualcompanies, we establish clear goals and utilize milestone
management, aiming to achieve goals over the course of
three years. Our process involves managing PDCA overtwo stages – the basic policy and priority topics, as well as
individual engagement.

p l anP

Engagement Process

Review and decision by the Engagement Department
Example of narrowing down in line with priority
topic (climate change)
1 E
 xclude companies that have attained or committed toobtaining SBT certification
2 S creening by Scope 1 and 2, Scope 3, carbon intensity(comparison with industry peers)
3 D ecide target companies for engagement, considering
each company’s situation

Human Rights
Risks
Diversity
Redefine
the Board of
Directors etc

Topics particular toeach company

Engagement Results
Priority topics (decided in July 2021)
1

Rational explanation of financial strategy

2Integrate Business Strategy andSustainability

3

Redefine the Board of Directors

4 trengthen commitment to capitalS
efficiency

5

Reduction of cross-shareholdings

6

Climate Change

7

Natural Capital

8

Diversity9

Human Rights Risks

10 Disclosure of Materiality and Risk

Information

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

Engagement(1,010 meetings)

2022)
Ratio Number of
topicsRatio by
topic

Milestone
Status(as of December 31,

2022

Business strategy

16%

Financial strategy

15%

361

69%
ESG-related meetings
Environmental
19%
Social14%
Governance28%
Proxy voting-related 7%

1,666

Total

59

2,424 topics

Status ofMilestone
Management

397

470
343
679
174

2,424

In 2022, we carriedout engagement
across 2,424 topics.
Currently, we aremanaging milestones
for a total of 934
topics. Of these, 204
topics are already at“Step 5: Conclusion.”(number of topics)

Communicate issues to portfolio company

266

Company shares a recognition of the issues 314
Company formulates countermeasures
Company implements countermeasures
Completion

126
24
204

Responsible Investment Report 2022

60

Engagement on Priority Topics

We carried out engagement in line with the ten key themes established by
the Responsible Investment Committee (in July 2022) Here, we introduce
some examples of engagement in 2022 in line with NAM’s uniquemilestone management.

Rational Explanation of
Financial Strategy
PeriodCompany formulates
countermeasures
Company shares arecognition of the issues

monthsCommunicate issues tocompany

12

24

36

NAM’s concerns

Company
We understand the concerns of investors, but this is thetime when we need to transform the company. It will be difficult toprovide a detailed explanation right away.

Integrate Business Strategy
and Sustainability

0

24

36

NAM
How about reconsidering your business model and appeal
to investors as a distinctive real estate company that outwardly showsits environmental contributions?
Company
We discuss our environmental efforts almost every day.
Though technological innovations in decarbonization seem to beoccuring in the construction industry, our discussion has not reachedto the point where we can narrow down our business.

*The period is the number of months from start of interviews until December 2022

12

24

Completion: April 2022 3 interviews
Interviewee: Senior Executive Officer, others

36

A clear explanation about their approach to new businesses (especiallyconcerning investment discipline, progress management)

Outside directors chair the Nomination /Committee, or all outside
directors serve on the Nomination/Compensation Committee.

Initially

We conveyed the concerns about investments in new businesses, andencouraged the company to reconsider its cash allocation. In 2022,
the company announced a share buyback.
The company held a business briefing to dispel the concerns about
new businesses.

Completion
Company implements
countermeasures
Company formulates
countermeasures
Company shares arecognition of the issues

Progress

Communicate issues tocompany

Initially

Engagement

Communicate issues tocompany3

Goalmonths

NAM’s concerns

61

months

NAM’s concerns

14

Their information disclosure about climate change lags behind their industry
peers, but there is nothing about their environmental efforts that are inferior
to industry peers. They should reconsider their business model and appeal
to investors as a distinctive real estate company.

Overview

Company formulates
countermeasures
Company shares arecognition of the issues

The company president is the chair of the Nomination/Compensation
Committee, and these committees have only been convened a few times.
Some of the outside directors are not committee members, and only give
advice. There is a lack of awareness with respect to separating oversightand execution of decision-making.

Period12Company implements
countermeasures

PeriodMost recently

NAM
Investors are concerned about the fact that 30% of cash
flow is allocated to loss-making new businesses. It is necessary toprovide a little more detailed explanation.

0

RetailCompletion

Progress

Goal

Initially

Real Estate

Redefine the Boardof Directors

Completion: May 2022 4 interviews
Interviewee: Representative Director and President, IR

The company is working to transform its business structure in response
to automobile electrification to tackle climate change issues . They arecontinuing to invest in new businesses, but they keep posting losses. Their
explanation to investors about cash flow allocation is inadequate.

Overview

Company implements
countermeasures

Progress

21

Glass and Ceramics Products0Completion

Most recently

NAM
What is the reason for some outside directors not serving as
members of the Nomination/Compensation Committee?

Overview

Company
They are members of committees responsible fordecision-making, and we receive beneficial advice from them.
NAM
Oversight and execution are not separated. If an outside
director has the knowledge to provide advice, we want him/her tocontribute that expertise to nomination and compensation matters.

Strengthen commitment tocapital efficiency

The outside directors were mainly just providing advice, and thesenior management team’s awareness regarding separating oversightfrom execution was weak. We thought that improvements would taketime due to the fact that a change in thinking was necessary, but thecompany took action to address this faster than expected, and placed
all outside directors on the Nomination/Compensation Committee.
Outside directors were also appointed as committee chair.

Completion
Company implements
countermeasures
Company formulates
countermeasures
Company shares arecognition of the issues

Progress

Period29

MachineryCompletion: Nov. 2022 3 interviews
Interviewee: Head of Corporate Communications
Department

Communicate issues tocompany

months

0

12

24

36

Completion: June 2022 5 interviews
Interviewee: Director and Senior Managing
Executive Officer

Goal

NAM’s concerns

Goal

Promote businesses that outwardly show
contributions to the environment

ROE was struggling to grow as profit growth was not keeping up with sales
growth and the balance sheet was ballooning. Executive compensation
was not linked to capital efficiency, and we were concerned about thecommitment to improving ROE.

Executive compensation with capital efficiency metrics as KPIMost recently

The company has implemented ZEH (Net Zero Energy House) into
condominiums and promoted consideration of the environment,
health and comfort. The company is well aware of the brand power ofcondominiums, and has narrowed its deliberations to rental properties
without brand power.

Initially

Overview

NAM
The company has started working to improve capitalefficiency, including a share buyback, but the stock market isquestioning whether this will continue. The company can express its
commitment through executive compensation.
Company
We used to emphasize P/L, but we changed ourmanagement metrics to be focused on our balance sheet. Reflecting
this in executive compensation is something we will work on going
forward.

Most recently

The company initially took a cautious approach to revising executive
compensation, but made improvements in steps, such as introducing
stock-based compensation. In the end, the company adopted
earnings performance-linked compensation with ROIC as the KPI.

*The period is the number of months from start of interviews until December 2022

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62

Engagement on Priority Topics

Reduction of crossshareholdings
Transport equipment
0Completion

PeriodCompany formulates
countermeasures
Company shares arecognition of the issues

monthsCommunicate issues tocompany

15

12

24

36

NAM’s concerns

Initially

Company
We understand. We will review this without preference
for any particular stock. We are also selling the shares of groupcompanies, though it is small-scale. We have not discussed this within
the group, so we will take the action as an individual company, not asa group, if any.

36

Initially
NAM
Industry peers have already released carbon neutral plans.
We want to hear about your efforts to decarbonize.
Company
We are currently formulating our plan, considering
matters such as biomass, hydrogen, ammonia, and solar power. We
are doing CCS on a test basis, and we want to find the best location
for it, mainly overseas.

*The period is the number of months from start of interviews until December 2022

36

Initially

According to the company’s securities report, the company has soldall its shares of three finished vehicle manufacturers excluding groupcompanies. Elsewhere, the company has sold all its shares of atelecommunications company as well as a portion of other company’s
shares, so we have confirmed that the company is making steadyprogress on enhancing asset efficiency.

Most recently

NAM
We are focusing on your human rights risk, due to the natureof your business, but your information disclosure is inadequate.

Overview

Company
We recognize this as a problem. We have incorporated
this into our policy for suppliers.

The company has started working on traceability of lumber
procurement, and has otherwise carried out some forwardlooking initiatives.

NAM
We want you to perform human rights due diligence anddisclose the outcomes.

Natural CapitalCompany implements
countermeasures
Company formulates
countermeasures
Company shares arecognition of the issues
Communicate issues tocompany

24

24

Implement human rights due diligence and disclose the resultsmonths

NAM’s concerns

Engagement

12

Sale of cross-shareholdings

12

The company has its own coal mines, and petroleum products occupy alarge part of the business portfolio. Industry peers had announced carbon
neutral plans, but the company was lagging in this respect, so quickconsideration was required.

63

0Completion: Dec. 2022 2 interviews
Interviewee: Director in charge of Sustainability, and others

Goal

PeriodOverview

Communicate issues tocompany

NAM’s concerns

Completion

12months12

RetailWe have completed engagement asking the company to strengthen its
initiatives related to overall ESG risks as well as to enhance its disclosure. In
terms of the next step, there will be a focus on individual ESG risks, but thecompany’s efforts on human rights risk are lagging, though this is important
given the specific nature of its business.

Progress

0Company formulates
countermeasures
Company shares arecognition of the issues

Goal

Climate Change

Petroleum and coal productsCompany implements
countermeasures

PeriodMost recently

NAM
You are certainly sorting out cross-shareholdings. The stock
market is paying attention to the shares of group companies. Are you
discussing this within the group?

Completion

Progress

Completion: June 2022 2 interviews
Interviewee: CFO

The company is reducing cross-shareholdings, but there are factors
undermining this, such as group companies and business relationships.
Amid the significant changes in the industry, including electrification andautonomous driving, it is necessary to review cross-shareholdings, including
shares of group companies, in order to improve asset efficiency.

Overview

Human Rights Risks

Company implements
countermeasures

Progress

Completion
Company implements
countermeasures
Company formulates
countermeasures
Company shares arecognition of the issues

Progress
Period5

FoodCompletion: April 2022 3 interviews
Interviewee: Vice President

Communicate issues tocompany

months

0

12

24

36

Completion: July 2022 First interview
Interviewee: Representative Director and President, IR

Goal

NAM’s concerns

Goal

Release a “Carbon Neutral Plan”

The company is actively implementing ESG efforts, but as the TNFD entered
the stage of establishment preparation, it was necessary to encourage thecompany, which uses large amounts of agricultural and seafood products,
to take speedy action.

Disclosure of risks and countermeasures regarding biodiversity

Most recently

The company released a carbon neutral plan. There will still be
GHG emissions remaining in 2050, but the plan is to absorb theseemissions with CCS, etc. The company is also considering obtaining
SBT certification, which demonstrates their forward-looking approach
towards climate change issues.

Initially

Overview

NAM
As the framework for disclosures based on TNFD enter the
preparatory stage, and you use a lot of agricultural and seafood
products, we want you to address biodiversity in a forward-looking
manner and speed up your efforts to strengthen your initiatives.
Company
We have made a net-zero declaration on climate, but inother areas of sustainability we are lagging behind major overseas
companies, and we plan to tackle this proactively.

Most recently
Regarding biodiversity, the company has designated palm oil,paper, sugar crops, coffee beans, beef, soybeans, and otheritems as priority raw ingredients, and has disclosed a policy toadvance sustainable procurement. In 2022, there were more
specifics noted than in the previous year, and there was progressin terms of disclosure.

*TNFD: Taskforce on Nature-related Financial Disclosures*The period is the number of months from start of interviews until December 2022

Responsible Investment Report 2022

64

Engagement on Priority Topics

Diversity

Completion
Company implements
countermeasures

Progress
PeriodCompany formulates
countermeasures
Company shares arecognition of the issues

monthsCommunicate issues tocompany

27

Electrical Equipment
0

12

24

36

NAM’s concerns

Goal
Establish medium- to long-term targets regarding promoting the active
participation of women (the ratio of women managers, etc.)

InitiallyNAM
We appreciate your efforts regarding the environment,
including your formulation of a vision, but your initiatives onsocial issues, such as promoting the active participation of
women, are insufficient.
Company
That is tough to hear. Regarding promoting theactive participation of women, we do not want to do anythingother than leveling the playing field.

(July 2022)

The company has disclosed a target for the ratio of womenmanagers. This accompanies a specific plan to target anddevelop talented women, and this plan has been found to beeffective.

Business

Integrate Business
Strategy and Sustainability
Demand explanations of business strategies that
integrate sustainability. This includes disclosureof information related to materiality and risk.
This integrates “Disclosure of Materiality and
Risk Information.”

Disclosure of Materiality and
Risk Information

Company implements
countermeasures

Progress

Company formulates
countermeasures
Company shares arecognition of the issues
Communicate issues tocompany

37

months

1224

NAM’s concerns

Initially

NAM
You only have listed risk information withoutmateriality, and it is not linked with management’s priority
issues, either.
Company

Environmental

Climate Change

NaturalCapitalCompanies are expected
to set GHG reduction
targets aiming for net-zero,
obtain SBT certification,
disclose Scope 3
emissions and amount of
GHG absorption, etc.

Completion: Sep. 2022 4 interviews
Interviewee: Director and Managing Executive Officer

We are closely examining it.

Human
Rights Risks
Ask companies to formulate
human rights policies and perform
human rights due diligence as
demanded by the public both inJapan and overseas.

1.8%
10.8%
2.7%

Financial

Rational explanationof financial strategy

SocialDemand efforts toaddress biodiversity andwater risk.

3.7%

4.1%
32.6%

Ask companies to explain their use of
cash on hand, shareholder return policy,
reduction of cross-shareholdings,
etc. Integrate “Reduction of crossshareholdings.”

13.6%

Goal

The company has a wide-ranging business structure, and scandals
are not uncommon. The company is urgently trying to bolster risk
management across the entire group, but disclosure of risk information
is not adequately organized.

Overview

36

Environmental

Completion

Period0

Yosuke Uchida

Review of Priority Topics

Most recently

RetailHead of Engagement
Department

Completion: Feb. 2022 4 interviews
Interviewee: Representative Director and President, others

The company’s efforts on ESG issues are focused on the environmentand governance, while its efforts on social issues are lagging. In
particular, the company has not even established a target regarding
promoting the active participation of women.

Overview

We set priority topics for engagement, and establish goals for each company
based on those topics. The priority topics are like a compass used fornavigation, presenting clear plans at the present time, each of which are
independent items. In particular, when reviewing the priority topics this timearound, we focused on how to link them to enhancing corporate value.
For example, the former topic of “Reduction of cross-shareholdings” wasintegrated into both “Strengthen commitment to capital efficiency” and “Rational
explanation of financial strategy” in this review. The content was designed toencourage specific actions by portfolio companies. On the other hand, “Solving
problems to realize well-being within society” aims to support a wide range ofvoluntary efforts by companies, and seeks not only corporate transformation
but also to achieve overall stakeholder sustainability. By enriching these priority
topics, we will continue to enhance our engagement program.

13.2%

1.6%

SocialUtilize Human
Capital Possessing
Diverse Values
Demand that companies utilize humancapital in line with a growth strategy,
including gender diversity. Expand thescope of “diversity.”

15.9%

Sort out risk factors and disclose information.
SocialMost recently

NAM
Despite the improvement in risk management
disclosure, your handling of sustainability risk is unclear.
Company
We are organizing it with qualitative expressions.
We will provide disclosure going forward.

Governance

Strengthencommitment tocapital efficiency
Demand commitment to capitalefficiency (including the reductionof cross-shareholdings) throughexecutive compensation. Integrate“Reduction of cross-shareholdings.”

Milestone
management status(as of Dec. 2022)
GovernanceRedefine the Boardof Directors
Enhance effectiveness. Support the full-fledgedtransition to a monitoring board. (Discuss together
with the revision of proxy voting standards)

New

Solve Problems
Aimed atRealizing WellBeing withinSocietyNew
Encourage efforts to link
problem solutions for realizing
well-being within society withbusiness opportunities.

*The period is the number of months from start of interviews until December 2022

65

Engagement

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66

Engagement by Analysts

Innovation Lab
Right

Chemicals Industry

Senior Equity Analyst & SeniorEngagement Manager
Chemicals industry

Mitsuhiro Kimura

Example of engagement in thechemicals industry
Chemicals industry issues and engagement
Company A

Company B

Efforts are needed to reformthe business portfolio aiming
for carbon neutrality, and we
asked the company to formulate
measures to address this andexplain them.

The company has been reshufflingits business portfolio, centeredon general-purpose products,
but in order to encourage further
efforts we asked the company
to strengthen its commitment tocapital efficiency.

Response

Response

Aiming to reduce CO2 emissions
50% by 2030 and have zero
emissions in 2050 by promoting
energy-saving and reforming thebusiness portfolio. However, rawmaterials and by-products are interrelated in the product manufacturing
process, so structural reforms willtake some time.

Making progress on talks withrelated parties inside and outside
the organization with the aimof rebuilding the problematic
business. Will work towards
carbon neutrality.

Engagement results

Engagement results

Announced that it will completely
withdraw from the problematic
business with large CO2 emissions,

Announced the sale of an
overseas subsidiary engaged in
the problematic business as wellas the withdrawal from domestic
production of certain products.

and will stop production in the firsthalf of 2025. Significant progressin the effort targeting carbon
neutrality.

