Resona Asset Management

SUSTAINABILITYR EPORT
2022 / 2023

To ensure a prosperous and happy life
for future generations as well as ourcustomers as our customers all we do.

Identity of Resona Asset Management
The purpose of Resona Asset Management is“to ensure a prosperous and happy life for future generations as well as our customers.”
To realize this purpose we have explored:
Which“values”we cherish,
What sort of“corporate culture”we require, andWhat kind of“business model”we should operate.
We have articulated them as the“Identity of Resona Asset Management.”

Our Purpose

We are clearly aware that our reason for being, or“purpose,”is to ensure a prosperous“To ensure a prosperous
and happy life for future
generations as well as ourcustomers”

and happy life for future generations as well as our customers.
We are eager to one day share in the happy stories as our smiling clients declare“I wasable to build up my assets through investment services provided by Resona AssetManagement,”“Transactions and relationship with Resona Asset Management have

Our Value

brought me an affluent and happier post-retirement life”and“Through investing in

Respect open culture, long-term
perspective, and diversity

products provided by Resona Asset Management, I was able to contribute to realizing abetter society and environment for the sake of future generations.”
In order to make this happen and in order to“provide to ensure a prosperous and happy

Corporate Culture

life for future generations as well as our customers.”at any time, we commit ourselves to

1. Mutual respect,
2. Pursuit of expertise, 3. Addressing real customer needs

acting as an asset manager focused on meeting genuine customer needs.
Furthermore, we hereby declare our intention to be“a responsible investor”and also to
be“a long-term investor,”assisting our clients in their asset formation over the long term.

Business Model

And to realize these above-mentioned objectives in a sustainable manner, we hereby
make a commitment to reinforce our asset management capabilities continuously.

Trust bank model
We will commit and conduct our fiduciary duties through long-term business perspective and commitment.

What we seek to do to ensure a prosperous and happy life
for future generations as well as our customers.
Desirable future*

Sustainability of client lifestyles

Contents
Identity of Resona Asset Management

1

Index-related engagement

60

Message2

Direction of future engagements

61

Chapter 3

Resona Asset Management’s Proxy Voting

62

Chapter 4

ESG Integration at Resona Asset Management70─ Corporate Section ─
Chapter 1

Chapter 2

Inclusive social
economySustainable
environment

Corporate culture,
purposeOverview of Resona Asset Management

4

Framework of corporate governance

6

Resona ESG Ratings

72

Framework of fund governance7

ESG integration on equity/active investment

73

Human resources strategy

8

ESG integration in active fixed income investing operations

74

Desirable Future and Materiality for Resona Asset Management10

ESG integration in equity quantitative investment

76

Materiality (material issues)

12

ESG integration in passive investments

77

Resona Asset Management’s Impact Investing78

Impact assessment on SDG Bonds

84

Assessment on Responsible Investment Activities

86

PRI annual reporting and assessment

86

Self-assessment on responsible investment activities

87

Risk management system

88

Compliance management system

89

Customer-centered business operations

90

ESG funds and impact funds

92

Year 2020: Considerations on Materiality

94

Year 2021: Scenario Analysis

95

Year 2022: Materiality Analysis Based on study on Regional
Rivalry Model

96

Chapter 3

The Sustainability of Resona Asset Management

14

Chapter 4

Disclosures in Accordance with the Recommendations of the
Task Force on Climate-Related Financial Disclosures (TCFD)

18

What we can do To ensure a prosperous and happy life for future
generations as well as our customers* For more details about our thoughts on the desirable future, see page 10.

We believe that society and the environment as well as the investee companies should be sustainable toprotect our clients’assets and to underpin the sustainability of our client lifestyles.
By achieving our concept of the desirable future to ensure a prosperous and happy life for the future
generations as well as our customers. we fulfill our fiduciary duties as a responsible investor.

Chapter 2

Chapter 626

─ Responsible Investment Section ─
Chapter 1

Chapter 5

Responsible Investment of Resona Asset Management

30

Framework of responsible investment and stewardship activities

34

The Engagements of Resona Asset Management

36

Materiality (top-down) engagement

40

Information disclosure engagement

44

Bottom-up engagement (equity/active investment)

46

Bottom-up engagement (fixed income/active investment)

48

Engagement Report50

Appendix

Resona Asset Management

S U S TA I NA B I L I TY R E P O R T

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1

Message

It is important tosuccess and to takeconsider the path and steps toconcreate and practical actions.

We would like to thank for your continued support of Resona Asset Management.

establishing an identity, launching impact funds and issuing impact reports, using AI

Looking back over the past year, we have experienced a series of events that could

governance committee meetings to enhance customer-centered business operations.

be major turning points. The spread of COVID-19 infections and Russia’s invasion of
Ukraine have had a large effect on financial markets, but also on other areas. For

example, they have caused rivalry and problems related to human rights and energy.
However, through the penetration of remote work, great strides have been madetoward digitalization and moving away from old customs. Also, the United States haschanged its monetary policy in order to curb inflation, and these changes haveto make our engagement activities more sophisticated, and establishing fundThis year we also thoroughly reviewed our overall responsible investment activities
in order to make them more sophisticated. Some of our concrete policies include

implementing“Resona ESG Ratings,”which use our proprietary assessment metrics,
and establishing policies on responsible investment activities, such as“Engagement
Policies”.

caused worldwide interest rate, foreign exchange and equity markets to greatlyThis report was renamed as Sustainability Report, and the report provides details on

to intensify primarily due to climate change.

responsible investment activities, it also reports on concept and corporate

fluctuate. Additionally, global weather abnormalities and natural disasters continue

The purpose of Resona Asset Management is to ensure a prosperous and happy life
future generations as well as our customers. We will continue to work diligently to

our concrete policies and activities in line with our purpose. In addition to ourframework for achieving our responsible investment activities. We believe we were able
to disclose our desired direction, activities and initiatives that we were focusing on.

fulfill our mission of maximizing returns from our customer assets while also helping

Resona Asset Management will humbly and diligently continue to take concrete andis our responsibility as a fiduciary who manages valuable customer assets.

investee companies and to develop a healthy capital market. We will also cooperate

to realize a sustainable society and develop a healthy capital market. We think thisWith all of these major changes, I think it is important to set clear objectives andtargets, to consider the path and steps to achieving these targets, and then to takespecific and practical actions.

practical actions and act as a long-term responsible investor to improve the value ofwith all stakeholders to solve social issues in these turbulent times with concreteand practical actions to help achieve a sustainable society.

We would like to ask for your continued support and encouragement.

In the last year’s Stewardship Report 2021/2022, I have stated that it is important
for asset management companies to express their corporate purpose. We have
implemented various concrete initiatives in line with our purpose, such as

2

Resona Asset Management

S USTA INA BILITY R E POR T

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Akihiko Nishioka

Representative Director and President
Resona Asset Management Co., Ltd.

Resona Asset Management

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Corporate Section

─ Corporate Section ─
Chapter

1

Overview ofResona Asset Management

years

Approx.

Establishmentof Asset
Management
Business¥

We have established an organization supported by 129
investment professionals. While pursuing specialized
knowledge by different investment style, we share theknow-how on responsible investment.

3 Responsible investment

Became ina signatory to PRI

4 Network

We leverage the network which we have developed as apioneer to the responsible investment to gather advanced
knowledge and information. We also participate incollaborative engagements at various engagement platforms.

Professionals

Number of meetings held
to share information related
to responsible investment

129

45

2003

Number of collaborative
engagements

1,722

25

Number of times invited
to serve as external committee
member, etc.

Signing the PRIStart of
ESG integration
and PRI reporting

2008

2010

2012

4

Resona Asset Management

Signing the CDP
2010
Establishment of
PRI Japan
2011
Adoption of Principles
for Financial Action
for the 21st Century

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Around2022 / 2023

Introduction of
ESG investment criteria
Drafted manuals andheld briefing sessions(collaboration withPRI Japan)

2014
EstablishedJapan’s
StewardshipCodeAt present

Organizational chart
General Meetingof Shareholders

Public pension¥33.5 trillion,

Audit and Supervisory
Committee
Internal Audit Office

Representative
Director and President
Executive
Committee

Responsible Investment
Committee
Asset Management
Committee

18.5％

Client Services Division

Index Investment Division

Asset Management Client Services Division

Fixed Income Investment Division

Fund Administration Division

Asset type

Equity Investment Division

Information Technology Planning Division

Responsible Investment Division

Investment Risk Administration Division

Trading DivisionCorporate Administration Division
Compliance Office

26.0％

2015
2015
• ‌Adoption of the 2030
Agenda for Sustainable
Development• ‌Adoption of the Paris
Agreement• ‌Established the
Corporate GovernanceCode(As of September 30, 2022)

Chaired the AssetManagement, Securities
and Investment Banking
Working Group of the
Joined Institutional
Principles for Financial
Investors
Action for the 21st
Collective Engagement
Century
Forum (IICEF)

2016

Fund governancecommittee meeting

Investment Planning Division

41.1％¥10.6 trillion,

Joined PRI
collaborative
engagement

Responsible investment
verification committee meeting

Compliance and Risk Management Committee

Global ﬁxed
income ex. Japan¥16.8 trillion,¥2.0 trillion, 4.9％

11

2014

2020

2000

Other ¥0.9 trillion, 2.3％

Other ¥3.8 trillion, 9.5％

trillion

Know-how in diversified
portfolios of long-term global
investments accumulated
through management ofpension fundInvestment Evaluation
Committee

Global equities
ex. Japan

40

Consolidates asset
management functions ofResona Bank into Resona
Asset Management

Deregulation pertaining topension fund asset allocations
and scope of portfolios

Board ofDirectors

Japanese equities

2013

¥

Rising expectations forinvestment services such as
the move towards the“100-year life,”and the switchfrom saving to wealth¥4.9 trillion,
12.2％¥7.5 trillion,

Chaired the
Corporate Working
Introduction ofGroup of PRI Japanthe concept of
Network
universal ownership2022

Accumulated know-how
in diversified portfoliosof global investments

Corporatepension

Number of times
participated in collaborative
engagement platforms

28

Instrument development
and investment education
know-how for individual
investors¥

Composition of AUM

Japaneseﬁxed income

Involvement as an
initial member of
PRI Japan

2006
External
Establishment
environmentof PRI

1990

Expansion of corporate
pension market

ClientResona’s track record of responsible investment
Injection of public funds
Embarked on a fresh
start as a company thatsociety allowed tosurvive

Around2008

Total number ofengagements conducted(In-house)* ‌The universal owners who have large assets under managements(AUM) and conduct diversified investments should ensure market
and social stability and sustainability in order to protect the interestof their clients.

418 trillion

10 trillion

81.9％

We have adopted the concept of universal ownership* andpromote responsible investment activities. We also practice anengagement strategy geared to finding solutions to ESG issues
across society by identifying responsibilities for social sustainability.

3

2019

¥

3 trillion

Retail ¥1.4 trillion, 3.6％

management capability/
2 AssetHuman resource development

2

Approx.

Approx.

Grew share primarily
through pension fundsof SMEs

60

1

Approx.

2003

1987

1962

by asset size and asset management structure.

Approx.

Chapter

Resona AssetManagement
established

Includes predecessors The Daiwa Bank,
Ltd., The Asahi Trust & Banking Co., Ltd.,The Daiwa Trust & Banking Co., Ltd., andResona Trust & Banking Co., Ltd.

Resona Asset Management in January 2020, it became one of Japan’s leading asset managers both

In 1962, we were established to start our asset managementbusiness, mainly focusing on corporate and public pension fundmanagement. In 2008 Resona Bank became a signatory to the
Principles for Responsible Investment (PRI), and has been aparticipant to the PRI Japan network since it was firstestablished. We have built up a track record in responsible
investment through our work as chair of the PRI Japan WG andother roles.

Chapter

2015

Resona Bank

the Resona Group. By consolidating the trust asset management functions of Resona Bank into

History of asset management

Chapter

Trends in AUM

Resona Asset Management was established in August 2015 as the asset management company of

1 History

Chapter2017

As Deputy Chair of ESG
Financial Strategy Task
Member of theForce, drew up“Strategy
Committee on
needed in order to
Principles forbecome ESG financial
Financial Action
for the 21st Century superpower”proposal

2018

Joined Climate Action 100+

2019

2019
• ‌Drew up long-term
growth strategy for
Paris Agreement• ‌G20/Osaka Blue
Ocean Vision

Joined ICGN,ACGA andAIGCC• ‌Participation in PRI
collaborative• ‌Participation in
Access to Nutrition engagement initiative forhuman rights,“Advance”
Initiative (ATNI)• ‌Steering Committee• ‌Endorsed andmember of the Japansupported the
Impact-driven Financing
Finance for
Biodiversity Pledge Initiative

2020

2020
• ‌Japan to vow carbon neutral
by 2050s National• ‌Launch of Japan’
Action Plan on Business andHuman Rights (2020-2025)

Resona Asset Management

2021

2022

2021
COP26

2022
• ‌VRF and CDSB
integrated into the
ISBB• ‌GX Implementation
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Corporate Section

─ Corporate Section ─

1

Chapter

Chapter

Chapter

1

2

3

4

Overview of Resona Asset Management

Framework of corporate governance

Framework of fund governanceResona Asset Management has established a Corporate governance structure by ensuring the

In April 2021, Resona Asset Management established the fund governance committee meeting

separation of business execution and its oversight, and by appointing independent outside directors.

exclusively consisting of outside directors for the purpose of verifying adequacy of governance with

As an asset management company from the perspective of pursuing the most optimal profits forrespect to individual funds managed by it.

clients and fulfilling our role as a responsible investor, we are conducting our business under a

The fund governance committee meeting verifies from external third-party perspectives that funds

framework of continuous and effective verification and checking.

are established and managed in order to realize the most optimal profits for our clients.

・‌We ensure independence from our Group through appointing two independent outside directors of our six directors,
and we also realize the separation of business oversight and business execution through the Audit and Supervisory
Committee with independent outside directors.

▪Fund governance committee meeting
Members

ParticipantsOperations・‌Independent outside directors of various backgrounds have been appointed; one has experience as an outside
director at another asset management company and another works as a law scholar and as a lawyer.

Schedule:
Generally held twice a year
(May and November)・‌As executive officers and general managers of the investment business units, professional individuals who have longpractical experiences in investment management are appointed.
・‌Through committees consisting of independent outside directors and external experts, we have set up a frameworkfor verifying operations of the execution units by third parties.

Three outside directors
Chairman: Director Otsuki

General Meeting of Shareholders

Board of directors

Matters for verification

Chapter

Chapter

6 Directors

inside : outside = 3 : 3
executive : non-executive = 2 : 4
2 outside directors are independent

Audit and Supervisory Committee
InsideOutside Independent
OutsidePresident, and executive officers responsible for the Investment
Planning Division, Responsible Investment Division, Client Services
Division, Investment Risk Administration Division, and Corporate
Administration Division’s Compliance Office, as well as relevant
individuals nominated by the committee chairman

Qualities of newly established funds as products(at every meeting)

Investment quality of each fund(at every meeting)① Background and purpose of the offering fund

① Investment performance③ Appropriate scale of investment③ Fund balance

The appropriateness of discussions and conclusions at theAsset Management Committee is subject to verification,
particularly with respect to the following five points.

② Target clients

Whether or not funds are established

Whether or not responsible investment

and managed appropriately

activities are carried out appropriately

Fund governance committee meeting

Responsible investment
verification committee
meeting

Asset Management
Committee

Investment Evaluation
Committee

Compliance and Risk Management Committee

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Responsible Investment
Committee

The appropriateness of discussions and conclusions at theInvestment Evaluation Committee is subject to verification,
particularly with respect to the following five points.

② Tracking error (a measure of realized risk)④ Number of investment securities④ Anticipated risks and returns⑤ Turnover ratio⑤ Trust fees

Management policy on funds with less-than-expected balance (first half of fiscal year)
Fee levels of public funds (latter half of fiscal year)
ReportExecutive Committee

Secretariat:
Investment Risk
Administration Division

Verification

ReportVerification

Asset Management Committee

Investment Evaluation Committee

The objective of Asset Management Committee is to facilitate
appropriate management of trust assets and other investments
as well as client-oriented planning of investment instruments
through engaging in discussions and reporting with respect toimportant matters concerning management of investment
trusts and execution of investment advisory services, and alsowith respect to important matters of planning and control
regarding investment trusts as investment instruments.

The objective of the Investment Evaluation Committee is tocontribute to managing trust assets and other investments
appropriately and maintaining and improving investment
quality from the client perspective through reporting anddiscussing investment management, investment performanceand other issues of trust assets and other investments.

ChairmanPresident

ChairmanPresident

Members

President, and executive officers responsible for theInvestment Planning Division, Responsible Investment
Division, Fund Administration Division, Investment Risk
Administration Division, Corporate Administration
Division, and Corporate Administration Division’sCompliance OfficeMembers

President, and executive officers responsible for theInvestment Planning Division, Responsible Investment
Division, Investment Risk Administration Division, Corporate
Administration Division, Corporate Administration Division’sCompliance Office, Client Services Division, and AssetManagement Client Services Division

Schedule

Quarterly and as necessary

Schedule

Quarterly and as necessary

Secretariat

Investment Planning Division

Secretariat

Resona Asset Management

Investment Risk Administration Division

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Corporate Section

─ Corporate Section ─
Chapter

1

Overview of Resona Asset Management

Human resources strategy

Resona Asset Management’s ideal personnel▪S omeone who embodies the corporate culture (emphasizes mutual respect, pursues
expertise, meets true client needs).
▪S omeone with the competence that leads to recognition as a professional both insideand outside Resona Asset Management.
▪S omeone who thinks and makes judgments from a long-term viewpoint, and commits
to their own role.

We believe that three elements are required for professionals.While the foundation is provided
by Science, which consists of theory and technology acquired mainly through study and training,
and Craft, which involves artisanship and skills acquired through experience, Art is an expressionof individuality and sensitivity.From the point of view of enhancing one’s competence as aprofessional, it is undesirable that a person be lacking in one of these three elements.We work todevelop professionals through OJT and other training programs, as well as career formation
support that respects individuality and independence.
Degree of professionalism

Science

Craft

Art

Theory andtechnology

Experience,
artisanship andskill

Insight, intuition
and inspiration

We believe that raising the level ofprofessionalism means to increase
the volume and enhance the qualityof performance, through adding Art
to the base of Science and Craft.
2022 / 2023

Chapter

1

2

3

4

◦Managers conducting assessments are required to have especially long experience in asset
management and a high level of expertise.

Value assessment

Performance assessment

Asset management professionals are assessed on
the responsibilities and functions defined in theirjob description from the following perspective

Assess the degree to which they have achieved
the annual performance target that was set inaccordance with their responsibilities

MindsetResona Group Action Principles:
RESONA STANDARD
Our code of conduct on asset
management

Example of fund managers

Skill sets
expertise and skills as an asset
management professional
Long-term performance that demonstrates
expertise and skills

Reflection in promotion and pay increases

Developing professionals

S USTA INA BILITY R E POR T

Chapter◦The assessment of professional personnel is conducted fairly based on an assessment of values
and performance, having first established a job description that accords with their actual duties.

In order to fulfill our purpose, which is to ensure a prosperous and happy life for future
generations as well as our customers, it is essential that we take a sustainable and long-term
approach to discharging our fiduciary duties and our duties to society. We believe the mostimportant factor in achieving this is recruiting and developing professional human resources whoshare our sense of corporate identity.
In order for each and every one of these individuals to be able to exert their abilities as aprofessional to the fullest extent, it is also important that their expertise and performance areassessed fairly in an environment of mutual respect.We continue our efforts to recruit, develop,
and conduct fair assessments of such personnel, and to instill a corporate culture that supports
the values described above.

Resona Asset Management

Chapter

Framework for personnel assessment

Basic approach to human resources strategy

8

ChapterQuantitative assessment
Active managers: Performance of thefunds they manage
Index managers: AUM reflected fromclients’assessments
Qualitative assessment
Appropriateness of investment process
Contribution to team management andpersonnel development

Reflection in performance incentives

Initiatives for human resources recruitment and development◦We have been hiring new graduates since the professional personnel system was adopted in 2008,
and since the founding of Resona Asset Management in 2015, the ratio of new graduates to total
employees has remained at a high level, regardless of business conditions or financial market trends.
◦We operate an ongoing program of accepting young employees changing roles from otherparts of the Resona Group, mainly those who have not yet reached their fifth year since joining
their companies.In particular, there has been a steady increase in personnel aiming to get
involved in asset management operations at Resona Asset Management after first gaining
experience in submitting asset management proposals directly to customers.
◦In terms of HR development, in addition to new employee training, we provide training tailored to therole in question (external training for different types of investment asset and operations), in order torapidly bring younger personnel up to the required level and to broaden the skills among senior
employees.For younger employees, rather than limiting the scope of training to their own duties, we
provide ongoing training that covers the operations of all departments within Resona AssetManagement.Not only does this provide support for the independent career formation of younger
employees, but it is also intended to foster a corporate culture that emphasizes mutual respect.
◦In the area of ESG, where there have been dramatic changes in the environment, as well as
increasing the number of staff through internal transfers and external training, we are working
to raise the level of expertise as a whole through the recruitment of external personnel using
targeted mid-career hires and other methods.
◦For in-house global asset management, to which we are strongly committed, we continue totake a long-term approach to enhancing our human resources by assigning younger employeeswith outstanding linguistic skills to this area.
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Corporate Section

─ Corporate Section ─
Chapter2

Desirable Future andMateriality for
Resona Asset Management

Chapter

Chapter

Chapter

Chapter

1

2

3

4

Desirable future

We aim to realize a“desirable future.”
The purpose of
Resona AssetManagement

Inclusive social
economy“Ensure a prosperous and happy life for future generations aswell as our customers.”

Sustainable
environment

As a member of the investment community in the capital markets, we strive to
Basicapproachcontribute to the sound development of the capital markets. We will fulfill our

Corporate culture,
purposeroles as a responsible investor by protecting the stability and inclusiveness of thesocial economy and the sustainability of the environment through investments.

Realizing the“desirable future”

Our goal

We believe that the“desirable future,”which we aspire to achieve, can be realized bylinking the three elements:“inclusive social economy,”“sustainable environment,”and“corporate culture and purpose.”

Inclusive social economy
A future which builds dynamic social and economic systems that consider various important forms of capital

Desirable future

We believe it is important to build dynamic social and economic systems that take into account social
relationship capital, natural capital, and human capital in order to realize a“sustainable society”that will
establish the foundation to ensure a prosperous and happy life for future generations as well as our customers.

Sustainable environment
A future where decarbonization and a circular economy are achieved, and biodiversity is preserved
We aim to maintain the sustainability of the environment that is the foundation for a stable social
economy and corporate profitability over the medium to long term. We believe it is important forcompanies to: achieve decarbonization within the entire supply chain, promote resource circulation
throughout their product lifecycles, and understand and manage the impact and dependency on natural
capital, including biodiversity.

Corporate culture, purpose
A future where the purpose and role of corporations are redefined, and a new corporate culture is fostered
As corporate responsibility expands to include the entire supply chain and the sustainability ofcorporations becomes directly linked to the sustainability of society, it is important to redefine thepurpose and role of corporations and to foster a corporate culture that aligns with them.

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ESG issues

Society（S）

Materiality(material issues)

Environment（E）

Governance（G）

In order to realize a desirable future, it is essential to address various ESG issues.
We identify the ESG issues by listing and evaluating these issues, and designate thoseimportant as materiality. Based on this evaluation, we implement various initiatives suchas responsible investment activities.

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─ Corporate Section ─

2Desirable Future and Materiality for
Resona Asset Management

Chapter

Chapter

Chapter

Chapter

1

2

3

4

Materiality (material issues)
Materiality assessment

Materiality Matrices (as of January 2023)

Our material issues are selected to achieve a“desirable future.”●Governance ●Environmental●Society / human capital●Society / community●Society / products, services and society

Material issues are determined by assessing each ESG issue through the following selection
process.
▪Selection process of our materiality

To list up
ESG issues

Assessment
framework

Materiality
assessment

OutputTo list up ESG issues based on:
Global ESG trends such as policy changes, regulations,shareholder proposals, and information which is gathered
through engagements with the investee companies and our
stakeholders.
To establish assessment criteria & method on:・‌The“Importance to sustainability,”vertical axis, and・‌The“Importance to long-term investment performance,”
horizontal axis

To plot Materiality Matrices based on each ESG issue score.
Each ESG issue is scored based on the assessment criteria.

ESG issues of particular importance(material issues)

Importance to sustainability

Chapter

Corporate Section

List of ESG issues(Approx. 30)

Assessment criteria &methodology

Materiality assessment(Results of materiality analysis)

Importance to long-term investment performance
Review and study

Review in light of environmental and social changes,
and conduct a study* Conducted by the advice of BSR

Changes of each ESG
issue

Review and study of Materiality Matrices
2020 ▶ Mapped ESG issues and identified materiality.

Details of material issues
Climate changeE▶ Conducted a survey on the impact of COVID-19.

2021 ▶ Studied how ESG issues would change under each future scenario.

Made certain assumptions towards a“desirable future”and“probable future.”
The assumptions were based on three future scenarios: “Conventional Development Model,”“Regional Rivalry Model”and“Sustainable Model.”2022 ▶ Conducted studies on the Russia-Ukraine war, whether our Materiality Matrices would change underthe“Regional Rivalry Model.”S

Biodiversity andforest conservation

Preserving natural capital such as biodiversity, natural and water resources, andpreventing over-harvesting and deforestation, which would threat natural
capital.

Child labor andforced labor

Protecting the human rights of workers at corporate activities, preventing forcedlabor and child labor, and improving labor practices

Product quality andsafety, social impact of
products and services

Ensuring product quality and safety,
responding to under and over nutrition, and ensuring food sustainability

Diversity and inclusion

Ensuring board/employees diversity and equal opportunities, and diverse
workstyles
Preventing discrimination and harassment▪Review and study outcomes
We have realized that the Materiality Matrices would change based on the external environment. We
have also recognized the necessity to consider the new ESG issues. We plan to review and reassess ourMateriality Matrices for the period from July 1, 2022 to June 30, 2023.

G* Please see page 94 for details.

Reducing greenhouse gas emissions associated with corporate activities,
promoting energy conservation, using renewable energy, and adapting toclimate change

Anti-corruption

Preventing involvement with bribery, fraud, collusion, and money laundering on
corporate activities* Corporate activities include supply chains.

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Corporate Section

─ Corporate Section ─
Chapter

3

The Sustainability of
Resona Asset Management

Chapter

Chapter

Chapter

Chapter

1

2

3

4

On-site teaching at high schools: “Our Life and Finance”
With financial education becoming a required subject in high schools in FY 2022, we have
prepared two general curriculums and have been holding mock lessons for teachers and visiting
lectures for students to provide high school students the opportunity to learn and think on theirown about how finance and the economy are related to their daily lives.

Our purpose is to ensure a prosperous and happy life for future generations as well as our customers.
Each of us has a responsibility to ensure a prosperous and happy life for future generations as▪Curriculum

News

Life plan

The news, asset management, and you─ All changes have unforeseen
consequences? ─Create your own future map

The purpose of the theme of“how does theThis class is to get students to think about

daily news affect you?”is to get students

finance and asset management for theirto have a better understanding of theown life plan (future map) while

economy and finance.

considering questions like“how much

It is also a class to get students to thinkmoney would I need to fulfill my future

about asset management as a way to deal

goals?”or“what should I do to savewith the rapid changes of the world.

money?.”

well as our customers.
In order to fulfill our responsibility for future generations, we help asset management forcustomers and take initiatives and actions in educational, environmental, and other fields.

Endowed courses at universities: “Finance and SDGs”
In cooperation with institutes of higher learning, we hold classes with specialist lecturers on
corporate/investor activities for achieving SDGs.
▪Activities achieved
Sophia University (April to July 2022)
Details oflecture“The Challenges and Possibilities of SDGs: From the Perspective of Corporations and Investors”◦Progress and current state of ESG and SDGs
◦ESG (environment, society, governance) from the perspective of corporations◦ESG and SDGs from the perspective of investors▪Activities achieved◦A sustainable society and capital markets◦Game of Choice (card game)*◦Initiatives in Japan for achieving SDGs
◦Challenges and solutions for achieving SDGs (group discussion)* This was created and published by the supply chain working group of Global
Compact Network Japan.

2022 spring semester: Lecture at

Date

Class

SchoolJune 2022

Life plan

Saitama Prefectural Ogawa
High School

July 2022

News

Consumer seminar for
Saitama prefectural faculty,
etc.

October 2022

News

Hoshino High School

November 2022

Life plan

Sakaehigashi
Senior High School

November 2022

News

Saitama Prefectural Hasuda
Shoin High School

December 2022

News

Tokyo Metropolitan
Chihaya High School

December 2022

Life plan

Saitama Prefectural Asaka
High School

Sophia University

Kansai University (April to July 2022)
Details oflecture“SDGs in Terms of Actual Finance Work”◦ESG, SDGs, and finance trends around the world and in Japan◦SDGs from the perspective of asset management◦ESG from the perspective of corporations◦SDGs and the implementation of ESG in equity investments◦A new form of capitalism with a focus on SDGs
◦ESG and SDGs from the perspective of financeSample of materials used in◦SDGs from the perspective of integrated reports

the lectures

In addition to endowed courses at universities, we have given many lectures as lecturers or guest
speakers at Aoyama Gakuin University, Keio University, Tokyo Metropolitan University, Tokyo

Visiting lecture at Saitama Prefectural Ogawa High School

University of Science, Hitotsubashi University, and Waseda University.

14

Resona Asset Management

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Resona Asset Management

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15

─ Corporate Section ─
Chapter3

Corporate Section

Chapter

Chapter

Chapter

Chapter

1

2

3

4

The Sustainability of
Resona Asset Management

General employer action plan based on the Act on the Promotion of
Women’s Active Engagement in Professional Life

Efforts to reduce our environmental impact

One of our values is respect for diversity. We have established and released a general employer

carbonization and a Sound Material-Cycle

action plan based on the Act on the Promotion of Women’s Active Engagement in ProfessionalLife as one of our initiatives for achieving diversity in our use of human resources, diverse work
styles, and a work-life balance.

The Resona Group considers achieving deSociety to be significant business challenges,
and through our role in finance, we arecommitted to setting environmental policies
and achieving our 2030 SDGs.

Creation of personnel system and environment that makes working easier for female employees To be achieved by

In order to realize this commitment, as a part ofour efforts to achieve de-carbonization and a(1) Percentage of female workers hired

At least 50%

Sound Material-Cycle Society, we are starting(2) Percentage of female workers

At least 40%

FSC certified paper, and bioplastics when

(3) Difference in the average years of continuous employment of males and females hired

0 years

to use products made from recycled tea leaves,

FY 2026

Paper bag with paper handle and envelopes made from recycled
tea leaves

possible for equipment and consumables within the company out of concern for the environment
and in order to reduce the use of products derived from fossil fuels.

(4) Percentage of female workers in management

At least 30%

Endowment activities(5) Percentage of female executives

At least 30%

We donate part of the proceeds from public investment funds established and managed by the company.

Creation of work environment that further improves the work/life balance
Female employees

Male employees

Percentage of people who take childcare leave

100%

80%

Average length of childcare leaveー (not set)

3 days or longer

To be achieved by

Fund names

Fund names

Resona Japanese Small/Medium Equity Fund
(Nickname: Nihon no Mirai)

Saitama Resona Global Balance Plus ESG(Nickname: SaitamaDGs)

Donations are made to

Donations are made to

FY 2024* The average length of childcare leave for female employees is already beyond 12 months, so a target duration has not been set.

Social gatherings for young female employees
Social gatherings are held by senior female employees forfemale employees who have been with the company for 1 to
3 years. The goal is to allow young female employees tosocialize with senior female employees and learn from theirseniors’experience so that they can apply it to their own

The Resona Foundation for Future

work and career plan.

