Sustainability
Report 2024

Nikko AM Sustainability Report 2024

1

Looking Back

Introduction — Looking Back

From strength to strength .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 3
— A message from Stefanie Drews, President
A snapshot of corporate sustainability in 2023 .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 5A history of our sustainability activities .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 6Good governance is transformative .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 7
— An interview with Yoichiro Iwama, Chairman of the Board of Directors

Investment Management

Investing in a low-carbon future .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 10
— A message from Hiroshi Yoh, Chief Investment Officer
ESG approach, philosophy, and governance .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 11
Implementing ESG principles . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 12
Japan Sustainable Investment Team. .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 14
Japan Equity Team .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 17
Japan Investment Technology Fund Management Team .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 21
Japan Fixed Income Team .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 23
Asian Equity Team (Ex. Japan) . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 25
Asian Fixed Income Team (Ex. Japan) .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 27
Multi-Asset Team . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 29
New Zealand Equity and Bond Teams .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 30
US Investment Team .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 32
Global Equity Team .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 33
Global Fixed Income Team . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 35
Portfolio Solutions Group . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 37
Stewardship
Engagement on ESG topics .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 39
Engagement case studies . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 40
Proxy voting on ESG topics.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 42
Proxy voting case studies .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 43
Collaborative engagement .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 45
Promoting ESG . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 46

Investment Management

Corporate Sustainability

Looking Ahead

Corporate Sustainability

Honing our ability to listen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
— A message from Yutaka Nishida, Executive Chairman
Environment .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 50
Cybersecurity .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 52
Social impact . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 53
DEI at Nikko AM . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 54
Sustainability Town Hall . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 55
Sustainability groups
Global Racial Equality Group . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 56
International Women’s Group . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 58
Japan .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 60
Asia .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 64
EMEA .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 65
New Zealand .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 66
Americas .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 67
Insider perspectives .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 68

Looking Ahead

Leveraging our strengths to shape the future .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 71
— A message from Joyce Koh and Daisuke Kono, Joint Global Heads of Sustainability

Additional Information

External commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .73
Contact information .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 74
Important information . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 75

Cover image:
A Nikko AM Americas volunteer
reading to children at SouthBronx United’s Literacy Day

Nikko AM Sustainability Report 2024

2

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

A message from Stefanie Drews, President

From strength
to strength
Every year, our firm invests moretime, energy, and resources insustainability. This enables us totake greater action in our threefocus areas of environment &climate, reducing inequality,and diversity & inclusion. And
it helps to make our firm, ourcommunities, and our worldstronger.

world by joining Nature Action 100 as aninvestor participant. This global investor-led
initiative engages with 100 leading
companies in eight key sectors, calling onthem to take more urgent action to help
reverse habitat loss, reduce pollution, andend their overexploitation of resources. As
these firms take meaningful action now, they
are ultimately helping to mitigate long-term
financial risk.

“we entered into a strategic
partnership with Osmosis,
an exceptional investment
manager headquarteredin London. Its sustainable
investment philosophy
emphasises resource
efficiency as key to longterm outperformance”

In 2023, we strengthened our ability toanalyse the potential impact of climatechange on businesses. Our latest report for
the Task Force on Climate-related Financial
Disclosures (TCFD) — to be released in June
2024 and covering the 2023 calendar year
— provides the most detailed explanations
yet of how Nikko AM manages and governs
climate risks and opportunities on ourinvestments.
In October, we strengthened our commitment
to protecting biodiversity and the natural

Nikko AM Sustainability Report 2024

Our business also invested more in sustainability through new partnerships. In July,for example, we entered into a strategic
partnership with Osmosis, an exceptional investment manager headquarteredin London. Its sustainable investment
philosophy emphasises resource efficiency
as key to long-term outperformance. Nikko
AM now has exclusive rights to distribute
Osmosis’s innovative investment products
in most countries in the Asia–Pacific region.
Together, we can better meet the needs oftoday’s environmentally conscious investors
and make an even stronger impact on ourworld.
We added more members to our Global
Sustainable Investment team, including a
Global ESG Integration Lead and an ESG
regulations specialist. As this team grows, weare strengthening our expertise in the fieldof sustainable investments, allowing us tobring benefits to our clients and make a moresignificant contribution to society and ourenvironment.

Signing agreement with Osmosis (Holdings) Limited3

Looking Back

When it comes to corporate sustainability,
numbers are also going up. As of December
2023, we had 137 employees involved in 11
sustainability groups, which represents 13%of all employees (up from 11% in 2022). Thisgets us very close to our 2025 goal of 15%.
The result of greater participation is more
activity. Sustainability groups organised over
70 initiatives in 2023, making a more significant contribution in our three focus areas
than ever before.

“Nikko AM has set a goal
to become an industry
leader in women’s career
progression … I am
committed to supporting
our female employees inany way I can; I want to seethem go from strength tostrength in their careers”

Corporate Sustainability

Looking Ahead

We are very proud to have demonstrated ourstrengths in DEI in 2023. For the fifth consecutive year, Nikko AM was awarded a Goldrating on the PRIDE Index by the organisation
work with Pride for our efforts in cultivating
an LGBTQ+-inclusive workplace. This award isimportant to us because diversity is foundational to our strength.
One area where we need to become evenstronger in 2024 is women’s empowerment.
We continue to get closer to realising our#30by2030 goal, but we’re not there yet — at
the end of 2023, women occupied 23.8% of
leadership positions, a 3.6% rise over 2022. As
senior management, HR, the Global Corporate
Sustainability team, and management atregional offices continue to collaborate, weare confident we will make this a reality.
Nikko AM has set a goal to become anindustry leader in women’s career progression
and, although we are making progress, weneed to move more quickly. Our International
Women’s Group has proposed several ways for
us to accomplish this — including improving
policies to help women’s advancement,
providing better support for women when
they return from career breaks, and doing
more to recognise female leaders — andsenior management is looking into how we
can implement these ideas. I am committed
to supporting our female employees any way
I can; I want to see them go from strength tostrength in their careers.
In 2023, we marked the five-year anniversaryof the creation of the Corporate Sustainability
Department. It is so encouraging to see how it
has grown and how our sustainability efforts

Nikko AM Sustainability Report 2024

Investment Management

Receiving award at the 2023 Influential Women in Institutional Investing Conference by Pensions & Investments

have increasingly made a difference each year,
in many areas. As we continue to invest in
sustainability in the years ahead, I know ourimpact will grow even stronger.

Stefanie Drews
President

4

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

A snapshot of corporate sustainability in 2023
Number of internal events (by calendar year)
Japan Women’s Group
Japan LGBTQ GroupEMEA Sustainability Group 6

19
13

Japan Environment Group

18

Japan Abilities Group

14

Japan Philanthropy Group

17

6

Japan
Abilities
Japan
Women’s

Japan
LGBTQ

1
7
4
3
1
4

Japan
Philanthropy
Sus. groups(ex. Japan)

Asia Sustainability Group 16

Global Racial
Equality

Global Corporate
Sustainability Team
Global Racial Equality Group

15

Tokyo
Singapore

International Women’s Group 35

Sustainability group volunteers

137*(approx. 13% of total employees)

3
1
4
1
2

Others5**

Global Corporate
Sustainability Team total

8**

11
7
37

Total

3**

New Zealand Sustainability Group 9

CY2023

4

Japan
Environment

Americas Sustainability Group 13

CY2022

4

26
10

20

30

40

Percentage of female employees at Nikko AM
Dec 2020

Dec 2021

Dec 2022

Dec 2023

Ratio of women in
total workforce*

36.9%

37.3%

38.7%

39.5%

Ratio of women in
managerial roles**

18.5%

20.5%

20.2%

23.8%

Ratio of women on the
Board of Directors of
Nikko AM

20.0%

25.0%

33.3%

33.3%

WIP

(dedicated members: 4)*Permanent full-time employees and directors of Nikko AM and its consolidated subsidiaries.
**Defined as functionally Group Manager / Team Lead or above, or with corporate title of Senior Vice President or above.

*Excluding Global Corporate Sustainability Team. Eliminating double counting of dual members.
**Including members concurrently in other departments. As of 31 Dec 2023.

Nikko AM Sustainability Report 2024

5

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

A history of our sustainability activities
1999

2007

2010

2011

Launched Japan’s first socially responsible
investment fundBecame an early signatory of the
UN PRI

Launched the world’s first fund to invest
only in World Bank Green Bonds

Signed the Japan Ministry of the Environment’s
Principles for Financial Action for the 21st Century

Became the first Japanese asset
manager to disclose proxy voting
results on our corporate website

Developed a corporate Environment Policy

Chaired the PRI-Japan Network(April 2011 – March 2014)

2019

2018

2016

2013

Published inaugural Task Force on Climaterelated Financial Disclosures (TCFD) Report

Became the first Asian-headquartered asset
manager to support all four areas under The
Investor Agenda

Established Stewardship and Voting Rights
Policy Oversight Committee

Developed Creating Shared Value (CSV)
equity investment strategy (Japan)

Started measuring annual carbon footprint
from operations
Established three firm-wide focus areas:
Diversity & Inclusion, Reducing Inequalities,
and Environment & Climate

2020
Published inaugural annual Sustainability
Report covering 2019
Launched first global sustainability group:
the Global Racial Equality Group

Formed the Global ESG Steering Committee

Adopted UN Women’s Empowerment Principles
Established the Corporate Sustainability
Department
Formed local sustainability groups in all offices

2021

2022

Joined the Net Zero Asset Managers initiative

Developed Global Engagement and
Stewardship Strategy

Revised group-wide environmental policy andset a greenhouse gas reduction target
Established Global Diversity & Inclusion Policy

Became signatory to the UK Stewardship
Code (UKSC)

2023
Won LGBT Great iiBT Bronze Award 2023
Signed strategic partnership with Osmosis(Holdings) Limited

Established the Global Sustainable
Investment teamSet 2030 interim target for 2050 net zero goal

Nikko AM Sustainability Report 2024

6

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Yoichiro Iwama, Outside Director and Chairman of the Board of Directors

Good governanceis transformative
Yoichiro Iwama, Outside Director
and Chairman of the Board of
Directors, speaks with Masahiko
Komatsu, Co-head of theJapan Sustainable Investment
Department, about Japan’s
economy and the challenges
facing companies today.
Masahiko Komatsu: In March 2024, theNikkei 225 surpassed its all-time high for the
first time in 34 years. I know that you wereinvolved in the establishment of Japan’s
Stewardship Code and the Corporate
Governance Code, specifically the follow-up
council reviewing their adoption, so how doyou view this historic moment for Japanesestocks?
Yoichiro Iwama: Public opinion is divided
on how successful the Abenomics strategy
actually was in reviving the Japanese
economy. However, its emphasis on

Nikko AM Sustainability Report 2024

reinvigorating financial and capital markets
and encouraging corporate governancereforms have had commendable results. The
establishment of Japan’s Stewardship Codein 2014 and the new Corporate Governance
Code in 2015 improved the perception of themarket dramatically.
Masahiko Komatsu: Since then, the approachof institutional investors has changed significantly. They have a deeper understandingof the importance of stewardship and are
now promoting the sustainable growthof companies through dialogue and theirinvestment practices.
Yoichiro Iwama: It is worth noting that, inJapan, the Stewardship Code was establishedprior to the Corporate Governance Code.
This is a clear indication that the first step forreform was to address the behaviour of institutional investors and asset owners.
Masahiko Komatsu: It took 34 years for the
Nikkei 225 to reach a new high, which isunusual for a developed country. Can you

give us your view on why it has taken so long?
Yoichiro Iwama: It’s clear that the impact of
the bursting of Japan’s economic bubble wasgreater than we could ever have expected.
We refer to the period since as “the lost 30

years”. That is why it was not just the market
that took longer than expected to recover but
Japan’s entire economy. Of the three arrowsof Abenomics, the third, structural reform,
was the most important. Unfortunately, thepolitical, public, and business sectors failed

7

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead“Given [Nikko AM’s] extensive
practical knowledge of themarket, I feel the company
can be more active in sharing
its perspective as an asset
manager externally”

for them going forward. As Chairman of
our Board of Directors, could you also shareyour impression of our company as an asset
manager and what you would like to see fromthe company in the future?
Yoichiro Iwama: Investment management is
a fiduciary business. We have an obligation to
fulfil our stewardship responsibilities to ourclients.
to fully realise the drastic and painful reforms
that were needed to achieve this.
Masahiko Komatsu: What challenges remain
for the Japanese stock market to achievesustainable growth in the future? And what
are the challenges for listed companies andinstitutional investors?
Yoichiro Iwama: It is essential for
consumption to grow steadily, because it
accounts for such a large part of the Japanese
economy. That means wages need to increasesteadily without being outpaced by rising
prices.

Nikko AM Sustainability Report 2024

It is crucial for institutional investors toengage with the companies in their portfolios
to ensure that they develop and implement
appropriate growth strategies that lead tosustainable growth and stable wage increases.
On the other hand, company management
must strive to be fully accountable to theirinvestors.
Masahiko Komatsu: Companies have beenenhancing shareholder returns in responseto the Tokyo Stock Exchange’s requestthat all listed companies on the Prime andStandard Markets take “Action to Implement
Management that is Conscious of Cost of
Capital and Stock Price”. This has been a major

factor behind the recent stock market gains,
but do you feel it is sustainable?
Yoichiro Iwama: It goes without saying thatcompanies should return surplus cash toshareholders. It is also true that a company’s
ability to achieve sustainable growth incorporate value depends on its ability tocreate a growth strategy that exceeds its
cost of capital. We could say that identifying
companies with such abilities and engaging
with them is the mission of asset managers.
Masahiko Komatsu: Lastly, please sharewith us your assessment of Nikko AM’s
stewardship activities and your expectations

Nikko AM is a company headquartered inJapan, but it operates at a global level. Thisis demonstrated by its status as a signatory
to the UK Stewardship Code. Given the firm’s
extensive practical knowledge of the market,
I feel the company can be more active insharing its perspective as an asset manager
externally.
It is essential that our stewardship activities
lead to services of the highest quality. I want
to see Nikko AM continue its diligent efforts toimprove the effectiveness of its engagement
activities.

8

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Investment
Management
Nikko AM New Zealand employees in a meeting

Nikko AM Sustainability Report 2024

9

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

A message from Hiroshi Yoh, Chief Investment Officer

Investing in a
low-carbon future
In 2023, average world temperatures were thehottest ever, continuing a run of more than
10 record-breaking years. The rising heat has
been accompanied by disastrous climate-related events all around the globe, from themost devastating fire season in Canada andthe worst drought in the Amazon to thehighest-ever monsoon rainfall in parts ofChina, Japan, India, and South Korea. The Paris
Agreement of 2015 aimed to cut the rise inworld temperatures to 1.5 degrees, but we are
already perilously close to breaching that limit
long before the target date of 2050.
Our Sustainability Report 2024 demonstrates
the importance we place on managing
climate change through our investment
activities, as well as addressing social andgovernance issues. Asset managers are
particularly well placed to promote change,in view of the influence we can exert overbusinesses. The best demonstration of ourcommitment is through our engagement
activities with investee companies, illustrated
in this report by our case studies.
Progress at some of these companies in 2023
came as a result of our involvement over
several years. We saw this in Indonesia, where
the dominant electricity company is making
strides to decarbonise its generation capacity.

Nikko AM Sustainability Report 2024

This is something we have been encouraging the firm to do, together with a group ofinvestors, for the last couple of years. In India,
one of the world’s largest cement producers
has committed to reducing its emissions andincreasing the use of renewable energy. It
was spurred on to make this commitment
by an investor group, of which Nikko AM is amember. Over time, we believe these changes
can make a difference to real world global
emissions, and we will continue to engage
with both companies on their progress.
We are also trying to be as strategic as
possible when it comes to engagement
and proxy voting. In 2022, we conducted asurvey of companies in our Global Equity
strategy to determine whether they understood the implications of our commitment toa low-carbon future. Their responses allowed
us to focus our engagement in 2023 on thosecompanies with the highest carbon intensities
or in sectors most exposed to climatechange risks. In Japan, we have been more
active in backing climate change resolutions,
supporting around 50% in 2023, which is asignificant increase over previous years.
Our Global Sustainable Investment Teamfurther expanded its team during the year,with three new roles added in Singapore,

Tokyo, and London — and more expansion
planned for 2024. The team continues tostrengthen the integration of environmental,social, and governance considerations into
our investment activities.
Our work in this area in 2023 was recognised
by a number of awards. Our Global Head of
Sustainable Investment, Natalia Rajewska,
was named Rising Star at the AsianInvestor
Asset Management Awards 2024. Our Asian
Equity team won the Best Application of ESG
award in the Singapore country category
from Asia Asset Management magazine. And
the Head of the Investment Technology FundManagement team, Masayuki Teraguchi, wasrecognised as Japan’s ESG Fund Managerof the Year by The Asset, an industry mediagroup.
We also remain focused on our products. We
improved the sustainability characteristics
of our pioneering Green Bond Fund forwhen it relaunched in October in a UCITS
format, available across the EU. The Green
Bond Fund now has a wider remit to invest
in suitable corporate bonds. It meets theEU’s sustainability requirements under article
9 of the Sustainable Finance Disclosures
Regulation and aligns with some of the UN’s
Sustainable Development Goals. In addition,

we have developed our own ESG labelling
framework to help investors choose the mostappropriate sustainable investment strategies
to meet their climate commitments andsustainability-related goals.
Our work is not done, but we think what wehave achieved in 2023 is evidence that we aremaking advances. We continue to challenge
ourselves to do more, which will include
developing new products and approaches tosupport the transition to net-zero.

Hiroshi Yoh

Executive Corporate Officer, Global Head ofInvestment, and Chief Investment Officer

10

Looking Back

ESG approach,philosophy, andgovernance

Investment Management

Corporate Sustainability

Looking Ahead

Stewardship Governance Structure

Board of Directors
Independent Directors

Global Executive Committee

Global Stewardship Functions
ESG Global Steering Committee

Subsidiary-specific Stewardship Functions
Local Board of Directors
Independent Directors

Our ESG approach and philosophy
Nikko AM, as an asset management company,
acts as a fiduciary on behalf of its clients andis firmly committed to putting its clients’best interest first. It places fiduciary and ESG
principles as the highest guiding theme of its
corporate value and actions.
We are a global asset manager, but our origins
lie in Japan. Japanese culture values harmony— both with nature and with others — so
we have grown with the belief that we must
be a good corporate citizen. Our approachto sustainability has evolved with this as our
foundation.
We strongly believe that ESG considerations
are inherent to long-term corporate value
creation and contribute to the realisation ofsustainable economic growth. An overview of
our ESG policy can be found on the Fiduciary& ESG Principles page of our website. The
principles are based on the UN-supported
Principles for Responsible Investment.

Nikko AM Sustainability Report 2024

Governance
Responsibility for sustainability starts at the
top. Both our President, Stefanie Drews, andour Executive Chairman, Yutaka Nishida,
have been given specific key performanceindicators to enhance the group’s ESG activities in line with international standards. The
ESG Global Steering Committee oversees
our ESG activities. It reports to the Board of
Directors, chaired by Yoichiro Iwama, andto the Global Executive Committee (GEC) ofsenior management, led by the President (seechart).
Governance of our stewardship and ESG
activities takes place at both the global andlocal subsidiary level. The ESG Global Steering
Committee is responsible for all ESG activities at Nikko AM. It oversees the integrationof ESG within investment teams, sets policy,
develops strategy, makes external disclosures,and recommends ESG-related initiatives andparticipation in external bodies.

Stewardship and Voting Rights Policy
Oversight Committee
Independent Directors

Local Proxy Voting OversightGlobal Sustainable Investment Team

Local Stewardship Oversight

The committee is chaired by the Global Headof Investment, Hiroshi Yoh, and its members
are the heads of our investment teams
worldwide, who are in charge of stewardship
implementation in their individual investment
processes. It is further supported by the
Global Sustainable Investment team, which
provides dedicated expertise and implementation support.
Our Global Head of Sustainable Investment,
Natalia Rajewska, reports directly to the
President and the Chief Investment Officer.

Members in each of the five functions of the
Sustainable Investment team report directly
to the Global Head of Sustainable Investment.
Each Nikko AM Group subsidiary has anindependent executive team led by a regional
head who reports to the President and is
responsible for formulating and executing
targets and plans decided by the Board andthe GEC in line with local regulations andcustoms.

11

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Implementing ESG Principles

Practising what
we preach
ESG has been an area of focus for Nikko AM for more than two
decades, beginning in 1999 when we launched Japan’s firstsocially responsible investment fund.

In 2022, we created our Global Sustainable
Investment team (see chart). One of its priorities is to strengthen how each investment
team integrates material ESG issues into theirinvestment approach. To support this aim,
the team in Singapore hired a global ESG
Integration Lead in 2023.
Also, we are required to navigate a complex
and fast-changing regulatory landscape forsustainability reporting. Inadvertently failing tomeet regulatory requirements and our clients’
expectations can result in both financial andreputational costs. So, the team also hired an
ESG Regulations Specialist in 2023 to help us
manage these risks.
The Global Sustainable Investment team isdivided into five functions:Regional ESG Specialists: The ESG specialists
on this team work closely with the regional
investment teams to support their ESG
integration and stewardship efforts. They
also work with other functions, such as client
services and product development.

Nikko AM Sustainability Report 2024

Research and Integration: This function,
which was expanded in 2023, is responsible
for providing our investment teams and ESG
specialists with subject matter expertise
while ensuring we continuously improve our
integration efforts.
Stewardship: This function, which is still
being developed, coordinates and supports
our firm-wide stewardship efforts. It aims tocontinuously improve our stewardship activities, including engagement, proxy voting,and ESG research, as well as their respective
disclosures.
Data and Reporting: Team members are
dedicated to sourcing, storing, validating, anddisseminating ESG data globally, as well as
providing support with ESG data analytics andreporting.
ESG Regulation: This function is responsiblefor identifying, assessing, determining, andsupporting our approach to ESG regulations
and standards globally, with a focus on regulations in EMEA.

Global Sustainable Investment Team Governance Structure
Chief Investment Officer

President

Global Head of Sustainable
Investment

Regional ESG
Specialists

Research andIntegration

StewardshipLed by our global network of more than
200 investment professionals, Nikko AM has
integrated sustainability in the investment
process of most asset classes. Together
with the portfolio manager and analysts,
the Global Sustainable Investment teamis responsible for ensuring sustainability
practices are integrated into each of ourinvestment approaches.
Most investment employees have undertaken
suitable training in stewardship andsustainability principles. These include
internal training in the recommendations of
the Task Force on Climate-related Financial
Disclosures and courses offered by the PRI
Academy.
In Japan, our Japan Sustainable Investment
Department makes judgements on voting
and stewardship activities for our Japanese
portfolios, as well as engaging with thoseJapanese companies not already coveredby sector analysts in actively managed
portfolios. It was fully integrated into the

Data &
Reporting

ESG Regulation

Global Sustainable Investment team in early2023. The scope of its work was increased
to cover all asset classes managed by ourJapanese investment teams. Read more
about the Japan Sustainable Investment
Department on page 14.
In November 2023, Nikko AM acquired aminority stake in the UK-headquartered
Osmosis (Holdings) Limited. It is a
research-based quantitative investment
manager focused on delivering improved
risk-adjusted investment returns with
better environmental outcomes. Throughthis partnership, we have exclusive
distribution rights in Asia for Osmosis’
investment products and strategies. This
investment is a significant step forward in
our inorganic growth strategy and shows
our ever-deepening commitment tosustainability.

12

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Implementing ESG Principles

Helping clients meet their sustainable investment goals
In 2023, we developed a new classification frameworkfor our range of ESG products. This framework provides
a methodology for categorising our ESG Inside products,
the name we use for all our products that incorporatematerial ESG factors in their investment processes.
ESG Inside
Three categories of products that incorporate material ESG
factors and negative screensSome members of the Global Sustainable Investment Team

ESG Managed

ESG Themed Investing

ESG Impact

Strategies managed toa range of binding ESG
investment criteria toachieve or promote certain
environmental or social
characteristics.