67

Engagement

The chemicals industry is responsible for a large amount of
GHG emissions, and the effort to become carbon neutral isan urgent issue. Meanwhile, there are also many productsthat contribute to GHG emission reductions, making it anindustry that is also indispensable for achieving carbon
neutrality in the world. In addition, chemical products arebasic materials supplied to various related industries. As
a result, the chemicals industry possesses many productgroups, ranging from general-use products to specialty
products, and it is sometimes seen as being subject toconglomerate discounts in the stock market.
We have been talking with companies in the chemicals
industry about the need for business portfolio reforms
that contribute to both GHG emission reductions andprofitability improvements. It should be noted here that thechemicals industry builds both upstream and downstream
supply chains in the manufacturing process, and an energybalance is maintained, so it is not easy to separate and takeout only specific products. Discussions with companies cansometimes be tough, but rather than seeking only shortterm results, it is important to evaluate and understandcompanies’ medium- to long-term initiatives.
The engagement activities that we have been working
on are starting to yield results. Company A has a low-profit
business with high GHG emissions. For several years,
we have been talking with the company’s management
team and discussing the need for reforms to its businessstructure to improve profitability and achieve carbon
neutrality. Meanwhile, the business at issue was closelyintertwined with the raw materials and by-products of otherproducts, making it difficult to withdraw from this business.
However, the company solved the problem by collaboratingwith other companies and decided to withdraw from thebusiness. Business portfolio reforms targeting carbon
neutrality are picking up speed.
While Company B possesses growth businesses, it faces
the challenge of stabilizing and lifting the profitability of its
general-purpose businesses. While praising the capacity
cuts made thus far, for more than five years we have been
explaining to the company the need for more in-depth
restructuring. Currently, the company is making progresson structural reforms, including the sale of an overseas
subsidiary and the announcement of the suspension ofsome domestic production bases. We can expect thecompany to further strengthen its commitment to its returnon capital. While communicating to management our
positive assessment of these kinds of structural reforms in
the chemicals industry, we are talking with the company
about further measures to be taken and we are supporting
its efforts.

Senior Quantative Analyst

Daisuke Katayama
Left

Measuring the Effects of Engagement Activities
The details of engagement activities with companies
by institutional investors like us are generally not widelydisclosed, and the effectiveness of these activities is notalways clear. The Innovation Lab is utilizing the accumulated
data from our past engagement activities with portfolio
companies to quantitatively measure and analyze the effects
of engagement activities.
Specifically, we used a fixed effects model* to verify postengagement changes in governance structures and thefinancial performance of companies that we engaged withfrom FY2016 to FY2021. We found that there was statisticalsignificance for the following six items with respect to thecompanies that we engaged with.
Analysis-related issues include the difficulty of extracting
the effects of our engagement activities alone, as well
as data bias, such as the fact that companies with poor
governance systems are more likely to be targets for

Quantatative Analyst

Keisuke Morita

Statistically Significant Items

engagement in
Abolishment of takeover defense
the first place.
1 measures
Going forward,
Increase in ratio of shares held
2 by executives
in addition toaddressing these
Increase in ratio of women
3 directors and outside directors
issues, we wantto continue to4 Decrease in surplus cash ratio
accumulate data
Increase in shareholder returns
5 (DOE)and measureeffectiveness,
Improvement in profitability
6 (ROA)and work with
the Engagement
Department andothers to contribute to improving engagement activities.
Our analysis and verification process was supervised byProfessor Yumiko Miwa of Meiji University, who provided us
with beneficial comments.

* The fixed effects model is an analysis technique that enables the identification of the effects of engagement by accounting for trends common to all companies, such as
the adoption of the Corporate Governance Code, as well as the heterogeneity of companies.

CEO Engagement
We view CEO engagement as one of the valuable tools in dialogue
with portfolio companies. We have already engaged in dialogue withCEOs of more than 10 companies, and the details of these dialogues
are posted on our website. This is an important means for us tocommunicate to the outside about the many engagement activities
that we are working on.
This CEO engagement focuses on the issues facing portfolio
companies from the perspective of institutional investors as well as
measures to improve corporate value, with the aim of having CEOs
earnestly exchange opinions with one another and hold more indepth discussions. We believe that discussions among company
leaders will allow everyone to share opportunities to rediscover
new value and competitiveness of Japanese companies centeredon ESG. Also, in addition to receiving opinions regarding our
engagement activities during dialogue, we believe that receiving
feedback about the details we disclose will allow us to further
deepen and enhance our engagement activities.
Reference

Conversation

Panasonic Holdings Corporation

Deeply implement autonomous
responsible management in groupcompanies and promote growthaccompanying strategic andoperating capabilities
Right: Yuki Kusumi, Representative Director, President, and Group
Chief Executive Officer of Panasonic Holdings Corporation
Left: Hiroyasu Koike, President and CEO of Nomura AssetManagement Co., Ltd.

https://global.nomura-am.co.jp/responsibility-investment/investors/feature/trptalk_panasonic.html

Responsible Investment Report 2022

68

Global Equity Engagement

Global Equity Milestone Management

We continue to enhance our engagement activities for global
equities as well. Companies are facing many global ESG
issues, and collaboration with overseas investment teams isessential not only for engagement with overseas companies
but also for engagement with Japanese companies. Because
global equities encompass a large number of target countries
and companies, we are leveraging the expertise of ourinvestment teams around the globe, as well as utilizing
outside resources, to optimize our engagement activities.
In 2022 our overseas offices conducted engagement
on a total of 772 topics (the total number of engagements
was 323). We divide engagement topics into a total of six
topics: Business strategy; Financial strategy; Environmental;social, Corporate governance; and Disclosure/Dialogue. The
investment managers and analysts in each office decide
the engagement topics and carry out engagement withcompanies.
Our engagement partner overseas is Sustainalytics,
and we either conduct collaborative engagementwith Sustainalytics or fully outsource engagement to
Sustainalytics (Refer to Page 72). In addition, we also
make use of collaborative initiatives such as the Access to
Medicine Foundation to carry out engagement alongsideother asset management firms on specific topics (For details,
please refer to Pages 73-74).

In our global equity engagement as well, we share ourawareness of ESG issues with companies, set specificgoals, and carry out milestone management until the goals
are achieved. In addition to the engagement and milestone
management that we conduct on our own, we also perform
milestone management for collaborative engagement with
Sustainalytics. As with milestone management for Japanese

Global Equity Milestone Management
Recognition of topics
and issues
Selection of target
companies

Engagement
ESG evaluation

Examples of Milestone Management*(Refer to Page 55)
Nomura Asset Management’s Global Equity Engagement

Example of Engagement by Overseas Offices
Our Science Based Targets Initiative (SBTi) project was
originally launched at the end of 2021 and targeted specificallyholdings in our Global Sustainable Equity (GSE) portfolio.
Throughout the course of 2022, the team continued
extensively engaging with companies and gradually expanded
the scope of the project to cover all OKTBL holdings (OK tobuy list). We believe this was the next natural step in assisting
our own commitment as a company to the Net Zero AssetManagers (NZAM) initiative. As part of this commitment,
Nomura Asset Management, have set an interim 2030 targetof 55% of total AUM to be managed in line with net zero and tohave set Science Based Targets.
During 4Q22, we continued to push those companies
that have not yet committed to having their GHG emission
reduction targets validated by the SBTi, and are delighted
with the initial progress we are seeing on some of ourengagements. As an example, we want to provide an updateon one of our SBTi milestone engagements with a US electricutility company. After an extensive engagement with themand despite the methodological challenges they were facing,the company announced in November 2022 their near-termtarget commitment, which we are very pleased with. Theirinitial hesitation about the feasibility of such a commitment
was due to lack of control over power supply as a pure play
network operator, as according to the SBTi’s methodology
for validation, if a company’s Scope 3 emissions are morethan 40% of their total emissions, a reduction of Scope
3 should be included in the overall reduction target. Asan energy transmission and distribution business, power
supply falls in the company’s Scope 3 emissions. However,through conversations with the company and putting themin touch with the CDP, they were encouraged to hire external
consultants who successfully assisted them in committing.
We believe this is a great example of engagement for
positive impact and as a next step we plan to work with boththis company and others on our holdings list (through ourintercompany collaboration project) to assist them on theirjourneys as well.

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 the engagement
process, we are able to effectively implement PDCA (Plan, Do,
Check, Act). The ESG issues focused on during engagement
and the goals established vary greatly depending on thecompany.

D

P
Discover y ofsubsequent
topics andissuesCollaborative engagement
by Nomura AssetManagement andSustainalytics

Engagement outsourced
to Sustainalytics

US Electric Utilities
company

Hong Kong insurancecompany

Malaysian food company

Number of interviews

4

3

3

Period14 months

25 months

22 months

1

Do

Plan

Engagement by
Nomura AssetManagement offices

Communicate
issues to portfolio
company2Company shares arecognition of theissuesC

A

3Company
formulates
countermeasure

Check

Act

4
Company
implements
countermeasure

5

Engagements with Global Equities

Milestone
management

Performance review
Policy review

Conclusion(Keep records/
progress evaluation)

Total number of engagement
topics by overseas offices
Engagement
topic mix

772topics

Engagement
region mix

Status ofmilestone
management(323 meetings)(number of
topics)

2022
Ratio

Engagements by
Sustainalytics*(2021)

461
2022

Engagement

Numberof topics

Ratio

Numberof topics

Business strategy

9%69

Europe12%95

Financial strategy

4%32North America

18%

141

Communicate issues to portfolio company

Environmental

29%

223

Asia and Emerging

69%

536

Company shares a recognition of the issues

Social25%

194

Total number of topics

772

Company formulates countermeasures

Governance

15%

119

Company implements countermeasures

Disclosure/dialogue

17%

135

Conclusion

Total number of topics69* 1: Communicate issues; 2: Share recognition; 3: Formulate countermeasures; 4) Implement countermeasures;
5) Conclusion

772

65
52
50
13
18

Status of Global Equity Milestone Management (as of December 31, 2022)
In 2022, we carried out engagement across 722 topics.
Currently, we are managing milestones for a total of 198 topics (148 companies).
Of these, 18 topics are already at “Step 5: Conclusion.”*Target universe: MSCI ACWI ex Japan

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70

Examples of Global Equity Engagement (Milestone Management)

Engagement by Sustainalytics

Progress

US consumer staple company A

Conclusion
Company implements
countermeasures

Company shares arecognition of issues

15Communication ofissues to company

monthsPriority Topics

24

36

Monitoring system and traceability in the supply chain,initiatives to prevent deforestation

Overview

E

Global Standards
Engagement

Please explain your procurement policy, relevant

Our suppliers are requested to adopt “No

Deforestation, No Peat, No Exploitation (NDPE)” policies and toestablish grievance handling systems. Our 12 Palm ESG staffers arein charge of monitoring this process. We confirmed that 100% of ourpalm oil was certified by the RSPO, as of July 2021.

Material Risk
Engagement

Engagement Policy

Target companies

Engagement Policy

Target companies

Respond to instances of deforestation occurring inthe supply chain, and curb future deforestation

Encourage companies to resolve severe
incidents as well as build a strategy aimed atpreventing future recurrences and improving
ESG practices

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

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

Companies withparticularly high ESG riskin their industry

Company A

If deforestation discovered via satellite images isconfirmed in parts of our supply chain following an investigation by
a NPO specializing in commodities research, and we will work to
rectify this.
NAM

Do your KPI for commodity procurement include not only

Thematic Engagement

costs, but also matters related to sustainability?
Company A

RSPO certification is included in our procurement

policy, and we are paying an RSPO premium (costs have increased).

E

E

Engagement related toFeeding the future

Engagement related toLocalized waterEngagement Policy

Progress

US utility company B

Conclusion

Company shares arecognition of issues
Communication ofissues to company

months24

Most recent interview / November 2022 / 4 interviews
Interviewee / Senior Vice President-Finance and Regulatory
and Treasurer, Vice President, Investor Relations

36

Priority Topics

NAM’s Concerns

Goal

Commitment to setting/validating SBTs

The company has GHG reduction targets and a goal fornet zero by 2030, but these have not been validated by
the SBTi.

Commitment to attain SBT validation

Initially
Please explain why the company has not received SBT

validation, given that we have shared that costs for validation are

Overview

limited and validation offers advantages.
Company B

The reason we were not proactive about getting ourtargets for SBT validation is that, as a pure play network operator,
the impact we have on customers’ power supply is limited.

71

Engagement

Target companies
Agriculture,
agrochemicals,
packaging food, foodretail companies

Engagement Policy

Target companies

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

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

Company formulates
countermeasures

12

NAM

Efforts to help the food industry transition toa sustainable world food system, including
managing natural capital such as land andwater, reducing food waste, and responding tochanging consumer trends.

S

Company implements
countermeasures

Period12

S G

Most recently

governance system, and supply chain monitoring system.
Company A

S G

Goal

Initially
NAM

E

Most recent interview / June 2022 / 2 interviews
Interviewee / Sustainability Director, Senior Vice President,
Investor Relations; etc.

NAM’s Concerns

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

engagement based on violations of international norms
such as the United Nations’ Global Compact, Material Risk
Engagement covering companies with critical ESG risks, andThematic Engagement, which focuses on solutions to specifictopics, such as localized water and responsible cleantech
from a global perspective.

Company formulates
countermeasures

Period12

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 to carry out collaborative
engagement with and outsource engagement to
Sustainalytics. Sustainalytics provides Global Standards
Engagement, in which companies are selected for

Most recently
Company B

NAM introduced us to the person in charge of SBTi.

We received a lot of information through a fruitful meeting with that
person. With the aim of setting SBT and acquiring validation, we
hired an external consultant and also expressed our commitment toacquiring SBT validation in November 2022.
NAM

We hope you will continue your efforts towards attaining

SBT validation.

E

S

S

Engagement related toModern slavery

Engagement related to
Responsible cleantech
Engagement Policy

Target companies

Encourage an appropriate response toenvironmental and social risks in theiroperations and supply chain, and a product life
cycle approach to promote more sustainableproduction of cleantech solutions.

Solar power generationequipment, wind power
generation equipment,
battery-powered electricvehiclesG

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

Target companies
Companies in apparel andconstruction industries

G

Engagement related toTomorrow’s Board

Engagement related to
The Governance of SDGs

Engagement Policy

Target companies

Engagement Policy

Target companies

Encourages companies to have directors withthe appropriate abilities to deal with important
ESG issues and to display the necessarycommitment

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

Encourages companies to define meaningful
SDGs strategies that align with their businessplans. Aims to influence these companies to
produce positive outcomes in line with the2030 SDG agenda.

Consumer goods,
financial, and Informationand communications
technology companies

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72

Cooperation with Initiatives

Commitment tono-deforestation
together with otherfinancial institutions

In 2022, the satellite-based collaborative
engagement towards zero deforestation
marked its second full year of engaging
with and holding companies acrossvarious industries to account for
deforestation events occurring in theirvast supply chains. Nomura AssetManagement UK is proud to continue toparticipate in this project by being thelead/co-lead investor on dialogues withtwo companies and supporting multiple
others.
During the course of the year, NAM
UK participated in initial dialogues withthree companies across the personal
products, beverages and chemicals
industries. In particular, NAM UK
co-led a constructive engagement

Access to Nutrition
Initiative

73

Engagementwith a British personal products
business. Throughout the process, theteam touched upon the company's
supply chain monitoring systems,
practices, grievance mechanisms
and traceability efforts, as well as
their deforestation-free commitments.
Most importantly, the team touched
upon the flagged deforestation events
within the company’s vast supply chain
by our satellite-monitoring partner,
Satelligence. The team was delighted
to see that the company demonstrated
sufficient monitoring and supply chain
traceability efforts. As in many of theteam’s other dialogues, the need for
an industry-wide collective effort was
flagged given the scale of the issues at
hand.
NAM UK also actively participatedin follow-up dialogues with fourother companies. These included a
US household products business, aFrench personal products company
and a French food & staples retailingbusiness. These interactions were thesecond or third engagements withthese companies, which allowed us
to discuss new areas as well as themonitoring and traceability efforts within
a single commodity (palm oil sourcing
in Malaysia). Our broader discussions
touched on other soft commodities(beef and soy supply chains), otherregions such as Indonesia and Brazil,
further efforts to mitigate biodiversity
loss, the companies’ reforestation
policies and targets, and smallholder
farmers’ inclusion. The investor group isalso pleased to see that quite a few of
the companies that were engaged havesubsequently published detailed reports
around deforestation cases linked totheir supply chains. This reaffirms theinvestor group’s belief that engaging
with company specific evidence,
provided by our satellite-monitoring
partner, can be an effective tool to drivechange. NAM UK looks forward tocontinuing this journey and supporting
both peer investors and businesses on
their path to zero deforestation.

Satellite image example of deforestation:
Red boundaries show the deforested area.
Left shows area prior to deforestation activity. Right shows area following deforestation activity.
Sources: Satelligence report

The expected role of institutional
investors in solving nutritional problems
has been growing. As of December 31,
2022, the number of asset management
firms supporting the Access to Nutrition
Initiative (ATNI) Investor Pledge had
expanded to 80 firms representing
collectively US$19.9 trillion in AUM.
A full year has passed since NAM
pledged its support to ATNI, and during
this time NAM continued to proactively
participate in engagement meetings
asking target companies to improveaccess to nutrition.

NAM is co-chair for engagement
alongside a Japanese food company,
and we hosted the second engagement
meeting in October 2022. We hadconstructive discussions on thedefinition of healthy products, while we
confirmed details regarding progress
toward solving nutritional problems,such as KPI setting for achieving thenutrition-related targets which were
established during the 2021 Tokyo
Nutrition Summit.

