Resona Asset Management

Stewardship Repor t

2020/2021

Message

Corporations are playing
a sustainable society.

First, as well as offering our condolences to those
who have lost loved ones to the novel coronavirus
disease (COVID-19), we convey our heartfelt
sympathies to those who have contracted thedisease, their families, and others worried by thecurrent situation.
In addition, we wish to express our sincere
gratitude to medical professionals and to others
working diligently to maintain social and economic
activity. While placing the highest priority on
ensuring the health and safety of our employees,
their families, our clients, and those employed atinvestee companies, we will do our utmost efforts tofulfill the duties of the asset management business.
Our 2019/2020 Stewardship Report contains thefollowing statement:“The responsibility of theinvestment manager is no longer limited toinvestment results, but is extended towards
achieving sustainable society.”Climate change andFoster a corporate culture

Professional ethics for
asset managers

other ESG factors are already presenting real risks
and opportunities to companies, and have been
incorporated into the investment process for sometime now. However, we have come to the realizationthat taking another step forward to use the power offinancing with the aim of achieving a better future
has become one of the responsibilities of asset
management companies.
Over the past year, in addition to securing themanagement resources necessary to move ahead
with resolving these issues, we began a variety ofactivities centered on the Responsible Investment
Division. In the 2019/2020 Stewardship Report, we
discussed the kind of society we wish to achieve.
For the year 2020/2021 we have gone a stepfurther, selecting and prioritizing the importantengagement issues that we believe Resona AssetManagement should address in order to achieve
such a society. This has clarified the level ofconsistency with past engagement topics. Moreover,with a focus on the engagement topics of climatechange, reforestation, and job creation, we have
utilized the cutting-edge framework by referring toseveral advanced studies to carry out impact
assessments. It is through such a framework that wehave been able to set out routes to integration,
engagement and impact assessment.
Resona Asset Management has also worked
proactively with Japanese and overseas institutional
investors, centering collaborative engagement as anefficient and effective mechanism for implementing
these activities, broadening their scope, andResona Asset Management
The officers and employees of Resona Asset Management conduct businessgenuinely for the sake of our clients based on high standards of professionalism.

Code of conduct

Compliance with laws
and regulations

Pledge (Commitment)・Basic obligations of asset
management(ii) 	Pledge to investee companies

Professional ethics Corporate mission Legal compliance(i) 	For the sake of our clients(ii) Reject personal gain(iii) 	Pursue improvement ofexpertise and skills(iv) Responsible investment(v) 	Contribute to thedevelopment of financial
and securities markets(vi) Contribute to society

We support and promote the asset
formation aims of our clients drawing
on the asset management skills of theResona Group developed over many
years in the field of pension fundmanagement as well as our extensive
expertise pertaining to diversified
portfolios of long-term investments inJapanese and foreign assets.

・Regulations on advertising, etc.
・Conduct prohibited of asset
managers
・Management of personal
information(i) Pledge to clients(iii) Pledge to capital markets(iv) Pledge to shareholders(v) 	Pledge to pursue
professionalism(vi) 	Pledge to compliance withlaws and regulations

an increasingly influential role in achieving
achieving greater selectivity by participating in adiverse range of platforms. It is through suchinitiatives that we aim to maintain our commitment
to using our own power to ensure a better future.
One important measure we will implement going
forward is a further strengthening of impact
management. We will pursue impacts of greater
scope and continuity, and seek more compelling
impact explanations, through such initiatives as
expanding impact themes, giving closer
consideration to negative impacts, and broadening
the range of eligible instruments. In addition tofurther intensifying both unilateral and collaborative
engagement activity, we will take a more proactive
approach to using the power of financing to fulfill
our commitment to ensuring a better future, such as
by expanding stakeholder dialogue and broadening
our involvement in public engagement (participatingin policy planning as external committee members,
responding to requests for public comments).
As shown by the recent commitment, made by
Prime Minister Yoshihide Suga in his keynote speech
to the Diet, to cutting Japan’s greenhouse gas
emissions to effectively zero by 2050, the direction
to take in dealing with environmental problems isbeing determined at a global level, and isaccelerating the switch to new industry structures.
Moreover, as if revealed by the COVID-19 pandemic,
the challenges faced by society have also become
increasingly clear. We are not so arrogant as tobelieve that ESG issues, including these, can be
resolved solely through the power of financing.