Social gathering for young female employees

Town meetings

Minato Bank Foundation

Once a year an opportunity is provided to young employees

The goals are to provide school subsidies to students
enrolled in universities in Hyogo Prefecture who haveexcellent academic skills and a good character but
difficulties in attending school for economic reasons. This
is to improve education in Hyogo Prefecture and foster
people who will contribute to society.

who have been with the company for 2 to 6 years to
exchange opinions with the president and executives of asset
management division by being able to directly ask questions
regarding our business strategies, business model, etc.
Town meeting

16

Resona Asset Management

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The goal is to provide the necessary support to raise thepeople responsible for the next generation and tocontribute to the development of communities.

Saitama Prefectural Fund for Promoting
Measures Against COVID-19 Infections
The goal is to support healthcare professionals fighting
on the frontlines against COVID-19.

* The description of fund donations covers January through December 2022.

Resona Asset Management

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17

Corporate Section

─ Corporate Section ─• Establish the basic policy on responsible investing• Oversee execution of activities related to ESG
issues including climate change
Oversight

President

As an asset management company, we have supported the goals of the Task Force on Climate-• Manage execution of activities related to
ESG issues including climate change

related Financial Disclosures (TCFD) since November 2020. We have made climate-related• Make a final decision on important mattersfor execution of activities related to ESG
issues including climate change (E.g.:
climate change policy, engagement policy,etc.)*

financial disclosures on governance, strategy, risk management, and metrics/targets inaccordance with the Task Force’s recommendations since 2021. Since the Implementing
Execution

information disclosure in accordance with the updated guidance.

* Decided by the President after taking the
feedback from the Responsible Investment
Committee into consideration
Reporting

The following is our climate-related financial disclosure relevant to the 4 pillars of the TCFD

Chapter

1

2

3

4

Direction

Audit
Committee

Reporting• Audit business execution, including thoserelated to ESG issues, and make reports to
the Board of Directors
Provide opinions

Responsible Investment Committee (Chair: President)

Members: Executive officers in charge of the Responsible Investment Divisionand other relevant investment divisions, and the compliance/risk unit; generalmanagers of the Responsible Investment Division and other relevant
investment divisions; and an outside expert• Discuss on important points for execution of activities related to
ESG issues including climate change (E.g.: climate change policy,
engagement policy, etc.)• Monitors relevant activities by the investment divisions.

◦“Governance”section	describes our governance structure related to ESG issues including

Information • ESG analysts do research on ESG issues including climate change in Japan and abroad
infrastructure • Deploy internal ESG databaseactivities.
◦“Strategy”section	describes the details on the climate-related opportunities and risks
that may affect the investee businesses in our portfolio.
◦“Risk management”section	describes our processes for identifying, accessing, and managing risks,
including the risk of losses in trust assets under our management due
to the manifestation of the climate-related risks.
◦“Metrics and targets”section	describes the key metrics and targets that we use to measure and manage
the climate-related opportunities and risks as well as our performance
related to them.

activities (including activities to address ESG issues including climate change) and to improve them as needed. The

Transition
risks

Activities related to ESG issues (including ESG integration, stewardship activities such as engagement and proxyvoting) are taken by the Responsible Investment Division and other relevant investment divisions in line with thepolicies and strategies agreed in the above mentioned process. We have ESG analysts who do research on ESG
issues in Japan and abroad and an internal ESG database as an information infrastructure for these activities.
We implement the PDCA cycle, where activities related to ESG issues taken by the relevant investment divisions aremonitored and assessed by the Responsible Investment Committee, and the policies and strategies related to ESG
issues are revised based on the assessment.
Additionally, our proxy voting (including those related to climate change) are verified by the“Responsible
Investment Verification Committee,”which comprises three outside experts.

Resona Asset Management

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by the President

Policy andLegal・Increased operating costs due to increased pricing of GHG emission (introduction of carbon tax, etc.)
・Increased operating costs due to stronger regulations for existing products and services
・Write-offs, asset impairment, and early retirement of existing assets due to policy changes

Technology

・Reduced sales of existing products and services due to an introduction of alternative products and services
with higher carbon efficiency
・More capital investment in or increased costs for R&D

MarketReputation
Physicalrisks

as an outside expert, and meetings are held once every 1 or 2 months. Important matters, such as policies andPresident makes a final decision on such matters after taking the feedback from the Committee into consideration.

• Act

in line with the policies and strategies set

Specific examples of the climate-related opportunities and risks and their potential financial impact (short, medium and long term)

Committee is chaired by the President and includes Dr. Takeshi Mizuguchi of Takasaki City University of Economics,
strategies related to activities to address ESG issues are discussed actively and carefully by the Committee. The

Relevant
investment
divisions

As an asset management company, it is important for us to increase the enterprise value of our investee companies,
and through that, to maximize the value of the trust assets under our management from a medium-to-long term
perspective. To realize this goal, we provide support for the investee companies so that they make the most of theclimate-related opportunities to achieve sustainable growth, and they avoid or mitigate negative impacts resulting
from the manifestation of climate-related risks.
The following table shows the climate-related opportunities and risks on the business sectors to which our portfolio
has relatively large exposure, and which is likely to be heavily affected by the manifestation of climate-related
opportunities and risks.

address climate change. Such activities are reported to the Board of Directors, which includes outside directors, at
We have established the“Responsible Investment Committee”to validate and verify our responsible investment• Function as the Secretariat of the Responsible Investment Committee• Act in line with the policies and strategies set by the President▪Climate-related opportunities and risks which may affect the business of the investee companies in our portfolio

We have a strong governance structure to allow the Board of Directors to oversee the execution of the activities toleast once a year.

▪Verify our
proxy voting

Strategy

GovernanceOur overall governance structure for ESG issues including climate change is shown in the figure on page 19.

Members: Threeoutside experts• Identify, assess and manage risks (including the risk of losses intrust assets under our management due to the manifestation ofclimate-related risks)recommendations: governance, strategy, risk management, and metrics/targets.

Board of Directors monitors and oversees the execution of relevant

Responsible
Investment
Verification
Committee

Compliance and Risk Management Committee (Chair: President)

Responsible
Investment
Divisionclimate change, the roles of relevant internal organizations and how the18

Chapter

Board of Directors

Oversight

Reporting (once a year)

Guidance for the TCFD recommendations was updated in October 2021, we have improved ourChapter

Our governance structure for ESG issues including climate change

Request to discuss
the relevant matters

4

Disclosures in Accordance with
the Recommendations of the Task
Force on Climate-Related
Financial Disclosures (TCFD)

Report resultsfrom discussion

Chapter

Chapter

Opportunities

・Reduced sales of existing products and services due to a shift in consumer preferences
・Increased costs due to increased energy and raw material prices
・Reduced sales of existing products and services due to a shift in consumer preferences or negative reputationof the industrial sector

Acute/
Chronic

・Damage or early depreciation of existing assets in locations at high risk for extreme weather events

Resource
efficiency

・Reduced operating costs and increased sales due to improved efficiency in business and production processes

Energysource・Reduced exposure to potential increases in fossil fuel prices and changes in carbon emission costs
・Increased sales of products and services with higher carbon efficiency
・Increased sale of products and services due to favorable reputation in markets

Products and・Increased sales of products and services with higher carbon efficiency
services
Market・Increased sales due to an access to new markets
・Increased sales resulting from diversification of financial assets

Resilience・Increased market valuation through resilience planning for business assets and processes to prepare for natural disasters
・Increased sales of new products and services related to ensuring resiliency▪Climate-related scenario analysis
Our parent company, Resona Holdings, has been performing climate-related scenario analysis through the processes
below. (1) identify“real estate and construction,”“automobiles and transportation,”and“energy”as importantbusiness sectors, based on the extent to which each business sector will be affected by climate-related opportunities
and risks and the exposure to each business sector it has in its portfolio; (2) assume a total picture of future society inboth 2°
C and 4°
C scenarios and assess the impact on the important business sectors when the picture is realized, and(3) analyze the magnitude of climate-related risks the portfolio is exposed to and how it will change over time.
We will build on the Resona Holdings’work and improve the assessment of the climate-related opportunities andrisks through scenario analysis.
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19

─ Corporate Section ─
Chapter

4

Corporate Section

Chapter

Chapter

Chapter

1

2

3

4

Disclosures in Accordance with the
Recommendations of the Task Force on
Climate-Related Financial Disclosures (TCFD)

１. Carbon footprint of our portfolio (Scope 3 category 15 GHG emissions)

Risk management
We categorize risks into credit risk, market risk, liquidity risk, operational risk (including legal/compliance risks andthe risk of losses in trust assets under our management), and reputational risk, and manage them.
Compliance and Risk Management Committee, President and Board of Directors have the following role in our risk
management framework. (See page 88 for our overall risk management framework.)
Discuss risk management policies, execution and improvement of risk management
Compliance and Risk
activities to ensure our overall risk management level is adequate, and recurrenceManagement Committee prevention measures for risk events.
President

Determine important matters for execution of risk management activities and manage
the execution.

Board of Directors

Establish risk management policies and framework, and oversee the execution of risk
management activities

Climate-related risks are recognized as“Risk drivers,”which may amplify the categorized risks in various ways (Basicconcept regarding the approach to address Climate Change by financial institutions, Financial Services Agency July2022).
It is of great importance for us, as an asset management company, to manage the risk of losses in trust assets
under our management due to the manifestation of climate-related risks. With the aforementioned risk
management system, we will identify, assess and manage the risk of losses in trust assets under our management

The size of our portfolio continues to increase. It hascreated greater upward pressure on carbon footprint ofour portfolio. We are focusing on Japanese companies
in our portfolio, whose GHG emissions dominate a large
proportion in our portfolio, and actively encouraging
them through engagement and proxy voting to reduce
their GHG emissions, so that we can reduce carbon
footprint of our portfolio relative to the benchmarks. We
will continue such efforts, taking into consideration that
reducing carbon footprint of our portfolio on an absolutebasis will be indispensable in the future.

In order to avoid and mitigate the risk of losses in trust assets under our management due to the manifestation ofclimate-related risks, we will encourage our investee companies to make climate-related financial disclosures, settargets related to GHG emissions, and develop their plans for transitioning to a low-carbon economy throughvarious measures including engagement and proxy voting. We will continue working with our investee companies
to transition to a carbon neutral economy.

8,000
6,000
4,000

6,352

4,079

101.1%

0March 2020

6,222

1,000
800

677

600

116.8%

400

March 2020

Carbon footprint of our portfolio(Scope 3 category 15 GHG emissions) *1

Net Zero by 2050
[Set in our policy on climate change (January 2023).]2

Weighted average carbon intensity (WACI) *2

ー3

Consistency of carbon footprint of our portfolio with SDS(Sustainable Development Scenario)ー4

Number of companies with which we have made an
engagement on climate changeーCarbon footprint of our own operations(Scope 1 and Scope 2 GHG emissions) *5

Net Zero by FY 2030
[Set in Resona Holdings’ long-term sustainability
targets (June 2021). These targets are applied for allcompanies in the Resona Holdings.]

March 2021

1,600
1,200

100%

800

99%

400

98%

0

99.4%

March 2022 September 2022

820
550

517

104.6%

87.1%

March 2021

101.2%

130%

50

120%

40

110%

30

100%

20

90%

10

80%

0

March 2022 September 2022

properly, taking into consideration our policy where we as an“universal owner,”contribute to reduce GHG emissions
in the whole society by reducing GHG emissions of our portfolio. We consider to use metrics to measurecontributions by investee companies to reduce GHG emissions in the whole society.

slightly lower than WACI of the benchmark.

Japanese equities

Our performances related to the metrics in the table are provided on pages 21-23.

547.6694.59
101.8%March 2021

489.27

98.1%
92.3%
March 2020

104%
103%
102%
101%
100%
100.7%
99%
99.9%
98%
March 2022 September 2022
95.52

93.58

March 2022 September 2022

98%

939

1,212

1,149

100.2%March 2020

107%
1,005

103%

104.9%
102.0%March 2021

105%

101.3%

101%

March 2022 September 2022

99%

47

41

96.2%

96.7%

35

34

100%
95%
90%
85%

76.0%
March 2020

80%

83.5%
March 2021

March 2022 September 2022

75%

(t-CO2e/1 million US$)

portfolio
150
125
100
75
50
25
0

136.90103.6%March 2020

116.37102.8%March 2021

104%
103%
102%
101%
101.2%
100%
100.5%
99%
98%
March 2022 September 2022
116.80122.18March 2021

250
200
150

218.54107.6%

177.34

199.34102.1%March 2020

March 2021

108%
104%

104.7%

50

110%
106%

107.8%

100
0183.12

102%

100%
March 2022 September 2022

Global fixed income ex. Japan
102%
100%
98%
99.3%
96%
94%
92%
93.4%
90%
March 2022 September 2022
440.26527.56■ WACI of our portfolio
2022 / 2023

99%

Global equities ex. Japan

Japanese fixed income
600
500
400
300
200
100
0

99.8%

*2

our portfolio’s WACI got higher in 2022, but it is still

March 2020

100%
99.6%

March 2021

102%
101%

101.3%March 2020

103%

CFP of our portfolio / CFP of the benchmark*3

improvements. For Japanese and Global fixed income.

102.8%

8,081

Global fixed income ex. Japan

than the benchmark’s, and we are seeing continuous

We continue to review metrics and targets we should use to assess and manage our climate-related activities

S USTA INA BILITY R E POR T

0

a focus on equities, where portfolio’s WACI is higher

98.34

7,923

2,000

101%

2. Weighted average carbon intensity (WACI)

1２0
100
80
60
40
20
0

8,155

5,952

We are actively taking actions to decrease WACI withTargets

Resona Asset Management

102.2%

4,000

102%

■ Carbon footprint of our portfolio

Metrics

56,000Japanese fixed income

Metrics and targets

1

6,432

100.0%

2,000

0

opportunities and the targets related to each metric (if set).

8,000

Global equities ex. Japan

101.1%

200

The following table shows the metrics we use to assess and manage the relevant climate-related risks and10,000*1(1,000t - CO2e)

portfolio

Japanese equities

due to the manifestation of the climate-related risks described in the“Strategy”section.

20

Chapter

250
200

174.76198.1650
0225.34

97.7%

96.8%

110%
100%

150
100

230.7070%75.5%March 2020

March 2021

90%
80%

86.2%

March 2022 September 2022

60%

WACI of our portfolio / WACI of the benchmark*４
Resona Asset Management

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21

─ Corporate Section ─

4Disclosures in Accordance with the
Recommendations of the Task Force on
Climate-Related Financial Disclosures (TCFD)

3. C onsistency of carbon footprint of our portfolio with SDS (Sustainable Development Scenario)
Japanese equities

under STEPS

under APS

Chapter

Chapter

1

2

3

4

FY 2021 (July 2021–June 2022)(29.8%)

153 companies （58.4%）

Management level

32 companies （14.7%）

87 companies （33.2%）

Global companies ex. Japan

8 companies （25.0%）

25 companies （44.6%）

1 company

Management level（3.1%）

1 company （1.8%）[( %): percentage of companies with which we have made an engagement on climate change]

80%
60%
40%
20%

2050

2049

2048

2047

2046

2045

2044

2043

2042

2041

2040

2039

2038

2037

2036

2035

2034

2033

2032

2031

2030

2029

2028

2027

2026

2025

2024

2023

0%
2022

65 companies

Japanese companies

under APS■100%

(As of September 2022)

Global equities
ex. Japan
160%

Current (and projected on a BAU basis) CFP of our portfolio
Maximum acceptable CFP of our portfolio under SDS■ under STEPS■

under APS■

Current (and projected on a BAU basis) CFP of the benchmark
Maximum acceptable CFP of the benchmark under SDS
under STEPS

Through our materiality analyses (page 12), we recognize“climate change”as one of the most important
challenges of the present and future. Therefore, we actively have made engagements with the investee companies
on the issue.
The number of companies with which we have made an engagement on climate change in FY 2021 significantly
increased over FY 2020 (by about 2.4 times). Also, the percentage of companies with which we have made an
engagement on climate change also significantly increased. Growing awareness of climate change among theinvestee companies in a wide range of industries have brought us more opportunities to make an engagement withthem on the issue.
More specifically, the number of engagements on the improvement of climate-related financial disclosure inaccordance with the TCFD recommendations has increased, as a consequence of the fact that more and morecountries have made such disclosure mandatory in recent years. We will continue engagements with the investee
companies on climate change, using our text mining AI technology to evaluate the quality of their information
disclosures.

5. Carbon footprint of our own operations (Scope 1 and Scope 2 GHG emissions)

under APS

*5

Our performance in Scope 1 and Scope 2 GHG emissions (Unit: t-CO )2

100,000

140%
120%■ Scope 1

73,77780,000

100%

6,263

72,00660,00080%

40,00060%
40%

20,000

20%

0
2050

2049

2048

2047

2046

2045

2044

2043

2042

2041

2040

2039

2038

2037

2036

2035

2034

2033

2032

2031

2030

2029

2028

2027

2026

2025

2024

2023

0%
2022

Chapter

4. Number of companies with which we have made an engagement on climate change

120%

*1

Equities:

March 2020

March 2021

March 2022

September 2022

Point of time at which the projected GHG emissions for our portfolio on a
BAU basis will exceed the maximum acceptable GHG emissions under SDS

2034

2038

2046

2044

Our current portfolio warming potential (in ℃) by 2050

2.2℃

2.0℃

1.7℃

1.9℃

Point of time at which the projected GHG emissions for our portfolio on a
BAU basis will exceed the maximum acceptable GHG emissions under SDS

2020

2022

2022

2022

Our current portfolio warming potential (in ℃) by 2050

3.0℃

3.1℃

2.9℃

2.9℃

We compare the projected carbon footprint of our portfolio, which is calculated on a BAU basis, with the maximum
acceptable CFP under SDS (Sustainable Development Scenario) with the Institutional Shareholder Services(hereinafter, ISS) analysis tool. The result shows that (1) the projected CFP of our portfolio will exceed the
maximum acceptable CFP under the scenario before 2050, (2) our current portfolio warming potential (in ℃) by
2050 will exceed 1.5 °C, and (3) our current activities to avoid the excession are insufficient.

Resona Asset Management

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*2

*465,507FY 2017

FY 2018

Σ

Outstanding amount

EVIC

5,949

60,31756,944

5,428

51,516

FY 2019

FY 2020

×Company emissions

EVIC=Enterprise value including cash
Note: The value of outstanding listed equity is defined based on its
market value (market price × number of shares held)i

Current value of investment inCurrent portfolio value

52,651

5,082

47,569FY 2021 (preliminary values)

Bonds:

Σ

Outstanding amount

EVIC

×Company emissions

EVIC=Enterprise value including cash

×

Issuer’s Scope 1 and 2 GHG emissions i
Issuer’s $M revenue i

Ratio of the Scope 1 and Scope 2 GHG emissions of investee companies in our portfolio relative to the emissions of companies in the benchmark (following
table).
Ratio of WACI of our portfolio relative to WACI of the benchmark (following table).
Assets*5

66,266s Scope 1 and Scope 2 GHG emissions are allocated based on portfolio weights. The
Carbon intensity (expressed in tons CO2e/ US$M revenue). Issuer’
formula is shown below.

Σ*367,515

6,499■ Scope 2

Scope 1 and Scope 2 GHG emissions of investee companies in our portfolio. The formula is shown below.

(As of September 2022)

22

Chapter

FY 2020 (July 2020–June 2021)

Current (and projected on a BAU basis) CFP of our portfolio

Maximum acceptable CFP of our portfolio under SDS■ under STEPS■
Current (and projected on a BAU basis) CFP of the benchmark
Maximum acceptable CFP of the benchmark under SDS

140%

Global equities Japaneseex. Japan
equities

Chapter

Corporate Section

BenchmarkJapanese equities

TOPIX

Global equities ex. JapanMSCI ACWI (excluding Japan)

Japanese fixed income

NOMURA-BPI (corporate bonds)

Global fixed income ex. Japan

Bloomberg Barclays Global Aggregate Bond Index (corporate bonds)

Total for the Scope 1 and Scope 2 GHG emissions of Resona Asset Management and the banks in the Resona Holdings. The emissions are calculated inaccordance with the standards of the Energy Conservation Law.

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─ Corporate Section ─
Chapter

4

Corporate Section

Disclosures in Accordance with the
Recommendations of the Task Force on
Climate-Related Financial Disclosures (TCFD)

Chapter

Chapter

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1

2

3

4

Our 2022 highlights and looking ahead
with the updated Implementing Guidance for the TCFD recommendations, while considering and implementing▪Encourage the investee companies to take actions to address climate change through proxyvotingactivities which are required for us to align with the Guidance, when possible.

We have been active in climate proxy voting.

We recognized the fact that our relevant activities had been insufficient to meet the requirements in some sections

We generally vote against proposals to amend the articles regarding execution of business as they may haveof the TCFD recommendations. As we are actively encouraging the investee companies to make climate-related

potential to restrict freedom in conducting business. However, we have voted for shareholder proposals for two

financial disclosures in accordance with the TCFD recommendations, we must take the fact seriously and makeenergy companies to amend the articles to conduct climate scenario analyses in accordance with the long-term

efforts to improve our disclosure.

target of the Paris agreement and to disclose its transition plan, climate-related risks and opportunities in the mid

We have improved our climate-related financial disclosure, as described on page 18-23, this year in accordance

The data disclosed in the“metrics and targets”section shows that the level and speed of the activities for GHG
emissions reduction by our investee companies are not sufficient to achieve the target set by the Paris Agreement,
while they have made progress toward it, and it is possible that the demands on the investee companies to reduce
their GHG emissions will be more stringent and negatively impact their business performance.
In 2022, we have made progress with the following activities to address climate change. We will continue to makeactive efforts with the investee companies to combat climate change so that they can avoid the aforementioned
climate-related risks and improve their corporate value by making use of climate-related opportunities. We believethat the steady advancement with these activities is vital to realize our Purpose“To ensure a prosperous and happylife for future generations as well as our customers.”

and long term based on the analyses, as we emphasized the importance of the fact that the proposals was in linewith global standards. Although the proposals were rejected by majority, we continue explaining our standpoint tothe companies and encouraging them to take more efforts.
Also, we have amended our proxy voting standard to integrate climate change into our proxy voting activities. We
have added to the standard the article that we do not positively respond to the re-appointment of board members,
if the company’s climate-related financial disclosures in accordance with the TCFD recommendations (or anequivalent framework) or its medium- and long-term targets in line with the Paris Agreement are not sufficient.

▪2 impact funds to contribute to address climate change
In order to realize our purpose “To ensure a prosperous and happy life for future generations as well as ourcustomers”, we recognize climate change as one of the most important issues to be addressed. To shape positive▪Establishment of our “climate change policy”

outcomes and impacts to address climate change and other environmental and social challenges while pursuingeconomic returns, we have setup and are managing two impact funds, the“Japan Equity Impact Investment Fund”*

As a result of our materiality analysis, we recognize climate change as one of the most important issues of theand the“Global Impact Investment Fund (Climate Change)”. We continue engaging with the investee companies ofpresent and future. Accordingly, we have established a“climate change policy”in January 2023 in order to express

these impact funds to encourage them to shape positive impacts through their business activities. We haveour stance to climate change. With this policy, we have made commitment that we aim to achieve net zero in our

published impact reports on the impacts the funds created, and we will continue to do so regularly in the future.

business activities (Scope 1, 2 and 3 category 15 GHG emissions *1) by 2050, and we contribute to address climate

We estimate that, the investee companies contributed to GHG emissions reduction of about 34 million tons in totalchange through our investment activities.*2

in FY 2021 through their business activities.

*1 Our performances are disclosed in the“metrics and targets”section.

* The“Japan Equity Impact Investment Fund”aims to contribute to address various environmental and social issues other than climate change, to make Japanese*2 For details on the policy, refer to the URL.

society sustainable and easy to live in.

https://www.resona-am.co.jp/about/climate.html* For details on impact funds, see page 78.

▪Encouraging the investee companies to take actions to address climate change throughengagements▪Integrated approach to issues related to climate change, biodiversity, natural capital,

We are taking a role as the“lead investor”for engagements with two automobile manufacturers in one of the

In recent years, climate change, biodiversity loss, degradation of natural capital, and transition to circularinternational collaborative engagement initiatives“CA100+”. In 2022, one of these companies have set its interim

economy have been recognized as global risks. Given that these challenges are interrelated, it has also been

GHG emission reduction target.

suggested that an integrated approach to address them should be taken.

* For details on CA100+, see page 51.

and circular economy

We are participating in many international initiatives on biodiversity, natural capital, and circular economy,
including the“Finance for Biodiversity Pledge,”and collecting information related to these challenges in thecontext of climate change.
The information that we have collected is used for enhancing our ESG integration, engagement, and proxyvoting activities.

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Employee discussion

Thinking about the future in terms of“purpose” of Resona Asset Management.

What we can do to ensure a
prosperous and happy life for
future generations
as well as our customers
Our Chief Sustainability Officer, Matsubara, asked three employees actively involved in the company
about their own roles and thoughts on Resona Asset Management’s purpose, which is“to ensure a
prosperous and happy life for future generations as well as our customers.”

Shingo Kondo

Minoru Matsubara

Saki Tsuruta

Responsible Investment
Division
Senior Investment
Manager

Chief Sustainability Officer
Executive Officer,
Responsible Investment
Division

Investment Planning
Division
Investment Manager

Tran Ngoc Lan
AnhEquity Investment Division
Fund Manager

What does it mean for Resona AssetManagement to be responsible for solvingsocial issues?

policies related to stewardship activities, and I am ininvest, we analyze whether actions taken to solve social/

generations. As an asset management company, I thinkcharge of making our climate-related financial disclosuresenvironmental problems are having an impact. From thewe should take a firm approach to this problem.

in accordance with the TCFD (Task Force on Climate-perspective of customers who entrust us with their assets,

Kondo:“Inequality,”pointed by Tran, is a very important

Related Financial Disclosures) recommendations.

it is our products that show them how their money issocial issue to tackle. There is a concept“social common

Matsubara: Today, I would like to have an open discussion

In Japan, the concept of“sustainability”seems to becontributing to society.

capital”as a foundation of society, economy orwith everyone who support Resona Asset Management’s

linked to certain preconceptions about environmental

Recently, I have been involved with sharing information

corporations. A stable society, is a form of social common

daily activities about their thoughts on what our purpose

conservation, etc., but I think the original meaning of theon our impact investments externally, and this has

capital, so are a stable climate and a clean environment.

means for the future as we approach 2050.

word is more broad than it. I mean its original meaning is

made me more aware of our company’s earnest stance

If inequality is seriously exacerbated, it will lead to social

The purpose of Resona Asset Management is to ensure a“the ability to sustain”the functions of society,toward impact investment, and it has increased myunrest, and will have a negative impact on corporate

prosperous and happy life for future generations as well as

corporation or the environment into the future. A few

expectations for it.

profitability.

our customers. We aspire to become a company that can

decades ago, Japan enjoyed a period of great economic

Tran: I joined the company in 2021, and I am a member

From such a point of view, inequality is an important ESG

make our customers say with a smile that they were able

prosperity, but recently, it becomes urgent for the countryof the Equity Investment Division. Due to the COVID-19

issue that long-term investors including us should

to build assets because they used our investment services,to respond to several challenges related to economics,

pandemic, I have started to work remotely from myaddress. We should raise the issue when we have an

they were able to have a fulfilling retirement because ofsociety, and the environment, which have manifested

hometown in Vietnam I was still working at home inengagement with our investee companies.

our company, or that they were able to help create adomestically and abroad. Focusing directly on theseVietnam, but as of May 2022, I was finally able to comeMatsubara: Listening to all of your speeches, I have comebetter society and environment for future generations bychallenges and thinking about what we can do to sustain

to Japan, and I am working in Tokyo.

to realize once again that there are many roles andinvesting in the products that we manage. The purpose is

the functions of society, corporation or the environment

A worldwide social problem that I am strongly interested

responsibilities that finance industry should play infilled with such thoughts. In order to realize this purpose, I

into the future is the essence of the word“sustainability.”

in is inequality. Unfortunately, in current society,contributing to the creation of a better society.

believe our company should be a long-term investor

My work in sustainability is based on this idea.

inequality is prevalent in all regions everywhere.

In the future, finance will still be about the lending of

capable of building assets and be aware of our

Tsuruta: This is my third year at this company. I am a

Inequality in medical care, education, food, water, health,money, but it will also be about making a better society

responsibilities as responsible investor.

member of the Investment Strategy Division, and I am

etc., lead to distrust in national governments and social

through the adept use of that money. Therefore, financeFirstly, I would like to ask you what you think about

involved in compiling reports and promoting externallysystems, and it can lead to violence and conflict.

can be said to play an important role as a baton

solving social and environmental issues through your daily

our responsible investment initiatives, such as ESG funds.

Inequality also prevents sustainable economic and social

connecting the present and the future. Also, as Resona

work at Resona Asset Management. Please share yourI am paying attention to impact investment as one of thedevelopment, and it greatly dampens the achievement of

Asset Management fulfills its role in finance, it isthoughts on this matter.

solutions to social and environmental issues. Impact

SDGs (sustainable development goals).

necessary to pass the baton in a good way to the

Kondo: I joined the company in September 2022. As ainvesting is a kind of investing that does not only focus on

Among the many forms of inequality present in society,younger generations who will carry our company’s future,member of the Responsible Investment Division, I am

financial returns, but also on creating an impact (positive

I am strongly interested in“income and asset inequality.”

starting from the active generation to them.

involved in policy /strategy planning related to ESG or

effect on society) by helping solve social/environmental

I believe this is a serious social problem needs solving. If

Now, I would like to ask our future generation what theysustainability issues. For example, I create proposals forproblems, etc. Before investing or when continuing toleft unchecked, inequality will spread to futurewant to do as they look toward society’s future.

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Employee discussion
What we can do To ensure a prosperous and happy life for future generations as well as our customers

Shingo Kondo

Minoru Matsubara

Saki Tsuruta

Tran Ngoc Lan Anh

As those responsible for the next generationof finance, what should we be doing?

the future, to think about issues that affect society, thegeneration. Our corporate culture where different

environment, etc., and their solutions.

opinions can be expressed freely is a great asset in such

In order to pass things on to the next
generation under positive conditions

Tran: As stated, I have a strong sense of crisis regarding

a generation. It is likely that this culture will prevent the

Tsuruta: As a continuation of what I just said, impact“inequality,”and my reason for joining the Resona Group

company from misconduct to occur.

Matsubara: Thank you everyone.

investing is closely linked to our company’s purpose. I think

is so that I can help solve issues related to inequality in

However, there are some issues to improve our business

As Tran suggests, I think it is important to interpret thethat impact investing is exactly one of our initiatives to ensure

income and assets. The Resona Group is one of the few

operations. Given that the scope of ESG challenges iscompany’s purpose as our identity and to share this“a prosperous and happy life for future generations.”Our

financial groups in Japan that excels in the retail field andincreasing rapidly, it is getting unfeasible for a single

purpose with others.

impact investments focus on two things: solving climate

has asset management functions. I find value in my work

person to cover all ESG challenges for the implementation

This identity provides the structure for Resona Assetchange issues and domestic social issues. If we can curtail

because I believe that it will help solve inequality over theof their work. It is necessary to develop ESG humanManagement’s principles. Our purpose is located at the

global warming by addressing climate change, that will lead tolong term. I am responsible for equity investments, I aim

resources with a long term perspective.

top of the pyramid, and it is supported by our values anda prosperous and happy life. Also, if the sustainability of

to contribute to the wealth of retail customers by finding

When I read the company’s Purpose Statement, I find two

corporate culture. You all have identified several

Japanese society is enhanced, we can ensure a prosperous

and investing in“strong companies”and“sustainableaspects which are so impressive. One aspect is that, thekeywords,“open-minded culture,”“long-termand happy life for future generations as well as our customers.

growth companies”with a long-term perspective. When

Purpose Statement explicitly mentions future generations,perspectives,” and“respect for diversity.” Our identity is

Of course, we are not the only asset management

searching for such companies, one important factor isbut not the current generation. I feel, in the Purpose

found within these concepts.

company that does impact investing, but it helps solve

their stance toward sustainability and ESG. For example, I

Statement which does not explicitly mention the current

I believe we must continue to have values to realize oursocial and environmental issues, and our impact investing

would like to find companies active in solving social andgeneration, that the company, as a long-term investor,

purpose, corporate culture that allows us to have ouris highly aligned with our purpose. We would like to ourenvironmental problems closely linked to their own

has pride in being one step ahead and considering theown views, to have a culture of mutual respect, to pursue

customers and the broader public to know the value ofbusiness, such as food companies taking measures

benefit for future generations. The other aspect is thatexpertise, and to have a desire to meet the true needs of

our impact investments and our aspirations as an asset

against food loss.

the Purpose Statement includes the words“prosperous”

customers.

management company. There are many cases where theWorldwide inequality will not be resolved quickly, but I

and“happy”both. I believe that this shows the company’s

This is something that I want to do, but I can’t do it alone.

power of an asset management company like ourhope that we can help stop its expansion.

aspiration to pursue not only financial returns, but also

In order to get many others involved and create a newcompany alone is not enough to reach a solution.