Commitment toaccess to medicine

The team have continued to work
closely with Access to Medicine(ATM) and our peer signatories to theinitiative over the year. Nomura AssetManagement continued in its role as
the co-lead investor for a large UK
pharmaceutical that is a leader within
the vaccine space and also engaged
extensively with companies involved insupporting access to COVID treatment.
As the co- lead for the Access to
Medicine (ATM) investor engagement
initiative with the UK pharmaceutical wehosted a group call with the company
across both areas of improvement
identified by ATM and also our own

expectations. This included for example
improving impact reporting and aligning
C-Level management with accessoutcomes. The call was productive andwe felt the company was very engaged
and open to debating where our views
differed taking on board in particular theneed for better impact data to support
the sustainable investment community
in making better decisions.
In the first half of the year we
continued our engagement for
impact with companies involved in
COVID vaccine development andmanufacturing, following up the public
letter to the industry that we signed
alongside a number of our responsible
investment peers, with individual
engagements with the companies.
We participated in collaborative
engagement calls with companies
to seek to put pressure on them totake a more sustainable approachto supporting access and strongly
push our views around company
responsibility to support access,reporting on impact and aligning
management with outcomes. In
the second half of the year theteam ramped up its efforts further,and worked with peers to develop
letters to the companies pushing for
management remuneration to be tied toaccess outcomes and highlighting both
best practices and potential routes forthe companies to introduce appropriate
management remuneration targets.
These letters were sent directly tothe companies and were made public
in order to maximize the pressure on
the companies to push forward andimprove social impact. Meetings werealso held with some of the companies
and included engaging with for example
remuneration committees to discuss
our proposals.

Report published every
two years

In December 2022 in Tokyo in
conjunction with the publication of theAccess to Medicine Index 2022
The Access to Medicine Index Investor
Event was held to discuss key findings
from the Access to Medicine Index
and best practices for access to
medicines.
Representatives from the Accessto Medicine Foundation, investors,
pharmaceutical companies, academic
experts, etc. gathered, and from ourcompany, an ESG specialist in Tokyo
participated.

Responsible Investment Report 2022

74

Proxy Voting
Promoting the transition to monitoringboards through disciplined proxy voting

1
The Unique
Aspects of Our
proxy Voting

Systematic and ongoing efforts to
influence companies

2

Effective and robust process

Along with engagement, we aim to realize
desirable management styles.

Thorough discussions by the Responsible
Investment Committee + real-time monitoringof conflicts of interest by the Responsible
Investment Council.

3

4High level of accountability

We disclose the reasons for voting infavor of or against all proposals. We givedetailed reasons for proposals requiring
special explanation.

Standards that go beyond simply
listing conditions for opposition

We have clearly stated our stance of
supporting a transition to monitoring boards
through our proxy voting standards.

The Outline of Proxy Voting

System to Manage Conflicts of Interest

In proxy voting, we focus on the corporate governanceof portfolio companies. The basic structure of corporate
governance is that directors and auditors are elected at ashareholders’ meeting, and directors (the board of directors)
and auditors supervise senior management throughnominations, compensation matters, and audits.
Accordingly, the following three aspects are particularly
important in proxy voting: the election of directors (nomination),
executive compensation (compensation) and the election ofauditors (audit). In addition, the appropriation of surplus isimportant when it comes to Japanese companies because
Japanese companies are often criticized for retaining a large
amount of cash and deposits and being unwilling to return

profits to shareholders through dividends and share buybacks.
Moreover, proposals submitted by shareholders have also been
increasing in recent years. Due to differences in legal systems, it
is easier to make shareholder proposals in Japan than in Europe
and the United 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 of our engagement withportfolio companies, and we make judgments on proposals
by all portfolio companies in accordance with our own proxyvoting guidelines.
The four points noted in above are the unique aspects of our
proxy voting.

Basic Corporate Governance Structure
Election

Members of the Responsible Investment Committee, thehighest decision-making body, include, in principle, only
persons involved in investment and research decision making,while people in a position with a conflict of interest or people
with the possibility 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 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

Nomura Asset Management’s System toManage Conflicts of Interest

stewardship activities, especially proxy voting involving conflictsof interest, to make sure that decisions are made that do not
adversely affect the interests of clients as a result of conflicts ofinterest.
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 and Supervisory
Committee. Furthermore, members of the Responsible
Investment Council attend Responsible Investment Committee
meetings, and are able to immediately state their opinions.
Responsible Investment Committee

Responsible Investment Council
Chair

Oversight (nomination, compensation, audit)

Members

Secretariat

Shareholders’ meeting

Directors (Board of
Directors) / Auditors

Senior management

AttendCCO*

Independent outside directors and others

Responsible Investment
Department*Chief Conflict Officer

75

Proxy Voting

Responsible Investment Report 2022

76

Changes in Results of Exercise of Voting Rights for Japanese Companies (calendar year)
Proxy Voting Process for Japanese Equities

Proposals on company organizational structure

Total Company(Ratio of votes against, same as below)

proposals

The proxy voting process is as shown in the figure below. The process for
proposals that can be judged in accordance with the proxy voting guidelines(proposals that do not require qualitative judgment) is different than the process
for other proposals (that do require qualitative judgment).

Reference

Opinions from multiple proxyvoting advisory firms

The ratio of votes against is shown inthe chart below.
See details on the right.
8.2%

7.6%

8.3%

8.5%

23,894

Number of
proposals

Our ratio of votes against proposals increased in 2022. The main reasons for this were in
November 2021 we raised the ratio of outside directors that we are asking companies witha controlling shareholder to have on the board, in January 2022 we reinstituted a businessperformance standard, and in November 2022 we adopted a standard of voting against
proposals if there are no female directors.
Election anddismissal of directors

Proposal judging process
Members(as of December 2021)

Role

Responsible Investment
Department

Secretariat

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

Qualitative
judgment notnecessary

Qualitative
judgment isnecessary

Qualitative
judgment isnecessary*

No conflicts ofinterest

There is a conflictof interest

24,8782019

23,8772020

Preparation of proposals

24,700

2021

2022

5.3%

5.8%

18,438

17,95920192020

Holds deliberations andmakes decisions based on
the secretariat’s proposals
Makes revisions to thesecretariat’s proposals as
required

13.3%

13.3%

2,589

1,811

Number of
proposals
1,539

2020

2021

2022

12.8%

18,429

2,963

2021

2022

2019

16.6%

Executivecompensation*1

12.7%
9.8%

9.5%

174

Number of
proposals

157

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 the Board of
Directors and the Audit andSupervisory Committee

236

315
2019

2020

2021

28.6%

856

2019

Decidewhether toagree oroppose

23.7%

826

1,087

2020

2021

2022

In 2022, the number of proposals increased,
mainly regarding articles of incorporation. We
voted in favor of proposals that we confirmed
would be effective in improving shareholder
value or strengthening governance.

Decidewhether toagree oroppose24.0%

Decidewhether toagree oropposePayment of retirement benefits
to retiring executives
83.8%

85.5%

Number of
proposals
945

191

2022

2019

18.8%

Global Basic Policy for Proxy Voting

165

123

Number of
proposals
120

2020

2021

2022

Discuss
2019

Organizational
restructuringrelated*2
14.0%

5.0%
3.3%

1,593

Europe76.7%

Our ratio of votes against proposals increased in 2022. The main reason is that from June
2021 we reinstituted our standard for appropriations of surplus. In addition, the number of
proposals related to organizational restructuring and other capital policies decreased from theprevious fiscal year, but the ratio of proposals we voted against increased. Please also refer toexamples of reasons for voting for or against proposals on Pages 81-82.

4.7%

Share

78.0%

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

Appropriation of
surplus

Proxy Voting Process for
Global Equities

0.6%
1,548
2020

7.9%

1,500

Number of
proposals
1,502

4.5%

2021

2022

2019

44

Introduction, update andabolition of takeover defense
measures

Tokyo
98.7%

100%

96.5%

9.8%

38

61

Number of
proposals
43

2020

2021

2022

Proposals on othercapital policies*3
13.0%

100%

9.0%

Reference

Considering local
circumstances, makedecision different fromthe policy if necessary

Discuss

Asia

Discuss

USA
Share final decision
Discuss

Globally-uniform proxy voting

Proxy Voting

16.4%

Number of
proposals
17,924

Our ratio of votes against proposals declined in 2022. The main reason for this was the
improvement in compensation governance that continued from the previous fiscal year.

*This includes proposals of group affiliates.

77

8.1%

Proposals on executive compensation

The ratio of votes for is shown inthechart below.

Formulation of
the guidelines

For proxy voting (excluding Japaneseequities), we generally decide tovote for or against a proposal inaccordance with our Global Basic
Policy on Proxy Voting. However, if theinvestment managers and analysts
possessing a deep understandingof 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.

6.8%

Election anddismissal of auditor

Total Shareholders’proposals

Five people involved in decisionmaking for investment andResponsible
research (The Responsible
Investment
Investment Council members
Committee
participate in Responsible
Investment Committee
meetings)

Responsible
Investment
Council

Process of
formulating
proxy voting
guidelines

78

Results of Proxy Voting for Global
Companies
January-December 2022
Company Shareholders’proposals proposals

Total

Votes for18,083451

18,534Votes
against

2,034

293

2,327

Total

20,117744

20,861

Ratio of
votes
against39.4%

57

Number of
proposals
63

2019

2020

2021

2022

Proposals on articles ofincorporation
Proposals on articles
of incorporation
3.2%

3.0%
Number of
proposals

1.7%
630
530

11.2%
2019

2020

1.0%
2,402

2021

2022

100

Number of
proposals
77

2021

2022

6.8%
3.1%
65

590

10.1%

92

2019

59
2020

*In addition to the above, in 2022 we voted on 83
proposals related to the election and dismissal of
accounting auditors, and two other proposals. We
voted against 0% and 50% of these proposals,
respectively.
*1 Revisions of executive compensation amounts,
issuance of stock options, introduction/revision of
performancelinked compensation plans, executive
bonuses, etc.
*2 Mergers, business transfers/assumptions, shareexchanges, stock transfers, company splits, etc.
*3 Share buybacks, reduction in statutory reserves,
capital increases via third-party allotment, capital
reductions, share mergers, issuance of classshares, etc.

Responsible Investment Report 2022

78

Overview of Proxy Voting Standards for Japanese Companies
Here, we explain our Proxy Voting Standards for JapaneseCompanies (the “Proxy Voting Standards”). Please refer
to our website for details. In addition, for companies andsectors particularly impacted by COVID-19, and for which
we thus determined that it would not be appropriate to apply
business performance standards (see table below), we madejudgments flexibly based on considerations of the individual
circumstances of the company and/or sector.
Reference

Changes to Proxy Voting Standards for Japanese Companies

Proxy Voting Guidelines Structure

Month/Yearof Revision

Proposal Category

March 2006

Director election/
executive compensation

NAM

Global Basic
Policy for
Proxy Voting

Proxy VotingStandards
for Japanesecompanies

Application
to Japanesecompanies

March 2007

Director election
Director election
METI

Reflect engagement
statusRigorously judge
corporate actions,transactions involving a
conflict of interest, andresponsibility taken foroutcomes

Thinking

We may vote against a company proposal in the cases below

We will reflect the outcome ofengagement aimed at realizing
desirable management (Refer toPage 21-22)

If a portfolio company has not made adequate efforts andimprovements are not expected despite the fact that during
engagement we pointed out that efforts to realize desirable
management were insufficient and urged action.

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

If actions that significantly damage shareholder value (misconduct, etc.)
are foundIf ROE is slumping*1. In the case of a monitoring board*2, if ROE isstagnating and there is no effort being made to improve management(business performance standard)If cross-shareholdings are particularly large*3
If a financially-sound listed subsidiary with a large amount of net
financial assets is lending money to the parent company*4
If minority shareholders’ interests are not protected in M&A, etc.

Diversity of the board of
directors

Diversity is important for a board of
directors to function properly.

If there are no female directors*5

Board of directors’
independence

In order to supervise the senior
management team, it is necessary
to have a certain number of outside
directors. In addition, outside
directors must have independence.

If the number of outside directors is below a minimum level (two outside
directors or one-third of the total number of directors, whichever is lower, ora majority if there is a controlling shareholder (including listed subsidiaries))
If the term of office of an outside director is 12 years or more, if thenotification as an independent director is not confirmed, or if the outside
director has worked for a company that is a major shareholder
 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 supervision of
conflicts of interest between the company and its management,
controlling shareholders, etc

Effectiveness of outside
directors

Outside directors are required toeffectively supervise management.

Appropriatecompensation
governanceBecause the process for determining
executive compensation mustbe 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 * 7(for acompany that does not have compensation governance*6 in place)Appropriate incentives

Although stock compensation
is important as a management
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

Effective utilization offinancial assets

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

Proxy Voting

Key Change
Created the Proxy Voting Committee (2001)

 usiness performanceB
standard based on ROE

NEW (ROE threshold = 3%, take management improvement efforts into consideration)

Business performancestandard based on ROE

Raised ROE threshold from 3%

1

3

Number of outside directors(listed subsidiaries)

Ito Report* indicated ROE of 8% (August 2014)ISS

Director election4

 inancial assets are not utilized effectively*8, and shareholder returns
F(dividends and share buybacks) are not appropriate

NEW (Minimum of one (1) outside director if there is a director who came from parent company)
Introduced business performance standard based on ROE (February 2015)

Business performancestandard based on ROE

In addition to 5%, references relative values (industry median value)

Number of outside directors

NEW (Minimum level of one (1) outside director, will vote in opposition if ROE is less than 8%)

1

April 2015

5%

2 Requirements for
NEW (Applied to companies with committees at the time)
independence of outside directors

Tokyo Stock Exchange Enactment of Corporate Governance Code (June 2015. Revised in June 2018, re-revised in June 2021)

April 2016

April 2017

November
2017

Director elections/Auditor
electionsShareholder proposals

Director election
November
2018
Executive compensation

4

Number of outside directors
Number of outside directors(listed subsidiaries)

Raised minimum from one (1) to two (2) outside directors

2

Independence requirementsfor outside directors

Specifies requiring independence for all companies
Reference independent director notification

2

Independence requirementsfor outside directors

Added requirements related to large shareholders

6Changes to articles ofincorporation

Stipulated types of proposals we will vote in favor of3

Number of outside directors(listed subsidiaries)

Integrate into 44

Number of outside directors

Abolish requirements for ROE
If there is a controlling shareholder: Raised minimum from two (2) to one-third5

Effectiveness of outside
directors

NEW (We will vote against proposals if it is clear that outside directors were unable to fulfill the7

Revisions of articles ofincorporation

November2019

June 2020

Director election

Compensation governance4

If there is no controlling shareholder: Raised the minimum from two (2) to one-third forcompanies other than a company with a board of company auditors
If there is a controlling shareholder: Abolished requirements for ROE

M&A, finance related

Specifies the stance of taking conflicts of interest with minority shareholders, etc. into
consideration

9

10

COVID-19

Number of outside directors

Raised the minimum for a company with a board of corporate auditors from two (2) to one-third

Independence requirementsfor outside directors

Added term in office (12 years)

11 Monitoring board

requirements
10

COVID-19

12 Incorporate engagement

January 2022

Director election

outside directors, etc., if company has a monitoring board)

Reinstated the application of some standards related to appropriation of surplus
NEW Encourage the realization of desirable management (gender diversity, cross-shareholdings, etc., including initiatives targeting ESG issues)

Business performancestandard based on ROE

Lowered threshold of comparative value to 25th percentile of industry median value
Take management improvement efforts into consideration only when company has a monitoring board

Number of outside directors

There is a controlling shareholder: Raised minimum from one-third

10

COVID-19

Business performancestandard based on ROE

1

Director election

NEW (Relaxed requirements related to business performance, etc., if company has a monitoring board)
NEW (Vote in favor of making payment of stock compensation satisfying certain requirements tooutcomes
1

4

November2022

NEW (Established eight requirements to be met, including gender diversity, cross-shareholdings, etc.)
Support for the transition to monitoring boards

4

Director election/
appropriation of surplus

Director election

Abolished the application of some standards related to business performance andappropriation of surplus

2

Executive compensation

November2021

compensation governance is in place)

Number of outside directors

11 M onitoring board

June 2021

role expected of them)NEW (Relaxed requirements to vote in favor of company proposals if it is determined thatSpecifies that general shareholders' meetings will not be ruled out, and that, in principle,
we will vote in favor of proposals if the surplus appropriation and the number of outside
directors meet the minimum standards.

Director election/
appropriation of surplus

Director election

Raised minimum from one (1) to two (2) outside directors

Board of directors
authorization for dividend
8

orporate restructuring/
capital policy

November2020

NEW (Will vote in opposition if attendance rate is below 75%)

3

Director elections

Director election

Effectiveness of outside
executive officers

5requirements[November 2022 Revisions]*1 Changed the threshold for ROE. The lower of 5% and 25th percentile in sector
the lower of 5% and 33rd percentile in sector*2 C hanged the monitoring board requirements as follows.
At least one female director
At least 10% female directors
Cross-shareholdings less than 10% of invested capitalless than 25% of net assets for financial
institutions (no change for non-financial companies)*3 N ewly established a standard to vote against proposals for election of board chairperson/CEO, etc. as director if cross-shareholdings are particularly large (non-financial
company: more than 25% of invested capital; financial institution: more than 50% of net assets).
*4 W
 ill vote against proposals for election of board chairperson/CEO, etc. or outside director as director, if a financially-sound listed subsidiary with a large amount of net
financial assets is lending money to the parent company, etc. (added to the existing standard)*5 Newly established a standard to vote against a proposal for the election of board chairperson/CEO, etc. as director if there are no female directors.
*6 Raised the standard for judging a company’s compensation governance. The requirement is now to have a compensation committee, at least two (2) outside directors
as committee members, and the number of inside directors must not exceed the number of outside directors.
*7 F
 or executive retirement benefits of a certain amount, in addition to having solid compensation governance, we added a requirement that the majority of directors must be outside directors.
*8 R aised the ROE standard from 8% to 10%. Here, if a company is financially-sound and has a large amount of net financial assets, and the ROE level is low, we judge thecompany to be “not effectively utilizing financial assets.”