Strategies investingin themes or assets
specifically contributing tosustainable solutions (eg.
decarbonisation, net zero,clean energy).

Strategies that hand pickcompanies that provide
environmental or social
impacts through theirbusinesses while pursuinginvestment return objectives.

The new categories will help our clients choose the most appropriate sustainable
investment strategies to meet their ESG or sustainability-related investment goals. The
three categories of ESG Inside products, which relate to the type of approach adopted, are:
ESG Managed, ESG Themed Investing, and ESG Impact.
This classification framework is not intended to match a current or future taxonomy orregulatory system (although, ESG Impact currently only includes funds that meet article 9of the EU’s Sustainable Finance Disclosure Regulation). We will regularly review and amend
it as necessary to ensure it complies with applicable regulatory requirements.

Nikko AM Sustainability Report 2024

Greenwashing
Greenwashing began as an industry buzzword
but has become a rapidly growing categoryof risk. It is a situation where investment
firms make misleading or exaggerated claims
about their sustainability practices of its
products and approaches. The primary causeof greenwashing among investment firms
is ambiguous regulatory guidance, which
creates room for errors of interpretation that
may come back to haunt them.

of ESG approaches used in our investment
processes. We want to ensure clients haveaccess to reliable and accurate information,so we provide details and, where possible,
additional examples to support the validityof the investment process. Every year, we
report on our ESG activities to the Principles
of Responsible Investment (PRI) reporting
framework. Through the PRI report, wedemonstrate transparency and accountability
in our ESG activities.

As there is rising interest in ESG funds, wehave taken a number of steps to protect
ourselves against greenwashing claims andmeet regulatory requirements. Our sustainability categorisation framework provides
a coherent structure for defining the range

13

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Japan Sustainable Investment Team

Encouraging
companies toimprove
Stewardship activities

global sustainability standards through close
collaboration with the Global Sustainable
Investment Team. The primary tasks ofthis new department are: (1) to conductsustainability-focused engagement, (2) topromote responsible investment activities at
Nikko AM, and (3) proxy voting.

Implementation framework
The Japan Sustainable Investment
Department was established on 1 April 2023
to further enhance stewardship activities and
ESG integration in Nikko AM Japan teams. It
also works to strengthen our efforts to meet

Organisational structure for stewardship activities
Board of Directors
Oversight

ReportReportStewardship and Voting Rights Policy
Oversight Committee(Majority outside members)

Stewardship and Proxy Voting
Committee
Chairman: CIO

ReportJapan Sustainable Investment Department—Stewardship activities(Engagement, Proxy voting)—ESG Integration

Coordination

Dialogue

Listed companies and other issuers

Nikko AM Sustainability Report 2024

Oversight/
Resolution

Oversight/
Resolution

ReportCoordination

ESG Global Steering
Committee

Oversight/
AdviceReportGlobal Sustainable
Investment Team

Oversight

Government agencies

Investment management
departments in Japan

Members of the Japan Sustainable Investment Team

Global collaborative
framework
The Japan Sustainable
Investment Department
is part of the Singaporebased Global Sustainable
Investment Team, which isled by the Global Head of
Sustainable Investment.
Team members fromJapan, together withthose in Asia and EMEA,
hold weekly information-sharing meetings tokeep track of the latest
ESG knowledge. The
department in Japanaims to reflect these
insights in our investment
management operations.

Knowledge sharing
Hold weekly global
meetings to shareimportant updates:— Global Head andregional ESG teams
share information
regularly— Each area
exchanges
information
as needed

Japan

Working groups— Working groups for each project(TCFD, UK Stewardship Code,etc.) are set up and appropriate
personnel are assigned
from the global teamGlobalcoordination— The global teamalso coordinates
ESG activities
with otherareas, incl.
New Zealandand the US

Global Headof Sustainable
Investment

EMEA

Asia

14

Investment Management

Looking Back

Corporate Sustainability

Looking Ahead

Japan Sustainable Investment Team

Conflict of interest control framework
We have established a Conflict of Interest
Control Policy , which is published on our
corporate website. Based on this policy, wemanage transactions and other activities,
which could potentially cause conflicts ofinterest, in a way that ensures we conductbusiness appropriately. In addition, theStewardship and Voting Rights Policy OversightCommittee works to prevent conflicts ofinterest through monitoring and supervisionin accordance with the policy. A majority of its
members are from outside Nikko AM.
If we need to make a proxy voting decision
and Nikko AM’s parent company is involved— a situation where conflicts of interest
are of particular concern — it is discussed
in advance by the Stewardship and Voting
Rights Policy Oversight Committee. Decisions
are made based on the results of monitoringand oversight regarding conflicts of interest.

Engagement

Engagement policy
We focus our engagement on issues that arematerial to the sustainability of a company.
Medium- to long-term issues differ fromcompany to company, so we identify theappropriate sustainability issues that need
to be addressed before engaging with acompany. If necessary, we have advancediscussions internally with the relevant
investment professionals.
Following an engagement meeting, weshare the content of our discussion with theinvestment management departments. Thenthe investment management professional in
charge makes the final investment decision.
For investee companies that have mediumto long-term issues, we engage with them

regularly to follow up on progress made andto encourage improvements.
Key ESG themes
We believe that actively addressing ESG
issues is essential for companies to growsustainably. After conducting a review in May
2023, we expanded our list of key ESG themes
to six. These themes are primarily used as aframework to help us prioritise the companies
that we need to focus on and to help us follow
a specific engagement agenda when we meetwith these firms.
ESG Category

Key ESG Themes

E

Action for a decarbonised society

E

Biodiversity

S

Human capital and productivity

S

Diversity

S

Human rights

G

Effective GovernanceEngagement process
We conduct organised engagement in linewith the process shown below.

SharingissuesAddressing
issuesStage

Category

Confirmation method0

Nikko AM's identification of issues—

Nikko AM identifies issues

1

Presenting issues to company—

Issues presented, but unable to reachunderstanding with company (lack ofshared understanding)2

Reaching shared understanding ofissues with company

Engagement

Shared understanding of issues withcompany

3

Presenting measures to address
issuesDisclosure

Company announces measures toaddress issues

4

Implementing measures to address
issuesEngagement/disclosure

Company implements measures toaddress issues

5

Resolving issues

Engagement/disclosure

Issues have been resolved or company isable to resolve issues itself

Distribution of Issues





G



25%

23%





E
Capitalpolicies

S

DisclosureMonitorissuesBusinessstrategyG
Businessstrategy

Engage



Other





Measureeffects/summariseStage description

Measure and review effectiveness: We also manage the rate of progress made on addressing
issues. In FY2023, progress was made on 14.5% of the issues that had been identified as of theend of 2022.

No. of issues by theme and rate of progress

Selectionof subject
companies
Establish
policy for
next FY

Monitor issues to be addressed: The
challenges we identify through engagement
are classified into stages and registered in ourissue management platform for continuous
monitoring. As of the end of December 2023,
267 companies and 515 issues were being
managed on this platform.

Select companies to engage with: In
addition to selecting companies forengagement based on our key ESG themes,
we carry out focused engagement for
stocks held in our active funds.




Other




10%

14%
S

15%

Capitalpolicies

12%Disclosure

E
No. of issues overall

Progress rate

*Rate of progress is “No. of issues progressed to stage 3 or higher/total number of issues”
Nikko AM Sustainability Report 202415

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Japan Sustainable Investment Team
Establish policy for next fiscal year: Every July,
we establish our objective for the next fiscal
year based on effectiveness measurements andfull-year overviews. We believe that carrying out
a Plan–Do–Check–Action cycle is essential to
improving our stewardship activities.
Coordination with investment management
teamsTeam members in the Japan Sustainable
Investment Department are assigned responsibility for different sectors. They partner withanalysts in the Equity Research Group, as
necessary, to exchange information on the
sectors and stocks they cover. This gives theteam an understanding of the fundamental
issues that investee companies are facingand enables them to conduct high-quality
engagement.

Item

The department also holds meetings withmembers of the Equity Fund Management
Department twice a month to shareengagement case studies, discuss the
progress of engagement for each company,
and review the latest sustainability topics.
This is an opportunity to tell investment
management personnel about the latest information on sustainability.

In October 2023, we joined Nature Action
100, a global investor-led initiative, tohelp put pressure on companies that areoverexploiting natural resources to protect
biodiversity. It is also an opportunity for us
to gain more insights into biodiversity. Thisis just the latest in our increased efforts tojoin collaborative initiatives and our first
concerned with nature and biodiversity.

Gaining ESG knowledge through collaborative engagement
We have been a lead investor in the Climate
Action 100+ initiative since June 2023. The
role involves encouraging companies to takefurther action on decarbonisation in cooperation with other investors. We also work to
expand our ESG knowledge through participation in initiatives including the Asia Investor
Group on Climate Change (AIGCC) and the
30% Club Investor Group.

Proxy voting
We also work to integrate our engagementwith our proxy voting by reflecting thecontent of our engagement in voting
decisions. We also provide investee
companies with feedback during engagement
meetings on voting results, as necessary, andrequest improvements if there are proposals
we have voted against.
In addition, we have revised our proxyvoting guidelines in view of the content of

our engagement with companies as well aschanges in the business environment. Thechanges we have made include expanding
the coverage of our standards on female
directors (applicable from April 2024).
Although in the past we have opposed
climate change-related shareholder proposals,
we voted in favour of approximately half ofsuch proposals at the general shareholders
meetings held in June 2023, considering theimportance of environmental issues. For thosecompanies whose shareholder proposals
we opposed, we sent a letter containing
our reasons for approval or disapprovaland expectations of their future actions.
Our intention is to avoid situations where
our votes against climate change-relatedshareholder proposals are interpreted as us
signalling that companies can slow down
their decarbonisation initiatives.

ChangeDirector appointments(Expanded markets covered by requirements
regarding female directors)

Previously, in principle, we voted against proposals to appoint directors who are top managers at companies listed on the Tokyo Stock Exchange’s Prime Market thathave no female directors
In 2023, we began applying this principle to all markets, not only the Prime Market

Outside director appointments(Raised required percentage of board meeting
attendance)

Previously, we voted against the reappointment of directors if their board meeting attendance was lower than 75%
In 2023, we raised the minimum percentage of attendance required for us to vote in favour of reappointment to 80%

Appointment of statutory auditors(Added principle of opposition in case of
misconduct)

Previously, we had no standard.
In 2023, we established a standard of opposing proposals for appointments, in principle, if a candidate is deemed to be involved in or
responsible for misconduct

Statutory auditor appointments(Raised required percentage of meeting attendance)

Previously, we voted against the reappointment of statutory auditors if their directors/board of statutory auditors meeting attendance was lower than 75%
In 2023, we raised the minimum percentage of meeting attendance required for us to vote in favour of reappointment to 80%

Shareholder proposals(Clarified stance on proposals on climatechange action)

We make decisions on shareholder proposals after examining them on a case-by-case basis, in view of potential improvements in medium- and long-term shareholder value. In principle, we vote in favour of shareholder proposals on the disclosure of action to address climate change, except for in these two cases:
1) where action taken by the company is in line with the proposal’s content
2) where putting the proposal into practice would disadvantage the company or constrain its business activities
In 2023, we stipulated these specific criteria

Nikko AM Sustainability Report 2024

16

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Japan Equity TeamCSV scores leadto excess returns
ESG
Human Resources
Carbon Neutrality
Environmental & Social
Management Implementation
Resilience

12 CSV
Evaluation
factors
Financial
Shareholder Return
Financial Discipline

MarketCompetitiveness
Entry Barriers
Brand Equity
R&D/CAPEX
Cost Advantage
Market Growth Potential

Company assessments based on
CSV
The Japan Equity FundManagement Department
is responsible for the active
investment management ofJapanese equities based onbottom-up research. Our assessments of major Japanese companies
are founded on their ability tosustainably co-create economic
value, with a focus on corporate
earnings as well as social value linked
to ESG factors. This approach stems
from the concept of Creating Shared
Value (CSV), a form of corporate
management proposed by Professor
Michael Porter of Harvard University
in 2011.[1] Professor Porter andhis co-author proposed thatcompanies should play a central
role in solving social challenges
and that the solutions they provide
can result in innovation, thereby
sustainably creating social as well as
economic value. They also emphasised that companies performing
these socially centred activities
would exemplify a preferred form ofcapitalism.
Nikko AM was an early supporterof CSV and started conducting
CSV-based evaluations of major
Japanese companies in August
2013. Professor Porter has stated
that, to his knowledge, Nikko AM
was the first asset manager tointroduce CSV-based corporate
evaluations. As shown in the chart,[1]

Nikko AM Sustainability Report 2024

we divide CSV into three broad
fields: ESG, market competitiveness,and financial. Firms are evaluatedon a total of 12 factors across thesethree fields. The social challenges
and business opportunities of acompany differ greatly dependingon the industry to which it belongs,
so our corporate analysts use
a range of evaluation items to
examine each company, in line with
relevant issues and the businessenvironment. This allows themto evaluate each firm's ability tocreate shared social and economic
value as a CSV score. In the fieldof ESG, evaluations are based ona cross-functional approach that
includes impartial assessments by
the Japan Sustainable Investment
Department, which is primarily
responsible for ESG-focused
engagement, and the managers of
the Japan Equity Research Group.
In 2022, we introduced an
engagement platform to facilitate systematic and effective
engagement with investee
companies. The platform enables
us to manage the list of companies
that we have identified as havingroom to increase their corporate
value. We also use it to manage
material issues and progress. As ofthe end of December 2023, we aremonitoring a total of 515 material
issues for 267 companies.

Yasushi Ishikawa, Head of the Equity
Fund Management Department“Nikko AM was an
early supporter of
CSV and started
conducting CSVbased evaluationsof major Japanesecompanies inAugust 2013”

M. Porter and M. Kramer, “Creating Shared Value,” Harvard Business Review, January–February, 2011 Issue

17

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Japan Equity Team“In recent years, a particularly pronounced tendency is forshare prices of companies with high CSV ratings to be given a
premium and those with low CSV ratings to be discounted”

As we shared in the 2023 Sustainability
Report, CSV scores have become increasingly significant to our stock valuations since
the second half of 2017, when awarenessof ESG investment began to rise in theJapanese market. It became even moresignificant in the latter half of 2020, when theJapanese government announced its carbon
neural target. In recent years, a particularly
pronounced tendency is for share prices ofcompanies with high CSV ratings to be given a
premium and those with low CSV ratings to bediscounted.

Nikko AM Sustainability Report 2024

This result suggests that even in a market
environment where CSV valuations have beensignificantly factored in, there are still CSV
factors that have not been fully accounted for,and stocks expected to see upsides from CSV
stock prices are generating excess returns.
Given the current Japanese equity market,
we believe that assessing a company's ability
to co-create economic and social value is an
essential focus point for generating excess
returns.

Cumulative excess returns of the top performing stocks implied by CSV stock prices
20%

15%

10%

5%

0%

−5%

Jul-21
Aug-21
Sep-21
Oct-21
Nov-21
Dec-21
Jan-22
Feb-22Mar-22
Apr-22
May-22Jun-22
Jul-22Aug-22
Sep-22Oct-22
Nov-22
Dec-22
Jan-23
Feb-23Mar-23Apr-23May-23Jun-23
Jul-23Aug-23
Sep-23Oct-23
Nov-23
Dec-23Jan-24Feb-24Mar-24The predictive quality of CSV stock prices
In August 2021, we began calculating “CSV
stock prices” as a fair-value stock price when
the CSV assessment is accurately reflectedin the market. The move was intended tostrengthen our ability to integrate CSV in ourinvestment management.

In such a market environment, can the CSV
stock price lead to future excess returns?
The chart on the right shows the cumulative
excess returns for an equal-weighted basket ofstocks, for which CSV scores have been calculated, comprising the top 20% of expected
returns. The figures were calculated bycomparing the CSV stock price with the stock
price at each point in time, every month since
July 2021 when the CSV stock price was introduced. This group of stocks has consistently
generated excess returns, with an annualised
excess return of 7.25% and an information
ratio of 2.2, which indicates a very highinvestment efficiency.

Cumulative Excess Returns

Analysts and fund managers from the Japan
Equity Fund Management Department and
the Japan Sustainable Investment Department
are working together to conduct engagement.
In many cases, these engagement efforts have
led to an improvement in the CSV score, andthey give analysts and fund managers theopportunity to identify signs of improvement
in corporate value.

Note: Analysis period is August 2021 to March 2024.
Source: Nikko Asset Management

18

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Japan Equity Team — Equity Research GroupThe future ofcorporate value
In 2023, the Equity Fund Management Department marked the tenth year since
we introduced CSV (Creating Shared Value) scores. Since 2013, we have assigned
CSV scores to over 680 stocks. In addition, in 2021 we started calculating CSV
stock prices based on these scores. We disclose them in our research reports
alongside analysts’ investment decisions and share price targets. Our aim is tofacilitate the integration of CSV scores in actual investment management by
converting them into market values that we are familiar with.
Masanori Hoshino, Equity Research Group Manager

In the wider business environment,
the Tokyo Stock Exchange has
called for companies to take action
to implement “management thatis conscious of cost of capital andstock price”. We feel that, as a result,the business execution abilities ofcorporate management is being
called into question more than everbefore. Furthermore, personnel
shortages and stagnant wages are
becoming increasingly pressing
issues for company management
to address. The corporate value ofa company in five to ten years’ time
will likely differ depending on how
it addresses these issues. Two key

Nikko AM Sustainability Report 2024

ESG themes for Nikko AM, “effective
governance” and “human capitaland productivity” — which havebeen assigned CSV scores — will
help us make even more effective
assessments of these issues as socialand economic conditions in Japanchange.

short-term earnings, it will also
be recognised as a step to higher
corporate value in the medium
term through the recruitment andretention of superior talent as wellas increased employee motivation.
In fact, we are beginning to see suchcompanies in the market.

Management initiatives tomaximise corporate value cansometimes have a negative impact
on short-term performance.
Drastic improvements in compensation are a good example of this.
Although a large increase in salarylevels naturally puts pressure on

By combining the traditional
approach of focusing on earnings
forecasts and valuation analyses
with CSV assessments, we aim toavoid underestimating corporate
value and achieve stable performance.

“Two key ESG themes
for Nikko AM, ‘effective
governance’ and‘human capital andproductivity’ — whichhave been assigned
CSV scores — will help
us make even more
effective assessmentsof these issues”

19

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Japan Equity Team — Research Active Management Team

Getting companies touse cash effectively
On the Research Active
Management Team, we
believe that sustainability is
becoming an increasingly
important element ofasset management. This isbecause societal demands
on investee companies
are growing, even as theconstraints on human andnatural capital become
more evident. We also see
declining global economic
growth and increasingly
oligopolistic capital
markets. So, investment
managers need to invest
in companies that canenhance corporate value
by avoiding external
diseconomies andreducing capital market
risk.

Nikko AM Sustainability Report 2024

Our team is responsible formanaging the Japan Cash Rich
Company Equity Strategy, whichaims to generate returns byinvesting in companies that have
healthy balance sheets and thepotential to improve return on
equity through the effective useof surplus cash.
As Japan moves to end deflation,
the rationale for companies tohold cash is fading and the trendof using their cash is expected togain momentum.
Companies are increasingly
responding to calls by the Tokyo
Stock Exchange to take action to
implement “management that is
conscious of cost of capital andstock price”. Although we areencouraged to a certain degreeby their response, we believethat share buy-backs and othershort-term measures to boost
stock prices will only have a
temporary effect. Our view is that
progress in creating corporate
value over the medium to longterm will therefore need to bemonitored.

In this context, it is becoming
increasingly important forcompanies to use their cash
effectively — in other words,
good governance. Through ourengagement with companies, we
actively incorporate this concept in
our corporate value assessment.
Aside from engagement, one
screening tool we use to detect
potential change at companies
is to monitor the diversity of the
management team by checking themembers’ professional background,age, and gender. As we observechanges in these attributes, we canidentify companies that appear to
be making progress in their diversity
journey and proceed to engage
with them. We seek to identify
companies that — in addition to
governance issues — are tacklingissues that need to be addressedto help create a more sustainable
society, such as climate change andhuman capital, while improving
their own profit growth and market
competitiveness. We aim to include
such stocks in our investment
portfolios and deliver outperformance for our clients.

Yu Sato, Fund Manager, Research Active
Management Team“We seek to identify
companies that— in addition to
governance issues —are tackling issues thatneed to be addressedto help create a moresustainable society”

20

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Japan Investment Technology Fund Management Team

Sharing what
we learn

Our ESG investment approach
The Investment Technology FundManagement team is responsiblefor developing and managing
index and quantitative active
funds. We actively research and use
sustainability information in ourfund management processes. We
believe it is important to approach
ESG investment with a theoreticaland empirical understanding of
the wide range of factors — suchas future returns, cost of capital,
and time horizons — throughwhich ESG can impact shareholder
value. This means we continuously
conduct in-depth research into
each of the environmental (E), social(S), and governance (G) components of ESG using a quantitative
approach.

Nikko AM Sustainability Report 2024

Sharing information with asset
ownersWe believe that ESG investments
can generate social and economic
value when a virtuous circle iscreated in the investment chain,
which encompasses investee
companies, asset owners (suchas pension funds, banks, andinsurance companies), and asset
managers (like Nikko AM). As an
asset manager, we are committed
to communicating our ESG
investment approach to asset
owners so they have a clear understanding of our philosophy.
One example of this is our participation in the 17th Global Fiduciary
Symposium, held in November
2023. It was attended by about
300 participants, most of whom

Members of the Investment Technology Fund Management Team

were institutional investors,
including representatives for
public and private pension funds
and university funds. The team’s
Masayuki Teraguchi appearedon a panel called “Human capitalmanagement, which is gaining
importance, and its impact on theJapanese equity market”. Masayuki
explained that Japan’s investment
in human capital as a percentage of
GDP is remarkably low comparedwith other developed countries,

adding that Japan’s labour productivity per worker is the lowest
among G7 nations. He presented
an analysis, created by Nikko AM’smachine learning model, thatshowed human capital is the ESG
factor most strongly associatedwith Japanese stock returns in the
TOPIX 500 Index. The data showedthat there are higher shareholder
value gains in companies with the
management discipline to invest
skilfully and actively in their people.

“The data showedthat there are higher
shareholder value
gains in companies
with the management
discipline to invest
skilfully and actively intheir people”

21

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead“the Japanese Equity Human Capital Empowerment Strategy…
was recognised for setting itself apart from other investment
strategies with its focus on human capital investment efficiency
as one of its key concepts”

Also in November 2023, Yasushi Kato — aproduct specialist in the team — spoke
on a similar theme at an external seminarfor pension funds and other institutional
investors. After giving an overview of current
trends in human capital investment by
Japanese companies, he introduced theaudience to the Nikko AM Japanese Equity
Human Capital Empowerment Strategy, which
is focused on investment in people, and gave
details about the strategy’s effectiveness.
ESG Fund Manager of the Year (Japan)
Award
The success of the Japanese Equity Human
Capital Empowerment Strategy during 2023
was recognised in April 2024 when Masayuki
Teraguchi and his team received the ESG FundManager of the Year (Japan) Award from themulti-media firm The Asset.
Investment strategies focusing on the society
pillar of ESG generally tend to emphasise
one particular perspective, such as diversity& inclusion or women’s career activities.
However, this strategy was recognised forsetting itself apart from other investment
strategies with its focus on human capital

Nikko AM Sustainability Report 2024

investment efficiency as one of its key
concepts.
Our cutting-edge ESG research
Visiting Professor Ryohei Yanagi from the
Graduate School of Accountancy at Waseda
University, together with his team, and Kyoji
Hasegawa, a quantitative analyst in theInvestment Technology Fund Management
team, conducted a joint study on the growing
importance of non-financial factors, such as
ESG, in assessing corporate value. Professor
Yanagi proposed the Yanagi Model, whichemphasises the relationship between ESG andcorporate value, and it is highly regarded byacademics and finance professionals in Japanand overseas.
After reviewing a wide range of ESG Key
Performance Indicators, the team conducted
detailed analyses of the impact of ESG initiatives on corporate value in each industry
sector across the Japanese market. Theirresearch provided important insights into
investment management and stewardship.
We also plan to share the knowledge wehave gained with the industry by publishingsome of our findings in the Capital Markets

Research Institute’s monthly periodical(which, as of May 2024, is scheduled for publication in the July 2024 issue).
Masahiro Suzuki, a quantitative analyst in theteam and an expert in machine learning ineconomics and natural language processing,
won the Most Innovative Application of
Artificial Intelligence award at the 2024 Best of
the Best Awards, which are presented by theHong Kong-based Asia Asset Management
magazine. The award was established in 2023.

between industry and academia, waslaunched in June 2023. Chaired by Professor
Takaaki Hoda of Keio University and Satoshi
Sasaki, Principal Researcher at Persol Researchand Consulting, the consortium was createdto support human capital management
at Japanese companies to help themincrease their corporate value. Nikko AM is a
consortium participant and endorses its activities. The consortium is scheduled to publish
its research findings as a book.