I think it is great that our company has its own identity.

the vision where the customers live happily in a stableage, it is necessary for people to work together andHowever, it is necessary to highlight the current state of

Having an identity is essential for working strongly as one

society and environment. It would be fantastic if thecooperate with common aspirations. An aspiration is notsocial and environmental issues from the perspective of

team. Based on our company’s identity, each member

company, with such a great Purpose Statement, realize

a dream, but a strong passion that supersedes time andan asset management company and to express an

can act independently while we work towards achieving

many cases of the enhancement of the enterprise value

space to fulfill people’s wishes. I have a renewed

approach to solving them.

goals as a single team.

as a fruit of serious pursuit of ESG element. I would also

determination to declare to everyone both inside andIn addition to impact investing, we have many good

Kondo: After being transferred to Resona Asset

like to work hard to contribute to the company to do so.

outside the company that these strong feelings are theproducts and initiatives that are useful for our customers

Management, I feel that the corporate culture is free anddriving force for achieving Resona Asset Management’s

and society. As someone who involved in the spread ofopen. This culture allows everyone to have an honest

purpose, and I would like to entrust this purpose to those

information, I share information on impact investing andexchange of opinions. I hear that President Nishioka’s

who will be responsible for future generations. Thank you

the other strengths of our company with the hope that itstrong leadership has contributed greatly to thevery much.

could become an opportunity for customers, particularly

establishment of this culture. I think this is great. People

those of the young generation who will be responsible forput great importance on Diversity in the current

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Responsible Investment Section

─ Responsible Investment Section ─
Chapter1

Responsible Investment ofResona Asset Management

Chapter

Chapter

Chapter

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Chapter

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1

2

3

4

5

6

ESG issues such as climate change have already manifested as concrete risks and opportunities. As an asset
management company, we are not only expected to be a“Future Taker”that aims to improve corporate value
and expand medium- to long-term returns while considering current and future ESG issues and adapting to them,based on the current real-world situation. We are also required to be a“Future Maker”committed to realizing abetter future by proactively engaging the real world and creating impacts to improve the situation.
We implement our activities to improve the corporate value of investee companies by incorporating ESG into
investment decision-making process (ESG integration), conducting engagement activities with investee companies,
and exercising voting rights. In addition, as a long-term investor and universal owner, we conduct engagement witha wide range of stakeholders, practice impact investment, and work towards realizing a desirable future as a
Future Maker.

Future Taker

Global issues
caused byexternal
diseconomies

Dialogue

Climate change

Engagements

Future Maker

SupportProxy voting

Income inequality

Inclusive social
economyCollaboration
with a wide
range ofstakeholders

Human rights

ESG integration

Basic policy on responsible
investment

Sustainable
environment

Enhancement ofcorporate value

Disclosure
Cybersecurity

Pursuing impact

Creation ofa newparadigm

The purpose of
Resona AssetManagement

Aging society witha low birth rate

Realizing the“desirable future”

Proxy voting
Universal
ownership

Anti-corruption
Corporate culture,
purposeNatural disasters

Awareness・・・

FutureTaker

30

Resona Asset Management

We aim to enhance corporate value and expand the mid-to-long-term returns forstakeholders by considering current and future ESG issues that may arise in light ofthe current state of the real world, adapting to them, and aiming to improve them.

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FutureMaker

We strive to be committed to realizing a better future by proactively
engaging with the real world and creating impacts to improve its conditions.

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Responsible Investment Section

─ Responsible Investment Section ─
Chapter

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6

Responsible Investment ofResona Asset Management

Overview of responsible investment activities

Responsible investment policies

We are undertaking various activities to ensure a prosperous and happy life for future generations aswell as our customers. This is a part of our efforts towards the purpose of Resona Asset Management,
to ensure a prosperous and happy life for future generations as well as our customers.

We have set out various policies to implement responsible investment activities. We haveestablished a“basic policy on responsible investment.”This policy is based on the Principles of
Responsible Investment and Japan’s Stewardship Code. ESG integration, engagement, and proxyvoting policies were established based on the basic policy.
We have also established climate transition and exclusion policies. The climate transition policy
aims towards net zero emissions, and we are excluding weapons of mass destruction (WMD)
from our investable universe.

The purpose of Resona Asset Management“To ensure a prosperous and happy life for future generations as well as our customers”

Japan’s Stewardship CodeThe purpose of
Resona Asset Management

当 社のパーパス“Desirable future”
Basic policy on responsible investment
Inclusive socioeconomy

Sustainable environment

Corporate culture, purpose▪	Within the investment framework, we aim
to support the investee company to raise
corporate value from a medium- tolong-term perspective. Our investment
decisions are conducted through gatheringand analyzing financial and non-financial
information, including ESG factors.

List and assess ESG issues

Biodiversity and forest
conservation

Product quality andsafety, social impact of
products and services

Diversity andinclusion

1

2

3

ESG incorporation
in investment
decisions

Engagements

Conduct
proxy voting

M ateri al i ty

Identify materiality (material issues)
Climate change▪MeasuresChild labor andforced labor

Anti-corruption

Climate transition policy

ESG integration policy
Policy to incorporate ESG into
investment decision process (seepage 70 for details)

Engagement policy
Policy to promote
constructive engagement tosupport the improvementof corporate value andsustainable growth (seepage 36 for details)

Policy on excluding specificweapons manufacturers
Policy to exclude specific weapons
manufacturers from the investable
universe (see page 71 for details)

Policies and standards inrelation to proxy voting
Proxy voting policies (seepage 62 for details)* For details of the basic policy on responsible investment and the climate transition policy, please access the following URL.
https://www.resona-am.co.jp/english/responsible-investment/basic.html
https://www.resona-am.co.jp/about/climate.html (in Japanese only)

Take the following measures based on materiality and ESG issues
Action policy on Japan’s Stewardship CodeESG integration

Engagements(see page 36 for details)

Proxy voting(see page 62 for details)(see page 70 for details)

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established policies to address each of its principles. Prior to Japan’s Stewardship Code, we have established our basic policy on
responsible investment. We have clarified our approach to seek to enhance client returns of the assets under management from a

Impact investment(see page 78 for details)

32

In February 2014, Resona Asset Management announced its endorsement and acceptance of Japan’s Stewardship Code, and has

medium- to long-term perspective. We believe that we are able to fulfill our stewardship obligations through implementation of various
measures. And we will promote measures that are aligned with Japan’s Stewardship Code.
For details, please access the following URL.

https://www.resona-am.co.jp/english/responsible-investment/pdf/ActionPolicy_on_Principles_for_RII.pdf

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Responsible Investment Section

─ Responsible Investment Section ─

1Framework of responsible investment
and stewardship activities
The Responsible Investment Committee Meeting is conducted to consolidate asset management
function’s expertise.

The objective of the Committee Meeting is to fulfil our stewardship responsibilities as asset

manager to achieve a sustainable society and to support the growth of the investee companies
and to.

Responsible investment verification committee meeting
Monitoring function

Chapter

Chapter

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1

2

3

4

5

6

Central platform for promoting PDCA cycle
Chairman: President▪Responsible investment expertise▪Checking function

Each Division(Equity and Fixed Income Investment)▪Secretariat of Responsible Investment
Committee▪Passive investment engagement function▪Proxy voting▪Checking and supervising function

Responsible Investment DivisionViewpoints and information on
passive investment engagement
function

Responsible investment meeting

Equity Investment Division

President and key members including
executive officers responsible for asset
management functions, and generalmanagers of related divisions

Fixed Income Investment DivisionViewpoints and information on active
investment engagement function

Responsible investment meeting
・ The responsible investment meetings are held on weekly
basis to regularly share information and discuss on– Responsible investment, news flow as it pertains to ESG
issues, and– Progress made on engagements with companies.
・ Through this meetings and other forums, the Responsible
Investment Division– Shares information and discuss with relevant divisions, and– Reflects these in proposals to the Responsible Investment
Committee.

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Incorporate ESG issues into investment
process, and devise solutions andimprovements.

ESG incorporation

Constructive engagements

Actively carry out engagements in orderto enhance corporate value from a
medium- to long-term perspective.

Assess the progress on activities andreport on points of improvements andissues to be addressed for the next
fiscal year.

Self-assessment on
responsible investment
activities

Proxy voting

Conduct proxy voting by considering
engagements and investment analysis.

Responsible investment verification committee meeting
Established in November 2017, the responsible investment verification committee meeting was set up to enhance thegovernance framework as it relates to matters such as management on conflict of interests in the realm of managing trust
assets. To such ends, the meeting acts as a forum for gaining an external third-party perspective in verifying thatstewardship activities encompassing the proxy voting are conducted appropriately.
Operations
Schedule: Held at least twice a year
Secretariat: Investment Risk Administration Division
Members
Chiharu Baba
Ryo Tsuchida▪Topics covered at responsible investment meetings(January to December 2022)

・ Study Group on Financing from the Private Sector to Help Corporate
Initiatives for GX (Green Transformation) in Industries
・ Participation to the PRI Advance initiative・ Endorsement and support to the“Investor Agenda”
・ Report on progress of impact investment and assessments
・ 2023 revision of proxy voting guidelines for Japanese equities

2022 / 2023

・Discussion on updates to the proxy voting guidelines ・Self-assessment discussions
・Discussion on voting decision to certain AGM proposals ・Report on responsible investment
which are not simply able to determine
activity・2021 PRI Reporting
・Voting results for Japanese and Global equities
・Engagements progress and plan changes▪Activity cycle to enhance corporate value

Compliance and Investment Risk
Administration Unit

Discussions will be reflected to the proposalsof the Responsible Investment Committee▪Key discussion and reporting items of the Responsible Investment Committee

We aspire to fulfill our stewardship responsibilities to a greater extent by improving our responsible investment activities
drawing on efforts of the Responsible Investment Committee in terms of discussions, opinions on improvements andself-assessment regarding the status of action being taken with respect to the Stewardship Code.

▪Active investment engagement function

Responsible Investment Division

The Responsible Investment Committee examines Resona’s responsible investment activities to see whether they are
conducted appropriately in accordance with Resona’s basic policy on responsible investment. It plays an important role inacting as a control tower for continuously devising solutions and improvements.
The committee consists of President, executive officers and general managers from the asset management functions. To
secure internal controls, executive officers in charge of the Compliance Division and the Investment Risk Administration
Division participate. The committee harnesses its members’collective experience and expertise to carry out initiatives that
contribute to sustainable growth of the investee companies. Since May 2017, Professor Takeshi Mizuguchi, President at
Takasaki City University of Economics was welcomed onto the committee as an external expert and leading authority on
responsible investment. He has been furnishing opinions and advice from an outsider’s perspective to the activities ofResona Asset Management, based on his extensive knowledge.
At the Responsible Investment Committee, various evaluations and discussions take place, including reports on specificinitiatives established in various policies including the“basic policy on responsible investment,”changes to proxy voting
guidelines, and the deliberation of agenda items.

・Incorporation of ESG into
investment process・Constructive engagements
・Conduct Resona’s proxy voting

Committee members
External expert:
Professor Takeshi Mizuguchi

Responsible Investment Committee▪Specific initiatives to the“basic policy on responsible
investment”

Responsible Investment Committee

34

Chapter

Responsible Investment ofResona Asset Management

Investees

Chapter

Chapter

Shoichi Tsumuraya

Outside Director of Resona Holdings, Inc.
(Chairman: Former Deputy President of Mizuho Trust & Banking Co., Ltd.)
Outside Director of Resona Asset Management Co., Ltd.
(Professor, Sophia Law School)
External expert(Professor, Graduate School of Business Administration, Hitotsubashi University)

Major items reviewed
Appropriateness of proxy voting guidelines (Japanese equities, Japanese REITs, Global equities ex. Japan)
Appropriateness of proxy voting execution (Japanese equities, Japanese REITs, Global equities ex. Japan)
Appropriateness of other stewardship activities(Matters deemed necessary such as review from the perspective of management on conflict of interests regarding stewardship activities)

Reviewed content
・The tenth committee meeting (held in February 2022)
Revisions to proxy voting guidelines for Japanese and Global equities
・The eleventh committee meeting (held in August 2022) Proxy voting results for shareholders meetings during July 2021 to June 2022
The suitability of the topics subject to review was verified at the above meeting.
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─ Responsible Investment Section ─
Chapter

2

The Engagements ofResona Asset Management

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2

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5

6

The three originalities of engagements
We will focus on efficacy and efficiency through our three unique form of engagements:“networks,”“a top-down approach,”and“+collaboration.”1
In order to ensure a prosperous and happy life for future generations as well as our customers, it
is important for investee companies to be managed so that they can improve their social value
over the long term and achieve sustainable growth based on sustainable social andenvironmental corporate activities. One of our methods for achieving this in cooperation withinvestee companies is to conduct engagements.

With this basic approach, we have set an engagement policy based on our basic responsible

As pioneers of responsible investing, we use our own network to have active discussions (throughstakeholder dialogue) with the following stakeholders to collect advanced information and knowledge.
This information and knowledge is used to select engagement themes and indicators to screen thetarget companies.
External experts

investment policy, and we conduct engagements according to both policies.

NGO

The overview of our Engagement Policy▪Objective
We aim to preserve benefit for our clients on mid to long term perspective.
We cooperate with investee companies to increase their sustainability as a company and their social andenvironmental sustainability, i.e., the foundation of their corporate activities, in order to encourage sustainablegrowth and long-term improvements in their social value in order to provide greater benefit to customers from along-term perspective.

Networks (Efficacy and efficiency of information collection)

We participate as a member of discussion committees to the Financial Services Agency; theMinistry of Economy, Trade and Industry; and the Ministry of Environment.

Long-term global
investors

We communicate with global investors on collaborative engagements and ESG engagement
issues.

Labor unions

We are a member of the Research Committee on Information Disclosure as a“Good
Company”and Promotion of the Principles for Responsible Investment from a Workers’
Standpoint of the Research Institute for Advancement of Living Standards.

Organizations

Since the PRI Japan Network was established in 2008, we have been actively involved in the
PRI Japan Working Group as a signatory organization and an advisory committee member.
Under the Principles for Financial Action for the 21st Century, we are a steering committee
member and joint chair of the Asset Management/Securities/Investment Banking Working
Group and a committee member of the Japan Impact-driven Financing Initiative.

▪ProcessEngagement planning
Based on materiality analyses we will determine engagement themes on social and environmental issues, inaddition to business and management strategies and information disclosures. We will determine target companies
and engagement plans based on the stage of each investee company.
Conducting engagements
We will conduct constructive engagements based on the research of management strategy and their ESG risks andopportunities.
We will also communicate with institutional investors and stakeholders in order to ensure the appropriate andeffective engagements.
Monitoring and actions
We will monitor engagement progress and report its progress to the Responsible Investment Committee. If
incremental actions are required, we will set intermediate targets and manage milestones. We will encourage thecompany to react based on their progress. We will consider to vote against director election if improvements are
not made. We will also revise engagement plans as needed.
Information disclosure
We will carefully provide information and explain our future engagement policies to our customers, and will
disclose its progress in the sustainability reports and other suitable formats.
* Please refer to the following URL for details on our Engagement Policy.
https://www.resona-am.co.jp/investors/engagemento_katsudou.html

Through CSR Review Forum Japan, we work with the NGOs and experts from Japan andoverseas to perform research and spread awareness.

Regulators▪Creation of organizational frameworks
We will establish the organizational frameworks with the appropriate skill sets of human capital and training, sothat we will be able to conduct engagements with investee companies.
We will also establish a centrally managed database on investee companies, prior engagements to effectively andefficiently conduct engagements.

In the process of advancing corporate governance and ESG activities, we regularly collectinformation from and exchange opinions with the external experts such as university professors.

The youth
generation

2

We invited youth activists to the CSR Review Forum Japan for discussion.

Top-down approach (Efficacy and efficiency in screening themes and companies)

We take a top-down approach to select engagement themes, based on our“desirable future”
and materiality analyses.

With the top-down perspective, we can take an efficient and effective approach to selectengagement issues and target companies.

3+Collaboration (Efficacy and efficiency of engagements)

In addition to our in-house engagements, we are able to conduct effective and efficient engagement
through the top-down approach by participating to various collaborative engagements.

Our engagement themes include natural capital, such as climate change and biodiversity, as well as
human capital, such as human rights and labor practices.

It is beneficial for us to participate to the collaborative engagement in order to use the knowledge
and support of experts and the global institutional investors.

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Chapter2

Chapter

Chapter

Chapter

Chapter

Chapter

Chapter

1

2

3

4

5

6

The Engagements ofResona Asset Management

Three types of engagements

Engagement activities

We generally use the following three types of engagements.

In FY 2021 (July 2021 through June 2022), we conducted following engagements, which are1

described in the following charts.

Materiality engagement (top down)

Top down engagements to the target companies based on materiality analyses and ESG issues.

2▪Activities of the Responsible Investment Division
In addition to materiality engagement (top down), the Responsible Investment Division conducts

Information disclosure engagement

Engagement to correct the disclosure discount (*) resulting from insufficient information disclosure
by the investee company(*: When a company’s value is not adequately assessed due to an insufficient disclosure ofbottom-up engagement tailored to each company’s status.

The Responsible Investment Division also collaborate with the Equity Investment Division on
information disclosure engagement.

non-financial information, etc.)

3

J a p a n e s e li s t e d c o m p a n i e s

Bottom-up engagement

Anti-takeover measures 2%

Engagement conducted based on an individual company’s governance status or an original active
investment theme

participating as a member to the policymaker discussion groups, etc., in order to share opinions fromthe perspective of institutional investors, and to obtain understanding.
Type

Other 1%

Corporate
governanceMateriality (top down)Information disclosure

Bottom up

8%

Capitalpolicies

9%Socialissues12%

Mainexamples ofthemes(and global ESG issues)

Rectifying the disclosure
discount

Climate change, conservationof natural capital, etc.

Management strategies,
capital policies, etc.

Number of cases(companies)

Encouraging and improving
the disclosure of nonfinancial information basedon integrated reports

Setting items based on
unique company themes

13%

Information
disclosure

Corporate
governance437(300 companies)

16%

Environmental
issues17%
Management strategies

12%More sophisticated TCFD
disclosures
Sustainable acquisition ofpalm oilManagement strategies

23%

Our materiality

Focus

Other 1%

Capital policies 1%

Anti-social behavior 2%
Regarding proposals

We also actively conduct index engagement with index providers and public engagement by

G lo b a l li s t e d c o mp anies ex . J ap an

Information disclosure

14%

28%

Number of cases(companies)

80(61 companies)
Environmental
issuesSocial issues

21%

20%

▪Activities of the Equity Investment Division
The Equity Investment Division conducts bottom-up engagement according to the company’s.
This is because the viewpoints of the company’s risks and opportunities differ across eachdifferent investment approaches. The Equity Investment Division also collaborate with theApproach

Use of both in-house andcollaborative engagement (*)

Responsible Investment Division on information disclosure engagements.
Primarily in-house engagement

Primarily in-house engagement* Climate Action 100+, etc.

▪Activities of the Fixed Income Investment Division
The Fixed Income Investment Division actively conducts bottom-up engagements based on eachissuer’s progress status. This is because unlike the equity investments, fixed income investors

Investee companies

Targetdoes not have voting rights, and downside risk exceeds upside potential.

Responsible Investment Division
Divisionsinvolved

Equity Investment Division▪FY 2021 (July 2021 through June 2022) activities

Fixed Income Investment Division

The Responsible Investment, Equity Investment, and Fixed Income Investment Division are themain bodies of conducting engagements.

The Responsible Investment Division conducts engagements on passive investment, while theEquity Investment and the Fixed Income Investment Division conduct engagements on active

Number of engagements
conducted

Equity Investment Division

Fixed Income Investment Division

1,196 (563 companies)

89 (74 companies)* For details on our information disclosure engagement, see page 44. For details on the engagement activities of the Equity Investment
Division and the Fixed Income Investment Division, see pages 46 and 48, respectively.

investment.

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The Engagements ofResona Asset Management

Materiality (top-down) engagement

Materiality(ESG issues)

Purpose of the engagements
We believe that it is necessary to increase sustainability of the investee companies on theenvironmental and social fronts, in order to enhance client returns. Our material issues are
determined along the following two axes:

The“Importance to long-term investment performance,”which is the sustainability of the investee

Climate changesustainability. We expect that the progress on each material issue will lead to the enhancementof the performance of clients’assets.

The objectives of materiality engagements are to raise investee companies’corporate value andto grow clients’assets over the medium to long term, by setting material engagement issues, andto conduct engagements by taking a top-down approach.

E (Environmental)

companies, and the“Importance to sustainability,”which is the societal and environmental

Concept of engagements
We believe that we are able to conduct efficient and effective engagements, with a focus on the

Natural capital

determined by importance and feasibility, based on material ESG issues and global ESG issues.

conservation

which we possess advanced experience. We are conducting in-house engagement on sustainablepalm oil procurement and anti-corruption measures.

We also actively participate in collaborative engagements which are established at the global

Child labor

increasingly diverse and as we invest in a large number of companies.

Forced labor

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S (Social)
Implementation/milestone
management(in-house only)

In-houseengagements:
Engagement
progress statuses
are sharedinternally; andreported
periodically at
the Responsible
Investment
Committee.

Product quality
and safety

Diversity andinclusion

Diversity andinclusion

Anti-corruption

Chapter

Chapter

1

2

3

4

5

6

Climate Action 100+ (collaborative engagement)
A global initiative to ensure companies to take necessary action on climate change. The
initiative is assisted by the PRI, Asia Investor Group on Climate Change (AIGCC), Ceres,
Investor Group on Climate Change (IGCC), and Institutional Investor Group on Climate Change(IIGCC). To encourage 166 target companies which include 10 Japanese listed companies to
set and to better disclose their management strategy and business reorganization to alignwith the Paris Agreement.

・ Reduced GHG emissions
・ Enhanced disclosure of
GHG emissions reduction

CDP Non-Disclosure Campaign/Science-Based Targets Campaign (collaborative engagement)
CDP NDC: To build on the main request for information disclosure by selectively engaging
1,473 high-impact companies that have consistently lagged or declined to respond to CDP.
SBTi Campaign: Sign a letter to be sent to a 1,610 high-impact sample of companies
requesting the adoption of science-based targets to help companies align with the goals of
the Paris Agreement.

・ Enhanced disclosure of
GHG emissions reduction・ Improving governanceoversight on climate change

AIGCC Asian Utilities Engagement Program (collaborative engagement)
encourage 7 target companies to implement a strong governance framework that clearly
articulates the board’s accountability and oversight of climate change risks and opportunities.
Take action to reduce greenhouse gas emissions in a way that is aligned with the Paris
Agreement.

・ Enhance climatechange-related disclosurein accordance with TCFD
recommendations

Encourage the companies to enhance information disclosure on the risks and opportunities inline with the TCFD recommendations (in-house)encourage the high GHG emitters such as auto, steel, chemical, electric power companies toenhance disclosure in line with the TCFD recommendations.

Zero-deforestation

Zero deforestation engagement (collaborative engagement)
ask companies to publicly disclose supplier lists for soft commodities, as these productspresent high risks for deforestation.
Companies linked to cases of deforestation are being asked to mitigate the effects of suchdeforestation and putting in robust processes to prevent it from happening in the future.

・ Biodiversity conservation
・ Zero-deforestation

Finance for Biodiversity Foundation Engagement Working Group (collaborative engagement)
Knowledge and experience are shared during biodiversity engagements with companies
Auto Leather Seats Engagement (collaborative engagements)
Collaborative engagement established at Finance for Biodiversity Foundation. Engagementwith 5 automotive seating manufacturers and 7 auto manufacturers to address thedeforestation risk caused by auto leather seats.

・ Using RSPO-certified palm oil
・ Formulating andimplementing sustainableprocurement policies

Sustainable palm oil procurement (in-house)
support investee companies related to palm oil supply chain.
encourage sustainable palm oil procurement.
* This topic also relates to S (Social).

Reducing forced labor risks

Apparel & Footwear Engagement using the KnowTheChain Benchmarks (collaborative
engagement)
encourage the 43 target companies of the KnowTheChain Benchmark assessment toprevent and mitigate reputational risk of forced labor and to commit to responsible
recruitment.
Investors Against Slavery and Trafficking APAC Collaborative Engagement (collaborative
engagement)
promote effective action among the investee companies to find, fix and prevent modern
slavery, labor exploitation and human trafficking.

Controlling the negative
impact of the nutritional valueof food and drink on society
and the economy

ATNI Investor Collaborative Engagement Global Index 2021 (collaborative engagement)
ATNI UK Retailer Index 2022 Collaborative Investor Engagement (collaborative engagement)
encourage 25 global food and beverage companies and 11 UK-based retail companies toaddress malnutrition, undernourishment and over nutrition.

Formation of sustainablesupply chains

Global Investor Engagement on Sustainable Protein Supply Chains (collaborative engagement)
Sustainable Aquaculture Engagement (collaborative engagement)
encourage companies in the food and fisheries industry to form sustainable supply chainsfor foodstuffs.

Mitigation of human rights
risks for workers,
communities, and society

PRI Advance: a stewardship initiative for human rights and social issues (collaborative
engagement)
The following expectations are set for companies where human rights risks and impacts aremost severe:▪ Fully implement the United Nations Guiding Principles on Business and Human Rights (UNGPs)▪ Align their political engagement with their responsibility to respect human rights▪ Make further progress on the most severe human rights issues in their operations andacross their value chains

Ensuring diversity in Board of
Directors

30% Club Japan/UK Investor Group (collaborative engagement)Group consists of asset owners and asset managers. To encourage awareness and to takesteps to achieve board gender diversity in the investee companies.
* This topic also relates to S (Social).

Drawing up and disclosing
policies on anti-corruption

Promotion of anti-corruption measures (in-house)encourage the key industries (construction, trading company, and finance) to use theAnti-Bribery Assessment Tool made available by GCNJ, and to disclose anti-corruption policies.

Social impacts ofthe products andservices

G (Governance)* For specific engagement details, please refer to the table on page 41.

Select target
companies basedon:corporate
disclosure data
(financial andnon-financial);
andanalysis ofintegrated
reports.

Select target companies(in-house or collaborative engagements)

Decide whether
to engage
in-house orcollaboratively
based on:our knowledge
and global
collaboration
platforms.

Select approach

Set engagement
topics inconsideration of:materiality andglobal ESG
issues;importance ofsustainability;andengagement
feasibilities.

Determine engagement topics(and global ESG issues)

Engagement process

Chapter・ Reduced GHG emissions
・ Enhancing climate-related
financial disclosures・ Improving governanceoversight on climate change

platforms such as PRI and CDP. We believe that we are able to conduct effective and efficientengagements through the collaborative engagements, as the global ESG issues are becoming

ChapterEngagement themes

including forests

In-house engagements: We select target companies and conduct engagements on issues for

Chapter

TopicsBiodiversity

big picture, by taking a top-down approach based on materiality. The engagement themes are

Materiality

Chapter

Chapter

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Collaborative engagement and working groups involved
Participated since
January 2020

participate and endorse support to subgroups and investor statements provided in the table.

E

The ★ indicates collaborative engagement which we lead or co-lead.

Information
disclosure

Handling of
misconduct

Proposals withstrong opposition

Anti-takeovermeasures

Crossshareholding

Listed parent companies
and subsidiaries

Participated since
May 2020

E

It has three missions: to pursue an effective and efficient ESG information disclosure framework, toaccumulate practical examples (demonstrations), and to encourage mutual understanding among
stakeholders for more amicable decision making.
Engagement themes

E

S

G

Announced by the UN in 2005. These are investment rules signed by institutional investors, etc., totake actions regarding the environmental, social, and governance issues of investees when making
the decision to invest.
Collaborative engagement and working groups which we participate
Sustainable Commodities Practitioners Group
Climate Action 100+

Apparel & Footwear Engagement using the KnowTheChain Benchmarks
Advance: a stewardship initiative for human rights and social issues
Investor declarations that we signed and endorsed in 2022
2022 Global Investor Statement to Governments on the Climate Crisis
Call for Stronger Alignment of Regulatory and Standard Setting Efforts
around Sustainability DisclosureStatement from the Private Financial Sector to the Conference of the Parties
to the Convention on Biological Diversity

E

Non-Disclosure Campaign
SBT Campaign

3

4

5

6

Initiatives of Collar Capital (UK) founded by investor Jeremy Collar in 2015 related to the foodindustry. A centralized investor network that shares the importance of ESG risks and opportunities
that occur during production in the food and fishery industries

Theme

Participated since
Involved since

Destruction of forests

September 2017

Climate change
Labor practices
Supply chain
Human rights
Supply chain
Theme

Climate change

Participated since
May 2020

G

Participated since
March 2021

S

Participated sinceJune 2021

Date of signature
May 2022

November 2022

Theme

Date supported

Food sustainability

November 2022

Established in Singapore in September 2016 as a division of the Global Investor Coalition (GIC). It is
an initiative between asset owners and financial institutions in Asia for increasing awareness of therisks and opportunities of investing related to climate change and de-carbonization.
Collaborative engagement and working groups we are participating in

Theme

Participated since
Involved since

Climate change
Climate change

April 2020
September 2020

S

Collaborative engagement and working groups we are participating in
China Working Group, Korea Working Group

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Participated since
February 2022

E

Diversity in boardsof directors

April 2022

Investor declarations that we signed and endorsed in 2022

Theme

Date of signatureStatement on Addressing Racial Inequality and Call to Action

Diversity in boardsof directors

March 2022

2022 / 2023

April 2021

Theme

Participated since
Involved since

Governance

April 2022

Forced labor

Established as a non-profit organization in 2013. Develops and supplies tools for measuring the degreeof action taken in the food and drink industry to address malnutrition in order to encourage change.
Participated collaborative engagement and working groups

Theme

Investor Collaborative Engagement Global Index 2021

Nutrition

Participated since
Involved sinceJune 2021

Nutrition

March 2022

Signatory organization and connecting institute for partner organizations. Established in March
2021 with the goal of encouraging action and supporting cooperation among financial institutions
through working groups.
Theme

Participated since
Involved since

Biodiversity
Biodiversity

January 2022
February 2022

Theme

Participated since
Involved since

Destruction of forests

February 2021

Participated collaborative engagement and working groups
Engagement Working Group
Auto Leather Seats Engagement

Other
Participated collaborative engagement and working groups

Participated since
October 2012

Japan

Participated since
Involved since

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Climate change

Encourages effective action to“find, fix, and prevent”modern slavery in the APAC region. Identifies
modern slavery risk in the business and supply chains and encourage the company to implement
measures and better disclosure

ATNI UK Retailer Index 2022 Collaborative Investor Engagement

International

Theme

Global Engagement

Participated since
Involved since

Other platforms

Established in the UK in 2010. Working group comprising asset owners and managers who use
stewardship to encourage investee companies to have more diversity in their boards of directors inorder to maximize shareholder benefit.
Collaborative engagement and working groups we participate

Theme

FfB Foundation: Finance for Biodiversity Foundation

30% Club Japan Investor Group
30% Club UK Investor GroupG

March 2021
March 2022

Global Roadmap to 2050 for Food and Agriculture

ACTIAM Satellite-based Engagements Towards No Deforestation

Participated sinceJune/December
2019

January 2020

ATNI: Access to Nutrition Initiative

December 2022

Biodiversity

Food sustainability

Food sustainability
Labor practices

Investor statements signed and endorsed in 2022

協働エンゲージメン
Engagement themes
トのテーマ

April 2019

August 2022

Participated since
Involved since

IAST APAC: Investors Against Slavery and Trafficking APAC

May 2018

Information
disclosure

Theme

ACGA: Asian Corporate Governance Association

Encourages actions against environmental problems by sending letters to the world’s largestcompanies (at least 1900 Japanese companies) signed by institutional investors that endorse theactions to request disclosure of greenhouse gas emissions and reduction initiatives.
Participated collaborative engagement and working groups

2

Established in Hong Kong in 1999. For 20 years, it has encouraged corporate governance regulations
and practical systemic improvements in Asia through independent research, advocacy, and education.

