Sustainability Report2022

Introduction— Contents

Introduction“Taking purposeful steps today” .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 3
— a message from the President
Snapshot of 2021 .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 5
“Moving towards equality” .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 6
— an interview with our Outside Directors

Investment Management

Investment Management

Corporate Sustainability

Looking Ahead

New Zealand Equity and Bond Teams .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 29
US Investment Team .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 31
Portfolio Solutions Group .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 32
Proxy voting and engagement .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 33
Proxy voting case studies .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 34
Engagement case studies .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 35
Promoting and implementing ESG best practices .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 36

Corporate Sustainability— a message from the Chief Investment Officer“Making a positive impact in our communities” .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 39
— a message from the Executive Chairman

Our ESG investment approach .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 11

“The catalysts for meaningful change” . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 41

“Integrating ESG into everything we do” .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 9A history of our sustainable investment activities. .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 10
Japan Equity TeamA message from the Head of Japan Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

CSV-based company assessments .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 13

Japan Equity Research Group .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 14
Active Ownership Group .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 16

Growth Strategy Fund Management Team .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 17

Value Strategy Fund Management Team .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 18

Sustainability promises .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 40
— a conversation with the Global Co-heads of Sustainability

D&I enriches our firm’s culture .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 43
Enhancing our commitment to the environment . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 44
Working Group initiatives. .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 45

Looking Ahead

Japan Investment Technology Team . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 19

Looking ahead .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 54
— Staying focused

Global Equity Team .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 22

— our participation in external initiatives

Japan Fixed Income Team .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 21
Global Fixed Income Team .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 24
Asian Equity Team (Ex. Japan) . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 26

Asian Fixed Income Team (Ex. Japan) .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 28
Published in 2022, this report describes our sustainability journey in 2021

Nikko AM
Sustainability Report 2022

External commitments .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 55
Contact information . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 56
Important information . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 57

Cover photo: The individuals featured are staff members of Nikko AM

2

Introduction

Investment Management

Taking purposefulsteps today
A message from Stefanie Drews, President

To deliver on long-term targets, weneed to set interim goals along theway. The year 2021 was an important
one for setting up clear signposts
that will get us taking purposefulsteps on the journey today so we
can help make the world moresustainable.
We are now on our way to achieving a number of challenging goals for each of our three core areas of sustainability: diversity & inclusion (D&I), reducing inequalities, andenvironment & climate.
In the area of D&I, our Global Diversity & Inclusion Policy
cements our commitment to diversity and our belief that
greater D&I will bring our clients an even better range ofsolutions. In March 2021, we announced our aim of “30
Nikko AM
Sustainability Report 2022

Corporate Sustainability

Looking Ahead“Connections have also beenstrengthened from the top downwith senior management more
involved than ever in promoting
sustainability at Nikko AM“

by 2030”. This will be a strong motivator for us to increase
the number of women in management positions globally to
30% — from 18.4% — over the coming years.
We are also making strides in the area of reducing
inequalities — in fact, we’re running. Although remote work
has been the norm, employees around the world havecontinued to make a difference in their communities by
supporting several charities, and one way they have done
this is through virtual runs in Japan, the UK, Singapore, andHong Kong.
Another initiative I would like to highlight is the launch of
Nikko AM New Zealand’s Freedom Fund. This investment
fund gives clients the chance to put their dormant capital
towards the fight against modern slavery and human trafficking. We hope that it will have a lasting impact on many
people’s lives.
In the area of environment & climate, we have continued
our important carbon offset projects. But we also want totake a more active approach in reducing our own carbon

3Introduction

Investment Management

Corporate Sustainability

Looking Ahead“It has been very inspiring
to see that, what started
organically, from the bottom up,by passionate individuals at ourfirm, has become an international
programme, championed fromthe top by senior management,
and is translating into global
action — and impact”

Stefanie Drews working from home

footprint. In September, we updated our environmental
policy and set a target of cutting greenhouse gas
emissions across the Nikko AM Group by 40%, peremployee, of 2019 levels by 2030. The pandemic has
shown us that we can achieve strong business resultswith lower emissions, and we want to continue down
this path, even as business normalises over the next few
years.
In November, we joined the Net Zero Asset Managers initiative to affirm our commitment to supporting the goal of
net zero greenhouse gas emissions by 2050.
For everyone at Nikko Asset Management involved insustainability efforts, 2021 was also the year we became
more connected. Our Global Sustainability Team made it
Nikko AM
Sustainability Report 2022

a priority to see that our nine working groups became as
closely integrated as possible, encouraging them to communicate regularly, share ideas, and support one anotherin a variety of ways.
Connections have also been strengthened from the top
down with senior management more involved than ever inpromoting sustainability at Nikko AM globally. It has beenvery inspiring to see that, what started organically, fromthe bottom up, by passionate individuals at our firm, has
become an international programme, championed fromthe top by senior management, and is translating into
global action — and impact.
A top priority for us now is to further foster a culture thatvalues sustainability — so we have set yet another target:

to raise the number of employees who volunteer in sustainability working groups from 8% to 15% by 2025.
Now that we can clearly see some of the stops along
the path, we will continue to take steps every day tomake sure we get to where we need to be.

•

Stefanie Drews
President

4Investment Management

Introduction

Corporate Sustainability

Looking Ahead

Snapshot of 2021
Sustainability at Nikko AM by the numbers

Volunteers dedicated to sustainability

Accelerated cultural shift

Number of volunteers in each of Nikko AM’s working groups

Number of internal events

30
14

NAM Europe WG

NAM Women’s GroupNAM LGBT GroupNAM Environment WG
NAM Abilities

7

10
7
10
5

2020

NAM Americas WG

11

Global Racial Equality GroupNAM Asia WG

8

2021

Passionate involvement from colleagues
Number of internal events

Global Sustainability TeamTokyo
Singapore

484

6**
3**

8

NAM New Zealand WG

125

4
108

Working Group Volunteer Total

Global Sustainability Team Total(approx. 8.1% of employees)(dedicated members: 2)

65*

9**

2020

*Excluding Global Corporate Sustainability Team. Eliminating double counting of dual members.
**Including members working concurrently in other departments. As of 31 Dec 2021

2021

250

Averagenumber ofattendees

2020

2021

Maximum
number ofattendees

Global events in dual languages
10
of 14

Nikko AM
Sustainability Report 2022

JP Abilities
JP Women
JP Environment
JP LGBT
SG, SG/EU
NZ
Global Sus. Team

71.4%
2020

28
of 30

93.3%
2021

5

Introduction

Mihoko Sogabe, Outside Director

Investment Management

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

Moving towards equality

Three of our outside directors discussed the theme of sustainability and theadvancement of women.

With the establishment of the Corporate Sustainability
Department in 2018, we placed sustainability at theheart of our corporate strategy. How has Nikko AM
evolved since then?
Mihoko Sogabe: As an asset manager, Nikko AM is
responsible for addressing sustainability in two ways: promoting our ESG investment activities and behaving sustainably as an organisation. I feel that, since the pandemic
began, we have accelerated the pace of these efforts andare now seeing many positive results.

Nikko AM
Sustainability Report 2022

Yoichiro Iwama: Nikko AM’s senior management has
been working to communicate the firm’s stance on sustainability, both internally and externally. Although we aremaking steady progress on this front, I think there is stillroom to bolster this effort.
We have set a target to raise the number of female
managers in the Nikko AM Group to 30% (from the current level of about 20%) by 2030. What do you think weneed to do to achieve this goal?

Corporate Sustainability

Looking Ahead

Mari Yamauchi, Outside Director“The most important way to ensurethat Nikko AM truly maximises
its human capital is to create aframework that gives everyone
equal opportunities”

Yoichiro Iwama: My view is that the ultimate goal
should be to achieve an equal ratio of men and women.
So, I consider 30% an interim goal. Since women currently make up about 37% of Nikko AM’s workforce,the 30% female managerial goal is an appropriate firststep. The most important way to ensure that Nikko AM
truly maximises its human capital is to create a framework that gives everyone equal opportunities and fairly
evaluates the abilities of employees, regardless ofgender.

6

Introduction

Investment Management

Yoichiro Iwama: One option we could consider as aninvestment in our people is a programme for active
international personnel exchange. If we have more global
employees who are exposed to the diverse viewpoints
and values of those with different experiences, skills, andattributes, not only will this contribute to the sustainablegrowth of our company, it will strengthen the humancapital of the organisation and show our clients that weare a Japanese asset manager with a global mindset.

The promotion of women’s participation in the workplace is not only a matter of addressing their careergoals and work styles. It is also about reforming the work
styles of men and, as a result, creating a workplace thatis comfortable for all employees, male and female. Some
examples of this are ensuring that all male employees
who become fathers take childcare leave, and that men
and women take the same amount of time away fromwork.

At the same time, the company needs to help women progress and to provide them with the tools to enable this.
When women rise to a new position, they face new challenges that can be difficult at first, but they need to understand that this is also an opportunity to quickly enhancetheir skillset. This boosts confidence, makes work moreinteresting, and increases motivation to rise further. It’s
important for the firm to keep on motivating our female
employees to make that virtuous cycle a reality for them.
The 2021 revision of Japan’s Corporate Governance
Code also calls for ensuring diversity. Do you haveany suggestions about how Nikko AM should be
addressing issues such as human resource training or
recruitment policies as part of its corporate strategy?

Nikko AM
Sustainability Report 2022

Looking Ahead

diverse range of individual needs, for example, throughtalent development and job allocations tailored topersonal life plans and goals. The role of HR will become
ever more important.

Mari Yamauchi: In order to achieve the target by 2030,
the firm needs to increase the ratio of women in managerial positions by more than 1% each year. This is morethan achievable, but we need a systematic approach,such as mandating the inclusion of female candidates
for recruitment and promotion, and setting numerical targets at department head and recruiting manager
levels.

Mihoko Sogabe: I agree with Yamauchi-san that weneed to implement work-style reforms for male employees to achieve this target. By having men experiencechildcare and nursing care first-hand, it will become thenorm for men to be actively involved in everything that ishappening at home. This, in turn, helps to create mutual
understanding among all employees at work and leads
to a better working environment for everyone.

Corporate Sustainability

What are your expectations and hopes for Nikko AM?

“Whether in the area of investment
management or our own
sustainability efforts, I believe
engagement activities are central to
our pursuit of sustainable growth.”

Mari Yamauchi: The objectives of the younger generation
are changing with the times, and being self-fulfilled
and making social contributions are more importantto this group than ever before. So, our efforts in ESG
investment and sustainable business operations enhance
our competitiveness in recruitment. As employees
increasingly seek a flexible work style, the human resource
department will need to ensure they are catering to a

Yoichiro Iwama: Since Nikko AM established the
Corporate Sustainability Department three years ago,
its initiatives have steadily been taking shape. Whether
in the area of investment management or our own
sustainability efforts, I believe engagement activities arecentral to our pursuit of sustainable growth. As Nikko AM
aims to become a top-tier global asset manager, I intend
to work with the management to promote our corporate
sustainability initiatives further.
Mihoko Sogabe: As Iwama-san said, by further
strengthening our internal engagement, we can become
a company that employees are enthusiastic about
working for. I believe this will be one of the key elements
in meeting the expectations of society and contributing
to societal growth. I expect Nikko AM to continue on thissustainability journey, and I will support the management
so that the company can realise its goals.
Mari Yamauchi: Just as Nikko AM expects its investee
companies to meet high standards to realise a sustainable
society, we too need to continue to be proactive andposition ourselves as industry leaders. I believe thatefforts to create a comfortable working environment
for all, and at the same time improve productivity, cancontribute to the realisation of a sustainable society where
diverse opinions and values are respected.

•

7

Introduction

Investment Management

Corporate Sustainability

Looking Ahead

Investment
Management
Nikko AM
Sustainability Report 2022

8

Introduction

Investment Management

Integrating ESG into
everything we do

Corporate Sustainability

Looking Aheadon the spirit of our fiduciary and ESG principles — andmaking enhancements through innovative solutions — weremain firmly committed to providing clients with highquality financial services that meet their needs.

•

A message from the Chief Investment Officer

At Nikko AM, we regard environmental, social, and governance (ESG)
principles as a core part of our corporate philosophy and have integrated them into our investment
decision-making process.
Given that we launched Japan’s first socially responsible investment fund in 1999, we now have over 20 years’
experience in ESG, working consistently to connect ESG
factors with excess returns.
In November 2021, we joined the Net Zero AssetManagers Initiative (NZAM), a group of asset managers
from around the world who are committed to achieving
net zero greenhouse gas emissions by 2050. We view climate change as one of the most urgent and life-threatening challenges global society faces today. Throughour participation in NZAM and other international initiatives — including The Investor Agenda, the Task Force on
Climate-related Financial Disclosures (TCFD), and Climate
Action 100+ — we will strengthen our response to climatechange in line with the Paris Agreement and the United
Nations’ Sustainable Development Goals.
One way we are trying to connect our efforts to tackle
climate change with achieving excess returns is throughour internally developed Creating Shared Value scoring system for assessing Japanese equities. As weare always working to improve ESG integration in our
Nikko AM
Sustainability Report 2022

investment management operations, we included some
additional ESG components to this scoring system in 2021,
and we have also started using a new proprietary ESG
analysis tool, which won the BQuant Mastermind award at
the Bloomberg BQuant Hackathon event in October.
Just as the debate around ESG is intensifying, we areseeing a sudden shift in the energy mix of some countries,
which is leading to increased power shortages and geopolitical instability. In some areas, we are observing phenomena that could be interpreted as transition risks. Throughwork led by our Active Ownership Group in Japan and our
global investment specialists overseas, we are proactively
engaging with investee companies to encourage them toengage in climate action and other corporate ESG activities, in addition to sustainable value creation.

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

While we continue to take action on “E” (environmental)
themes, which are at the heart of our ESG activities, wehave also announced Nikko AM’s key ESG themes, which
demonstrate our firm’s commitment to addressing other
ESG issues. We feel we have many opportunities to tackle
those relating to the “S” (social) of ESG, given our focus
on work styles, personnel strategies, labour productivity,
and the promotion of diversity. Furthermore, our ongoingwork in the “G” (governance) area includes discussions on
the effectiveness of the boards of directors of our investee companies in view of revisions to Japan’s Corporate
Governance Code, the need for capital cost conscious
business management, approaches to group governance,
and the protection of minority shareholders’ interests.
More than ever, asset managers are playing an importantrole in addressing ESG challenges. By taking action based9

A history of our sustainable
investment activities
1999
Launched Japan’s firstsocially responsible
investment fund2007
Became a signatory of
the UN’s Principles for
Responsible Investment (PRI)2018
Became thefirst Asianheadquarteredasset manager
to support all
four areas under
The Investor
Agenda*2010
Launched the world’s first
fund developed with theWorld Bank

2017
Established the engagement
and proxy voting specialist team,called the Active OwnershipGroup (in Japan)

2019
Published our inaugural TCFD Report

2011
Signed onto Japan’s Ministry ofEnvironment-led Principles for
Financial Action for the 21st Century

2017
Enhanced our governance byrequiring full disclosure of our
proxy voting results (in Japan)

2019
Became a memberof the International
Corporate GovernanceNetwork

2020
Published our inaugural
Sustainability Report

2011
Served as chair of the
PRI Japan Network (April
2011–March 2014)

2016
Established the Stewardship andVoting Rights Policy OversightCommittee and the Global ESG
Steering Committee

2020
Enhanced our governance byrequiring full disclosure of our
proxy voting results (in the UK)

2013
Developed
the Creating
Shared Value(CSV) equity
investment
strategy for
Japan

2021
Joined the Net Zero AssetManagers Initiative*This includes signing and supporting the Global Investor Statement to Governments on Climate Crisis, Climate Action 100+, the Task Force on Climate-related Financial Disclosures (TCFD), and the Asia Investor Group on Climate Change working group, based on Nikko AM research.

Nikko AM
Sustainability Report 2022

10

Our ESG
investment approach
At Nikko Asset Management, we act
as a fiduciary on behalf of our clientsand are firmly committed to putting
their best interests first.
We place fiduciary and ESG principles at the heart of ourbusiness, and they are the highest guiding themes of ourcorporate actions — and the foundation of our corporate
value.
We regard “fiduciary” as a general term that covers awide range of roles and responsibilities assumed by our
employees, and we believe that a commitment to environmental, social, and governance (ESG) principles is essential to carrying out our fiduciary duty. By incorporating
ESG considerations in all our investment decision-making processes, we can contribute to long-term corporate
value creation and sustainable economic growth.
CODE OF CONDUCT REGARDING FIDUCIARY AND ESG
PRINCIPLES
1. Provide higher-quality investment management
		Basic guidelines– Offer high-quality asset management services fromtrue investment professionals– Make efforts to enhance our governance structure
and activities as an institutional investor fulfilling
ESG requirements, the Stewardship Code, and other
responsibilities

Nikko AM
Sustainability Report 2022

2. Develop products and deliver easy-to-understandinformation that is always aimed at maximising
investor interests
Basic guidelines– Develop high-quality products that maximise investor
interests and respond to investors’ changing needs– Create and deliver important information, such as
fees, in an easy-to-understand way
3. Strengthen corporate governance
Basic guidelines– Foster and deepen a strong compliance culture, andestablish rigorous compliance processes– Implement appropriate mechanisms to motivate
employees
IMPLEMENTING FIDUCIARY AND ESG PRINCIPLES
Board of Directors
Fiduciary and ESG principles are at the heart of everything we do at Nikko AM. Resolutions, reporting, anddeliberations relating to these principles are carried out at
our Board of Directors meetings.
Global Executive Committee
Members of the Global Executive Committee (GEC) areappointed by the Board of Directors. Pursuant to the
Global Executive Committee Charter, which is approvedby the Board of Directors, the GEC makes resolutions
and holds discussions on business execution matters,
excluding those for which a Board of Directors resolution is required. The GEC also develops frameworks toensure that employees are fully informed about the fiduciary principles; conducts reviews of internal activities toimprove our initiatives; and gathers relevant market information. Additionally, the committee submits items forapproval to the Board of Directors as necessary.