Nikko AM is researching deep learning using
Japanese text data from the financial sector
and other similar information to enhance
the accuracy of our analyses of investee
companies, the economy, and capital markets.
These efforts are also intended to further
improve investment performance and realiseeven more sophisticated ESG assessments
and risk management.
A collaboration between industry andacademia
The Consortium for Human CapitalManagement and Corporate Value, a researchorganisation strengthening collaboration

22

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Japan Fixed Income Team — Credit Research Group

Human capital andcorporate value
The focus of our credit ESG analysis
On the credit research group of the Japan
Fixed Income team, we believe ESG considerations are key factors when analysing
qualitative risks that cannot be covered
exhaustively by financial analysis. We focus
on eight ESG items, displayed in the diagram
below: two of these are related to theenvironment, three are related to society, andthree are related to governance. We began
this type of analysis in 2009, and we periodically review and update these focus areas
based on case studies we conduct.
Environmental (E)Society (S)Governance (G)Changes inenvironmental
regulations

Human capital

Corporate
governance

Manufacturer
responsibility

Accounting fraud

Relationship with
antisocial forces

Corporate ethics

Environmental
pollution

Integration of ESG factors
Our credit analysts consider ESG factors in
addition to the fundamentals of each issuer.
ESG factors are integrated into investment
decisions for the industries and issuers wecover.

Nikko AM Sustainability Report 2024

Case study

In-depth discussions on human capitalwith life insurers
We regard bonds issued by Japanese life
insurers as key investment assets. To date,
we have enjoyed favourable performanceby actively investing in these bonds. We
believe we can further improve investment
performance by seeking to enhance thecorporate value of each company throughdiscussions and proposals that help tostrengthen their business capabilities. As
part of these efforts, we are holding morein-depth discussions on human capitalwith these life insurers.
Issue
Dedicated sales personnel are at the core ofJapanese life insurers’ business capabilities. We
monitor changes in sales personnel numbers as
an important indicator of the current status ofeach company’s sales infrastructure. Our analysis
shows that companies that have maintained andstrengthened their sales staff channels see steadygains in new business as well as improvement intheir corporate value. The analysis also demonstrates
that companies whose sales channels have grown
weaker experience sluggish growth in new businessand see less of an increase in their corporate value.
Some of the issuers in which we invest are currently
seeing declines in sales personnel numbers. These
companies have significant room to increase theircorporate value in the future by strengthening
their sales channels. We believe that we can help to

Akihiko Yoshino, Credit Research Group Manager

Trends in sales personnel numbers and new business at different companies
Companies where sales personnels have increased

Companies where sales personnels have decreased

Polyline: Number of staff in thousands
Bar chart: Total annualised premium from new business

Polyline: Number of staff in thousands
Bar chart: Total annualised premium from new businessCompanyA

CompanyC

Sep-19Mar-20

Sep-20Mar-21

Sep-21

Mar-22

Sep-22CompanyB

Mar-23CompanyD

Sep-23further improve investment performance by engaging
with these companies on the theme of human capital in
relation to sales personnel.
Engagement
There are limited opportunities to engage withJapanese life insurers as many of them are not publicly
listed. However, given our focus on researching thesecompanies because of their importance to us as
investment targets, we hold one-on-one meetings withrepresentatives from these firms approximately twice ayear.
In the meetings we held with life insurers in November
and December 2023, we reviewed their analyses of thefactors behind changes in sales personnel numbers. We
also suggested the following actions:— Use separate analyses for non-sales employees
and sales personnel when conducting employee
engagement surveys

Sep-19Mar-20

Sep-20Mar-21

Sep-21CompanyE

Mar-22

Sep-22CompanyF

Mar-23

Sep-23— Set KPIs related to working environment and job
satisfaction of sales personnel— Include a sales personnel training approach andpolicy reforms in business plans— Expand the evaluation framework for sales
personnel to include activities other than sales
performance and more qualitative evaluation
items
OutcomeCompanies have generally responded positively to
our suggestions. For example, they have acknowledged the need to analyse the proportion of sales
personnel who are managers and to consider ways
to measure work environment and job satisfaction.
In the future, we expect to see them making more
effort in these areas. We also intend to evaluate theresults by observing both quantitative trends insales personnel channels and qualitative progress
through regular engagement.

23

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Japan Fixed Income Team — Global Bond Fund Management Team

Evaluating thesoundness of societies

Interpreting our sovereign ESG analysis
If, for example, a country scores extremely
poorly on environmental factors, it may beprone to more frequent and severe disasters
associated with environmental degradation
over the long term. This may undermine social
stability more than in countries that haveachieved a low-carbon society. In turn, thismay adversely impact a country’s sustainablegrowth.
Also, a nation with poor social factors may
not be fully utilising its human capital. In thelong term, this may widen the gap between
rich and poor, contribute to widespreadsocial unrest, and hinder long-term growth.
Similarly, poor governance factors are likely toincrease political risks. Alongside greater risks

Nikko AM Sustainability Report 2024

of terrorism and conflict, elevated politicalrisks raise the likelihood of adverse effects
on debt soundness by increasing unsoundgovernment spending.
The scatterplot shows the relationshipbetween the International Monetary
Fund (IMF) estimate of GDP per capita inpurchasing power parity (PPP) terms andthe sovereign ESG score calculated by ourdepartment (as of March 2024). It covers
sovereign debt that the Fixed Income Fund
Factors evaluated for sovereign ESG scores
Environmental (E)Society (S)Governance (G)Greenhouse gas
emissions/capita

Humandevelopment

Corruption

Greenhouse gas
emissions/GDP

Gender equality

Government
effectivenessClimate change
vulnerability andresilience

Average life
expectancy

Political stability

Sustainability offorest resources

Secondaryeducation
penetration

Regulatory
quality

Sustainability ofmineral resources

Electricity
penetration rate

Rule of law

Sustainability ofenergy resources

Modern slavery(forced labour)

Government
response tomodern slavery

Sustainabilityof freshwater
resources

Gini coefficient

Freedom ofspeechManagement Department has invested in, allof which is issued by countries included in the
FTSE World Government Bond Index. Most ofthese countries are developed nations andthe deviation in their sovereign ESG scores isrelatively small. Even then, the sovereign ESG
score and GDP per capita (in PPP terms) ofthese countries show a strong correlation.
We see ESG factors as useful measures ofthe sustainability of a society as well as thestability and soundness of its economic,
political, and social infrastructure. ESG
factors are also thought to have an effect on

Osamu Matsubayashi, Fund Manager,
Japan Fixed Income Team
Global Bond Fund Management Teama country’s debt over a long period of time.
Monitoring these factors to supplement credit
ratings, which focus on the fiscal conditions ofa country, is therefore seen as an effective wayof enhancing the long-term stability of bondinvestments.

Sovereign ESG scores and GDP per capita (PPP terms)
100

Sovereign ESG scores

The focus of our sovereign ESG analysis
Sovereign bonds, both domestic and foreign,are a major component of our current
fixed income investments. As they do withcorporate bonds, major rating agencies — S&P,
Moody's, and R&I — provide ratings for debt
issued by leading countries in both their local
currencies and foreign currencies. Ratings
are based on analyses of the risk of default,
which generally take into account countries’
fiscal balances and their debt levels, as well asother information such as financing structures,
economic growth trends, and the stability of
their markets.

90

y = 0.0006x + 43.808
R² = 0.6839

80

70

60

50

40
20,00030,00040,00050,00060,00070,00080,00090,000GDP Per Capita (PPP terms)

24

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Asian Equity Team (Ex. Japan)

Knowing the score
Our ESG methodology
The consideration and integration of ESG
factors is a core part of our Asian equity
investment process. This is linked to ourfundamental belief that companies withstrong or improving ESG performance canachieve high, sustainable returns. While we
recognise there are potential risks, we thinkfirms prioritising ESG offer good opportunities
for shareholders.
Our ESG Materiality Map, which we havecustomised for Asia, allows us to identify
the material issues and opportunities foreach of the companies we cover. As part ofour proprietary ESG scoring methodology,
individual companies are assessed and scoredon environmental, social, and governancefactors alongside fundamental analysis, which
informs the overall company score. The casestudy below illustrates how we apply thesescores.
In 2023, Asian companies continued to
improve their ESG data disclosures, but thelack of consistent and verifiable data is still aprevalent issue across the continent. As such,
firms in Asian markets — where an understanding and appreciation of ESG investingis still developing — lend themselves
naturally to active ESG engagement, which
we supplement with ESG-focused research.
We rely on our research analysts and their
engagement with companies to identify
material ESG risks and opportunities.

Nikko AM Sustainability Report 2024

Additionally, with the many complex, diverse,
and fast-changing economies in Asia, we
believe ESG implementation is more nuancedin the region than elsewhere, and there
cannot be a one-size-fits-all approach. As we
assess materiality, we are always cognisantof the differences in ownership, culture,and stages of development compared with
developed markets.
We have continued to enhance our
ESG-integrated investment framework to help
us keep up to date with ever-evolving global
regulations and to determine their effect onshareholder returns. This research involves
close collaboration with our dedicated ESG
Asia (ex. Japan) analyst and the broader
Global Sustainable Investment Department.
Engagement
A key aspect of our ESG-integrated
investment framework is engagement. We
continue to engage with companies not
only to better understand their ESG risks andopportunities, but also to encourage them toimprove their disclosures and performance.
While adherence to ESG principles in Asian
nations still lags that of developed countries,
we have seen some improvement. Companies
are generally more aware of the importanceof ESG, and some are making an effort tomitigate the risks.

Members of the Asian Equity Team“We have continued to enhance our ESG-integrated investment
framework to help us keep up to date with ever-evolving global
regulations and to determine their effect on shareholder returns”

25

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Asian Equity Team (Ex. Japan)

Case study

ESG scoring in action
Issue
First Resources, one of the leading palm oil producers
in Indonesia, has courted controversy over deforestation and the impact of its operations on biodiversity.
Additionally, our materiality map (see table) had
flagged a number of other issues that warned ofproblems at the company. We decided we had toengage with First Resources to see how it was seeking
to improve in these areas.

Activity
The Asian Equity team met the company in March2023 and again in December. At these meetings, welearned that it was on track to achieve its sustainability commitments and that it was actively addressing
the issues we raised. In 2022, the Roundtable on
Sustainable Palm Oil industry group certified 34%of the company’s operations, more than double the
15% it achieved in 2020. While this is still considerably lower than the 77% coverage achieved byits competitor Wilmar International, we think First
Resources will be able to reach the same level in 2024.
The company’s MSCI sustainability score should also
improve over the next two years. Although it is far
from perfect with regard to ESG implementation, First
Resources is no worse than average and is on track to
improve its sustainability performance.

Outcome
We will continue to engage with the company andmonitor its progress as it improves biodiversity, uses
land more sustainably, and starts a new project todevelop biofuels.

Asian Equity Team ESG Materiality Map
Environmental Pillar (50%)

Social Pillar (30%)

Governance Pillar (20%)

Climate Change

Nature Capital

Pollution & Waste
Management

Environmental
Opportunities

Human Capital

Product Liability

GHG Emissions fromOperations

Water

Toxic Emissions &Waste

Clean Tech

Labour Management

Product Safety &Quality

GHG Emissions from
Product/Customers

Land & Biodiversity

Packaging Material &Waste

Green Building

Labour Development

Privacy & Data
Security

Physical Risk

Resource
Management

Electronic Waste

Renewables

Health & Safety

Responsible
Investment

Supply Chain
Management

Financial System
Instability

Financing
Environmental Impact

Primary Risk
Issues which can put a company out of business

Secondary Risk
Issues which can have a material impact on shareholder returns.

Social Opportunities
Access to Basic
Services (Food, HC,
Finance, Power,
Comms, Education)

Corporate GovernanceCorporate Behaviour

Beneficial Ownership Assessment (Individual,
SOE or Capital Market)
Minority Interest
Alignment

Business Ethics &Fraud

Opportunities in
Health & Wellbeing

Principal-Agency
Alignment

Anti-Competitive
Practices

Community
Development

Board

Corruption &Instability

Pay

Past Transactions

Accounting Practices

Transparency &Disclosure

Opportunities
Issues which can lead to a material enhancement in shareholder returns

Governance
Opportunities
Ownership &Management Change

Pre-defined General Secondary Risk
Climate Change and ESG-Governance

The individual issue names identified on this page are not a recommendation to sell or purchase an individual issue and do not guarantee holding or non-holding in a fund or strategy.
Nikko AM Sustainability Report 2024

26

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Asian Fixed Income Team (Ex. Japan)

A holistic view
Our approach to ESG
ESG analysis is integrated into our credit
research process as part of the bottom-up
fundamental analysis of issuers, forming acomponent of our Internal Credit Rating(ICR) framework. It provides us with a more
holistic view of issuers because it enhances
the process of identifying investment opportunities and helps to manage risks. We
believe that material ESG factors can impact a
company’s credit profile, and companies withstrong and/or improving ESG performanceoutperform over the long term.
Our ESG Materiality Map, modified for Asia,
is the starting point for our credit analysts in

identifying the key ESG issues that issuers
face (see materiality map).
Our credit research analysts conduct ESG
analysis as part of the bottom-up credit
research process. They have the best understanding of the material ESG issues facedby the issuers within the sectors they cover.
These analysts then assign a weight to theindividual environmental (E), social (S), andgovernance (G) pillars to determine themateriality of these key ESG issues to theissuers, then they assign a score for eachpillar, reflecting the issuer’s performance inthese areas. This analysis allows us to form
a holistic understanding of the issuer andhelps us to find and support companies thatare improving their ESG performance.

provides an insight into how that issuer isperforming relative to its peers, helping us
to identify leaders and laggards.

We use a different model to evaluate
and quantify a country’s exposure to,and management of, ESG risk factors.
Our proprietary ESG Sovereign Rating
Model was developed in 2022 by theIssuers are also assigned an ESG outlook of“Deteriorating”, “Stable”, or “Improving” byconsidering the expected ESG trends of theissuer over the next 12 to 18 months. This

Asian Fixed Income team’s ESG Materiality Map
Environment

SocialGovernance

CarbonEmissions

Product Carbon
Footprint

LabourManagement

Health & Safety

Board

Pay

Financing
Environmental
ImpactClimate Change
Vulnerability

Human Capital
Development

Supply Chain
LabourStandards

Ownership

Accounting

Water Stress

Biodiversity &Land Use

Product Safety &Quality

Chemical Safety

Business Ethics

Anti-Competitive
Practices

Raw Material
Sourcing

Toxic Emissions& WasteFinancial
Product Safety

Privacy & Data
Security

Corruption &Instability

Financial System
Instability

Packaging
Material & Waste

Electronic Waste

Responsible
Investment

Insuring Health& Demographics

Tax
Transparency

Ownership &Management
ChangeOpportunities in
Clean Tech

Opportunities inGreen Building

Controversial
Sourcing

Access to
Communication

Minority Interest
Alignment

Principal-Agency
Alignment

Access to
Finance

Access to
Healthcare

Opportunities
in Renewable
EnergyRegulator Track
RecordOpportunities
in Nutrition &HealthMembers of the Asian Fixed Income Team

Nikko AM Sustainability Report 2024

27

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Asian Fixed Income Team (Ex. Japan)

strategy. Engagement can either
take place between our team andrepresentatives from a company or,
where possible, collaboratively, withother investors as part of investor
initiatives.

Fixed Income (Ex. Japan) team andthe broader Global Sustainable
Investment team.

Members of the Asian Fixed Income Team

Asian Fixed Income team and the
Global Sustainable Investment
team. In 2023, we further refined
this model by reviewing the E, S,
and G indicators used and incorporating new ones, such as the“Modern Slavery Index”, which wethought were of growing relevance.
We arrived at a total of 21 indicators,
from publicly available sources,that broadly cover all three pillars.
Sources included the World Bank, theUnited Nations, and the European
Commission Emissions Database for
Global Atmospheric Research.
This model helps us to better
evaluate ESG elements and has
added substantially to the quality of
our investment analysis. We continue
to enhance our ESG-integrated
investment framework byresearching ESG issues and keeping
up to date with global regulations.
Then we try to better understandhow those issues and regulations
could affect us and the companies
we invest in. We conduct our
research in close collaboration witha dedicated ESG analyst on the AsianEngagement
In addition to assessing our issuerson their disclosures, we have formany years made engagement
an important aspect of our credit
research process. Our analysts
actively engage with companies
about the downside and upside risksof ESG factors and how they may
affect operations or help to drive
sustainable returns over time. We
find that engagement provides us
with better insight into the issuer
and how ESG considerations arefactored into their overall business

Our engagement activities have
led to a marked improvement incompanies’ understanding of theirown ESG risks and opportunities,
which is something we illustrate
in our case study. As part of ourstewardship activities, we willcontinue to work on enhancing
our engagement approach andeducating our investee companies
on the impact of ESG risks andopportunities.

ESG Sovereign Model

E

S

G

GHG Emissions

Human Development
Index

Control of Corruption

GHG Emissions
per Capita

Gender Inequality Index

Government
Effectiveness

GHG Emissions
per GDP

Lost Health Expectancy

Political Stability &Absence of Violence

Vulnerability Index

Secondary Education
Attainment

Regulatory Quality

Mineral Depletion

Access to Electricity

Rule of Law

Energy Depletion

Gini Coefficient

Voice & Accountability

Modern Slavery Index

Govt Response toModern Slavery

Net Forest Depletion

Case study

Powering change through engagement
In our 2023 Sustainability Report, we described an engagement weundertook in 2022 as part of the Asian Utilities Engagement Programme(AUEP) of the Asia Investor Group on Climate Change (AIGCC). In
2023, we continued this collaborative engagement with the company,
Perusahaan Listrik Negara (PLN), and saw it make further progress.
Issue
The state-owned company is the dominant power generation, transmission, anddistribution provider in Indonesia. With close to 90% of its production powered bythermal sources, PLN is heavily exposed in the transition to zero carbon. Not surprisingly, it scores poorly among Asia–Pacific utilities firms for both absolute and relative
carbon emissions. In addition, the Indonesian government appoints half the directors,
severely limiting the board’s independence. The AUEP has focused on encouraging thecompany to address these environmental and governance issues.
Activity
We had two collaborative meetings with PLN as part of AIGCC’s AUEP engagement in
2023, which followed on from our two meetings with the firm in 2022.
— In May, we received an update on PLN’s decarbonisation plans. We learned that thecompany was working with the Indonesian government to finalise the early closureof several thermal coal-fired power plants. We also discussed potential financing structures to help underwrite the shutdown process.
— In June, we had a discussion with the company on Indonesia’s transition to net
zero, which involved other AUEP investors as well as representatives from Indonesian
government ministries. Investors provided feedback on what they are looking for intransition planning and ideas about potential financing.
Outcome
PLN has made strides in its efforts to decarbonise. Since the start of our collaborative
engagement in 2022, the company has announced the cancellation of a substantial
amount of new coal-fired power plant capacity and agreed to halt new developments.
Recently, it announced Indonesia’s first early shutdown of a coal-fired power plant,
subject to certain conditions being fulfilled.
Taken together, we view these efforts as signifying the company’s commitment toclean energy and, ultimately, zero carbon. Together with fellow investors in the AUEP,
we will continue to monitor the firm’s progress through our engagement.

Renewable Freshwater
Resources

The individual issue names identified on this page are not a recommendation to sell or purchase an individual issue and do not guarantee holding or non-holding in a fund or strategy.
Nikko AM Sustainability Report 2024

28

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Multi-Asset Team

Carefully screening
portfolios
Multi-asset investing, bydefinition, involves a wide rangeof assets, including equities,
fixed income securities, and realestate investment trusts (REITs).
The Multi-Asset team manages
a broad range of portfolios
using a variety of investment
approaches, and our ability tointegrate ESG considerations
varies across our diverse client
portfolios.
In situations where we use Nikko AM’s active
equity and credit funds, we undertake ESG
integration and company engagement onmaterial issues. But where we invest using
passive funds, such as exchange traded funds,
our ability and opportunity to integrate ESG
can be limited.
As we draw on our proprietary research of the
return potential for different asset classes, ourexperience with portfolio construction, andthe expertise of Nikko AM’s Global Sustainable
Investment team, we can support clients withadditional ESG requirements.

Nikko AM Sustainability Report 2024

Firm-wide exclusions on cluster munitions
apply across all our strategies where we havediscretion. Together with an ESG specialist, we
screen portfolios to identify companies thatbreach social safeguards such as those listed
in the Ten Principles of the United Nations
Global Compact and the Organisation for
Economic Co-operation and Development(OECD) Guidelines for Multinational
Enterprises on Responsible Business Conduct.
Companies that have been flagged as beingin breach of social safeguards will be further
assessed, which might entail engagement toclarify areas of concern, before we divest as alast resort.
We always aim to invest in the best interestsof our clients, so we are always transparent
in our communications and discussions of
how we integrate ESG considerations in ourinvestment process.

Members of the Multi-Asset Team

“Together with an ESG specialist, we screen portfolios to identify
companies that breach social safeguards such as those listed in
the Ten Principles of the United Nations Global Compact”

As ESG regulations and disclosure requirements evolve, we are committed to
exploring further opportunities with our
Global Sustainable Investment team tofurther embed ESG considerations into ourinvestment process.

29

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

New Zealand Equity and Bond Teams

Regularly reviewing
ratings and risks
ESG integration
Nikko AM New Zealand’s equity and bondteams speak with a united voice on ESG
issues. As medium- to long-term investors,
we use our extensive experience to understand and evaluate the materiality of industry
and company ESG factors and how they may
impact our investment decisions, through ourbottom-up fundamental approach. On someoccasions ESG factors may not be material
enough to alter our conclusions. There is noset formula.
We rely on the experience of team members
to understand ESG impacts and document
them in our investment research reports.
While these reports form an importantelement in our approach, they cannot be
assessed and managed in isolation. Other
factors, such as the quality of a management
team, must also be carefully assessed.
Engagement and proxy voting
On a quarterly basis, we screen the investments we hold across all portfolios— together with investments on watch orunder active assessment — using a tool fromMSCI ESG Research. This process assists theteam by adding another layer of scrutiny to
our knowledge of companies. Many debt

Nikko AM Sustainability Report 2024

issuers are also listed on the New Zealand
Stock Exchange and are captured during thisscreening.
The outcome of this process is that companies
are rated against the standards and performance of their industry peers on a scale from
AAA to CCC. We engage with companies
in an effort to raise the bar in areas where
improvement would be beneficial to stakeholders. These areas may be identified by
MSCI research or our own research. A ratingof BB or less does not necessarily mean weshould not invest in a company, but that weneed to engage with the company on themain issues causing the poor rating.
Similarly, a higher MSCI rating does notalone dictate a higher investment weight.
The primary driver of a company’s weight inour portfolios will still be determined by therelevant portfolio manager, based on a rangeof both quantitative and qualitative factors.
The MSCI rating is only one of the quantitative
factors that feeds into our investment process.
Companies that have higher ratings or are

Members of Nikko AM New Zealand’s equity and bond teams

actively improving their ESG standards will
ultimately be recognised by market participants, so our process should highlight theseopportunities.

down on modern slavery in supply chains.
In 2023, we screened our bond portfolio for
exposure to uninsured climate change risk(see case study).