CDP
Participated sinceApril 2017

1

Asian Utilities Engagement Program (AUEP)

Information disclosure

PRI: Principles for Responsible Investment
Participated since
March 2008

Chapter

AIGCC: Asia Investor Group on Climate Change

EDSG

Participated sinceNovember 2021

Chapter

Global Investor Engagement on Sustainable Protein Supply Chains

A general corporation established with the goal of supporting healthy goal-focused dialogue(collaborative engagement) between companies and institutional investors so that the institutional
investors can suitably perform stewardship activities.
Engagement
themes

Chapter

Sustainable Aquaculture Engagement
Working Condition Engagement

Global platforms

Domestic platforms

G

Chapter

Collaborative engagement and working groups we are participating inS

IICEF: Institutional Investors Collective Engagement Forum

Participated since
October 2017

Chapter

FAIRR: Farm Animal Investment Risk & Return

In addition to conducting collaborative engagement on the following platforms, we also

Global platforms

Chapter

Chapter

E

S

G

Participated since
October 2021
Participated sinceApril 2020

G
Participated since
December 2021

E

Principles for Financial Action for the 21st Century

Implements initiatives based on seven action principles for financial institutions who want to fulfill their
responsibilities and roles as required in order to achieve a sustainable society

Japan Impact-driven Financing Initiative

Initiative to encourage cooperation among numerous financial institutions who agree that the purpose of their
existence is to have a thorough understanding of their impact in order to facilitate solutions to environmental
and social issues and to implement impact-driven investment.

ICGN: International Corporate Governance Network

Established in Washington DC in 1995. Institute that provides a place for the global exchange of informationand views related to corporate governance issues, establishes governance standards and guidelines, andprovides support and advice for executing corporate governance.

TNFD Forum: Taskforce on Nature-related Financial Disclosure Forum

Established June 2021. Initiative with the mission of developing frameworks for the management ofenvironmental risk and information disclosure and changing the flow of capital to create a positive impact on
the environment.
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Chapter

Chapter

Chapter

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2

3

4

5

6

The Engagements ofResona Asset Management

Information disclosure engagement

VisionY-axis: PBR (magnitude)
5.0●End of March 2019 United States (S&P 500)
●End of March 2022

0.0
0.0

United States, Germany, and Japan from the end of
March 2019 through the end of March 2022.

Germany (DAX)

2.0
1.0

●T
 he figure on the left plots the ROE and PBR of the

improvement compared to US and German
corporations for both ROE and PBR.

Japan (Tokyo Stock Exchange)

5.0

10.0

ValuesBusiness model (strategy)

Analysis of business environment
Identification and evaluation of
key risks and opportunities
Identification of social andmanagement issues

Determining materiality
Coporate strategy and capital allocation
Human resource strategies (new)Building medium- and long-term plans

Governance
Governance framework
Skill matrix●J apanese companies have a low level and low rate of

15.0

20.0

25.0

X-axis: ROE (%)* Created by the company based on data from Bloomberg

56.44
54.81

69.52
70.18

70.89

56.90

63.70

55.51

82.83
69.27

56.72
69.65

72.77
63.98

66.37

68.97

68.18

69.89

69.11

60.74

62.65

62.53

67.16
64.13

55.78
58.47

62.59
60.12

62.92
58.07

61.17
57.56

66.63
70.33

59.16

70.45
56.58

60.26

56.81

64.46

59.05

62.13

Sustainability committee

58.99

68.15

60.38

Financial performanceNon-financial KPIs and acceptability
Cost of capital, ROE and ROIC

65.16
58.35

67.31
55.15

76.87
76.47
71.61
75.88

62.56
54.57
71.23
58.76

CN/Transition strategies, etc.
Risk management

61.62
65.72

77.17
63.61

59.62
60.77

Scope 1 and Scope 2 metrics

74.95

75.58

48.60

Risks and opportunities
Scenario analysis
International carbon pricing

Scope 3 metrics
Target ・ Emission reductions

Human resource strategies (detailed item) (new)Perspective (1) Strengthen the link between ahuman capital strategy and business strategy

75.70
83.70
70.22
66.83

Perspective (2) Find the gap between thecurrent situation “( As-is”) and the goal “( To-be”)
Perspective (3) Nurturetransformational corporate culture
Factor (1) Build a dynamic talent portfolio
Factor (2) Embrace diversity and inclusionof employees’knowledge and experience
Factor (3) Motivate employees to re-skill themselves

Factor (4) Enhance employees’engagement level
Factor (5) Enable employees to work
anytime, anywhere as much as possible

Concrete actions
by companies

Fostering trustfrom investors

Reflection in
valuation

Improvingcompany value

Quantitative AI-based evaluation of integrated reports and the use of these evaluations
In order to objectively quantify the value creation story in the integrated reports and performhorizontal analyses across companies, we developed a quantitative evaluation model for integrated
reports that uses text mining technology (AI), and it assigns a quantitative score to the integrated
reports of around 800 companies. This quantitative AI-score is calculated from four items: values,
governance, business model (strategy) and KPIs. In FY 2022, there were more items related tosustainability. A quantitative AI-score* for TCFD and human resource strategies was added.
* The AI analysis used for integrated reports is also applied to Annual Securities Reports (ASR) regarding TCFD and human resource strategies
to analyze sustainability disclosures in the ASRs of around 4,000 companies listed in Japan.

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59.38
53.49
0.00

68.92
66.08
63.38

65.92

58.39
63.36
46.80

70.26
70.28
65.69

61.25

42.67
50.39
0.00

59.68

50.99
55.50

Company a Company b Company c
69.59
66.63
70.45
66.63

69.86

61.81

72.09

62.50

69.51

70.45

68.12

86.04

72.26

65.92

80.22

72.73

66.89

66.07

57.32

63.43

74.64

63.66

64.17

68.75

47.73

39.13

47.56

62.91

71.00

49.79

57.20

68.99
54.86

48.91
53.43

59.77
57.36
58.58

46.71
51.60

53.99
65.34

▪Examples of disclosure of AI–scores
Cost of capital, ROE and ROIC 71.35
Non-ﬁnancial KPIs andacceptability 56.18

AI-score [Total] 59.13
80
70

Financial performance

60

62.60

50

MVV and purpose 55.40

Purpose 58.86
Vision 49.27
Mission 56.07●T hrough information disclosure

engagement, quantitative scoresfrom integrated reports aredisclosed as shown in the graphon the left, visualizing therelative degree to which
disclosures are made incomprehensive reports.

Values 56.85

40
30
20

46.62

Accurate understanding of the upsides/opportunities and downsides/risks of business continuity for investors
Sharing the value creation story

66.85

If engagements will be performed with companies that have already issued an integrated report,
we will use materials with comments added to the quantitative scores by our analysts. We receive
feedback on our quantitative scores from companies whose awareness of issues is very similar toour own.

Business model (strategy)

10

52.33

Diversity 47.57
Director Compensation

Analysis of businessenvironment 62.58

60.02

Identiﬁcation and evaluation of
key risks and opportunities 43.26

Sustainabilty of directors

57.73

Identiﬁcation of social andmanagement issues 41.46

Skill matrix 59.11
Governance framework 59.81

Determining materiality 46.25

Governance 56.41

Resona Asset Management

59.15

Factor (9) Labor practices
Factor (10) Compliance

Sustainability committee

Creation of win-win relationship between companies and investors

44

76.62

Factor (7) Diversity
Factor (8) Safety and well-being

KPIs 65.27▪Path for improving company value

Eliminating the gap in
understanding between
companies and investors

63.25

Directors, supervisor, etc.

Factor (6) Mobility

It is becoming more important for companies to disclose and evaluate non-financial information in
addition to financial information. As the external environment surrounding business changes
significantly due to increasing environmental and social problems, recent geopolitical risks, etc.,
companies must clarify their strengths and meaning of existence in society before implementing
them in long-term management policies and strategies. Also, asset management companies must
understand this information before evaluating company values and conducting engagements.
Integrated reports provide an overall description of the important elements that create company
value, such as the company’s values, materiality, business model, and governance. They are aninvaluable information disclosure tool for sharing the company’s value creation story withinvestors and other principle stakeholders. The information in the report is closely tied to thecompany’s value. Accordingly, we conduct engagement by encouraging integrated reports to bedisclosed and substantially improved. Also, we are focusing on discussions on more specific TCFD
disclosures to strengthen information disclosure engagement.

Encouraging integrated
reports to be disclosed andsubstantially improved

61.47
59.65

Metrics and targets

Approach to engagements

Intermediate targets
and triggers

69.11
69.40

Strategy

62.79
59.20

Company a Company b Company c
65.97
70.09
61.98
62.13
55.30

Governance
Sustainability committee

62.68

62.07
63.78
69.59
74.27

TCFD score [Total] (new)65.93

Sustainabilty of directors
Director compensation
Diversity

KPIs

80.80
82.71
78.09

MissionWhen comparing the Japanese stock market with stock markets, we are aware that the
profitability of capital (ROE) is low and the valuation (PBR) does not increase. There are various
reasons for the valuation not increasing, but we think that the disclosure discount resulting fromJapanese companies not sufficiently disclosing information is one major factor. Our goal is toincrease the value of investee companies by encouraging the disclosure of non-financial
information and making substantial improvements through information disclosure engagement.

3.0

Company a Company b Company c
75.32
64.59
69.91

Integrated report AI-score [Total]
MVV and purpose
PurposeObjective of engagements

4.0▪Examples of AI-scores

Coporate strategy andcapital allocation 59.63●W hen an engagement isconducted, the person
responsible explains the
improvements and thebackground behind theevaluation score.

Building medium- and long-term plans 53.81

Engagement conditions and assessment
During the 1-year period from January to December 2022, we conducted engagement over 200
times with over 100 companies to encourage integrated reports to be disclosed and substantially.
We believe that overall, we have substantially improved the content of integrated reports ofinvestee companies beyond our initial expectations. However, in order to eliminate the disclosure
discount and achieve an increase in company value, it will be necessary to get investee
companies to make continual improvements and implement the value creation story andstrategies that they disclosed. We intend to engage in further discussions with these companies.
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Responsible Investment Section

─ Responsible Investment Section ─
Chapter

2

The Engagements ofResona Asset Management

Bottom-up engagement (equity/active investment)

Our approach to engagements

Chapter

Chapter

Chapter

1

2

3

4

5

6

Establishment of engagement themes
In the area of active stock investing, Resona Asset Management pursues engagements based on two mainestablishment in response to specific investment philosophies, conditions at specific investee companies, andother such factors.
In regard to bottom-up engagement specifically, we establish themes based on individual conditions at each
investee organization, which include considerations of capitalization strategy, business portfolio optimization
and advancements in corporate governance. In addition, we take consideration of long-term corporate
strategy measures related to structural changes in business environments brought about by society’s pursuit ofnet-zero-emission policies slated for realization by 2050, community fragmentation risk, and other such factors.
Resona Asset Management’s active-investment teams carry out analyses of corporations considered forinvestment based on our proprietary investment philosophy, and as a result, each team operates based on its
own unique engagement themes.
The Value-focused Team, for example, sometimes invests in companies that have problems leading to fallingstock prices, but which also exhibit high potential for solving said problems via structural reforms and otherchanges and show promise in terms of future corporate-value improvements. In such cases, engagement
themes will usually focus on reforms and improvements for unprofitable business areas, as well as businessfocus shifts and the like.
Primary company-analysis focus areas, and engagement themes, for each team are as described below.

At its core, the act of investing is funding by an investor who has shared values with and trusts in theinvestee, whom they expect to create value for society through their corporate activities. Even if there aresome tensions between the two parties due to their differing stances and roles, this kind of relationship canbe formed in the most constructive and optimal manner possible if both parties understand that they are
working as a team toward the shared goal despite the mutual differences between them. When attempting
to build this type of relationship, engagements between the investee and investor can go a long way tohelping out in many ways. If any problems are faced by the investee in their pursuit of corporate value
improvements, or they have not made their policies and approaches entirely clear, a necessary first step isfor the investor and investee to refrain from setting any specific targets for the time being, and instead startby identifying and understanding the problem areas. Conversely, if the cause or causes of a problem areclear from the outset, it is more appropriate to set clear targets and milestones aimed at implementing
corporate-value improvement measures, and share progress levels as said measures are pursued. Resona
Asset Management takes a flexible approach to engagements while always working to ensure an accurate
grasp on current conditions at the investee company, and providing constructive ideas and opinions with thegoal of corporate value improvements.
Active stock investing provides many opportunities for such engagements with current investees as well aswith investee candidates not yet included in the portfolio. When pursuing engagements with said
candidate organizations, it is important to focus not solely on the acquisition of information; it is also
necessary to examine potential problems and issues while▪Engagement results
thinking about what action is required to bolster corporate value
No. of engagement
at the company in question. This approach facilitates a deeper
cases
understanding of each candidate organization and enables sound
1,423 (with 639
FY 2020
investment decisions, while also facilitating more effective and(July 2020–June 2021)
companies)
smooth discussions with said company regarding corporate value
1,196 (with 563
FY 2021
improvement measures should the company ultimately be(July 2021–June 2022)
companies)
selected for inclusion in the portfolio.

▪Important points of notice related to FY 2021 engagements
1．
Excellent synergetic effects from information-disclosure engagement

Increased numbers of investee companies on the market whose value-creation history and approach are clearlycommunicated and who strive for improved market valuation(For further details on information-disclosure engagement, see p. 44.)2．
Improved diversity of divisions established as contact points

Added the Investor Relations Division, the Sustainability Promotion Division and others as contact points
S USTA INA BILITY R E POR T

Chapter

disclosure with the aim of bolstering corporate value; and bottom-up engagement based on individual theme

In order to ensure a prosperous and happy life for future generations as well as our customers, thenumber-one thing Resona Asset Management strives for in active stock investing is the maximization of
medium- and long-term investment performance. To this end, we consider it our responsibility as aninvestment company to ensure a thorough understanding of each investee company in order to facilitate
appropriate investment activities, while also providing firm backing for investee efforts to improve their own
corporate value. With this approach as our foundation, we engage in engagements aimed at bolstering
customer profits through medium- and long-term investment performance improvements, based on a
precise understanding of corporate value for each investee, and while providing support throughconstructive discussions aimed at realizing corporate value improvements for the investee.
By taking a proactive approach to such corporate value improvement measures as part of our pursuit ofexcellent stock investment performance, we believe that we can vitalize and strengthen the market as a wholein truly meaningful ways. Helping outstanding companies to ambitiously pursue leading-edge measures is, after
all, a best-practice approach for effecting positive impacts on the overall market, and that’s why Resona AssetManagement utilizes engagements targeting medium- and long-term performance improvements as a means ofvitalizing that very market.

Resona Asset Management

Chapter

approaches: information-disclosure engagement via disclosure-discount adjustments through promotion of

Purposes of engagements

46

Chapter

2022 / 2023

Investment team nameCompany-analysis focus areas

Engagement themes
Clarification of capitalization strategy andlong-term management strategy,advancements in information disclosure
methods/approaches, etc.

Market-focused
Team

Sustained profit growth,
fostering of social utility

Global Corporation
Team

Continual improvements in competitive strength;
winning habits and ISDK analysis

Utilizing capitalization strategy and individual
strengths to bolster management strategy
and other areas

Value-focused
Team

Practicality of structural reforms;
reasons for low stock prices and extent ofreform-implementation capabilities

Elucidation of management-related problems,
establishment and implementation of
profitability improvement measures,
implementation of capitalization strategy
improvements, etc.

Small-cap Stocks
Team

Demand arising from societal structure changes,
corporate management personnel

Long-term strategy (investing) acceleration,
IR improvements, management philosophy
establishment, etc.

Managing engagement progress
The Value-focused Team, whose investment results directly correlate to the investee company’s structuralreform measure progress and successes (or lack thereof), establishes engagement check items at the start ofinitial investments and monitors progress related to these on a monthly basis. If monitoring reveals unfavorable
results, the team identifies the reason or reasons behind the problem, shares its findings and views with theinvestee company, and gives added support for improvements moving forward at said company.

Resona environmental, social, and corporate governance (ESG)
evaluation, and engagement
In accordance with our ESG Integration Policy—which concerns environmental, social, and corporate
governance (ESG) issues—we do not, as a general rule, pursue active stock investing in any company thatfails to meet standards stipulated in Resona ESG Ratings. However, some such investee candidates areultimately determined to be worthy of investment because they exhibit promise for future improvements, inwhich case we pursue engagements regarding relevant ESG issues with the investee.
For further details on Resona ESG Ratings, see p. 72.
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Responsible Investment Section

─ Responsible Investment Section ─

2

The Engagements ofResona Asset Management

Bottom-up engagement (fixed income/active investment)
Purposes of engagements
We believe that the most important aspect of bond investment is to realize stable and continuous
investment returns on the assets entrusted to us by our clients. If bonds in which we invest default
before redemption or lose investment grade due to a credit rating downgrade and forcing to be
sold at a substantial loss, the portfolio may be significantly hurted in a bond investment with highdownside risk. We regard that it is necessary to take consideration of such risks in advance andavoid them in order to ensure stable, continuous profits from investments. To this end, we integrate
ESG (environmental, social, and corporate governance) considerations into our pre-investment
assessments and investing processes for active bond investments, while also pursuing continual
engagements based on our Engagement Policy—with said activities primarily targeting the bondissuing organizations themselves. Through these actions, we strive to mitigate or eliminate difficultto-foresee future risk such as stranded-asset risk, reputational risk and other risk types so that we
can maximize our customers’investment returns over the medium and long term.

Our approach to engagements
When viewed as fund procurement through public offering, corporate fixed income investments
bring in funds from wide-ranging investors in much the same way as stock investments do.
However, stocks are a type of instrument in which investors have the ability to influence investee
company management and operations through their voting rights, whereas securities as afundraising tool do not offer those same rights to investors. In recent time, there have been an
increasing number of cases of hybrid bonds, which are corporate bonds but are recognized ascapital for rating purposes, but these bonds also do not have voting rights.
As things stand now, dialogue has been growing more thorough and strengthened between
companies and their equity investors thanks to corporate governance improvement measures, but
we find bond investors still have few opportunities for direct engagements with the issuing
company’s management. We recognize that bond investors have limited means of directly
approaching the issuer’s management, such as voting rights. However, given that the issuer’s cashflow is the source of the bond’s principal and interest payments, and that the issuer’s sustainablegrowth through avoidance of future risks can be the basis of its long-term creditworthiness, weconsider that bond investors, as stakeholders, basically share the same awareness of issues as
equity investors, and that it is important for bond investors to engage in dialogue with issuers
regarding their future. We believe it is important for bond investors to engage in engagementswith issuers regarding their future cash flows and various risks.
In many cases, we feel bond investors lack access to the same levels of information as
stockholders, and although recent years have seen the emergence of issuers who treat bondinvestors and equity investors the same, providing equal levels of information to both parties, suchcompanies are still few in number. SDG Bonds such as green bonds, which have been on the rise inrecent years, are closely related to the sustainability strategies of the issuers, and it is welcome that
more and more issuers are providing bond investors with detailed explanations. However,
unfortunately, there are still some issuers that do not enough disclose information on SDG Bonds.
We believe that impartial and thoroughgoing information disclosure and engagements with theissuer’s management are essential to facilitate
avoidance of future credit risk. With the aim of▪Engagement results
bolstering effectiveness of engagement
No. of engagement cases
activities, Fixed income Investment Division
carries out coordinated efforts involving
FY 2020
Responsible Investment Division, Equity
83 (with 55 companies)(July 2020–June 2021)
Investment Division and other relevant divisions
while working to communicate investor
FY 202189 (with 74 companies)
concerns and opinions to management of the(July 2021–June 2022)
bond-issuing organizations.

48

Resona Asset Management

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Chapter

Chapter

Chapter

Chapter

Chapter

1

2

3

4

5

6

Establishment of engagement themes
In engagements related to materiality and ESG (environmental, social, and corporate governance)
considerations, Fixed Income investment Division focuses particularly on the medium- to long-term
effects on credit for two top-priority risk management themes: climate change and lifestyleinfrastructure resilience. Several sub-themes have been established on these themes. Considering
the abovementioned circumstances as they relate to bond investors, we prioritize fair and sufficient
information disclosure and smooth communication with bond investors as sub-themes of particularimportance. Sub-theme focuses are also revised as necessary in order to avoid long-term risk.
The target of engagement is selected mainly from issuers of bonds with long maturities, such as
electric power companies, railroad companies, and energy-related companies, which are closely
related to the above two themes. In addition, through engagement efforts, we promote action
even at issuers whose fail to meet the standards of our Resona ESG Ratings.
For example, in the case of a bond-issuing electric power company which generally issues large
amount of cooperate bonds, we continually remind that company of the need to regularly
restructure and pursue greater balance in energy mixes with the goal contributing to carbon
neutrality, of the necessity of securing sufficient resources for maintaining and managing powerdistribution infrastructure as society ages and its birthrates decline, and of the need for information
disclosure and engagement with bond investors when raising funds through corporate bond issuance.
We also request that issuers of SDG Bonds, such as green bonds, disclose the framework and thirdparty certification materials in a centralized and easy-to-understand manner on their websites.

Engagement processes, and progress management
In engagement operations, we track conditions and progress individually for each issuer. We haveestablished five milestones for engagements: 1) establishing opportunities for dialogue, 2) setting
and presenting issues, 3) sharing and discussing issues, 4) formulating and implementing
measures, and 5) resolving issues, and we manage progress for each major theme.
▪Five engagement milestones
Continual engagements until issues are resolved

Chapter

Chapter

Go back if
measures proveineffective

Establishing
opportunities
for dialogue

Resona Asset Management and the issuing organization create opportunities for engagements

Setting andpresenting
issuesResona Asset Management specifies and shares important ESG issues with the issuer.

Sharing anddiscussing
issuesThe bond issuer shares ESG issues throughout its organization and deliberates on them

Formulating
andimplementing
measures

The issuer creates and deploys a countermeasure plan

ResolvingissuesResona Asset Management determines that measures are practically effective,
and continues monitoring and confirming conditions

We believe that if issuers properly address ESG issues, etc., they will be able to avoid

unpredictable fluctuations in future cash flows and maintain sustainable growth, and will beadequately prepared for various risks, thereby avoiding the loss of corporate value. It will lead tothe expansion of customer benefits from a medium- to long-term perspective, and we believe that
this will lead to increased profits for our customers over the medium to long term. It is for thesereasons that we strive to realize more effective engagements with bond-issuing organizations.

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Engagement
ReportEngagement
Report1

2[ M a t e r i a li t y ( t o p - d o w n ) e n g a g e m e n t ]Sustainable palm oil procurement

In August 2017, we initiated engagements pertaining to environmental and social issues on procurement ofsustainable palm oil. Palm oil is the most commonly used vegetable oil in the world, particularly as a raw material innumerous food products, detergents and other household items, and cosmetics. However, palm oil underlies many
problems in the major producer countries of Malaysia and Indonesia, particularly in terms of deforestationaccompanying development of palm plantations, child and forced labor, and conflicts with indigenous peoples of thenations. Japan also has many companies that handle palm oil-based products and accordingly are involved in thepalm oil supply chain. Meanwhile, in comparison with companies in Europe and the United States, we believe there
is still substantial room for improvement among companies in Japan on palm oil related issue. We support the target
companies related to the palm oil supply chain to understand“sustainable palm oil”procurement and to formulate
their procurement policies.

[ M ateri al i ty (top-down) engagement ]Climate change/Climate Action 100+

Climate Action 100+ is a five-year investor-led global initiative to ensure the world’s largest
corporate greenhouse gas emitters take necessary action on climate change. The initiative is
assisted by five investor networks, the PRI, Asia Investor Group on Climate Change (AIGCC),
Ceres, Investor Group on Climate Change (IGCC), and Institutional Investor Group on Climate
Change (IIGCC). The target companies are the world’s largest corporate greenhouse gas
emitters, and ten Japanese companies are included.
Net Zero Company Benchmark has been disclosed since March 2021. The Climate Action
100+ Net Zero Company Benchmark was launched in March 2021 to assess the performance of focus companies against theinitiative’s three high-level goals: emissions reduction, governance, and disclosure. This benchmark provides comparable information
on how the companies are setting their management strategy and business reorganization to align with the Paris Agreement.

Engagements with Japanese companies/Lead Investor

Products using palm oil and palm kernel oil

We are conducting ongoing engagements with two Japanese companies as a lead investor.
▪Progress on Net Zero Company Benchmark
Instant noodles Chocolate snacks

Margarine

Ice creams

Frozen foods

Released in October 2022, based on company disclosure as of May 13, 2022. Several items improved compared to the March 2021
assessment (based on company disclosures as of January 22, 2021).

Powdered milk Detergents and cosmetics

Process of engagements
We aim to encourage the target companies to achieve each of the following milestones in order to avoid environmental, labor, andhuman rights risks throughout the supply chain. We will encourage the companies to carry out Corporate Social Responsibility (CSR)
efforts to realize and develop a sustainable society.
1 Understand that palm oil procurement is connected to risks on deforestation, child labor and forced labor [(i)].
A Confirm how much palm oil derived material is used in their products [A-(i)], and ensure traceability on supply chain [A-(ii), (iii), (iv)].
B Understand the RSPO-certified palm oil [B-(i)], and recommend its use [B-(ii)].
C Disclose sustainable procurement policy [C-(i)], disclose certified oil procurement targets [C-(ii)] and finally, disclose NDPE* policy
targets [C-(iii)].
The following diagram shows the engagement milestones and progress of the target companies.

Ensuring
traceability

Step A-(i)Step A-(ii)Step A-(iii)

Step A-(iv)Become aware that acompany’s own
products contain palm
oil raw materials

Determine suppliersof raw materials
related to palm oil

Encourage suppliers
to ensure traceabilityof raw materials
related to palm oil

Understand the extent
to which traceability ofpalm oil has beenachieved

53/61

46/61

20/61

12/61

63/63

Step B-(i)

49/63

24/63

Assessment classification:

Understand the
RSPO-certification
schemes

Step C-(i)Step C-(ii)Step C-(iii)

Disclose sustainableprocurement policies
on palm oil

Disclosure on targets
and progress on
RSPO-certified palm oil

Incorporate NDPE
policy into palm oil
procurement

36/61

28/61

11/61

Purchase RSPO-certified
palm oil

60/61

41/61

62/63

36/63

43/63

30/63

Company A(2040)・ Zero emission:
Ambition 2030, supported by numerous
innovative efforts to achieve the aim ofcarbon neutrality across the life cycle ofthe company’s products by FY2050

ー

Achieve carbon neutral

Supply chain

Progress on each process

Number of processes
achieved (average)

(i)

A-(i)

A-(ii)

A-(iii)A-(iv)

B-(i)

B-(ii)

C-(i)

C-(ii)

C-(iii)

Trading company

100%

100%

100%

80%

80%

100%

100%

100%

80%

60%

5

9.0

Edible oils refinery and chemicals

100%

100%

83%

50%

50%

100%

100%

67%

50%

50%

6

7.5

Food manufacturers and toiletry
products manufacturers

100%

94%

91%

45%

24%

97%

85%

64%

64%

12%

33

6.8

Retailers, restaurants and services

100%

68%

47%

11%

11%

100%

21%

32%

11%

5%

19

4.1

2022 / 2023

TCFD disclosure

Improved assessment items compared to March 2021:

Scenario analysis(2030)• 	100% electrification of globally soldall automobile vehicles• 	Achieve carbon neutral, with a focus
on electrification of motorcycles(September 2022)

Other• 	 100% electrification of new vehicles
in major markets by early 2030

• Accreditation under
Science Based Targets[Climate governance]• 	 Introduced CDP score as
performance-linked incentive.
(June 2022 ASRs)• 	 Set Scope 3 emission targets• 	 Has selected 2030 milestone
concerning CO2 emissions intensityfrom the use of products (Scope 3).
In the area of corporate activities(Scope 1 and 2), the company aims
to reduce its CO2 emissions by 46%
from FY2019. The company has
applied to the Science Based
Targets to receive validation ofthese targets. (Sustainability Reportin July 2022)• 	 TCFD disclosure in the2022 integrated reports(September 2022)• Applied for Science
Based Targets approval(January 2022)[Capital investment]• 	 Updated its targets regarding EV
and R&D expenditures in April andelectric motorcycles in September
2022

We are currently engaging with seven global companies as a collaborating investor. The following is an engagement case witha US-based petroleum company.

11/63
Difficult

S USTA INA BILITY R E POR T

ClimategovernanceEngagements with global companies/Collaborating Investor

No. ofcompanies

Resona Asset Management

No, does not meet any criteria

Medium-term target(2050)▪Main engagement topics◦Shared the views of natural gas as a backup for renewable energy.
◦Disclosing targets and Scope 3 emissions on transition◦Promoting dialogue with local communities▪Status of Net Zero Company Benchmark
While there are no improved items since March 2021, we will continue to pursue engagements.
Net Zero GHG by
2050 ambition

The progress of the 63 engagement target companies based on supply chain classification shows that average achievements tend tobe higher for upstream companies.

50

Climate policy
engagement(disclosure)

Capital alignment(disclosure)

There are several areas of progress after May 2022, such as new target settings. (Bold items in the table below)

Goal

Progress breakdown on palm oil by supply chain

Downstream

Partial, meets some criteria

Company B

Easy

Upstream

Decarbonization
strategy▪Status of initiatives of two target companies as of December 31, 2022 (extract)

17/63(Note 1) This includes not only palm oil but also CSR-based procurement policies, etc.
(Note 2) Survey by Resona Asset Management. Company status are based on the engagements, websites, integrated reports, and CSR reports, as of the engagement
dates until June 2022.
indicates status as of June 30, 2021, andindicates status as of June 30, 2022.