Fiduciary and ESG
principles are at theheart of everything we
do at Nikko AM
ESG Global Steering Committee
The ESG Global Steering Committee was launched in
November 2016. It is chaired by the CIO and is made upof 14 members who are mainly leaders from our global
investment management teams. Meetings are observed
by many members of the sales, client services, and products departments. The committee meets quarterly to discuss ESG investment initiatives, their implementation, andpotential new ESG approaches. It also promotes realisingthese initiatives. The committee reports its activities tothe Board of Directors.
Stewardship & Voting Rights Policy OversightCommittee
The Stewardship & Voting Rights Policy OversightCommittee was launched in June 2016 to enhance thetransparency of Nikko AM’s stewardship activities inJapan and strengthen its governance. The Stewardship& Voting Rights Policy Oversight Committee is an independent committee, one of the internal governancebodies recommended under Japan’s Stewardship Code.
The committee has a high degree of independence, withfour independent external members out of seven, as ofDecember 2021. As an independent body with oversightauthority, the committee monitors Nikko AM’s engagement with investee companies and proxy voting. This is toensure that they are acting in line with fiduciary and ESG
principles, and truly serving the interests of investors. In
principle, the committee meets quarterly and reports its
activities to the Board of Directors.
In addition to these groups, the Stewardship OversightCommittee at Nikko AM Europe was established toenhance transparency in stewardship activities, such as
engagement and proxy voting, in the region.

•

11

Introduction

Investment Management

JAPAN EQUITY TEAM

Co-creating social andeconomic value

It was also a year of progress in making sustainability areality, with an increase in the number of initiatives being
carried out. One of the most notable developments wasa growing sense of urgency about the risk of climatechange around the world. In October 2020, Japan committed to achieving carbon neutrality by 2050, and 2021
was a chance for all levels of society to push forward
decarbonisation initiatives.

Nikko AM has a long history of co-creating social andeconomic value through our evaluations and engagementwith companies. We built on that record in March 2021 byestablishing these three key ESG themes as considerations we deem important for most Japanese firms:
Nikko AM’s key ESG themes

For this structure to change, firms will need to make investments to improve efficiency in a variety of areas, such as byraising productivity with limited human capital through education, vocational training, and ensuring the right people arein the right jobs. Furthermore, in order to make such strategic investments in human capital, companies need to haveeffective governance. Therefore, these key ESG themes areclosely connected to each other.
Although companies’ approach to ESG factors are
addressed primarily through non-financial information,
we consider it important to quantify them where possible;
and recognise the materiality of each issue by evaluating
the impact these issues have on companies’ future earnings and shareholder value. Our research into the relationship between the efficiency of human capital investment

12
3

Our investment management teams take a unified
approach to company analysis and evaluation as well as
dialogue and engagement with companies, centred on the
key ESG themes noted above. At the same time, we also
fully take into account variances between ESG risk factors and revenue opportunities that companies face. This
is what we call Creating Shared Value, a type of company
assessment, which is how the Japan Equity team integrates
ESG into our investment process. Through this, we strive toenhance the value of investee companies and accumulate
investment returns over the medium- to long-term.

•

Japan Equity organisational structure
Trading Department(16)

E – Action for a Decarbonised Society
S – Human Capital and Productivity
G – Effective GovernanceIn order to realise a decarbonised society, it is necessary
to effectively utilise the decarbonisation technologies possessed by Japanese companies, and at the same time,to transform the industry structure through digitalisation.

Looking Aheadand shareholder value1, as well as earnings propagation
effects in supply chain networks2, have led to us being
awarded the Securities Analysts Journal Prize for two
consecutive years. We also have been conducting joint
research on artificial intelligence with the University ofTokyo since 2018 to enhance our investment management capabilities with cutting-edge digital technology3.

A message from Yasushi Ishikawa, Head of Japan Equity

In 2021, the world became moreaware of the crucial need for sustainability than ever before, at the national,
corporate, and individual level.

Corporate Sustainability

CIO

Strategist

Head of Equity FundManagement Department

GrowthStrategy
FundManagement
Team
(3)

Value
Strategy
FundManagement
Team
(4)

Research
ActiveManagement
Team
(3)

Strategic
Investment
Team
(2)

Alternative
Research
Team(2)

EquityResearch
Team(11)

ActiveOwnership
Group
(4)

Ishikawa, Y. and K. Hasegawa, “Efficiency of Japanese Corporate Investment in Human Capital and Shareholder Value”, Securities Analysts Journal, June 2019 (FY2019 Securities Analysts Journal Prize)
Tsuchiya, S., “Earnings Propagation Effects through the Global Supply Chain Network”, September 2020 (FY2020 Securities Analysts Journal Prize)
Suzuki, Katagi, Sakaji, Izumi, and Ishikawa, “Stock Price Analysis Using Combination of Analyst Reports and Several Documents,” November 2019 (Best Paper Award at CDEC 2019, the 2nd international workshop)

Nikko AM
Sustainability Report 2022

12

Introduction

Investment Management

Corporate Sustainability

JAPAN EQUITY TEAM

CSV-basedcompany
assessments

In 2011, Professor Michael Porter ofHarvard University put forward theconcept of Creating Shared Value(CSV) for corporate management.
He proposed that companies should play a central
role in solving social challenges and that the solutions
they provide can result in innovation, thereby creating
both social and economic value1. He argued that suchsocially-centred corporate activities are what capitalism
should inherently aim for.
Nikko AM was an early supporter of the CSV concept
and started conducting CSV-based evaluations of major
Japanese companies in August 2013. According toProfessor Porter, to his knowledge, Nikko AM was thefirst asset manager to introduce corporate evaluations
based on the idea of CSV.
As shown below, Nikko AM’s application of CSV isbroadly divided into three fields: ESG, market competitiveness, and financials. These fields include a total of
12 items to be evaluated. As the social challenges andbusiness opportunities a company faces differ greatly
depending on its sector and other factors, our corporate
analysts evaluate firms and assign CSV scores based on
1

ESG— Human Resources —— Carbon Neutrality —— Environmental & Social —— Management Implementation —Looking Ahead“the widespread
adoption of suchsocially centred
corporate activities
can reinvent thecapitalist system”— Resilience —Financial

12 CSVevaluation
factors— Shareholder Return —— Financial Discipline —MarketCompetitiveness— Entry Barriers —— Brand Equity —— R&D/CAPEX —— Cost Advantage —— Market Growth Potential —each company’s key challenges and business environment.
In particular, the final evaluation of ESG field are determinedthrough a cross-functional approach that includes impartial assessments from the Active Ownership Group, who arein charge of stewardship activities, along with the Equity
Research Group Manager.
Since 2013, our analysts in charge of corporate CSV
evaluations have been assigning investment ratings andtarget stock prices to firms based on the companies’ ability to create shared value. Fund managers then use thisbottom-up assessment to integrate ESG into theirfunds. We are currently further strengthening the
ESG/CSV integration in our funds with the introductionof CSV stock prices that reflect the premium/discountthat CSV evaluation generally brings to the stock price.
We are confident these enhancements will generatevalue in the form of investment returns.

•

Porter, M., and M. Kramer, “Creating Shared Value,” Harvard Business Review, Jan-Feb., 2011 Issue.

Nikko AM
Sustainability Report 2022

13

Introduction

Investment Management

Corporate Sustainability

Looking Ahead

JAPAN EQUITY TEAM / RESEARCH GROUP

Recognising the realdemand for ESG

By Masanori Hoshino, Group Manager of the Japan Equity Research GroupWe increasingly see data showingthat ESG factors have a growing
impact on stock price performance.
We believe that these results are only natural, given thereal demand for ESG factors to be incorporated by businesses. And firms are realising that they have to pay
attention. For instance, decarbonisation can lead to bothbusiness opportunities and risks; having a high environmental burden can damage a company’s brand value; andpersonnel shortages are growing in severity.
Our CSV evaluations attempt to explain corporate value
by assigning scores in the three areas of ESG, market
competitiveness, and financials. This framework has led
us to consider ESG in conjunction with economic value,
US population forecast by age group
Generation Z (Year of Birth 1997-2012)

80
70

Millennials (1981-96)

60
50

Generation X (1965-80)40Baby Boomers (1946-64)

30
20
0

2010

2015

2020

2025

2030

2035

Note : Figures up to 2019 are population estimates andthose for 2020 onward are from 2017 National Population Projections
Source : United States Census Bureau
Created by Nikko Asset Management for illustrative purposes.

Nikko AM
Sustainability Report 2022

•

2040

Age

61-65

2021

2025 (projection)

2030 (projection)

56-60
51-55
46-50
41-45

Silent Generation (1928-45)

10The graph on the left shows that one reason the size of acompany’s environmental burden affects its brand value
is the rise in consumption attributable to Millennials andGeneration Z. By empathising with the values of these generations, we believe we can develop various investment
ideas and enhance the sustainability of our investment
management performance. To encourage robust discussion from different viewpoints — and keep up with investment opportunities associated with our changing times— the Japan Equity Research Group strives to have analysts from different age groups on the team (see the chart
below).

Analysts by age group(Million people)

90

and we expect CSV evaluations to play an ever-greater rolein our integration of ESG considerations at Nikko AM.

“one reason the size of acompany’s environmental
burden affects its brand value
is the rise in consumption
attributable to Millennials andGeneration Z”

36-40
2045

2050

31-35
26-30
21-25

14

Introduction

Investment Management

Corporate Sustainability

Looking Ahead

JAPAN EQUITY TEAM / RESEARCH GROUP

ESG solutions need to beconsidered from both aglobal and local perspective

Playing our partto build a better
society

By Yukiko Hanai, Sector Analyst,
Japan Equity Research Group

By Tatsuhiko Ikeda, Sector Analyst,
Japan Equity Research Group

Companies are affected not onlyby their competitive power, butalso by their management policies and strategies, and nonfinancial information disclosures.

Sustainability is a key factor inevaluating investee companies.

Given the growing importance of ESG
issues in company management, myjob involves deepening my understanding of the firms I cover through my regular
engagement with them.
An analyst’s contribution to fund performance goes beyond analysing fundamentals. Fluctuations in the relative market
positioning of stocks and changes in investor preferences are also important considerations. I judge which market areas look
the most promising and where we are likely
to find value that has yet to be priced into
stocks. I also need to determine the righttime to act and, for this, I draw on the expertise of our fund managers in addition tosell-side analysts and salespeople.
What I find most rewarding about my work
is making initial decisions, working with fundmanagers, and seeing the results reflectedin fund performance. As financial marketschange every day, we continuously work tostay on top, interviewing experts in various
Nikko AM
Sustainability Report 2022

fields and management at each company toevaluate their efforts in non-financial areas.
The degree to which sustainability initiatives have been adopted varies from company to company. So, instead of merely
basing investment decisions on how a firm’s
sustainability-related disclosure information compares with other companies, weshould also focus on the extent to which
companies have improved with regard tosustainability.
On the Japan Equity Research Group, we
continue to enhance our operations andmake them more sustainable. The baseof all our business activities is the goal of
benefiting others and contributing to thewell-being of society as a whole. We will doour utmost to help solve societal issues
through our investment activities andcontribute to building a better society as acorporate citizen.

•

Increasingly, firms need to build sustainablebusiness models as the impact of theiractivities on the global economy grows andlimitations on natural and human capital
become more apparent.
After gaining an understanding of the roles
and issues that companies and industries
have, analysts at investment management
firms need to gather information oncompanies’ management policies and theirinitiatives to realise a more sustainable
society, then engage with firms while
maintaining a medium- to long-term
perspective.
Among the various sustainability initiatives
being implemented, companies’ actions
to achieve carbon neutrality have received
widespread attention. Also, in addition totheir earnings results, businesses now
actively release information on their contributions towards realising a decarbonised
society.
Climate action and increased awarenessof the consequences of global warming
are creating a growing consensus throughout the world on the need to decarbonise.

For companies that offer superior products and services, this could lead to awide range of global business opportunities. At the same time, the differing economic circumstances between countries
and regions will also make it necessary
to customise decarbonisation solutions.
This is likely to create winning opportunities for players that launch businesses
adapted to the unique circumstancesof each region. In order to tie decarbonisation with corporate valuation, it isimportant to have both global and local
perspectives.
There is no one uniform solution to realising a decarbonised society. That said,
the Japan Equity Research Group willcontinue to act as a catalyst for activities
that lead to a sustainable society throughour research, analysis, and engagement
activities.

•

15

Introduction

Investment Management

Corporate Sustainability

Looking Ahead

JAPAN EQUITY TEAM / ACTIVE OWNERSHIP GROUP

Active engagement,
better outcomes

Enhancing our stewardship activities can lead to greater returns

At Nikko AM, we believe businesses thatprovide solutions to societal issues canhelp create economic value.

Nikko AM
Sustainability Report 2022

“we aim to build win–win relationships through which
companies benefit from sustainable growth in corporate
value and investors secure investment returns”

Working within the Japan Equity
Fund Management Department, theActive Ownership Group (AOG) leads
stewardship activities, including proxyvoting, engagement (i.e., constructive,
purposeful dialogue with investee
companies), and ESG integration. By
combining our diverse knowledge andexperience, as well as coordinatingwith other departments such as
the Investment Technology FundManagement Department, we strive
to enhance the sophistication of ourstewardship activities and deliver greater
returns for our clients.

Throughout 2021, we worked
to enhance sustainability in ourstewardship activities. In March,
we publicly announced our key
ESG themes (E – Action for a
Decarbonised Society; S – Human
Capital and Productivity; G – Effective
Governance), and we are addressingthese key themes both in ourcompany analyses and throughour engagement. Then, in April, wewelcomed our first dedicated GroupManager.

engagement
in a unified
way as a
department.
We also
improved our
engagement
recording andmanagement
methods, andMasahiko Komatsu,
introducedGroup Manager of the Active
Ownership Group
milestone
management in our engagement.

In August 2021, we introduced asector assignment system within ourgroup and improved our coordination
with the Japan Equity ResearchGroup analysts, which is helping us
to ensure we conduct high-quality

In 2022, the group will focus on
managing engagement milestones tofull effect in order to secure returns
through engagement.

Our fund managers and analysts interact
with companies and hold discussions
on a diverse range of topics — based on
this shared understanding, as well theirown viewpoints. By exchanging mutually
beneficial information and opinions,
we aim to build win–win relationships
through which companies benefit fromsustainable growth in corporate value
and investors secure investment returns.

•

16

Introduction

Investment Management

Corporate Sustainability

Looking Ahead

JAPAN EQUITY TEAM / GROWTH STRATEGY FUND MANAGEMENT TEAM

Finding firms that have a strong
environmental record“For more than 20
years, Nikko AM has
held the convictionthat companies are
more competitive when
they take meaningfulactions to protect theenvironment and that
this is essential to theirsurvival and growth”

Working to bring greater attention to “invisible” values

On the Growth Strategy FundManagement Team, we believe that
excess returns can be secured by
identifying competitive companies
through bottom-up fundamental
research and investing in true growthcompanies that are expected to see
medium- to long-term profit growth.
Nikko AM
Sustainability Report 2022

For more than 20 years, Nikko AM has held theconviction that companies are more competitive when
they take meaningful actions to protect the environment
and that this is essential to their survival and growth. Our
team manages Japan’s first socially responsible fund,which was launched in 1999. The environment-themed
fund was intended to meet the needs of investors
seeking to invest in companies whose environmental
policies they agree with.
The fund selectively invests in ecologically soundcompanies that have a strong environmental record inaddition to a clear management vision and competitive

strengths. In addition to data on corporate profitability andgrowth potential, we expanded the scope of the corporate
evaluations used for this fund by adding environmental
excellence, as an ESG consideration, as well as Nikko AM’s
Creating Shared Value evaluations. These evaluations,
therefore, cover not only financial information and other“visible” values, but also “invisible” values such as action onwaste disposal and biodiversity, in view of climate change,sustainable governance, and stakeholder interaction.
In recent years, growing interest in ESG investments hascreated a more conducive environment for assessing“invisible” values to generate sustained excess returns.
However, methods for disclosing information for thesekinds of evaluations vary among companies, given that
there are no clear disclosure standards for them. We
believe that our work to bring greater attention to thesekinds of “invisible” values to the greatest extent possible— not only for the fund but also for our other funds — ishelping to enhance our corporate evaluations and stock
selections.

•17Introduction

Investment Management

JAPAN EQUITY TEAM / VALUE STRATEGY FUND MANAGEMENT TEAM

Mirroring the needs of society
By Shigeru Aoyagi, Chief Fund Manager

The Value Strategy FundManagement Team manages
investments using a bottom-up,
contrarian approach.

Since we began investing in 1996, our assets under management have grown by 20 times, which demonstrates ourstrong track record.
Investment philosophy
We invest in undervalued companies with the potential togenerate earnings by addressing various societal issues.
The alpha earned from the turnaround in the share pricebecomes our source of added value. Japan’s protracted
period of slow economic growth has made its stock market
one of the world’s rare pure value plays. The country ishome to many companies that are not valued fairly and are
discounted despite being needed by society and boasting products, services, technology, brands, and humanresources that will translate into future profit streams.
The Japanese economy matured out of its high-growthphase more than 30 years ago, yet many challenges
remain. The upside of these challenges is the innovationthat has taken place. Today, many countries and regions
are starting to grapple with societal issues that are arguably the by-products of economic growth. Challenges
include low birth rates, shrinking working-age populations,environmental issues, and structural deflation.
There are many attractively valued Japanese companies that offer clues on how to address such challenges.
They have advanced expertise in areas such as laboursaving robotics and environmental technology, and it isthese companies that can offer us significant investment
opportunities.
Engagement and ESG initiatives
Since we launched our strategy in 1996, we have beenassessing the value of companies as minority investors.
Through our efforts, we have supported investee companies to realise their true potential — and share risk withthese firms by investing in them — and as a result haveshared success together with the companies.