We also monitor the carbon footprint andweighted average carbon intensity of ourportfolios. This information helps to form abaseline, which we use to find opportunities
in areas that we can invest in. Then we try to
encourage these firms to move towards alower carbon future.

In our opinion, voting is an integral part ofresponsible stewardship of capital. Analysis
of a company’s corporate governancestructure helps to form our view of the qualityof a management team. We exercise proxyvoting rights independently and solely in
the interests of our clients and beneficiaries.
When we vote against a company resolution,
it is our policy to write to the management
to explain our reasons in an endeavour toadvance the company’s development.

We may also take action to combat other risks
to our portfolio. In our previous sustainability
report, we described our efforts to clamp

30

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

New Zealand Equity and Bond Teams

Case study
Anticipating the ramificationsof climate change in New
ZealandIssue
Climate change is affecting New Zealand, as
elsewhere, resulting in more extreme weather.
In early 2023, floods and a cyclone caused
widespread damage to property. Should such
weather events worsen and become more regular,bond holders will increasingly face risks due
to losses on damaged assets and uninsured orunder-insured property.
Activity
The New Zealand Fixed Income team reviewed
potential risk exposures across its holdings.
Risks were deemed to be any assets that could
be significantly damaged by weather events or
where insurance might be insufficient, such as
securitised vehicle and equipment loans andtheir providers. To better understand and manage
these risks, the team questioned all issuers andprimary financiers about these types of assets toascertain whether:— full insurance is a requirement for such financeor leases— there is a mechanism to ensure borrowers or
lessees do not let their insurance lapse and thatthe finance provider is a notifiable party on
insurance policies

The Ngaruroro River in Hawkes Bay, New Zealand, overflowing a day after Cyclone Hale hit the region on January 11, 2023.

— there are risk management systems in place toensure insurance is maintained as loans age
OutcomeThis exercise allowed the team to more precisely
quantify our exposure to extreme weather events— and assured us that no undue risk currently
exists. However, we acknowledged that risks could
increase in the future. We will continue to stayabreast of developments in this area to determine
whether intervention may be necessary in the
future.

Nikko AM Sustainability Report 2024

31

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

US Investment Team

Sustainable
collaborations
ESG integration
The US investment team has increasingly
focused on ESG considerations in ourinvestment process. We do this throughour sub-advisers, which provide us withinvestment advice for managing our different
equity mandates. Each sub-adviser has its own
dedicated approach to analysing companies
in relation to ESG. We hold monthly and ad
hoc conversations with them, where we
discuss the potential risks to the investment
strategies as well as the opportunities that
may arise from the changing environment.
We use various tools and metrics to assess
ESG risks and opportunities, including
ESG ratings from third-party providers.
The investment team’s philosophy is basedon the belief that companies with strong
ESG practices are better positioned todeliver sustainable, long-term financial
performance. We recognise that addressing
ESG risks and opportunities is critical tomanaging risk and maximising returns.
Each sub-adviser has a slightly different
approach to ESG. However, they all integrate
ESG into their investment process byconsidering a broadly similar range offactors, such as environmental impact,labour standards, and business ethics. In
practice, some advisers place more focus

Nikko AM Sustainability Report 2024

on these factors than others. An importantpart of the process is engagement. Bothour sub-advisers and our investment teamengage with companies to encourage themto adopt sustainable business practices.
Another key pillar of the ESG framework
is finding innovative companies that aredeveloping new ways to address ESG issues.
We believe that companies that are focusedon innovation and new technologies are
more likely to be sustainable and havea positive impact on the environmentand society. They are also more likely tooutperform financially in the long term.
Making every vote count
The area where we believe we can have an
impact in implementing our ESG philosophy
is through proxy voting. We take our proxyvoting responsibility seriously and work as ateam to review all ballots before voting. We
also use a proxy adviser, which recommends
how we should vote, and its recommendations
are based on our group voting policy. Whenassessing proxy ballots, we find it useful toengage with companies to complement
the proxy adviser’s recommendations.
One proxy ballot item that we review
with increased scrutiny is the shareholder
opinion on executive compensation. The

Say-on-Pay vote asks investors to vote on
the compensation of the top executivesof a company. It is an advisory vote that is
not binding, but we expect management
to make changes in the event of low
shareholder approval. As an asset manager,
we take Say-on-Pay votes extremely
seriously, reflecting our commitment toensure alignment between executive
compensation and company performance.
We use the proxy ballot to convey ourconcerns when we perceive a disconnection
between pay and performance.
By actively engaging in these votes, we
assert our fiduciary responsibility to protect
shareholder interests and advocate fortransparent compensation practices. The
frequency of these votes differs for eachcompany but, given the option, we support
the ability to vote on executive compensation
annually. Ultimately, leveraging our voting
power for Say-on-Pay resolutions underscores
our dedication to promoting sustainablelong-term value creation and fostering trust
between management and shareholders.

“The investment team’s
philosophy is basedon the belief thatcompanies with strong
ESG practices are better
positioned to deliver
sustainable, long-term
financial performance”

Executive compensation plans vary bycompany and often have different goals,
depending on the size of the company,
the business sector, or the stage of thecompany’s development. Additionally,as ESG metrics are increasingly used
in incentive compensation, we believe
it is important for investors and proxyadvisers to question companies on theuse of such metrics and whether they
have achieved any related goals.
A collaboration to improve
emissions in the skies
Together with Climate Action 100+, anindustry initiative, the US investment teamis involved in a collaborative engagementwith a major US airline. We have calls withthe airline to learn how it is working to
reduce carbon emissions and encourage it
to improve its reporting and disclosures.
The company has been receptive to investor
feedback and is making large investments
towards a more sustainable future. It has
committed to an interim target of reducing
its carbon emissions intensity by 50% by2035, compared with 2019, and a long-termtarget of achieving net zero by 2050. To
reach this goal, the company is improving
efficiency, adopting more sustainable
alternatives, and collaborating with partners.
One of its main areas of focus is finding ways
to expand the supply of sustainable aviation
fuel, which requires working together with
policymakers, suppliers, and airports.
We will continue to engage with thiscompany and encourage them to stayon track with their commitments.

32

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Global Equity Team

Sustainability indepth and breadth
We have long believed that sustainability should be at the coreof our stock selection process. Our Future Quality investment
approach helps us to identify those companies we think are well
positioned to sustain high returns into the future, while creating
value for all stakeholders and our planet. Our underlying belief isthat the market will increasingly recognise that these companies
will not only weather future challenges, but also be able todeliver solutions to the problems that we face.

Members of the Global Equity TeamESG analysis is undertaken by each portfolio
manager and analyst, and is fully integrated
into the stock-selection process. This ensuresthat we can robustly evaluate the materiality of each factor and its potential impact.
We rely on our four-pillar Future Quality
analysis, which includes in-depth evaluations of ESG factors, to determine theireffect on a company’s risks and returns. Our
research includes an analysis of a company’s
corporate governance, social practices, theenvironmental sustainability of its products orservices, and its ability to fund its growth and
ESG commitments.

Nikko AM Sustainability Report 2024

Engaging within and across the portfolio
In creating a sustainable portfolio, picking theright stocks is only part of the job. It is also
crucial to make sure the chosen companies
remain committed to pursuing sustainable
practices. Our investment team engages withinvestee companies to help promote better
ESG practices if we believe there is room forstandards to improve (see our case study
below). From time to time, these engagements can embrace the whole portfolio— when we believe there is an issue that
affects many companies. Climate change is aprime example.

In our 2023 Sustainability Report, we
described a survey undertaken by our Global
Equity team of companies in our Global
Equity strategy to determine whether their
management teams understood the implications of our commitment to supporting andcontributing to a low-carbon future. In lightof their responses, in 2023, we focused on thecompanies in the portfolio with the highest
carbon intensities or those in sectors most
exposed to climate change risks, even if theircarbon footprint might be relatively low.
Through this process, we identified a numberof engagement priorities where there wereparticular areas for improvement. The priorities were specific to each company as we
wanted to ensure that our engagement
added value to the company and helped us to
improve our investment thinking. We adjusted
our expectations according to the size of eachcompany’s carbon footprint. For example, we
made one company a priority for engagement
even though it already has in place anambitious climate strategy compared with its
peers. It is by far the largest emitter of greenhouse gases in our portfolio and, therefore,
demanded higher expectations and a higher
degree of scrutiny.

33

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Global Equity Team

Case study
Keeping clear of conflict minerals at an
IT company
Hexagon is a global provider of design, measurement, andvisualisation technologies held in our Global Equity portfolios.
Issue
MSCI reported that the company had below-average disclosures and procedures for auditing suppliers that might be involved in sourcing raw materials
from controversial parts of the world. In our 2023 Sustainability Report, wereported steady improvement at the company following our engagement.
This progress continued in 2023.
Activity
The Global Equity team started engaging with Hexagon in 2021, when we
first discussed with its representatives the problems associated with sourcing
minerals from countries enduring conflict or human rights abuses. Theseminerals are often referred to as “conflict minerals”. Our engagement in
2023 was to ensure the company was pursuing its commitment to conduct
supplier audits.
In April, the company published an update on its progress in its Sustainability
Report. It had set a target of auditing 100% of its suppliers in high-riskcountries — a total of 75 at the time — by the end of 2023. At the end of2022, the number of these suppliers had been reduced to 56 and, of these,
11 audits had been completed. The report confirmed that the company
stood by its goal of auditing all of these suppliers by the end 2023.
In August, we held one of our regular company calls with Hexagon’s CEO
and investor relations team, and they promised to give us further updates
later in the year. In December, the company reiterated its commitment ofauditing 100% of its suppliers in high-risk countries by the end of the year.
Subsequently, when Hexagon presented its full year results in January 2024, it
was confirmed that the commitment had been fulfilled.
OutcomeAs a result of this effort, the company’s processes to ensure that raw materials
are sourced from areas free from conflict are now better than its peers in theindustry, and MSCI scores Hexagon above the industry average on controversial sourcing. We consider our engagement on this particular issue iscomplete, although the company’s sustainability efforts will continue to bemonitored through the Future Quality process used by our Global Equity
team to evaluate investments.

Metal raw materials stacked at a freight terminal

The individual issue names identified on this page are not a recommendation to sell or purchase an individual issue and do not guarantee holding or non-holding in a fund or strategy.
Nikko AM Sustainability Report 2024

34

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Global Fixed Income Team

Consistency is thefoundation forsustainability
We start from the premise that the world economy is gradually
moving, albeit rather haphazardly, towards sustainability.
Therefore, it is incumbent on us to incorporate
ESG principles into our investment process.
We have always believed in employing aconsistent process that relies on quantitativeand qualitative inputs to generate ideas andconstruct high conviction portfolios, whichshould reward us suitably for the risk we take.
ESG implementation
ESG factors are considered across all our
products at the research and screening stageof the investment process. We continue todevelop our proprietary ESG monitoring tools
and are increasingly taking ESG considerations into account when selecting bonds. Ourassessment of corporate governance focuses
mainly on general management quality, whileenvironmental and social analyses tend to
capture risks and opportunities linked to a
specific industry or region.

Nikko AM Sustainability Report 2024

Given that the majority of our fixed income
assets are in AAA-rated bonds, it is sometimes
challenging to ensure that the environmental
and social aspects of a business align withevery one of our investors’ wishes. However,
we strive to make sure these businesses meetthe standards set out by the UN-supported
Principles for Responsible Investment.
ESG considerations are incorporated where
they are deemed material to the investmentcase and in line with our clients’ risk appetiteand perspectives on ESG investing. For
example, for clients with high sustainability expectations, our Global Green Bondstrategy has historically invested strictly ingreen bonds from global AAA-rated sovereigns, supranationals, and agencies withthe strongest sustainability credentials.
Issuers include the World Bank, the European

Members of the Global Fixed Income Team“We have always believedin employing a consistentprocess that relies on
quantitative and qualitative
inputs to generate ideas
and construct highconviction portfolios”

35

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Global Fixed Income Team

Investment Bank, and KfW, the German stateowned investment and development bank.
However, in 2023 we expanded our investable
universe to include corporate credit as ameans of supporting clients’ growing desire tohelp fund the transition to a net-zero future.
Our Global Green Bond strategy — relaunchedin October and managed from London —includes social and sustainable bonds from
corporate issuers, and it provides the ability
to invest in sustainability-linked bonds in the
future. It complies with article 9 of the EU’s
Sustainable Finance Disclosure Regulation,
giving investors across the EU access tobonds that finance affordable and clean
energy, sustainable cities and communities,
and climate action. It falls under the impact
category of our ESG classification system,
covering funds that invest in companies thathave an environmental or social impact, while
also pursuing return objectives (see the implementation section on p. 13 for more details).

strategies, as well as other non-financial
information, including their management
policies, business strategies, and material
ESG matters, as part of an assessment ofcorporate value that ultimately informs ourinvestment decisions (see our case study foran example).
However, given our relatively small exposure
to corporate bonds and emerging markets,
we are realistic about the practical limits to
our influence, and we avoid situations where
we might end up in corporate actions thatwould disproportionately tie up resources
and time.

Limited leverage
It is more difficult for a fixed income investor
to have a direct influence on the directionof investee companies. A bondholder lacks
the voting rights that accompany equity
ownership. Even so, it is important for us toengage with management when we see areasthat can be improved.

Case study

Ensuring lessons have been learned at Iberdrola
This Spanish multinational electric utility company is one of the world’s largest producers
of both electricity and wind power.
Issue
While performing due diligence on a bond issued by the company for possible inclusion in our Global Green
Bond fund, we came across a historical controversy involving hydro-electric plants it built in Brazil, notably
the Teles Pires Dam. The company had been criticised for its lack of consultation with indigenous populations
during the dam’s construction.
Activity
The Teles Pires Dam is no longer owned by Iberdrola. Nevertheless, we wished to ensure that lessons had beenlearned, that the principles of the UN Global Compact had not been breached, and that we would not fundprojects that did significant environmental or social harm. We therefore decided to undertake enhanced due
diligence and arranged a call for early January 2024.
The company was transparent with us about the controversy and the work it had done to address the social andenvironmental aspects of its Brazilian dam projects. It is undertaking systematic stakeholder engagement andhas conducted major in-depth assessments to reduce similar risks in the future. It also confirmed that remedial
measures in relation to the dam were carried over to the new owner when the project was sold. Furthermore,
it told us that it is not planning any major new hydro-electric projects in South America and provided us witha detailed report on the social and environmental impact and mitigation activities relating to its Brazilian dam
projects still active.
Outcome
We are satisfied with the measures the company has taken to reduce the environmental and social risks
associated with its hydro projects. We have therefore downgraded the status of our investment from “Enhanced
Due Diligence Required” to “Monitor”. No further action is required at this stage.

With regard to corporate credit, our Global
Fixed Income portfolio managers andresearch analysts work alongside our ESG
analysts to engage with the companies inwhich we invest. These discussions cover
the firms’ corporate earnings and financial

The individual issue names identified on this page are not a recommendation to sell or purchase an individual issue and do not guarantee holding or non-holding in a fund or strategy.
Nikko AM Sustainability Report 2024

36

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Portfolio Solutions Group

How wemonitor externalmanagers
Philosophy and policy
The Portfolio Solutions Group evaluates,
selects, and monitors external managers.
We believe that ESG factors are inherent
to long-term corporate value creation andsustainable economic growth. We therefore
embrace ESG to better manage investment
risk, deliver better quality long-term
investment returns, have a positive impact on
our communities, and be good stewards of
our environment. We uphold a high standard
in integrating ESG considerations into ourinvestment process.

“our team regularly monitors
whether external managers
are fully integrating ESG
factors into their investment
management process and, if
necessary, encourages them tostep up their activity”

Nikko AM Sustainability Report 2024

We have had most external managers sign
letters of intent affirming their commitment
to integrating ESG into their investment
management. They are expected to
implement a process for assessing andobserving current and future ESG-related
investments. Nonetheless, our team regularly
monitors whether external managers are fully
integrating ESG factors into their investment
management process and, if necessary,
encourages them to step up their activity. Our
periodic assessments of external managers’
ESG initiatives — in terms of their companies,
personnel, research, and investment
processes — means ESG plays a key role in ourmanager selection.
The Portfolio Solutions Group operates
an inter-regional ESG Working Group for
managing external managers, comprising
members from our Tokyo, Singapore, andNew York offices. The working group is led
by Naoyuki Murota of the Portfolio Solutions
Group in Tokyo. It conducts research into therapid changes that are taking place in ESG

Members of the Portfolio Solutions Groupinvestment and keeps up to date with theevolution of ESG investment requirements.

integrated effectively into their investment
activities.

Based on this research, we regularly review
our ESG evaluation framework to properlyreflect ESG requirements for the asset
management industry. We include thoseconsiderations in our assessments of externalmanagers and use them in our discussions
with these managers to ensure that ESG is

Updating our ESG evaluation framework
Attention to ESG factors is increasing year
by year in the asset management industry,
especially concerning climate change. Thereis an urgent need to accelerate the transition
towards global net-zero emissions and we
firmly believe asset managers need to be at37

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Portfolio Solutions Group“We believe that engaging with investee companies andexercising voting rights are powerful tools for us to fulfil ourstewardship obligations”
Members of the Manager Research Teamthe forefront in driving that change. In order
to better evaluate how external managers aresupporting the transition, we revised our ESG
Evaluation Framework and ESG Due Diligence
Questionnaire again in 2023. We will continue
to review and update these documents toimprove our ESG evaluation process.
Engagement and voting
We believe that engaging with investee
companies and exercising voting rights are
powerful tools for us to fulfil our stewardshipobligations. For funds managed under discretionary investment contracts, we exercise
voting rights in line with Nikko AM’s proxyvoting policy, rather than delegating themto external managers. When exercising our
voting rights, we refer to recommendations
from Institutional Shareholder Services, aproxy voting adviser, and conduct stringent
checks on proposals, such as those relating to

Nikko AM Sustainability Report 2024

the remuneration of senior staff, the composition of boards, and the reappointments ofdirectors.
Improving external managers’ ESG
integration
We aim for uniformly high standards but,
ultimately, each external manager integrates
ESG factors into their investment process todiffering degrees. Where integration is foundto be inadequate, managers are encouraged
to raise their standards.
For example, we saw that one externalmanager was investing in fast-growing
small-cap stocks that did not disclose sufficient ESG-related information, particularly
environmental data. As a result of ourrepeated engagements and advice on ESG
processes, the manager started to deepen
its understanding of ESG issues, leading to

the creation of its own ESG checklist andimproved ESG research to feed into theirstock selection process. In 2023, it went
further. Where the original checklist items
were merely rated with a “yes” or “no”, it has
now established a more precise survey with afive-level rating system.
Some other external managers are beginning
to integrate ESG factors explicitly into theirinvestment processes, while yet otherswith partial ESG integration have introduced self-developed models and started
to take into account how climate change
will affect the financial performance of theirinvestments.
ESG integration is developing fast among
our external managers, but we will continue
to make sure it becomes a universal andeffective part of their investment processes.

38

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Stewardship — Engagement on ESG topics

Helping companies
stay on asustainable path
As a leading asset manager, we recognise thatengagement and stewardship are important partsof our fiduciary duty, particularly with reference tosustainability.
Members of the Global Sustainable Investment TeamWe engage with our investee companies
on their strategy, operations, and financial
decisions, as well as their performance andmanagement with respect to material ESG
issues.

buy and sell decisions and for engaging withthe companies they cover.

Investment teams engage with companies
on relevant ESG issues, both before andduring the period of investment. Our Global
Sustainable Investment team also participates in industry-led engagements throughcollective investor groups, such as the Asia
Investor Group on Climate Change andClimate Action 100+. Information from theseengagements is shared with the respective
investment teams. The analysts and portfolio
managers in our investment teams areultimately responsible for assessing the ESG
risks and opportunities that inform portfolio

Materiality: Our engagements are driven bymaterial factors, especially ESG factors

Nikko AM Sustainability Report 2024

Three overarching principles guide ourengagements:

Intentionality: We establish clear objectives
and expectations for our engagements
Effectiveness: We engage in a constructive,
positive, and pragmatic mannerWithin those principles, several key factors
decide how we prioritise companies forengagement, which can differ by region andasset class:— the size of our holding and/or our influence— a poor ESG score or the scope for
improvement— the nature of an issue and/or the severity ofa breach

The details of our engagement approach
are outlined in our Group Engagement and
Stewardship Strategy . It formalises ourengagement and stewardship activities,
ensures unity across regions, and allows us toshare with the market our global engagement
commitments. Examples of our engagement
can be found in the case studies that follow
and in other sections of this report.

— a voting event— our ESG thematic priorities— the client’s priorities— the company’s openness to dialogue

39

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Stewardship — Engagement case studies

Case study 1

Encouraging a major Korean steel maker
to do more for nature (Asian Fixed
Income and Asian Equity)
POSCO Holdings is a South Korean groupinvolved in businesses ranging from steel
to electric vehicle battery materials. It is
held in our Asian Fixed Income portfolios.
Issue
POSCO Holdings has laid out a carbon-reduction
roadmap to reach net zero by 2050. Nevertheless,the group’s short-term targets fail to meet theambitions of the Science Based Targets initiative (SBTi),a UN-backed group pushing companies to adopt aclearly defined path towards reducing emissions inline with the Paris Agreement.
Also, the group’s listed subsidiary POSCO Internationalhas been criticised for contributing to deforestationin New Guinea. It has since announced a policy of“No Deforestation, No Peatland, No Exploitation”.
But it has not committed to making the disclosures
recommended by the Taskforce on Nature-related
Financial Disclosures (TNFD), a corporate initiative that
promotes doing business in a more nature-friendly
way.
Therefore, we wanted to engage with POSCO
Holdings on its carbon-reduction strategy. Also,
through the holding company, we planned to pushfor more of their subsidiaries to sign up to SBTi,and specifically for POSCO International to sign up
to TNFD. We believe these moves would clearly
demonstrate the group’s commitment to meetinginternational sustainability targets. The chart shows
the ESG issues our investment team consideredcrucial to its analysis.

Activity
Representatives of our Asian Fixed Income team andan Asia ex-Japan ESG analyst met POSCO Holdings
in September 2023 to discuss several key ESG issues,
focusing on the Environment pillar. Discussions
included POSCO International’s biodiversity
management practices and whether it would sign up
to the TNFD, as well as the group’s intention to havemore subsidiaries sign up to the SBTi.
The POSCO representatives understood our concerns
about POSCO International not being a signatory to
TNFD while the group was. However, they said POSCOInternational would report on how its operations areadhering to best practices on safeguarding biodiversity for 2023. The company has hired a biodiversity
expert and will start reporting on biodiversity on anannual basis.
We also learned that, as part of its plans to reducecarbon intensity, POSCO Holdings is looking to
implement hydrogen reduction steelmaking, whichuses 100% hydrogen to make direct reduced iron. The
process produces no carbon emissions. The groupis also shifting its fuel supplies from coal to naturalgas, which will generate 30% less carbon emissions
compared with current steel production.

Case study 2company said it had no specific targets for improving
the portfolio’s sustainability. We also argued that a
proposal to introduce limits on equity dividends toprotect bondholders would be ineffective given that,as a private company, it could easily pass cash aroundthe group in the form of inter-company loans.

This large, privately owned fund manager
specialises in real estate, with operations
spanning China, Japan, and Europe.
Although we sold the publicly listedbonds in 2022, we continue to monitor thecompany.

In May and August 2022, we engaged with the firm
to push for greater disclosure, particularly in relation
to significant inter-company loans and related-party
transactions over the previous year. However,management was only willing to disclose minimal
details, stating that more would be revealed at a later
date. We felt this was not acceptable, given the size,
opaqueness, and impact of these transactions, so wesold the bonds shortly afterwards.