Industry

Yes, meets all criteria

Step B-(ii)Switch procurement
and the use ofmaterials to
RSPO-certified oil

61/61

55/63

Short-term(2020-2025)
GHG target

Company B

Long-term target

Disclose
procurement
policies andcommitments

Step (i)Become aware of risks
palm oil poses inrelation to deforestationand human rights issues

Medium-term(2026-2035)
GHG target

Company A*NDPE : No Deforestation, No Peat, No Exploitation

Start

Long-term(2036-2050)
GHG target

Net Zero GHG by
2050 ambition

Long-term(2036-2050)
GHG target

Medium-term(2026-2035)
GHG target

Short-term(2020-2025)
GHG target

Decarbonization
strategy

Capital alignment(disclosure)

Climate policy
engagement(disclosure)

Climategovernance

TCFD disclosure

US petroleum company

Assessment classification:

Yes, meets all criteria

Partial, meets some criteria

No, does not meet any criteria

Engagement plans after 2023
The first five years of activities for Climate Action 100+ are complete, and Phase 2 will start from 2023. An update of Net Zero
Company Benchmark is scheduled for announcement in autumn of 2023, and we will formulate plans based on the assessment
results and continue our engagements.
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Engagement
Report3

Engagement
Report［ M a t e r i a li t y e n g a ge m e n t (t o p - d o w n ) ］

Labor practices and human rights

4［ M ateri al i ty engagement (top-down) ］

Board Diversity
The 30% Club is a global-scale working group, founded in England in 2010, with thegoal of improving female-to-male corporate director ratios. With chapters in 18
countries/regions including Japan, this organization makes major contributions toward
increased female-director numbers in organizations around the world.
Resona Asset Management has been a participant in the Japan Investor Group, which isan investors’working group belonging to the 30% Club, since June 2019. Moreover, wehave been part of the 30% Club UK Investor Group since December of the same year.

KnowTheChain is a collaborative partnership initiative among four organizations: theBusiness & Human Rights Resource Centre, Humanity United, Sustainalytics, and Verité.
As part of this initiative, we pursue engagement in relation to labor practices, humanrights and similar issues among apparel and footwear manufacturers.
In regard to three specific industries identified as being at particularly high risk of forcedlabor practices—information and communications technology, food and beverage, and apparel and footwear—
KnowTheChain assesses global corporations for forced-labor risk using KnowTheChain benchmarks.
▪Engagement cases

Gender diversity among top corporate executives

KnowTheChain Benchmarks

We conducted engagement with Company A, the Japaneseapparel and footwear company.

2020 Assessment results

Company A

Industry average◦‌	Company A’s 2020 assessment results (released in 2021) showed

Institutional investor
community

improvements in 4 indicators, ranking elevated to the top 20 among 37

Investor Group

Establish and share bestpractices for purposes ofachieving goals

Asset owners

Improve dialogue
capabilities for institutional
investors overall

companies. We engaged with company for the potential for further
improvements on“recruitment.”◦‌	We have also conducted engagement on specific measures and policies

Asset managers

Increase female board-of-director
percentages in TOPIX 100
companies to the following levels:▪Measures at Company A
Recruitment
・ Restricting freedoms of immigrant-workers via recruiting fees, passport confiscation have become a global-scale problem.
However, this is an area in which Company A was rated positively.
・ Company A has deployed its basic-policy on supplier code of conduct. But it did not connect to better assessment, due to rare
chance to take counter measures. Therefore, they are considering ways to increase said opportunities as part of human-rights
due diligence efforts.
・ Further risk-mitigation measures are expected in their operating regions.

Purchasing practices
・ Company A was aware that did not disclose sufficient information on responsible procurement. Ever since their 2021 evaluation,
they have been striving to better understand sustainable purchasing practices.
・ For example the company is working to eliminate disparities between predicted and actual numbers of orders received by sharing
predicted numbers and plan-based numbers with suppliers four months in advance of order receipts, and then maintaining frequentcontact with suppliers to make adjustments accordingly. In addition, the company has been working to formulate a plan for
utilizing leftover materials in later production operations for reusing excess materials.

FAIRR Working Condition Engagement is a collaborative engagement working group
established in 2022 that promotes change aimed at reducing labor-practice risk
among the seven leading companies in the meat-processing industry. Based on thecompany disclosures FAIRR initiative evaluates health & safety, toward fair working
conditions, and efforts toward establishing unions.
▪Engagement cases and corporate measures
We conducted engagement with Company B, a Hong Kong based meat processor.
Information disclosure on health & safety and Grievance mechanisms

Fair working conditions and distribution by by contract type・ In response to labor shortage problems, Company B has established policies aimed at making them a more attractive workplacein order to retain current workers, ensuring a sufficient workforce, and making jobs at the company more attractive to potential
new hires.
・ Moving forward, we expect Company B to provide explanations and disclose information on specific measures they will
implement to make their organization more appealing as an employer.

B. Fair working conditions
Distribution bycontract type

Oversight ofgovernance structure

C. Worker representation
Support worker
representation

Dialogue withworkers

FAIRR assessment results
Color coding: Best practice cases

52

Response measures currently underway

Resona Asset Management

Senior management

Achieved

July 2020

12.9%

June 2022

17.2%

2030

30%へ

In pursuit of greater transparency,
the Board of Directors sharesinformation on conditions related
to gender diversity with investors at
suitable times, and also reports on
progress toward established goals

Major activities in 2022
Discussion meetings led by
the Best Practices Subgroup

In order to deepen understanding of efforts toward corporate governance strengthening and improved
gender diversity, female directors from the Japanese Institute of Certified Public Accountants (JICPA)
joined in two meetings to exchange opinions and ideas.

Sharing of best practices

A session was held, as a means of subgroup participation involving approximately 20 companies, toshare best practices in regard to engagement activities, corporate information disclosure, corporate
director selection, etc.

Release of an annual report

An annual report containing engagement examples, reports on progress and other such information was released.

Efforts by the 30% Club UK
Investor Group

Letters were sent to seven American companies whose diversity-related measure implementation was
subpar. In these letters, explanations were requested in regard to board-of-director response measuresrelated to gender and ethnic diversity, and calls were made to establish and publicize specific targets
related to diversity policies and successor-training plans and strategies.

Engagement progress and examples
In order to enable effective, meaningful monitoring and supervision, it is preferable to establish boards of directors with sufficient diversity
among their members. Therefore, we put high priority on realizing such diversity in relation to gender, nationality and other factors.

Female director
increases

Foreign-national
director increases▪Example of engagement : Company C
PeriodEngagement in promotion of gender diversity

Resona Asset Management: Communicated to Company C, which did not currently haveany female directors, that efforts toward including outsider directors with differing
2018
backgrounds—not just female directors, but foreign nationals and other such members—
would be preferable.
Resona Asset Management: As a request for improvements to Notice of Call procedures,s skill matrix and reasons for director
2019 we recommended releasing information on the board’
selections, as well as enthusiasm levels and similar information for each director candidate.
Resona Asset Management: Pointed out the importance of gender diversity as it relates toeffective realization of director functions.

2020 university professor, a human resources specialist, a manager experienced in executive-level

A. Health & safety
Sick-leave system
introduction

Board of Directors

Company C: Explained that they had no female director, but that they currently employed a▪Company B assessment results (selected subindicators)

Grievancemechanisms

10% by the end of 2020
30% by the end of 2030

▪Action by engagement-targetedcompanies

・ Explained the investor expectation on information disclosure for Company B, the company expressed awareness and stated theirdisclosure policy. Moving forward, we expect that the company to disclose information on grievance cases, and measures taken.

Subcategory

Investee company

Targets

on“purchasing practices,”where there are still room for improvement.

Main category

Shareimportance ofissues and theirsolution

Response measures partially implemented

S USTA INA BILITY R E POR T

2022 / 2023

Response measures not yet implemented

management, and a certified public accountant as outside directors in pursuit of a wellbalanced board, and that they also employed female employees in managerial capacities
as section heads within Japan and department heads outside of Japan.

2021 Company C: Set a female hiring rate for new-university-graduate hires of 20 percent or higher.
2022 Company C: Elected their first female director and disclosed the board of directors’skill matrix.

Resona Asset Management

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53

Engagement
ReportEngagement
Report5

6［ I n f o r m a t i o n - d i s c lo s u r e e n g a g e m e n t ］

Corporate Disclosure

Example of engagement with gas equipment manufacturer Company D regarding
strengthening of information disclosure▪Issues detracting from company’s investor appeal
Investor appeal◦Company D is a major manufacturer of household-use heat energy equipment with sophisticated technological capabilities andexcellent competitive strength. Furthermore, they are making changes in response to trends toward decarbonization, and are
expected to disseminate a number of value-added products with excellent energy-saving performance on a global scale.

Issues◦Since they currently focus most of their efforts on gas-related equipment, there is concern regarding the possibility of increased
stranded-asset risk depending on the direction that future government measures and energy mixes take. Furthermore, as carbonemission elimination measures begin to become more commonplace among household users, there is major concern regarding
efficiency and energy-saving improvements for the company’s devices and equipment, as their activities in this area still seem lacking.
Therefore, it is desirable that Company D better disclose opinions and propose solutions to stock-market investors in order to quell
investor doubts, promote further government measures, and otherwise foster improvements.

▪Engagement details◦We had already been in regular contact with Company D. However, in order to realize the abovementioned information-disclosure
strengthening measures, we explained to them the importance of communicating not only new-technology and -product development
details, but also of their company vision and goals as well as how they approach social-environment factors and other such issues.
Furthermore, we have repeatedly explained the importance of visually communicating their future value as a corporate presence.
◦In September 2021, we created a logic model incorporating solutions to societal issues (including climate change issues), mutuallyshared ideas with Company D while conveying the necessity of creating a clearer value-creation model, and proceeded withdiscussions regarding approaches and methods for identifying and rectifying issues in pursuit of strengthened information disclosure.
◦Following the above initiatives, we engaged in dialogue with senior directors in charge of investor relations, environment-related
department personnel, and other members of Company D through discussion meetings regarding the establishment of definitions for
products that contribute to quality-of-life and global-environment improvements, visual representations of efforts to reduce greenhousegas emissions, and other such issues. Furthermore, we shared our views and opinions on rapidly-accelerating changes in external
environments and discussed measures to deploy in response. Regarding information disclosure, we shared AI scoring results (see Fig. 1)
and explained to Company D the need for major improvements in the“values”and“management-environment analysis”categories.

▪Company D responses and future expectations◦In November 2021, Company D established and publicized their carbon neutrality policy.
◦In December 2022, we exchanged knowledge and ideas regarding greenhouse-gas emission calculation methods with Company D inorder to further mutual understanding of greenhouse gas reduction measures. We also identified in finer detail, and shared important
points of discussion in regard to, measurement and assessment methods for determining levels of contribution toward
decarbonization. (see Fig. 2)◦Both parties have a shared understanding of the issues relating to and importance of external-environment changes and corporate
disclosure strengthening efforts. Moving forward, we believe Company D will announce and implement more concrete measures inthese areas.

Cost of capital, ROE and ROIC 45.65

Total 46.42
70

Non-ﬁnancial KPIs andacceptability 60.62

60
50

Financial performance

40

47.82

20

Sustainability
committee

10

50.83

Business models
and strategy 48.68

57.70

Continuity of directors

Identiﬁcation of socialand management issues

42.92

Skill matrix 49.17

56.45

Establishing mediumand long-term plans
44.61

54

Value 48.90

Identiﬁcation and evaluationof major risks and opportunities

41.15

Governance 44.56

Mission 39.42

Analysis of businessenvironment 46.83

Diversity 42.24
Executive compensation

Governance framework 45.36

Vision 34.65

30

KPIs 51.65

Resona Asset Management

Fig. 2FY

Values 40.08
Purpose 41.98

Determining materiality 58.28
Discussion of strategy andcapital allocation 36.06

S USTA INA BILITY R E POR T

2017 2018

2019

2020

Engagement example with general retail Company E▪Issues detracting from company’s investor appeal
Company E celebrates their 350th anniversary in 2023 and boasts high-quality brands as part of their corporate group—including
Japan’s first-ever department store brand. However, they have struggled with low profitability, which is an issue that needs be
addressed. In order to rectify this shortcoming, Company E had been closing unprofitable store locations, cutting costs and selling off
non-core business operations. When we first embarked on engagement (around 2019), Company E had not yet publicized any clear
growth strategy and were focused primarily on cost-reduction measures. In response, we urged them to make good use of their brandstrength (as an established department store chain), as well as the corporate group’s rich management resources, in order to bolster
business performance.

▪Engagement details◦Company E provides regular opportunities for us to engage in information and idea exchange meetings with the president and othermanagement personnel. Resona Asset Management attends various business-related informational meetings. More recently, we havetaken part in smaller meetings with commerce division personnel, toured the Tokyo flagship store, and otherwise endeavored todeepen our understanding of actual conditions within the company.
◦Initially, discussion among Company E management focused mainly on closing unprofitable locations, means of eliminating deficits at
subsidiaries such as the Hiroshima and Matsuyama stores, and other such measures. During said discussions, the president at thetime (now former president) suggested that, because the Matsuyama store was located near an airport limousine bus stop as wellas Matsuyama Castle and various other tourist attractions, it would be possible to leverage these advantages to realize more
profitable performance.
◦Following the appointment of a new president, discussions at Company E began to take a new direction. They shifted toward ahigh-sensitivity, high-quality consumption approach and began to fundamentally re-examine their department store business model.
Furthermore, they began focusing discussions more on bringing together the rich range of knowledge and experience present
throughout group companies while giving more management autonomy to each group company. Ultimately, Company E decided tochange course in their overall strategy, focusing not just on boosting department store sales, but also on utilizing the strengths andappeal provided by their department store business to pursue greater profits in the finance and real estate industries (see Fig. 1).
Currently, they are talking about how to implement this new approach in practice. In particular, their idea to more fully utilize
company-owned real estate in Shinjuku as a central part of redevelopment plans for that area shows promise.

▪Company E responses and their effectiveness◦By switching from a mass-marketing to an individual-marketing approach, the company is striving to forge deeper connections withcustomers through individual trait identification, and they are beginning to see real results from these efforts (see Fig. 2).
Furthermore, by promoting greater autonomy at individual group companies, they are bolstering the potential of their businessendeavors in fields outside of department store operations, which include the aforementioned real estate and finance businesses.
◦In response to calls for greater information disclosure from outside directors as well as executive officer reviews and monitoring,Company E has expressed their intent to make improvements in information disclosure both domestically and internationally, andthey have already seen some positive results in this area.

Fig. 1: Excerpt from Company E business-related
explanatory materials

Fig. 2: Data prepared by Resona Asset Management
based on meetings and other sources

Main indicators

FY 2019

FY 2021

Predicted for
FY 2022(July
2022–June
2023)

Identified-customer
sales (billions of yen)

451.2

417.8

600.0

Foreign tradecustomer sales(billions of yen)

―

79.0

100.0

MICARD member sales(billions of yen)

451.2

394.2

500.0

2021

Consolidated sales(billions of yen)

347.1

348.0

340.5

344.4

366.2

Sales for calculation-targetedbusiness (domestic business,billions of yen)

186.8

180.8

181.1

183.1

171.5

Energy-savings contribution
amounts (PJ)

―

―

6.4

6.1

5.7

Greenhouse gas emission
reduction amounts (t-CO2e)――344,392 331,263 305,880* Regarding CO2 emission reduction effects, we explained to Company D our thinking
on quantitative effects as well as our calculation methods.
* Company D explained their calculation methods and approach regarding thedisclosed figures, and both parties have identified and shared points of discussion
aimed at greater accuracy and advancements in the future.

2022 / 2023

Equity investment/active◦Not stopping with mere structural reforms such as closing unprofitable locations and renovating stores that were in the red,Company E has begun to exhibit top-line growth thanks to efforts aimed at expanding high-sensitivity, high-quality consumption
through improvements and innovations in foreign trade operations. Moreover, based on the policy of taking a more scientificapproach to department store operations and management, they have achieved changes in cost structuring and are moving toward
improved profitability.

◦In response to our request for clearer expression of Company D’s desire to contribute toward decarbonization at the household
level, Company D established, in their May 2021 medium-term management plan, definitions for products that contribute toquality-of-life and global-environment improvements, and set goals for those categories.

Fig. 1: Quantitative scores in the 2021 integrated report［ B ottom-up engagement ］

Resona Asset Management

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55

Engagement
Report7Engagement
Report8［ Bo t t o m - u p e n ga g e m e n t ］

Equity investment/active

Engagement example with call center operator Company F

Progress［ B ottom-up engagement ］

Fixed income/active
IssuerEngagement details

Engagement themes▪Issues detracting from company’s investor appeal◦Company F is a call center operator first listed on the market in March 2022. The parent company itself was founded quite a longtime ago, and Company F was established within that larger trading company in 2000. As a result, Company F is a relatively reliable,
firmly grounded, promising organization compared with other newly listed companies, and they have also exhibited a strong drive
toward customer-oriented operations and market share growth. Furthermore, Company F purchased an IT firm in 2016 and beganinternal creation of their own systems, which bolstered their growth potential significantly. In addition to lowering cost ratio, they
have improved freedom of added value in services, achieving major growth compared with their competitors. More recently, they
have established a software as a service (SaaS) model and made related growth-oriented moves such as releasing their systems forpurchase by outside customers, leading many to expect great progress from the company in coming years.
◦In contrast, their stock price has generally stayed low following their IPO. Reasons for this include (1) their low rating as a newcomerin the mature call-center industry, with a PER of 10× relative to the 11× to 18× ratios seen at other industry members; (2) distrust
regarding the intentions behind the parent–subsidiary pair listing of Company F at a time when the parent company’s listing was thetarget of growing criticism; and (3) concerns about the long-term risk of delisting and other potential problems due to Company F’s
market capitalization of ¥19.7 billion, which does not reach the ¥25.0 billion Prime Market standard.

3
Sharing anddiscussing
issuesCompany G(electric4

power)

Formulating
andimplementing
measures▪Engagement details◦During the IPO roadshow stage, Company F's business model was highly valuated for its promise in terms of growth potential andsocietal contributions. However, the company itself has not been sufficiently conscious of these appeal points, and they have failed
to sufficiently utilize them in information disclosure and other efforts. Moreover, it feels as if their stock price is being discounted
compared with standard prices. Therefore, Resona Asset Management told Company F that if they wish for any advice from an
investor's perspective, we would be willing to provide it.
◦In response, Company F said that they would like to consult with us regarding the direction of information disclosure, strategy
formation, and other measures and operations, to which we responded with engagements. We communicated which types ofchanges we think would be best for Company F to make while providing advice on and proposing solutions to the abovementioned
problems. We encouraged them to:(1) Widen their target to include society as a whole, in contrast to their current, relatively myopic focus on only their own industry
and customers;(2) Change up the playing field in order to expand the scale of their potential growth and foster more positive outside evaluationsof their company; and(3) Strengthen disclosure of information with high appeal.

▪Company F responses◦There are already signs that Company F is making changes to their general shareholders’ meeting call notices, financial results
briefings, and other documentation and procedures. Furthermore, they are expanding their scope focus, which previously centeredon their own organization’s relationships with customers, to include all types of stakeholders such as employees and wider society
itself. They are also implementing dividend increases based on logical explanations, and have exhibited willingness to engage indialogue with the stock market in relation to their corporate value. Moving forward, we expect that Company F’s continuingengagement will lead to further-accelerated growth and contribute to valuation improvements.

3
Sharing anddiscussing
issues3
Sharing anddiscussing
issues3First page inside the

Sharing anddiscussing
issuesCompany H(electric
power)

Company I(heavyindustry)

Company J(information
technology)

shareholders’ meetingcall noticeThis page used tocontain Company F’s
corporate philosophy
and content focused2

primarily on customer-

Setting andpresenting
issuesoriented action. Now,
it has been changed toreflect a focus on
wider society.

56

Resona Asset Management

S USTA INA BILITY R E POR T

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Company K(energy)

We have pursued continual engagements on multiple occasions with
Company G regarding measures aimed at carbon neutrality, power grid
maintenance amid electricity deregulation trends, and other sustainabilityrelated issues. We requested extensive dialogue with stakeholders and theinvestment market as a whole, as well as thoroughgoing information
disclosure and other such activities.
We also point out that the maintenance of the nuclear power value chain
could be a future business risk in light of issues related to the restart ofnuclear power plants and the management problems of some nuclear
power-related companies, and we encourage issuers to consider how to
respond and to publicize their measures as appropriate.
In regard to engagement milestones, Company G has completed“Sharing anddiscussing issues”in relation to information disclosure and continual dialogue,
and is nearing the“Formulating and implementing measures”phase.

We pointed out that information disclosure has been insufficient at Company
H in regard to engagement on green bond issuance.
We explained that, despite the important role of corporate bond issuance asa source of fund procurement for the company, they disclose only limited
information through their website and other common communication
mediums, and they do not disclose enough information regarding previously
issued green bonds. Upon hearing our request to rectify these shortcomings,
Company H shared our concerns throughout their organization and told us
they would deploy response measures at the earliest possible date.
In terms of engagement milestones, Company H is at the“Sharing anddiscussing issues on issues”phase.
We pursued engagement regarding Company I’s green bond issuance.
During engagement with the company coinciding with their issuance of SDG
Bonds last year, we explained that bond investors would like the same levelof information disclosure as is provided to equity investors. However, wefailed to see improvement in this area on the company’s part, so we made afollow-up request asking them once again to eliminate this informationprovision disparity.
During our latest meeting with Company I, we were told by finance and IR
division personnel in attendance that the company has shared the issues
throughout their organization, and that they intend to disclose the requested
information via their website and other suitable sources at the earliest
possible date.
In terms of engagement milestones, Company I is at the“Sharing anddiscussing issues on issues”phase.
We had previously requested that Company J engage in continual dialogue
with bond investors, and the company has responded by creating andfinalizing a policy for carrying out such engagements on a regular basis.
However, bond-related information disclosure via their website and othersources has been insufficient, particularly in regard to information on green
bonds and other SDG Bonds. When we pointed this out and requested
improvements, Company J said that they intend to discuss the matters with
relevant divisions and implement response measures as soon as possible.
In terms of engagement milestones, Company J is at the“Sharing anddiscussing issues on issues”phase.
We pursued engagement with Company K regarding their transition-bondissuance.
Because the transition plan they have disclosed only provides a rough outlineof the required information, we requested disclosure of the plan in greater
details, as well as KPIs and other such details, all of which are required forlong-term investing.
Company K shared these issues within their organization, and have told us
they will strive to include the requested information in their next mid-term
management plan (to be released the following fiscal year) while also making
preparations for public disclosure moving forward.
In terms of engagement milestones, Company K is at the“Setting andpresenting issues”phase.

Resona Asset Management

Theme:

Climate change
Sub-themes:
Strengthened
information disclosure
Continual dialogue

Theme:

Climate change
Sub-themes:
Strengthened
information disclosure

Theme:

Climate change
Sub-themes:
Strengthened
information disclosure

Theme:

Climate change
Sub-themes:
Strengthened
information disclosure
Continual dialogue

Theme:

Climate change
Sub-themes:
Strengthened
information disclosure

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Engagement
Report9Engagement
Report10［ Bo t t o m - u p e n ga g e m e n t ］

Passive investment(Japanese companies)

Efforts toward Japanese-company corporate governance improvements［ B ottom-up engagement ］

Passive investment(global companies ex. Japan)

Efforts toward corporate governance improvements

During engagement aimed at corporate governance improvements, Resona Asset Management sets multiple
themes for each target company based on the company’s specific circumstances and conditions. One exampleof past engagement activities based on said themes is described below.

Resona Asset Management conducted engagements based on individual themes for each investee

Common corporate-governance themes utilized by Resona Asset Management

Engagement case (Company M)

Governance◦Board of directors composition◦Board Diversity◦Board of directors effectiveness evaluation◦Outside-director independence◦Parent–subsidiary pair listing issues◦Voluntary committee establishment◦Succession◦Reductions in cross-shareholdings◦Skill matrix◦Discontinuance of takeover-defense measures◦Stock compensation linked with medium- and long-term results◦Director term-of-appointment shortening

Our action related to main themes
Action by engagement-targeted companies
Target company action cases◦ Resona Asset Management shares
identified problems at the company inquestion via engagement.
◦ Following dialogue and engagement, wemonitor said company’s action over theyears (see graph on right).
s◦ In addition to confirming said company’action, we revise engagement themes asnecessary in response to corporate
governance code revisions and othersuch occurrences.

2020/61402021/62022/6

122

120
80

71

60

37

40
20
0

46
22

Outside-director
increases

8

13

26
3 8

12

Share-based
Director termpayment
of-appointment
system introductions
shortenings

13

7 6

11

Takeover-defense Cross-shareholding
measurereductions
discontinuances

Company M is a multinational Internet and media corporation listed in South Africa that offers its services in more than
130 countries and regions. We pursued engagement with the company on independence of their auditing committee
members as well as their multi-class stock scheme.

Independence of audit committee members
The South African corporate governance code (King IV) requires the audit committee to be independent, yet nonindependent director sits on the audit committee for Company M. We have informed Company M that we have voted
against re-election of the non-indipendent candidate. Company M explained that:“The candidate has worked in various
executive positions throughout our group in the past. After served and retired from as the director on finance position, heelected as non-executive director. Due to the complex tax code of our operations, the candidate is a certified public
accountant and understands our business operations, which is why his role as an auditor is necessary.”We agreed upon
continual explanations should be provided by Company M to the shareholders.

Company M introduced their multi-class stock scheme in 1994, but with consideration for stockholder rights, we consider
that scheme to be undesirable. We inquired about the company’s standpoint of this scheme. Company M told us that thiswas a core component of their business model as it pertains to inter-company collaborations, acquisitions and other areas.
The company also explained that it is an important factor in ensuring management rights. Furthermore, even their
European business performance exceeds South African business, the South African government authorization is required inorder to change their country of registry. Therefore, they intend to continue with multi-class stock scheme.
We understand that Company M has unique circumstances which must be taken into full consideration, but we still believethat their current scheme is not acceptable from a shareholder’s perspective, so we will continue engagement.

Engagement case (Company N)◦ Company action has continued for three years’time, and the company shows a general trend toward improvement.
◦ Measures related to cross-shareholding reductions have been particularly numerous.
◦	Unfortunately, The number of companies discontinuing takeover-defense measures have been decreasing year by year, which
has negatively influenced overall results.

Individual-company engagement example (Company L)
Company L has more than 100 subsidiaries within its corporate group and focuses most of its business activities on chemicals. Onefourth of is total sales are from outside of Japan. Resona Asset Management pursued engagement with Company L based on multiple
governance themes, including director composition and cross-shareholdings.
Theme(s)below.

Continuation of the multi-class stock scheme

100

Target company action (broad summary)

Periodcompany in order to activate governance improvements. Some examples of engagements are described

Engagement toward governance improvements

2019

・Outside-director
increases
・Effectivenessevaluations
・Performance-linked
compensation

・Requested an increase in the number of outside directors
・Requested release of information clarifying PDCA cycle implementation in regard toboard-of-directors evaluation results
・Requested disclosure of information that provides easy-to-understand correlations
between KPI achievement levels and performance-linked compensation

2020–2021

・Reductions incross-shareholdings

・Requested an increase in the number of outside directors, and also requested
reductions in cross-shareholdings

Company N is a multinational enterprise from the United States, formed through the merger of two corporations. Our
engagement with the company focused around three topics: multi-class stock scheme continuation, concurrent outsidedirector appointments, and diversity.

Continuation of the multi-class stock scheme
This scheme has been in place since the 2013 management buyout (MBO). Company N is aware of concerns andcriticisms from its stakeholders. We understood the company’s explanations. But because their current scheme deprives
shareholder rights of common stocks, we plan to continue the engagement.

Overboarded director appointment
We voted against director appointment because, the candidate had overboarding director positions, and could prevent
them from fulfilling their duties. After the AGM we have engaged with Company N on the non-executive director candidate.
Explanation provided from Company N:“This director candidate has been involved with the company operations as an investment banker since the 2013 MBO,
and has served as non-executive director since that time. He has wide-ranging knowledge of the industry and has showncommitment to management operations for the last seven years. Their concurrent appointments will not interfere in theirability to make management decisions.”However, the candidate holds director position to seven different companies
including Company N.
Furthermore, the company N’s board are being asked to take on increasing responsibilities in response to new regulations
and rules that have come into effect, and we are concerned about whether he will have the necessary time to sufficiently
deal with related issues

Diversity2022

58

・Female director
increases
・Reductions incross-shareholdings

Resona Asset Management

・Outside board members were increased, resulting in 5 of 12 directors being
independent outside directors
・We confirmed a ¥44 billion reduction in cross-shareholdings・Cross-shareholding
reductions

S USTA INA BILITY R E POR T

2022 / 2023

Company N has set a target of increasing the percentage of women in senior management positions to 40 percent by theyear 2030. As of 2021, it is at 25 percent. In regard to Company N’s target, they understand that just pursuing it based on
numbers alone is a superficial approach, and they place high importance on elimination of disparities and improvements incommunication between employees and management because it bolsters employee retainment rates.
Resona Asset Management

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Responsible Investment Section

─ Responsible Investment Section ─
Chapter2

Engagements ofResona Asset Management

Chapter

Chapter

Chapter

Chapter

Chapter

1

2

3

4

5

6

Index-related engagement

Direction of future engagements

Indices served as a benchmark for passive investments need to be market representative, transparent,

Based on materiality analyses, global ESG (environmental, social, and corporate governance) issue
considerations, Resona Asset Management intends to pursue the three main engagements—described on
page 38—based on the following approaches.

replicable, and functional. Aiming to be highly reliable indices from long-term investment perspective,
Resona Asset Management proactively exchanges opinions with index providers.

1

Index governanceIndex providers are responsible for keeping indices referred by passive funds the best possible
ones for investors and are required to establish a robust governance framework. In pursuit ofthese ends and the goal of sound, sustained development for all indices, index providers retain
committees for purposes of hearing the opinions of asset managers and other market

participants, carry out consultations as a means of better understanding market participants’ideas, and pursue other such measures in order to strengthen governance frameworks.

Resona Asset Management is a member of the Index Advisory Panel under JPX Market Innovation& Research (JPXI), the operating organization for TOPIX (which is Japan’s leading stockbenchmark). Also, we are a member of the FTSE Asia Pacific Regional Fixed Income Advisory

Committee under FTSE Russell, the operator of the FTSE World Government Bond Index. Throughthese memberships, we strive to promote further index development.

ESG index monitoring
Resona Asset Management invests in both Japanese and global equity funds that utilize ESG(environmental, social, and corporate governance) indices as benchmarks. During ESG index

selection, and even after we began investing in an index, we check adequateness of the index
regularly at a meeting with the relevant provider. As for ESG indices, we check the following
aspects as well, addition to the characteristics generally required such as market
representativeness, transparency, replicability, and functionality.
Main category

Subcategory

Data accuracy

Quality assessments

Monitoring

Human resources andframeworks

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Information disclosure

Governance

Information barriers

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In regard to the“E”(environmental) category of ESG issues, we are aware of not only climate change issues,
but also problems related to decreasing biodiversity, depletion and loss of various natural resources
including water resources, and other issues that have been identified as global risk factors. Furthermore, we
are aware of the interrelationships among these. Resona Asset Management participates in a wide range ofinternational initiatives related to climate change, biodiversity, circular economies.
Moving forward, we intend to step up efforts even further in relation to the abovementioned global risk
factors. As for the“S”(social) of ESG issues, we understand that achieving labor-practice improvements,
addressing human rights issues and pursuing other such measures are vital to securing sufficient workforces
and minimizing company reputational risk.
Biodiversity◦Acquisition of company data
◦Verification of accuracy◦ESG score verification and evaluation◦Introduction of new data into ESG evaluations◦Organizational structure (ESG division)◦Securing and training of dedicated personnel◦Disclosure of index calculation methods◦Consultation◦Organizational structure◦Separation of information

Engagements on the sustainable paper and wood procurement

In light of threats to biodiversity and other problems known to be caused by paper and wood procurement practices, we are
pursuing engagements with 20 major investee companies whose supply chains handle large quantities of said materials in an effort
to promote changeovers to purchasing of Forest Stewardship Council (FSC) certified products in place of current products.

Biodiversity

Participation in Nature Action 100

During the 15th session of the Conference of the Parties (COP 15) in relation to the Convention on Biological Diversity,
participating members adopted the Kunming-Montreal Global Biodiversity Framework (GBF), which includes a pledge totake urgent action to halt and reverse biodiversity loss to put nature on a path to recovery by 2030. Following this adoption,
the Conference established the Nature Action 100 initiative, in which Resona Asset Management is a planned. Thisinitiative focuses on companies in important sectors related to the goals of the GBF, and specifies corporate action
aimed at protecting and revitalizing natural environments while also prescribing progress monitoring in relation to key
indicators.