Nikko AM
Sustainability Report 2022

Corporate Sustainability

Looking Ahead“We see the stock
market as a kind of
mirror that displays theneeds of society”
One of the most important elements of our research is
acquiring non-financial information. Accurately assessing
the long-term value of a company means not only evaluating the financial data already factored into its enterprisevalue, but also discovering the critical non-financial information that points to its underlying potential.
To generate multiples of enterprise value, it is essential toassess the potential of management and the company’s
frameworks while also gaining a good understanding of
the core business. One key element in gaining non-financial information is engagement, which has been integrated
into our investment processes since our team was established. This is embodied in two proprietary approaches
in our research: multi-layered research and historicalinformation.
Besides shareholder returns, we think a firm’s social contributions are becoming more important when assessing
non-financial information. This evolution is a godsend for
us because we have always focused on this aspect.
We see the stock market as a kind of mirror that displays
the needs of society. As fund managers, our mission is todeliver profits for clients by building portfolios that reflect
different types of needs, while at the same time sending amessage to the world. We seek to understand, from a neutral perspective, what society will need in five to ten years.
Then we identify the companies that can actively addressthese points, we invest in them, and we provide returns
to our beneficiaries. As professional fund managers, we
believe our role is to deliver these benefits while also communicating effectively with society.
There is a lot happening in today’s society — including thegrowing importance of ESG factors — that is expected tobe reflected by the stock market.

•

18

Introduction

Investment Management

Corporate Sustainability

Looking Ahead

JAPAN INVESTMENT TECHNOLOGY TEAM

Sustainablevalue across awide range ofasset classes
Connecting ESG performance and value“we place a strong focus
on the relationshipbetween companies’
CO2 /greenhouse gas
emissions and theirstock prices”

Understanding the impact of ESG factors
The Investment Technology Fund Management
Department has more than 20 members and is made up
of two teams: the Passive Fund Management Team and
the Quantitative Investment Management & Development
Team. The Passive Fund Management team offers passive management products across a wide range of asset
classes, not limited to fixed income and equities, but also
alternative assets such as REITs, commodities, and multiasset classes. The Quantitative Investment Management &Development Team primarily operates quantitative active
and smart beta strategies for Japanese and foreign equities. The department has JPY 14.9 trillion in assets undermanagement (as of the end of December 2021).
Our ESG investment approach
Given that environmental, social, and governance (ESG)
factors can impact shareholder value in various ways

Nikko AM
Sustainability Report 2022

— such as future earnings and capital costs — we believethat having a theoretical and empirical understanding of
the impact of these factors is a key part of ESG investment(see chart on the next page). That is why we conduct ongoing research into individual ESG factors using a quantitative
approach while actively cooperating with the dedicatedstaff members responsible for engagement and proxyvoting as well as ESG specialists within our organisation.
The results of our research are used to integrate ESG factors into existing investment products and to develop new
ESG products. They have also contributed to academic
research.
Environmental research
In our research into environmental factors, we place a strong
focus on the relationship between companies’ CO2/greenhouse gas emissions and their stock prices. We think thatshareholder value assessments that only cover scope 1

19

Introduction

Investment Management

Corporate Sustainability

Looking Ahead

JAPAN INVESTMENT TECHNOLOGY TEAM

(1) ESG, a partial indication of a company’s attributes(future earnings risks)

Present (point in time t)

Current shareholder value = f (future earnings t, capital cost t, mispricing t)

ESG(2) Changes in universal macro factors(e.g. tax, regulations, consumer trends, etc.)

Changes in
expected
earnings

Changes incapital cost(3) Changes in specific factors“Our research in social factors
has a particular focus on
the relationship between
companies’ human capital
investment efficiency and theirshareholder value”

Future (point in time t+1)

Future shareholder value = f (future earnings t+1, capital cost t+1, mispricing t+1)

*Created by Nikko Asset Management for illustrative purposes.

emissions (direct emissions) and scope 2 emissions (indirect emissions from electricity, heating, and cooling) areinsufficient and that coverage of scope 3 emissions (indirect emissions that occur along a firm’s value chain) willcontinue to increase in importance. Currently, however,
it is rare for companies to disclose their scope 3 emissions, and there is room for improvement in the credibilityof scope 3 emissions data. We are currently undertaking
the challenging task of gathering information on investee
companies’ scope 3 emissions by combining scope 1 and2 emissions data with the insights we have gained from ourglobal supply chain research1.
Social research
Our research in social factors has a particular focus on

the relationship between companies’ human capital investment efficiency and their shareholder value2. Based on a
study that suggests higher human capital efficiency leads
to higher share price performance, in January 2021, welaunched the Japanese Equity fund focusing on this theme.
This strategy invests in the stocks of companies with superior human capital investment capabilities.
Governance research
Governance is notoriously difficult to assess objectively
given the significant variability in ratings among ESG rating
institutions, compared with environmental and social ratings3. This reflects the large impact that idiosyncratic elements generally have on companies’ governance. It goes
without saying that directors play a large role in corporate

governance. We also believe it is essential to assess thecomposition of a company’s board in view of factors suchas the company’s industry, its size, and any concurrent
positions held by its directors. In particular, the team analyses the relationship between factors that indicate thequality of corporate governance such as composition ofshareholders and directors, and the company’s economic
performance. We publish our research results in industry
journals and give presentations in seminars and academic
conferences, etc. For example, we gave a presentation on
the findings to domestic and foreign pension plan sponsors and other institutional clients4. We are also in the process of developing the Japan Equity Stable Growth ESG
Strategy based on the insights we have gained.

•

Tsuchiya, S. 2020.“Earnings Propagation Effects through the Global Supply Chain Network”, Securities Analysts Journal, 58(10), 65-77. (FY2020 Securities Analysts Journal Prize)
Ishikawa, Y., and K. Hasegawa. 2019. “Efficiency of Japanese Corporate Investment in Human Capital and Shareholder Value”, Securities Analysts Journal, 57(6), 67-79. (FY2019 Securities Analysts Journal Prize)
Gibson, R., P. Krueger, and P. S. Schmidt. 2021. “ESG Rating Disagreement and Stock Returns”, Financial Analyst Journal, 77(4), 104-127
4
Teraguchi, M. 2021.“ESG Investment for Pension Funds: Discussion Points and Practical Solutions to Challenges”, Pensions & Investments’ 15th Global Pension Symposium
1
2
3

Nikko AM
Sustainability Report 2022

20

Introduction

Investment Management

Corporate Sustainability

Looking Ahead

JAPAN FIXED INCOME TEAM

Conducting careful analysis to reachthe best investment decisions
By Akihiko Yoshino, Group Manager of Credit Research
The focus of our ESG analysis
When analysing environmental, social, and governance(ESG) factors, we currently focus on eight specific items:
two related to the environment, and three each for society and governance. On the Japan Fixed Income team, we
see ESG considerations as key factors in analysing qualitative risks that can’t be covered exhaustively by financial
analysis. We also periodically review these focus areas
through the use of case studies.

Environment (E)Society (S)Governance (G)Changes inenvironmental
regulations

Human capital

Corporate
governance

Environmental pollution

Manufacturer
responsibility

Accounting fraud

Relationship with
antisocial forces

Corporate ethics

ESG integration: an investment case study
In November 2020, we invested in a corporate bond issued
by a major food service operator (Company S). The investment decision was made in view of a financial analysis
performed by the analyst in charge, based on our key ESG
factors. In addition, we established an understanding of
the issuer’s current business situation through interviews
as well as on-site investigations at the firm’s restaurants
before making our decision. We feel that this is a good
example of an effective investment decision based on ESG
factors together with financial analysis.
Cost Comparison per store
600
500

K company

300

C company

200
100
0
2016

Integrating ESG analysis
The credit analysts on our team perform both fundamental analysis and ESG factor analysis of individual issuers.
Their findings are incorporated into the investment process by comprehensively evaluating both the fundamentals and ESG characteristics of the industry/issuer andreflecting them in our investment decisions.
Nikko AM
Sustainability Report 2022

S company

400

2017

2018

2019

2020

2021

2022

— A focus on human capital
One social factor we focus on is human capital. Based oncase studies that show human capital has a large impact
on a firm’s creditworthiness, we believe that staff treatment
and training significantly affect the quality of individual restaurants, which are of paramount importance to the business foundations of companies in the food service sector.

Akihiko Yoshino— The focus of our financial analysis
In our financial analysis, we focused on Company S’s
costs per restaurant and compared them with its competitors in the same industry. We found from our analysis
that the company invests more than its industry peers on
personnel expenses and other related operation costs.
— Interviews and investigations
During interviews we conducted, the company said thatit intends to increase IT investment for better and more
effective staff allocation, and that its business strategy
is to increase revenue by increasing customer satisfaction with a corresponding rise in average spending per
customer.
We also conducted on-site investigations to confirm thatthe company is successfully maintaining service quality
while improving staff allocation at the individual restaurant level.
— Decisions based on ESG factors and financial
analysis
From the perspective of human capital as a key ESG
factor, we analysed the issuer’s financial standing, conducted interviews, and investigated its restaurants.
Based on the results of our analysis, we judged that
Company S’s strength in human capital fed into its business performance. Our positive evaluation of the issuer’s
long-term business competitiveness and creditworthiness led us to the final decision to invest in the bond.

•21

Introduction

Investment Management

Corporate Sustainability

Looking Ahead

GLOBAL EQUITY TEAM

ESG at thecore of Future
Quality

The year 2021 was when ESG moved
from being a niche term within theinvestment industry to common
parlance.
The pandemic, extreme weather events, and growing
inequality are just some of the major forces that have led
to ESG and sustainability now being part of the global
zeitgeist.
For the Global Equity team, the COP26 meeting in Glasgow— a short distance from our Edinburgh office — was adaily reminder of the good intentions of most to cooperate
and find a solution to the climate emergency, but also of
the scale of the challenge.
Society cannot solve the problems that it faces today
without the private sector making a significant contribution. We believe the market will increasingly allocate capital to companies that are working to solve society’s major
challenges and that these companies will be best placed
to sustain high returns into the future, while creating value
for all their stakeholders.
Nikko AM
Sustainability Report 2022

ESG integration
Our Future Quality investment philosophy focuses on
researching and investing in some of tomorrow’s mostprofitable companies. Given the scale of the challenges
the world is facing today, we are finding an ever-increasing
number of companies that form part of the solution rather
than being part of the problem, which is critical for both
future financial returns and the wellbeing of future generations. These companies are well positioned to benefit fromthis shift in attitudes and capital, and many are alreadycore holdings within our portfolios.

ESG issues are long-term in nature. Hence, as long-term
investors, we have worked to ensure that ESG factors arealways a core part of our investment process — from idea
generation all the way through to risk monitoring, client
reporting, and compliance adherence.
Many ESG issues are also subjective, which means thirdparty ESG ratings are often wrong. For ESG integration to beeffective, we believe it is necessary for our portfolio managers to be heavily involved in all ESG responsibilities, such as
proxy voting and engaging with management teams.

22

Introduction

Investment Management

Corporate Sustainability

Looking Ahead

GLOBAL EQUITY TEAM
Multi-stakeholder model

Strong financial
performance

Consumers

Customer

Growth

Employees

PlanetCash flow

Shareholders

Society

Return on capital

In 2021, we also saw an increase in regulation around
ESG, such as Europe’s Social Financial Disclosure
Regulation. Given our strong heritage in integrating
ESG, complying with rising regulation hurdles has beenstraightforward. However, we also recognise where we areheaded, so we continue to strengthen our ESG processes
with improvements such as increased investment in ESG
resources.
Engagement and proxy voting
Through engagement and voting, we focus on the materiality of an issue with the aim to enhance the long-termvalue of our shareholdings and to foster corporate bestpractices.
All our engagement activities are undertaken by portfolio
managers and analysts as part of our regular contact withmanagement teams. This means that material ESG issues
are considered throughout the investment process andare integrated accordingly into our investment analysis.
Consequently, issuers have a good understanding of why
ESG is a core part of our investment decision making, andof our expectations of ESG performance.

Nikko AM
Sustainability Report 2022

Purpose-led
Future Quality

Our engagement activities have the following objectives:– Improve our understanding of a company’s businessmodel, strategy, and ESG materiality, as well as to monitor performance– Help issuers and other third parties (such as ESG rating
agencies) understand why ESG is a core part of ourinvestment process– Engage with issuers to encourage them to adopt bestpractices– Monitor and engage with companies taking actions thatput it at risk of contravening the UN Global Compact orOECD norms– Vote in line with our Future Quality philosophy and client
wishesWe seek commitments from companies to address any
concerns raised by the portfolio managers, and we subsequently monitor these issues and company progress.
When appropriate, we will participate in collective engagement and escalation where satisfactory outcomes have notbeen achieved.

“Given the scale of thechallenges the world is facing
today, we are finding anever-increasing number ofcompanies that form part ofthe solution rather than being
part of the problem”

In 2021, and continuing in 2022, we have put our focus on
the following specific areas related to ESG:
– Encourage issuers to measure their scope 3 emissions(indirect emissions across supply chains) and establish
long-term carbon emissions reduction targets– Encourage issuers to follow best practices by disclosing
board diversity and gender pay gaps
– Encourage issuers to avoid all forms of human rights
violations– Monitor the level of controversies based on bribery,fraud, and governance structures, and engage withmanagement teams when these factors appear to raiserisk– Identify and subsequently engage with companies thatappear to be avoiding paying a fair tax contribution or
may be involved in tax-related controversies
We disclose all meaningful engagement and voting
records in our ESG quarterly report, which is available
on request.

•

23

Introduction

Investment Management

GLOBAL FIXED INCOME TEAM

There is evidence to support this, as we have observed
the continued, significant growth of green and sustainable issuance in credit markets.
On the Global Fixed Income team, we have created aquantitative ESG scoring template — part of a systemthat uses AI and machine learning — to help ensure thatthe bonds we are considering for our portfolios comply
with our ESG standards.
An AI-based methodology for ESG analysis
The systematic and fully automated platform we areusing was designed to aid analysts and portfolio managers in integrating ESG analysis into the investment process. It provides transparency and flexibility in the selection of relevant input variables (and respective weights)
for different fields, including supranational organisations& agencies, sovereigns, US municipal bonds, Canadianmunicipal bonds, and all corporate sectors.
The methodology of the system is made up of threemain steps.
Nikko AM
Sustainability Report 2022

Looking Ahead

Figure 1 – High-level block diagram of themethodology of the ESG platform

Automating
ESG analysis
As we emerge from the COVID-19
pandemic, we continue to believe
the planned recovery will lead to amore sustainable global economy.

Corporate Sustainability

Data acquisition

1. Data acquisition
The platform’s algorithm retrieves all the necessary datafrom different sources, both publicly available and proprietary databases. The input data and ESG scores are automatically updated on a weekly basis.

Normalisation

2. Data filtering and normalisation
For each ESG variable, if more than 40% of the data is
missing then that ESG variable is removed from the analysis. Moreover, if that ESG variable has very similar values
across a sector, it adds no useful information and, therefore, it is also removed. Any issuer (such as a country
or company) with over 40% of the data missing is also
removed from the analysis.
Next, the data is normalised within each sector. We employ
a scoring system based on z-scores. A score of 0 means
average performance compared with others in the same
sector, a score of 1 means one standard deviation better
than others in the same sector, and so on.
3. Data imputation and ESG score computation
To handle missing data, a Monte Carlo Multiple Imputation
framework is used. The missing values are replaced by distributions of plausible values (given the observed data),
which are then used to estimate the pillar scores and final
ESG scores.

Data imputation and
ESG score computation

Environmental scoreSocial score

Governance score

ESG score24

Introduction

Investment Management

Corporate Sustainability

Looking Ahead

GLOBAL FIXED INCOME TEAM
Figure 2 – ESG-integrated investment process
The four steps of our ESG implementation framework

ESG considerations
Top down

1. Market assessment

Alpha opportunities

2. Investment themes

3. Screening and research

4. Portfolio construction

Bottom up

Risk management

Our approach to ESG
Our philosophy
On the Global Fixed Income team, we believe in employing a consistent investment process that incorporates
quantitative and qualitative inputs to generate ideas andconstruct high conviction portfolios, where we are suitably rewarded for the risk we undertake. We see ourselves
as capital allocators and we intend to continue our efforts
to provide capital needed for issuers to implement a sustainable transition programme, where the investment
mandate allows. As investors, we have a unique opportunity to identify risks, engage with issuers, and make decisions that can influence positive, sustainable change. We
believe it is our responsibility to create innovative products and strategic partnerships across the capital market
structure to establish pathways for meaningful flows into
sustainable investments. Through this approach we strive
to deliver consistent returns that meet our investors’
goals.
ESG implementation
ESG is considered across products where the investment
mandate allows. We consider ESG a fundamental part

Nikko AM
Sustainability Report 2022

of our investment process, as it can affect the returns ofan investment. In the mandates where ESG is applied, it isdone so at the screening and research stage of a product’s
investment process, as well as at the portfolio construction
stage. The scale and manner of ESG integration depends
on investor-specific expectations of a product.
While we are aware of the importance of ESG factors, infunds where ESG is not part of the mandate, it will not preclude other appropriate investments that fit the mandateof the strategy. Additionally, in funds where the mandate
restricts the team to specific issuers, the fund’s mandate
will take precedence over ESG analysis.
Our access to issuers helps us gain insight into current trends and gives us an opportunity to ask specific
ESG questions. We regularly attend sector conferences
and take part in investor roadshows and calls, either inperson or virtually. By engaging with issuers as part of ourresearch, we are able to fully understand if an issuer is inline with our ESG agenda and upholding the UN Principles
for Responsible Investment framework. When we are monitoring our portfolios, we will make sure an issuer is on trackand not deviating from industry peers.