Sustained investor pressure pays off at amajor Asian property group (Asian Fixed
Income)Issue
The company has traditionally had minimal green
building targets, with only a small portion of its
portfolio classified as sustainable. As a privatecompany, it is subject to a significantly lower standardof governance than its publicly listed rivals, with fewer
restrictions on related-party transactions and controls
over dividend policy. It also has minimal reporting
requirements.

Outcome
We will continue to review the group’s overall ESG
progress and monitor its carbon reduction strategy.
For POSCO International, we will continue to monitor
how they are mitigating its biodiversity risks, including
if it signs up to TNFD.
POSCO Materiality
Environment High
Carbon Emission, Opportunities in Clean TechSocial Moderate
Health & Safety, Product Safety & Quality
Governance High
Ownership, Corruption & Instability, Board

Activity
Although we are no longer bondholders, we are keen
to see the company improve its green credentials
so we can invest in it again in the future. Therefore,
we wanted to engage with management to see if itwould increase green building representation in its
portfolio. We also wanted it to improve its financial
disclosures and transparency.

Despite no longer being an investor, we engaged
with the company in 2023. We gave our support for
a new related-party transactions committee thatwas set up in October 2022 in response to pressure
from investors, but we continued to urge the firm
to introduce stronger controls on related-party
transactions.
Outcome
We believe that our sustained pressure has led
to steady progress at the company. In 2021, after
listening to our criticisms, it modified the terms of its
bond structure to ensure inter-company loans werealso covered by the limits on dividends. The following
year, the company announced its first environmental
target, namely that all new property developments
should meet the requirements of the GRESB, an internationally recognised standard for ESG performancein real estate and real assets. Then, in 2023, following
the establishment of the new related-party transactions committee, we learned that the company had
significantly reduced related-party transactions.
We will continue to monitor the company todetermine whether we want to invest again in the
future.

In May 2021, during a green bond group investor
call, we pointed out that the proportion of green
building assets in its portfolio was low. However, theThe individual issue names identified on this page are not a recommendation to sell or purchase an individual issue and do not guarantee holding or non-holding in a fund or strategy.
Nikko AM Sustainability Report 2024

40

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Stewardship — Engagement case studies

Case study 3

Paving the way to lower emissions at
India’s biggest cement company (Asian
Equity)Our 2023 Sustainability Report highlighted
our collaborative engagement with
UltraTech Cement, one of the world’s
biggest cement companies. It illustrated our
support for Climate Action 100+ (CA100+),
an investor-led initiative that calls on theworld’s largest corporate greenhousegas emitters to take action on climatechange. In 2023, we saw further positive
developments.
Issue
UltraTech Cement (UltraTech) is one of 170 companies
targeted by CA100+. We hold it in our Asian Equity andAsian Fixed Income portfolios. It operates in a sector
where emissions are hard to abate.
The company has been proactive in addressing thetransition to zero carbon. For instance, it is a signatory
to the Global Cement and Concrete Association(GCCA) Climate Ambition 2050 and is committed to
the GCCA’s Net Zero Concrete Roadmap. It also hasmade commitments to EP100 and RE100, two lobby
groups promoting the move to zero carbon.
Activity
In November 2023, we had another collaborative
engagement call with UltraTech. Our discussion
centred on the company’s decarbonisation efforts.
Analysts from both our Asian Equity and Asian Fixed
Income teams have been participating in the collaborative engagement.
The investor group questioned UltraTech as to why
its 2050 net zero carbon target is not validated by the
Science Based Targets initiative (SBTi). UltraTech said it
would look at aligning with the SBTi but was consciousthat it needed to balance the more demanding
emissions target against the cement requirements ofcustomers.

The investor group wanted to learn the next steps in
UltraTech’s plans to scale up its use of greener powersources to meet its target of raising the proportion ofrenewables from 19% in 2023 to 100% of electricity
requirements by 2050. To reduce its reliance on thermalcoal, UltraTech is developing a number of solar energy
farms. It has also signed renewable energy powerpurchase agreements and is looking at introducing
waste heat recovery systems.
At the time of our meeting, UltraTech said its power
consumption from renewables was closer to 30%, well
above its goal of 19% for 2023. By 2026, the company
aims to raise that to between 50% and 60%, using bothrenewables and heat recovery. UltraTech’s decarbonisation roadmap is not solely reliant on renewables, inpart because several regions of India face implementation problems caused by the limited availability of
renewable power. As a result, the company’s decarbonisation strategy covers three main areas:— improving operational efficiency, notably in clinker
processes (raw material extraction)— diversifying the business— reducing dependency on thermal fuel, whichamounts to 30% of company emissions
Outcome
Representatives from the company responded well tothe call and asked for our feedback on its progress, aswell as our thoughts on areas where we think it can
improve. We will continue to engage with UltraTech
and review how it further develops its decarbonisation
strategy.

UltraTech is developing a number of solar energy farms

Case study 4

Flexing our muscles with Nestlé andCoca-Cola to address plastic pollution(Global Equity)
Issue
Food and drinks giants Nestlé and Coca-Cola haveboth been accused of being among the largest
plastic polluters in the world by the Ellen MacArthur
Foundation, a pressure group promoting the circular
economy. This is despite both companies being
strategic partners of the foundation and signatoriesof the Business Coalition for a Global Plastics Treaty, agroup seeking a UN treaty on plastics.
Activity
The Global Equity team wanted to follow up on issues
specific to each company.
— Coca-Cola: In May 2023, a report from Oceana — alobby group dedicated to protecting the oceans— pointed out that Coca-Cola was not going tomeet its target of having 25% of its products soldin reusable packaging by 2030. In fact, the share fell
from 16% to 14% in 2022.
— Nestlé: In early 2023, MSCI moved Nestlé’s ratingon plastic packaging pollution from “moderate” to“severe” due to a change in MSCI’s rating methodology. In July, it responded to a controversy related
to Nestlé’s palm oil sourcing and deforestation
activities in Indonesia by moving its rating from“moderate” to “very severe”.
We see the impact of both Coca-Cola and Nestlé on
biodiversity as a material risk. We wrote to Coca-Colain June 2023 asking it to comment on its progressin meeting reusable packaging targets and othercommitments. We did not get a response.
In June, we had a constructive discussion with representatives from Nestlé about the company’s plastics
targets and concerns over the lack of regulation andinfrastructure in most countries to support progressin this area. We also probed the company on what
measures it has taken over the past few years tomonitor its supply chain and address deforestation.

Despite both companies adopting sector-leadingtargets, the total amount of plastic they produce
continues to increase every year. Their current targets
are focused on changes in the use of material, suchas reducing the weight and changing the design of
packaging. Neither company has a target to reduce
single-use plastics.
Considering the companies’ lack of meaningfulplans to reduce the amount of plastic waste they
are responsible for creating and the absence of a
response from Coca-Cola, we looked to other meansof engagement to escalate our concerns. As a result,during the third quarter of 2023, we decided:— to publicly support a call by investors for intensive
users of plastic packaging to take urgent action
to reduce plastics. It is an initiative coordinatedby VBDO, a Dutch sustainable investor network,
which has set out clear expectations for companies
such as Coca-Cola and Nestlé, including reduction
targets for single-use plastics. The collaboration also
gave us access to a new engagement channel with
Coca-Cola and Nestlé.
— to become an investor participant in Nature Action
100 (NA100), a new investor-led initiative that
supports nature and combats biodiversity loss.
We asked to participate in the direct engagement
group with Nestlé. However, given our expertise in
Asia, we were instead allocated companies in that
region (and Coca-Cola is unfortunately not among
NA100’s target companies).
Outcome
It is still just the beginning of our efforts to drive
improvements at Nestlé and Coca-Cola. Our influenceis limited by being a relatively small investor in bothcompanies. However, by joining the two new investor-led coalitions, we hope that we will gain better
access to management and increase our leverage toeffect change. We will monitor both firms’ progressagainst biodiversity targets to ensure they stay on
track. We will also consider using our voting rights toescalate any concerns at the companies’ next AGMs.

The individual issue names identified on this page are not a recommendation to sell or purchase an individual issue and do not guarantee holding or non-holding in a fund or strategy.
Nikko AM Sustainability Report 2024

41

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Stewardship — Proxy voting on ESG topics

Good stewardshiprequires active
votingProxy voting is a key part of being a good steward of
our clients’ money. We take great care to ensure thatour voting serves the interests of both companies
and clients, particularly in sustainability matters,
where we are guided by ESG principles.
Proxy voting is an integral part of our active
stewardship approach and we endeavour
to vote all shares where we have voting
authority. We believe voting is an importantmechanism for holding boards andmanagement teams to account, especiallyin passive strategies, when selling the stock
is not always a feasible option. In our fixedincome investments, where we do nothave the voting rights that are available toshareholders, we aim to be active owners
by engaging with the issuer on matters ofconcern.
The Nikko AM Group Proxy Voting Policy establishes our company-wide approach to proxyvoting decisions. This policy establishes theprinciples we use for determining how we
exercise our voting rights at the group level.

Nikko AM Sustainability Report 2024

Implementation of the group-wide policy isundertaken by our regional offices, whichhave the freedom to interpret the principles
to suit local conditions.
As a result, there are some variations in how
our voting and wider stewardship activities are implemented across the group.
For example, in our Global Equity strategy
in the UK, we have a supplemental proxyvoting policy for addressing environmental
and social principles and, in Japan, we havea separate policy, Standards for Exercising
Voting Rights on Japanese Stocks.
Our detailed Guidelines on Exercising Voting
Rights form part of the company-wide proxyvoting policy. Some of the considerations it
covers include:

Breakdown of voting by region, January to December 2023
Region ofcompany
incorporation

Number ofshareholder
meetings

Number of
resolutions

Votes formanagement(Number)Votes formanagement(%)

Votes against
management(Number)Votes against
management(%)

APAC ex.
Japan

2,502

18,161

15,816

87.1%

2,345

12.9%

EMEA

1,080

18,14916,574

91.3%

1,575

8.7%

Japan

2,405

23,93919,883

83.1%

4,056

16.9%

Latin
America

192

1,884

1,672

88.7%

212

11.3%

North
America

1,037

12,338

11,340

91.9%

998

8.1%

Total

7,216

74,471

65,285

87.7%

9,186

12.3%

— shareholder return— the separation of executive and supervisory
functions— the size and composition of the company’sboard of directors— the auditors— executive compensation systems— new share issuance— company control and takeover defences
A summary of our firm-wide voting records
for 2023 is listed in the table. We analysed
7,216 shareholder meetings and voted on
74,471 resolutions. Overall, across all regions,
we voted against management on 12% of
resolutions. The most common reason forvoting against management was in relation to
the election of directors.

We use Institutional Shareholder Services (ISS)to execute our proxy voting decisions. ISS
also provides research and customised voting
recommendations based on our proxy voting
policies. The portfolio manager or analyst
takes a nuanced approach to reviewing the
research and recommendation from ISS,
supplementing it with our own proprietary
research on the company. Ultimately, it is theinvestment teams that are responsible for the
final voting decisions. Examples of our voting
activities can be found in the case studies that
follow.

42

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Stewardship — Proxy voting case studies

Case study 1

Voting for greater dividends anddiversity at a Japanese media group(Japan Equity)

Case study 2

Banking on better green targets at alarge Japanese financial services group(Japan Equity)
Issue
We hold this large Japanese banking and financial
services group in our Japan Equity portfolio. A shareholder resolution on climate change was proposed atthe 2023 AGM by three non-governmental environmental organisations: Kiko Network, Market Forces,
and Rainforest Action Network. The resolution statedthat the group’s significant involvement in carbon-intensive sectors exposed it to substantial financial risk
but that it had not made sufficient efforts towards
achieving zero emissions by 2050. It called on thegroup to set suitable zero-emission targets.

Issue
We were dissatisfied with the absence of womenon the board and the low level of dividends at thislarge Japanese media group, held in our Japan
Equity portfolio.
Activity
To register our disapproval, we voted against
the directors at the shareholders’ meeting in
June 2022 and engaged with the company that
October to encourage it to increase the pay-out
ratio and appoint a female director. We warned
their representatives that we would again oppose
the company’s proposals to elect directors at thenext AGM if there was no action.
OutcomeAt the shareholders’ meeting in June 2023, wevoted in favour of the directors as the payout ratio
now met our requirements and a female director
had been newly appointed. The vote passed with
88% in favour.

Activity
The group said it had been “earnestly working” toaddress climate change, including by:— committing itself to achieving net zero carbon
emissions across the group by 2030 and in its loan
and investment portfolio by 2050
— setting reduction targets for 2030 for its lending
to the power, oil, gas, and coal sectors, aimed atachieving the Paris Agreement’s 1.5°C reduction goal

— By 2040, it would end loans for coal power
generation
In its report to the Japan Equity team, Institutional
Shareholder Services (ISS), our proxy voting agent,suggested that some of the shareholder criticisms
were fair. However, it suggested their concerns weremore than offset by actions the group had taken.
ISS did not recommend supporting the shareholder
proposal.
Outcome
We agreed with ISS and voted against the resolution.
We acknowledged the merits of the proponents’case but noted that the group had committed itself
to enhancing disclosure and releasing new carbon
reduction targets for its lending. We believed thecompany’s activities were in line with global frameworks and, in our opinion, already satisfied thedemands made by the shareholders. In the vote, theresolution failed, with only 27% support.
Although we opposed this proposal, we havecontinued to impress on the company the key role offinancial institutions in controlling emissions and theimportance of its further engagement in this area. We
intend to continue applying pressure on this firm tosupport the transition to a decarbonised society.

Therefore, representatives said they believed they
had already made the commitments required by theshareholder proposal. It also laid out the group’s plans
for further measures:— In 2023, it would set emissions reduction targets for
its lending to the steel and automobile sectors— By October 2024, it would set targets for lending tosectors accounting for roughly 90% of total global
greenhouse gas emissions— By 2030, it would end lending to thermal coalmining in member countries of the Organization
for Economic Co-operation and Development andby 2040 for non-members

Nikko AM Sustainability Report 2024

43

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Stewardship — Proxy voting case studies

Case study 3

Case study 4

Issue
Microsoft is held in our Global Equity portfolio.
In May 2023, plans by the software giant to open
data centres in countries with questionablehuman rights records, such as Saudi Arabia,
provoked a backlash from a number of humanrights groups. As a result, certain shareholders
submitted a proposal to the 2023 annual shareholders’ meeting requesting that the company
prepare a report on its human rights due
diligence process for high-risk countries.

Issue
Procter & Gamble (P&G), one of the world’s
biggest consumer goods companies, is heldin our Global Equity portfolio. In May 2023, thecompany generated controversy by abandoninga 2020 pledge not to buy wood pulp fromdegraded forests. As one of the biggest buyers ofwood pulp, this drew widespread criticism fromgreen lobby groups, investors, and others.

Attempting to strengthen humanrights policy at Microsoft (Global
Equity)The proponents expressed particular concern
over the plans to expand data centres in locations
shown by the US State Department’s Country
Reports on Human Rights Practices to have poor
human rights records. They noted, for instance,that Saudi Arabia’s cloud computing laws andregulations are not aligned with international
human rights standards, undermine the right toprivacy, and allow state surveillance.
Activity
ISS recommended that we vote in favour of theresolution. We agreed with its assessment that theresolution addressed legitimate concerns overpossible complicity in human rights violations,which could increase reputational, legal, andworkforce risks for the company. ISS added that, as
the company builds more data centres, additional
disclosures would improve shareholders’ evaluation of the company’s management of theserisks.

Voting to clean up deforestation
policy at Procter & Gamble (Global
Equity)The company went ahead with the move despitea resolution on deforestation that passed atthe 2020 AGM with the support of more than
two-thirds of shareholders. That resolution had
noted the lack of any comprehensive plan from
P&G to reduce its exposure to deforestation andforest degradation. It requested that P&G issue areport assessing its efforts to eliminate deforestation and the degradation of forests in its supply
chains. These failings were addressed by company
policies in 2021, so the reversal on the forest
degradation pledge was a clear step backwards.
Outcome
To show our displeasure, we voted against there-election of the chair of the Governance &Public Responsibility Committee to hold her
accountable for overseeing the removal of thepledge. However, the vote passed with 89.4% ofshares voting for her re-election.

OutcomeGiven our general agreement with thesearguments, we voted in line with the ISS recommendation. However, the resolution failed to pass,with only 33.6% of votes in favour.

The individual issue names identified on this page are not a recommendation to sell or purchase an individual issue and do not guarantee holding or non-holding in a fund or strategy.
Nikko AM Sustainability Report 2024

44

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Stewardship — Collaborative Engagement

Carefulcollaboration starts
to pay dividends
Our engagement with companies is an important way for us toencourage change. However, there are times when our voicealone is not enough. Collaborative engagement with like-minded
investors can increase shareholders’ influence on companies’
corporate behaviour and ESG performance.
While these collective initiatives are becoming
more common in many regions, collaborative engagement is still in relatively
uncharted territory in certain parts of theworld. For example, in some countries in Asia,
one-to-one engagement can be viewed as
more constructive and culturally appropriate
as it is a way to build trust.
Japan accounts for the majority of our equity
assets and we are mindful that collaborative
engagement in the country can be moredifficult due to local regulations covering
reporting requirements. Therefore, we only
participate in collaborative engagement
after careful consideration. Recently, we havebeen engaging as part of a consultation initiative organised by the Japan Stewardship
Forum about the current state of stewardshipregulation. We hope that the changes weanticipate will be made following these

Nikko AM Sustainability Report 2024

discussions and will allow investors to engage
with companies more freely in the future.
Most of our collaborative engagements are
the result of our membership in industry-led
initiatives. These include:— The Asian Utilities Engagement Programmeof the Asia Investment Group on Climate
Change (AUEP & AIGCC)— Carbon Disclosure Project (CDP)— Climate Action 100+ (CA100+)— Global Investor Statement to Governmentson the Climate Crisis— International Corporate GovernanceNetwork— The Investor Agenda— Nature Action 100 (NA100)— Net Zero Asset Managers initiative— Principles of Responsible Investment— Task Force on Climate-related Financial
Disclosures

Strength in numbers
In 2023, we increased our active participationin various collaborative engagements. This is
illustrated by the case studies elsewhere inthis report. For example, we have continued
our collaborative engagement under industry
initiatives such as CA100+ (“Paving the way
to lower emissions at India’s biggest cementcompany” on p. 41) and the AIGCC (“Poweringchange through engagement” on p. 28). We
also publicly supported an initiative led by
VBDO, the Dutch Association of Investors for
Sustainable Development, and became aninvestor participant in NA100 (“Flexing ourmuscles with Nestlé and Coca-Cola to address
plastic pollution” on p. 41).
For several years, we have been a memberof CDP, an international group aiming to
improve climate-related disclosures. We haveworked through two of its initiatives, theNon-Disclosure Campaign (NDC) and theScience-Based Targets initiative. In 2023, weserved as the lead investor in engaging two
companies under the NDC. This included
a call with a renewable power generationcompany in Japan. We were happy to seethat this company subsequently disclosed its
carbon emissions data for the first time.

Our criteria for collaboration
The decision to join with other shareholders
to achieve a common cause is generally basedon the following criteria:— whether the initiative is consistent with
our Group Engagement and Stewardship
Strategy as well as the particular issues wewant raised— whether the initiative is likely to be
successful, taking into account, for instance,
past results and other participants in theinitiative— whether the cost, time, and effort involved
is commensurate with the anticipated effect— whether the organisation sponsoring theinitiative is one with which we want to be
associatedUntil recently, most of our engagement
has been restricted to a single asset class.
However, in some regions we have started
to combine our engagement activities,
sending representatives from both equity
and fixed income teams to those companies
where we have both equity and fixed income
holdings as a way to increase our leverage.
(For example, “Encouraging a major Korean
steel maker to do more for nature” on p. 40
and “Paving the way to lower emissions at
India’s biggest cement company”, mentioned
above.)

45

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Promoting ESG

Spreadingthe word
We believe that being a good corporate citizen includes sharing
our knowledge while also being willing to learn from the wisdomof others in the industry. With that in mind, we participated in a
number of events relating to sustainability in 2023.
Masayuki Teraguchi, Investment Technology FundManagement TeamOne of the major themes for us throughout
the year was the importance of investing inhuman capital for better investment returns.
An event we participated in that had a focus
on this theme was a study group on humancapital management led by Professor Takaaki
Hoda of Keio University and Satoshi Sasaki,
Principal Researcher at Persol Research andConsulting. Nikko AM’s Head of Investment
Technology Fund Management, Masayuki
Teraguchi, outlined his research, which
included findings on how ESG factors affectshare prices.
He showed that investing in human capitaleffectively increases labour productivity
over an extended period, and companies
that maintain management discipline while
skilfully and aggressively investing in people
tend to be more likely to achieve higher valuations. This is supported by recent studies that

Nikko AM Sustainability Report 2024

have shown companies that take diversity andinclusion seriously are more competitive.
Nikko AM’s second speaker of the day,
Masahiko Komatsu, Co-Head of the Japan
Sustainable Investment Department,
discussed the wider impact of good humancapital practices. He argued that — considering Japan’s shift from a long period of
deflation to an inflationary economy, anageing population with a declining birthrate,
an increase in capital investment, and a labour
shortage — the skilful management of humancapital will determine the sustainable growthof companies.
Another event on the importance of humancapital management was the Global Fiduciary
Symposium, which brought together representatives from pension funds, endowments,
and asset managers. Masayuki appeared on apanel discussing human capital managementin the Japanese equity market. He gave
details about our analysis showing thathuman capital is the ESG factor with thehighest correlation to equity returns among
companies on Japan’s TOPIX 500 Index.
In November, we took our message about
the value of investing in people to four ofJapan’s largest cities: Tokyo, Osaka, Nagoya,“One of the major themes
for us throughout theyear was the importanceof investing in humancapital for better
investment returns”

and Fukuoka. Yasushi Kato of the Equity FundManagement Department was invited totake part in a seminar series titled “Managing
Pension Fund Assets in a World of Inflation
and Rising Interest Rates — Securing
Returns and Managing Risk in a Changing
Environment”, which was organised by oursister company Sumitomo Mitsui Trust Bank.
The premise of the series was that the key togenerating additional returns in the current
circumstances is to focus on non-financial
assets and human capital. Yasushi outlined
recent trends in human capital investment by
Japanese companies and told the audience
about our Japanese Equity Human Capital
Empowerment Strategy, which focuses onfirms that are committed to investing in theirpeople. A total of 700 representatives, mostly
from pension funds, attended the event. We
were very pleased with the positive feedback
we received about Yasushi’s presentation.

46

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Promoting ESG“we are aiming to bring the highest global standards to Asia,
using both top-down and bottom-up approaches”

Apart from the theme of human capital,
we were involved in events on other topics
relating more generally to sustainability. In
the summer, Natalia Rajewska, our Global
Head of Sustainable Investment, spoke at apress gathering organised by Asia Researchand Engagement, a non-profit-making
industry pressure group, called “Catalysing
Decarbonisation in Asia”. She explained how
Nikko AM integrates sustainability into theinvestment processes, addresses climatechange and other aspects of ESG, as well as
how we overcome problems with ESG data
and the importance of tailoring ESG analysis
to Asian portfolios. Twelve Asian journalists
from media groups such as AsianInvestor and
The Business Times attended the event.

Nikko AM Sustainability Report 2024

In October, Natalia spoke on the “Bridging
the ESG Skills Gap” panel at the PRI in
Person conference in Tokyo. She said that
we are aiming to bring the highest global
standards to Asia, using both top-down andbottom-up approaches. In the same month,
we showcased our sustainable investment
capabilities at the Morningstar Sustainable
Investing Summit in Amsterdam, with representatives from Nikko AM speaking about
Green Bonds, Japan Value Equity, Global
Equity, and Asia ex. Japan Equity.