However, taking into account the function of supply
chains in a globalized world economy, corporations
are playing an increasingly influential role inachieving a sustainable society.
In such an environment, as members of global
society we in the asset management industry must
give behind-the-scenes support to sustainablecorporate growth, by committing solidly toengagement and other activities, thus fulfilling ourroles and responsibilities within the context of thislarger trend.
We believe that this contributes not only toachieving a sustainable global environment andsociety, but also to raising the corporate value ofinvestee companies over the long term, to thedevelopment of sound capital markets, and also tolong-term improvements in investment performance.
As a responsible long-term investor, we, Resona
Asset Management, will continue to embraceincreasing social responsibility. While we continue to
conduct effective stewardship activities, we willcontribute to achieving a sustainable society, bothby facilitating long-term growth in the corporate
value of investee companies and by helping findsolutions to social challenges.

Akihiko Nishioka

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

Contents
32 Chapter 3 Passive Investment Stewardship Activities

Message
2 Asset Management Company of the Resona Group40s Responsible Investment
6 Chapter 1 Resona’844-53 ￨ Engagement report

Framework of responsible investment andstewardship activities

54

12 Chapter 2 Responsible Investment and Stewardship
Activities at Resona Asset Management
16

Re-consideration of prioritizing our materiality

18

Addressing climate change (response to TCFD
recommendations)22

Impact management

26

Feature discussion

Constructive dialogue and engagement withinvestee companies (Passive investment)

58 Chapter 4 ESG Integration and Engagement on Equity/
Active Investment
64 Chapter 5 ESG Integration and Engagement on Fixed
Income/Active Investments Proxy Voting
66 Chapter 6 Resona’

Taking responsibility and acting to realize our vision
for the desirable economic systems of the future

Resona Asset Management

Engagement plan for FY2020

1

72 Chapter 7 Assessment of Responsible Investment and
Stewardship Activities

Stewardship Repor t 2020/2021

Asset Management
Company of
the Resona Group

Asset Management Company of the Resona Group◦Resona Asset Management was established in August 2015 as the asset management company of theResona Group. By consolidating the trust asset management functions of the Resona Bank in January
2020, it became one of Japan’s leading asset managers both by asset size and asset management
framework. (As of the end of September 2020, assets under management were approximately ¥28
trillion, and there were around 100 asset management professionals)◦Resona has a track record in asset management of over 58 years.* Over that time it has accumulated
the know-how to provide stable and sustainable returns over the long term, primarily through corporate
and public pension fund management.
◦The Resona Group is one of the leading commercial banking groups in Japan, and aims to be No. 1 inretail. By combining our networks both inside and outside the Group with management capabilities
developed over many decades in pension fund management, we will provide instruments and services
for which clients have a genuine need.
*Calculation includes Resona Bank period

Our Purpose
We believe that both investee companies with sustainable businesses, and a sustainable society andenvironment that constitutes the base for corporate activities, together help protect the assets entrusted
to us by clients, and underpin the sustainability of client lifestyles.
By practicing responsible investment activities and seeking to make the desirable economic systems of
the future a reality, we discharge our fiduciary responsibilities as an asset manager that can provide
abundance and happiness to future generations as well as our own.
An asset manager that can provide abundance and happiness to future generations as well as our own
Desirable economic systems of the future

Sustainability ofclient lifestyles

Sustainability ofsociety andthe environment

Sustainability ofcorporations

Fiduciary duties

Resona Asset Management

2

Stewardship Repor t 2020/2021

Initiatives to further enhance our asset management
Our vision
Clarification of our vision and strengths as an asset manager, and initiatives to achieve our goals

Current

・Clarification that Resona Asset Management (1) contributes to the asset-formation support business as
the asset management function of the Group, and (2) aims to develop the business by leveraging its
asset management capabilities

Future・In order to achieve our vision, we are committed to a policy of continuously implementing measures
such as enhancing our human resources assessment system, strengthening fund governance, andconducting research and development aimed at reinforcing our asset management capabilities

Governance
Demonstrating functions that provide checks on management and fund management from theperspective of client interests

Current

Future・When asset management functions were consolidated in January 2020, Resona Asset Management
moved to a Company with an Audit and Supervisory Committee structure as well as two independent
outside directors for the purpose of enhancing governance.
・An Investment Committee and Investment Assessment Committee were set up at the time the company
was established・Conduct review of internal discussion forums with the aim of further intensifying and developing previous
initiatives for fund governance