For example, if we were to face a situation where an issuer
in our Global Credit Fund faced an ESG breach, we might beunable to exclude the issuer solely on an ESG basis, given
the yield, spread, and diversification targets set within thefund. However, ESG would be a factor in our industry andissuer analysis, and it is part of the investment decision
when we feel it will affect investment returns. It is likely thenegative ESG factor would result in us selling the holding
and replacing it with a peer company with similar economic
characteristics and a better ESG profile.
Case study
A European banking and financial institution
Strategy: Global Credit
Sector: Financial
Region: Europe
Aim: Gain insight into changes and steps taken following
money laundering allegations
Overview: The company in question is a large financial
institution in Europe. We held a call with the firm’s treasury
team to discuss its overall ESG profile and to better understand the details of an internal investigation that was conducted because of a money-laundering scandal in 2017and 2018. Although we were told that the institution conducted a year-long internal investigation, the firm still had
not settled the matter and said further investigation wasneeded.
Outcome: We were not sufficiently reassured by the company’s response and felt the issue was being played down.
Even though the company’s financials showed good performance in the previous quarters, the ongoing investigation of the anti-money-laundering case created uncertainty for the subordinated bonds, and we believed therisk – return trade-off was unfavourable for the Global
Credit fund given the ongoing investigations. Therefore, we
decided to replace this holding with a peer company withsimilar economic characteristics and a better ESG profile.
It is worth noting that in other portfolios, we still hold bonds
from this issuer, owing to the restricted nature of the portfolios. In these instances, it would be of detriment to ourinvestors if we were to preclude appropriate investmentsthat fit the mandate of the strategies.

•

25

Introduction

Investment Management

Corporate Sustainability

Looking Ahead

ASIAN EQUITY TEAM (EX. JAPAN)

Using ESG to identify firms
likely to outperform“we made important structuralrefinements to better integrate
ESG into our investment
process”

By Robert Mann, Head of Asia ex-Japan Equity

The Asian Equity Team comprises
20 seasoned professionals basedin Singapore, Hong Kong, andShenzhen. We have an average of 19
years of investment experience.
Our team members have a rich diversity of backgrounds,
representing nine primary nationalities and with language
capabilities covering all the major Asian languages. Fiveof the 20 people on our team are women. Most importantly, along with our common values and commitment
to mutual respect, we bring together a diverse mix of cultures, demographics, and expertise.
Our team is well-equipped to meet the challenges ofinvesting in the diverse and fast-moving Asian andemerging markets.
Understanding the approaches companies take to ESG
factors has always been an important part of our Asianequity process and has helped us to identify companies
that are likely to outperform. This is linked to our fundamental belief that companies with sound or improving
ESG performance tend to perform better financially in thelong term. In 2021, a lot of our overall research time has
been spent on ESG. We have focused in particular on:

Nikko AM
Sustainability Report 2022–––

gaining a deeper understanding of how companies in our
research universe perform on material ESG areas
encouraging our portfolio companies to improve theiractivities in material ESG areas
keeping up with the many new regulatory and voluntary
ESG-related initiatives around the globe.

We remain committed to doing our own bottom-up ESG
research on companies in our research universe. This isimportant because the data available on Asian companies, while improving dramatically, is still not available ona large enough scale with the necessary level of accuracy
and consistency. The quality of ESG data is of the utmost

26

Introduction

Investment Management

Corporate Sustainability

Looking Ahead

ASIAN EQUITY TEAM (EX. JAPAN)“There also seems to be more nuance involved in Asia, which we
believe is best understood and interpreted by sector specialist
analysts supported by our ESG Specialist and tested in robust
team discussion. This approach sets us apart in the market”

importance given our deep ESG integration processes,
where the ESG performance of companies is built into ourfundamental company analysis.
There also seems to be more nuance involved in Asia,
which we believe is best understood and interpreted
by sector specialist analysts supported by our ESG
Specialist and tested in robust team discussion. Thisapproach sets us apart in the market. As the broader sustainable investment industry and ESG data evolve, weplan to continue to enhance our work in this area to further improve our company research and portfolio construction. We will also actively use our voice to gain further investment insights and drive positive change
In 2021, we built on the work laid down in 2020, when we
made important structural refinements to better integrate ESG into our investment process. We continue to be
guided by our key belief that strong and/or improving ESG
performance is fundamental to companies achieving andsustaining high returns, and we remain focused on ESG
issues that have a current or foreseeable material impact
on shareholder returns.

Nikko AM
Sustainability Report 2022

A substantial part of our work in 2021 revolved around completing our proprietary ESG evaluations on all the companies that we own across our portfolios. To date, our team’s
bottom-up ESG research covers around 450 companies,
forming a powerful driver for our stock selection and portfolio construction. In addition, we are constantly calibrating our ESG (and other fundamental) scores across sectors,
analysts, and portfolios, in order to ensure consistency andadherence to our process methodologies.
In 2021, we also made preparations to meet important ESG
regulatory requirements in Singapore, Hong Kong, the eurozone, and the UK. Our work has centred on understanding
the various regulatory demands and where they overlap;
evaluating ESG data and service providers; and formulating
how best to deepen and enhance the disclosures that we
make to our regulators. This work will stretch into 2022, andwill no doubt continue to evolve.
As part of our ongoing focus on better understanding physical and transitional climate risk in our portfolio, we haveengaged with some of our portfolio companies on these
topics. Our initial discussions covered a range of companies
across the energy, property, tech, and healthcare sectors.

Although the companies’ responses varied widely, we see
growing awareness of physical and transitional climate
risks in Asia. In our experience, most companies sampled are in the early stages of exploring ways to quantify,
disclose, and manage the potential future climate risks.
However, many are working on, or planning to improve,
their disclosures in 2022. For example, some companies
have recently become supporters of the Task Force on
Climate-Related Financial Disclosures (TCFD) or plan tostart aligning their disclosures with TCFD.
Climate risk disclosure is constantly evolving, and webelieve the level of disclosure in Asia is still relatively nascent. As our climate risk disclosure relies on the reportingof our portfolio companies, we will continue exploring data
sets to better understand how these risks could impact our
portfolio in the long run. We will also engage directly with
our portfolio companies to gain further insights and use
our influence to improve climate risk disclosures.

•

27

Introduction

Investment Management

ASIAN FIXED INCOME TEAM (EX. JAPAN)

Enhancing
our ESGprocess

Environment

ESG integration
For the Asian Fixed Income team, environmental, social,and governance (ESG) analysis is integral to our investment process. When we conduct credit research, ESG
analysis supplements our bottom-up fundamental analysis on issuers. We have been incorporating qualitative
factors such as corporate governance into our Internal
Credit Rating (ICR) model since 2011, and we moved tointegrate all three ESG pillars into the scoring system of
our ICR model in 2016. In 2021, our research process was
further enhanced to incorporate ESG issues and materiality when assessing the ESG profiles of companies.

ESG research process
2. Bottom Up
Credit Research

4. Portfolio
Review

ESG Analysis
Relevant and Material
ESG Issue
Active Engagement

Credit Analysis
Quantitative andQualitative Assessments

Internal ESG Score

Internal Credit Rating (ICR)

Fundamentals

Valuation
Relative andHistorical Valuations

Investment Ideas
Nikko AM
Sustainability Report 2022

SocialGovernance

CarbonEmissions

Product Carbon
Footprint

LabourManagement

Health & Safety

Board

Pay

Financing
Environmental
ImpactClimateChangeVulnerability

Human Capital
Development

Supply Chain
LabourStandards

Ownership

Accounting

Water Stress

Biodiversity &Land Use

Business Ethics

Anti-Competitive
Practices

Raw Material
Sourcing

Toxic Emissions&
Waste

Corruption &Instability

Financial System
Instability

Packaging
Material & Waste

Electronic
Waste

Tax
Transparency

Ownership &Mgmt Change

Op. in Clean
Tech

Op. in Green
Building

Op. in Renewable Energy

Product
Chemical Safety
Safety & Quality
Financial
Product safety

Privacy & Data
Security

Responsible
Investment

Insuring Health &Demographics

Controversial
Sourcing

Access to
Communication

Access to
Finance

Access to
Healthcare

Op. in Nutrition & Health

Minority Interest Principal-Agency
Alignment
Alignment
Regulator Track Record(Reference: Sustainability Accounting Standards Board, MSCI)

3. Portfolio
Construction

Looking Ahead

The enhancements we made to our ESG research process in 2021 provide a framework that will enable a systematic and independent assessment of companies’
ESG profiles. This acts as a check against over-reliance on external ESG ratings organisations. The ability to differentiate industry ESG leaders from laggards,
and identify companies well positioned to capitalise on
the shifting policy and operating landscape, will protect
against downside risks, which may be inherent in certain sectors or companies.

Continually improving our researchand ourselves

1. Top Down
Marco
Research

Corporate Sustainability

5. Ongoing Risk
Management

Technical
Supply and Demand
Dynamics

ESG factors are considered an important part of theteam’s credit analysis. We integrate ESG into our research
approach, both as a means to enhance our process of identifying investment opportunities, and as a risk management
tool. We believe that:–––

it is our responsibility to consider ESG factors when
making investment decisions on behalf of our clientscompanies that showcase strong and/or improved ESG
performance can financially outperformmaterial ESG factors can impact a company’s financial
performance, so incorporating ESG into our credit analysis provides us with a stronger, more holistic credit view

The integration of ESG analysis into our credit research
process enables us to achieve the following:– bespoke differentiation between industry leadersand laggards in ESG– identification of material ESG risks that have thepotential to evolve into credit risks– an enhanced and holistic Internal Credit Rating (ICR)
that integrates ESG factors
Education and training
In 2021, as part of our ongoing commitment to sustainable and responsible investing, all our investment professionals undertook a formal instructor-led
training course by Moody’s Analytics called ESG Risk
Assessment for Lenders & Asset Managers. The course
provides participants with an understanding of sustainable financing and investing with attention given to
ESG considerations, supplemented by in-depth casestudies.
Engagement and proxy voting
The Asian Fixed Income team regularly engages withcompanies that we are invested in, and companies weare considering investing in, to discuss a wide variety of topics including company strategy and ESG. In
2021, we participated in 35 meetings with companies
where ESG was discussed. Environmental issues were
the focus of the majority of these meetings, as a resultof the number of our engagements with companies in
the utilities sector, where carbon emissions and energy
mix are material ESG factors. Governance issues were
the next most commonly discussed, primarily throughour engagements with property firms, where company
transparency and potential hidden liabilities were major
concerns this year.

•

28

Introduction

Investment Management

Corporate Sustainability

Looking Ahead

NEW ZEALAND EQUITY AND BOND TEAMS

Drivingsustainablechanges

Encouraging firms to move towards a lower
carbon future
ESG integration
Nikko AM New Zealand’s equity and bond teams have aunited voice on ESG issues. We are primarily medium- tolong-term investors with a fundamentally driven bottomup approach. We seek to understand how industry andcompany ESG factors may impact investments and, ultimately, client portfolios. The ESG risks and opportunities
faced by a company form an important element in understanding investments but cannot be managed in isolation.
The quality of a management team, for example, mustalso be carefully assessed.
We use our extensive experience to help us understandand evaluate the materiality of ESG factors. While onsome occasions ESG factors may not be material enoughto alter our conclusions, a specific understanding of
ESG analysis can help us build a picture of the risks andopportunities faced by a company. There is no set formula for quantifying the importance of each ESG factor
or adjusting how we value each company. We rely on theexperience of team members to understand ESG impacts
and document them in our investment research reports.
Engagement and proxy voting
On a quarterly basis, we screen the investments we hold
across all portfolios — together with investments on
Nikko AM
Sustainability Report 2022

“We seek to understandhow industry and company
ESG factors may impact
investments and, ultimately,
client portfolios”

New Zealand Equity teamwatch or under active assessment — using the MSCI ESG
Research tool. This process assists the team by adding
another layer of scrutiny to our knowledge of companies.
Many debt issuers are also listed on the NZX and, therefore,
also captured during this screening.
The outcome of this process is that companies are rated ona scale from AAA to CCC relative to the standards and performance of their industry peers. We engage with companies in an effort to raise the bar in relatively weak areas or
areas where ongoing improvement is beneficial to stakeholders. These areas could be identified by MSCI research or
our own research. A rating of BB or less does not necessarily make a company un-investable from our perspective but
does necessitate active company engagement on the main
issues underlying the relatively poor rating.
A higher MSCI rating does not alone dictate a higher investment weight. The primary driver of a company’s weight inour portfolios will still be determined by the relevant portfolio manager, given a range of both quantitative and qualitative factors. The current MSCI rating is explicitly assessed asa quantitative factor consistent with our established investment process. Companies that have higher ratings or are
actively improving their ESG standards will ultimately berecognised by market participants, so our process is likely
to highlight these opportunities.
We have also started monitoring the Weighted Average
Carbon Intensity of our portfolios. This provides a usefulplatform to form a baseline to monitor trends. We use thisto find opportunities in areas that we can invest in andthen influence these firms to move towards a lower carbon
future.
In our opinion, voting is an integral part of being responsible stewards of capital. Analysis of a company’s corporate
governance structure helps to form our view of the quality of a management team. We exercise proxy voting rights
independently and solely in the interests of our clients andbeneficiaries. When we exercise voting rights against company resolutions, it is our policy to write to investee companies to explain our reasons in an endeavour to advance thecompany’s development.
Fixed income case study for engagement
The TR Group is the leading New Zealand truck and trailer
leasing and rental company. It supplies or manages around
6,700 heavy trucks and trailers, accounting for one in tenof the country’s front-line fleet. The company’s philosophy is simple. It aims to be the best in the world at hiring
trucks and trailers, and make a positive difference in people’s lives.
The TR Group recently issued its second five-year bondon the New Zealand debt capital markets. Nikko AM NZ
purchased both the first and second issue of its bonds. In

29Introduction

Investment Management

Corporate Sustainability

Looking Ahead

NEW ZEALAND EQUITY AND BOND TEAMSNew Zealand Bond teamaddition to the investment grade credit rating and competitive pricing, we were drawn to the company’s ESG
strengths and, in particular, its clear strategy and marketleading push into electric and hydrogen-powered lightand heavy-duty trucks.
The group’s culture of ownership, leadership, honesty,
teamwork, work ethic, and continuous improvement,
resonated with us. Discussions with management incorporated relevant examples of this culture at work whilestressing that these values are non-negotiable and something employees live by.
We were also impressed by the TR Group’s Alternative
Energy Initiative. If widely adopted, the move to alternative fuels across New Zealand’s transport fleet could significantly reduce the country’s carbon emissions.
According to the TR Group, its vision is “to leave a lasting imprint by making a positive difference in people’s
lives”, and one of its values is leadership. So, in line withthese, it is taking responsibility for exploring alternative
energy options, with the aim of “making a positive impact
to lower our country’s carbon emissions”. It is investing in
two types of environmentally friendly trucks.

•

TR Group’s
Battery
Electric (BE)Trucks

These are the TR Group’s thoughts on the two kinds of trucks
Battery Electric (BE) Trucks
We believe small BE trucks perform better than large
ones. The challenges with BE vehicles are that they
are heavy, take a long time to recharge, have a limited
range (100–150km per day, so they are only suited towork within cities), and NZ’s electric vehicle charging
infrastructure is limited
We have taken delivery of 10 BE trucks with another 20
being built. We plan to order a further 90 over the next
two years.
Hydrogen Fuel Cell (HFC) Trucks
HFC trucks are effectively an electric truck but with arange extender in the form of hydrogen gas and a fuelcell that generates electricity to recharge the batteries.

This overcomes many of the issues faced by trucks
powered only by batteries. They can refuel in the sameamount of time as a diesel truck, use a much smaller
battery bank so they are lighter, and can travel a longer
range (up to 650km), making it more practical.
The downside of hydrogen is the inefficiency of energy
use and the cost of both the truck and the fuel. An HFC
truck is $750,000 compared with $280,000 for a diesel
equivalent, and the cost of fuel is three times that ofdiesel. However, every HFC truck prevents carbon
emissions equal to that produced by 150 cars frombeing released into the atmosphere.
We have ordered 20 HFC Trucks.

*The individual issue names identified on this page are not a recommendation to sell or purchase an individual issue, and that it does not guarantee holding or non-holding in a fund or strategy.