Natalia Rajewska, Global Head of Sustainable Investment, speaking at the Asia Research and Engagement event

These are only some examples of ourspeaking engagements related to sustainability in 2023. We will continue to look foropportunities to share our knowledge on thisimportant subject in the years to come.

47

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Corporate
Sustainability
A Nikko AM Europe employee abseiling at Forth Bridge, Scotland, to fundraise for charity

Nikko AM Sustainability Report 2024

48

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

A message from Yutaka Nishida, Executive Chairman

Honing ourability to listen
Every two years, Nikko AM
conducts an employee
engagement survey, and we
carried out our latest survey
in 2023. We ask all employees
about a range of important
topics, and their responses help
the firm to identify our strengths
as well as areas where we needto improve.
The results showed an improvement in
how employees evaluate communicationfrom senior management. I believe this isbecause we have placed an increased focus
on providing a clearer picture of our firm’s
long-term business strategy to our employees.
We also found that employee satisfaction
with their work–life balance was high. This
reflects our commitment to maintaining aflexible work environment for every one of
our employees, enabling them to maximise
their abilities.

Nikko AM Sustainability Report 2024

However, I feel there is one area where bothmanagement and employees have room toimprove: our ability to listen.
It goes without saying that an investment
management company must fulfil its fiduciary
duty of managing and growing clients’ assets,
and it also needs to earn society’s respect
through its actions as a good corporate
citizen. To do this most effectively, it is crucial
that we know how to listen to others well.
We must listen carefully to our clients. We
also need to listen attentively to all ourother stakeholders — including our shareholders, employees, service providers, andbusiness partners. This is how we will remain asustainable business.
The prerequisite for attentive listening is an
open environment where we respect eachother’s differences and where people feel they
can speak up. This means we have to fostera culture that embraces diversity. I have no
doubt that diversity is a source of innovationand competitiveness. As employees come to a
deeper understanding of the positive benefitsof diversity for our company — and, byextension, society — this culture will take root.
When it comes to diversity at Nikko AM, in
the area of women’s career advancement, I
am very pleased to see that the percentageof women in management positions ismoving closer towards our 30% by 2030 goal.
But this is only an interim milestone. In theyears beyond, we will continue our efforts topromote DEI — not only in terms of gender,
but also race, age, disability, sexual orientation, and all other aspects.
Also, as the number of people hired after the
pandemic rises, it will become increasingly
important for us to ensure we can strike theright balance between maintaining flexible“I feel there is one area where
both management andemployees have room toimprove: our ability to listen”

workstyles and the human connections thatare created through face-to-face communication, which includes listening to one
another.
As each employee gains a clearer sense of
how they can contribute to the company’s
growth and finds this optimal balance, it will
improve the sustainability of the organisation
over the long run and help us navigate thechallenges we face.
By further honing our ability to listen carefully
to the voices of our diverse employees andby advancing our DEI efforts, I am confident
our management of the company will keep
improving.
Yutaka Nishida
Executive Chairman

49

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Environment

Striving to shrink our carbon footprint
Nikko AM Group greenhouse gas
emissionsWith the help of a UK-based thirdparty consultant, Carbon Footprint
Limited, we measure greenhouse gas(GHG) emissions from the Nikko AM
Group’s corporate operations, basedon firm-wide energy consumption
and transportation data.
The assessment covers our direct
and indirect emissions fromour operations in Scope 1 (i.e.
fuel combustion) and Scope 2(i.e. consumption of purchased
electricity), as well as certain indirectemissions in Scope 3 (e.g. businesstravel, as well as activities notincluded in scopes 1 or 2 that require
fuel and energy use).
We have set a goal to reduce our
GHG emissions from corporate
operations by 40% per employee by
the year 2030, compared with 2019
levels.
For 2023, our total market-basedcarbon footprint — which recognises
a reduced emission factor for green
energy contracts — was 2,101.56t
CO2e (2.11t CO2e per employee)compared with 1,658.11t CO2e in
2022 (1.21t CO2e per employee).
Compared with our baseline year of
2019, when we generated 5,469.5t
CO2e (5.9t CO2e per employee), thisNikko AM Sustainability Report 2024

Scope2019 tonnes
CO2e

Activity

Electricity generation

2022 tonnes
CO2e2023 tonnes
CO2e% changefromBaseline Year

8.6

8.0

10.0

8.5

8.5

-0.1%

785.3

624.3

502.0

259.1

144.2

-81.6%

Scope 1 Site gas
Scope 22020 tonnes 2021 tonnes
CO2e
CO2e

District cooling

N/A

N/A

N/A

N/A

43.7

N/A

Home-workers

N/A

352.6

446.6

442.8

404.3

N/A

4,491.7

755.8

95.2

802.5

1,412.8-68.5%

Rail travel

95.3

32.5

28.9

76.2

48.3

-49.3%

Electricity transmission & distribution

40.1

29.4

24.6

14.7

5.8

-85.6%

N/A

N/A

N/A

N/A

1.1

N/A

23.9

10.8

12.8

42.7

18.8

-21.4%

Non-controlled site electricity

N/A

5.9

4.8

5.2

6.2

N/A

Hire cars

18.6

3.6

2.5

6.3

6.7

-64.2%

Employee owned car travel (grey fleet)

4.2

N/A

N/A

0.2

1.3

N/A

Bus travel

1.9

0.0

N/A

0.0

0.0

N/A

Flights

Scope 3 District cooling Electricity transmission & distribution
Taxi travel

Scope 3 subtotal

4,675.7

1,190.5

615.3

1,390.5

1,905.2-59.3%

Total tonnes of CO2e5,469.5

1,822.8

1,127.3

1,658.1

2,101.6-61.6%

Tonnes of CO2e per employee

5.9

2.1

1.2

1.2

2.1

-63.9%

represents a 63.9% reduction inemissions per employee.
Business flights accounted for 67%
of the total carbon footprint, whileelectricity usage from our offices
and remote-working employees’
homes accounted for 7% and 19%,
respectively.

Compared with 2022, on-site
electricity generation decreased,
mainly due to a green electricity
contract at our Tokyo office, which
was in effect for the full year. Also,
there was a marked increase inemissions from business flights in
2023. However, this was expected
as global travel was still somewhat

limited in 2022 due to thepandemic.

reduce carbon emissions from theatmosphere.

Carbon offset projects
We offset greenhouse gas emissions
from our operations through thepurchase of an equivalent amountof certified voluntary carbon credits
from projects that help capture or

We are aware of the scepticism overcarbon offsets and recognise thatcarbon credits are not a long-term
solution. Reducing the absolute
reductions of our operation carbon
footprint is our ultimate goal.

50

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Environment

Reducing GHG emissions
Business travel is crucial for ouroperations, but we have implemented steps to raise awarenessamong employees about its impact
on the environment.
Since 2022, everyone making
overseas travel requests is required
to include the carbon footprint of
their international flights on theirapplication forms. This policy helps
the employees taking the flights
and their managers to understandhow much each flight adds to ourfirm’s total carbon footprint. The
aim of this initiative is to encouragethem to consider reducing thenumber of people travelling,bundling more meetings into asingle trip, or planning routes more
efficiently.
Every quarter, we take the overseas
travel data for each region and post
it on our intranet platform for all
employees to see. We plan to add
domestic flights to this visualisationin 2024.
Environmental initiatives at theTokyo office
At the Tokyo office, as part of ourcommitment to environmental
sustainability, we stopped giving
visitors water in plastic bottles in2023 and now offer them water insmall eco-friendly paper cartons.

Nikko AM Sustainability Report 2024

Throughout 2023, the Tokyo
office collected used items from
employees to be upcycled orused for various social initiatives.
Approximately 13,000 plastic
folders were collected and sent tothe stationery company ASKUL to
be recycled into pellets, which areused to create materials for thefirm’s recycled product line. Also,
volunteers removed the plastic fromplastic umbrellas left at the office tobe reprocessed into stylish fashion
items by PLASTICITY, a brandspecialising in upcycling.
Funds from the sale of about
280 used books donated by ourcolleagues were given to social
charities such as the food bank
Second Harvest Japan and The Big
Issue Japan Foundation, an organisation supporting the homeless.
In addition, over 980 unused
postcards were donated to theJapan Committee of Vaccines for
the World’s Children, which paid
for the delivery of vaccines andsyringes for more than 115 children
in developing countries.
We will continue to collaborate
with our sustainability groups andinternal stakeholders to comeup with ideas — big or small— to contribute to the sustainability of our environment and ourcommunity.

Volunteers removed the plastic from plastic umbrellas to be reprocessed into stylish fashion items

2023 Market-based Emissions Breakdown

2% 4%

Flights
Site electricity
Home-workers
Rail travel
Other

飛行機移動
自社施設
在宅勤務者
電車移動
その他

19%

7%
67%

51

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Cybersecurity

Sustainability through cybersecurity
In a report from 2022, the World Economic Forum states,“Cyber risk is the most immediate and financially material
sustainability risk that organisations face today. Thosethat fail to implement good governance on cybersecurity,using appropriate tools and metrics, will be less resilient
and less sustainable.”

We consider cybersecurity a part of ourcorporate sustainability because data
breaches have the potential to hurt business
continuity, as well as long-term value andtrust. So, it is of the highest priority for us todo everything we can to protect our systems
and all the data we store — including that ofour clients, our employees, and our company— and, by extension, prevent identify theft,
financial fraud, and other harms.
Nikko AM has implemented cybersecurity
measures for all our offices. These includeanti-malware software, a firewall, and access
control, as well as annual penetration testing
to ensure their effectiveness in detecting andpreventing potential threats. We have also
implemented an IPS (Intrusion Prevention
System), email filtering protection, endpoint
security software for servers and terminals,
and a web filtering system to block access tomalicious websites. When necessary, security
patches are also quickly applied.
As a foundation to these steps, we haveestablished global policies on information
technology, cybersecurity, and information handling, and we work with the Risk
Management and Compliance departments
to ensure that all systems, policies, and procedures follow industry best practices andcomply with rules and regulations.

Nikko AM Sustainability Report 2024

“it is of the highest priority
for us to do everything we
can to protect our systems
and all the data we store— including that of ourclients, our employees, andour company”
It is necessary to conduct due diligence onthird parties and critical service providers tomake sure they are implementing appropriate
cybersecurity management, so we do thisregularly. We also provide our employeeswith security training, which covers areas
such as protocols for reporting cybersecurity
incidents, how to respond to threats,
examples of potential threats, protecting
against data loss, avoiding clickbait, and how
to identify a phishing email. They are given
quizzes to confirm they can effectively use
the skills they have learned.
In the event of an infection, we have established procedures to take appropriate action
and minimise damage.

52

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Social Impact

It’s good to giveIn 2007, Nikko AM started a donation scheme that is connected
to one of our funds. The fund was designed so that a portion of
direct revenue from the investment management fees would
be donated to those who need the money most. Since then, thescheme has been adopted for other funds. We believe this is agood way for us to give back to society.

The first of these funds to be set up takes
a portion of the investment management
fees from one of our global fixed income
products and donates it to the International
Development Association (IDA). It is a divisionof the World Bank that provides grants
and low-interest loans to help low-income
countries invest in their futures, improve lives,and create safer, more prosperous communities. In 2023, we donated approximately JPY
5 million through this scheme. In total, we
have given over JPY 550 million to IDA since
the initiative began in 2007.
Every year since 2018, Nikko AM has also
been donating a portion of our investment
management fees from a fund that invests
in companies in the genomics industry.
The donations go to charities dedicated tosupporting the rights and interests of patientswith rare diseases and their families. These
contributions also help institutions wherescientists are conducting research on the

Nikko AM Sustainability Report 2024

practical application of genomic medicine tocure these diseases. In 2023, we donated overJPY 9 million to eight patient organisations
and research institutions. Since we began thisscheme, we have donated more than JPY 62
million.
Following a natural disaster, our employees
are always eager to donate to support thosein need. For example, after hearing about thedevastating earthquakes that struck southeastern Turkey and northern Syria in February
2023, an employee suggested at our Idea
Generation Forum that we should make adonation. Then a cyclone hit New Zealand in
March, and an employee at the New Zealand
office suggested raising some funds and thatthe company could match the amount raised,since New Zealand is part of Nikko AM’s
network of offices.
The Global Corporate Sustainability teamand sustainability groups from each region

Wreckage of collapsed buildings after the 2023 Turkey–Syria earthquake

responded immediately and launchedfundraisers to collect donations forhumanitarian aid in the affected regions.
More than 145 employees joined thecampaign, resulting in a total of morethan JPY 3.5 million for international aid
organisations. This amount includes the
personal donations of the participating staff
members and the matching donations fromthe firm.
As part of the Nikko AM Employee Charity
Programme in Japan, a pool of funds is set
aside from the monthly contributions of
the programme participants to be activatedwhen a severe natural disaster strikes. In
2023, record rainfall and flooding hit parts ofwestern and northern Japan, resulting in theloss of lives and property. In response, JPY
400,000 in donations from the programme
and the firm were made to a relief fund set upby the Japanese Red Cross Society.
In another area of social impact, Nikko AM
has become a corporate sponsor of the NHK
Symphony Orchestra. We donated 30 tickets
for the orchestra’s family concert to a local
NPO, which provides support for children who
have stopped going to school.
We will continue to look for ways, large andsmall, to make a positive impact in our local
communities.

53

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

DEI at Nikko AM

A path tosustainablesuccess
Diversity, equity, and inclusion (DEI) are crucial
drivers of sustainable growth and long-term
success in today’s business landscape. At Nikko AM,
we recognise the transformative power of DEI in
enhancing decision-making and creating a workplace
where every individual feels valued and respected.
We are committed to nurturing an inclusive culture
where diversity thrives.
An example of our commitment todiversity is our collective #30by2030
goal of having women hold at least
30% of our managerial roles by theyear 2030. To help us make progress
towards this goal, the Global HR
team established guidelines for all
senior managers to help them build
more inclusive leadership teams.

above 25%, they should aim toachieve more than 40%. Finally,

The guidelines start by having senior
managers recognise the current
status of female leadership in a
department, then set an achievablelong-term target within a reasonable
timeframe. These targets vary basedon the current status. For example,
if representation is currently below
15%, a senior manager should aim toinitially reach 25%, or if it is currently“Senior leaders arechallenged to think
about how they
can change thecorporate culture in
more inclusive andequitable ways”

Nikko AM Sustainability Report 2024

Nikko AM Japan employees having discussions outdoors

senior managers are asked to submit
annual goals to help them achieve
their long-term targets.
Takahide Miyawaki,
Global Head of HR“These targets provide a roadmap,
but we are not just trying to achieve
numerical goals,” explains Taka
Miyawaki, Global Head of HR. “Seniorleaders are challenged to think
about how they can change thecorporate culture in more inclusive
and equitable ways so that we canachieve our broader DEI aspirations.”
Nikko AM has always promoted an
inclusive workplace culture in which

every individual, irrespective ofgender, sexual orientation, age,
race, or ethnicity, feels valued
and empowered. The firm also
empowers its volunteer sustainability groups — such as the
Global Racial Equality Group, theInternational Women’s Group, theJapan Women’s Group, the Japan
Abilities Group, and the Japan
LGBTQ Group — to drive progressin their respective aspects of DEI.
We believe that unconscious
biases and prejudice come froma lack of awareness, information,and empathy. Therefore, we aim
to continuously provide opportunities for employees to learn about
and understand the challenges
faced by marginalised individuals
in society. In turn, this contributes
to the creation of a truly inclusive
culture within our organisation.
We understand that diversity is notjust a goal to achieve but a journey
to embrace. As we look to the
future, we remain determined inour commitment to strengthening
DEI at Nikko AM as a driver of our
growth.

54

Looking Back

Corporate Sustainability

Investment Management

Looking Ahead

Sustainability Town Hall

Doing good
together
On 19 September, Nikko AM’s Global Corporate
Sustainability team held the third Sustainability
Town Hall, under the theme #DoGoodTogether.
The event underscored the commitment of the firm
and its employees to sustainability — both froman investment standpoint and as a responsible
corporate citizen.

Sustainability Causes Poll Results (Global)
Physical Health
Economic Wellbeing
Climate Change

Benjamin McCarron, Founder andManaging Director of Asia Research& Engagement, gave the keynote
address, titled “Protein transition:
Responsible investment for asustainable food system”. Often
when we talk about sustainability,
it can feel distant and irrelevant,but the presentation was relatable
to the attendees and showed them

Nikko AM Sustainability Report 2024

how they could do more to bringsustainability into their lives.
The programme also included
presentations from our global
investment teams covering key
updates to our Green Bond
Strategy, sustainable investment
strategies, and our ESG methodology. The Human Resources
Department provided a DEI update
on our progress to reach our#30by2030 goal and talked aboutsome upcoming HR initiatives.
In another session, Nikko AM
Chairman, Yutaka Nishida, joined
representatives from our sustainability groups for a fireside chat.
They discussed how the groups
champion sustainability in their

Top 4 Causes (Regional)

Mental Wellbeing
Education
Human Rights
Financial LiteracyJapan
1. Physical Health
2. Economic Wellbeing
3. Climate Change
4. Mental Wellbeing

Asia (ex. Japan)
1. Physical Health
2. Mental Wellbeing
3. Economic Wellbeing
4. Climate Change

EMEA
1. Climate Change
2. Physical Health
3. Economic Wellbeing
4. Mental Wellbeing

Americas1. Education
2. Physical Health
3. Mental Wellbeing
4. Economic Wellbeing

NZ
1. Mental Wellbeing
2. Economic Wellbeing
3. Climate Change
4. Education

Gender Equality
Biodiversity
50

Approximately 470 colleagues
attended the event live on Zoom.
In addition to Nikko AM employees
and outside directors, a selectnumber of employees from ourparent company Sumitomo Mitsui
Trust Holdings and sister company
Sumitomo Mitsui Trust AssetManagement attended to learn
about our initiatives.

Top 4 Causes (Global)
1. Physical Health
2. Economic Wellbeing
3. Climate Change
4. Mental Wellbeing

100

150

regions — for employees and thecommunity. Yutaka reaffirmed thecommitment of senior leadershipto supporting employees andproviding an open environment
where they feel they can speak
freely.
He also shared that we should
be proud of our firm’s culture,
where employees look outwards
to support the community, withthe many initiatives locally andglobally, offering something foreveryone. Yutaka added that byvolunteering together, the bond
between individual employees
will deepen and, as a firm, we will
move forward together. Managers
were also encouraged to get

200

250

300

350

their team members to use theirvolunteer leave so we can do moregood together.
Our Global Corporate Sustainability
team conducted a survey asking
colleagues to choose the sustainability causes they are most
passionate about. The top four
were: physical health, economic
wellbeing, climate change, andmental wellbeing. We agreed
to donate USD 50 to our global
charity pool for each response, up
to a target of 500. The total of 600
responses easily surpassed thetarget and was the highest numberof responses a Sustainability
Town Hall campaign had everreceived. As a result, USD 25,000

in donations were split among five
regions to be donated to charities
decided by each regional sustainability group, based on the survey
results. This leaves tangible proof
that we #DoGoodTogether.
The charities that received the
donations include: Sankakusha
and WELgee in Japan, Limitless
and Daughters of Tomorrow in
Asia, Maggie’s and Smart Works in
EMEA, South Bronx United in theAmericas, and Kindness Collective
and Women’s Refuge in New
Zealand.

55

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Global Racial Equality Group

Encouraging
harmony
Our sustainability groups provide forums for employees
from various departments to have open discussions on thesustainability issues that interest them.
These groups are bottom-up initiatives that provide
educational opportunities for employees and can effectreal change at the company through the proposals they
make. Each group has an executive sponsor from our Global
Executive Committee that provides advice and support.
The executive sponsor participates in group meetings andactivities, and they help to raise the group’s visibility andencourage more employees to join. Participation in oursustainability groups, which employees join voluntarily, issteadily increasing; we currently have 11 groups with morethan 130 members globally.

Nikko AM Sustainability Report 2024

Global Racial Equality GroupThe mandate of the Global Racial Equality
Group (GREG) is to help employees moredeeply understand — then change —inequality in the workplace and ourcommunities. In fiscal 2023, GREG organised
three speaking engagements on racial andinequality issues that different regions face.
The first in the series was a fireside chat with
Sharon Joseph, CEO of the Boys & Girls Club ofHarlem in the US, which was held in July 2023.
The focus of her talk was on understanding

the racial wealth gap and highlighting its
impact on urban communities, specifically
New York’s Harlem neighbourhood.
Drawing from her experience growing up inHarlem, Sharon spoke to the 180 employees
in attendance about how the wealth gap
affects education, medical care, and foodsecurity, as well as the long-term challenges
of generating family wealth and leaving alegacy. She described the impact of historical
discriminatory practices — such as redlining,
segregation, and over-policing — on Black
populations in urban areas. Employees left the
talk better equipped to support and advocate
for the underrepresented in their communities.
In November, GREG organised a talk featuring
Dr Mathew Mathews, the Head of IPS Social
Lab — a centre for social indicator research —and a Principal Research Fellow at the Instituteof Policy Studies in Singapore. His talk focusedon how to make workplaces more inclusive.

Sharon Joseph, CEO & Executive Director, Boys & Girls Clubof Harlem“The focus of her talk wason understanding the racial
wealth gap and highlighting
its impact on urban
communities”

Representing OnePeople.sg, an organisationthat champions racial harmony initiatives,
Mathew shared his research findings on race
relations in Singapore, giving colleagues fromother parts of the world a chance to learn
about the diverse local landscape. He also
described his own experience of microaggressions at work and gave advice on ways
to create an environment that encourages
workplace harmony, including how employees
can better recognise and challenge their own
biases, develop skills to understand culturaldifferences, and exercise empathy. As more
people recognise the value of diversity, he56

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Global Racial Equality Group

Yasushi Kawaguchi recounting the history of discrimination of the Burakumin

to how it affects marital decisions.
He stressed the importance ofrespecting individuals for who they
are, a lesson he only truly learned
after opening up about his own
Buraku roots. He also explained that
he believes discrimination begins

Dr Mathew Mathews, with OnePeople.sg, sharing about workplace harmony from the Singapore office“As more people
recognise the valueof diversity, heconcluded, they will
foster a more inclusiveand collaborative work
environment”

concluded, they will foster a more
inclusive and collaborative work
environment. The presentation
ended with an engaging Q&A
session with the more than 100
colleagues that joined the event inperson and online.

about the history of discriminationin Japan against the Burakumin. The
term refers to people descended
from former outcast communities.
Their ancestors in feudal times may
have had jobs such as butcher,undertaker, or executioner.

In March 2024*, the group helda third talk. Yasushi Kawaguchi,
Executive Director of the Yamaguchi
Human Rights Enlightenment Centre,
spoke to more than 100 attendees

While sharing his personal experiences, Yasushi discussed how
discrimination of the Burakumin
persists today, in everything frommentions in casual conversation“he believes
discrimination begins
when people lackinformation. Manyof the insights andlessons he shared canbe applied in contexts
anywhere in the world.”

when people lack information. Manyof the insights and lessons he shared
can be applied in contexts anywherein the world.
The feedback was very positive, withmembers of the audience saying
the talk was relatable because of
Yasushi’s personal stories.

*Footnote: Although the reporting period for this report is January to December 2023, we have chosen to include this third event in the series,
which took place in March 2024, to highlight inequality and discrimination in a third region where Nikko AM operates.

Nikko AM Sustainability Report 2024

57

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

International Women’s Group

Safety, strength,
and success
The International Women’s Group (IWG) — whichmarked its first anniversary in late 2023 — is madeup of four regional groups from each international
office outside of Japan: Asia, EMEA, the Americas,
and New Zealand.
With more than 35 members fromdifferent genders and backgrounds,
the IWG meets to discuss initiatives they are passionate about.
The group provides a platform forboth women and men to voice theirconcerns and share ideas that help
to empower female employees, andit plays a pivotal role in supporting
diversity, equity, and inclusion in our
workplace. Members also organise
events for women at the company
as well as local initiatives supporting
community causes, with the aim ofpromoting career advancement andcreating a supportive environment
for both our colleagues andcommunities.