79

1

Director election/executive
compensation

January 2010

h ttps://global.nomura-am.co.jp/responsibility-investment/vote.html

Key Point

Key Point-The same number is used for the same
type of key point.
-Particularly important revisions are highlighted.

13 D iversity of board of

directors
14 Cross-shareholdings

majority

Reinstated application of business performance standard
Raised the comparison value threshold from 25th percentile in industry to 33rd percentile in industry.
NEW (We will vote against a proposal if there are no female directors
NEW (We will vote against a proposal if there is a particularly large amount of cross-shareholdings)*Final report of the “Competitiveness and Incentives for Sustainable Growth – Building Desirable Relationships Between Companies and Investors –“ project

Responsible Investment Report 2022

80

Disclosure of Proxy Voting Results (Reasons for voting for or against proposals)
Since the October – December 2019 quarter, we havebeen disclosing the reasons that we voted for or against
all proposals, and we have been providing detailed
explanations of the reasons for those proposals we feelrequire special explanation. This is an effort to further
increase visibility with respect to appropriate proxy voting.
Here, we introduce some specific examples of disclosure withrespect 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.
Proposer

Proposal classification

VotingresultReason for proxy voting result

Ordinary
GSM

Company

Director election/
dismissal

Voted
for

Although ROE is struggling and does not meet our standard, we voted for the proposal,
taking into consideration the fact that the deterioration in financial indicators such as ROE
has been limited better than other companies in the same industry in Japan and overseas.

VotedagainstA proposal for the election of a newly elected candidate belonging to a major
shareholder of the company. Although this candidate satisfies our standards, there areconcerns that the current board of directors is too sensitive to the wishes of certain
major shareholders and that diverse opinions are not being valued. Therefore, we voted
against the proposal, determining that there was a possibility that the election of thiscandidate would exacerbate these concerns.

Company

Director election/
dismissal

Climate change-related proposals submitted by shareholders
 proposal to amend the articles of incorporation was submitted to a number of companies asking them to address the issueAof climate change. The issue of climate change is one of the environmental and social issues that we believe to be particularly
important for the sustainable improvement of corporate value, and there have been multiple cases in the past in which we
voted in favor of similar proposals after deliberating on them individually. However, we have a policy of voting against proposals
in the following cases, and there were no proposals that we could vote in favor of this time.
When there is a possibility of restricting the execution of business due to excessively detailed content
When the proposing shareholder has not fulfilled its accountability with respect to the reasons for the proposalIn addition, some of the proposing shareholders indicated that they would like the proposal to be judged on as arecommendation to the company, rather than as a change to the articles of incorporation. Our policy is to fully consider the
impact if the proposal were to be passed, and although we will flexibly judge the appropriateness of specifying a company’s
response to environmental and social issues in the articles of incorporation, we do not believe it is appropriate to deliberate on
this as a recommendation.

GSM Type

Proposer

Proposal classification

Proposals we determined to require special accountability
In addition to proposals related to M&A and capital policy, there were proposals asking companies to increase board diversity.
GSM Type

Proposer

Proposal classification

VotingresultOrdinary
GSM

Company

Director election/
dismissal

Voted
againstOrdinary
GSM

Company

Director election/
dismissal

Improper information disclosure was identified. We judged that our standards regarding
the duties as a director were not satisfied, and voted against the proposal in accordancewith our standards.

Voted
againstInappropriate related-party transactions were identified, but the nomination committee
did not sufficiently pursue responsibility. We judged that our standards regarding
the responsibilities of a director were not satisfied, and voted against the proposal inaccordance with our standards.

Ordinary
GSM

Shareholder

Director election/
dismissal

Voted
for

Ordinary
GSM

Shareholder

Director election/
dismissal

Voted
againstThis was a proposal requesting the election of an outside director. Although the proposal
regarding the capital allocation policy is reasonable to a certain extent, we judged that the
influence of candidates for which there are concerns about independence may become
excessive, and we therefore voted against the proposal in accordance with our standards.

Ordinary
GSM

Shareholder

Appropriation of
surplusVoted
againstThis was a proposal seeking additional shareholder returns. We judged that the
proposing shareholder had not fulfilled its accountability for the company's businessand financial strategies and its own large-scale purchase of shares, so we voted against
the proposal in accordance with our standards.

Ordinary
GSM

Special
GSM

Ordinary
GSM

Shareholder

Company

Appropriation of
surplus

Organizational
restructuring-related

Company

Proposal related toother capital policy

Shareholder

Proposal related
to articles ofincorporation

Voted
for

This was a proposal seeking additional shareholder returns. After considering the large
amount of financial assets held relative to the scale of the business, the unclear use
of financial assets, and the fact that the impact on financial soundness is minimal, we
determined that it would contribute to the improvement of shareholder value, and voted
for the proposal in accordance with our standards.

Voted
for

This was a proposal regarding the overseas business integration with the parent
company. Because we recognized the reasonableness of management decisions,and confirmed that a certain amount of efforts are being made to protect the interestsof minority shareholders, we voted in favor of the proposal in accordance with ourstandards. Although it did not lead to us voting against the proposal, we pointed out tothe company our concerns about issues such as weak corporate governance, conflictsof interest with minority shareholders, and insufficient information disclosure.

Voted
againstThis was a proposal regarding the third-party allotment of common stock. In addition
to the purchase of treasury stock, this proposal aimed to reduce the share ownership
ratio of a certain major shareholder, and we judged that the board of directors had not
fulfilled its accountability for protecting the interests of minority shareholders, so wevoted against the proposal in accordance with our standards.

Voted
for

This was a proposal seeking at least one male director and at least one female director.
Judging that it would contribute to the improvement of gender diversity on the board of
directors, we voted in favor of the proposal in accordance with our standards.

*We have omitted places mentioning individual company names.

81

Reason for voting result

This was a proposal requesting the election of an outside director. The proposer’s
assertion pointing out the slump in capital efficiency was reasonable to a certain extent,
there was room for improvement in the composition of the board of directors, andthe board of directors had not made a persuasive counterargument to the proposer’s
assertion. Considering the above, in accordance with our standards, we voted in favorof the proposal for a candidate that was consistent with the assertion.

Ordinary
GSM

Proxy Votingof climate change, we provided a comprehensive explanation
about the background behind our decisions on climate changerelated proposals as a whole.

If it contains content that may impose specific restrictions on the execution of business

GSM type

Ordinary
GSM

In the individual disclosure for April – June 2022, in addition to
explaining the reasons for the decisions made on each of the
proposals submitted by shareholders with respect to the issue

Ordinary
GSM

Ordinary
GSM

Ordinary
GSM

VotingresultReason for proxy voting result

Voted
againstThis was a proposal to change the articles of incorporation regarding disclosure of efforts toaddress the problem of climate change. Although we agree with the importance of climatechange issues with respect to medium- to long-term corporate value, we determined thatthe details of the proposal included content that could impose specific restrictions on
business activity and that it would not be appropriate to include such content in the articles
of incorporation, so we voted against the proposal in accordance with our standards.

Shareholder

Proposals related
to articles ofincorporation

Shareholder

Proposals related
to articles ofincorporation

Voted
againstThis was a proposal to change the articles of incorporation regarding disclosure of efforts
to address the problem of climate change. Although we agree with the importance of theclimate change issue with respect to medium- to long-term corporate value, the proposal
included overly specific content and could restrict the execution of business, and wedetermined that it would not be appropriate to include such content in the articles ofincorporation, so we voted against the proposal in accordance with our standards.

Shareholder

Proposals related
to articles ofincorporation

Voted
againstThis was a proposal to amend the articles of incorporation regarding disclosure related
to the problem of climate change. We judged that the proposer was not fulfilling its
accountability because there was no specific indication of the company’s risks andbusiness opportunities arising from climate change issues, so we voted against the
proposal in accordance with our standards.

Proposals involving the possibility of a conflict of interest
We give detailed explanations for proposals of group affiliates,
including our parent company Nomura Holdings as well as
for discussions related to matters involving group affiliates.
GSM Type

Ordinary
GSM

Special
GSM

Special
GSM

ProposerCompany

Company

Company

Proposal classification

Proposal related toother capital policy

Organizational
restructuring-related

Proposal related toother capital policy

Here, we discuss proposals in which Nomura Securities, agroup affiliate, was involved in acquisitions or organizational
restructurings as a financial advisor and third-party assessor.

VotingresultReason for proxy voting result

Voted
for

This was a proposal to squeeze out shareholders who did not participate in the tender
offer by the parent company. We voted in favor of the proposal in accordance with
our standards, taking into consideration the fact that efforts to protect the interests ofminority shareholders were confirmed and that the economic terms were reasonable.
Nomura Securities, a group affiliate, was involved in this deal as a financial
advisor and a third-party assessor.

Voted
againstThis was a proposal regarding a share exchange. If it went through, the company would
become a listed subsidiary of a major shareholder, which raised concerns about aconflict of interest with minority shareholders, and the effort to protect the interests ofminority shareholders were insufficient, and we determined that accountability had notbeen fulfilled with respect to the economic terms being unfavorable, so we voted against
the proposal in accordance with our standards. Nomura Securities, a group affiliate,
was involved in this deal as a financial advisor and third-party assessor.

Voted
againstThis was a proposal to squeeze out shareholders who did not tender in a tender
offer made for a management buyout (MBO). The conflict of interest with minority
shareholders was significant, and we determined that the board of directors had
not fulfilled its accountability with respect to the fact that the economic terms were
inadequate compared to other similar tender offers, so we voted against the proposal inaccordance with our standards. Nomura Securities, a group affiliate, was involvedin this matter as a financial advisor and third-party assessor.

*We have omitted places mentioning individual company names.

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82

Proxy Voting FAQ
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 to encouragethem to improve corporate value and realize sustainablegrowth. We reflect the opinions of portfolio companies andinformation about portfolio companies obtained throughengagement in our revisions of our proxy voting standards.
Additionally, we take the information we attain throughengagement into consideration to make highly-effective

Relationship between
engagement andproxy voting

decisions when actually carrying out proxy voting.
In addition, following this most recent revision, we may voteagainst a director election proposal if, despite our indicating
through engagement to a 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, the portfolio company has not taken
adequate steps and improvement is not expected.

Formulation of proxyvoting standards

Decisions that differ
from our proxyvoting standards

Example: Through engagement, we found that some Japanese companies
are making progress on enhancing the function of supervising senior
management both in form and substance. Based on this, we decided thatthe time had come to introduce voting standards that would support thetransition to a monitoring board.

Annual Schedule of a Proxy Voting Representative
June, followed by March and May, are the months in which the largest numbers of Japanese companies holdtheir general shareholders’ meetings. We exercise our voting rights for about 1,600 portfolio companies in June
alone, and more than 1,900 portfolio companies in these three months. Below, we discuss the approximate
annual schedule for proxy voting, focusing on this period with a high concentration of shareholders’ meetings.

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

Proxy Voting Annual scheduleJul.

Our decisions may differ from the proxy voting standards if we can identify
actions targeting improvement, or in cases of circumstances we did not
anticipate at the time the proxy voting standards were formulated.
Example: For stock compensation that did not satisfy our standards, we voted in favor of a
proposal due to the fact that, through engagement, we found that the payment
to senior management did satisfy our standards, and although it did not satisfy
our standards, we confirmed the need for the payment to employees.
*Refer to Page 21-22 for information about desirable management

Aug.

Sep.

Oct.

Nov.

Dec.

Jan.

Feb.

2

1

with respect to proposals related to executive compensationor capital policy. The effectiveness of corporate governancecomes into question particularly for proposals related to M&A
and financing, so we carefully discuss these issues, including
the impact that a rejection of the proposal would have, and wevote against the proposal if we decide that it will not contributeto the interests of minority shareholders.
Furthermore, we aim to achieve desirable corporate
governance and improve corporate value by working on
portfolio companies through a combination of proxy voting andengagement. We position proxy voting as one of the means
to do this, and we do not believe that our opposition rate isindicative of our stance.

Mar.

Apr.

May.

Jun.

Jul.

3
4

5
6

1

6

Revisions to Proxy Voting Guidelines

6

6

2

July – October

It seems like you vote against company proposals only a small
percentage of the time. Can you comment on that?
Proposals concerning the election of directors are themost common type of proposal, and therefore havea large impact on our opposition ratio. Taking into
consideration the continuity of the board of directors*1, we limit
director election proposals we oppose to candidates holding
the responsibility for individual matters. This is the reason why
our opposition ratio looks relatively low (see chart below). Our
opposition ratio for proposals to elect directors is 7% (AprilJune 2022), but the percentage of companies for which we
opposed one or more candidates within a proposal was 40%(same period), which is not a particularly low level. On the other
hand, since the number of proposals is low, the overall impact
is small, but our opposition ratio appears to be relatively highCouncil attend the Responsible Investment Committee meetingand participate in the deliberations. Also, following the conclusionof the Responsible Investment Committee meeting, theResponsible Investment Council holds a meeting where it closely
examines the issue from the perspective of conflict of interest.

As with other portfolio companies, we make decisions
about whether to support or oppose proposals for groupaffiliates based on our guidelines. As a proposal with aconflict of interest, the Responsible Investment Committee will
discuss the proposal referencing the opinions of multiple proxyvoting advisory firms. Members of the Responsible Investment

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

Reflect efforts
towards realizing
desirable
management

Engagement

What about proxy voting with respect to group affiliates?

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

3

Engagement in anticipation of thegeneral shareholders’ meeting.

November – January
We conduct engagement mainly with the portfolio companies that
we think will be significantly impacted by the revisions to our Proxy
Voting Guidelines. We communicate our views and encouragethem to strengthen their corporate governance. In addition toindividual meetings with portfolio companies, we also explain ourviews at seminars.

4

February – May
As the busy season approaches, we ramp up engagementwith an eye towards shareholders’ meetings. This is the time
when companies are finalizing the proposals they will make atshareholders’ meetings (the proposals have already been finalized
in some cases), so portfolio companies tend to be most interested
in the prospects for individual proposals. However, we try to keepthese discussions focused on strengthening corporate governanceover the medium to long term.

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

Period when most generalshareholders’ meetings are held
March – June

This is a period when we need to accurately judge a large numberof 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 want companies to provide information
disclosures that are clear and easy to understand.

Guideline for Director Election Proposals
All candidates

Applicable toreason*2 for
opposition

Persons
subject toopposition

Judgments on
individual proposals

If proposal we
opposed isrejected

Board of Directors
meetings cannot beheld due to absenceof directors

Opposition ratio will rise
Undermines the abilityof the Board of Directors
tocontinue functioning

Board of Directors
meetings can beheld with otherdirectors

Opposition ratio will decline
Ensures the ability of theBoard of Directors tocontinue functioning

5

Engagement to strengthen corporate
All year, particularly November – March

We chosethis

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

6

Disclosure of proxy voting results
January/April/July/October

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

*1 Under the Companies Act, a minimum of three directors is necessary in order to hold a Board of Directors meeting. *2 Shortage of outside directors, low ROE, etc.

83

Proxy Voting

Responsible Investment Report 2022

84

Features of Integration
Equity Investment
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 strategy integrates ESG considerations
into its investment philosophy and process
in a different way, a common ESG evaluation
platform is shared by all strategies.

Fix Income Investment
We select and model ESG factors that arematerial for credit investment based on a varietyof research. In addition to this ESG factor
model integration, qualitative evaluations bycredit analysts are also considered within theinvestment process to improve the portfolio’s
risk-adjusted return and sustainability.

Integrating ESG factors into the investment process iscritical, as we believe financial performance and ESG efforts(non-financial information) are closely related and influence
one another. We utilize proprietary ESG evaluations of
portfolio companies when making investment decisions.
In order to effectively incorporate ESG considerations andother nonfinancial information into the investment process
to supplement the analysis of a company’s fundamentals(financial information used to evaluate a company), we
conduct our own ESG assessment for both equity investing
and fixed 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 to Japanese companies, as
the scope also includes companies in developed countries
in Europe and the Americas, as well as companies in Asiaand emerging countries. In addition to global themes suchas climate change and human rights, we assess specificmaterial ESG considerations for individual industries andcompanies, and utilize information from multiple externalsources to create our proprietary ESG scores. These ratings
are made available to all portfolio managers for integration
into the investment decision-making process.

ESG Integration
Nomura Asset Management recognizes risks
and opportunities, and incorporates them into
the investment process using different methods
for each strategy based on our own ESG
assessments.