Nikko AM
Sustainability Report 2022

30

Introduction

Investment Management

Corporate Sustainability

Looking Ahead

US INVESTMENT TEAM

Good advice fromgood partners
Making informed decisions based on ESG factors
ESG integration
The US Investment Team works with three sub-advisers, one for each of our thematic strategies, that give us
investment advice on short- and long-term risks to thebusiness environment. This helps us make informed strategic decisions. Each sub-adviser has its own dedicatedapproach to analysing companies based on environmental, social, and governance (ESG) factors.
We manage equity funds pertaining to thematic innovation, global natural resources, and an emerging market
country strategy. Our portfolio managers review themodel portfolio received from the sub-advisers andthe recommended changes in light of the objective of
the account, as well as the investment guidelines andrestrictions.
ESG risks vary depending on the industry and the location of operations. It is our responsibility to fully understand these risks through communication with the subadvisers, engagement with the companies, and datacollection from third-party firms. The first line of defence
against risk is the investment team.
Our suite of thematic innovation strategies have fundstructures domiciled outside the US, including two UCITS
funds. The UCITS funds have driven some of the ESG
integration at Nikko AM Americas because they fall under
the Sustainable Finance Disclosure Regulation.
Because the innovation strategies comprise multi-cap
and multi-sector companies in various stages of development, a standard scoring set is often not sufficient. We
understand that there are different schools of thought

Nikko AM
Sustainability Report 2022

about what constitutes good ESG practices, so we rely
heavily on the sub-adviser’s unique research and evaluation of these disruptive companies.
Risks associated with ESG have been a central focus forthe global natural resources strategy for many years.
Companies with real assets, such as those within theenergy and materials sectors, have been at the forefrontof the global ESG discussion. We use our monthly callswith the sub-adviser to stay updated on the risks and relevance of the natural resources strategy in light of thetransformations taking place in the business environment.
These calls, along with engagement with firms in our portfolio, allow us to take a qualitative approach to our ESG
analysis.
It is clear that consumer tastes are shifting and governments are making an effort to promote low-carbon alternatives. In 2021, in addition to many of the traditional firms
in our natural resource holdings moving towards low-carbon or reduced investments, the sub-adviser opportunistically initiated multiple positions within the energy transition theme. The natural resources strategy has beentested by the market over the past few years. However, we
believe natural resources companies are uniquely positioned to address the global issue of climate change anddrive the energy transition at scale.
Engagement and proxy voting
Proxy voting and engagement with companies are a fundamental part of the portfolio management process.
Towards the end of 2020, the US Securities and Exchange
Commission issued rules regarding the supplying ofproxy voting advice, as well as supplemental guidance to“Risks associated with ESG have been
a central focus for the global natural
resources strategy for many years”
investment advisers regarding their responsibilities concerning proxy voting. In 2021, to comply with the new guidance, the investment team refined our process to ensurethat every proxy ballot is reviewed before the annual or
special meeting.
We use the services of an external specialist who provides
voting advice and analytical reports in line with the proxyvoting policy. We consider this advice, specifically items
flagged where the adviser recommends a vote against
management. We also consider shareholder proposals.
Engagement with companies is carried out on a case-bycase basis. Depending on the content of a proxy statement, we may reach out to a company before voting,although the most common type of engagement has
been when companies reach out to us for a call or videoconference.
During the proxy voting off-season, we accepted several
meetings to engage specifically on ESG issues. We believe
our engagement based on ESG issues could be improved
going forward as public companies begin to disclose additional information.

•

31

Introduction

Investment Management

Corporate Sustainability

Looking Ahead

PORTFOLIO SOLUTIONS GROUP

Ensuring external managers fully
integrate ESG considerations
The Portfolio Solutions Group assesses, selects, and monitors external managers to which
Nikko AM outsources a portion of its investment management activities.
ESG integration
We believe that considering ESG factors in our investment process is inherent to long-term corporate value
creation and realising sustainable economic growth. We
embrace ESG as a means to better manage investment
risk, deliver high quality long-term investment returns,
do good in our communities, and be good stewards forthe environment. In line with this philosophy, we plan tohave most external managers sign letters of intent affirming their commitment to integrating ESG in their investment management. Going forward, external managers
will be expected to implement a process for assessing
and observing current and future ESG-related investments. At the same time, our team will regularly monitor
whether external managers are fully integrating ESG factors in their investment management process and, if necessary, encourage them to step up their ESG integration.
Given that we have a process to conduct periodic assessments of external managers’ ESG initiatives in terms of
their companies, personnel, research, and investment
processes, ESG already plays a key role in our manager
selections.
As ESG factors continue to grow in importance in theasset management industry, we expect to see stronger
global ESG regulations in the future. The Portfolio
Solutions Group operates an ESG Working Group thatcomprises members from our Tokyo, Singapore, andNew York offices. In view of the rapid changes occurring in ESG investment in the asset management industry, the ESG Working Group researches changes that are

Nikko AM
Sustainability Report 2022

“Going forward,
external managers
will be expected to
implement a process
for assessing andobserving current
and future ESGrelated investments”

taking place and keeps up to date with the ongoing evolutionof ESG investment requirements. We include those considerations in our assessments of external managers and workwith them to ensure that ESG is integrated effectively in theirinvestment activities.
Engagement and proxy voting
We believe that engaging with investee companies andexercising voting rights are powerful tools for us to fulfil ourstewardship obligations. For funds managed under discretionary investment contracts, we exercise voting rights inline with our own proxy voting policy rather than delegating proxy voting to external managers. When exercising our voting rights, we refer to recommendations from
Institutional Shareholder Services Inc. (ISS), a major proxyvoting advisor, and conduct stringent checks on proposals
on matters including investee companies’ remuneration of
officers, the composition of their boards, and officer reappointments. We also encourage the external managers wework with to help make society more sustainable throughtheir engagement with investee companies, and review
their engagement activities periodically.

•32

Introduction

Investment Management

Corporate Sustainability

Looking Ahead

PROXY VOTING AND ENGAGEMENT

Proxy voting and engagement
The Nikko Asset Management Group Proxy Voting Policy
establishes our group-wide approach to proxy voting
decisions. One objective of the policy is to underscore
our focus on ESG in proxy voting decisions that areundertaken by Nikko AM and all our overseas investment management subsidiaries. Another objective is tomake it clear that proxy voting by each of the investment
management teams in the group is based on the same
approach.
The policy expresses our basic approach to proxyvoting decisions, company engagement, and matterssuch as conflicts of interest. Additionally, each overseas

Global voting results 2021

From Jan 2021 to Dec 2021

investment management subsidiary within the group may
also stipulate its own detailed proxy voting criteria and disclose its own proxy voting results.
Under our Proxy Voting Policy, Nikko AM’s head office hasin place Guidelines on Exercising Voting Rights, whichgive details about proxy voting criteria, and Standards for
Exercising Voting Rights on Japanese Stocks, which include
numerical criteria for proxy voting on Japanese equities. Allof these documents are disclosed on our website.
We make specific proxy voting decisions based on therules mentioned above, and we incorporate the results of

Number of
resolutions

Votes withmanagement(%)

Votes against
management(%)

APAC (ex.Japan)

2,457

19,51088%

12%Reorg. and Mergers

EMEA

1,213

17,53691%

9%

Non-Salary Comp.

Japan

2,465

23,772

88%

12%

Latin America

228

2,071

88%

12%

North America

1,077

11,368

91%

9%

TOTAL

7,440

74,257

89%

11%

Nikko AM
Sustainability Report 2022

Below are some examples of our investment team’s
engagement activities with companies before and after
exercising our voting rights, as well as the results of our
proxy voting in 2021.

Votes Against Management Proposals

Numberofmeetings

Regionour engagement activities in our overall assessments.
Additionally, in March 2022, we disclosed our Global
Engagement and Stewardship Strategy on our website.
The strategy covers our philosophy on engagement objectives, methods and execution, prioritisation, documentation and monitoring, collaborative engagements, andescalation.

528

Routine/Business

743
1,311

Directors Related

4,279

Capitalisation

712

Antitakeover Related

82
0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

33

Introduction

Investment Management

Corporate Sustainability

Looking Ahead

PROXY VOTING CASE STUDIESCASE STUDY 1
A building materials company based in Ireland

CASE STUDY 2
A financial company based in Japan

Since December 2020, we have had ongoing engagement with the company’s senior management regarding governance issues. Governance concerns around thetesting of products and the true culture of the organisation were raised during a judicial review involving the firm.

In 2021, the financial company announced a takeover bid tomake a bank — in which it had a 20% stake — into a subsidiary. The bank responded by announcing that the bid wasa hostile takeover attempt and that its management team
opposed it. The bank’s management team then signalled its
intention to convene an extraordinary general meeting ofshareholders with the aim of proposing the activation of its
takeover defence.

Over the course of 2021, we met four times with management in order to highlight our concerns around governanceand discuss the actions management was taking to make
improvements. We further highlighted our position throughour proxy voting. We chose to abstain on the re-electionof the CEO and voted against the re-election of the majority of the non-executive directors to make a further statement that we believe it is time for a refresh. We also voted
against the approval of the remuneration report.
Senior management recognised the need for change
and has put in place several measures, including placing
product compliance officers within each business segment, hiring a group-wide Product Compliance Director
who reports directly to the CEO, changing the terms ofreference for the Audit Committee to include productsafety, and implementing a group-wide code of conduct
programme.
In our view, these changes will make the company abetter business, and we are prepared to give management time to make the necessary improvements. Without
trivialising these issues, we believe, on this occasion, thisis the best approach to take as long-term investors.

Nikko AM
Sustainability Report 2022

To help us make a decision on the proposal, we held separate interviews with the bank’s President and the Senior
Executive Vice President of the financial company. We concluded that the takeover would be beneficial to the bank’s
shareholders mainly on the grounds that the takeover priceincluded a suitable premium, that the partial purchaseapproach was unlikely to create conflicts of interest, andthat the bank’s corporate value was likely to increase under
the financial company’s management team. We therefore
decided to vote against activation of the takeover defence.
Ahead of the extraordinary general meeting of shareholders, there were press reports that the government — amajor shareholder in the bank, with a stake exceeding 20%— was against the proposal, so the bank announced that it
had decided against proposing the takeover defence andcancelled the general meeting. The takeover bid was completed and the financial company successfully turned thebank into its subsidiary.
At a press conference following the bid’s completion, thefinancial company president made a positive impression
by emphasising how the takeover would boost the bank’svalue. He also signalled his intention to create a comprehensive financial platform through the two companies andto generate synergy mainly in the securities and banking
segments. We look forward to continuing to engage withthe financial company going forward.

CASE STUDY 3
Virtual-only general meetings held by Japanesecompanies
Ten of the general meetings of shareholders held in June
2021 included proposals for the companies’ articles of incorporation to be amended to allow virtual-only general meetings. We considered our response to this development— given that we did not have an existing proxy voting standard on proposals for virtual-only general meetings — andalthough our basic approach is to support new initiatives bycompanies, our initial position was to oppose virtual-only general meetings in accordance with our stewardship responsibilities. We had two main reasons for this position. First, we could
not rule out the possibility of companies taking advantage of
emergencies by running virtual-only meetings in ways thatserved their own interests. We also felt that amendments tocompanies’ articles of incorporation were unnecessary, giventhat fully virtual meetings will be held without such amendments under a revision to the Industrial Competitiveness
Enhancement Act in the next two years.
We later explained our position in response to an inquiry froma firm planning to propose a change to its articles of incorporation that would allow it to hold fully virtual general meetings. Based on our engagement with that company, and after
learning of other firms planning to propose similar amendments, we reconsidered our position and switched to a policyof voting in favour of such proposals. While reconsidering ourapproach, we decided that the best policy regarding new initiatives by companies was to support them in principle when
exercising voting rights, but to hold senior management
teams to account at the following year’s general meeting ofshareholders if the initiatives prove problematic. We believethat this approach enables us to support new efforts by firms
while also mitigating risk.
We still have some underlying concerns given that there are
currently many uncertainties about how virtual-only general
meetings should be run and how they can be operated in a
way that is appropriate for shareholders. However, we also
intend to develop ideas of best practices for operating virtualonly general meetings based on engagement with companies.

34

Introduction

Investment Management

Corporate Sustainability

Looking Ahead

ENGAGEMENT CASE STUDIESCASE STUDY 1
An industrial conglomerate based in Singapore

CASE STUDY 2
A fuel distributor based in New Zealand

CASE STUDY 3
A department store chain based in JapanThe company is involved in power generation and otherutilities, as well as urban development. In its power generation segment, the company oversees 9.5GW of conventional energy and more than 3.3GW of renewable energy.
Because of its conventional energy portfolio, the firm has
one of the largest carbon footprints among all Singaporelisted companies. Yet, it is one of the key overweight positions in our Singapore and ASEAN portfolios, contributing a significant proportion of the total carbon intensity to
our portfolios.

This is a company that we believe does a very good job withdisclosure on ESG issues and actively engages with investors.

We have been engaging with the head of the
Sustainability Promotion Division of this company.
Although earnings are currently struggling from theimpact of COVID-19, we consider the company to beparticularly reform-minded in its sector. The firm hasachieved great cost cuts and has stated in its current
medium-term business plan that it intends to make further improvements by aiming for a return on equity of
7% in fiscal year 2023.

Our numerous engagements with the company havetherefore focused on evaluating its decarbonisationplans. From our discussions, and the company’s publicgreenhouse gas emissions reduction targets, we believethat management is highly motivated to execute on its
promises to reduce its carbon footprint. These include
commitments to:–––quadruple gross installed renewable energy capacity
to 10GW by 2025, from 2.6GW in 2020
halve its greenhouse gas emissions by 2030 anddeliver net-zero emissions by 2050
grow its sustainable solutions portfolio to comprise
70% of net profit from around 40% in 2020

Importantly, the company believes that simply selling its
conventional energy assets is not an ideal solution forthe planet, as the plants would continue to operate under
new ownership. As such, it is actively exploring transition
financing solutions that will bring about an accelerated
decommissioning of its conventional energy assets. Thisis an energy transition approach that we support.
Our investment rationale is that the company is a sustainability champion of Singapore, with clear targets to
reduce its carbon footprint, and aggressive ambitions for
its renewable energy business. We will continue to monitor the company’s ESG performance and proactively
engage with it on material ESG topics.

Nikko AM
Sustainability Report 2022

The company’s business is primarily based on the distributionof fossil fuels, which are currently essential for maintaining
both our economy and social infrastructure. That said, locallyand globally we are transitioning to a lower carbon future. This
company has a role to play in this transition, both throughalternative fuels such as bio-fuel, EV charging infrastructure,and, potentially, hydrogen, but also through reducing its own
operational carbon emissions. The company has reduced
operational emissions by 17% since its 2017 financial result
and is targeting a 42% reduction from its 2020 financial year
through to 2030, in line with a science-based target consistent with 1.5 degrees of warming. Where the company cannot
reduce its operational emissions, it offsets them by investingin permanent native forests in New Zealand.
From a social perspective, the company has a number ofpolicies and programmes in place to work towards goals
such as pay parity, workforce diversity, and supporting local
communities.
From a governance perspective, this is one of many businesses that we have regular engagement with, both at theexecutive level and the board level. Our most recent engagement with the company’s directors has been around a
takeover bid it received, which included conditions suchas a restriction on dividends being paid. The bid faces a
number of hurdles, including Overseas Investment Officeand Commerce Commission approval. These approvals canpotentially take six to 12 months, and we expressed to thedirectors our view that a certain level of dividends should beallowed to be paid, without affecting the bid price. We also
wanted a break fee to be included with both these demands,
compensating for the risk around the timeframe and potential for the deal not proceeding. The board was understanding of our view. After a due diligence period, we learned that arevised bid has been tabled and endorsed by the board, which
has both of our requests reflected.

In addition to structural reforms, including fixed cost
reductions, the company plans to achieve its goal byincreasing profitability through strengthening its realestate development, financial, and digital operations.
Although the firm’s progress on some of its initiatives
will need to be monitored in the future, we appreciate
the practical efforts that it is planning to implement.
From a longer-term perspective, we have also been
discussing the company’s decrease in the ratio of its
younger employees in recent years and asked how management intends to enhance employee engagement
and proactively use their younger human resources.
The company said that its firm-wide employee turnover is comparable to other firms in the department store
sector, but added that the ratio of employees who leave
the company in their third year is relatively high.
In addition, it stated it had been using a job-based humanresources framework since the early 2000s, but thatthe system had tended to limit employees’ roles to predefined duties, so the firm is countering this by entrusting store staff with broader responsibilities. The company is considering making phased changes to its humanresources framework to match the employees’ work with
their individual preferences and motivation levels.
The company’s use of human capital is a theme where
we would like to see some progress. We intend to continue discussing these issues with management.

35

Introduction

Investment Management

Promoting and implementing
ESG best practices

Corporate Sustainability

Looking Ahead

society, structural changes in industries are necessary
and, from this perspective as well, efficient investment in
human capital is becoming increasingly important.”
In his closing remarks, Ishikawa commented on the needfor greater diversity in Japan’s investment industry.
“Here in Japan, too, the financial industry is male dominated,” he said. “To induce a shift from such an environment, I belong to Nikko AM’s Women’s Working Group.
We believe with a more diverse team, including perspectives of women and people of other nationalities, we canenhance investment efficiency.”

Yasushi Ishikawa, Ph.D., Head of the Equity Fund Management Department
in Japan, and Senior Executive Director of Global Multi-Asset

Yasushi Ishikawa speaks on a panel about humancapital at the ICGN Global Virtual Summit
On 3 November, the International Corporate GovernanceNetwork held its Global Virtual Summit. Guests included
institutional investors, authorities, asset managers, andjournalists from around the world.
Yasushi Ishikawa, Ph.D., Head of the Equity FundManagement Department in Japan, and Senior Executive
Director of Global Multi-Asset, participated in a panel
called “Human Capital — Why it’s More Important than

Nikko AM
Sustainability Report 2022

Ever Before!”, together with professionals in the fields oflabour management and corporate governance.
“Companies that are good at investing in human capital,
in terms of the right timing and right allocation, can makeadditional profit after their investment and generate excess
stock returns,” Ishikawa began.
After explaining how to estimate the efficiency of corporate investment in human capital based on historical data,
he continued: “Especially in order to achieve a decarbonised

Nikko AM participates in P&I’s Global Pension
Symposium
Nikko Asset Management took part in Pensions &Investments’ 15th Global Pension Symposium in Tokyo on
8 to 10 November. The theme was “The Vaccine, Global
Economic Recovery and Pension Investing Resiliency”.
Experts from domestic and international pension funds,
investment management firms, academia, and otherfields shared their insights in presentations and panel
discussions.
Representing Nikko AM was Masayuki Teraguchi, Headof Investment Technology in the Fund Management
Department. He took part in the ESG Investing for
Pension Funds panel discussion, which summarised ESG
issues and explored solutions.
Teraguchi noted that while the uptake of ESG scoresand ESG indexing strategies benefit stakeholders andcontribute to long-term corporate value, there is often

36Introduction

insufficient awareness that ESG indexing strategies
can also drive high returns. He explained that the ESG
engagement and ESG score-based investment strategies in this space have very different time horizons andexpected returns. He then emphasised the importanceof both evaluating initiatives for stakeholders to encourage firms to take a proactive ESG approach and pursuingstrong performance of ESG investing. Teraguchi showed
how investors could do both while giving examples of
empirical research at Nikko AM.