Nikko AM Sustainability Report 2024

GlobalInternational Women’s Day (IWD)
is an important annual event for
the IWG, and each regional groupchooses different ways to celebrate.
At the global level, for the second
year in row, we launched a special
International Women’s Day website.
It featured interviews with Nikko
AM’s President, Stefanie Drews,
and Executive Chairman Yutaka
Nishida, as well as comments from
Nikko AM Asia President Eleanor
Seet and a number of male andfemale members of the IWG and theJapan Women’s Group. The website
also had some wonderful photosof colleagues from around theworld striking the 2023 IWD pose,#EmbraceEquity.

Floral bar fundraiser in Singapore

Asia
The IWG at our Asia office marked
IWD on 21 March 2023 with aflower bar fundraiser, with proceedsfrom the sale of bouquets given
to Daughters of Tomorrow in
Singapore. Daughters of Tomorrowhelps women from low-income
families build confidence and skills
through job readiness programmes
and then supports them as they try
to secure gainful employment and abetter future.
Our generous employees raised
approximately SGD 3,500 at
the event, and this amount was
doubled with dollar-matchingby the Tote Board, the Singapore
government’s grant-making
organisation.

Volunteers at LSA’s thrift shop in New YorkThe Americas
The International Women’s Group at
the US office continues to flourish
as it supports women in the fieldof finance as well as those in ourcommunity.
It held several initiatives throughout
2023. For one initiative, employees
volunteered at LSA’s thrift shop, theproceeds from which help to support
disadvantaged women and children
in the community. Additionally, thegroup held a clothing drive for gently
worn women’s business attire, which
was donated to Bottomless Closet.
This organisation also supports
disadvantaged women in New York
City by providing them with businessclothes for job interviews and work in
the professional world. As employees
came together and dedicated theirtime to these causes, they not only58

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

International Women’s GroupA boxing session in Edinburgh

helped those in need but also
strengthened a sense of unity andcompassion within the team.
In addition to its community
outreach efforts, the group focusedon empowering the women at
the US office through a variety ofevents and activities. For example, it
organised a Krav Maga self-defenceclass where women learned skills toenhance their safety and confidence.
EMEA
The EMEA IWG is passionate about
expanding the pool of young female
talent in asset management. In
2023, the Edinburgh office becamea member of Future Asset, a charitythat encourages high school girls
in Scotland to consider careers in

Nikko AM Sustainability Report 2024

the asset management industry
through a competition called
Growing Future Assets. A number
of Global Equity team members
mentored the students, and one
acted as a judge in the competition.
One of the finalists even worked at
Nikko AM on an internship to gain
some work experience — whichshows the team’s efforts are having
a positive impact.
For IWD 2023, the group ran boxing
sessions in London and Edinburgh
to help build the strength, confidence, and self-defence skills of
female employees. On 8 March,
Manya Klempner, the founder ofBermondsey Boxing Club, wasinvited to speak at a Lunch andLearn session. In her motivationaltalk, “From Finance to Fighter”, shegave an overview of her journeyfrom a career in investment banking
to the decision to leave and start aboxing club and fitness brand.
New Zealand
For IWD, the New Zealand office
hosted a morning tea for all
employees. They had the opportunity to help women in the local
community achieve economic
stability and safety by making
donations to two organisations:
Women’s Refuge and Dress for
Success.
Women’s Refuge is a charity that
supports women and children
experiencing family violence. One
night of safety at Women’s Refuge
for a woman and child costs justNZD 20 and includes a cleanbed, secure transport, hot meals,
supportive staff, access to a 24/7
crisis line, and advice. With theoffice’s donation of NZD 740, thegroup is essentially giving womenand children 37 safe nights awayfrom an abusive environment.
The local charity Dress for Successexists to empower women toachieve economic independence
by providing support, professional
attire, and the tools to help themin work and life. In 2023, Dress for
Success helped over 1,200 women
through its services, including bygiving capsule wardrobes thatconsists of five mix-and-match
outfits. Employees collected anddonated 10 bags of corporate
clothing to support this cause.

59

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Japan sustainability groups

Doing what we
can for others
Japan Women’s GroupThe Japan Women’s Group works
to promote the advancement of
women’s careers. It supports thefirm’s goal of increasing the ratio of
female mangers at Nikko AM to 30%
by 2030.
In March 2023, the group hosted
a number of events to markInternational Women’s Day.
In collaboration with theInternational Women’s Group, theJapan Women’s Group held the lastsession of the year-long Power Pact
series, which focuses on helping
women acquire the skills necessary
for career advancement. Christina
Khoo, a leadership and life coachfrom Singapore, was invited backto speak about how to handledifficult conversations. She advised
attendees not to wait to have theseconversations, to be clear about
their purpose, and to focus on thefacts.

Nikko AM Sustainability Report 2024

Another example is a seminar thegroup organised titled “Women’s
Career Progression in the AssetManagement Industry”, whichfeatured a discussion between
an external industry expert andPresident of Nikko AM, Stefanie
Drews. They drew from their personal
experiences to suggest what needs
to be done to better support
women’s careers in the industry.

encouraging mid-career women to
take the next step and promoting
diversity and inclusion, both at thefirm and in the communities where
they work.

In July and August, some membersof the Japan Women’s Groupattended the International
Conference for Women in Business.
They brought back many insights
and ideas from the event and fromnetworking with other participants.

“Three assistancedogs were brought
in to demonstrate
their abilities. Whenparticipants saw how
gentle and capable
the dogs were, they
couldn’t stop smiling— and some evenshed a tear”

In 2023, the Japan Women’sGroup marked five years since its
formation. In the coming years,
members will continue to lookfor opportunities to learn about
advancing women’s careers. In
particular, they will further focus on

Japan Abilities GroupIn 2023, the Japan Abilities Groupplanned events that would give
employees a better understanding

Nikko AM Japan employees at an event with the Guide Dog & Service Dog & Hearing Dog Association of Japanof the challenges those with physicaland mental disabilities face.
For example, in April, the groupinvited Chikako Kodama, founderof NPO Agenda Yamagata, to speakat a webinar. In her talk “Enrich Your
Mind and Soul with Music”, she told
the 65 employees in attendance
about her organisation, which
provides music instruction tochildren with learning disabilities,
and new research that had been
done in the field. Many employees
were moved by the videos showing
how much the children enjoyedplaying music and how some had
developed skills to such a high levelthat they played in competitions.

The group held a few large eventsin conjunction with Disability Week
in December. One of these was aseminar on assistance dogs withrepresentatives from the Guide
Dog & Service Dog & Hearing Dog
Association of Japan, which Nikko
AM supports through the Employee
Charity Programme. In addition to
guide dogs for the blind, there areservice dogs for those with disabilities and hearing dogs for the deaf.
In the seminar, employees learned
that demand for assistance dogs ismuch greater than the supply. They
also heard about issues that people
with assistance dogs have to deal
with, such as how medical facilities

60

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Japan sustainability groups

and restaurants often refuse to allow entry
to hearing dogs and service dogs, which are
not as well known in Japan as guide dogs
for the blind. Three assistance dogs werebrought in to demonstrate their abilities.
When participants saw how gentle andcapable the dogs were, they couldn’t stopsmiling — and some even shed a tear.
In December, the group held a seminar on
living a long and healthy life while dealing
with illness. A total of 110 employees fromdifferent regions attended.
Hidetoshi Matsuura, a mental health worker
and certified psychologist at LIVA Inc., spoke
about bipolar disorder (previously known
as manic depression). He covered a rangeof topics, including the definition of mental
illness, coping with stress, and how to
support people with mental health issues.
The event helped employees to deepen theirunderstanding of bipolar disorder and learn
the importance of supporting those with thedisorder so they can be themselves at work.
Japan LGBTQ GroupThe Japan LGBTQ Group focuses on issues
facing the LGBTQ+ community in Japanand promotes support of the community
both at the company and in the community.
Members organised a number of activities
throughout 2023 to show their support
for those in the LGBTQ+ community. In
April, for example, the group led the firm’s
participation in the spectacular Tokyo
Rainbow Pride Parade, one of Japan’s largest
events to raise awareness of the LGBTQ+
community.

Nikko AM Sustainability Report 2024

Representatives of Nikko AM at the Tokyo Rainbow Pride Parade

Employees representing Nikko AM walked
in the parade — which took them throughthe popular Tokyo districts of Shibuya andHarajuku — smiling, waving, and shouting“happy pride” to spectators. It was a deeply
satisfying event for all the participants.
In June, the group held a hybrid event for
Pride Month. In the first half, a representativefrom our sister company Sumitomo Mitsui
Trust Bank gave an overview of their firm’s Ally
Network to 170 employees on Zoom. Then,in the second half, the group spoke about its
partnership with LGBT Great, a global financial
alliance, and announced that Yukitoshi Akao,
Head of the Project Management Office

Department and co-lead of the Japan LGBTQ
Group, had been named one of the organisation’s Top 50 Executive Allies for 2023.
In November, for the fifth year in a row,
Nikko AM was awarded Gold in the PRIDE
Index 2023 by the Japan-based organisation
work with Pride, which helps companies
promote LGBTQ+-related diversity initiatives.
PRIDE is an acronym for the elements scoredunder the index: Policy, Representation,
Inspiration, Development, and Engagement/
Empowerment. Gold is the highest rating,and this award recognises our endeavours
to create an inclusive workplace for LGBTQ+
individuals and all our employees.

To mark Pink Friday, also in November,
Nikko AM teamed up with Bloomberg andNational Australia Bank to jointly host a panel
discussion titled “Learning from the LGBTQ+
Community: 3 Keys to Inclusive Team Building”.
Neill Peterson of Nikko AM joined the event
as a panellist. The focus of the discussion wason how managers can communicate with
employees to create an open environment.
Companies are increasingly recognising that
this topic is an important factor in boostingteam productivity. Neill spoke about how toestablish and respect boundaries, and theimportance of intention, integrity, and thewillingness to admit mistakes. At Nikko AM,
Japan LGBTQ Sustainability Group members
and other employees gathered in theboardroom to watch a live broadcast of the
discussion. They all wore pink T-shirts to show
their support.
The group then brainstormed ways to increase
the number of allies at Nikko AM — those
who understand and support the LGBTQ+
community. As a result of this session, thegroup decided it would launch the Nikko
AM Ally Network globally in 2024 and invite
employees to join. A logo has been created
for the Ally Network, and the group plans to
distribute merchandise so employees canshow they are an ally and demonstrate theirsupport for the LGBTQ+ community.

61

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Japan sustainability groups“marine waste has nonational boundaries
and decomposing
plastic harms marine
and human life“
solar power generation works andshowed them how to connect
batteries and controllers to thepanels so that they could light alightbulb using solar energy. It madeeveryone reflect on the importanceof electricity and how we take it for
granted in our daily lives.

Nikko AM employees at a beach cleanup in Japan

Japan Environment Group
With the end of the Covid-19
pandemic, the Japan Environment
Group began organising full-scale
outdoor volunteer activities again in
2023.
The group, together with Bloomberg,
invited Dr Kazuyuki Imamura of the
NGO Arakawa Cleanaid Forum togive a lunchtime seminar in April
about the problem of plastic waste

Nikko AM Sustainability Report 2024

in the Arakawa River. He notedthat marine waste has no nationalboundaries and decomposing plastic
harms marine and human life. Then,the following month, Nikko AM
and Bloomberg employees went to
the Arakawa riverbed for a beachcleanup, which was led by Arakawa
Cleanaid Forum. In December,
Nikko AM volunteers went out
again to participate in a cleanup of
Enoshima Beach, organised by the

Kanagawa Bikazaidan foundation.
They gathered many bags of plastic
and other garbage over a two-hour
period.
Group members also organiseda solar panel workshop at Ecoru
Togashi — Tokyo’s first nearlynet zero energy building — in
September. Koji Takayama of the
NPO Class for Everyone taught
employees and their families how

In addition to outdoor activities,
the Japan Environment Group also
held various seminars for employees
to learn about a range of environmental issues. In March, it organiseda seminar with Shuichi Takizawa, amember of the Japanese comedy
duo Machine Guns. Based on his
experience working as a garbage
collector, he spoke about how
to dispose of waste in a moreenvironmentally friendly way, theimportance of changing how weconsume, and what we can do
to contribute to the Sustainable
Development Goals — with lots ofhumour thrown in.

Solar panel workshop at Ecoru Togashi

In May, the group hosted Akihiro
Ushiyama, an interior design
advisor at Shioda Furniture in
Nagano Prefecture, who gavea seminar titled “Long-lastingHomes and Furniture”. The talk was
broadcast live from an old privatehouse that had recently beenrenovated then designed with
furniture from Shioda Furniture.
Akifumi Seto, an analyst fromthe Equity Fund Management
Department, interviewed Akihiro.
He pointed out that passionate
craftsmen pay close attention todetail and create furniture thatlasts longer than pieces that are62

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Japan sustainability groups“passionate craftsmen
pay close attention
to detail and create
furniture that lasts
longer than pieces thatare mass-produced”

people how to build their own solar
power generating devices for homeuse. The talk was followed up with a
DIY workshop in September where
employees had the chance to learn
how to do this.

Seminar on long-lasting homes and furnituremass-produced. He also noted that
products manufactured domesticallyare better for the environment when
they are used domestically.
In October, the group invited
Tori-kun, a professional birdwatcher
and author, to talk about the importance of biodiversity. He told thenearly 100 employees in attendance
how the habitats of different speciesof wild birds have been changing
and that it is possible to identify
problems in the urban environment
when the number of wild birds
increases or decreases.
Japan Philanthropy GroupThe Japan Philanthropy Group works
to reduce inequity, disparities, andpoverty and is committed to helping
address social issues through avariety of activities.
It operates the Nikko AM Employee
Charity Programme, which allows
employees to make payroll-deducted donations to pre-selected

Nikko AM Sustainability Report 2024

organisations. Nikko AM matches
the amount of each employee’s
donation. Sixty-two employees wereparticipating in the programme
as of the end of 2023. The Japan
Philanthropy Group works withthe organisations it supports topromote awareness of the donation
system among employees by organising information sessions andvolunteer activities.
The group conducted its latest
review of the organisations it
supports through this programmein 2023. Reviews are conducted
every three years. Members interviewed representatives from 15
candidate organisations, each one
working to address one of fivedifferent social issues. After a seriesof votes by group members andother Nikko AM employees, thegroup chose to partner with three
new organisations and continue
its partnership with two others.
They are The Volunteers Groupto Send Wheelchairs to Overseas

Employees and their families fix children’s wheelchairs before they are sent to Ukraine

Children, Maggie’s Tokyo, Guide
Dog & Hearing Dog & Service Dog
Association of Japan, Anata no
Ibasho and Bridge for Smile.
The Japan Philanthropy Group
organised several events in 2023
that provided employees with
opportunities to learn about a wide
range of social issues. For example,
in April, a group of 14 employees
and their families volunteered at
The Volunteers Group to Send
Wheelchairs to Overseas Children.
They helped to fix and package 18
used wheelchairs to be shipped to
Ukraine.

In June, members held a seminarwith Mami Rudasingwa and herhusband Gatera, who are representatives of the Mulindi One Love Project.
The NPO, based in Rwanda, provides
artificial limbs free of charge to thosewith disabilities.
In August, the group, together with
the Japan Environment Group,
invited Koji Takahama, founder of
the NPO Class for Everyone, to givea lunchtime seminar called “Beyond
Electric Self-Sufficiency”. Class forEveryone provides ICT education forchildren in emerging countries, andKoji spoke about his work teaching

In November, Toshinobu Daikohara,
Director of the Japan Gatekeeper
Association, gave two Active
Listening Training sessions.
Employees learned about theimportance of listening attentively and showing empathy — andhow this helps to build stronger
relationships.
The group made several donations
throughout the year. One was to
the Japanese Red Cross Society fordisaster relief following torrential
rainstorms that caused extensive
damage in western Japan in June
and July.
It also partnered with Learning
for All, an NPO that works toaddress child poverty, to conduct
a Christmas gift drive in Octoberand November. Members sent 25
presents to children from disadvantaged backgrounds.

63

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Asia Sustainability Group

Learning, helping, making an impact
Gardens, part of the Mandai Wildlife
Group, went into its second year
as its corporate sponsorship of thepygmy hippo, Miata, continued.
Also, all interested employees
were invited to take part in an
animal enrichment workshop —an educational initiative where 20
participants learned how to maketoys for the zoo animals.

Fostering greater inclusion, reducing inequality,
and striving to be more environmentally conscious— that sums up an enriching 2023 for the Asia
Sustainability Group.

Sweating to support mental health
In 2023, the group continued
to advocate for mental health.
For the third consecutive year, it
co-organised a virtual run with
Limitless, an NPO that provides
counselling for young people facing
challenges as a result of poverty,
mental illness, and social inequality.
More than 40 Nikko AM staff
members ran a minimum of fivekilometres each to raise funds for
Limitless. The group contributed
USD 4,000 towards this cause.
Education, fun, and community
During the school holidays — firstin June and again in November
2023 — the Asia SustainabilityGroup partnered with the charity
Cahaya Community to organise twoenrichment programmes for thechildren it supports.

Nikko AM Sustainability Report 2024

The first was a trip to the Sustainable
Singapore Gallery, which gives
visitors an overview of Singapore’s
sustainable development journey.
After the gallery tour, employees
had a picnic and kite-flying competition with the children and theirfamily members.
For the second event, the group ran
a Futsal tournament called Cahaya
Fearless Fox Cup 2023. Combining
education and recreation has beena hallmark of the partnership with
Cahaya Community since it began
in 2021.

Nikko AM employees and their children at the Singapore Zoo

To ensure the Asia SustainabilityGroup followed this up with action,
32 staff members volunteered for abeach clean-up at Tanah Merah in
Singapore. They picked up a total of
341 kilogrammes of rubbish.

A total of 15 Nikko AM employees in
Singapore volunteered for the two
events.
Better biodiversity
In 2023, Nikko AM Asia’s partnershipwith the Singapore ZoologicalColleagues had the chance to learn
about marine biodiversity and,specifically, the environmental significance of the tropics. In a webinar,
held to mark World Environment
Day in June, speakers from Green
Nudge — a group that aims to build
thriving green communities — told
employees from different Nikko
AM offices about Southeast Asia’s
marine biodiversity and what needs
to be done to protect marine life.

Beach cleanup event, part of World Environment
Day coinciding with the school holidays

Miata, Nikko AM’s adopted pygmy hippo

64

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

EMEA Sustainability Group

Committed to ourcommunities
Nikko AM’s EMEA employees participated in a variety ofvolunteering and fundraising activities during the year that
had a positive impact on their local communities and helped
those in need.
Getting out and doing good
In London, EMEA Sustainability Group
members volunteered at the Children’sBook Project, where they took part in a booksorting and bundling session, after which thebooks were sent to schools and nurseries. It
is an initiative that helps to promote bookownership among children. This project isessential as it has been proven that literacy
and book ownership can significantly impact achild’s education and mental health.
Employees also volunteered at Holland Park
where they helped to prepare around 40,000
young plants, which are grown in glasshouses,
for distribution to schools, hospitals, andcommunity gardens across the borough. Thisinitiative helped to enhance biodiversity andimprove breeding habitats for local wildlife.
Volunteers gave their time to Peckham Rye
Park, as well. They helped with maintenanceof the formal gardens and removed nine bagsof undergrowth, which created more wildlife
habitats for the park. They also restored therose bed.

Nikko AM Sustainability Report 2024

people in need. This service helps to reachsome of the most marginalised people in
Edinburgh.
Raising funds in fun (and hair-raising) ways
EMEA Sustainability Group membersorganised several fundraising initiatives tosupport their employee-nominated charity
partner, Maggie’s — an organisation thatprovides invaluable support to cancer
patients and their families.
Two Nikko AM employees abseiled down
London’s Cheesegrater skyscraper, raising
an impressive GBP 1,730. Not be outdone
by his colleagues in London, an employee
at the Edinburgh office then abseiled off theForth Bridge in Scotland, raising GBP 904. The
group also held a raffle at the summer party,
hosted by the London office. Thanks to some
generous prize donations from the firm andsenior employees, it raised GBP 2,200. A night
hike brought in GBP 1,180.
These fundraising initiatives raised more than
GBP 6,000, and the firm matched over GBP
4,000 of this, which allowed the group to
donate over GBP 10,000 to Maggie’s.

Edinburgh staff preparing meals to be distributed

At Good Food Matters (GFM), a community
garden and kitchen in South London, volunteers cleared some raised vegetable beds andgot them ready for new planting, then theytackled an overgrown strip of land along thefence between the GFM site and the adjacent
allotments.
In Edinburgh, employees volunteered at
Empty Kitchens Full Hearts, where surplus
food is turned into free, nourishing meals for

The company retained its Payroll Giving Gold
Award in 2023 thanks to the generosity ofstaff and the firm’s efforts to promote payroll
giving.
In the weeks leading up to Christmas, boththe UK and Edinburgh offices ran toy drives
for underprivileged children. In London,
the group collected gifts to be distributedby a charitable organisation. Colleaguesin Edinburgh also raised money for a local
charity, which was then used to purchase

Abseiling to raise funds for Maggie’s at London’s Leadenhall
Building (The Cheesegrater)

gifts. Nikko AM donated a total of GBP 1,000— GBP 500 to each charity — to support thegroup’s fundraising efforts.
The EMEA Sustainability Group donatedsome spare office furniture to the Four
Square charity in Edinburgh, which in turnwill be given to those who are experiencing
homelessness or are at risk of becoming
homeless. The group also collected pre-loved
coats from colleagues to be passed on toless fortunate people during the cold wintermonths.
These initiatives demonstrate the company’scommitment to making a difference in ourworld.

65

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

New Zealand Sustainability Group

Hope for the future
Two key areas of focus for the New Zealand Sustainability Group
in 2023 were encouraging young female leaders and deepening
employees’ understanding of Māori values.
YWCA Y25 Young Leaders Panel
The New Zealand Sustainability Group was
proud to sponsor the annual YWCA Y25
Young Leaders Panel for Youth Week — called“Leaders of tomorrow? Leaders for today!” —featuring a group of young woman leaders
who shared their inspiring stories. They
spoke about the realities and challengesof leadership today, as well as remaining
resilient, handling criticism, and staying true
to your values.

Te Ao Māori cultural training
As a signatory to the New Zealand
Stewardship Code, the sustainability group
recognises that the firm can do more to moveahead in its journey towards understanding
and embracing Te Ao Māori — the Māori
worldview that emphasises the relationshipbetween nature and people — and theprinciples of Te Tiriti o Waitangi, or The
Treaty of Waitangi, New Zealand’s founding
document.

Simon Haines, Co-lead of the New ZealandSustainability Group, said after the event,“Getting the chance to see such capable
young women in action and inspiring thegeneration coming up after them, fills me witha lot of hope for the future.”

In 2023, Nikko AM NZ took the first step
towards learning about how to incorporate
these values into the investment process.
It engaged Mathers Solutions, a Māori
Development Consultancy, to hold two
cultural training sessions for everyone at the
New Zealand office. These courses helped
employees to better understand the Māori
worldview and values, as well as the principlesof the treaty.
Te Ao Māori training session

Nikko AM Sustainability Report 2024

66

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Americas Sustainability Group

Educationchanges lives
The Americas Sustainability Group’s activities are aligned with
Nikko AM’s three core areas of sustainability: diversity & inclusion,
reducing inequalities, and environment & climate. In partnershipwith local nonprofits, employees led various initiatives — including
helping at a thrift store, reading books to children, and acting as
judges of students’ final summer school presentations — which
demonstrate their strong commitment to making a meaningful
and lasting difference in the community.
Volunteering at the Annual Spring Plant Sale for Grow NYC

In 2023, the group continued to support
local nonprofits that promote diversity
and inclusion. The Classical Theatre ofHarlem (CTH), one of these organisations,provides a platform for diverse and thoughtprovoking performances, creates spaces
for underrepresented voices, and helps
celebrate culture within the community.
Sustainability group members provide
financial support for the organisation atsome of its fundraising events. Also, one of
CTH’s major efforts is an outdoor theatre
performance at Marcus Garvey Park. It isfree to attend and takes place every night
during the month of July. Nikko AM Americas
employees have made it a tradition to show
their support for CTH by attending thisperformance as a group every year.