Natural capital

Participation in the Ceres Water Finance Initiative (VWFI)The VWFI views water resources as a factor tied to financial risk, and demands that companies whose operations have major
impacts on water resources take action necessary to preserve those resources. Ceres, the administrative organization behind
this initiative, has established the“Corporate Expectations for Valuing Water,”which express expectations of companies basedon six viewpoints. These include action that contributes to water quality preservation and ecosystem protection, monitoring ofboards of directors, and others.

Human rights
Sub-items

2022 / 2023

Materiality engagement (top-down)

Participation in PRI Advance

PRI“Advance”is an initiative established by The Principles for Responsible Investment (The PRI), a network that calls forsolutions in the areas of human rights and the society. Resona Asset Management participates in this initiative as a lead
investor to 1 of the 40 target companies.

2

Information-disclosure engagement

From the perspectives of corporations, disclosure of non-financial information is becoming an increasingly
important part of ensuring higher corporate value. Moving forward, We will continue utilizing quantitativeevaluation models based on text-mining technologies and other such approaches to pursue engagements
intended to promote better information disclosure via integrated reports as well as information-quality
improvements.
Additionally, with consideration for discussions related to improved future information disclosure fromcompanies demanded by the TCFD, we will delve deeper into information-disclosure engagement withthe aim of further bolstering corporate value at investee companies.
3

Bottom-up engagement

Based on unique investment philosophies, each investment team at Resona Asset Management carriesout bottom-up engagement by considering the specific conditions, circumstances and characteristics ofeach investee company, setting themes accordingly, and then pursuing engagements based on said
themes.
Moving forward, all of our teams will carry out proactive and sustained engagements based on themes
related to investee corporate-value improvements, bond-issuer future risk avoidance and mitigation, andsimilar in pursuit of medium- and long-term growth for the assets under management. Moreover, we willcontinue to identify ESG-related issues, which affect our portfolio performance, and revise engagements
themes as necessary.
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The proxy voting process

Proxy voting authorizer: President(General Manager of the
Responsible Investment Division)

As an institutional investor, Resona Asset Management assumes key responsibility for facilitating
corporate governance improvements of its investee companies. Accordingly, the corporate activities of
our investee companies have a significant impact on the environment and society and in turn, we
recognize that those changes also affect our investment results.
Consequently, we have established the Articles of Proxy Voting to conduct the appropriate proxyvoting operation to serve in the best interests of our customers. We have established several sets ofguidelines based on the Articles, such as:(i) the Fundamental Concepts on Proxy Voting;(ii) the Global Governance Principles; and(iii) the Proxy Voting Guidelines.
(i) shows the basic guidelines to appropriately conduct proxy voting operations, and (ii) is the
Principles stipulating Good Governance standards across listed equities.

❹

Responsible Investment
Committee(secretariat: Responsible
Investment Division)

Monitoring:
Investment Risk
Administration
Division*Monitor the proxyvoting process*Conﬁrm theappropriateness ofproxy voting byparent companies,
etc.

Fundamental Concepts on Proxy Voting

12
3

Proxy voting operation on our equity holdings is used as a means of fulfilling our fiduciary duties
to enhance shareholder value, solely for the interest of our clients.
Proxy voting will not be used for supporting particular political or social campaigns.
We conduct proxy voting on our holdings based on public information, i.e., information
and research outcomes which are gathered through public information.

We strive to raise shareholder value over the long term when conducting proxy voting. We consider the response to
the social responsibility, such as the issuers’governance structure, legal compliance, corporate ethics, societal
harmony and environmental initiatives.

❷

❶

❸

Proxy voting deliberation:
Responsible Investment Division*Veriﬁes the appropriateness of proxyvoting from a third-party perspective

3

Resona Asset Management’s
Proxy Voting

Chapter

Responsible Investment
Veriﬁcation Committee Meeting

Chapter

Chapter

Proxy voting
execution:
Custodians❺

Global Governance Principles▪ Board responsibilities
・The board should act in the interests of company’s shareholders by promoting sustainable growth of thecompany from a long-term perspective. This involves assuming accountability to shareholders and otherstakeholders, and giving consideration to a wide range of stakeholders integrating ESG factors.
・The board should supervise management decisions by the executive managers.
・The board should be sufficiently independent from management (and significant shareholders) to ensure that
it is able and motivated to effectively supervise management’s performance for the benefit of all shareholders,
including in setting and monitoring the execution of corporate strategy, with appropriate use of shareholder
capital, and in setting and monitoring executive compensation programs that support that strategy.
▪ Board composition
・The board should preferably have no less than a majority of independent non-executive directors.
・The board should preferably have a sufficiently diverse mix of directors to ensure effective supervision of businessactivities of management.
▪ Information disclosure (financial & non-financial), and ensuring reliability
・The board ensures reliability of financial and non-financial information disclosed by the company, and accordingly
assumes oversight responsibility for providing such information to the respective stakeholders.
・The board should disclose highly reliable information in a timely manner so that shareholders are able to fully
exercise their voting rights upon having sufficiently understood content of proposals, and so that shareholders
are able to effectively conduct engagement on issues which may affect their interest.
▪ Shareholder rights
・Rights of all shareholders should be equal and a shareholder’s voting rights should be directly linked to theshareholder’s economic stake.
・The board should ensure that shareholders have voting rights on key decisions and transactions of the company.
Whereas these governance principles constitute recommendations, as such companies are to draw up
voting guidelines for Japanese and global equities that are aligned with their business realities, in light ofvarying laws, regulations, business practices and corporate governance codes of the respective countries.

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Establishment of the Proxy Voting Guidelines❶ ‌The Responsible Investment Division drafts the Proxy Voting Guidelines. The draft Guidelines are submitted to
the Responsible Investment Committee meeting for discussion.
❷ ‌The President approves to adopt the Proxy Voting Guidelines, based on the discussion at the Responsible
Investment Committee meeting.
Deliberations on proposal❸ ‌The Responsible Investment Division prepares “proxy voting details” materials based on the Proxy Voting
Guidelines. Any proposal case for which proxy voting details cannot be determined by the Proxy Voting
Guidelines is submitted to the Responsible Investment Committee meeting for discussion.
❹ ‌The President approves the proxy voting decisions based on the Responsible Investment Committee’sdiscussions. (The General Manager of the Responsible Investment Division approves regular proxy voting
decisions.)
Voting instructions❺ ‌The Responsible Investment Division sends voting instructions to the custodian banks.

* Management on conflict of interests
Those carrying out proxy voting pertaining to equities of Resona Holdings do so upon seeking advice
from a third-party proxy advisor (ISS) pursuant to the Proxy Voting Guidelines of Resona AssetManagement. The proxy voting details are verified by the Investment Risk Administration Division on
periodical basis;
reported at the Responsible Investment Committee meeting; andverified at the Responsible Investment Verification Committee meeting.
The Investment Verification Committee is independent from the proxy voting process.

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Establishing and revising proxy voting guidelines
Establishment of and revisions to proxy voting guidelines are carried out by the Compliance andcarried out once a year. The guidelines may be revised with consideration taken for legislativeon proxy voting guidelines at Resona Asset Management, please visit the following webpage.
on quarterly basis at our website.
Proxy voting guidelines: ▶

https://www.resona-am.co.jp/investors/giketuken.html▪Major revisions to proxy voting guidelines (applicable for general shareholders’meetings from
Before revisions

Board composition

Directorcompensation,
retirement
allowance payment

Takeover-defense
measuresDirector
appointment

January 2022 onward)
Revised version

Reason for revisions

We will vote against the representative director’s appointment if;
the board composition is not at least one-third independent, and no rational andsufficiently convincing argument is provided.

Following revision of the Japan Corporate
Governance Code in June 2021, there has
been an increasing trend toward outside
director appointment even at companies withboards of auditors.
Therefore, we have made this revision topromote higher independence on board
composition.

・We will vote against retirement allowance payments to outside directors and audit
committee members.
・We will vote against retirement allowance payment if it fits to one of the following;
negative recurring profit or net loss for three consecutive year, or, in case of insolvency.
・We will vote against retirement allowance payment if;
individual payment amounts and/or the total retirement payment is not disclosed.

As a general rule, we will vote against payment of retirement allowance.

Taking consideration of corporate governance,
retirement allowances are problematic because
they tend to increase in amount relative tolength of service, which is a practice that does
not lead to improved corporate value over the
medium and long term.
Therefore, we have discarded our previous
guidelines for this category and as a general rule,
we will vote against retirement allowancepayments.

・We vote against a proposal of anti-takeover measures that does not meet any one of thefollowing standards:-The board composition is majority independent.
-Measure deployment requirements and conditions are clearly defined (only in the case of a
Supreme Court Class 4 two-step coercive buyout)-Others as necessary
・We will vote against introduction and continuation of the takeover-defense measure if
The companies do not exhibit efficient management operations (an ROE of less than 5% for
3 years running), the company has excessive net cash (comprising 25% or more of total
assets), or the company exhibits an ROE of 25% or less in its lowest-performing businesscategory for 3 years running.
・We will vote against director reappointment if continuation of takeover-defense measures isdecided upon by the board without approval at the AGM, and the above conditions are not met.

As a general rule, we will vote against the introduction and continuation of priorwarning-type takeovers. However, we may consider to support the implementation/
continuation if the board composition is majority independent by outside directors,
and is able to provide a rational and sufficiently convincing argument for measure
implementation/continuation.
Determinations on the measure implementation/continuation will be made on acase-by-case basis following thoroughgoing and detailed examination of measuredetails and comparisons of both the acquirer and the target/investee’s corporate
value improvement plans.
As a general rule, we will vote against director reappointment if;
the continuation of takeover-defense measures is decided by the board without
receiving approval at the AGM.

If these measures are utilized primarily for
self-protection and -preservation by corporate
management, then minority investor interests
may suffer. Therefore, we have made theserevisions to clarify our general policy of
opposing prior-warning-type takeover defense
measures, and discarded our previous
guidelines.

We will vote against the representative director’s appointment if;
the board composition is not at least one-third independent, and no rational and sufficiently
convincing argument is provided. However, in the case of companies with boards of auditors,
we will support representative director’s appointment if;
the company has appointed two independent outside directors, and,is 25 percent independent.

▪Major revisions to proxy voting guidelines (applicable for general shareholders’meetings

Board composition

Risk Management Committee following the necessary discussions. Revision on proxy voting guidelines areamendments, Corporate Governance Code, and companies’governance conditions. For more information
Furthermore, information on voting for each investee company, along with relevant reasons are disclosed

from January 2023 onward)
We will vote against the representative director if;
the company is listed in the Prime Market, and we are unable to confirm the presenceof a female member in the board, audit or nominating committee.
(Confirmation of female members will be made via the previous fiscal year’s financial
statement, the“Yuho.”) However, we will not vote against if;
a rational and sufficiently convincing argument is provided on the company’s policies
and measures on gender-related issues, or, if we are able to confirm the presence of afemale member via Annual General Meeting (AGM) materials,－

Unless the company provides a rational and sufficiently convincing argument regarding
their cross-shareholding reductions policy, and exhibits a history of reductions.
we will vote against representative director if;
the company has a total cross-shareholdings amount* equivalent to 20% or more of
consolidated total net assets, and, does not exhibit a certain degree of capitalefficiency (ROE of 8% or more), (The percentage of cross-shareholdings relative toconsolidated total net assets will be calculated based on the previous fiscal year’sfinancial statement.
However, if information on cross-shareholdings at the latest quarter’s end is included
as reference materials along with a shareholders’meeting call notice, we will utilize
those figures instead.)－

We added these new guidelines in reflectionof the need for greater gender diversity.

In the past, we have already pursued
dialogue with regard to companies’
cross-shareholdings.
However, we determined that greater efforts
toward cross-shareholding reductions werenecessary, and thus established these new
guidelines.

* This refers to the balance sheet total for“invested equities held for purposes other than pure investing.”

In addition to the revisions described above, we have made additional revisions to clarify definitions and content,

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and added and revised explanatory notes. Please view the website mentioned above for further details on revisions.

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Resona Asset Management’s Proxy Voting

Proxy voting results for Japanese equities (from July 2021 to June 2022)

Proxy voting results for global equities ex. Japan (from July 2021 to June 2022)

The following provides details on Resona’s proxy voting results for Japanese equities. We basicallydecide how to vote on proposals based on details released in convocation notices and other suchdisclosures. However, there are also cases where we weigh the pros and cons of proposals after
having gained an extensive mutual understanding of the matter at hand through engagements withthe respective company.

The following provides details on Resona’s proxy voting results for global equities ex. Japan. We
basically decide how to vote on proposals based on details released in convocation notices andother such disclosures. However, there are also cases where we weigh the pros and cons ofproposals after having gained an extensive mutual understanding of the matter at hand throughengagements with the respective company.

Opposition ratio

Management proposals(Previous year)

10.4％（11.7％）

Support ratio(Previous year)

2.0％

Shareholder proposals（5.7%）

Total number of proposals

23,716
Total number of proposals

Voted against

Opposition ratio

2,474
Voted for293

6

We thoroughly considered the notion of whether or not shareholder proposals would contribute to enhancing shareholder value over the medium tolong term, and whether or not they would better protect the rights of shareholders. Meanwhile, our guidelines on proxy voting placed consideration
particularly on the notion of whether or not respective companies meet our standards in terms of their governance frameworks and financial practices.

Corporate bodies

Opposition ratio(Previous year)

Appointment and dismissal of
directors
Appointment and dismissal of
corporate auditors

11.2％ （11.7%）
15.0％ （14.8%）

Appointment and dismissal of
accounting auditors

0.0％ （0.0%）

Director compensation

Opposition ratio(Previous year)

10.0％ （13.5%）

Director compensation (*1)

Total number of
proposals

17,4491,370
73
Total number of
proposals

964

Voted against director nominees if issues arose on:
appropriateness of board compositions (independence ofoutside directors); corporate earnings and capitalefficiency.

We deliberated on propriety regarding independence ofoutside corporate auditors, etc., and if we concluded that
there were issues, we voted against. When insufficient
explanations were given for reducing corporate auditors
overall, or outside corporate auditors, we voted against
appointments of representative directors.

Voted against payment of bonuses and granting of stock
options to outside directors, corporate auditors, etc.

Voted in favor of stock compensation to serve as fixed
remuneration if it is provided in a manner whereby it does

Management proposals

Shareholder proposals

99.1％ （80.6%）

Retirement bonus payments
for retiring board members

Capital policy

Opposition ratio(Previous year)

1.9％ （2.0%）
6.5％ （0.0%）
100.0％（100.0%）
0.0％ （2.3%）

Appropriation of surplus

Restructuring (*2)
Introduction, renewal orabolition of anti-takeovermeasures
Other proposals related tocapital policy (*3)

Articles of incorporation
Articles of incorporation

Other proposals
Other proposals

Opposition ratio(Previous year)

0.8％ （2.0%）
Opposition ratio(Previous year)

50.0％ （33.3%）

110
Total number of
proposals

1,448
46
62

Voted against retirement bonus payments to retiringboard members.

Corporate bodies

In principle, we voted against the introduction/continuationof prior warning-based anti-takeover measures.

72
Total number of
proposals

2,112
Total number of
proposals

10*1. Proposals on compensation policy, stock options plans, adoption and amendments to performance-linked compensation, and bonus plans.
*2. Proposals on mergers, transfer of business, equity swaps, equity transfers and company splits.
*3. Proposals on share buybacks, reduction on statutory reserves, third-party allotment, capital reduction, reverse stock splits and issuance of classified stock.

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Total number of proposals

12.8％（10.0％）

Support ratio(Previous year)

78.6％

37,405
Total number of proposals（85.0%）

Opposition ratio(Previous year)

Total number of
proposals

Appointment and dismissal of
directors

9.3％ （6.7%）

13,393

Appointment and dismissal of
corporate auditors

6.8％ （4.0%）559

Appointment and dismissal of
accounting auditors

0.7％ （1.0%）

2,148

Director compensation

Opposition ratio(Previous year)

Total number of
proposals

Director compensation (*1)

23.7％ （26.4%）

4,246

Retirement bonus payments
for retiring board members

0.0％ （0.0%）0Capital policy
We deliberated on propriety regarding standards forshareholder return policies and retained earnings, etc., andif we concluded that there were issues, we voted against.
Voted against director reappointment where dividend
payments are decided at the board meetings (instead ofannual shareholders meetings).

(Previous year)

1,596

Voted against

4,772
Voted for

1,254

Consider whether
shareholders would benefit from information disclosure;
information disclosure would provide shareholders with more meaningful rights;
information disclosure would contribute to enhancing shareholder value over the medium to long term; andinformation disclosure would support shareholders in evaluating the companies.

not affect independence.

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ChapterAppropriation of surplus

Restructuring (*2)
Introduction, renewal orabolition of anti-takeovermeasures
Other proposals related tocapital policy (*3)

Articles of incorporation
Articles of incorporation

Other proposals
Other proposals

Opposition ratio(Previous year)

0.6％ （0.7%）
29.9％ （18.4%）
13.3％ （14.4%）
11.0％ （10.2%）
Opposition ratio(Previous year)

8.7％ （7.2%）
Opposition ratio(Previous year)

14.2％ （7.8%）

Determine the propriety and appropriateness of board
and committee composition in consideration of the legal
system and corporate governance code of each country.
Consider candidates’career, qualifications, andmanagement performance.

Determine the independence of outside directors.

We expect director compensation to be well-devised to:・Facilitate sustainable growth of corporate value,・Designed to be linked to both the company-level andindividual performance, and・Reviewed at the compensation committee comprised ofindependent outside directors.

Total number of
proposals

1,395

Consider the validity of the dividend policy and the levelof retained earnings.

2,839

Consider the validity of the capital policy and its impact
on shareholder value.

98

Consider whether aims and specifics of proposals would
contribute to enhancing shareholder value.

4,986
Total number of
proposals

929

Take into account effects of proposals on shareholder
value upon having thoroughly considered propriety ofreasons for amendment.

Total number of
proposals

6,812

Consider whether proposals are appropriate anddeliberated on effects of proposals on stock value.

*1. Proposals on compensation policy, stock options plans, adoption and amendments to performance-linked compensation, and bonus plans.
*2. Proposals on mergers, transfer of business, equity swaps, equity transfers and company splits.
*3. Proposals on share buybacks, reduction on statutory reserves, third-party allotment, capital reduction, reverse stock splits and issuance of classified stock.

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Examples of qualitative-deliberation voting
At Resona Asset Management, we exercise our voting rights based on the Resona Global
Governance Principles and our voting guidelines. The following are two voting case studies that
required qualitative considerations and decisions.
Governance framework

Votingguidelines

Considerations
when determining
our vote

Shareholder value improvement

Shareholder rights protection

In response to shareholder proposals, we take thorough consideration of whether the proposal
sufficiently contributes to shareholder value improvement before making a decision.
Through our voting guidelines, we determine whether the company in question fulfills ourgovernance framework requirements, fiscal standards, and other requirements before finalizing our decision.
Moreover, because shareholder proposals pertain to a diverse array of items in the social andenvironmental fields, we determine whether said proposals contribute to medium- and long-term
shareholder value improvements and more effective protection of shareholder rights.
For proposed amendments to articles of incorporation, we may consider all factors mentioned
above as well as the suitability of their inclusion in articles of incorporation, and then decide
whether to vote for the proposal.
Example: Promotion of greater information disclosure on climate change risks◦ Whether the proposal contributes to improved corporate value◦ Whether the proposed amendment(s) to the articles of incorporation create any potential
hindrance to execution of business affairs, detract from corporate value, or have any other suchnegative consequence

Statusoverview for
the twoshareholder
proposals

Backgroundbehind thedecision

An ordinary
generalmeeting ofshareholders
was held in
June 2022.

Environmental NGO submits shareholder proposal.
 esona Asset Management met to discuss ideas and opinions with theRenvironmental NGO and came to understand the following background information.
The shareholder proposals to Company O were made for the following two reasons:(1) Company O loans and underwritings for the coal industry had increased throughout 2020(according to environmental NGO research)(2) Company O’s climate change policy was weaker than the policies of other companies in thesame industry
・Regarding the case 1 proposal, a similar level of information disclosure had been requested via
a similar proposal last year to Company P, which is a corporation in the same industry as
Company O・Regarding the case 2 proposal, more detailed information disclosure on par with that made ofoverseas financial institutions was requested in accordance with the IEA Scenario
Company O released its“Opinion of the Board of Directors on Shareholder◦ Mid-May 2022:
Proposals,”which is a document expressing the company’s rejection of said
shareholder proposals.

and disclosing short- and medium-term greenhouse gas emissions reduction targets
1 Settingconsistent with the goals of the Paris Agreement
Shareholder proposal:

Proposal

The following clause shall be added to the Articles of Incorporation:
Chapter X: Shift to a Decarbonized Society
Article Y:	Setting and disclosing short- and medium-term GHG emissions reduction targets consistent
with the goals of the Paris Agreement
・ To promote the long-term success of the Company, given the risks and opportunities
associated with climate change, and in accordance with the Company’s commitment to theParis Agreement on climate change, the Company shall set and disclose a business plan withshort-term and mid-term greenhouse gas emissions reduction targets across its overall
investment and loan portfolio aligned with Article 2.1(a) of the Paris Agreement (the“Paris goals”).
・ The Company shall report on its progress against such targets in its annual reporting.

Standpointand decision

At that time, Company O’s plan for mitigating climate change wassomewhat lacking in several of its solutions when compared withthe content of the Paris Agreement.
Therefore, it has been determined that disclosure in regard to said
factors would help improve Company O’s corporate value.

Shareholder
proposal:

Voted For

Overview of discussion points and decision reasoning:This proposal was similar to the one presented to Company P last year, did not represent any
extraordinary request dissimilar to those made of other global businesses, and did not create any
obstacle to the execution of business affairs.

2 Financing consistent with the IEA’s Net Zero Emissions Scenario, etc.
Shareholder proposal:

Partial amendments to the Articles of Incorporation

Proposal

68

In response, Company O
announced that they plan
to reduce greenhouse gas
emissions to net-zero for allof their investment andlending portfolios by 2050,
and that they are preparing
to issue an action plan
describing specificmeasures for theircorporate group as a wholeover the short-to-medium
term of about three years.

Resona Asset Management held a meeting with Company O that same day.

Partial amendments to the Articles of Incorporation

Case

An environmental NGO explained toCompany O that their current policies
and business activities are resulting in
expansions in fossil fuel supply
networks and fail to conform with the
IEA Net Zero Emissions by 2050
Scenario and the Paris Agreement.
Because the NGO was not able toachieve required information
disclosure from Company O on theseissues through standard engagement
alone, the NGO submitted a joint
shareholder proposal.

◦ April 2022:◦ Early May 2022:

Example of qualitative-deliberation voting ▶ (Company O)

Case

Company O has
continued dialogue
with domestic andinternational NGOs
and beenrequested stronger
climate change
countermeasures
for several years, aswell as otherJapanesecompanies.

The following clause shall be added to the Articles of Incorporation:
Chapter X: Shift to Decarbonized Society
Financing consistent with the IEA’s Net Zero Emissions Scenario, etc.
Article Y:

Resona Asset Management

・ Acknowledging the Company’s support for the goal of net-zero emissions by 2050, and inaccordance with both the Environmental Program Finance Initiative (UNEP FI)
recommendations to the G20 Sustainable Finance Working Group and the International
Energy Agency (IEA)’
s Net Zero Emissions by 2050 Scenario, the Company shall set anddisclose proactive measures to ensure the proceeds of the Company’s lending andunderwriting are not used for the expansion of fossil fuel supply or associated infrastructure.

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Standpointand decision

The establishment of new important-information disclosure
requirements and other requirements in regard to investment
plans, prerequisites for said plans, and other foundational
information used for management decisions, which affect thecase-by-case execution of business affairs, would create obstacles
to dynamic, rapid business-operation changes, policy
establishments and amendments, and other responses to changes
that occur within the management environment.
In turn, these obstacles might lead to the loss of corporate value.

Resona Asset Management

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Shareholder
proposal:

Voted
Against2022 / 2023

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ESG Integration at
Resona Asset Management( i ) ESG integration on active equity investment

We will utilize“Resona ESG assessments”into company research and portfolio construction.

( ii ) ESG integration on active fixed income investment

ESG integration to fixed income is conducted based on“Resona ESG assessments”from credit analysis
standpoint.“Resona ESG assessments”is considered from the long term credit perspective if the issuers.
This is because fixed income’s downside risk exceeds the upside potential, and that the investors should beaware of the credit worthiness of the issuers until its maturity.

Resona Asset Management views ESG (environmental, social, and corporate governance) integration as avital element for achieving investment performance over the medium and long term. ESG integrationentails non-financial information analyses and assessments for equity and fixed income-issuers in regard
to ESG factors as part of active equity and fixed income investing operations, with the aim of facilitating
suitable investment decisions and actions.
Based on this approach, we have been a signatory to The PRI since 2008, and we carry out ESG
assessments for the abovementioned organizations by asset class, investment strategy. These are part ofcontinual efforts to realize ESG integration that is optimal in terms of investment performance.
In recent years, many corporations have taken a more proactive approach to information disclosure,
resulting in a much wider range of non-financial information becoming available.
As follows, much more sophisticated knowledge and skills are now required to successfully conduct
analyses and assessment on ESG information. In response to these trends, Resona Asset Management isstriving to realize even more advanced ESG integration for purposes of bolstering investment performance.
To this end, we have been revising our measures on a Group-wide scale, and have established our ESG
Integration Policy and Exclusion Policy for Specific Weapons Manufacturers.
Starting in 2023, we are pursuing new measures for ESG integration with these policies.

At Resona Asset Management, we will pursue further sophistication in ESG integration with a particular focus on
the following measures:
1. ESG database improvements and greater detail in systematic quantitative evaluations
2. Strengthening knowledge for ESG analysts and knowledge management operations
3. Further improvements on transparency and clarity to ESG integration process
4. Establishment and strengthening of systems to monitor ESG integration▪Information disclosure on ESG integration approach
We will make thorough and clear explanations to customers on Resona Asset Management’s ESG integration
approach and methods. In addition, we carry out suitable information disclosure through our sustainability reports.
* For more information on the ESG Integration Policy, please visit the following webpage:https://www.resona-am.co.jp/about/integration.html

Overview of our ESG Integration Policy

Overview of our Exclusion Policy on Specific Weapons Manufacturers▪Objective▪Objective

We aim to preserve benefit for our clients’assets and to expand growth of the portfolio companies on mid to longterm perspective by taking following measures.
Understanding the downside risk and the upside potential on the ESG context of the investee companies.
Integrating ESG assessments into the potential investment outcome, portfolio construction, and risk management.

We prohibit any investment to the company that develops, manufactures, and/or is otherwise involved in any way
with weapons of mass destruction (nuclear weapons, chemical weapons, biological weapons), antipersonnel mines,
cluster munitions, and/or any other inhumane weapons.
This is because we deem it inappropriate to invest such company as an institutional investor,▪Creation of organizational frameworks▪Policy summary

We will establish the organizational frameworks with the appropriate skill sets of human capital and training, sothat we will be able to conduct engagements with investee companies. Also, we will establish a centralized ESG
database for ESG assessments on investee companies to effectively and efficiently conduct engagements. We will
also integrate ESG assessments and database into engagements with the investee companies.

As a general rule, we prohibit investment in any company that develops, manufactures, and/or is otherwise
involved in any way with weapons of mass destruction (nuclear weapons, chemical weapons, biological weapons),
antipersonnel mines, cluster munitions, and/or any other inhumane weapon type.

▪Exclusion list of weapons and companies▪Process(1) ESG assessments
We will utilize our proprietary“Resona ESG Ratings approach,”which provides both quantitative and qualitative
assessments to investable universe for listed equity and fixed income. Quantitative assessment entails identificationof ESG factors based on assessment indicators—with consideration taken for material factors and others—andassessing quantitative ESG scores based on a proprietary methodology. ESG assessment ratings are given to each
investable company by the following process.
ESG analysts to conduct qualitative analyses on top of the quantitative score by integrating the input from thecompany analysts.

(2) Integration of ESG assessments into investment decisions“Resona ESG assessments”will be integrated into investment decisions based on the asset class andinvestment strategies. For companies that fail to meet the minimum standards of“Resona ESG
Assessments,”these equities are generally uninvestable for all the active investment products.
Engagements and proxy voting (voting against director election) should be used as an escalation tactics
for exceptional cases to be held in the investment portfolio.

70▪Measures toward sophistication of ESG integration

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We prohibit investment in any company that develops, manufactures, and/or is otherwise involved in any way withany of the following five weapon types: nuclear weapons, chemical weapons, biological weapons, cluster munitions
and antipersonnel mines. However, any company which operates in a signatory nation to the Treaty on the
Non-Proliferation of Nuclear Weapons, which possesses nuclear weapons and is exempted from the exclusion policy.
Countries possessing nuclear weapons include the United States, France, the United Kingdom, China and Russia.
Note that involvement with the abovementioned weapons may include development, manufacturing, sales,
maintenance, modifications/improvements, transport, experimentation, testing, related-facility operation, andweapon-use training drills.

▪Applicable assets
As a general rule, these stipulations and rules apply to all invested assets. However, the exclusion policy may not
apply in the case of passive investment or investments according to the individual-customer guidelines.

* For more information on the Investment Exclusion Policy for Specific Weapons Manufacturers, please visit the following webpage:https://www.resona-am.co.jp/about/integration.html

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ESG Integration at
Resona Asset Management

Chapter

Chapter

Chapter

Chapter

Chapter

Chapter

1

2

3

4

5

6

Resona ESG Ratings

ESG integration on equity/active investment

The Resona ESG Evaluation process

Our approach to ESG integration

The Resona ESG Ratings approach is designed to provide an understanding of ESG (environmental,social, and corporate governance) related risks and opportunities at investment-targeted companies,
based on unified guidelines and in a manner that transcends the bounds of asset class, investment
strategy and other such individual considerations. To achieve this, Resona ESG Ratings integratequalitative assessments into the standard quantitative ESG evaluation approach.

When carrying out long-term stock investing operations, we consider an understanding of ESG(environmental, social and corporate governance) related risks and opportunities to be a vital
part of investment decisions. With active investing in particular, which seeks out high returns
based on market averages, it is necessary to fully comprehend ESG-related issues from a global
perspective, accurately understand how those issues affect investee companies, and incorporate
this knowledge suitably from the early stages of operations when making investment decisions.
ESG issues are wide ranging, pertaining to climate change, biodiversity and other natural-capitalconsiderations, as well as to human rights, labor practices and other human-capital factors.
Moreover, these issues are becoming more complex and mutually influential from year to year
due to the effects of political trends and other factors. At Resona Asset Management, we areaware that ESG integration, which takes consideration of said issues in relation to investment
decisions and investing actions, is increasingly important.
Therefore, in 2023, we established our Resona ESG Ratings method which serves as a unified ESG
evaluation approach used consistently throughout the Group to assess investee corporations. Utilizing
this evaluation approach as a basis, our investment teams compile their stock/bond universes, carryout company analyses, build portfolios, and pursue other such actions based on individual teaminvestment philosophies and strategies, all of which contribute to advancements in ESG integration.

ESG database◦Company-disclosed data (including statistics from outside
sources), and calculations/analyses based on text data andsimilar

ESG scoring model◦Quantitative scoring of the target company’s understandingof and responses to ESG-related risks (for environmental
and social factors: this is evaluated primarily based on risk
amounts and risk management considerations)

ESG quantitative evaluation
Environmental(E) scoreSocial (S)score

Corporate
governance (G) score◦Calculated based on E, S and G scores

Resona Quantitative ESG Evaluation+

ESG integration process

Qualitative ESG evaluation◦Resona ESG Ratings score assigned by bringing
together Resona Quantitative ESG Evaluation andqualitative ESG evaluation results

Resona ESG Ratings

Resona ESG
Evaluations

Available investment universes
Domestic stocks(1) Stock/bond issuersthat don’t pass ESG
evaluation are
eliminatedForeign stocks

Market capitalization,
creditworthiness, liquidity, etc.