Investment Management“The hackathon judges were very
impressed with the Nikko AM application.
One judge commented, ‘It was very
multifunctional and easy to understand.
The visualisation was beautiful’”Nikko AM wins its third consecutive Bloomberg
BQuant Hackathon Grand Prize
The Nikko Asset Management team picked up a third consecutive Grand Prize for the firm at BQuant Hackathon
5: Quants for ESG Investment, which Bloomberg held in
October 2021. Four asset management firms and four lifeand general insurers competed in the hackathon.

Corporate Sustainability

Looking Ahead

Global Fixed Income team participates in Responsible
Investor Europe and USA 2021 conferences
For the third year in a row, Nikko Asset Management participated in the annual Responsible Investor (RI) Europe 2021
conference from 14 to 18 June, and the RI USA 2021 conference held from 7 to 9 December. Both were digital events.
RI is a large-scale international ESG-focused conference andis held in several cities around the world. It saw more traction in 2021, as COP26 was held. Approximately 700 people,
including institutional investors, asset managers, and industry specialists, attended each of the conferences.
Thomas Archer, a product specialist for the Global Fixed
Income Team, took part in a panel discussion entitled“Green and Sustainability Bonds and ESG within the EU’s
Sustainable Financial Strategy” at the European event. He
was also in a panel discussion entitled “Challenges andOpportunities in the Mature North American Green Bond/Blue Bond Market” at the US event. He was joined by ESG
professionals from asset managers and rating agencies in
discussions focusing on ESG trends in each regional market.

The Nikko AM team presented an application that it developed to plot the relationship between Bloomberg’s ample
ESG data, share prices, and supply chain data. This interactive application makes it possible to compare corporate ESG data. Team members were inspired to create
a dashboard that would enable centralised ESG data
checking.

The RI Europe discussion aligned well with Nikko AM’s Global
Green Bond Strategy, which aims to provide customers withsustainable returns that contribute to achieving the Paris
Agreement targets. In addition, while discussions at the RI
USA event focused primarily on the North American green
bond market, the investment efforts we have made to position green bonds as an asset class enabled us to share ourexperience and contribute in a meaningful way.

The hackathon judges were very impressed with the
Nikko AM application. One judge commented, “It was very
multifunctional and easy to understand. The visualisation
was beautiful”, and another said, “This was a very interesting experiment in using supply chain data.” It is evident
that the app was very well received.

•

Bloomberg’s BQuant Hackathon

Nikko AM
Sustainability Report 2022

37

Introduction

Investment Management

Corporate Sustainability

Looking Ahead

Corporate
Sustainability
Nikko AM
Sustainability Report 2022

38

Introduction

Investment Management

Making a positive impact inour communities

Corporate Sustainability

Looking Ahead“our journey towards
sustainability is also ajourney of learning”

A message from Yutaka Nishida, Executive Chairman

As long-term investors, we arecommitted to sustainability and tocontinually meeting needs in each of
the communities where we operate.
Our ability to communicate our efforts well across ourglobal organisation will help us all to understand thechanging needs of each region and reinforce solidarity inour determination to make a meaningful difference at the
local level.
One of our most significant initiatives in 2021 was theSustainability Promise. We asked employees to voluntarily submit a promise about something they can do to help
make the world more sustainable. For each promise submitted, the firm made a $50 donation.
More than 400 employees responded, helping us toachieve our goal of raising $20,000. Part of these donations went towards the creation of the Nikko AM forest— a real-world commitment that will let us play a part inreforestation. The rest was put towards sending Covid-19
vaccinations to developing countries.
I am also delighted to see many staff members voluntarily
joining working groups and taking action on environmental and social causes they are passionate about. I thankall of those who have devoted time to these activities in
addition to their busy jobs. These actions of individuals,

Nikko AM
Sustainability Report 2022

that aim to accomplish genuine change, are helping todevelop a stronger corporate culture of sustainability at
Nikko AM.
However, there is more that we can do collectively. I believethat the senior management team can play a bigger rolein leading by example to build such a culture. We need toconstantly ask ourselves how we can better engage with
employees — for example, by showing greater empathy
and being more open to different perspectives — so that
more people will be motivated to join us on our sustainability journey. To this end, we have set an ambitious goal toincrease working group volunteers from 8% to 15% of ourworkforce by 2025.
In the years to come, I look forward to learning about theissues we face around the world through our corporate
sustainability webinars, where experts are invited to speak
on a variety of topics pertaining to our core areas of sustainability: diversity & inclusion, reducing inequalities, andenvironment & climate.
Our journey towards sustainability is also a journey oflearning, and I would like to see everything we learn put
into practice in our communities.

•

Yutaka Nishida

Executive Chairman

39

Introduction

Investment Management

Corporate Sustainability

Looking Ahead

Some of our sustainability promises

One of our initiatives in 2021 was the Sustainability Promise. We invited employees to voluntarily make a promise about how they would become more sustainable in their day-to-day
lives. More than 400 people responded. We believe that, as they keep their promises, they are helping to make their communities and the world a better place.

To continue pedal cycling to/from work and wheneverpossible attend prospect/client
meetings in London on mybicycle too!
Clive Paine – London

I will buy imperfect vegetables
and fruits to reduce food waste.
Mariko Koyatsu – Tokyo

I will opt for a lifestyle that uses
less packaging.

I will work to ethically consume. I
will purchase fair trade products
and products that support thosewith disabilities.
Yukako Kaneko – Tokyo

Rosetta Koo – Hong Kong

I commit to reduce consumptionof red meat, consume more
plant based meals and to buy
produce which are sustainably
sourced for my family and pets.

I promise to purchaselocally grown products from
responsible/sustainable farmers.
In order to help preserve ourwildlife in the ocean, I promise toremove trash on the beach anddispose of it properly.

Makoto Kawata – Tokyo

I promise to donate more tocharities that help underprivileged girls.
Zhuo’er Xu – Singapore

Jordyn Chew – Singapore

Miwa Takano – Tokyo

I have milk for my entire family
delivered in reusable glass
bottles.
Richard Kehoe – London

Reduce food waste at homethrough composting, worm
farming and bokashi.
Tim O’Loan – Auckland

I will not buy unnecessary
things./I will find more
opportunities to talk with mydaughter about sustainability.

When it is sunny outside I will
walk instead of using public
transportation.

Promote/run girls youth tennis
training at local club due to low
national female particpation
rates and therby improving
healthy living and D&I.
Cameron Kuwahara – Edinburgh

Having installed solar panels on
my home earlier this year, I willcontinue trying to ensure thatmost of my home power usage
is covered by the solar energy
I generate.
Leon Taki – Tokyo

I promise not to drive my kids toschool.

I won’t eat any animal products
anymore.
Marie Guittet – Auckland

I will pick up trash when I walk inthe park.

Shingo Murooka – Tokyo

Stephanie Gaspar – Singapore

I promise to walk or cycle more
instead of taking the car.

I promise to do a beach cleanup (plastic and any inorganic
rubbish) on my local beachevery week.

I promise to never buy plastic
water bottles and to eat veganmeals at least twice a day to
reduce my carbon footprint.

I promise to shut down mylaptop every day instead of justlocking it.

Pam Molloy – Auckland

Shuhei Murakami – Tokyo

Katelyn Hedden – New YorkJohnny Russell – Edinburgh

Participate in activities aimed
at creating a society in whichpeople with disabilities can live
comfortably.

I will reuse the water used towash vegetables, fruits and rice
for watering plants.

I promise to use coral-friendly
sunscreen.

Help equality within asset
management by mentoring
school girls in Scotland.

Masayoshi Sato – Tokyo

During the colder seasons, I will
wear one more layer so as to not
rely too much on the heater.
Tomomi Shimatani – Tokyo

Nikko AM
Sustainability Report 2022

Laura Jordan – New York

Steven Williams – London

Kazuki Nakayama – Tokyo

Iain Fulton – Edinburgh

Chiam Li Ping – Singapore

I will make it a habit to read/keep
documents without printing
them out.

Will be mindful of how muchfood my family cooks or buys toreduce food wastage.

I will continue to grow more of
my family’s own food and reduce
waste wherever possible.

Sharon Ingram – Auckland

Li Min Kwan – Singapore

I pledge to eliminate wastefulelectricity usage in my homeby turning off or unplugging
the lights and unnecessary
electrical devices frequently.
Tsuyoshi Kurokawa– Tokyo

40

Introduction

Investment Management

Corporate Sustainability

Looking Ahead

Joyce Koh

Daisuke Kono

The catalysts formeaningful change
A conversation with the Global Co-heads of Sustainability

The year 2021 marked the third anniversary of the launch of the Corporate
Sustainability Department at Nikko AM. To commemorate this milestone, we
sat down for a virtual chat with our Global Co-heads of Sustainability, Joyce
Koh and Daisuke Kono, who describe how the firm progressed in the area ofsustainability in 2021, and outline their plans for the future.
How has sustainability evolved at Nikko AM since you
became co-heads and where you do see it going?

What has been your biggest challenge leading thedepartment?

What have been some key milestones for the firm
since the department was created?

Daisuke Kono: The Corporate Sustainability
Department’s purpose — to act as a catalyst for change
in our company culture — has become much more widely
recognised. This was a result of both a deliberate, global
effort on our part and the rapid changes taking place inour world today. Going forward, I think corporate sustainability will become further embedded as an essential partof the management strategy of the firm.

JK: For me, the biggest challenge has been responding to
the urgent need for change with our limited resources. We
have so much to do in our three focus areas — diversity& inclusion (D&I), reducing inequalities, and environment& climate — and so little time. The corporate sustainability team is small, with many of our colleagues working in
multiple roles. But, looking back at the initiatives the teamand our various working groups have organised over the
past three years, it is amazing what we can accomplish
with passion and conviction.

DK: In 2021, we established long-term global targets tohave women in 30% of the firm’s managerial positions
by 2030 and to reduce our greenhouse gas emissions
40% per employee by 2030 compared with 2019 levels.
I believe the announcement of these goals was a major
milestone, because they will act as pole stars in theareas of D&I and environment & climate and will lead tothe creation of actionable short- and medium-term plansto ensure they are achieved.

Joyce Koh: I have definitely seen the pace of progressin the area of sustainability pick up at our firm. Support
from management has grown, the number of sustainability specialists in investment departments has increased,
and there is greater senior leadership participation in our
corporate sustainability initiatives. Our colleagues arealso embracing sustainability. There is stronger connectivity among working groups and higher participation at
all internal events. It’s clear that a culture shift is taking
place.
Nikko AM
Sustainability Report 2022

DK: While we have helped to encourage change in our corporate culture from the bottom up, the global corporate
sustainability team is relatively small, as Joyce mentioned,
and we are still relying heavily on working group leaders andcore working group members. We appreciate the support
we have received from senior managers, but now we needto do more to connect them to our working groups andmake their commitment more visible to all stakeholders.

Another milestone was in 2020 when the Corporate
Sustainability Department was made a global function.
This put us in a better position to align, connect, andsupport the global working groups and help them realise their proposals. Our efforts to achieve our mission
on a global scale have started to bear fruit, as evidenced
in the higher and more diverse participation in global
events, such as the inaugural Sustainability Town Hall,
the Power Chat series, internal seminars, and campaigns.

41

Introduction

JK: In 2021, we also saw the highest number of our colleagues come together to support a single initiative. Over
400 staff members made a sustainability promise in thelead-up to the Sustainability Town Hall. That level of participation was unprecedented.
Tell us more about the Sustainability Town Hall. Why
did you decide to hold it this year?
DK: One main focus of the Sustainability Town Hall wasto raise awareness of our sustainability working groups
among employees and senior management, and toencourage more people to join. These voluntary groups
are the “influencers” within Nikko AM, and a defining feature of our corporate sustainability activities.
Going into 2021, despite the efforts we had made overthe previous years to promote our working groups, participation had not reached the level we would have liked. So,
we thought the three-year anniversary of the Corporate
Sustainability Department was the perfect time to havemore people hear our message.
JK: We wanted to bring our colleagues around the world
together and do something as a firm that could highlight the great initiatives of our various working groups.
Our team did a lot of brainstorming to come up with an
idea that would be both meaningful and easy to implement for everyone while we were all working from home.
We decided that we would encourage people to make apersonal sustainability promise, as this seemed to be anauthentic and interesting way to engage our colleagues.
That grew into a fundraiser where the firm matched every
promise with a donation towards two causes: the COVAX
initiative for equitable vaccine distribution, and planting
trees to start the Nikko AM forest.

Nikko AM
Sustainability Report 2022

Investment Management“Over 400 staff members made asustainability promise in the lead-up to
the Sustainability Town Hall. That levelof participation was unprecedented”

Of the firm’s three focus areas of sustainability — D&I,
reducing inequalities, and environment & climate —where do you see us doing more?
JK: D&I is something we are passionate about, so moreneeds to be done to help women to progress in theircareers in order to have more women in managerial positions by 2030. This year, we have stepped up our environmental efforts, and 2022 will see us taking more concrete
steps to reduce our carbon emissions. One key area weneed to look at is business travel, which needs radical
change.
DK: I think we need to give equal attention to these threeareas to do our part in helping the world achieve the UN’s
Sustainable Development Goals. The areas of D&I andreducing inequalities actually overlap in many cases andthere is much more we could do externally, such as joining global initiatives. This is something that may help us
better shape our internal initiatives to meet our goals. As
for environment & climate, it is essential that we tackle
climate change from both the investment and corporate
perspective. On the corporate front, we will be launching specific action plans to meet our newly establishedgreenhouse gas reduction target.

Corporate Sustainability

Looking Ahead

Sustainability Town Hall 2021
The Global Corporate Sustainability team hosted
the firm’s first-ever Sustainability Town Hall on 29
September 2021. The Town Hall took place online
to maximise accessibility for our colleagues aroundthe world, and 484 employees attended the event.
Various members of our senior leadership teamspoke about the firm’s stance towards corporate
sustainability and how we are addressing it throughboth our operations and working groups. Membersof each of our regional working groups also gave
presentations on their initiatives and their plans forthe future.
In the lead-up to the event, the firm held a
Sustainability Promise challenge, inviting employees to submit a promise to become more sustainable in their daily lives. We reached our goal of over
400 promises and, in return, Nikko AM donated
USD 50 for each promise, or a total of USD 20,000.
These funds were split equally between two worthy
causes: USD 10,000 towards a tree-planting project called The Forest of Nikko AM, and USD 10,000
towards the COVAX initiative, aimed at equitableglobal access to COVID-19 vaccines.

•

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Corporate Sustainability

Looking Ahead

D&I enriches ourfirm’s culture

New initiatives and goals will ensure we continue to prioritise diversity

Diversity & Inclusion (D&I) is a topic
many organisations have had to grapple with as they pursue sustainability.
At Nikko AM, D&I is one of our threefocus areas of corporate sustainability.
Our global D&I policy was implemented to anchor our commitment to fostering and preserving a culture of diversity and inclusion among employees. It also allowed us toclearly state how we have incorporated D&I into our corevalues.
With this policy in place, we aim to strengthen our teams
by bringing together our people’s differences in a healthy
working environment. We have also explicitly outlined how
we manage recruitment; compensation and benefits; performance and career development; company rules andprocesses; and awareness.
We believe that diverse teams offer a broad spectrum ofperspectives, which will ultimately improve productivity
and efficiency, and will sharpen critical decision-making.
This, in turn, contributes greatly to the progressive solutions we are able to offer to clients.
Mentorship pilot programme in the UK and the US
In November 2021, a global initiative was piloted at ourLondon and New York offices. We started a mentoring programme to develop a sustainable culture of cross-learning
Nikko AM
Sustainability Report 2022

that will enable mentees to enhance performance andachieve their professional goals. The mentors, who areusually senior staff members, will also benefit from theopportunities to develop and hone their mentoring skills.
The time period for the mentor–mentee partnership isset at six months, with at least one meeting every month.
Seven pairs of mentors and mentees are taking part in thepilot programme. This programme is expected to be rolled
out firmwide in the second half of 2022.
“This has been a huge support and so meaningful to mypersonal progress and development within this industry. I
really look forward to every meeting,” said Leonie Ugur, aLondon-based mentee in the pilot programme.
Marcel Nyiri, another mentee based in New York, statedthat “the mentor–mentee programme is a good opportunity for me to connect with NAM Americas and get a feeling for the challenges that may lie ahead on my career
path.”
Gender diversity
In 2021 the firm set a target to increase the number ofwomen in managerial positions across the Nikko AM
Group from 18.4% to 30% by 2030. To support this initiative, our Power Chat online forum was launched to inspireand encourage female employees to take control of theircareers.
At Power Chat, a series of motivational dialogues
between global senior managers from various Nikko AM

Leonie Ugur

Marcel Nyiri

international offices, speakers shared their personal stories about their career journeys.
The first session featured Stefanie Drews, who was SeniorCorporate Managing Director and is now President, andNikko AM Asia President Eleanor Seet. The two spoke
about their individual experiences, facing challenges
unique to women while advancing in their careers and balancing their work and personal lives. In subsequent sessions, other senior executives, both male and female, discussed a number of situations they encountered at work
and in life that shaped them and helped them navigate
their careers more effectively.
Feedback from staff who attended the Power Chat sessions was consistently positive and we plan to continue
this internal programme for another year, albeit in analtered format, to make the advice given even more practical for attendees.
Increasing the sustainability quotient of staff
We believe that D&I can contribute to a culture of sustainable excellence in a powerful way. We are conscientiously
working to ensure that the workplace is an environment
where everyone has an equal opportunity to contributeand feel involved and supported.
To this end, the incorporation of sustainability goals into
each staff member’s goal setting in 2020 was an effective
move to increase the sustainability quotient of individuals.
As a result, in 2021, we saw a heightened awareness of theimportance of sustainability and more actions being taken
to make our workplace and our world more sustainable.