Nikko AM Sustainability Report 2024

fundraiser, donated backpacks and schoolsupplies to the Boys & Girls Club of Harlem,
and volunteered with South Bronx United.
This illustrates their dedication to supporting
educational opportunities and levelling theplaying field for underserved youth in New
York City. The Americas Sustainability Group
believes that contributing towards education
benefits the community because it helps toempower youth with knowledge and skills,
driving long-term socioeconomic growth.

Volunteers at South Bronx United’s Literacy Day event

The team addressed inequality in a number ofways throughout 2023. Members sponsored
10 seniors for a local high school’s senior dues

Additionally, the group volunteered with
GrowNYC — an environmental NPO focusedon food access, green spaces, reducing
waste, and education — which highlights
the company’s contributions to supporting
environmental sustainability. Employees

helped out at GrowNYC’s annual spring plantsale. The event provides community groups
with a variety of plants, herbs, and vegetables
at wholesale prices. These plants are intended
for use in neighbourhood open space
projects, such as community gardens, schools,
block associations, and churches. Nikko AM
volunteers spent a day helping customers
select the perfect plants for their needs andtransporting them to their vehicles.
The Americas Sustainability Group isdedicated to fostering a thriving and inclusive
community.

67

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Insider Perspectives

Reflections from the Global Corporate Sustainability Team
Nikko AM’s Corporate
Sustainability Department
was formed in 2018
to oversee corporate
sustainability activities
at our offices around theworld. Daisuke Kono andJoyce Koh were appointed
to lead the team as joint
heads in 2020.
It has grown from a group of
volunteers — with members
working on corporate sustainability as a second or third rolein their job description — intoa fully developed function withfour full-time employees. The
department celebrated its fifth
anniversary in 2023.
The team has increasingly
engaged stakeholders andignited their passion for sustainability. They focus on the three
key pillars of diversity & inclusion,
reducing inequality, andenvironment & climate.
As Nikko AM makes progress
towards its corporate sustainability goals, the advocateson this team reflect on how
their involvement has made a
difference to their work, their life,
and their aspirations.
Nikko AM Sustainability Report 2024

Momoko Sekiguchi

Michelle Chua

Neill Peterson

Rika Kosaka“My three-year journey with theteam has been eye opening,
inspiring, and fruitful. As I workwith the team and the sustainability groups, I feel a true passion forsustainability from the discussions
held and the ideas generated. It is a
privilege to have the opportunity tolearn and grow with such wonderfulcolleagues, and I am excited to dowhat I can to help create a world
where everyone can coexist and be
our authentic selves in our diverse
communities.”“Nikko AM does a great job of hosting
many virtual webinars to keep our
employees engaged across a range of
topics — from learning about threats
and conservation to the marine biodiversity in Southeast Asia to how we
get better at inclusion by practising
active listening and being a sympathetic and attentive listener.

“I am hopeful that we are standingon the brink of the golden age ofsustainability. We are witnessing
an unprecedented surge ininnovative green solutions andtechnological breakthroughs inenergy production. There is alsoa collective global consciousness
that is increasingly embracing
sustainable initiatives. Individuals
and businesses alike are realisingthat sustainability is not just aslogan to use so they appear moreenvironmentally conscientious,
but it is a pathway leading to thelong-term prosperity of humanity.
Although I will step down from theteam in February 2024 after five
years as a sustainability advocate,
I am truly honoured to haveplayed even a small role in theadvancement of its goals.”“I am proud to be able to promote
diversity and inclusion, and care forthe environment and philanthropy
in my work. I started my ‘sustainability career’ with the formationof the Japan Women’s Group, andI really hope to do more to create
an environment where our female
employees can shine even brighter.”“I am excited to dowhat I can to help
create a world where
everyone can coexist
and be our authentic
selves in our diverse
communities”

Within the first four months of joining
the company, I was asked to plan,
organise, and host our annual sustainability town hall meeting together witha team that I had not met in person. It
was very valuable to have this opportunity to connect with people, hear
their experiences, and learn about
what motivates them to give of theirtime beyond working hours.
Also, it is great to see such diversity
in our employee pool because it
encourages new ways of working
and brings about more creative andinclusive initiatives.”“I am proud
to be able topromote diversity
and inclusion,and care for theenvironment”

68

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Insider Perspectives

Mashiro Matsuura

Joyce Koh

Jeanie Cheah

Jade Rodeck

Daisuke Kono

“Now that we can work remotely
after the end of the pandemic, I
get the sense each day of just how
much it means for our employees —including myself to be engaged by
the firm.

“In 2023, we saw an uptick in thenumber of colleagues becoming
aware of our 11 sustainability
groups, which are all supported
by senior management. This
resulted in an increased interest
to join these regional groups.
Passionate members went on to
recruit more like-minded friends.
As of December 2023, participation
was around 13% of all employees
and continues to grow! To me,
this is one of the most gratifying
outcomes because it is not easy
for our colleagues to give theirpersonal time and resources tosupport sustainability.”“As I reflect on the past five years,
it has been amazing to watch the
Global Corporate Sustainability
team come together. We started
from zero and, in a few years —most of which we were working
from home because of Covid — wemanaged to engage colleagues
across all Nikko AM offices, encouraging them to get involved andorganise sustainability activities. We
can say with confidence that there isheightened awareness of the need
to be sustainable throughout thefirm.

“An early challenge we faced in thedepartment was to create a baseline
understanding that corporate sustainability encompasses more than just how
we should dispose of our waste.

“I like the dual meaning of the term
corporate sustainability, which isoften used but not so well defined.
It typically refers to the ways abusiness impacts the sustainabilityof our society and our environment,
but it also means the sustainability of the business itself. It wasa real eye-opener for me when I
understood that our company’ssustainability is dependent on thesustainability of the society andenvironment we operate in. Simply
put, doing good for all our stakeholders does good for our company
in the long run. That said, corporate
sustainability is not something that
produces tangible results in a shortperiod of time, which means it canbe hard to measure success — so,
we need to be diligent in doing
good, year after year.

Our corporate sustainability efforts
have played a big role in employee
engagement. It is great to get
feedback from employees about
how rewarding our sustainability
activities have been, be it the discussions we have in the sustainability
groups, our women’s progression
efforts, or getting together on theweekends for volunteer activities.
Our sustainability groups arebottom-up efforts that have given
employees a voice, and I hope eachand every one of them realise how
important their voices are to thefirm.”

Nikko AM Sustainability Report 2024

“As of December 2023,
participation was around
13% and growing! To
me, this must be oneof the most gratifying
outcomes”

Before Covid, activation on the
ground was one of the best ways
to reach our audience, but thathas changed as more people work
remotely and we see our colleagues
less often. For me, the challenge
will continue to be how we can domore and do better as the landscapeevolves.”Through engagement and education
efforts, we have significantly increased
awareness and influenced a positive
shift in corporate norms. I havewitnessed colleagues feeling more
empowered to question themselves andothers about how to pursue innovative
ways of supporting our three pillars ofdiversity & inclusion, reducing inequality,and environment & climate.
Our present challenge is to further raisethat bar to encourage new solutions andhelp advance sustainability as a firm.
I imagine a sustainable future as
one where firms rely less on specificsustainability initiatives, where it
is instead second nature for every
individual employee to apply theirunique skills in sustainable ways —both in their work and personal lives.”

I am happy that I can contribute tosociety as well as to our company’s
growth through our work incorporate sustainability.”

69

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Lookingahead
Nikko AM Asia employees with Cahaya Community at a visit to the Sustainable Singapore Gallery

Nikko AM Sustainability Report 2024

70

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Looking Ahead

Leveraging ourstrengths toshape the future
In the years since Joyce Koh and Daisuke Kono became
Joint Global Heads of Sustainability from June 2020,
they have seen the impact the team’s work has had on
the firm.
through donations, volunteering or
raising awareness.

The function marked its fifth
anniversary in October and is
now supported by three full-time
employees based in Japan and one
in Singapore. While these dedicatedpeople run the department, the 11
employee-led regional sustainability
groups are self-managed by
local teams on a volunteer basis.
Participation in these groups
continues to go up, and many
employees are active in more thanone.

“It is amazing to see how ourcolleagues — who are alreadygiving 100% of themselves at work
— are offering their time to manage
these activities so they can havean impact in their communities.
Nothing is driving them to do thisexcept for the altruism that comesfrom within each one of them,” says
Joyce.

In 2023, the world saw many
challenges on both theenvironmental and social fronts, withnatural disasters, political conflicts,
or ongoing inequalities in ourcommunities. After hearing aboutsome of these events, sustainability
group members were quick tosuggest ideas and deliver help where
we could make a difference, be it“At the start of 2020, only about
8% of the firm’s employees wereparticipating in these sustainability
groups. But our team’s mission
is to embed sustainability in our
corporate culture, so we set a
goal of reaching 15% by 2025 asa metric to gauge our progress,”says Daisuke. “By December
2023, we were thrilled to see that

Nikko AM Sustainability Report 2024

participation had grown to 13%, andwe are hopeful that we’ll meet ourgoal before 2025. This strong desireof individual employees to get
involved is what makes Nikko AM so
special.”While there is plenty to celebratefrom the past five years, there iseven more for us to do in the years
to come.
In 2024, the current Corporate
Sustainability Advisory Council,
which was set up in 2018, will
become a formal committee,
consisting of the senior
management team, representatives
from the Global Sustainable
Investment team, sustainability
group members, and other internal
stakeholders. This new committee
will formally discuss and approverecommendations from the Global
Corporate Sustainability team,
as well as set goals and monitor
progress.
When it comes to the D&I pillarof corporate sustainability, weare committed to reachingour #30by2030 goal of having
women occupy 30% ofmanagement positions by 2030.
Senior management and global
department heads across thecompany will continue in 2024 towork towards meeting goals set by
the Global HR team that will lead toan increase in female managers at
all levels.
Also, in partnership with Global HR,
the Global Corporate Sustainability

The Global Corporate Sustainability Teamteam is working on a plan to develop
end-to-end employee lifecycle
support for women as they build
their career in the firm.
Since so many Nikko AM employees
are compassionate and always readyto spring into action — whenever
and wherever they are needed —the Global Corporate Sustainability
team will be developing a global
volunteering framework. It will help
us to select and support causesthat are in line with the firm’s
sustainability goals and focus areas.
On the environmental front, we
continue to monitor the carbon
footprint of our operations andensure we are on track to meetour goal of reducing emissions.
At the same time, we will carry on
hosting educational opportunities
on environmental issues for our staff
and keep rolling up our sleeves,volunteering to plant trees or clean
up in our local communities.
Sustainability is a journey. We
must keep evolving in our rapidlychanging world so that we caneffectively shape the future of ourfirm and our world. The team willcontinue to partner with internal
stakeholders and external agencies
to help us advance towards ourdestination: a better world for the
next generation to enjoy.

71

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Additional
information
Nikko AM head office in Tokyo

Nikko AM Sustainability Report 2024

72

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

External commitments
Our participation in external initiatives

ClimateActionGlobal Investors Driving Business Transition

Asia Investor
ClimateActionGroup on Climate Change(AIGCC)Japan Association of
Value Creating ERM(Nikko AM Co. Ltd.)

Global Investors Driving Business Transition

ClimateActionGlobal Investors Driving Business Transition

ClimateClimateActionClimateActionActionClimateActionClimateClimateActionActionClimateClimateActionActionGlobal Investors Driving Business Transition
Global Investors Driving Business Transition

Global Investors Driving Business Transition

Global Investors Driving Business Transition

Global Investors Driving Business Transition

Global Investors Driving Business Transition

GlobalGlobalInvestors
InvestorsDriving
DrivingBusinessBusinessTransition
Transition

ClimateActionCDP

Principles for Financial
Action for the 21st Century(Nikko AM Co. Ltd.)

ClimateActionGlobal Investors Driving Business Transition

ClimateClimate Action 100+Action
ClimateActionClimateActionClimateActionInternational Corporate

ClimateActionGlobal Investors Driving Business Transition「 TCF D Cons or tium 」ロゴマーク

Global Investors Driving Business Transition

Global Investors Driving Business Transition

30% Club
Investor Group(Nikko AM Co. Ltd.)

Global Investors Driving Business Transition

TCFD Consortium(Nikko AM Co. Ltd.)

Global Investors Driving Business Transition

Governance Network (ICGN)

Global Investors Driving Business Transition「 TCF D Con s or tium 」ロゴマーク

Stewardship Codes

United Nations-supported Principles for
Responsible Investment (PRI)– UK Stewardship Code (Nikko Asset Management Co. Ltd.)– Japan Stewardship Code (Nikko AM Co. Ltd.)– Singapore Stewardship Principles (Nikko AM Asia)「 T C F D Co n s o r ti um 」ロゴマーク「 TCF D Cons or tium 」ロゴマーク「 TCF D Cons or tium 」ロゴマーク「 TCF D Cons or tium 」ロゴマーク

Task Force on Climate-related Financial
Disclosures (TCFD)「 TCF D Cons or tium 」ロゴマーク「 TCF D Cons or tium 」ロゴマーク「 TCF D Cons or tium 」ロゴマーク

Global Investor Statement
to Governments on Climate Crisis

The Investor Agenda

Women’s Empowerment
Principles

Nature Action 100

LGBT GreatThe Net Zero Asset Managers initiative

Nikko AM Sustainability Report 2024

73

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Contact information
JAPAN

Nikko Asset Management Co., Ltd.
Midtown Tower, 9-7-1 Akasaka, Minato-ku, Tokyo, 107-6242, Japan
Tel:+81-(0)3-6447-6000
Email: corp-sustainability@nikkoam.com
Web: en.nikkoam.com
Nippon Institutional Securities Co., Ltd. (NIS)(Subsidiary of Nikko AM)
Midtown Tower, 9-7-1 Akasaka, Minato-ku, Tokyo, 107-6242, Japan
Tel:+81-(0)3-6447-6080
Web: www.ni-sec.com/en/

HONG KONG

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

SINGAPORE

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

EMEA

Nikko Asset Management Europe, Ltd.
Level 5, City Tower, 40 Basinghall Street, London EC2V 5DE, United KingdomTel:+44-20-7796-9866
Email: EMEAenquiries@nikkoam.com
Web: emea.nikkoam.com

GERMANY

Nikko Asset Management Luxembourg S.A. (Germany Branch)Frankfurt SPACES Tower ONE, Brüsseler Str. 1-3, 60327 Frankfurt am Main, GermanyTel:+49-(0)69-710407-64I
Email: EMEAenquiries@nikkoam.com
Web: www.nikkoam.de

LUXEMBOURG

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

AMERICAS

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

NEW ZEALAND

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

Nikko AM Sustainability Report 2024

74

Looking Back

Investment Management

Corporate Sustainability

Looking Ahead

Important information
This document is prepared by Nikko Asset Management Co.,
Ltd. and/or its affiliates (Nikko AM) and is for distribution only
under such circumstances as may be permitted by applicablelaws. This document does not constitute personal investment
advice or a personal recommendation and it does not consider
in any way the objectives, financial situation or needs of any
recipients. All recipients are recommended to consult with
their independent tax, financial and legal advisers prior to any
investment.
This document is for information purposes only and is notintended to be an offer, or a solicitation of an offer, to buy orsell any investments or participate in any trading strategy.
Moreover, the information in this document will not affectNikko AM’s investment strategy in any way. The information andopinions in this document have been derived from or reachedfrom sources believed in good faith to be reliable but have notbeen independently verified. Nikko AM makes no guarantee,
representation or warranty, express or implied, and accepts
no responsibility or liability for the accuracy or completenessof this document. No reliance should be placed on any
assumptions, forecasts, projections, estimates or prospects
contained within this document. This document should not be
regarded by recipients as a substitute for the exercise of theirown judgment. Opinions stated in this document may change
without notice.
In any investment, past performance is neither an indication
nor guarantee of future performance and a loss of capital
may occur. Estimates of future performance are based onassumptions that may not be realised. Investors should be able
to withstand the loss of any principal investment. The mentionof individual securities, sectors, regions or countries within thisdocument does not imply a recommendation to buy or sell.
Nikko AM accepts no liability whatsoever for any loss or damageof any kind arising out of the use of all or any part of thisdocument, provided that nothing herein excludes or restricts
any liability of Nikko AM under applicable regulatory rules or
requirements.
All information contained in this document is solely for theattention and use of the intended recipients. Any use beyond
that intended by Nikko AM is strictly prohibited.
Japan: The information contained in this document pertaining
specifically to the investment products is not directed at
persons in Japan nor is it intended for distribution to persons
in Japan. Registration Number: Director of the Kanto Local
Finance Bureau (Financial Instruments firms) No. 368. Member
Associations: The Investment Trusts Association, Japan/Japan
Investment Advisers Association.
United Kingdom: This document is communicated by Nikko
Asset Management Europe Ltd, which is authorised andNikko AM Sustainability Report 2024

regulated in the United Kingdom by the Financial Conduct
Authority (the FCA) (FRN 122084). This document constitutes afinancial promotion for the purposes of the Financial Services
and Markets Act 2000 (as amended) (FSMA) and the rules of
the FCA in the United Kingdom, and is directed at professional
clients as defined in the FCA Handbook of Rules and Guidance.
Luxembourg and Germany: This document is communicatedby Nikko Asset Management Luxembourg S.A., which isauthorised and regulated in the Grand Duchy of Luxembourgby the Commission de Surveillance du Secteur Financier (theCSSF) as a management company authorised under Chapter
15 of the Law of 17 December 2010 (No S00000717) and as analternative investment fund manager according to the Law of
12 July 2013 (No. A00002630).
United States: This document may not be duplicated, quoted,
discussed or otherwise shared without prior consent. An
offering of any investments, securities or investment advisory
services with respect to securities may only be made byreceipt of relevant and complete offering documentation andagreements, as applicable. Any offering or distribution of aFund in the United States may only be conducted via a licensed
and registered broker-dealer or a duly qualified entity. Nikko
Asset Management Americas, Inc. is a United States Registered
Investment Adviser.
Singapore: Nikko Asset Management Asia Limited (Co. Reg.
No. 198202562H) is regulated by the Monetary Authority ofSingapore.
Hong Kong: This document is for information to professional
investors as defined in the Securities and Futures Ordinance,
and intermediaries only. The contents of this document havenot been reviewed by the Securities and Futures Commission
or any regulatory authority in Hong Kong. Nikko AssetManagement Hong Kong Limited is a licensed corporation in
Hong Kong.
New Zealand: This document is issued in New Zealand by
Nikko Asset Management New Zealand Limited (Company
No. 606057, FSP22562). It is for the use of wholesale clients,
researchers, licensed financial advisers and their authorised
representatives only.
Kingdom of Bahrain: The document has not been approved by
the Central Bank of Bahrain which takes no responsibility for its
contents. No offer to the public to purchase the Strategy will bemade in the Kingdom of Bahrain and this document is intended
to be read by the addressee only and must not be passed to,issued to, or shown to the public generally.
Kuwait: This document is not for general circulation to the
public in Kuwait. The Strategy has not been licensed foroffering in Kuwait by the Kuwaiti Capital Markets Authority or

any other relevant Kuwaiti government agency. The offeringof the Strategy in Kuwait on the basis a private placement
or public offering is, therefore, restricted in accordance with
Decree Law No. 7 of 2010 and the bylaws thereto (as amended).
No private or public offering of the Strategy is being made in
Kuwait, and no agreement relating to the sale of the Strategy
will be concluded in Kuwait. No marketing or solicitation or
inducement activities are being used to offer or market theStrategy in Kuwait.
Kingdom of Saudi Arabia: This document is communicatedby Nikko Asset Management Europe Ltd (Nikko AME), which isauthorised and regulated by the Financial Services and Markets
Act 2000 (as amended) (FSMA) and the rules of the Financial
Conduct Authority (the FCA) in the United Kingdom (the FCA
Rules). This document should not be reproduced, redistributed,
or sent directly or indirectly to any other party or publishedin full or in part for any purpose whatsoever without a priorwritten permission from Nikko AME.
This document does not constitute investment advice or apersonal recommendation and does not consider in any way
the suitability or appropriateness of the subject matter for
the individual circumstances of any recipient. In providing aperson with this document, Nikko AME is not treating that
person as a client for the purposes of the FCA Rules other thanthose relating to financial promotion and that person will nottherefore benefit from any protections that would be available
to such clients.
Nikko AME and its associates and/or its or their officers,
directors or employees may have or have had positions ormaterial interests, may at any time make purchases and/or sales
as principal or agent, may provide or have provided corporate
finance services to issuers or may provide or have provided
significant advice or investment services in any investments
referred to in this document or in related investments. Relevant
confidential information, if any, known within any company
in the Nikko AM group or Sumitomo Mitsui Trust Holdings
group and not available to Nikko AME because of regulations
or internal procedure is not reflected in this document. The
investments mentioned in this document may not be eligible
for sale in some states or countries, and they may not besuitable for all types of investors.
Oman: The information contained in this document nether
constitutes a public offer of securities in the Sultanate of
Oman as contemplated by the Commercial companies law of
Oman (Royal decree 4/74) or the Capital Markets Law of Oman
(Royal Decree 80/98, nor does it constitute an offer to sell, or
the solicitation of any offer to buy non-Omani securities in
the Sultanate of Oman as contemplated by Article 139 of the
Executive Regulations to the Capital Market law (issued by
Decision No. 1/2009). This document is not intended to lead tothe conclusion of any contract of whatsoever nature within the
territory of the Sultanate of Oman.

Qatar (excluding QFC): The Strategies are only being offered
to a limited number of investors who are willing and able toconduct an independent investigation of the risks involvedin an investment in such Strategies. The document does notconstitute an offer to the public and should not be reproduced,
redistributed, or sent directly or indirectly to any other party or
published in full or in part for any purpose whatsoever without
prior written permission from Nikko Asset Management Europe
Ltd (Nikko AME). No transaction will be concluded in yourjurisdiction and any inquiries regarding the Strategies should bemade to Nikko AME.
United Arab Emirates (excluding DIFC): This document andthe information contained herein, do not constitute, and are
not intended to constitute, a public offer of securities in the
United Arab Emirates and accordingly should not be construed
as such. The Strategy is only being offered to a limited numberof investors in the UAE who are (a) willing and able to conduct
an independent investigation of the risks involved in an
investment in such Strategy, and (b) upon their specific request.
The Strategy has not been approved by or licensed or registeredwith the UAE Central Bank, the Securities and Commodities
Authority or any other relevant licensing authorities orgovernmental agencies in the UAE. This document is for theuse of the named addressee only and should not be given or
shown to any other person (other than employees, agents or
consultants in connection with the addressee’s consideration
thereof ). No transaction will be concluded in the UAE and any
inquiries regarding the Strategy should be made to Nikko AssetManagement Europe Ltd.
Republic of Korea: This document is being provided forgeneral information purposes only, and shall not, and underno circumstances is to be construed as an offering of financial
investment products or services. Nikko AM is not making any
representation with respect to the eligibility of any person toacquire any financial investment product or service. The offeringand sale of any financial investment product is subject to theapplicable regulations of the Republic of Korea. Any interests
in a fund or collective investment scheme shall be sold after
such fund is registered under the private placement registration
regime in accordance with the applicable regulations of the
Republic of Korea, and the offering of such registered fund shallbe conducted only through a locally licensed distributor.
Canada: The information provide herein does not constituteany form of financial opinion or investment advice on the partof Nikko AM and it should not be relied on as such. It does
not constitute a prospectus, offering memorandum or private
placement memorandum in Canada, and may not be used in
making any investment decision. It should not be considereda solicitation to buy or an offer to sell a security in Canada. This
information is provided for informational and educational use
only.

75

Members of the Nikko AM Japan Environment Group at Arakawa Riverbed cleanup