ESG scoring model overview◦Scores are calculated for the three main areas: environmental (E), social (S) and corporate governance(G). Then, consideration is taken for material factors and others in each area to establish“issue”

Investment universes
Market-focused

Value-focused

Small-caps stock

Global corporations

categories (problem areas).
◦Next, more narrowly focused items known as“sub-issues”are identified within each issue, and supplychain-related scores are assigned to each sub-issue in the environmental (E) and social (S) areas basedon four evaluation points: risk exposure, risk management, opportunities, and disclosure.

Investment-candidate groupsMarket-focused▪Specific issue example (environmental)
Area

Issue

Environmental

Greenhouse gas(E)emissions

Specific examples of identified sub-issues
Risk exposure considerations
Scope 1 CO2 emission amounts, methane gas emission amounts, etc.
Risk-management consideration items
Confirmation of whether a net-zero emissions target is in place,whether that is based on scientific foundations, etc.

Growthsustainability
analysis

Portfolio

Value-forcused

Small-caps stock

Structuralreform
reliability
analysis

Management
reliability
analysis

Portfolio

Portfolio

Global corporations

ISDK
analysis

Portfolio(3) Consideration istaken of ESG
evaluation results(4) Portfolio risk analysis
and monitoring are
carried out

Note: ■ boxes display active stock investment strategy names

Advantages of Resona ESG Ratings(1) Stocks/bonds that do not meet Resona ESG Ratings standards are eliminated from the investment
universe. (However, if the stock/bond issuer exhibits promise for improved ESG evaluation results in the future, we may◦We establish evaluation criteria (issue structuring, etc.) based on ESG issues with consideration taken(2) Stocks/bonds that are highly rated in ESG evaluations are added to the investment-candidate group.
(3) Deliberations are made based on Resona ESG Ratings results and other ESG-related factors.
(4) ESG-related portfolio risk is analyzed and monitored.

for material factors◦Because scores are cross-categorical and consistent between evaluated companies, individualistic
influences are eliminated from both quantitative and qualitative evaluation results

72(2) Stock/bond issuers
rated highly in ESG
evaluations areadded as candidates

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choose to invest with engagements as a prerequisite.)

Note: Of these four items, numbers 1 and 4 are implemented as a part of all investment strategies, whereas numbers 2 and 3
are used only in certain investment strategies.
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ESG integration in active fixed income investing operations
Our approach to ESG integration
In bond investments, the portfolio can be severely damaged if the invested bonds default before
redemption or lose investment grade due to downgrades resulting from deteriorating credit
quality, forcing bond to be sold at a substantial loss. Therefore, in bond investments where
downside risk is high, we need to avoid such risks in advance in order to realize stable andcontinuous investment returns on the assets entrusted by our customers.
In general, credit ratings used commonly as indicators for creditworthiness in bond investing aredetermined primarily based on predictions of earnings and other financial performance factors
over the next one-to-two years. However in bond investment, generally, the maturity period of thebonds invested in often exceeds this, and the medium- to long-term earnings, financial and otherprospects are not necessarily reflected in the credit rating. Moreover, in regard to non-financial
information disclosure, various experimentations and attempts have been carried out in recent
years, but non-financial information has yet to be explicitly reflected on credit ratings. In order toavoid risk until redemption, it is necessary to carry out assessments of non-financial information
not adequately expressed by credit ratings and pursue precise medium- and long-term forecastsof financial performance and profitability. None of these are easy, but we believe it is important toproperly incorporate them into investment decisions, as they could lead to various risks if leftunchecked, and could lead to the abandonment of creditworthiness in the medium to long term.

▪ESG-related issues and potential risk areas

Corporate
strategy

ClimatechangeCompany
performance

Corporate
governance

Human rights

Board ofdirectors
Relationship withstockholders

Transparency andinformation
disclosure
Directorcompensation

E

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S

1

2

3

4

5

6

１）	While referring to Resona ESG Ratings results, we identify common ESG-related factors in the bond issuer’s industry that
may affect creditworthiness. For example, we consider decarbonization is one such factor in the electric power industry,
and countermeasures to declining birthrates and aging populations is a factor in the railway industry.
s industry, and ESG-related factors２）	After examining Resona ESG Ratings results, common ESG-related factors in the issuer’unique to the issuer, we complete a medium-to-long-term credit evaluation. ESG factors that may influence futurecreditworthiness come in many forms, including establishment of new industry regulations, government policy changes,
demographic changes, resource depletion risk, and others. Then, by qualitatively analyzing the paths through which these
ESG factors affect credit quality, future credit risk in bond issuers can be assumed and reflected in investment decisions.
３）	Based on evaluations from steps 1 and 2, our credit analysts and fund managers meet and hold discussions, then use theresults of said discussions to determine investment periods, investment weighting of each bond and other such details ofinvestment activities. For example, if certain industry regulations are slated for strengthening in ten years’time, and we canpredict with a high probability that those changes will have impacts on current industry business models, we will choose toinvest for no more than ten years in related bonds. In this way, we take consideration of not only current credit ratings, but
of future credit risk as well.

In principle, we will not invest in bonds of issuers that do not meet the minimum evaluation in the“Resona ESG Ratings.”However, if we do invest in such bonds as a result of our comprehensive
evaluation, we will encourage issuer to take action for improvement through engagement.

Qualitativeevaluation
Creation of buy/sellcandidates list

Offers to brokerage firms (bond names,
spread, amount, etc.), collection of
newly released information, andorganization of said information as data
Identification of promising bonds to form acredit-rating-correlated spread on anindustry-by-industry basis, and checks using
quantitative models that assess bankruptcy
probability, predicted credit ratings and so forthCreditworthiness evaluation with reference to Resona
ESG Ratings results

In pursuit of relatively promising investments,
we determine suitable investment candidates andbuild our portfolios while taking full consideration of
Resona ESG Ratings results

Identification of ESG factors that have
major impacts on bond investments
Climate change: environment-related factors, decarbonization
Lifestyle-infrastructure resilience: declining birthrates and aging
of society, infrastructure maintenance and management, etc.

Medium- and long-term
creditworthiness evaluations① Introduction of new regulations② Changes to important government policies③ Demographic changes④ Resource depletion risk
⑤ Increased scale of natural disasters and infrastructure aging⑥ Technological advancements and obsolescence⑦ Maintenance of adequate governance functions ...and others

Reflection in investment activities
Determination of eligibility for investment,
consideration of investment periods and investment weights

Local society

Failure to monitor and address these risks can lead to various problems

May bring about major declines inbusiness value and have adverse effects
on future cash flows for the company

Chapter

In order to reflect such difficult-to-predict future forecasts and non-financial information in ourcreditworthiness assessment and investment decisions, we conduct ESG integration in our bondactive management based on our“Resona ESG Ratings”from the perspective of assessing thecreditworthiness of the bonds we invest in. Considering the characteristics of bond investments,
where upside is limited while downside risk is high, we consider“Resona ESG Ratings”mainly inevaluating the long-term creditworthiness of issuers in order to prepare for risks that may affectthe creditworthiness of issuers until redemption. The ESG integration process proceeds as follows:

Selection of
investable bonds

Resources andenergyLabor
standards▪Stranded asset risk

Chapter

ESG integration process

Creation of investment
candidates list

Social

Product
liability

Chapter

Deforestation

Corruption anddisposal issues

Diversity

Chapter

Individual investee selection

Water
resources

Capitalstructure

Chapter▪ESG integration process (corporate bond investment)

Environmental

Financial issues

Chapter▪Reputational risk

▪Business continuity risk

▪Supply chain risk

‌ Information-quality deterioration risk
G ▪

May result in loss of public trust andhinder future business continuity
May result in loss of supply networks
and hinder future business continuity

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May reduce functionality of the corporate governancesystem and hinder management continuity

between parties with shared interests

May prevent equitable and timely provisionof information to stakeholders

During ESG evaluations, we take full consideration of issues identified by credit analysts as well as
Resona ESG Ratings results while also pursuing engagement with bond issuers in order to makecomprehensive assessments on which to base our decisions. Furthermore, we coordinate these
efforts with the Responsible Investment Division, Equity Investment Division and other relevant
divisions in order to realize a multi-tiered approach.
For SDG Bonds such as Green Bonds and Social Bonds, we also appreciate that the bond issue
itself is a strong engagement with society, as evidenced by the specific use of funds and theestablishment of key performance indicators (KPIs) in Sustainability Linked Bonds. When investingin these SDG Bonds, in addition to the usual credit quality analysis, we evaluate and monitor theinvestment in cooperation with the Responsible Investment Department regarding conformity withguidelines and principles of ICMA, the Ministry of the Environment, and the Financial Services
Agency, as well as the existence of third-party certification and information disclosure.
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2

3

4

5

6

ESG integration in passive investments

Approach to ESG integration

Resona Asset Management conducts ESG (environmental, social, and corporate governance)
integration in passive investing as follows.

Here we introduce our approach to ESG integration in quants value strategy.
Because sustainability (ESG) means the sustainability of future corporate profits, it is important totake ESG into account when thinking about investment philosophy. Price-earnings ratio (PER) is an
example of an indicator of undervalued stocks that expresses the attractiveness of the stock. Two
different stocks for which the most recent corporate profits are the same, and that have the same
market capitalization, will have the same PER. However, if their sustainability is different, thedownside risk to future profits will also be different. For that reason, the stock with the higher
level of sustainability is the more attractive. Accordingly, it is important that ESG is taken into
account when calculating the attractiveness of a stock.
Meanwhile, in order to practice ESG effectively, it is important that it is incorporated into thecompany’s value creation story by including ESG in the business strategy formulation process.
Therefore, we consider it important to analyze the degree of ESG incorporation in the value
creation process when building a portfolio.

ESG integration process
The process of ESG integration in quants value strategy is shown in the diagram below.
To analyze the degree of ESG incorporation into the value creation process, we conduct text
mining of integrated reports and calculate a sustainability factor. When performing thesecalculations, we utilize concepts such as the SDGs and ESG issues based on Resona’s Materiality
Matrices (please refer to page 13).
Furthermore, in selecting the investment universe, according to the“ESG Integration Policy”and the“Policy on excluding specific weapons manufacturers,”we have excluded ESG non-compliant stocks(Resona ESG Ratings) and specific weapons manufacturers from the investment universe.
1

Selection of
investment
universe

2

Portfolio
weights
calculation

Calculating attractiveness ofstock (alpha)3

Resona Alpha Model (Value)
Attractiveness of value stocks

Resona Rebalancing
Model

4

Trade
execution

Integrated
reportCompany aIntegrated
reportCompany c

Price-to-sales ratio
Price-to-cash-flow ratio
EBITDA/EV ratio…
Supplementary factors
Financial soundness
Corporate size
Momentum

ESG analysis(text mining)

Resona Asset Management

Sustainability factor (ESG)…

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▪Selection process for foreign SDG Bonds investments

Bond selection

Selections focus primarily on supranational bonds which are issued in line with theGreen Bond Principles, Social Bond Principles, Sustainability Bond Guidelines, andother principles and guidelines established by the International Capital Market
Association (ICMA)

Investment
attractivenessBonds considered for investment are narrowed down for selection based on
duration, credit rating, yield, and other factors

Confirmation ofconcept conformity

Through discussions with the Responsible Investment Division, which is dedicatedto ESG, we confirm whether the bond issuer’s activities conform with Resona
Asset Management’s identity and material factors.

InvestMain SDG Bonds types

Social bonds

Rebalancing
plan

Profit-based indicators of value stocks
Price-to-earnings ratio●Investment in green bonds and other SDG Bonds
Resona Asset Management invests in SDG Bonds to promote investment in green projects and social
projects, and to contribute toward the realization of a sustainable society. All SDG Bonds investments are
made with careful consideration for financial performance efficiency.

Green Bonds are any type of bond instrument where the proceeds will be applied to finance Green Projects related to renewableenergy, energy conservation, biodiversity preservation, etc.

Price-to-book ratio
Dividend yield

Integrated
reportCompany b●Fund management using ESG indices as benchmarks
For information on fund operation using ESG indices as benchmarks, refer to page 92.

Green bonds

Asset-based indicators of value stocks

Investment universe

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ESG integration in equity quantitative investment

Composite alpha

Chapter

Chapter

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Optimal portfolio

Social Bonds are any type of bond instrument where the proceeds will be applied to finance Social Projects related to education,
promotion of greater diversity, etc.

SDG Bonds
SDG Bonds are any type of bond instrument where the proceeds will be applied to finance a combination of both Green and Social
Projects.

Sustainability-linked bonds
Trade execution

Bonds whose interest rates and/or other financial characteristics are variable in response to progress made toward sustainabilityrelated goals and targets declared by the issuer.

In order to increase trust in and more widely disseminate SDG Bonds, International Capital Market Association (ICMA) as well as
relevant Japanese government bodies (Ministry of the Environment, Financial Services Agency) establishes guidelines. SDG Bonds
issuers are required to clearly state information on Use of Proceeds, Process for Project Evaluation and Selection, and Management ofProceeds. In addition, they are required to disclose up to date information on the use of proceeds (Reporting), impacts, and other suchdetails. These measures are taken to ensure bond eligibility while also enabling investors to make determinations regarding bondeligibility based on issuer-disclosed information.

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Resona Asset Management’s
Impact Investing

Since 2021, Resona Asset Management has been pursuing impact investing for publicly listed stocks.

Our approach to impact investing
Impact investing incorporates traditional investing approaches in pursuit of financial returns while
also pursuing beneficial social impacts, with both types of results viewed as equally important.
Targeted social impacts are those which can help solve social and environmental problems andcreate positive effects for society as a whole.
We consider impact investing to be an important means of ensuring a prosperous and happy life for
future generations as well as our customers, and based on this we establish investing intentions
aimed at generating positive social impacts which can be measured in some concrete way.
The act of investing is intended as a means of providing funding and other financial support forinvestee organizations. With impact investing, if one establishes clear intentions and makes
investing decisions based on the potential impacts born from investment in each candidate
organization, the result will be direct contributions toward a better society for all.
Organizations targeted for impact investing

Organizations that solve societal
problems through donations, public
policy change, etc.

Organizations that solve societal
problems through business strengths◦Bringing together human resources, management
resources and technologies creates synergy thatcan contribute in significant ways towardsocial-problem solutions◦New job creation and industrial innovations canhave positive, ripple-type effects throughout
various areas of society

Complementary
relationship◦Ethical and benevolent actions can solve
problems even in areas where business activities
are ineffective◦Redistribution of earnings can help create a morestable society for all

Resona Asset Management impact investment targets stocks listed on both domestic and global
markets, and is based on intentions founded on our overarching corporate goal as a company.

Overarching goal: to ensure a prosperous and happy life for future generations as well as our customers
Determination of intentions

Global-stock impact investing intention(related to climate change)

Domestic-stock impact investing intention

Realize a sustainable world in which the life andRealize a sustainable society for Japan that provides

health of no single person or other life form is

comfortable lifestyles

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Chapter

Chapter

Chapter

Chapter

1

2

3

4

5

6

Unique aspects of our impact investing
Resona Asset Management impact investing has three major focuses: long-term, highly selective
investments; impact assessments and reporting; and engagements with investees. Based on these,
we utilize investing operations to create opportunities to support efforts aimed at solving societal
problems, while also pursuing attractive investment returns.

1

Excellent returns through long-term,
highly selective investing

Innovation to solve society’s
problems

Companies that are able to overcome obstacles which
prevent solutions to daunting problems, and provide effective
solutions based on innovation (technological breakthroughs,
creative approaches, etc.), not only make major contributions
to rectifying the problems of society, but also create abundantbusiness opportunities in markets demanding differentiation
and realize continual corporate-value improvements over thelong term.
Through Resona Asset Management impact investment
operations, we believe that carefully searching out suchcorporations and pursuing long-term impact investment can
assist in efforts to solve various problems while also enablinghigh-yield, long-term returns based on said companies’
continual growth.

2Abundant business opportunities(investment opportunities)

Progress madetoward solving
societal problems

FutureCannot solve
societal problems

Present

Understandable and clear communication of value through impact assessments
and reporting

We believe it is extremely important, as a means of confirming
investment results, to regularly assess the types and degrees
of impacts achieved by investee companies, and issue reportsthat clearly express those results in ways that people outsideof our organization can readily understand.
When carrying out impact assessments, we utilize quantitative
indicators to determine progress toward realization of targets,
solution statuses, and other such factors, while also making
use of qualitative evaluations and sharing example cases aspart of a fixed-perspective examination approach.

3

Our impact investing

Chapter

Strategy
improvements

Resultsverification

Impact assessment

ImpactreportEngagements in support of corporate activities

With the goals of achieving target returns through long-term
investments and realizing our intended impacts, we place highpriority on engagements with investees as a means ofsupporting corporate activities that generate beneficial
impacts.
Our impact investing approach entails more than the pursuitof returns; we focus strongly on the impacts produced throughinvestee activities as well as the value these impacts have forwider society.
This approach is closely tied in with investees’corporate
philosophies, raisons d’être and overarching goals,
because we always strive to see things from each investee’sperspective, work with them toward the same goals, andotherwise serve as a close partner in our role as investor. We
believe that this approach is an extremely important part ofconstructive engagements, as it can result in closer
relationships of trust and lead to more fruitful engagement
results overall.

Social impacts

Chapter

Chapter

Resona Asset Management

Long-term
partnership
throughengagements

Company that generates
even greater impacts
and returns

Company thatgenerates major
impacts and returns

Return on investment

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2

3

4

5

6

The IMM process for impact investing

Domestic-stock impact investing

The impact measurement and management process (IMM process) is a management cycle
designed to actualize intentions in impact-fund investing.
Its main functions are setting of impact targets; establishing strategies, measurement indicatorsand target values; and managing impact performance.

Impact investing in domestic stocks is based on the intention of realizing a sustainable society forJapan that provides comfortable lifestyles. Japan faces a range of different threats to societal
sustainability moving forward, many of which are rooted in declining birthrates, aging of society,and demographic changes such as population declines. Moreover, these problems threaten toincrease the burdens placed on future generations and create unease and uncertainty on awidespread scale, further exacerbating the effects of low birthrates. This, in turn, has the potential
to worsen the adverse issues which already affect society.
With activities centering on the ten problem areas described below, we carry out impact
investing in order to put a stop to these destructive cycles and realize a sustainable society forJapan that provides comfortable lifestyles.

IMM process

Equity Investment Division

Impact investment
selection criteria
and conformity
confirmation◦Confirms whether investee company’s business activities
and intentions conform with fund impact targets◦Creates a logic model to identify investee company
outcomes◦Assesses whether it will be possible to achieve intended
impacts on a continual basis

Framework creation
for individualinvestee impact
measurements◦Develops a methodology for understanding impacts inquantitative terms◦Confirms the necessity of corporate information
disclosure for purposes of impact measurement

Engagement with theinvestee◦Identifies and shares issues related to impact creation,
confirms response measures, and provides support formeasure implementation◦Pursues joint efforts toward advancements in impact
assessment methods

Investee impact
assessment◦Assesses social impacts (both quantitatively andqualitatively)◦Pursues dialogue with the investee company to confirm
validity of impact assessments

Portfolio impact
assessment

Implementation ofnecessary action◦Measures social impacts at the portfolio level◦Identifies issues pertaining to fund intentions◦Decides whether to add to or sell from the portfolio◦Creates engagement plans for problematic investees◦Improves top-down logic based on results

Impact report issuance
In 2022, we published impact reports on our Japanese
Stock Impact Investment Fund and Global Impact
Investment Fund (Climate Change).
▪Japanese Stock Impact Investment Fund
https://www.resona-am.co.jp/fund/120021/pdf/impact_report.pdf▪Global Impact Investment Fund (Climate Change)
https://www.resona-am.co.jp/fund/120027/pdf/impact_report/fy2022.pdf

Responsible Investment Division
review
Does the new investee
candidate fulfill impact
fund selection criteria in
multiple required ways?
Are measures against
negative impacts and ESG
risk sufficient?

▪Destructive cycles related to societal issues
Globalproblems

Greater
uncertainty among
future generations

Increased burden
on futuregenerations▪‌Our domestic-stock impact investment intention
and ten societal problem areas
Domestic-stock impact investing intention“Realize a sustainable society for Japan that provides comfortable lifestyles”

Societal problem areas

Are the impact assessment
framework andassessments of createdimpacts sufficient?

Cycle ofgrowing
uncertainty

Decliningbirthrates

Cycle ofincreasedburdens

Longer life
expectancies

Aging ofsociety

Labor shortages
Leadership shortages

A society that is accommodating
to all people

Sustainable and resilient
living environments◦Future-generation community
development◦Maintenance and improvementof lifeline functions◦Disaster prevention andmitigation◦Industrialization of foodproduction and trustworthiness
improvements◦Utilization of sustainable energy◦Reducing household-task andchild-rearing burdens◦Diversification of andimprovements to education◦Sustainable medical treatment
and nursing care
◦Improvements for SME
management-related problems◦Individual empowerment

Global-stock impact investing
Based on impact
assessment results, areinvestment-team actions
suitable?

Our intention for global-stock impact investing is to realize a sustainable world in which the life andhealth of no single person or other life form is adversely affected by climate change or its impacts.
In addition to rising average temperatures on a global scale, climate change leads to more frequent
natural disasters and unusual weather patterns which adversely affect economic activity and naturalenvironments in wide-reaching ways. These, in turn, lead to increasingly widespread damage and loss,
and otherwise create potential for the emergence of various risks.
In order to avoid said risk, it is vital that we work to eliminate the root causes of climate change(climate-change mitigation), while also bolstering society’s resilience to the effects of climate change(climate-change adaptation).
In our climate-change-focused, global-stock impact investing operations, we strongly prioritize climatechange mitigation and adaptation in order to realize a sustainable world in which the life and healthof no single person or other life form is adversely affected by climate change or its impacts. As part ofthese efforts, we have established the eight priority-solution areas outlined below.
▪Our climate-change-focused, global-stock impact investing intention and eight priority-solution areas
Climate-change-focused,
global-stock impact
investing intention
Realize a sustainable
world in which the lifeand health of no single
person or other life
form is adversely
affected by climatechange or its impacts

Priority-solution areas

Chapter

Chapter

Climate-change mitigation:
limit the global temperature riseto less than 1.5°
C*◦Strengthening of renewable-energy-based electric power supply networks◦Achievement of low-carbon emissions at existing power-generation
businesses◦Electrification of energy sources◦Emission-reduction and energy-saving measures in areas not subject toelectrification◦Carbon emission reductions and absorption in agriculture, forestry, etc.
◦Promotion of comprehensive solutions and innovations related to bothclimate-change mitigation and adaptation

Climate-change adaptation:
mitigation of risks brought about
by climate change◦Improved resilience to natural disasters◦Solutions to water- and food-supply problems＊A target of less than a 1.5°
C rise in average global temperature compared with the average global temperature prior to the Industrial Revolution

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Chapter

5

Resona Asset Management’s Impact Investing

Investee engagements
Our fundamental approach to engagements as it pertains to impact investing is“serving as along-term partner to companies who are resolved to solve society’s problems.”In order toachieve this, we strive for the three goals outlined below.
By taking this approach, we endeavor to help investee companies understand that we function
not as an investor at odds with them, but as a partner pursuing the same goals. In this way, we
hope to realize constructive engagements.

1

Sharing of intentions◦Ability to explain and facilitate
understanding of concepts and future
visions/goals◦Sharing of current-situation understanding
regarding social issues that investee
companies can help solve◦Coordination of future goals and targets
that can be achieved through businessactivities

2Long-term, continuous investment◦Support for and long-term maintenance ofmanagement approaches, rooted incompany intentions, that facilitate solutions
to societal problems◦Firm maintenance of an approach enabling
precisely targeted investments toward
corporate value creation that generates
positive impacts

3

Constructive and focused engagement◦Clear and understandable expression ofpaths toward societal-problem solutions,and fixed-perspective monitoring of
progress◦Sharing of obstacles inhibiting achievementof goals, and support for strategy
improvements and enhancements

Investee company example

Company
overview

Priority-solution
areas

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Impactassessment❶ Maintenance and improvement of lifeline functions
NIPPON GAS developed an online, real-time metering system for confirming gas
Lifeline operator expense
usage amounts and has introduced it in approximately 1.1 million households as
reductions:of March 31, 2022. The system reduces labor required via sending of workers tocheck gas meters in person, while also reducing numbers of gas canisters that
Approx. ¥millionmust be managed, thus bringing down logistics costs. This has lowered
operating costs for the company as a lifeline service provider.
❷ Leveling out of lifeline costs
Consumer economic burden
By achieving an efficient framework for the supply of LPG as a form of
reductions:decentralized energy, NIPPON GAS has reduced the economic burden on
residents of suburban and rural areas where LPG costs tend to be higher
Approx. ¥per householdcompared with more urban areas.
❸ Creation of a social infrastructure services platform
As an industry pioneer in the transition to digitalization, NIPPON GAS is investing in the creation of an energy-supply
platform that will achieve optimization through coordinated data usage, and in the future they plan to provide thisplatform to other companies in the same industry. We evaluated these efforts highly because they show promise toenable locally rooted SMEs throughout the region to enjoy the same business efficiency boosts and information
availability as large LPG corporations, thus helping to eliminate disparities among residents’ living environments in thelocal region particularly.
We created a diagram-type logic model of the types of impacts we expect the company’s business activities to have (interms of solving societal problems) to visually convey their path toward said impacts, and pursued engagements basedon this model. As part of efforts to better understand current conditions and share future goals and targets in relation tosocietal issues, we discussed methods of quantitatively analyzing the effects of NIPPON GAS’s business activities.
Furthermore, as part of efforts to support their management approach of seeking solutions to society’s problems, we
proposed methods of conveying information on their overall growth-strategy approach, information on their future vision
based on said growth-strategy approach, and information on their path to that goal.
Since then, the company has been improving informational content communication through meetings and informationalsessions, striving to further clarify their future vision as it pertains to their growth strategy, and otherwise improving
information provision. They are also considering expressing, from multiple standpoints, the effects that their corporate
activities will have on society in their next integrated report.

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3

4

5

6

Genus plc

◦Genus was one of the first companies to incorporate a scientific approach that correlates DNA sequences withproduct characteristics (meat quality and other characteristics) into the breeding process, and has secured alarge global market share as a result◦Genetic improvements have bolstered the added value of their livestock products while also boosting grain-usage
efficiency (amounts of grain required up until shipping out of livestock-based products)
Carbon emission reductions and absorption in agriculture, forestry, etc.; solutions to water- and food-supply
problems

emissions from one cow or pig (including their feed) up until product ship-out
from among all such animals born in the latest fiscal year as the result ofGenus genetic engineering, and multiplying this number by the annual emission
reduction rate achieved through genetic improvements.
* Calculated by converting emissions to weight in CO2

Greenhouse gas emission
reductions:

Approx. 1.28
million tons

Rancher profit growththrough genetic
provision operations:

Approx. US$670
millionWe created a diagram-type logic model of the types of impacts we expect the company’s business activities tohave (in terms of solving societal problems) to visually convey their path toward said impacts, and pursued
engagements based on this model. We discussed the importance of developing a better understanding regarding
the social outcomes of greenhouse gas emissions while also pursuing the following three important engagement
topics:2,596

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1◦Solutions to water- and food-supply problems－ Improvements to existing feed production capabilities and efficiency
Through genetic provision efforts, Genus has bolstered the added value of
their livestock products and had positive influences on rancher income growthand production capacities. We rated them highly for these contributions. Ourestimates show that, in the pork industry, Genus helped expand profits fortheir customers by approximately US$670 million, which was calculated byconverting genetics-related merits into monetary form for all Genus pigs born
through genetic engineering in the most recent fiscal year (just under 200
million pigs in total). Moving forward, we plan to carry out quantitative
analyses for their cow-related operations (dairy and beef cows) as well.

Maintenance and improvement of lifeline functions

Resona Asset Management

Chapterthrough improvements in grain-usage efficiency (amounts of grain required up
until shipping out of livestock-based products) achieved via genetic provision
activities. Greenhouse gas emission reduction amounts were estimated to be
1.28 million tons-CO2e.* This was calculated by taking the average CO2

730

Engagement

Chapter◦Carbon emission reductions and absorption in agriculture, forestry, etc.
－ Greenhouse gas reductions in the agricultural industry (including livestock)
We rated Genus highly for their contributions to greenhouse gas emissions

Assessment of NIPPON GAS was carried out using a logic model created by Resona Asset Management.

Impactassessment

Chapter

Contributing to climate-change mitigation and adaptation through genetic provision based on own-brand pork andbeef livestock

NIPPON GAS CO., LTD.

◦A retailer for the entire Kanto region, focusing primarily on liquefied petroleum gas (LPG) but also operating incity gas and electric power◦A leading innovator in the energy industry through collaborations with outside companies in pursuit of a platformbuilding project

Social problem
area

Chapter

Assessment of Genus was carried out using a logic model created by Resona Asset Management.

Utilizing digital technologies to innovate in the energy industry and help solve regional problems

Company
overview

Chapter

Impact assessments and engagements for companies targeted in globalstock impact investing

Impact assessments and engagements for companies targeted in globalstock impact investing
Investee company example

ChapterEngagement◦The necessity of generating impacts as a company and achieving a certain degree of direct, positive correlation
between those impacts and financial value creation for purposes of succeeding in terms of both impact creationand financial returns◦In relation to the above, the necessity of helping investors to understand in qualitative terms, and assess inquantitative terms, which kinds of impacts (solutions to societal problems) Genus achieves as a company as wellas their path to said achievements◦As part of the shift toward a stronger focus on sustainability, the importance of rectifying the investor–investee
disparity wherein Genus has an understanding of the positive impacts their corporate activities are having onsociety, but they do not necessarily make it easy for investors to understand how these impacts lead tocorporate profits, nor do they make it clear how said impacts should affect stock evaluations from an investor’s
perspective

Genus understood the above items and provided extremely promising, forward-looking feedback in regard to theprospects of continued, long-term dialogue. Additionally, the company has embarked on a project to realize amore quantitative understanding of greenhouse gas emissions from ranches: This entails the use of satellites andcollaboration with a company possessing greenhouse gas measurement technologies, as well as utilization ofGenus’s access to the world’s top 100 cattle ranch operators which are located in 80 different countries. By
making use of satellite-based data and other information available to them, Genus is working to create a platformthat offers the world’s most precise, uniform, efficient measurement performance.

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Resona Asset Management’s Impact Investing

Impact assessment on SDG Bonds

Assessment results

Chapter

Chapter

Chapter

Chapter

Chapter

1

2

3

4

5

6

Assessment results by project category

The following table shows impacts per US$100 of investment by project category. Total impacts derived from
US$100 of Resona Asset Management’s investment in green bonds were US$309.6.

Resona Asset Management conducts impact assessment on SDG Bonds to gain extensive
understanding on green bonds impacts. We have started to assess impacts because impact
valuation takes traditional environmental and social metrics and converts them into monetary
values that measure the change in wellbeing, allowing comparison and evaluation of impact
areas.
Another purpose of assessing impacts is to engage with the issuers. We apply such impact
assessment initiatives to our engagements with issuers seeking to close gaps with issuers
regarding the way of thinking about impacts and impact pathways.
▪ScopeKPI in impact evaluations
Avoided and reduced
GHG emissions

Biodiversity preservationand enhancement

Jobs created

Project type5

We have determined the scope of 5 issuers and 3 assessment indicators based on:
Resona Asset Management’s materiality; global ESG issues; availability on impact assessments; andsignificance of sustainability projects.