Understanding and cooperation of the parent company in relation to the asset management businessCurrent

Future・Adopted a professional asset manager personnel system in 2008, and established an independent
structure for personnel assessment and compensation
・Clarified roles and business objectives of Resona Asset Management within the financial group in
September 2019, and worked to achieve shared awareness with the parent company

・Continue dialogue with the parent company with the aim of achieving our vision

Management setup
Put in place a management setup that places the highest priority on client interests and that focuses onlong-term asset management

Current

・Our top managers are all individuals with business experience in long-term asset management
・Managers of our investment-related departments are appointed from those with many years ofexperience in asset management

Future・Revise management appointment process and compensation structures, etc. in order to create amechanism for the promotion of promising personnel

Resona Asset Management

3

Stewardship Repor t 2020/2021

Strengths of Resona Asset Management

Trust bankmodel

Resona Asset Management’s roots lie in the trust bank industry, and it is oriented towards
the so-called“trust bank model.”The trust bank model is not dependent on short-term
profits, is based on the concept of fiduciary duties, and involves the duty of a strong andlong-term commitment to clients. As a result it aims to continuously generate profits overthe long term.

1 Responsible investment
We have adopted the concept of universal ownership and promoteresponsible investment activities. We also practice an engagement
strategy geared to finding solutions to ESG issues across society byidentifying responsibilities for social sustainability.

2 Network

Total number of dialogues andengagements conducted(Total of active and passive)

Number of engagement agendas

1,874

17

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

Number of times participated incollaborative engagement platforms

15

11

History of asset management

Year in which we becamea signatory to PRI

We leverage the network we developed as a pioneer in responsible
investment to gather information by interacting proactively with holdersof advanced knowledge. We also implement collaborative engagements
through our connections with various engagement platforms.

3 History
We began managing assets in 1962, and focused mainly on corporate
pension fund management. In 2008 we became a signatory to the PRI, and58

have been participants in the PRI Japan network since it was firstestablished. We have also built up a track record in responsible investment
through our work as chair of the PRI Japan WG and other roles.

management framework/
4 AssetHuman resource development

years

Asset management professional

We have built an asset management framework underpinned byapproximately 100 asset management professionals, primarily
analysts and fund managers. While pursuing specializations matched

Approx.

to asset management style, we seek to share know-how related toresponsible investment.

Professionals must embody attributes in three realms

Art

2008
Number of meetings held toshare information related toresponsible investment

100

Qualifying as a professional

Degree of professionalism

Insight, intuition andinspiration○ A professional possesses knowledge mutually forged throughhard work○ A professional is valued within and outside the organization○ A professional faithfully performs his or her job and takes
initiative in making decisions

Cra ftScience

Craft

Skills path

Science, theory and Experience,technology artisanship and skill

Resona Asset Management

49

Scien ce4

Stewardship Repor t 2020/2021

Ar t

Trends in AUM
ResonaAsset
Management

Resona Bank
2015
Resona AssetManagement
established

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

¥¥

3 trillion

28¥

10 trillion¥

At present
Rising expectations for investment
services such as the move towards
the“100-year life,”and the switchfrom saving to asset formation

2000

AroundDeregulation pertaining topension fund asset allocations
and scope of portfolios

Composition of AUM

Organizational framework

0.7 trillion, 2.3％

Other ¥

0.9 trillion,
3.3%

General Meetingof Shareholders¥

PublicpensionCorporate
pension

4.8 trillion,
17.1％¥

Know-how in diversified
portfolios of long-term
global investments
accumulated throughmanagement of pension
fund

18 trillion

Accumulated know-how
in diversified portfolios ofglobal investments

1990

Expansion of corporate
pension market

Retailtrillion

Consolidates asset
management functions ofResona Bank

Grew share primarily
through pension funds for
SMEs

Around2020
Approx.