85

ESG Integration

Responsible Investment Report 2022

86

RightPortfolio Manager

Shunnosuke Tochimoto
MiddleEquity Integration

Portfolio Manager

Shanshan Wang
Left

Equity Integration Approach

Equity Investment Process

Efforts to Advance ESG Integration

Corporate value is essentially the discounted present valueof future free cash flows. The business assets that generate
future free cash flow include not only fixed assets such as
production facilities, but also various types of intangible
assets (capital) not found in financial statements, including
human capital, natural capital and social capital. Evaluatingsuch capital, or business assets including non-financial
information, is necessary in order 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 the added value of our investments.
There are two aspects to evaluating intangible assets that
do not appear in a company’s financial information. The firstis 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”, the business impact of climatechange, supply chain resilience, intellectual property,
R&D capabilities and organizational strength, quality ofhuman resources and diversity are among the sources ofcompetitiveness that help differentiate a company from its
peers. We consider these factors to be materialized in the future
as financial information such as corporate profits and growth.
“Business risk evaluation” aims to ascertain the stability
and sustainability of 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 environment. In other words,
this “business risk evaluation” is looking at how to evaluate
the discount rate when discounting future cash flows to
the present value. To put it another way, the valuation of
intangible assets is an important aspect of determining
whether the valuation (relative price metric for the stock price)of the investment target company is too high or too low.

An in-house proprietary ESG score, which is jointly producedby corporate analysts and ESG specialists, is utilized for
ESG integration into our equity investments. The ESG score
includes environmental, social, governance, and SDGrelated considerations, and is a quantified representationof our analysis and evaluation 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 theportfolio are bought and sold according to their investment
ratings, the same score serves as a common language fordiscussion among corporate analysts, ESG specialists,and portfolio managers, allowing for more effective ESG
integration into operations. If additional ESG research isdeemed necessary, the Engagement Department takes thelead in conducting the necessary engagement activities incollaboration with corporate analysts and ESG specialists.
Our ESG evaluation framework is also applied to ourglobal equities investment. In addition to global themes suchas climate change and human rights, we assess specificmaterial ESG considerations for individual industries andcompanies and utilize information from multiple externalsources to create our proprietary ESG ratings. These ratings
are made available to all portfolio managers for incorporation
into the investment decision-making process. For example,
at our Singapore Office, country specialists (CS) are
assigned to cover each country in this diverse region, andthe main source of added value is the bottom up research
conducted by meeting with companies (2393 meetings in2022). Investment ratings are assigned to individual stocks
based on the fundamental research carried out by CSs as
well as the ESG evaluation. The portfolio is constructedbased on these ratings.

Issues such as climate change, human rights problems, anddiversity are common issues that need to be addressed
globally and over the long term, and they also have a major
impact on our portfolio management. Our investment teams
manage portfolios based on a stock selection process thattakes various ESG factors into consideration (qualitativeand quantitative decisions about ESG). When assessing acompany as an investment target, managers of activelymanaged portfolios must consistently ask “Is this a company
that controls ESG risks and opportunities and can continue
to grow in five or 10 years?” and manage the portfolio
by examining its constituent companies from a long term
perspective. In our investment process, in addition to ESG
specialists, ESG investment managers and investment
teams including portfolio managers are partially responsible
for ESG assessments. When selecting or trading stocks, ourportfolio managers make investment decisions after bothreferencing a variety of ESG data and information within thecompany as well as holding internal discussions.
Each investment manager controls the ESG risks andopportunities in the portfolio based on the ESG integration
policy of the fund for which they are responsible. For
example, when selecting a stock, we check the carbon
footprint of the company in question and always strive tokeep the carbon footprint of the portfolio lower than thebenchmark. In fact, there have been cases where we havechosen to invest in a different company in the same industry
with the same investment grade, if that other company isactively working towards net zero. Moreover, in addition to
improving our ESG governance score, we also sometimes
evaluate the provision of sporting goods to promote people’s
health and a company’s stance on building an ecosystemcentered on health promotion as ESG opportunities, andincrease the weight of that stock in the portfolio.
Coordination with engagement activities is also an
important element of ESG integration. The reaction of top

Senior Portfolio Manager

Yasuhiro Mimbuta

management during engagement meetings and the statusof milestone achievements are also important signals for
managers evaluating “opportunities.” Therefore, many of ourinvestment managers attend meetings with top executives,
where they discuss ESG issues. By accumulating moreexperience and case studies of gathering information
to make proper decisions on ESG-related risks andopportunities, performing ESG evaluations of individualcompanies, managing portfolios, and carrying out
engagement, we are able to select strong companies thatcan continuously grow amid the rapid changes in society forour customers.

Investors’ Basic Philosophy on Corporate Value
Corporate
value

ESG
evaluation

Accumulation of future earnings /cash flows

Financialanalysis

ESG score

Corporate analysts
Credit analysts
Present
Past
Nonfinancial
capitalPresent
Financialinformation
Nonfinancial
capitalCorporate
value

Passage oftime

ESG Integration

St rategy plat for m

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

87

Select target companis/Milestone
management/Escalation

FuturePortfolio Manager’s ESG Viewpoint
Business risks and opportunities

Current and future segment mix

Assessment of M&A strategy

Geographic risks andopportunities

Status of production and sales in regions with enhanced
regulations

Changes in the supply chain structure

Growth of environmental/social
solutions businesses

Profitability of environmental/social solutions businesses

Growth targets

Current customer and market development strategy

Assessment of R&D

ESG specialists

Engagement Department

Time
Passage oftime

Nomura AssetManagement

Team

Team
Team

Team

Environmental performance (CO2 emissions, stranded asset exposure, eco-friendly procurement ratio, etc.)
ESG track record

Social performance (employee turnover rate, diversity, safety indicators, actions on human rights, etc.)
Governance (governance structure, compensation, misconduct/scandals, etc.)

Portfolio

Responsible Investment Report 2022

88

ESG Scores forJapanese Equities
At Nomura Asset Management, our analysts
and ESG specialists collaborate to compute
proprietary ESG scores which represent Japanesecompanies’ true ESG abilities. ESG and other nonfinancial information are extremely important inpredicting corporate value based on future cash
flows. Researching, analyzing, and then scoring aportfolio company’s non-financial information makes
it possible to measure corporate value while taking
ESG into account, and we believe doing so leads tohigher added value of our investments.

ESG Integration

Since our portfolio companies
are improving their ESG-related
disclosures and their actual initiatives,
we revise the ESG scores for Japaneseequities on a regular basis, thereby
raising the effectiveness of company
evaluations using ESG scores. In the2021 revisions, we started financial
analyses using carbon pricing, andin the 2022 revision we included theamount of GHG absorption (the totalof GHG removals, avoided emissions,and offsets using carbon credits) inthe evaluation. Furthermore, in the2023 revision, we are taking it a stepfurther by estimating the economic
value of the GHG removals andavoided emissions, and reflecting thisin the climate change assessment.
In addition, we are reviewing someof the other environmental, social,and governance evaluation items,
taking into consideration changes inregulations, etc., based on the current
situation of Japanese companies
attained through engagement andproxy voting.

Sub-category

Sub-items

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

E

opportunity

Environmental E2: climate change
25% of total

risk

E3: N
 atural capital, other environmental issues
S1: S ocial strategy, senior management’s initiatives

S

Social

25% of totalrisk
opportunity

S2: Working environment, human capitalrisk

S3: Human rights, other social issues

risk

G1: Top management (evaluation of senior management) opportunity

G

Governance
25% of total

G2: Evaluation of board of directors

risk

G3: Other governance items

risk

SDGs

opportunity

25% of total

Evaluate
individual
subitems in linewith the themeof the larger
grouping Reflect
importance(materiality) inscore, taking
industry
characteristics
into account foreach company.

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 theindustry for each company.
opportunity :Evaluation mainly by analysts

SDGs opportunity
E

Environmental

S

E1 opportunity

E

Environmental

E2/E3

Social

S1 opportunity

risk

S

Social

S2/S3

risk

G

GovernanceG1 opportunity

G

Governance

G2/G3

risk

minus

89

Main categoryscore

The following is an overview of ESG scoring. The assessment
comprises four items each with a weighting of 25%. Thesefour items are Environment, Social, Governance, and SDGs.
There are a total of approximately 100 evaluation items, witha good balance between risks and opportunities. In terms ofopportunities, we evaluate items including management’s visionand commitment with respect to ESG issues (ability to explain,plan, and execute initiatives, as well as past achievements),
along with the future growth potential of companies that
contribute to the achievement of SDGs, as well as the
management resources that contribute to this. Meanwhile, forrisks, our evaluations emphasize items that can be quantitatively
analyzed, such as whether or not a company has provided
disclosure and/or obtained certification, as well as the data
disclosed and trends for such data. Furthermore, in orderto take unique sector characteristics and other factors into
consideration, we use materiality to reflect the differences in theunique characteristics of each sector into our evaluations.
For “Environment,” we look at whether a company is managing
transition risks and physical risks related to climate change
and incorporating such risks into its business strategy. We also
look at whether the company’s management has expressed acommitment to the environment. With respect to matters suchas the TCFD, we analyze and evaluate based on a company’s
integrated report and materials posted on its website. With
respect to evaluating natural capital and other environmental

New ESG Scoring Frameworkplus

ESG Score Content

assessments, we evaluate items such as those related to waste
management, conservation of river and marine resources, andbiodiversity (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 toaddress such risks. The former includes assessments such as
those related to employees’ human rights and the utilization ofhuman capital, while the latter relates to the issues 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 makesure that companies have put appropriate structures/
systems in place, such as the composition of the board,
outside director independence, and whether nomination andcompensation committees have been established. Meanwhile,
we also evaluate qualitative issues such as dialogue with top
management and successor planning. The unique strengths ofour corporate analysts, who have been studying and analyzing
companies extensively for many years, are reflected in ourevaluations. 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 asbusiness opportunities and appropriately incorporates them into
its business strategies. In doing so, rather than simply looking
at whether or not a company has businesses that enable it
to contribute to the achievement of each goal, we conduct
extensive research and forecast future sales mixes capableof contributing to SDGs goals, and look at whether or not acompany has excellent human and technological resources todifferentiate itself from industry peers.
To determine ESG scores, corporate analysts who havefrequent contact with companies and know the companies
they cover inside and out collaborate with ESG specialists whoanalyze ESG from a cross-industry perspective. They work
together, identifying items where one or the other possessparticular expertise. Ultimately, the Responsible Investment
Department is responsible for the final scores, which are thenshared with the related departments.

ESG Score Revisions

risk

Utilizing ESG Scores: Evaluation mainly by ESG specialists

Research division
Reflect in corporate value
assessment Discoverstocks to recommend

ESG scores generated byquantification of non-financial
information are used not only forinvestment decisions and new productdevelopment in investment portfolios,
but also for client reporting and our
ESG investment management.

Investment division
Reflect in investments
and decision-making ESG
monitoring of funds managed

Internal information
platform(research information)

Engagement Department
Ressponsible Investment
Department

More advanced ESG
integration

Identify ESG issues
Use in engagement

Utilizing ESG score data inengagement

Utilizing ESG score data ininvestment activity

Utilizing ESG scores in portfolio
construction and monitoring

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

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

When building and reviewing portfolios, wecheck scores for individual companies, use themto make comparisons with industry peers andsee 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 thebenchmark, they can use ESG scores to check
ESG risk bias and other factors.

Responsible Investment Report 2022

90

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, equity, inclusion and belonging, as well as value
creation to realize well-being within society) as important
topics.
Through internal discussions on the above, we have set
impact goals which we aim to achieve through our impact
investment. These goals target urgent issues facing theworld including climate change, natural capital depletion,access to healthcare, and social responsibility (for example,
access to financial services and to drinking water). We
then establish indicators (KPI) to measure the degree of
improvement for each established impact goal. For example,
for the impact goal “Eliminate Communicable Disease,” wecan evaluate the global progress by monitoring indicatorssuch as mortality rates for HIV, tuberculosis, malaria, andother illnesses published by World Health Organization(WHO). Additionally, we specify further segmented areasof investment linked to these indicators, and then selectIMPACT INVESTING

ExamplesWhat is impact investing?
At Nomura Asset Management, we believe that impact
investing is not limited to simply having an impact on theenvironment or society. We feel it is important for our impact
to generate earnings and cash flows, which will ultimately be
returned to asset owners and other stakeholders. In carryingout impact investing, we extensively analyze the impact thata portfolio company has on the environment and society,as well as the portfolio company’s earnings/cash flows
generated. At the same time, we engage with the portfolio
company to help it set KPI and targets that generate impact,
as well as proactively support business activities aimed atachieving them.
Impact investment is generally defined as investment thataims to create environmental and/or social impact and an
economic return on investment at the same time. As opposedto the conventional two-dimensional evaluation of risk andreturn, impact investment requires the advanced skill of threedimensional evaluation covering risk, return and impact. Impact
investing is defined as one category of ESG investment andsustainable investment given the fact that it is expected to bringabout environmental and social improvements.
The United Nations SDGs are often used as a framework for
impact investing. Adopted by the United Nations in 2015, theSDGs set forth 17 goals and 169 targets. The SDGs indicate
the enormous needs of the global market and effective risk
management methods that lead to returns on investments in
portfolio companies, and are viewed as useful indicators formeasuring the impact on the environment and society.
Proactive impact investing and accompanying engagement
activities create outputs and outcomes from the business91

ESG Integrationcompanies in which to invest in that area. Companies
included in the investment universe are linked with the
17 goals of the SDGs, and more detailed CPIs (Company
Performance Indicators) are then set. Carrying out detailed
and continuous monitoring of the established CPIs allows
us to not only appraise each company’s impact, but alsomeasure the extent of the improvement of the overall
portfolio and the impact itself.
Moreover, we are encouraging efforts to address issues byengaging with portfolio companies based on what we learn
from monitoring. By repeating this process, we will be able
to continue to generate impact that addresses social issues
while also pursuing economic returns.
Our impact investment fund is constructed based on
the so-called “outside-in” concept, whereby these kinds ofsocial issues are applied to portfolio companies, and thisconcept is shared within our domestic and overseas impact
investment strategies. In addition, we believe that publicly
disclosing these initiatives in our Impact Report and sharing
them with our stakeholders is essential in order to generate
impact and address social issues.

activities of portfolio companies, generate impact on theenvironment and society related to SDGs, etc., and return both
economic value and social value to asset owners and otherstakeholders.

Goal

NomuraAsset Management

Portfolio company

Returns

Returns

Indicator

Mitigate climate change
Atmospheric CO2 level

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

Impact investment
Engagement

Investment

Environment

Economic
returns
Socialreturns

Environment/Society =Stakeholders

Impacts
Outcomes
Outputs
Business activities
Inputs (investment)

SDGs
7.2

Increase global percentage of
renewable energy

SDGs
7.3

Double the improvement inenergy efficiency

Secure clean energy
Carbon emissions reductions

Pension funds, etc.

Individual investors

Clients/business
partners

Employees

Continuous dialogue utilizing
monitoring indicators and KPISociety

Goal

Mitigate the Obesity Epidemic/
Eliminate Communicable Disease

Indicator

WHO’s mortality rate for illnesses
and communicable diseases

Medicine-related businesses
Companies related to the healthcare
value chain

SDGs
3.3

SDGs
3.4

End the epidemics of AIDS,
tuberculosis, malaria and neglected
tropical diseases and combat othercommunicable diseases
Reduce premature mortality fromnoncommunicable diseases throughprevention and treatment

Social issues
that should
be solved

Establish impact goals andmonitoring indicators (KPI)

Identify investment field Select/Define portfolio companies

Identify SDGs topics

Status of development and widespreaduse of drugs combatting the threemain communicable diseases
Increase in R&D spending

Establish CPI for
individual companies

Continuous dialogue utilizing
monitoring indicators and KPIEngagement withportfolio companies

Responsible Investment Report 2022

92

GLOBAL SUSTAINABLE EQUITY STRATEGY (GSE)

Global Utilities and ESG Analyst

Nomura Global Sustainable Equity Strategy(GSE)
Lead portfolio manager

Daniela Dorelova

Alex Rowe

Global Sustainable
Equity Fund Impact
Report 2021

93

ESG Integration

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
the key 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 andmeasuring their impact.
We believe we can create ahigh degree of social impact by
establishing monitoring indicators
related to impact goals (KPIs) andby monitoring both these and CPIs
(Company Performance Indicators)of individual companies tied to theactual portfolio. Also, we support
actions that generate impact throughactual engagement with portfolio
companies, centered on the detailsof the monitoring of individualcompanies’ CPIs. The investment teampays close attention to what kinds ofchanges in actual corporate activities
these engagements have caused, andwhat kind of impacts those changes
have actually had on our society. We
believe that engagement by investment
managers with portfolio companies invarious ways through CPI monitoringis an important process towards
achieving the impact goals we haveestablished.

Meanwhile, due to the growthof sustainable investing, it has
become challenging to understandthe outcomes achieved throughinvestment. To better understandthese outcomes going forward, we
believe that “impact awareness” will
be important. Impact awarenessis defined as understanding boththe impact that a company has on
stakeholders through its products
and services (or the business of thecompany as a whole) and the impactthat asset management firms haveon a company through engagement
activities (dialogue with companies).
We believe that asset management
firms have an important role to playin first fully understanding efforts on
both fronts, and then communicatingthese efforts to investors in an easyto-understand manner. To help with
this, we publish an Impact Reportabout our initiatives under thisstrategy and share this report with our
stakeholders.
We believe that we will be able toreach our impact goals by working
with multiple stakeholders to solve
and share the many challenges facing
society.

GSE individual company’s CPI
Headquartered in the US, this is the world’s largest wind power
generation company. It is also expanding its solar power
generation business, and renewable energy alone accounts formore than 30% of its power generation. Including nuclear power,
more than 50% of the electricity it generates is carbon free.