•

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Corporate Sustainability

Looking Ahead

Enhancing our commitment
to the environment
Our updated environmental policy will hold us accountable for our emissions

We believe that corporate sustainability is not just about
doing good for society and the environment — it’s also
about the sustainability of our own business. In 2021, as
we thoroughly examined our firm’s impact on the environment, we decided it was time to update our environmental
policy, and we have set a measurable target that will holdus accountable for our emissions.
The revised policy sets out our commitment to environmentally conscious practices throughout our business
operations. We have changed the wording of the policy
so that it covers a broader range of areas pertinent totoday’s environmental conversations.
We have also included specific areas of focus, such as
our commitment to comply with the relevant environmental regulations of the regions we operate in; prioritise theselection of environmentally conscious vendors and service providers; eliminate waste across our operations bypractising the 3R’s of reduce, reuse, and recycle; and support external initiatives in areas such as ocean biodiversity, reforestation, and natural habitat conservation.
Most importantly, as many countries we operate in havebegun to pledge to achieve carbon neutrality by 2050,
our new policy features a firm-wide target to reduce ourgreenhouse gas emissions by 40% per employee by2030, compared with our 2019 emission levels.
This target builds upon our established process of measuring and offsetting our carbon emissions. Over the
Nikko AM
Sustainability Report 2022

The Forest of Nikko AM“With a shift to a post-COVID
mindset, and the innovation that
Nikko AM is renowned for, I’m
confident that we’ll be able toachieve our reduction target”
past few years, we have been aggregating data on ourenergy use and business travel, which is converted,by an external consultant, into the equivalent carbon
emissions. We then offset these emissions by purchasing carbon credits from certified projects, earning us acarbon neutral certification.
As a firm, we are taking this a step further as we strive
to minimise our footprint. We will now only offset theemissions we cannot reduce though our own efforts.
Two key areas we are focusing on — which currently
form the bulk of our carbon footprint — are our energy
usage in our office buildings and our emissions frombusiness travel.
“We will work with the relevant departments to come up
with action plans to address both of these areas, without hampering productivity or business success,” says
Daisuke Kono, Global Co-head of Sustainability. “With ashift to a post-COVID mindset, and the innovation that
Nikko AM is renowned for, I’m confident that we’ll beable to achieve our reduction target.”•

11,200 total trees plantedTanzania

Usambara Biodiversity Conservation

India

Trees for Tigers

6,000

5,200

trees

7.19 hectares

Total reforested

3,424 tonnes
Total CO2 captured

trees

5.5ha

Tanzania

1.7ha

India

2,704 t

India

720 t

Usambara Biodiversity
Conservation

Trees for Tigers

Trees for Tigers

Tanzania

Usambara Biodiversity
Conservation

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Corporate Sustainability

Looking Ahead

For a sustainable company anda sustainable world
Working group initiatives – Japan / International

Our working groups — in the areas of LGBT, women, abilities, the environment,
and global racial equality — are made up of employees who have joined
voluntarily and who activate our “bottom-up” sustainability initiatives.
We also created two videos for a recruitment event, introducing the working group leaders and members, andhaving them showcase the working groups’ activities.

In May 2021, we connected with all of our Japan-based
employees, many of whom were working remotely, bysending them a Sustainability Package to reaffirm ourcommitment to sustainability. In the package, we included
pins of each working group’s logo, an LGBT pamphlet,a reusable tumbler made of thinned wood, and chocolate sweets from Chocolabo, a chocolate company where
people with and without disabilities work together.

© 2018- Nakagawa GroupLGBT Working GroupIn April, the group held its first online viewing session of
an LGBT-themed short film, called Kalanchoe. This wasfollowed by a discussion with the movie’s director andsupporting actress. The heart-warming film, set in a rural
high school in Japan, prompted many of the viewers toreflect on LGBT issues. It was also a unique experience tohear from people involved in the movie’s production, andthis was very well received. Since many of those who took
part were working remotely, we invited their family members to join. Some mentioned that it offered an excellent
opportunity to talk about LGBT issues with their children.
In November, we celebrated Pink Friday, an event to raiseawareness of LGBT allyship by wearing pink clothes andusing pink Zoom backgrounds created specifically forthe occasion. At this meeting, each member talked about
their journey since the working group was founded in
2017.

Pink Friday Zoom meeting

In recognition of our LGBT initiatives, we received the Goldaward from work with Pride in 2021, our third consecutive Gold award from the organisation. In addition, we were
given the Best Workplace Award from JobRainbow at theirfirst D&I Awards.
One of the events that we hosted outside the company
was a seminar titled “Same-Sex Marriage — Where We Are
Now and Looking Forward” with Makiko Terahara, a lawyer.

LGBT-themed short film Kalanchoe

Nikko AM
Sustainability Report 2022

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Corporate Sustainability

Looking Ahead“While each of these initiatives seem
like small steps, we are confident
that they have helped to advance theunderstanding of LGBT issues and toadvocate the importance of D&I”
This was held in conjunction with LGBT Finance, a Tokyobased industry group focused on LGBT support, and it
drew a large audience from the member companies.
While each of these initiatives seem like small steps,
we are confident that they have helped to advance theunderstanding of LGBT issues and to advocate the importance of D&I, both at the firm and externally.
Japan Women’s Working GroupThe year 2021 was a landmark one for the group. First, in
conjunction with the Human Resources Department, we
set our #30by2030 goal that aims to have 30% of managerial positions held by women globally by 2030. This
led to the creation of our Power Chat series, an online
seminar initiative that empowers women by giving themthe opportunity to learn about the experiences of leaders within the firm and get some practical advice for boththe corporate world and the home. Held quarterly, senior
managers and other leaders talked about a range of
topics, including their personal stories, how to overcome
failure and be successful, how to effectively communicate
with bosses and colleagues, as well as how to balancefamily responsibilities. They always end with a powerful
message for attendees. These meaningful sessions havepresented employees with role models within the firm andoffered actionable advice for issues that everyone faces.
The group also hosted a number of seminars featuring
speakers from outside the firm. In June, we invited ayoung entrepreneur, Ai Hagiuda, founder of Afrika Rose.
The seminar focused on her business model that not only
creates employment in Africa, but brings a sense of
Nikko AM
Sustainability Report 2022

Oki Matsumoto, Chairman & CEO, Monex Group, Inc.

Wheelchair Rugby athlete Yukinobu Ike in action

satisfaction to all stakeholders, including employees andclients. We also welcomed Nahoko Shindo, Senior
Advisor at the World Health Organisation, to talk about
her career as a single mother from Japan working for a
supranational organisation and give valuable informationon the current situation of the COVID-19 pandemic. In
December, we had a talk from Miwa Seki, the founder ofmPower Partners Fund and renowned translator of Hans
Rosling’s Factfulness. Her seminar was about never
missing an opportunity, and being grateful for everyone
and everything, providing a powerful message for all
working women.
At the end of 2021, we welcomed entrepreneur andChairman & CEO of Monex Group, Inc. Oki Matsumoto,who spoke on the value of being different and how diversity can be leveraged as a business strategy. Using
modern portfolio theory and behavioural finance, he
explained the merits of diversity for corporate strategy
and how it relates to meritocracy, not just from the perspective of gender, but also that of LGBT and disabilities.

Abilities Working GroupSpecial mention needs to be given to the success of ourdisabled athlete employee, Yukinobu Ike. In addition to
being an employee of Nikko AM, he is the captain of theJapanese National Wheelchair Rugby team. The team won
bronze for the second time in a row in Tokyo in 2021, after
winning bronze in 2016 in Rio de Janeiro.
We held a pre-tournament pep rally and a post-tournament debriefing, with many employees tuning in online tocheer on Yukinobu. There are many “Ike fans” within thecompany, and the significance of hiring disabled athletes
has come to be widely understood at Nikko AM.
As a new initiative, we held a series of 11 Nursing Care
Cafés from February to December for a small group of
employees who are currently caring for elderly relatives,or who may need to in the future. At each meeting, Mieko
Akutsu of NPO UPTREE, which supports families that takecare of elderly relatives, spoke on a particular topic. Then
participants were given the chance to talk with each otherabout their daily problems and their concerns about the
future. Mieko, who is deeply knowledgeable about nursing care and consistently offers practical advice, gave46

Introduction

Investment Management

participants courage to face the future. We are looking
into follow-up events in this area.
We also invited Hitoshi Shindo, President of General
Partners, the first private employment agency in Japanto specialise in people with disabilities. His seminar was
extremely informative, sparking dialogue on diverse hiringthat goes beyond the standard ideas of disabilities. In
addition, we welcomed Toru Kishida, a representative of
the NPO Cancer Note, which provides support to cancer
patients. He took part in a talk-show style discussion,
titled “Let’s talk about cancer — yours and mine”, with
Nikko AM employee Yuichi Yamada. The seminar gave
employees the opportunity to listen to a frank conversation about cancer based on the experiences of Toru andYuichi, who are both cancer survivors and are balancing
work and family life. After being presented with the statistic that almost half of Japan’s population suffers fromsome form of cancer in their lifetime, employees learned
what to do if they or a member of their family is diagnosed
with cancer.
Environment Working GroupIn March, we invited Toru Furuhara of Asahi Breweries toa seminar titled “Let’s start with this one cup! Creating
hands-on environmental value with the Forest Tumbler”.
The Forest Tumbler, jointly developed by Panasonic andAsahi Breweries in 2019, is a reusable tumbler madefrom wood derived from forest thinning that makes beer
taste better. Toru told participants the story of the product’s development and plans for the future. All Japanbased employees received a tumbler as a part of the
Sustainability Package sent in the summer.
In July, we held a seminar titled “More trees! Sustainability
and Forests” with Shinkichi Mizutani, Secretary Generalof the organisation more trees. Represented by musician Ryuichi Sakamoto, more trees is engaged in a varietyof activities such as reforestation with the aim of creating a society where forests and people can live harmoniously forever. At the seminar, Shinkichi talked abouta wide range of topics, including disasters caused by
global warming due to deforestation and the current state

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Sustainability Report 2022

Corporate Sustainability

Looking Ahead“As a corporate citizen, I believe it is ourduty to help those in need and reducefood loss. I would like to thank Giving
Forward for this opportunity, and lookforward to working with them again in
the future”

Environment Working Group donating disaster supplies to the Giving Forward organisationof forests in Japan and around the world. Participantslearned what they could do to contribute to improving our
coexistence with forests.
At the end of the year, we held our annual donation of disaster supplies. This year’s donation was made throughthe organisation Giving Forward, our partner for the donation we made last year. The purpose of the organisation
is to deliver overlooked social resources to those in need.
Tsuyoshi Kurokawa of the General Affairs Department— who is in charge of managing our company’s disasterstockpile and co-lead of the Environment Working Group— prepared and arranged the shipment along with othergroup members. Tsuyoshi commented that, “As a corporate citizen, I believe it is our duty to help those in need
and reduce food loss. I would like to thank Giving Forward
for this opportunity, and look forward to working withthem again in the future.”

Global Racial Equality Working GroupThe Global Racial Equality Working Group is the first truly
global working group, in that it comprises members fromeach of Nikko AM’s global offices, including headquarters
in Tokyo. The group is working with an external consultant to create a survey that will provide a comprehensive
overview of race at our company, with the specific aim ofunderstanding areas where Nikko AM needs to improve
support for employees on the basis of race.
We have people from 25 different nationalities working
at Nikko AM, and this only enhances the work that thegroup performs. Marie Ovel, a compliance officer at Nikko
AM New Zealand and a member of the group, stated that,“Wherever we see bias, we must put our full, concerted
effort into removing it. We need to create a working environment where staff feel that, whoever they are, they will
be accepted.” She added that she would like to see a world
where “even beyond race, everyone was treated fairly andequally.”•47

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Corporate Sustainability

Looking Ahead

Sustainability unlimited
Working group initiatives – Asia

“In Asia, we have seen
the drive towards
sustainability pick up
brisk pace in recent
years, both on thebusiness front and in
our individual actions. We
initiated this journey as a corporate
entity from the angle of Corporate
Social Responsibility [CSR] and,since then, our Sustainability
Working Group has progressively
expanded its scope. Our activities
now involve all our colleagues,
whose commitment to sustainability
continues to deepen. We know thismomentum is here to stay because
we are seeing that our individual andcollective actions matter.”
Eleanor Seet

On the Nikko AM Asia Sustainability Working Group, we
have found that stretching our imagination to do more
for sustainability from home is as therapeutic as stretching ourselves to relieve our body aches after long hours
bound to our desks.
With activities requiring physical attendance put on holdfor the second year in a row, due to the evolving COVID19 pandemic, the team has found its own rhythm for conducting outreach to help reduce inequality and expand
inclusion.
In April 2021, we held a fundraiser for Cahaya Community,
which provides social support to children of families inneed. They engage these children through mentorship as
well as educational and sports programmes.
We raised a total of SGD 11,000 that went towards supporting three initiatives. The first was to set up study corners — with tables, chairs, and lamps — for 25 families,

which was done with the aim of cultivating healthy study
habits in these children over the long term. The second
was to provide academic materials, such as textbooks andworkbooks, for 110 children. And, when the situation permits, the remaining funds raised will be channelled towards
extracurricular programmes that are linked to sports, arts,and service learning.

Christina Michael, Principal of Canossian School for the hearing impaired in Singapore— Eleanor Seet, President and Head of Asia ex-Japan,
Nikko AM Asia
Cahaya Community provides social support to children of families in need

Nikko AM
Sustainability Report 2022

“We know this momentum is here
to stay because we are seeingthat our individual and collective
actions matter”

Learning to be inclusive
One out of every 1,000 babies born in Singapore has
severe or profound hearing loss, and five in every 1,000
have lesser degrees of hearing loss.

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Corporate Sustainability

Looking Ahead“After relentless monthsof social distancing,work from home, andother restrictions, therun — which eachparticipant could do
at a time and place of
their choosing — was awelcome mental break”

Some of the participants in the 5K virtual run in aid of Limitless, a non-profit entity in Singapore that helps youth grappling with mental health issues

On 19 August 2021, Christina Michael, Principalof Canossian School for the hearing impaired in
Singapore, and Barbara D’Cotta, from the Singapore
Association for the Deaf, helped the larger Nikko AM
community across different offices understand more
about living with hearing loss, as well as intervention
and support from the community. They were joined bya deaf adult and students from the Canossian School.

Running for mental health
In October, the working group collaborated with
Limitless, a non-profit entity in Singapore that helps
youth grappling with mental health issues, to organise avirtual run. Each sign-up for a five-kilometre run raised
SGD 25 to fund outreach and counselling programmes
for young people, ranging from 12 to 25 years old, fromall walks of life.

The webinar is a renewal of a very special bond with
the Canossian School, which was one of our earliest
CSR partners. In 2013, a good number of our staff volunteered regularly at the school to support the students with their art projects. The Canossian School
continually endeavours to integrate its studentssocially with the larger community.

A total of 116 staff and family members made the run,raising SGD 5,800, which includes a dollar-for-dollar
matching contribution from the Singapore Tote Board.
After relentless months of social distancing, work from
home, and other restrictions, the run — which each participant could do at a time and place of their choosing —was a welcome mental break.

Nikko AM
Sustainability Report 2022

In addition to all the programmes that were organised
to engage our staff, we have continued, for the second
year, to keep everyone connected with our bimonthly
email newsletter.

•

49

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Investment Management

Motivated to make adifference
Working group initiatives – Europe“Sustainability
informs every action
we take at Nikko
Asset Management.
We always have ourclients, employees, andcommunity at the frontof our minds.”

Looking Ahead

initiative gets new toys and gifts into the hands of children
who might not otherwise receive a Christmas present. The
Salvation Army offers “practical support and services to all
who need them, regardless of ethnicity, religion, gender, or
sexual orientation”.
Meanwhile our colleagues on the Global Equity team in
Edinburgh purchased toys for the Cash for Kids appeal in
Scotland.

John Howland-Jackson— John Howland-Jackson, Chairman,
Nikko Asset Management Europe

The profound impact of the COVID-19 pandemic brought
out the best in our colleagues and motivated them to help
others who are less fortunate. There are many examples
from 2021 of our people giving their time, money, andexpertise to support others, and these are a few of thehighlights.
Charitable giving award
After implementing payroll giving in 2020, Nikko AssetManagement Europe received a Silver Award fromthe Charities Aid Foundation in June 2021. From thescheme’s inception up to the end of 2021, our employees
had donated a total of nearly GBP 30,000 to charities they
selected.
Nikko AM
Sustainability Report 2022

Corporate Sustainability

Employees participating in the Virtual Big Fun Run for Trussell Trust

Virtual Big Fun Run
Employees participating in the Virtual Big Fun Run raisedover GBP 2,000 for Trussell Trust, a network supporting food banks in the UK. This amount was matched by
the firm, so the total amount donated was more than GBP
4,000.

Also, staff at the Edinburgh office volunteered at an organisation that collects surplus food donations and converts them into breakfasts, lunches, dinners, and snacks.
Community volunteers then package these meals into“day packs” for delivery across Edinburgh. Having been
inspired by the project, the team collectively made a cash
donation to the organisation.