Avoided and reduced
GHG emission* We did not determine“additionality”(Note) and negative impact.
Note: Additionality issue (i.e. would the jobs have been created anyway if the money was going to be invested elsewhere?); projects specify whether jobs areconstruction-related / operational. It refers to the (net) value excluding any value that would likely have been generated even if there had been no
investment in the project.

Environmental metrics

Impacts on climate change have increased due to further information disclosures by the issuers. On the other hand,
disclosures on the other two indicators are still not sufficient. An increase in disclosure rates is likely to help bringabout more substantial results in terms of impacts associated with the two indicators.

Social metrics

Biodiversity preservationand enhancement

Jobs created

Assessment results

Geographic distribution

The map below shows the extent of impacts achieved in the respective countries and regions grouped across threecolor-coded levels of impact.

▪Development of impact pathways

The eligible projects are

Referencing the methods that have been evaluated and developed thus far and basedon project information published by the issuer, we have created an impact paththrough input (provision of financing), output (amount of GHG emission reductions,type and area of improved soil, number of jobs created, etc.), and impact after theoutcome (avoiding agricultural product loss, reducing damage caused by flooding,
improved standards of living, etc.).
We have calculated monetary values related to the impacts for direct comparisons among
different types of impacts.

Deriving monetary
values forenvironmental orsocial impacts＄

based in various geographic

locations. We have identified
larger impacts in various
countries and regions,particularly in developing
nations.

Large impacts derived fromcountries and regions wherelarge projects were allocated.
OutputOutcomeGHG emission
reductions, etc.

Avoiding an increasein abnormal weather

Avoiding loss ofagricultural products

Avoiding heat stress

Avoiding adverse health eﬀects

Type and area ofimproved soil

Changes in ecosystemservices*

Number ofjobs createdWages incurred

Use of the informationin the materials provided by issuers

ImpactReducing damage caused
by ﬂooding
Providing venues andopportunities for tourism
Improvingstandards of living*Ecosystem services: The contributions of ecosystems to the beneﬁts that are used ineconomic and other human activity.
The above outcomes and impacts are examples.
For details, please see the Company’s Stewardship Report 2021/2022.

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ImpactLow high▪Engagements enlisting the impact assessment findings
Monetary value

Activity

Individual projects

Input

Financing provided

Chapter

Chapter

We are conducting engagements with the issuers using these assessment results.
・During the engagements, we shared the logic of the impact pathways with the issuers, and there were no major
discrepancies on the logic.
・During the engagements, we confirm whether any projects have gone through the accountability process orwhether any projects have been deleted from the eligible projects.
・Ongoing engagements have led to better information disclosure relative to last year with respect to many issuers
and indicators.
As for the issuers whose SDG Bonds were not eligible for assessment, we have also conducted engagements with
the issuers for better disclosure.

Engagement case
The Asian Development Bank (ADB) is one of the issuers with whom we regularly conduct engagements.
We conduct engagements on the following topics.
●Alignment with the Paris Agreement●Project details, information disclosure, overall risk management process on projects●Approach towards decarbonization●Response to the Second Party Opinions and verification
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Chapter

6

Assessment on Responsible
Investment Activities

PRI annual reporting and assessment
responsible investment activities, rating of the“PRI

Reporting and Assessment process”is placed as a key
performance indicator. We strive to improve thequality of our responsible investment activities by

setting various measures to improve external ratings.
The following is a summary of the 2021 PRI Reporting and Assessment.
Resona Asset Management

MedianInvestment & Stewardship Policy

★★★★☆

★★★☆☆

Listed equity - Active fundamental incorporation

★★★★★

★★★★☆

Listed equity - voting

★★★★☆

★★★☆☆

★★★☆☆

Fixed income - Corporate

★★★★☆

★★★☆☆
★★★☆☆

Resona Asset Management achieved four stars for its responsible investment initiatives (overallrating of investment and stewardship policy). We will strive to increase the quality of our
responsible investment activities to achieve five stars.

Chapter

Chapter

Chapter

Chapter

Chapter

1

2

3

4

5

6

Self-assessment on responsible
investment activities
As an institutional investor serving as an asset manager, Resona Asset Management has established its basic
policy on responsible investment with the aim of explicitly stating its approach to helping enhanceinvestment return of its clients from a medium- to long-term perspective. Accordingly, we carry out three
specific initiatives (i.e., ESG incorporation, constructive engagements, proxy voting). We also performself-assessments on a regular basis in order to further heighten the level of such initiatives. These selfassessments correspond to the assessments described in Guidance item 7-4 of Japan’s Stewardship Code.

Self-assessment process

Within our PDCA (plan, do, check, act) cycle of our

Fixed income - SSA

Chapter

Resona Asset Management’s Policies regarding Japan’s Stewardship Code stipulates that,“Resona AssetManagement believes that appropriately performing self-assessment with respect to its policies and initiatives
pertaining to its responsible investment is important. Under that premise, we will develop an effective
assessment framework that involves taking on tasks such as precisely determining issues in conjunction withexternal assessment, while operating on the basis of self-assessment performed by members of the
Responsible Investment Committee.”Our Responsible Investment Committee plays an important role infulfilling Resona Asset Management’s responsible investment and stewardship responsibilities.
We administered a tiered-assessment and open-ended surveys where members of the committee furnishedtheir thoughts with respect to: whether they feel that we are taking sufficient efforts with respect to initiatives
required under respective principles and guidelines of the stewardship code; whether they feel that we
maintain an organizational framework sufficient to carry out our stewardship activities; whether we areproperly implementing the cyclical PDCA (plan, do, check, act) approach with respect to stewardship activity
results, assessments and improvements; and, whether we are adequately operating the Responsible
Investment Committee in terms of its function as a responsible investment control tower. The self-assessment
period for 2021/2022 is determined as from July 2021 to June 2022.
In September 2022, the countermeasures to the previous 2020/2021 assessment were reported at the
Responsible Investment Committee meeting. The 2021/2022 self-assessment result was also reported as well.

Assessment results

1. Initiatives to address issues of last year

Last year, we recognized three issues:(1) to establish our investment philosophy and objective, (2) to improve disclosures on ESG
integration and engagement outcomes, and (3) to ensure proactive public disclosure.
(1) In addressing the first issue,
we explicitly stated and articulated our corporate identity to achieve our purpose to:cherish our values under our corporate culture, and to implement our business model.
(2) In addressing the second issue,
we took steps to improve disclosures on ESG integration and engagement outcomes.
However, this issue has yet to be adequately addressed, and this remains an ongoing concern.
(3) In addressing the third issue,
we have taken steps to:
upgrade the content of the Stewardship Report (Sustainability Report), issue the Impact Reports, and seek
disclosure improvements of our corporate website.

2. FY2021 self-assessment and issues to be addressed

The assessment outcome of the operation of the Responsible Investment Committee meeting wasdeemed as“generally appropriate.”
Several improvements on activities in line with the Japan’s Stewardship Code were acknowledged.
However, further improvements on ESG integration and engagement frameworks were required.

3. Plans

We will promptly work to implement specific action plans to address issues. The oversight scheme isestablished at the Responsible Investment Committee meeting to monitor the progress and outcomeof the action plans.

For policies regarding Japan’s Stewardship Code, please refer to the following URL.
https://www.resona-am.co.jp/investors/pdf/ssc_policy.pdf (in Japanese only)

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appendix

Risk management system / compliance management system

Risk management system

Compliance management system

Resona Asset Management has built a system for facilitating accurate and centralized assessment andmanagement of risk across the entire company. This has entailed stipulating the risk management

policy, establishing risk management divisions aligned with different risk categories, and establishing acomprehensive risk management division tasked with oversight of the respective risk administration
divisions.

▪Risk management system

Resona Asset Management has built a system for ensuring compliance with laws and regulations on acompany-wide basis, which has entailed drawing up the compliance management policy andestablishing a comprehensive compliance division that takes on oversight and supervision pertaining
to compliance with laws and regulations.

▪ Compliance management system
Board of Directors

Board of Directors

Representative Director and President

Representative Director and President

Executive Committee

Executive Committee

Committees
and councils

Committees andcouncils

Compliance and Risk Management Committee

Comprehensive risk
management division

Riskmanagement
divisionsRisk
category

Compliance and Risk Management Committee

Corporate Administration DivisionCorporate Administration Division

Creditrisk

Marketrisk

Liquidity
risk

Corporate
Administration
Division

Information
Technology
Planning
Division

Corporate
Administration
Division
ComplianceOﬃce

Investment
Risk
Administration
Division

Corporate
Administration
Division

Administrative
risk

Systemrisk

Legal andcompliancerisk

Trust asset
management
risk

Other
operationalrisks

Corporate
Administration
DivisionComprehensive
compliance divisionCorporate Administration Division

Every division
Reputational
risk

Operational risk

〇 Initiatives to prevent money laundering and other financial crimes〇 Risk management system for trust asset management risk
Trust asset management risk refers to the loss in trust assets or the compensation for lost profits caused byneglecting our duties, such as duty of loyalty and duty of care as asset manager.
The Investment Risk Administration Division, one of risk management divisions, manages such risk throughRegarding anti-money laundering and combating the financing of terrorism, we are taking actions effectively
through not only subject to requirements prescribed in the Act on Prevention of Transfer of Criminal Proceeds,
the Foreign Exchange and Foreign Trade Act, and other laws and regulations, but also evolving swift actions
based on risk-based approach, responding to external circumstances such as ever-changing international affairs.

regularly monitoring compliance with investment guidelines and the appropriateness of investment. We takeeffective action to prevent recurrence of risks that have emerged by enlisting initiatives that include overhaulingbusiness processes and imposing stringent training aligned with factors attributable to occurrence of such
incident. By reviewing operations subject to monitoring and the frequency of monitoring, we also control andreduce inherent risks.
Our risk management system is evaluated by an external auditing organization in accordance with the U.S.

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〇 Elimination of anti-social forces
In the context of our public mission and social responsibility, Resona Asset Management has set specificinternal rules and regulations and provides ongoing training and education on these compliance issues forStatement on Standards for Attestation Engagements No. 18 (SSAE 18), and our operations have been found todirectors and employees not to engage in transactions with anti-social forces and to prevent them frombe in compliance with that auditing standard.

intervening in transactions with customers through the corporate activities.

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appendix

C u s t om e r - c e n t e r e d b u s in e s s o p e r a t i o n s

Customer-centered business operations
Based on our overarching goal of to ensure a prosperous and happy life for future generations as well as ourcustomers, we hope to be an asset management company that customers are happy to choose first. We centerour business operations firmly on the customer in order to achieve this goal while also fulfilling our required duties
as an asset management firm.

Resona Basic Policy on Fiduciary Duties
The Resona Group management philosophy is“Live Up to Customer Trust,”and based on this we have establishedand publicized the Resona Basic Policy on Fiduciary Duties (hereafter,“Basic Policy”) for purposes of ensuring afirm and thoroughgoing focus on the customer in sales of financial products, investment of entrusted assets, and allother financial services provided.
Resona Basic Policy on Fiduciary Duties: https://www.resona-gr.co.jp/holdings/english/about/strategy/fiduciary.html

One item listed in the Basic Policy,“high-quality asset management”describes our basic approach to investing trust assets.
High-quality investing operations◦In order to provide customers with satisfactory results in long-term diversified investment, we pursue reliable added value over the
medium to long terms based on consistent investment strategies that incorporate thoroughgoing research and analyses, while also
striving to continuously offer low-cost, high-quality asset management services.
・Never contenting ourselves with past successes alone, we engage in continual self-improvement from day to day to further advance our
specialized knowledge and skills while pursuing profit for customers based on ethical and honest approaches, all with the goal of realizing
high-quality asset management services.
・We aim to be a highly professional organization in which customers have full confidence, carrying out both lateral and verticalcollaborations within and beyond our organization while engaging in effective two-way communication.
◦In pursuit of profits for the customer—the beneficiary—we engage in constructive dialogue and other measures required as a responsible
institutional investor with the goal of fostering improvements in investee-company corporate value, promoting sustainable growth, andfacilitating other such positive change.
・We agree with and adopt the guidelines laid out in Japan’s Stewardship Code, which is a set of regulatory guidelines for institutional
investors. By doing this, we show customers that we always act as a responsible institutional investor.
・In addition to financial information on investee companies, we obtain and analyze non-financial information, which includes information on
ESG (environmental, social, and corporate governance) related issues. And through its utilization, we strive to foster greater added value atsaid companies via medium- and long-term promotion of improvements to corporate value, sustainable growth and similar positive change.

Policy Initiatives on Customer-centered Operations
Based on the Basic Policy described above, we have established our Policy Initiatives on Customer-centered
Business Operations (hereafter,“Policy Initiatives”) intended to convey, in an easy-to-understand manner to ourcustomers, Resona Asset Management’s overarching goal as a company and our approaches to management
and business operations.
Policy Initiatives on Customer-centered Operations: https://www.resona-gr.co.jp/holdings/english/about/strategy/fiduciary.html

Be st in te r e s ts of t he cust omer
At Resona Asset Management, it is our view that long-term, diversified international investing is the best possible approach for delivering greater
prosperity to our customers—in other words, to serve their best interests.
In order to achieve effective performance in long-term, diversified international investments, we believe it is necessary to engage inhigh-quality index investing, and in active investing that achieves excess returns which are reproducible over the long term. Moreover, as
the importance of asset management grows in general, we are stepping up efforts to incorporate universal ownership considerations as ameans of further strengthening our responsible investing activities.
Acti ve i nvestment
Through deployment of reliable investment philosophies, andestablishment of and effectiveness monitoring for investingprocesses, we aim for better excess returns.

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R esp o nsib le inv est m ent

Through asset allocation strategies based on continual market
research and analysis operations, we strive to achieve performancethat meets customer expectations in terms of risks, returns andother important factors.

Through continual engagements and exchanges of ideas withinvestee companies, we endeavor to bolster their corporate value
and strengthen the stock market as a whole. Our approach is one
which does not place excessive burden on said companies; on thecontrary, we prioritize the quality of engagement activities and, tothis end, control the frequency of said activities accordingly.

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conflict of interest management
・‌We have established the Conflicts of Interest Management Guidelines as part of internal regulations. Based on this policy, we take appropriate
responses to all conflicts of interest encountered anywhere within the group.

Cl a r i f i c a t i o n o f f e e s a n d c o m m i s s i o n s・‌For all funds launched at Resona Asset Management, we verify fee and commission suitability via a Fund Operating Committee at the timeof fund establishment, and via a Fund Governance Council comprising outside directors after fund establishment. Furthermore, we clarify
points of consideration taken when determining fees and commissions.

Easy-to-understand communication of important information.
・When creating written materials to be used for fund sales, we consider the best ways of communicating, in an easy-to-understand manner
for the customer, the important information which customers will use to make investment decisions.
・We strive to provide sufficient amounts of information to companies that handle fund sales as part of efforts to eliminate any asymmetry
regarding information provided to customers.

P r o vi s i o n o f s e r vi c e s s u i t e d t o c u s t o m e r s・‌When setting up new funds, we endeavor to carefully consider and launch only funds that truly meet customer needs in order to realize
sustained long-term performance. To this end, we refrain from launching funds with overlapping product types, funds that rely upon
temporary or short-lived trends.
・‌Upon setting up a fund, discussions are held by the Fund Operating Committee to clearly identify and deliberate on anticipated customers
targeted for sales, as well as underlying reasons. Following fund creation, the Fund Governance Council (comprising outside directors) verifies
whether the fund has maintained the intended product characteristics following its creation.

F r a m e w o r ks f o r m o t i va t i n g e m p l o y e e s・‌Evaluators at Resona Asset Management, who have long-term investing experience and highly specialized knowledge, base theirevaluations on the performance of each employee with consideration taken for individual investing results and specializations.
Furthermore, evaluators also conduct qualitative assessments based on degree of conformity with the Company’s Code of Conduct(our corporate ethics code), the Conflicts of Interest Management Guidelines (comprising rules for dealing with conflicts of interest),
and other rules and regulations, while factoring in employee contributions to the Company as a whole. Together, these form ourcomprehensive personnel evaluation approach.
・‌In regard to evaluations of specialization levels, all employees are encouraged to attain CMA(Certiﬁed Member Analyst of the securities
analysts association of Japan), and the minimum-required specialization levels for an investment firm are ensured. Then, specializations
required for each work and position type are defined.

KPIs for customer-centered operations and public status updates
Resona Asset Management has established the following KPIs for customer-centered operations. We pursue
operations based on the Policy Initiatives on Customer-centered Operations and publish the statuses of said
efforts on our company website.

▪Publicly disclosed KPIs
KPI

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Description
Long-term performance (5-, 10- and 20-year performance) for active investingInd ex inv est m ent
We pursue continual research into methods of increasing
fund-management efficiency, as well as research on investment
methods and approaches, with the goal of providing high-quality
products at the lowest costs possible.

Balanced i nvestment

Resona Asset Management

In pursuit of the customer’s best interests, we have established the following basic approaches of business
operations as our Policy Initiatives. For further details on these approaches, please visit the website shown on
the previous page.

Best interests of the customer

Long-term performance (5-, 10- and 20-year performance) for index investing
Long-term performance (5-, 10- and 20-year performance) for balanced investingResponsible investing activity results (number of engagement cases)

Provision of services suited to customers

Ratio of funds with a net asset value of ¥10 billion or more (compared with all publicly
offered funds)

Frameworks for motivating employees

Number of frameworks relative to number of security analysts in relevant divisions* For further details on these efforts, please visit the following webpage:https://www.resona-am.co.jp/investors/fiduciary.html

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appendix

E SG f u n d s a n d im p a c t f u n d s

ESG funds and impact funds▪Resona Asset Management ESG funds (as of December 31, 2022)

Since October 2021, for purposes of protecting our customers, we have clearly identified and publicized
information on which of the publicly offered investment trusts we establish and operate are ESG funds
and impact funds.

About ESG funds and impact funds
Among investment activities related to ESG (environmental, social, and corporate governance) issues,
many different investment approaches and methods exist (as described below), and degree of
integration into the investment process and the impact on performance also vary widely from fund to
fund. Therefore, we do not consider it logical to employ uniform conditions and requirements for all
ESG and impact funds; rather, we identify ESG and impact funds through deliberations by our
professionals in planning and management divisions.

▪Example ESG investing approaches
Engagements with investees andexercising of voting rights

ESG integration

Negative and positive screenings

Investing based on environmental
and social sustainability themes

Norm-based Screenings

Impact investing

Fund namePrimary investment target

Establishment

Resona Japanese SME Stock FundJapanese stocks

Sep. 2018

Smart-i Domestic Stock ESG Index

Japanese stocks

October 2019

Domestic Stock ESG Index Open

Japanese stocks

September 2021

Smart-i Developed Country Stock ESG Index

Developed country
stocks

October 2019

Developed Country Stock ESG Index Open

Developed country
stocks

September 2021

Global SME Stock Fund

Global stocks

October 2020

Smart-i Global Stock Climate Change Index

Global stocks

October 2022

Saitama Resona Global Balanced Plus ESG

Multiple asset types

September 2020

Kyushu SDGs Global Balanced

Multiple asset types

November 2021

Fund Wrap Plus ESG (Stable Value Type)Multiple asset types

November 2022

Fund Wrap Plus ESG (Stable Growth Type)Multiple asset types

November 2022

Fund Wrap Plus ESG (Growth Type)Multiple asset types

November 2022

Note: These categories were created based on the Global Sustainable Investment Review 2020 by the Global Sustainable Investment Alliance

When establishing a publicly offered investment trust, we carefully examine all fund details and havethe Asset Management Committee hold discussions to determine whether the fund in question is
sufficiently equipped with the following characteristic requirements (see diagram below). Moreover, theFund Governance Council carries out regular verifications following the launch of fund operations toensure that said characteristics are being maintained.
(For further information on the Fund Operating Committee and Fund Governance Council, see page 7.)▪Resona Asset Management publicly
offered investment trusts▪ESG fund and impact fund characteristics
ESG fund

ESG fundPrimary investment target

Establishment

Japanese Stock Impact Investment FundJapanese stocks

June 2021

Global Impact Investment Fund (Climate Change)

Global stocks

Dec. 2021

in addition to getting financial returns

Impact fund

Disclosure for ESG funds and impact funds◦A type of ESG fund that targets issues related to society, the environment andsimilar, and seeks to create impacts* in regard to those issues based on thefund’
s intention◦Resulting impacts are evaluated in both quantitative and qualitative terms,
and evaluation results are disclosed on a regular basis

Other publicly offeredinvestment trusts

Resona Asset Management

Fund name◦A fund that takes ESG issues into consideration in the, investment processes

Impact fund92

▪Resona Asset Management impact funds (as of December 31, 2022)

With the goal of conveying to customers, in as easily understandable a manner as possible, thepurposes of fund establishment, investment processes, and fund characteristics (including details of
engagements with the investee companies, future plans and policies, and statuses of impact creation
efforts), and other such information in regard to ESG and impact funds, we publish legally requiredmaterials such as prospectuses while also issuing monthly reports, impact reports and otherdocumentation on a regular basis to fulfill disclosure requirements.

* Impacts that help solve social and environmental problems and otherwise have positiveeffects on society as a whole

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R e v ie w s a n d C on s id e r a t ion s o n M a t e r i a l i t yYear 2020: Considerations on Materiality

SourceStewardship Report 2020/2021 ,pp. 16–17

In the beginning of 2020, we conducted a materiality analysis in order to find measures and activities torealize a“desirable future.”We have then carried out an analysis to determine long-term changes inmaterial issues caused by external environment factors (see charts below), such as the COVID-19
pandemic. Based on these analyses, we identified ten types of issues that affect materiality, as shown inthe colored-in boxes in the lower chart.

Materiality matrix created in 2020

Year 2021: Scenario Analysis

Importance to sustainability

Privacy anddata protection
Environmental
pollution and waste
management

Water
resources

ESG issues of particular importanceLabor
practices

Effective utilization of resources,
and resource circulation(material issues)

Lifestyleinfrastructure
resilience

Anticorruption

Diversity andBiodiversity and inclusion
forestconservation

Product quality and safety, andsocial effects of products and services

Employment
Compliance

Access andaffordability for
products and services

Climate changeChild labor andforced labor

Corporate ethics / fairbusiness conduct●…Governance ●…Environmental ●…Society / human capital ●…Society / community ●…Society / products, services and society

Importance to sustainabilityChild labor andforced labor

Labor
practices
Inclusivecommunity

Anticorruption

Employment

Compliance

Access andaffordability for
products and services

Biodiversity andforestconservation

Product quality and safety, andsocial effects of products and services
Corporate ethics / fairbusiness conduct

Workplace health andsafety, employee well-being

Community development andindigenous people’s rights

Importance to long-term investment performance

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Regional Rivalry Model

Natural disasters, biodiversity, poverty, access to resources,
access to food supplies, water-related risks, business incountries/regions involved in conflicts or at high risk,sustainable raw-material procurement, worker rights

Sustainable Model

Tolerance for, and more fair distribution of, socioeconomic
burdens stemming from sustainability-issue solutions;
governance; partnerships; encouragement of newcompetition to foster revolutionary technology creation

Based on the IPCC’s SSP3 scenario, which is characterized bydevelopment with regions in competition, without any
environmental measures in place

In all three scenarios, we must come up with ways to close the gap between the forecasted future and our vision for adesirable future.

Forecasted future

Lifestyle-infrastructure
resilience

Effective utilization of resources,
and resource circulation

Human rights for the socially vulnerable, safety and quality of
new technologies, biodiversity, land rights, inequality inaccess to technologies, human rights violations in relation to
AI ethics and supervision▪Important consideration 2

Materiality matrix (changes in long-term significance)

Environmental
pollution and waste
management

Conventional Development Model

Based on the IPCC’s SSP5 scenario, which is characterized bydevelopment that relies upon fossil fuels without any environmental
measures in place, and which leads to the greatest emission volumes

As we pursue our overarching goal of ensuring a prosperous and happy life for future generations as well as ourcustomers, there are limitations to what traditional economic development can achieve in terms of problem solving. That is
why rapid framework and system changes, as seen in the Sustainable Model, are necessary. However, we expect toencounter obstacles while attempting to realize this model, as such rapid changes will place major economic burdens on
the current generation while also creating inequalities during the transition period.

Importance to long-term investment performance

Water
resources

Material issues▪Important consideration 1

Community development andindigenous people’s rights

Privacy anddata protection

Scenario

Based on the IPCC’s SSP1-1.9 scenario, which is characterized bysustainable development, and which keeps the average global
temperature rise below 1.5°
C

Workplace health andsafety, employee well-being

Stewardship Report 2021/2022 ,pp. 20–29

In 2021 we have assumed multiple scenarios for future projections, while the external-environment
factors were characterized by high levels of uncertainty. While referring to three models created by theIntergovernmental Panel on Climate Change (IPCC)—the Conventional Development Model, theRegional Rivalry Model, and the Sustainable Model—we discussed changes in regard to societal
problems based on three pillars established for purposes of realizing our vision for a desirable future:inclusive socioeconomics, sustainable environments, and corporate culture and overarching goals. Then
we analyzed the important issues encountered therein.

●…Governance ●…Environmental ●…Society / human capital ●…Society / community ●…Society / products, services and society
Inclusivecommunity

Source2022 / 2023

Climate change

Diversity andinclusion

Desirable future

Ratio of 3:4:3 for Conventional Development Model, Regional
Rivalry Model and Sustainable Model (in that order)

Ratio of 3:0:7 for Conventional Development Model, Regional
Rivalry Model and Sustainable Model (in that order)・Difficult to accomplish the overarching goal of providing
greater prosperity and happiness to current and future
generations
・Impacts on sustainability are not integrated as part ofeconomic activity; rather, economic and sustainability
actions are polarizeds・Regarding impacts on society, issues that surpass society’
ability to adapt and respond will surface, adversely affecting
business continuity and resilience

・Fosters a society capable of accomplishing the overarchinggoal of providing greater prosperity and happiness tocurrent and future generations
・Impacts on sustainability are integrated as part of market
economics, stakeholder capitalism emerges to enable
more diverse and multifaceted assessments of corporate
value, and sustainability issues become directly interlinked
with economic issues

In order to actualize the desirable future outlined above, it is necessary to integrate required social andenvironmental impacts as part of market economics and thus foster stakeholder capitalism, while also
cultivating an economic system that provides simultaneous support for technology innovation andcreation which help solve societal problems.
Through these examinations and deliberations, we have been reminded of just how important it is, as
an institutional investor, for us to promote the creation of new value for society by investee companies,
pursue engagement aimed at avoiding and mitigating business risk as it relates to sustainability, andtake consideration of issues not fully addressed by market economics (which can become burdens for
future generations) in our investing activities.

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R e v ie w s a n d C on s id e r a t ion s o n M a t e r i a l i t yYear 2022: Materiality Analysis Based on study on Regional Rivalry Model
Due to various adverse situations and conflicts occurring in the past few years, such as the COVID-19
pandemic and Russia’
s invasion of Ukraine, there are growing fears regarding the weakening of theinternational cooperation and collaborations among diverse parties needed to achieve a desirable future,along with fears that regional rivalry is worsening on a global scale. Resona Asset Management is an
institutional investor that focuses on ESG (environmental, social, and corporate governance) issues over thelong term to realize a desirable future for all. We are deeply concerned that trends are taking us further
from achieving an ideal future. Because the characteristics described by the Intergovernmental Panel on
Climate Change (IPCC) Regional Rivalry Model are now increasingly likely to emerge in the foreseeable
future, we predict that the gap between future projections and the desirable future will widen further.
If things proceed in line with the Regional Rivalry Model, a range of social problems will result, including
slowed growth for the global economy, rapid population increases, food shortages, exacerbation of poverty
problems, reduced levels of international cooperation, and slowing technological innovation. These, in turn,are predicted to lead to problems including weakening of society’s ability to adapt and respond to various
challenges, destabilization of social conditions, increased frequency of international conflicts, and the spreadof illegal economic activity and corruption, among others.
Therefore, we have carried out a materiality analysis based on the possible emergence of Regional Rivalry
Model conditions. Our matrix for ESG issues is shown below, with accompanying explanations ofincreasingly important material issues and newly emerging material issues provided in the right-hand chart.
Through examination of these analytical results, we have determined that the expected roles of thecompanies are expanding to realize a more sustainable society, and that the following efforts can lead to
improved corporate values; reducing negative social and environmental impacts, and, contributing to solve
social issues. In addition, we, as an institutional investor, have recognized the importance to conduct
responsible investment activities, which are rooted in engagements which considers the future changes of
ESG issues and companies’roles.

Expected ESG issues under the Regional Rivalry Model

Examples of ESG issues that increase in importance amid regional rivalry● Governance

Issues・Compliance・Anti-corruption・Corporate ethics / fair businessconduct

Effects of regional rivalry
As ESG integration becomes a large factor in investing, issues related tocompliance, anti-corruption, corporate ethics and similar are seen as increasingly
integral to corporate activities. However, international conflicts that havedetrimental effects on law and order, as well as increasingly pronounced
economic disparities, elevate risk for weakening of responsibility in corporate
actions. Therefore, it is important to refocus firmly on these issues.

● Environmental

Issues・Climate change
・Biodiversity
・Effective utilization of resources, andresource circulation

Effects of regional rivalry
Without international cooperation, it is impossible to solve problems related toclimate change and preserve biodiversity. Regional rivalry weakens the necessary
bonds of cooperation between nations, which can delay efforts toward solving,and even exacerbate, environmental problems.

● Society / human capital

Issues・Supply chain worker rights（child labor, forced labor）

・Labor practices（including working hours, worker safety
and well-being）

Effects of regional rivalry
International conflicts create increasing numbers of international refugees, which
results in larger numbers of workers in vulnerable positions. This can lead toincreasingly poor labor conditions, modern-day slavery, and other negative
consequences in both developed nations and developing nations.

●…Governance ●…Environmental ●…Society / human capital ●…Society / community ●…Society / products, services and society
Supply chain worker rights(child labor, forced labor)

Labor practices(including working hours, worker
safety and well-being)

Impact on sustainability

Effective utilization of
resources, and resource circulation

Access and affordability for
products, services andCommunity andtechnologies
indigenous people’s rights

Animal welfare（New）

Employment

Inclusivecommunity

Ethical and human-rights-related
effects of new technologies（New）・Community development andindigenous people’s rights

Product quality and safety,
and social effects of products
and services

Anti-corruption

Reskilling(New)

ComplianceCorporate ethics /fair business conduct

・Inclusive community

Diversity andinclusion

Biodiversity

Responsible marketingand consumer rights（New）

Environmental
pollution and waste
management

IssuesWater resources

Health and nutrition (New),and lifestyle-infrastructure resilience
Grievance mechanisms
and relief measures(New）● Society / community

Climate change

Privacy anddata protection

Business in countries / regions
in conflicts or at high risk
（New）

Resilience to ensurebusiness continuity（New）・Health and nutrition, and lifestyleinfrastructure resilience

Effects of regional rivalry
International conflicts not only destroy the foundations for safe, secure lifestyles
in affected regions, they also create the risk of exacerbated food security issues
on a global scale. These, in turn, have the potential to make communities incountries with low income levels increasingly vulnerable.

● Social / products, services and society

Issues

Effects of regional rivalry・Access and affordability for
products, services and technologies

In a world characterized by global business operations, conflicts in certain
regions can sever supply chains, trigger material- and energy-price spikes, andlead to other problems that make it difficult to provide people with essential
products, services and technologies. Moreover, conflicts in markets that serve asbases of operation and/or sales targets for companies can heighten the risk thatsaid companies will unwittingly commit human rights violations, ethical violations
and/or other damaging acts due to reasons attributable to the conflict situation.

・Resilience to ensure business
continuity
・Business in countries / regions inconflicts or at high risk*colored text in this chart refers to new issues expected to surface under the Regional Rivalry Model

Impact on long-term investment performance
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