Investment
Perspective

Alignment with
SDGs

Contributes to GHG emission reductions through ongoinginvestment in clean energy

Individualcompany’s CPI

Clean energy and carbon-free power generation

ImpactSupplied 70TWh of clean energy

Annual clean energy generation

(TWh)
75.0
70.0
65.0
60.0
55.0
50.0
45.0
40.0
35.0
30.0
2017

2018

2019

2020

2021

(year)(Source): Prepared by Nomura Asset Management based on data from thecompany’s website

The Global Sustainable Equity Fund Investee
Company Impact
The Global Sustainable Equity strategy’s portfolio companies haveachieved the following environmental and social impacts through theirbusiness activities (FY2021).
Mitigate Climate Change
Energy generation output by wind power generationequipment

Engagement for
ImpactEnvironment

Supplied 70TWh of renewable energy

351.1 million tons

Contributed toof CO 2 emission
reductions through the provision of services to customers

Mitigate Natural Capital Depletion
Impact Goal

%

Count

Mitigate Climate Change

33%

20

Eliminate Communicable
Disease7%

4

Global Access to Clean
Drinking Water

8%

5

Mitigate Natural Capital
Depletion

13%

8

Global Access to Basic
Financial Services

3%

2

Mitigate the Obesity
Epidemic

3%

2

Other Sustainability

32%

19

Total

Reduced the use of 185,000 tons of raw material
consumption

Eliminate Communicable Disease/
Mitigate the Obesity Epidemic
Provided obesity-related treatment (heart disease,diabetes) to 106.6 million patients in 2021

Financial inclusion (support that includes providing
access to financial services)
Society

28.3 million people in Kenya are using mobile payments

60

Responsible Investment Report 2022

94

JSEG individual company’s CPI

JAPAN SUSTAINABLE EQUITY GROWTH STRATEGY (JSEG)

Right

Portfolio Manager

Shintaro Harada
MiddleMain Portfolio Manager

Jun Takahashi
Left

Portfolio Manager

Kodai Sasaki

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

JSEG Impact
Report2021

ESG Integration

Active funds

Small

ESG
investment/
impactinvestment

Small

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

95

companiesthat createsocial value
Large

We began managing this strategy
in 2016 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.
While the global turmoil spurredby the 2020 COVID-19 pandemic
is settling down and society is

Largeadjusting as the disease becomesendemic, other disruptions arisingfrom geopolitical risks are expected
to continue for a prolonged period.
Therefore it is important not only to
pay attention to various social issues
caused by such turmoil, but also totake immediate action to address
those social issues.
As a part of this, “impact
investing” is attracting attention
as an investment method that
addresses the environmental andsocial problems that we face. This is
an investment method that, in asset
management products, in addition
to earning the usual investment
returns, seeks to solve issues insociety through the long-term holdingof shares of companies engaged
in business activities with an eye
towards addressing social issues.
Because ESG issues involve many
topics to be addressed over the
medium- to long-term, we believethat investing in companies on thepremise of long-term ownership willallow us to make investments that
seek both excess returns and aim
to address ESG issues. Utilizing
NAM’s proprietary ESG scoring, thisstrategy invests in companies that, in
addition to passing our fundamentals
evaluation, we view as being able
to create social value to contributeto achieving the SDGs. On top of
the two dimensions of risk andreturn used in conventional equity
investment, we are able to add athird dimension of impact creation(addressing social issues) to ourevaluation process. Furthermore,
we believe that sharing portfolio
companies’ outcomes and broad andcumulative impacts is an essential
process expected by investors
looking for us to address social
issues. Going forward, we want tohelp build a prosperous society byaddressing social issues throughimpact investing.

Investment
Perspective

Alignment with
SDGs

Individualcompany’s CPI

Supplies a variety of efficient motors, as motor drives accountfor a large amount of electric power consumption. Allows thecompany to solve social issues like increasing energy
efficiency and increasing the use of EVs while at the sametime also growing profits by expanding motor sales.
Helping to increase the rate of improvement of energy
efficiency throughout the entire world and contributing to theincreased use of electric vehicles which emit zero
greenhouse gases during operation
Number of sales of efficient motors, EV motors
Reduced CO2 emissions by 259,000 tons with EV traction
motor systems

ImpactContribution to a reduction of
CO2 emissions through sales of EV traction motors(10 thousand ton)
30
25
20
15
10
5
0

2019
2020
2021
(Source): Prepared by Nomura Asset Management based on data from thecompany’s website(year)

Impact from JSEG Portfolio Companies
JSEG portfolio companies have achieved the following environmental
and social impacts through their business activities (FY2021)
Mitigate Climate Change
Contributed to the reduction of 33.23 million tonsof CO2 by selling products with strong environmental
performance
Environment

Sold approximately 226,000 EV traction motors, whichstrongly curb greenhouse gas emissions

Mitigate Natural Capital Depletion
Procured 254,000m3 of ecosystem-friendly certified lumber
The resource recycling business handled 6.34 million
tons of materials for metals, including collection andprocessing of renewable materials from discarded vehicles
as well as scrap metal in the market and from factories

Eliminate Communicable Disease
Provided 30 million tabletsof antifilarial medicine
for neglected tropical diseases to 12 million people
Society

Invested ¥383.8 billion in R&D costs to promote
development of new drugs

Improving Living Standards
Used disinfectant to provide drinking water for 760

thousand people

Maintaining Social Infrastructure and Improving Productivity
Provided intermediary services to 453 small- and medium-sized enterprises
facing business succession problems due to the aging of executives andother issues, thereby helping to avoid ¥349.3 billion in economic losses.

Responsible Investment Report 2022

96

ASIA SUSTAINABLE EQUITY STRATEGY (ASE)

Right

In April 2022, NAM’s Singapore officebegan managing the Asia Sustainable
Equity Strategy based on our impact
investing philosophy. This fundinvests in companies, primarily thosein Asia, that have an overall positive
impact.
Approximately one-half of theworld’s population lives in Asia,
and Asia is both an important
manufacturing hub as well as an
indispensable region in global supply
chains.
As ESG investing and impact
investing receive attention globally,
focusing on companies’ activities tosolve social problems in Asia, where
growth is expected going forward,
represents an important investment
opportunity. In addition, we believethat this will generate positive impact
over the long term, and thereby
contribute significantly to solvingsocial challenges.
In addition, the impact goals
for portfolio companies in orderto achieve the goal of solving
such social issues are tied to the
Sustainable Development Goals(SDGs).

Head of ESG Asia

Viresh Mehta
MiddleSenior Portfolio Manager

Shigeto Kasahara
Left

ESG Investing in Asia and ASE’s Approach
To achieve our sustainable investment goals, our impact
investing approach involves making investments insustainable companies that contribute to, or are deemed tocontribute to, addressing social or environmental problems.
We focus on maximizing the impact on all stakeholders (theenvironment, customers, suppliers, employees, society
and investors) when making investment decisions. The
positive impact of a company is relevant to a wide rangeof stakeholders and has both financial and non-financial
dimensions. We are confident that we can achieve our impact
goals by collaborating with multiple stakeholders to address
the many challenges facing society.
Given the fact that Asia is a manufacturing hub and a key
region in global supply chains, social issues related to theenvironment are a top priority sustainability theme for theregion. For example, China alone accounts for one-thirdof global greenhouse gas emissions. At the same time, itmeans that there are many areas where we can contribute toaddressing social issues while also capturing new business
opportunities, such as the expansion of renewable energy
and water treatment initiatives.
In addition, as Asia is home to nearly half of the world’s
population, social responsibility, which is one of our impact
goals, is also an important theme in achieving well-beingin our society. Companies that adopt best practices andfocus on improving social issues in areas such as providing
a comfortable working environment, improving labor
practices, promoting diversity and inclusion, and respecting
human rights deliver positive changes that help addresssocial issues and also represent important investment
opportunities. The reality is that around 1.4 billion adults

worldwide are still unbanked, and a significant proportion of
the unbanked population resides in Asia, making financial
inclusion (access to basic financial services) one of the key
impact goals for us to achieve. In order to improve financial
access for the unbanked, it is necessary to build platforms
such as micro-lending and mobile banking (providing
financial services such as small loans and savings at
brick-and-mortar locations or online), and upgrade theinfrastructure to enable comprehensive financial services,and we believe that there is significant room for growth forcompanies aiming to solve social issues in this area.
However, ESG initiatives by companies in Asia (excluding
Japan), including the disclosure of related information and thedetails of the initiatives themselves, are inadequate comparedto those in developed countries, and the level varies greatly
depending on the country and company. Given the diversityof the Asian market, our Singapore office employs a countryspecific approach to portfolio management using country
specialists, enabling us to conduct detailed and differentiatedanalysis of ESG factors and portfolio stocks. To incorporate
these stocks into their portfolios, our country specialists
conduct research focusing on their respective areas ofexpertise, based on an understanding of country-specificdynamics, including ESG issues. We believe that a countrycentric, bottom-up approach to research and investment,
combined with our ongoing engagement with companies,
will help raise ESG awareness and responsibility among
Asian companies. We conducted 19 engagements with thisstrategy’s portfolio companies over the course of the year.

Senior Investment Executive

Stacy Kuah

China

32%

India

7%

Japan

3%

South Korea

2%

Mitigate Climate Change

CO2 emissions
by country

Indonesia

2%Australia

1.1%(2020)

Thailand

0.7%

Contributed to the reduction of 54.96
million tons of CO2 by selling products withstrong environmental performance

Malaysia

0.7%

Singapore

0.2%

New Zealand

0.1%

Rest of APAC

4%(Source): Prepared by Nomura AssetManagement based on data from The
EDGAR (Emissions Database for Global
Atmospheric Research) by European
Commission Joint Research Centre

97

Impact by Asia Sustainable Equity Strategy

ESG Integration

EU

7%

US

13%

Row

28%

(ASE) portfolio companies

Environment

Sold approximately 3 million EVs, whichstrongly curb greenhouse gas emissions
Energy generation output by Wind power andSolar power generation equipments
Supplied 142GWh of renewable energy

Mitigate Natural Capital Depletion
Contributed to the recycling of 97 million tons of water
through water treatment facilities (anaerobic treatment,
sedimentation treatment, disinfection, etc.)

Asia Sustainable Equity Strategy (ASE) portfolio
companies provide impact through their businessactivities on environmental and social issues as
discussed below. (2021)
Eliminate Communicable Disease/
Mitigate the Obesity Epidemic

Society

Invested US$16 billion in R&D aimed
at developing new drugs and bolstering
existing drugs

Mitigate Natural Capital Depletion
Provided US$35 billion to small- andmedium-sized companies

Global unbanked
adult population(% by country, 2021)

Bangladesh

4.1%

China

9.5%

Egypt, Arab Rep.

3.6%

India

16.7%

Indonesia

7.1%

Nigeria

4.6%

Pakistan

8.3%

Rest of the world 46.2%

Provided US$1.4 billion in home loans
to low-income households(Source): Prepared by Nomura Asset Management based on data from Global
Findex database

Responsible Investment Report 2022

98

Fixed Income Integration
Portfolio alignment metrics for credit investmentin the transition to net-zero emissions

A comprehensive approach towards
a future in which climate investments
are aligned with the Paris Agreement
In recent years, bond investors have been taking climate
and carbon risks into consideration much more than
before. However, traditional approaches to integrating
GHG emissions data are facing limitations. Not only
must integration effectively identify risks arising in thetransition to a low-carbon society, it must evolve to enable
cooperation with bond issuers in terms of allocation ofcapital and other matters.
While divesting from high-carbon-emitting sectors
theoretically increases the funding costs of suchcompanies, it reduces exposure to carbon emissions
in investment portfolios. In practice, however, divestingor excluding such sectors from the investment universe
simply shifts ownership of those GHG emissions from one
investor to another, and divesting investors also lose theright to engage with issuers in such industries.
A carbon emissions footprint analysis helps inquantifying and managing the carbon risk of a portfolio.
However historical emissions data on its own is abackwards-looking indicator. Investors relying on GHG
emissions alone will miss transition opportunities inissuers with credible decarbonization plans. Lowcarbon investment strategies can offer “virtual” portfolio
decarbonization, but cannot indicate the extent to whichinvestments are actually aligned to 1.5°C or Well Below
2°C scenarios.

The innovative nature of net-zero
portfolio alignment metrics in fixedincome investment
At NAM, we believe highly-granular, comprehensive, andforward-looking metrics are necessary to align credit
portfolios with the actual climate change targets soughtby the Paris Agreement. Recently, new methodologies

for investors to more accurately assess a company’s
decarbonization prospects, the Implied Temperature Rise
(ITR*1) and the Net Zero Alignment, have been devised.
The ITR model aggregates a large amount of data
related to climate change disclosed by companies andconverts the data into a metric shown as a temperaturescore in units of temperature, thereby making it easier
to intuitively understand how well aligned companies arewith the climate targets of the Paris Agreement. With the
ITR model, various settings can give different results,
but standardization of the model analysis is expected to
improve the results. With data demonstrating alignment
with net-zero targets and ITR models, investors can obtaina more comprehensive framework and data. In addition,
investors can both incorporate these in conventional
corporate analyses in a consistent manner, as well as
use them to make capital allocation decisions that do notconflict with climate targets aligned with the real world. In
this way, compared to prior GHG emissions, the measureof the ambition and credibility of a company’s net-zeroplan becomes a forward-looking indicator of investment
appeal. It is also a beneficial theme for investors toincorporate into engagement activities targeting issuers.
The concept of net-zero alignment is based on sciencebased, time-bound pathways to reduce the net increasein global GHG emissions to zero. In order to make thesepathways, which aim to reduce emissions on a global
scale, comprehensively aligned with the Paris Agreementtarget of limiting global warming to well below 2°C, andpreferably to 1.5°C by 2050, individual carbon emissions
targets at the country, industrial sector and company levelare integrated into the pathways. Initiatives like SBTi* 2
provide a scientifically rigorous verification of companies’
net-zero goals. Current carbon emissions trajectories andambitious net-zero commitments can be compared to acompany’s sectoral carbon budget* 3, tracked over time,and measured against industry peers. Directly comparing
the results to the Paris Agreement targets leads to moreintuitive and refined assessments of the level of alignmentof a company’s net-zero targets.

From concept to a megatrend thatcan be invested in
In addition to scope 1, 2 and 3 GHG emissions data, a
key piece of information for assessing climate alignment
is an issuer’s commitment and plan to achieve net zero.
Policymakers, bond issuers and investors have madenet-zero commitments a central imperative for setting,managing and tracking progress towards GHG reduction
targets. This has led to an exponential increase inplanning and target-setting to reach net-zero since theParis Agreement was signed in 2015. At the end of 2022,
over 160 countries representing 91% of global GHG
emissions and over 4,000 companies accounting for
more than one-third of global stock market capitalization
have either submitted or committed to net-zero targets. In
addition, more than 300 global investors, including NAM,
are participating in the Net Zero Asset Managers initiative(NZAM), which supports investments consistent with
net-zero emissions by 2050. Together, these investors
manage assets totaling US$59 trillion.
However, the Emissions Gap Report 2022 published by
the United Nations Environment Program (UNEP) statesthat even with the most recent commitments to net-zerotargets, temperatures will rise by 2.4°C to 2.6°C by 2100.
This is a temperature rise that far exceeds the Paris targetof limiting the worst impacts of climate change. Credit
investors like us are being asked to meet this challenge
by allocating capital to bond issuers with net-zero targets
and plans aligned with the Paris Agreement.

Investment Department,
Head of Sustainable Investment, Fixed Income

Jason Mortimer

Achieving Net-Zero

Efforts to Achieve Targets

In order to limit the rise in temperature, cumulative GHG
emissions must be kept below an upper limit referred to as the“carbon budget.”A growing movement to incorporate decarbonization
into company management and further promotion of
decarbonization through investment in such companies.

Need for net-zero GHG emissions by 2050
Global GHG Carbon emissions for each temperature scenario
emissions

2,500

Number of SBT companies by target (cumulative)
1.5°C

2,000

*1 A tool that converts current and future GHG emissions from companies into estimates of global temperature rise considering each company’s emissions reduction
targets.
*2 An initiative that encourages companies to set reduction targets aligned with scientific knowledge, with the goal of limiting the increase in global average temperature
due to climate change to 1.5°C above pre-industrial levels.
*3 The upper limit of cumulative GHG emissions (past emissions + future emissions) if seeking to limit temperature rise to a certain level.

2°C

Well-below 2°C

1,500
Net-zero pathway
1,000
500
1.5°C budget

2°C budget

Time
Budget year

1.5°C net-zero

2°C net-zero

0
2015

2016

2017

2018

2019

2020

2021

2022

(Source) Prepared by Nomura Asset Management based on the SBT Progress Report99

ESG Integration

Responsible Investment Report 2022

100

Global Net-Zero Bond Product
Our Global Net Zero Bond Product employs an ESG
investment strategy with a particular focus on climatechange mitigation among all of the environmental areas.
We select and invest in bonds based on considerations of
our own in-house fixed income ESG score and from theperspective of net-zero (efforts to achieve net-zero GHG
emissions by balancing the amount of GHGs emitted into
the atmosphere and the amount of GHGs removed from theatmosphere, effectively resulting in zero GHG emissions).
For this product, as a part of impact investing weemphasize generating impacts that will result in the
resolution of social issues and the monitoring and disclosureof these impacts. Specifically, we utilize a “temperaturescore” which is a monitoring metric that includes the efforts
by issuers to contribute to achieving the global common goalby 2050 stipulated in 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.
The “temperature score” we use in our fixed income
ESG strategy is assessed based on the extent towhich individual companies can achieve the emissions
reductions required to achieve the targets set by the Paris
Agreement. If the global average temperature rise in 2050
can be kept below 2°C above pre-industrial levels, theissuer’s temperature score will be calculated as below
2°C. Under this strategy, investee bonds are selectedso as to keep the average temperature score of theentire portfolio below 2°C. We believe that we can makean impact to mitigate climate change by providing theinvestment capital (through bond investing) necessary forcompanies to carry out business activities that contributeto mitigating climate change.
This product is being adopted as a strategy for investingin corporate bonds denominated in developed country
currencies in NAM’s ESG Balance Fund.