•

Wrap Up London
Every November, Wrap Up London brings together hundreds of volunteers to collect, sort, and distribute coats
to charities and for projects supporting those using its
services. A coat doesn’t only provide warmth, it is often
a gateway for someone to access services that will help
them get back on their feet. Our staff generously donatedwarm winter coats to the initiative.
Our team in London also donated presents to theSalvation Army’s Christmas Present Appeal. This annual

Surplus food donations being packaged into “day pack” meals for delivery across Edinburgh

50Introduction

Investment Management

Corporate Sustainability

Looking Ahead

Supporting the fight against
modern slavery
Working group initiatives – New Zealand“It is both our
privilege and duty
to use the skills
and resources atour disposal to begood stewards ofeverything over which
we have responsibility. We aredoing this successfully at Nikko
AM New Zealand and, specifically,
I am proud of how we are raisingawareness about modern slavery
and helping to bring this horrificproblem to an end through ourFreedom Fund.”George Carter

Reducing inequality
In 2021, the Nikko AM New Zealand office launched an
initiative to help abolish modern slavery and human trafficking by creating the Freedom Fund. It is estimated that
there are more than 40 million victims of modern slavery
in our world today, so the Freedom Fund gives investors
the opportunity to invest in a fund that donates all thefees and returns to the charitable organisation Tearfund.
Tearfund works with partners in five of the poorest countries to offer an end-to-end response to the issue ofhuman trafficking and slavery, tackling poverty and injustice through sustainable development. With its focus
on fighting modern slavery, our fund gives investors themost rewarding return they will ever get.

— George Carter, Managing Director, Nikko AM New ZealandFreedom Fund marketing image

Nikko AM
Sustainability Report 2022

In addition, during the holiday season, Nikko AM New
Zealand sent thank-you gifts to clients, business partners, and employees through 27seconds, a social impact
winery. 27seconds donates all of its profits to its partnerorganisation, Hagar, which provides trauma recovery careto survivors of slavery, trafficking, and severe abuse insome of the poorest countries.
As we have taken these steps to support the fight against
modern slavery, we have come to a deeper understandingof just how significant this issue is and how our everyday
choices can make a difference.
Promoting social issues in investments
In 2021, Nikko AM New Zealand, with support from the
Nikko AM Group, became a silver sponsor of Mindful
Money’s seminar series, which promotes social issues ininvestment such as impact investments, net zero commitments by fund managers, and social housing and investment issues. By leading a presentation in February, we
aimed to raise awareness about modern slavery and educate investors about ethical investing. We believe that by
doing our part in promoting social issues in investing wewill help educate others and make a meaningful change insociety.
Internships
For the first time, Nikko AM New Zealand has committed
to mentoring university students through an internshipprogramme. This allows them to develop their skillset andprepare for their future careers. It has helped build awareness about the kind of work that goes on behind investment management and has encouraged some students tochoose a career in the field.

•

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Corporate Sustainability

Looking Ahead

Supporting greater
equality in the arts
“Nikko AM has ahistory of morethan 20 years
addressing ESG
issues, so having a
local sustainability
working group at Nikko
AM Americas is a core part of ourvalues. Sustainability resonates
strongly today and should
continue to expand.”

Lawrence Prager— Lawrence Prager, Country Head and CEO, Nikko AM Americas

When it began, the Nikko AM Americas Sustainability
Working Group was focused on conducting in-person
volunteering activities. However, given the need to work
remotely throughout 2021, in-person opportunities forvolunteering were limited. Although the pandemic has
kept us apart, the reduced commutes to work and thedrop in business travel have decreased our overall carbon
emissions. Remote work has also inspired the office totransition to electronic statements instead of paper mailwhen possible.
The working group helps to keep the office connected,
which has been increasingly important during the pandemic. It is made up of around 10 employees, or 30% of
the office, from almost every department. The diversity ofexperience and backgrounds fosters thoughtful discussions during our meetings.
Each one of these employees is very environmentally andsocially responsible. Our meetings give us opportunities
to share personal initiatives and to learn from each other.
In 2021, some members went vegan, eliminated the useof plastic bags, planted gardens, started composting,or cleaned up local beaches. These generous employees continually strive to make a positive impact in ourcommunity.
We are thankful for the corporate support we receivefrom Tokyo for our philanthropic initiatives.

Nikko AM
Sustainability Report 2022

© Classical Theatre of Harlem

Working group initiatives – Americas

Classical Theatre of Harlem

Our office remains committed to supporting the arts andculture, donating USD 10,000 to local nonprofits in 2021.
For example, we started helping the Classical Theatre ofHarlem (CTH) in 2020 and have stayed connected with theorganisation throughout the pandemic.
CTH’s mission is to equalise access to the arts and make
New York’s performing arts scene more diverse and inclusive. The organisation works to bring the professional theatre experience to low-income areas, putting on theatrical
productions and providing educational programmes forlittle to no cost in Harlem and beyond. Our donations havesupported their digitalisation and other efforts.
One initiative CTH is working on is a project to convert
classical playwrights’ works into a series of short animations. The goal is for local schools to use this series as atool to teach the classics.
Our sustainability working group believes that the arts
should not be reserved for the rich, and the Classical
Theatre of Harlem shares our core values of diversity,
inclusion, and equality. It is also a growing organisation
with great leaders who have a lot of ambition. We hope tocontinue this partnership for many years.

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Introduction

Investment Management

Corporate Sustainability

Looking Ahead

Looking
Ahead
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Introduction

Investment Management

Corporate Sustainability

Looking Ahead

Looking ahead
Staying focused

At Nikko Asset Management, every
one of our teams is striving to do
better in various aspects of sustainability, in spite of the challenges anduncertainties of today.
As we finalise our Sustainability Report 2022 for publication, all eyes are on Russia and Ukraine. The crisis has
eclipsed the constant nagging concern of living with the
COVID-19 pandemic and perhaps has even overtaken
our heightened awareness of the need for greater sustainability. The uncertainty of the future makes it all themore necessary for us to stay focused and make clear
plans to become more sustainable.
As responsible investors, we will continue to add
resources that will help our investment teams enhance
processes related to ESG and expand our collaboration
with the investment community.
We are committed to continuing to raise internal awareness of our drive towards sustainability, and we believe
the support of senior management will help us toincrease the number of staff volunteers in the sustainability working groups from 8% to 15% of our total workforce by 2025. The level of participation internally is abarometer of engagement and the cultural shift taking
place within the firm, so reaching a critical mass of support from our employees is key to the full activation of
our sustainability strategy.
In the area of corporate sustainability, a critical change
we want to make is to designate active sponsors from thesenior management team for each of our three pillars:
diversity & inclusion (D&I), reducing inequalities, and environment & climate.

Nikko AM
Sustainability Report 2022

An important aspect of our D&I strategy is the engagement and empowerment of women through internal platforms. The year 2022 will see the launch of Power Pact,
which is an advanced iteration of the Power Chat online
seminar series we offered in 2021. Power Pact aims toequip women, as well as men, in soft skills that are relevant
to effectively navigating work and home life. The series
begins with helping participants identify how they can takecharge of their own career paths and personal growth.
In every region where we operate, we are also looking to
be a change agent to help reduce inequality at the company level, the industry level, or even at the national level.
In 2022, we will conduct our first racial equality survey,
which is a major project helmed by our Global Racial
Equality Working Group. This survey will be conductedacross all our offices. The objective is to identify potential

biases and gaps in racial equality in our organisation andtake action to address them. The findings will also contribute to our D&I strategy.
In the environment & climate space, we have cut carbon
emissions through the reduction of business travel, andwe now need to review other aspects of work as we entera post-COVID era. These include considering non-business travel plans, switching office energy supplies torenewable sources, and replacing office desktops withsecure laptops. We also intend to continue contributing toforestation projects.
As we develop new goals and programmes, we will also
keep reviewing what we have put in place to ensure weremain focused and outcome driven.

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Introduction

Investment Management

Corporate Sustainability

Looking Ahead

External commitments
Our participation in external initiatives

ClimateActionGlobal Investors Driving Business Transition

Asia Investor
Climate Climate
ActionGroup onClimateChangeAction(AIGCC)ClimateJapan Association of
Value Creating ERM(Nikko AM Tokyo)

Global Investors Driving Business Transition

Global Investors Driving Business Transition

ActionGlobal Investors Driving Business Transition

ClimateActionGlobal Investors Driving Business Transition

ClimateClimateActionClimateActionActionClimateActionClimateClimateActionActionClimateClimateActionActionGlobal Investors Driving Business Transition
Global Investors Driving Business Transition

Global Investors Driving Business Transition

Global Investors Driving Business Transition

Global Investors Driving Business Transition

Global Investors Driving Business Transition

GlobalGlobalInvestors
InvestorsDriving
DrivingBusinessBusinessTransition
Transition

ClimateActionGlobal Investors Driving Business Transition

Principles for Financial
Action for the 21st Century(Nikko AM Tokyo)

CDP
ClimateActionClimateAction 100+
Climate「 TCF D Cons or tium 」ロゴマーク

Global Investors Driving Business Transition

ActionClimateActionClimateAction Corporate
International「 TCF D Con s or tium 」ロゴマーク

Global Investors Driving Business Transition

30% Club
Investor Group(Nikko AM Tokyo)

Global Investors Driving Business Transition

TCFD Consortium(Nikko AM Tokyo)

Global Investors Driving Business Transition

Governance Network (ICGN)

Stewardship Codes

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

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

The Investor Agenda「 TCF D Cons or tium 」ロゴマーク「 TCF D Cons or tium 」ロゴマーク

Women’s Empowerment
Principles
Global Investor Statement
to Governments on Climate Crisis

The Net Zero Asset Managers Initiative

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Introduction

Investment Management

Corporate Sustainability

Looking Ahead

Contact information
JAPAN

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

HONG KONG

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

SINGAPORE

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

NEW ZEALAND

EMEA

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

GERMANY

Nikko Asset Management Luxembourg S.A. (Germany Branch)
Tower 185, Friedrich-Ebert-Anlage 35 - 37, 60327 Frankfurt am Main, GermanyTel:+49-(0)69-505047-301
Email: EMEAenquiries@nikkoam.com
Web: www.nikkoam.de

LUXEMBOURG

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

AMERICAS

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

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

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Introduction

Investment Management

Important information
Important information: This document is prepared by Nikko AssetManagement Co., Ltd. and/or its affiliates (Nikko AM) and is for distribution only under such circumstances as may be permitted by applicablelaws. This document does not constitute personal investment advice
or a personal recommendation and it does not consider in any way theobjectives, financial situation or needs of any recipients. All recipients arerecommended to consult with their independent tax, financial and legal
advisers prior to any investment.

This document is for information purposes only and is not intended to
be an offer, or a solicitation of an offer, to buy or sell any investments orparticipate in any trading strategy. Moreover, the information in this document will not affect Nikko AM’s investment strategy in any way. The information and opinions in this document have been derived from or reachedfrom sources believed in good faith to be reliable but have not been independently verified. Nikko AM makes no guarantee, representation or warranty, express or implied, and accepts no responsibility or liability forthe accuracy or completeness of this document. No reliance should beplaced on any assumptions, forecasts, projections, estimates or prospects contained within this document. This document should not be
regarded by recipients as a substitute for the exercise of their own judgment. Opinions stated in this document may change without notice.
In any investment, past performance is neither an indication nor guarantee of future performance and a loss of capital may occur. Estimates of
future performance are based on assumptions that may not be realised.
Investors should be able to withstand the loss of any principal investment.
The mention of individual securities, sectors, regions or countries within
this document does not imply a recommendation to buy or sell.
Nikko AM accepts no liability whatsoever for any loss or damage of any
kind arising out of the use of all or any part of this document, provided
that nothing herein excludes or restricts any liability of Nikko AM underapplicable regulatory rules or requirements.
All information contained in this document is solely for the attention anduse of the intended recipients. Any use beyond that intended by Nikko AM
is strictly prohibited.
Japan: The information contained in this document pertaining specifically to the investment products is not directed at persons in Japan nor
is it intended for distribution to persons in Japan. Registration Number:
Director of the Kanto Local Finance Bureau (Financial Instruments firms)
No. 368 Member Associations: The Investment Trusts Association, Japan/
Japan Investment Advisers Association.
United Kingdom and rest of Europe: This document is communicatedby Nikko Asset Management Europe Ltd, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority (the FCA)(FRN 122084). This document constitutes a financial promotion for the
purposes of the Financial Services and Markets Act 2000 (as amended)(FSMA) and the rules of the FCA in the United Kingdom, and is directed
at professional clients as defined in the FCA Handbook of Rules andGuidance.
United States: This document may not be duplicated, quoted, discussed
or otherwise shared without prior consent. Any offering or distributionof a Fund in the United States may only be conducted via a licensed andNikko AM
Sustainability Report 2022

registered broker-dealer or a duly qualified entity. Nikko Asset Management
Americas, Inc. is a United States Registered Investment Adviser.
Singapore: Nikko Asset Management Asia Limited (Co. Reg. No.
198202562H) is regulated by the Monetary Authority of Singapore.
Hong Kong: This document is for information to professional investors as
defined in the Securities and Futures Ordinance, and intermediaries only. The
contents of this document have not been reviewed by the Securities andFutures Commission or any regulatory authority in Hong Kong. Nikko AssetManagement Hong Kong Limited is a licensed corporation in Hong Kong.
New Zealand: This document is issued in New Zealand by Nikko AssetManagement New Zealand Limited (Company No. 606057, FSP22562) is thelicensed Investment Manager of Nikko AM NZ Investment Scheme and the
Nikko AM NZ Wholesale Investment Scheme and the Nikko AM KiwiSaver
Scheme.
Kingdom of Bahrain: The document has not been approved by the Central
Bank of Bahrain which takes no responsibility for its contents. No offer to the
public to purchase the Strategy will be made in the Kingdom of Bahrain andthis document is intended to be read by the addressee only and must not bepassed to, issued to, or shown to the public generally.
Kuwait: This document is not for general circulation to the public in Kuwait.
The Strategy has not been licensed for offering in Kuwait by the Kuwaiti
Capital Markets Authority or any other relevant Kuwaiti government agency.
The offering of the Strategy in Kuwait on the basis a private placement or
public offering is, therefore, restricted in accordance with Decree Law No.
7 of 2010 and the bylaws thereto (as amended). No private or public offering of the Strategy is being made in Kuwait, and no agreement relating to thesale of the Strategy will be concluded in Kuwait. No marketing or solicitation or inducement activities are being used to offer or market the Strategy
in Kuwait.
Kingdom of Saudi Arabia: This document is communicated by Nikko AssetManagement Europe Ltd (Nikko AME), which is authorised and regulated by
the Financial Services and Markets Act 2000 (as amended) (FSMA) and therules of the Financial Conduct Authority (the FCA) in the United Kingdom (theFCA Rules). This document should not be reproduced, redistributed, or sent
directly or indirectly to any other party or published in full or in part for any
purpose whatsoever without a prior written permission from Nikko AME.
This document does not constitute investment advice or a personal recommendation and does not consider in any way the suitability or appropriateness of the subject matter for the individual circumstances of any recipient. In providing a person with this document, Nikko AME is not treating that
person as a client for the purposes of the FCA Rules other than those relating to financial promotion and that person will not therefore benefit from any
protections that would be available to such clients.
Nikko AME and its associates and/or its or their officers, directors or employees may have or have had positions or material interests, may at any time
make purchases and/or sales as principal or agent, may provide or have provided corporate finance services to issuers or may provide or have provided
significant advice or investment services in any investments referred to inthis document or in related investments. Relevant confidential information,
if any, known within any company in the Nikko AM group or Sumitomo Mitsui

Corporate Sustainability

Looking Ahead

Trust Holdings group and not available to Nikko AME because of regulations
or internal procedure is not reflected in this document. The investments
mentioned in this document may not be eligible for sale in some states orcountries, and they may not be suitable for all types of investors.
Oman: The information contained in this document nether constitutes
a public offer of securities in the Sultanate of Oman as contemplatedby the Commercial companies law of Oman (Royal decree 4/74) or the
Capital Markets Law of Oman (Royal Decree80/98, nor does it constitutean offer to sell, or the solicitation of any offer to buy non-Omani securities
in the Sultanate of Oman as contemplated by Article 139 of the Executive
Regulations to the Capital Market law (issued by Decision No. 1/2009). This
document is not intended to lead to the conclusion of any contract of whatsoever nature within the territory of the Sultanate of Oman.
Qatar (excluding QFC): The Strategies are only being offered to a limited number of investors who are willing and able to conduct an independent investigation of the risks involved in an investment in such Strategies.
The document does not constitute an offer to the public and should not be
reproduced, redistributed, or sent directly or indirectly to any other party or
published in full or in part for any purpose whatsoever without a prior written permission from Nikko Asset Management Europe Ltd (Nikko AME). No
transaction will be concluded in your jurisdiction and any inquiries regarding
the Strategies should be made to Nikko AME.
United Arab Emirates (excluding DIFC): This document and the information contained herein, do not constitute, and is not intended to constitute,a public offer of securities in the United Arab Emirates and accordingly
should not be construed as such. The Strategy is only being offered to a limited number of investors in the UAE who are (a) willing and able to conduct
an independent investigation of the risks involved in an investment in such
Strategy, and (b) upon their specific request.
The Strategy has not been approved by or licensed or registered with the
UAE Central Bank, the Securities and Commodities Authority or any otherrelevant licensing authorities or governmental agencies in the UAE. This
document is for the use of the named addressee only and should not begiven or shown to any other person (other than employees, agents or consultants in connection with the addressee’s consideration thereof).
No transaction will be concluded in the UAE and any inquiries regarding theStrategy should be made to Nikko Asset Management Europe Ltd.
Republic of Korea: This document is being provided for general information purposes only, and shall not, and under no circumstances is, to be construed as an offering of financial investment products or services. Nikko AM
is not making any representation with respect to the eligibility of any person
to acquire any financial investment product or service. The offering and saleof any financial investment product is subject to the applicable regulationsof the Republic of Korea. Any interests in a fund or collective investment
scheme shall be sold after such fund is registered under the private placement registration regime in accordance with the applicable regulations of
the Republic of Korea, and the offering of such registered fund shall be conducted only through a locally licensed distributor.

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