Investment Process
By investing in bonds, we seek to realize a net-zero society andmitigate climate change while pursuing investment returns. Aiming tokeep the average temperature score of the portfolio below 2°C, we
promote the realization of a net-zero society through investments ingreen bonds and companies transitioning to decarbonization, while
we also seek sustainable asset growth by evaluating the investment
attractiveness of individual bonds. We invest in bonds we selectfrom among hard currency-denominated corporate bonds with a
BBB or higher rating at the time of investment, taking net zero*1 andESG*2 into consideration.
ESG score

From the perspective of fixed income investment, we aim to reduce
downside risk by quantitatively calculating the ESG score of eachissuer and excluding those issuers with comparatively low scores.

Net-zero
perspective

We select bonds with a focus on climate change mitigation, invest
in green bonds, etc., and companies that will decarbonize*4. We
select bonds based on efforts to achieve net zero emissions bybalancing GHG emissions and absorption.

ESG
integration

We determine investee bonds based on consideration of factors
including qualitative assessments including ESG initiatives,
creditworthiness, and yield level.

Creating Impact throughGreen Bond Investment
Being able to invest in green bonds is an appealing
aspect unique to fixed income investing. Three key
characteristics of green bonds include that the use ofproceeds is limited to green projects, the managementof procured funds, and ensuring transparency throughreporting after the bond issuance. As environmental
issues attract attention as social problems, the issuanceof green bonds has been increasing in many regions.
Because the use of bond proceeds is limited to projects
expected to benefit the environment, such as measures
to counter global warming, investments in green bonds
have a high affinity with impact investing. We believe thatinvesting in green bonds allows us to make a significant
contribution to solving social issues such as improving theenvironment. Under the Global Net Zero Bond Strategy, by
actively investing in green bonds, we will promote efforts
to curb GHG emissions through investment, and we canmore directly create impact to address the global issue of
mitigating climate change.

Issuance of green
bonds Payment ofinterest, etc.

ESG Integration

Return on
investment

Investment Investment

Greenproject

Investor
Senior Portfolio Manager

Portfolio Manager

Portfolio Manager

Matsumoto Hiroshi

Takeda Konoka

Nakano Shuhei

Hard currenc

Public utility
y- denominated bonds rated BBB
and above*3

screen out ba
sed onESG perspective
Qualitative evaluation
by credit analysts,
creditworthiness, yieldlevel, etc. are taken into
consideration when
deciding investee bonds.

screen out ba
sed onnet-zero pers
pective

Qualitative
assessment

As a public utility, this company focuses on wind
power generation in the renewable energy field,
especially offshore wind power generation, and isa leading company in this area. The company is
expected to contribute to the reduction of GHGs by
supplying renewable energy. In addition to aligningwith the policy needs of European countries to moveaway from fossil fuels and advance renewable energy,
this business is also attracting increasing attention
from the perspective of the energy security issue inEurope.
In the past, the company used a lot of coal and oil, but
in 2017 it announced that it would concentrate on thegreen energy business. It has continued to issue green
bonds to develop and operate offshore wind power
plants, thereby accelerating its supply of electricity
from renewables.

Example of reducing GHGs with green bonds
Example of green bond issued in 2017
Use ofproceeds

Multiple offshore
wind power projects

Amountissued

750 million euro
(Approx. ¥106.7 billion)

ExampleHornsea 1
One of the largest
offshore wind power
plants in the world
Area

407km

2

(approximately thesize of 10 Tokyo
Domes)

Portfolio*1 Net-zero refers to efforts to have zero effective emissions by balancing GHG emissions and absorption.
*2 ESG stands for Environment, Social, and Corporate Governance.
*3 Rating at the time of investment*4 This refers to companies that, even if they currently emit a large amount of carbon, have been evaluated by us as being companies that will
make greater contributions to climate change in the future through efforts to reduce carbon emissions.

101

IssuerPrepared by Nomura Asset Management based on data from thecompany’s website

Replacing fossil fuels with wind power throughinvestment in the project is estimated to reduce

CO2 emissions by 551,000 tons in 2021.

Responsible Investment Report 2022

102

Global ESG Balance Fund Product

Right

Product Manager

Mukai Daiki

Our Global ESG Balance Product engages in diversified investment inthree assets: fixed income, equities, and REITs, and we integrate our own
ESG methodology in the investment process for all three assets. We havedeveloped our proprietry ESG score model specifically for fixed income, anduse this score in our assessments of issuers. Our ESG developed countries
corporate bond Product and ESG emerging country sovereign Bond
Product, which both utilize this fixed income ESG score, are included in our
ESG Balance Fund Product’s fixed income portion.

MiddleLeft

Senior Portfolio Manager

Koizumi Sohei
Product Manager

Kinoshita Yuki

Utilization of fixed income ESG assessment

Developed country
corporate bonds

Emerging country
government bonds

Small-cap
equities

REIT

Investment Highlights

ESG Emerging country sovereign Bonds Product

The fixed income portion, which makes up half of the fund,
70% invested in USD-denominated corporate bonds issuedby companies in developed countries and 30% invested in
USD-denominated sovereign bonds issued by emerging
countries. In each investment process, we exclude issuersthat score in the bottom 30% based on the ESG scoringof the companies and countries in terms of their efforts
to address environmental issues (negative screening). In

Developed
countries

Emerging
countries

U.S. dollar-denominateddeveloped country
corporate bonds rated
BBB or higher
U.S. dollardenominated emerging
market government
bonds rated B or higher

addition to financial analysis and fundamentals analysis,
we also conduct an ESG analysis, including on efforts toaddress environmental issues such as reducing GHGs andconserving water resources (ESG integration). By investing inbonds issued by companies and governments with high ESG
assessments, we aim to generate stable investment returns
from sustainable growth.

Evaluate companies from an ESG perspective

Environmental score

Climate change risk score

Remove bond issuers with scores in the bottom 30% from the investment universe
Evaluate countries and government-affiliated institutions from an ESG perspective

Environmental score

Portfolio
construction

For our emerging market debt strategies, we invest in U.S.
dollar denominated bonds issued by EM governments andstate-owned enterprises.
When analyzing emerging markets, evaluating them froma broad perspective, such as their long-term environmental
efforts and their political risks, leads to better identificationof a country’s potential risks and to reducing downside
risks particular to investment in emerging markets, whichis extremely important in improving long-term investment
performance.
In this context, ESG evaluation is an absolutely essential
element in considering downside risk of a sovereign issuer.
Traditional fundamental analysis and ESG evaluation

complement one another, and we believe that integrating
ESG evaluation into the traditional investment process
reinforces our evaluation of an issuing country’s
creditworthiness.
For example, countries working to mitigate climate change
will be viewed positively by investors, and can enjoy thebenefits 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 of being subject to carbon taxes.
Taking ESG factors into consideration allows us to reflect
issuing countries’ potential risks into our credit evaluations.

Policy continuity score

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

Example of Using ESG Evaluation in Emerging Markets
Example of Using ESG Evaluation in Developed Country Corporate Bonds
This company is an automaker that boasts high namerecognition and a strong global brand. Starting with Germany,
the company does business all over the world, includingin European countries, North America, and Asia, and has
solidified its brand. The company is now actively working toaddress environmental issues, such as investing in electricvehicle technology and using clean energy in its manufacturing
processes.
Vehicle exhaust gas regulations in Europe are stringent,and sales of gasoline-powered vehicles are expected to bebanned in the future. Under these circumstances, the company
is focusing on sales of electric vehicles as a decarbonization
initiative, and has set a goal of selling only electric vehicles
in the future. In addition, in the manufacturing process, thecompany identifies parts that emit a large amount of CO2 andsets CO2 emission standards for the selection of parts, and has
achieved carbon neutrality (a balance between GHG emissions
and sequestration) at its manufacturing plants by installing solar

103

ESG Integration

European Transportation
Equipment Company

PV panels. Through these activities, the company has set a
goal of reducing the amount of CO2 emitted per vehicle 50%
by 2030 compared to 2020. By gaining an advantage over its
competitors through the rapid transformation of its businessstructure in response to environmental regulations, the company
is expected to maintain and expand its market share andbusiness base over the medium to long term.
100%
To less than

50% over 10 years
Illustration of thecompany’s CO 2
emissions reduction
targetEmissions fromvehicle use
Emissions frommanufacture/transport

Chile

The Republic of Chile is a country located along the Pacific Ocean coastline
in South America. The country is long and narrow, oriented in a north-south
direction, and contains both a desert region in the north and glaciers in the south,
making it a country with large differences in climate depending on the region of
the country. Because the country has a variety of climatic zones, it is working on
renewable energy projects taking advantage of the unique climate and characteristics
of each region. In recent years, the share of renewable energy such as solar power andwind power in the country’s power supply mix has increased. For example, in the northern
desert region of the country, solar PV generation takes advantage of the long hours ofsunlight, while in the south, which is famous for its year-round strong winds due to the
influence of the prevailing westerly winds, wind power generation becomes more popular.
Taking advantage of these strengths, the Republic of Chile announced a “Green
Hydrogen National Strategy” in 2020 regarding initiatives related to green hydrogengenerated from renewable energy and announced a number of goals, including:
1. Increase hydrogen electrolysis capacity to 5 gigawatts; 2. Establish the world’s
lowest cost green hydrogen production system by 2030 and; 3. Become one of
the world’s top three hydrogen exporters by 2040. We believe that environmental
measures such as the development and diversification of new sources of electric
power and the development of the green hydrogen business will contribute toimproving the country’s long-term creditworthiness.

Types of hydrogen classified
a color according to the
production process

GreyhydrogenHydrogen derived
from fossil fuelBluehydrogenHydrogen produced
when the CO2
created during the
production process
is captured andstoredGreenhydrogenHydrogen created
via the electrolysis
of water using
electricity fromrenewables

Responsible Investment Report 2022

104

Fixed Income Engagement
Our Fixed Income Group engages with issuers in
our investable universe, and hold dialogues with aparticular emphasis on perspectives unique to fixedincome investment. Financing aiming to address climatechange has high affinity with bond issuances, enabling
fixed income investors to seize potential opportunities.
However, bond investment requires the certainty of
repayment at face value, hence a strong focus to manage
downside risk is also necessary. Our Fixed Income
Group’s engagement focuses not only to capture future
opportunities, but also to discuss potential risk factorsthat could have a particular serious impact on thecreditworthiness of issuers, as well as on new downside
risks such as cybersecurity risks.

105

Toshihiko Suzuki
Nanako Iwasaki

Left

Senior Credit Analyst

Right

Senior Portfolio Manager

ESG Integration

Engagement with Sovereigns,
Government agencies, andSupranational organizations.
Recently, we have been actively holding direct dialogues(engagements) not only with companies that issue
corporate bonds, but also with sovereigns, government
agencies, and supranational organizations.
In our engagement on green bonds and other labeledbonds, while considering the unique characteristics ofeach issuer, we compare frameworks, use of proceeds,
and the impact etc. with similar issuers. We engage inconstructive discussions with issuers based on our own
research.
Our engagement not only encompasses Japanese
government agencies, but also with other sovereigns andpublic institutions overseas.
One example is an engagement we carried out with asovereign issuer in the Oceania region prior to its green
bond issuance.
In our preliminary research, we compare factors suchas the difference between green bond frameworks ofsovereigns and the actual or expected use of the labeledbond proceeds etc. For green bonds, the relative impact
on the environment etc., can vary greatly depending on theintentions of the project and actual allocation of proceeds.

For example, there are labeled bond issuances where green
buildings (buildings with a low environmental impact) are
aimed as the main use of the proceeds, while on the other
hand, there may be issuances that fund large-scale projects
which contributes to establishing a clean transportation
system through the development of a new railway network
system.
In our engagement, we take into account the regional
characteristics of the issuer as well as the scale and impactof the funds being raised, and hold discussions with anemphasis on creating strong and lasting impacts whichfurther advances the decarbonization of the economy.
In the fall of 2022, we conducted direct engagement witharound 20 supra-nationals and government agencies that
visited Japan. Because the missions and mandates of eachissuer differ considerably, details of the dialogue variedamong issuers, but we mainly discussed themes including
governance quality, strategic coherency and potential

impacts.
Also, in regards to cybersecurity risk which is a newdownside risk factor, we had discussions upon thepossibility of cybersecurity risks materializing, and theirimpact based on objective data, pointing out to thepossibility that governance risk for the issuer may also behigh in cases where the vulnerability of systems, etc. tocyberattacks are presumed to be high.
Many of the issuers recognized that the discussion
upon these new type of risks was something they had not
anticipated.
The reaction to the discussion was overall positive in manycases, and we carried out additional engagement with someof the issuers.
For our fixed income engagements, we will continue witha strong focus on identifying new downside risk factors,
alongside existing risk factors.

Engagement with Transition Bond Issuers
In corporate credit investment, one of the important
process is reflecting the issuer’s efforts on ESG issues into
the fundamentals evaluation. In particular, for companies
where decarbonization is part of its materiality, consistency
with the scale of investment and the financial strategy
to achieving net-zero by 2050 and interim targets is an
important point to monitor as a part of credit analysis. Thisis also one of the engagement themes that the fixed income
group focuses on during its engagement with issuers.
When engaging with an issuer on their green bondissuance, the discussions are mainly upon the use ofproceeds, which finances a wide range of environmentallyfriendly projects, such as green buildings and solar projects
etc. Albeit the fact that in some cases where the issuer’s
finance and ESG people are sitting at the same table, we
tend to observe they often discuss ESG issues and financial
strategy separately.
In contrast, the use of proceeds from transition bonds
is generally limited to the issuer’s medium- to long-term
decarbonization investments. For this reason, during
individual engagement prior to the bond issuance, ESG
issues and financial strategies tend to be discussed in an
integrated manner, and the details of these discussions isextremely useful in fundamentals analysis.
We also participate in tours of cutting edge facilities whichaims to play a vital role in achieving the net-zero goals oftransition bond issuer. By actually visiting facilities fromthe perspective of an ESG credit analyst, and having direct
dialogues with on-site personnel, we are able to better
understand and evaluate whether the issuers’ transition
efforts towards decarbonization are feasible. These types ofcommunication with transition bond issuers, will enable us
to properly incorporate a company’s efforts to address ESG
issues into our fundamentals evaluation, which is directly
linked to our investment portfolio.
Japanese companies are leading the world when it
comes to issuing transition bonds. As a global investor, ourFixed Income Group, including our overseas offices, holds
individual meetings with overseas issuers regarding the needfor transition and related initiatives.
In addition, diversification of financing methods isextremely important with Japanese companies expanding
their overseas business operations.
In fact, we believe that the potential demand for transition
bonds supporting decarbonization is extremely highoverseas as well, and we believe there is also significant
room for Japanese issuers to issue bonds overseas.
The growth of the transition bond market overseas will
likely provide a major boost not only to Japanese companies
but also to Asian companies building decarbonizedeconomies.
These discussions through engagements by the Fixed
Income Group is essential in the development and growth of
the ESG bond market.

About transition bonds
Transition bonds are bonds that aim to support a
gradual transition to a decarbonized economy. In
order to achieve carbon neutrality, it is necessary tosupport not only green finance such as promotionof renewable energy, but also efforts by companies
to reduce their GHG emissions in line with theirlong-term strategies. It is challenging for hard-toabate industries to decarbonize in a single leap,
thus supporting the transition to decarbonization is
the key. Such efforts include for example, switchingfrom heavy oil and coal to LNG and adopting highlyefficient combustion methods for LNG.
Engagement by investors is crucial in ensuring issuerstake meaningful actions, and avoid them taking
actions that look good on the surface.

Responsible Investment Report 2022

106

Outside director
Appointed in 2016

“I expect Nomura Asset Management
to play a role in solving ESG issues,
undeterred by any headwinds.”
Members of the Responsible Investment Council attend
Responsible Investment Committee meetings, and when
the Committee deliberates on proxy voting on generalshareholders meeting proposals involving Nomura Group
companies, they adhere to the “customers-first principle”
and make decisions that are in the best interest of ourclients. Recently, when it comes to portfolio companies’
M&A-related proposals, conflicts of interest between
large and minority shareholders are often the topic
of deliberations. As transaction structures become
increasingly complex, there are a growing number ofcases requiring difficult judgments.
ESG has become an important theme in our
engagement with portfolio companies and in proxyvoting, and is significantly impacting conventional
asset management thinking. The business objectiveof an asset management firm is to invest as efficiently
as possible and provide the largest returns possible toinvestors, and this objective remains unchanged today.
Currently, however, asset management firms are also
taking on the role of urging their portfolio companies
to increase their corporate value by addressing ESG
issues. The sharp rise in energy prices since last year
has become a headwind for addressing ESG issues.
However, if companies continue to only pursue profits,
they will destroy the natural environment, widen the gap
between the rich and poor, and even threaten the earth’s
survival. In this context, we hope that Nomura AssetManagement will be undeterred by such headwinds andcontinue to push forward with addressing ESG issues.

April 1973 Certified as an attorney (Dai-Ichi Tokyo Bar Association)
Joined Nishimura, Komatsu & Tomotsune (now Anderson Mori
&Tomotsune)
January 1977 Partner, Nishimura, Komatsu & Tomotsune
June 1978 Harvard Law School (LL.M.)
January 2011 Of Counsel, Anderson Mori & Tomotsune (present post)
June 2015 Outside Director, Nomura Asset Manaagement Co., Ltd.
(present post)

107

ESG Integration

Messages from the Responsible Investment Council

Akiko Kimura

Member composition
The Responsible Investment Council comprises
only the Chief Conflict Officer and persons
in independent positions in Nomura AssetManagement, including independent outside
directors. Currently, the Responsible Investment
Council has four members: one Chief Conflict
Officer; two independent outside directors; andone outside expert.
Positioning
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 the Boardof Directors and the Audit and Supervisory
Committee (Refer to “System to Manage
Conflicts of Interest” on Page 62).
Meetings held
Since its establishment in September 2016, theResponsible Investment Council has met a totalof 46 times through December 31, 2022. The
Responsible Investment Committee is attended
by the members of the Responsible Investment
Council, who promptly provide their opinions.
About the Responsible Investment Council
The Responsible Investment Council verifies
the appropriateness and validity of stewardship
activities, including the formulation of proxyvoting guidelines, proxy voting decisions,the formulation of engagement policies andengagement activities, thereby aiming to prevent
adverse impacts on clients’ interests due to
conflicts of interest or other issues.

Organizational Structure for
Responsible Investment
Board of Directors
Audit and Supervisory
Committee

Executive
Management
Committee

Supervision/verification/
recommendations,etc.

Responsible
Investment
Council

Responsible
Investment
Committee
Secretariat: Responsible
Investment Department

Reports on activities,
proposals of issues, etc.

Formulationof policies,
supervision
initiatives, etc.

Investment andresearch division

Main activities

Dialogue with portfolio
companies (engagement)
Proxy voting

Integration into
investment decisions(ESG integration)

Collaborative/public
activities

Ryoji Maeda

Yumiko Miwa

Outside director

Outside director

Appointed in 2021

Appointed in 2020

“I expect Nomura Asset Management
to strengthen structures for executing
stewardship activities.”“As a responsible investor, I expect
Nomura Asset Management to become
an industry leader for social change.”

This year marks my second year as a member of the
Responsible Investment Council, and I attended the June
Responsible Investment Committee meeting for the firsttime where we deliberated on general shareholders’ meeting
proposals. Our main responsibility is to manage conflicts ofinterest, and with respect to proposals involving Group affiliates,
we confirmed that the Committee is appropriately identifying
areas in which conflicts of interest could arise and making
judgments rigorously in accordance with our proxy voting
standards. In addition, the details of shareholder proposals
related to environmental and social issues are becoming
increasingly diverse, and we confirmed that the Committee’s
judgments are based on an understanding of portfolio
companies’ situations through engagement and other means,
and are made following sufficient discussion. Regarding our
proxy voting standards, which we revised in November 2022,
key points of debate were the growing interest in gender diversity
and efforts to address cross-shareholdings, and the standards
were quickly revised after considering societal demands, thesituation at portfolio companies, and other factors.
With increasing numbers of requests for companies todisclose sustainability information, it is important to further
strengthen cooperation within the entire Research andInvestment Unit in order to accurately grasp the situationof portfolio companies. I hope that further enhancing
the structure for systematically carrying out stewardship
activities, led by the Engagement Department, will resultin a higher level of investment quality. In addition, I hopethat as a company itself, Nomura Asset Management will
work with the Sustainability Development Department
established in April 2022 to address sustainability issues.

The Responsible Investment Council is tasked withmanaging conflicts of interest by verifying overall
stewardship activities. Like other members, I attend every
Responsible Investment Committee meetings regardlessof whether or not a conflict of interest is being discussed.
Nomura Asset Management established the Engagement
Department in November 2021, and has been working tobuild an effective engagement system, including reviewing
the desirable management style of portfolio companies in
December 2021 and November 2022. At the Responsible
Investment Committee, members of the Responsible
Investment Council, including myself, actively express
our opinions regarding reports from the Engagement
Department, as we strive to carry out more effective
engagement. I believe that both the Responsible Investment
Committee and the Responsible Investment Council
functioned in a highly-effective manner.
ESG has become increasingly important in investment
decision-making and engagement. In recent years, inaddition to climate change, environmental issues such as
biodiversity and water resources, and social issues including
diversity, human rights and well-being of society havebecome important themes. Companies are being urged to
identify risks and business opportunities in these areas, andto go a step further by practicing sustainability managementtaking geopolitical risks into consideration.
Nomura Asset Management is proactively working
on these kinds of ESG issues, including revising the key
engagement themes in July 2022.
As a responsible investor, I would like to see Nomura AssetManagement become an industry leader for social change.

April 1977 Joined Sumitomo Life Insurance Company
April 2002 Executive Officer, CIO of Investment Headquarters, Sumitomo
Life Investment Co.,Ltd.
December 2002 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.

April 1996 Full-time Assistant, School of Commerce, Meiji University(Assistant Professor from April 2000)
April 2002 Member, Fund Management Committee, Pension Fund
Association for Local Government Officials
October 2005 Professor, School of Commerce, Meiji University (current)
April 2006 Visiting Professor, School of Business, University of Michigan
April 2020 Member, Fund Management Committee, National Federation of
Mutual Aid Associations for Municipal Personnel (current)
June 2020 Outside Director, Eisai Co., Ltd. (current)
March 2022 Outside Director, Pigeon Corporation (current)

Responsible Investment Report 2022

108

Results of Self-Evaluation of 2022
Stewardship Activities
We actively engaged in stewardship activities in order toencourage portfolio companies to increase their corporate
value and promote sustainable growth, and to increase
medium- to long-term investment returns for clients andbeneficiaries.
To further enhance our activities, we performed a selfevaluation of our stewardship activities in 2022 (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 Coderevision on March 24, 2020.

Results of selfassessment (overall)More than 90% of respondents indicated that stewardship activities in our company wereappropriate.
The Responsible Investment Committee held discussions based on the results of thequestionnaire and comments received, and the final assessment was we were generallyable to carry out appropriate stewardship activities, including our response to the points
identified in the previous year as areas to be strengthened.

Consider a policy to increase the diversity of the Responsible Investment
Committee in order to incorporate diverse opinions into discussions.
Increase the awareness and level of understanding of the Basic Policy for
Responsible Investment, which was revised in December 2021, within theInvestment and Research Unit, which is responsible for stewardship activities.
Establish an implementation system for stewardship activities, centering on
the Engagement Department created in November 2021.

Among our stewardship activities in 2022, the following were brought up as
particularly effective initiatives.

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 to conflicts of interest,
also participated in the questionnaire and in subsequent discussions.

The deliberation process and output related to the basic policy for
responsible investment management.
Robust deliberations and management of conflicts of interest at Responsible
Investment Council meetings.
Progress on bolstering systems with the creation of the Engagement Department
Process for discussions about proxy voting, details of revisions to proxyvoting standards.

Questionnaire Overview
The following people responded according
to the questions.

TargetResponsible Investment Committee*1
members – 5
Responsible Investment Committee
Secretariat members – 7
Responsible Investment Council*2
members – 4

Questionnairetiming

PeriodcoveredResponse
format2 questions

Principle 2 (Manage conflicts ofinterest)

3 questions

Future Actions
1 question

Principle 4 (Engagement)

3 questions

January-December 2022

Principle 5 (Proxy voting)

3 questions

Signed (not anonymous)

Principle 6 (Report to clients andbeneficiaries)

1 question

Principle 7 (Skills for stewardship
activities)

1 question

Multiple choice (4 choices)
Write comments freely

109

Principle 1 (Formulate and publicly
disclose policy)

Principle 3 (Monitor investee
companies)

January-December 2022

ESG Integration

Disclosure related to Responsible Investment Report and proxy voting results, etc.

Total of 14 questions: Addressing each of theprinciples of Japan’s Stewardship CodeThe Responsible Investment Committee will deepen discussions on the points that need
to be enhanced as identified through this self-evaluation, and work to further improvestewardship activities.
The following points were identified as areas that need bolstering to further enhancethe effectiveness of our stewardship activities.

Questionnaire

Continuing from the previous year, consider strategies to increase thediversity of the Responsible Investment Committee.
Further enhance engagement by cultivating new ESG issues and elaboratingprocesses, etc., and bolster information disclosure.
Endeavor to revise forward-looking proxy voting standards based on
domestic and international trends.

*1 Comprises members from the investment and research functions*2 Comprises one Chief Conflict Officer, two independent outside directors and one outside expert

Responsible Investment Report 2022

110

Nomura Asset Management’s
ESG Communication Activities

Collaboration with initiatives, domestic and overseas public
institutions, etc.
Japan Stewardship Initiative (JSI) Steering Committee memberM ember of the Industry Advisory Panel (IAP) and Working Group on

Nomura Asset Management is also focusing ondelivering information related to ESG. NAM employees
give presentations and participate as panelists at
seminars to help people gain a better understandingof ESG.
Also, we work with initiatives as well as public
institutions to discuss ESG issues.
Furthermore, by participating in efforts toestablish standards for ESG reporting, we convey
our knowledge and insights about ESG to various
stakeholders in an easy-to-understand manner.

the ASEAN Taxonomy established by the ASEAN regulatory authority
Chair, Constructive Dialogue Promotion Working Group, Committee on
Financial and Capital Markets, Japan Business Federation (Keidanren)
Committee member, “Impact Investing Roundtable” cohosted by GSG and FSA
Member of JPX’s Study Panel on the Use of Digital Bonds in ESG InvestingAdvisory Committee member for “Advance,” the PRI’s collaborative
initiative for human rights and social issues
Internal Seminars in NAM
In-house study session on the revision of our own ESG score
Internal seminars about ESG (topics included our proxy voting standards
revisions and human rights engagement activities )Held internal seminar where human rights expert and Human Rights
Watch Japan Director Kanae Doi presented on the topic of “Global

In recent years, many different ESGReview ofrelated movements have been sprouting up
around the world.
In particular, in 2022, the tightening of
ESG investment-related regulations sped up in many
countries, and asset management firms are now being
strongly urged to both comply with regulations and be
accountable to end investors.
At the same time, the roles and responsibilities of
institutional investors are also undergoing significant
changes.
In short, there is growing demand for “investment
with spirit ,” which involves proactively addressing these
ESG issues, complying with regulations and being
accountable.
Behind this, there is the fact that what society wantsfrom investment and what it should be aiming for havebecome clear.

2022

For example, the Green Deal policy that has
begun in Europe aims to transition to a newsociety in which sustainable growth is enabled.
Taxonomies are now being built andregulations strengthened as part of efforts to generatesignificant investment flows aimed at transforming society.
If we view the current ESG regulations as mere regulatorycompliance, one could misread the large flow of investments.
At the same time, we may be seen as carrying out
investment without spirit and lose the confidence of our end
investors, which might cause us to no longer be sustainable
as an asset management firm.
To demonstrate this spirit, in 2022 we focused onenhancing our own ESG product governance.
In addition to earning the confidence of our clients aroundthe world by demonstrating our ability to comply with global
ESG regulations both domestically and internationally, we also
continued our efforts to enhance our own sustainability.

Human Rights Issues and Efforts Towards Solutions”
Held internal seminar where Dr. Mari Miura of Sophia University, an
expert in gender and politics research, presented on the topic of“Gender Equality”

External Activities in 2022

111

Jan.

 articipated in a panel discussion about ESG at a working group forP
non-financial companies organized by a consulting firmFeb.

 resented at “The Role and Future of Transition Finance - Aiming toPRealize Carbon Neutrality,” a webinar jointly held by Nomura
Securities and Bloomberg

Mar.

 ectured on academic research using ESG on the topic of “The Latest in AI/
L
Fintech - ESG Quants” at a Waseda University fund management course
Reported at the Association for Natural Language Processing under thetitle of “Quantification of Stakeholder Evaluation by ECS-BERT Model”
Presented and participated in panel discussion at the Ministry ofEnvironment’s online seminar “Changes in Environmental
Management and Measures Expected of Companies”
Participated in panel discussion for Green and Blue Bonds Seminarjointly organized by the Asia Development Bank and the Thai Bond
Market Association
Participated in a panel discussion at a seminar on impact investment
Presented at a seminar hosted by the Financial SDGs Study GroupParticipated in a panel discussion on stewardship responsibilities at a
JSI-sponsored seminarApr.

 poke at NIKKEI LIVE “Deep Debate – Decarbonization Disclosure
S– The Focus of ESG Investors”

May.

 ontributed the paper titled “The Value of Reputation Capital During theC
COVID-19 Crisis: Evidence from Japan” to Finance Research Letters
Participated in a panel discussion at Nikkei SDGs Forum Symposiumwith executives of unlisted venture companies focused on solvingsocial issues
Participated in a panel discussion about corporate governance at RI
Japan 2022Jun.

 eported under the title of “Automated Extraction of ESG Data fromR
Integrated Reports” at a Japanese Society for Artificial Intelligence
event
Participated in a panel discussion titled “Japan’s Path to Net Zero/
Carbon Neutrality” which was a jointly organized webinar by JPX
Market Innovation & Research and FTSE RusselJul.

 articipated in a panel discussion titled “Workshop on Transition
P
Finance in Asia” organized by the Asian Development Bank Institute

ESG Integration

External Activities in 2022

Sep.

 ectured on academic research using ESG on the topic of “The Latest in AI/
L
Fintech - ESG Quants” at a Waseda University fund management course
Participated in a panel discussion at the Japan Electrical
Manufacturers’ Association “Webinar on Responding to Climate
Change Non-Financial Information Disclosure in the Electrical Industry”
The GX League’s “GX Management Promotion Working Group” wasestablished, and Nomura Holdings was appointed as the chair (NAM
is active as a chair member)Presented at ESG seminar for municipal governments
Participated in a panel discussion about shareholder activism at a
ESG seminar for overseas private equity investorsOct.

 articipated in a panel discussion on “Concerns about ESG
P
Investment for Asset Owners” at Nomura Sustainability Day 2022
Participated in a panel discussion at METI’s “TCFD Summit 2022”
Presented on “Net Zero Bond Investment Philosophy and Evaluation
Methodology” at CIO Conference 2022 held by S&P Global
Participated in a panel discussion at “Financial Risk Management &Cyber Security Forum 2022” organized by JTB Communication DesignParticipated in a panel discussion titled “Making Impact Visible” atNomura Sustainability Day 2022
Lectured at a university class about sustainable financeNov.

 resented on “Building Sustainable Equity Portfolios for Investors”
P
stressing engagement to enhance corporate value and participated inpanel discussions at the Global Pension SymposiumParticipated in a panel discussion on sustainable investing at Japan
Investor Forum 2022 organized by Asia Risk
Contributed an article titled “Integrating Cybersecurity Evaluations in
ESG/Credit Risk Analysis for Sustainable and Resilient Investment” toNomura Sustainability Quarterly, a quarterly publication from Nomura
Institute of Capital Markets Research
Participated in a panel discussion on “Investors’ and Underwriters’
Perspectives on Sustainable Finance in ASEAN” at the Impact
Webinar Series organized by the Asian Development Bank
Participated in a panel discussion on ESG regulations at a CFA
Society Japan seminar
Participated in a panel discussion on proxy voting at the Osaka
KabukonDec.

 ontributed an article titled “The Need for Quantitative Opportunity
C
Evaluation by Investors Utilizing Climate-Related Non-Financial
Information Disclosure and Future Issues” in the December 2022
issue of Denki, the journal of the Japan Electrical Manufacturers'
Association.
Participated in a discussion at Access to Medicine Index investor
event held in Tokyo

Head of the Responsible
Investment Department

Toshiyuki Imamura

2023 and Beyond

At a bare minimum, we believe there arethree conditions we must meet in order to be
accepted by clients around the world and togrow sustainably as an asset management firm.
First, we must respond to the changing needs of end
investors.
Right now, there is a clear and growing movement to aspire
for sustainable investment. This investment is also aimed atcreating a more ideal society.
This sustainable investment movement has been
progressing in stages. It began with Stage 1.0 whichemphasized economic value, and then transitioned toStage 2.0 which aimed to achieve both economic value
as well as environmental and social value in a balancedmanner. Sustainable investment is now in the process ofadvancing to Stage 3.0, in which more emphasis is placed on
environmental and social value.
This does not mean that economic value is neglected, butrather, investment now aims to achieve greater social value
while securing economic value. We must respond to these
new investor needs.
Second, countries around the world are now adopting ESG
regulations in order to attract sustainable investment.
If we do not comply with ESG regulations, our asset
management business will fail. At the same time, we will lose
the confidence of end investors.
We must establish advanced ESG product governance toremain in compliance with these regulations.
To this end, it is critical to stay in compliancewith the most rigorous standards. In ourview, this will allow us to ultimately remain incompliance with the different regulations of each country.
Third, we must further foster the spirit of ESG within
Nomura Asset Management. Going forward, we will need tocontinue to comply with a wide range of ESG regulations andclient guidelines.
While doing this, we must not forget why these regulations
and guidelines exist in the first place.
If we forget what we are aiming for and fail to invest with spirit,
our compliance efforts will end up being merely procedural,
which will diminish our value in the eyes of end investors.
If our investment lacks spirit, we will certainly find it difficult
to survive going forward.
Sustainable investment is also an issue that is directly
linked to our national interest. If Japanese companies andasset management firms are left behind in this global trend, itmeans that Japan will not be able to attract risk money, which
will result in the decline of Japan as a whole.
To prevent this from happening, we must be sensitive
to the demands of end investors and society, and change
ourselves as needed.
As we move forward, Nomura Asset Management willcontinue striving to be a sustainable asset managementcompany.

Responsible Investment Report 2022

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