2019
Approx.

2003
Approx.

1987
Approx.

1962
Establishmentof Asset
Management
Business

Instrument development
and investment education
know-how for individual
investors

Balance/percentage
by client21.8 trillion,
77.2％

¥

Board of Directors

Audit and Supervisory
Committee
Internal Audit
OfficeRepresentative Director
and President

Executive
Committee

Responsible Investment
Committee

Responsible investment
verification committee meeting

Asset Management
Committee
Other¥

2.9 trillion, 10.4%

Investment Evaluation
Committee

Global ﬁxed income ex. Japan

13.4 trillion, 47.5%

Compliance and Risk
Management Committee¥

Global equities
ex. Japan

2.1 trillion,
7.5％¥

Japaneseﬁxed income

2.2 trillion,
7.6％¥

Balance/percentage
by asset type

Investment Planning Division

Client Services Division

Index Investment Division

Asset Management Client Services Division

Fixed Income Investment Division

Fund Administration Division

Equity Investment Division

Information Technology Planning Division

Responsible Investment Division

Investment Risk Administration Division

Trading DivisionCorporate Administration Division

Japanese equities¥

7.6 trillion, 26.9%

Compliance Office(As of September 30, 2020)

Resona Asset Management

5

Stewardship Repor t 2020/2021

Chapter

1

Resona’s Responsible
Investment

Changes in the social and economic environment, and roles of asset managers (Resona)
We have been promoting responsible investment activities upon having adopted the concept of universal
ownership since 2013. With a focus on external diseconomies, we urge companies to find solutions to ESG
issues while concurrently supporting them in their efforts to sustainably heighten corporate value.
▪Changes in the social and economic environment surrounding companies

Increasingly
severe problems
involving external
diseconomies

Corporate
pursuit of individual
returns

Adverse effects
on the sustainabilityof socioeconomic
systems

ClimatechangeEnvironmental
issuesIncomeinequality

HumanrightsThe notion of responsible investment
is an indispensable aspect ofsustainable development

Asset managers must
create socioeconomic systems
as a means of taking responsibility▪The role of Resona as an asset manager(i) Practice an engagement strategy
geared to finding solutions to ESG
issues across society by identifying
responsibilities for social sustainability.

(ii) Fulfill its role in acting as a
responsible investor with respect toproviding support of universal
ownership as a long-term investor

Formulate basic policy on
responsible investment

Resona’s track record of responsible investment
Injection of public funds
Embarked on a fresh start
as a company that society
allowed to survive

2003

Signing the PRI

Involvement as
an initial memberof PRI Japan

Start of ESG
integration and
PRI reporting

Introduction of theconcept of universal
ownership

Chaired the Corporate
Working Group of PRI
Japan Network

2008

2010

2012

2013

2014

Signing the CDPExternal
environment

2006
Establishment of PRI

2010
Establishmentof PRI Japan

Resona Asset Management

Introduction of ESG investment criteria
Drafted manuals and held briefing sessions(collaboration with PRI Japan)

2011
Adoption of Principles for Financial Action for the 21st Century

6

Stewardship Repor t 2020/2021

Basic policy on responsible investment
Our management of trust assets and other investments entails promoting increased value andsustainable growth of corporations from a medium- to long-term perspective, which involves sufficiently
assessing and analyzing financial information of investee companies, as well as non-financial informationencompassing means of addressing their environmental, social and corporate governance (ESG)
challenges. We endeavor to increase the value of trust assets and other investments through such efforts.

The unexplored“desirable economic systems of the future”

Policy of Resona AssetManagement (Purpose)

Enhancement of corporate value andmedium- and long-term investment returnof beneficiaries

Basis(Principles, International Standards)

Japan’s Stewardship Code

Basic policy on asset management

Basic policy on responsible investment

Those involved maintain a shared understanding of
the aims and spirit of general principles
Specific
initiatives

incorporate ESG (Environmental, Social and
1 To
Corporate Governance) issues into investment process2
3

Constructive dialogue and engagement
Appropriate proxy voting

Identifying material issues
UN Guiding Principles on

Business and Human Rights
Paris
Agreement OECD Guidelines forEngagement agendas and KPIs

Joined PRI
collaborative
engagement

Chaired the AssetManagement, Securities andInvestment Banking
Working Group of the
Principles for Financial
Action for the 21st Century

2015

2016

Multinational Enterprises

Joined Institutional
Investors Collective
Engagement Forum(IICEF)

Member of theCommittee on
Principles for
Financial Action forthe 21st Century

As Deputy Chair of ESG
Financial Strategy Task
Force, drew up“Strategy
needed in order tobecome ESG financial
superpower”proposal

Joined ICGN,ACGA and
AIGCC

2017

2018

2019

2020

2019

2020

Joined Climate Action 100+2015・Adoption of the 2030 Agenda for
Sustainable Development
・Adoption of the Paris Agreement

・Drew up long-term growth・Prime Minister Yoshihide Suga announces
strategy for Paris Agreement
Japan’
s aim to be carbon-neutral by 2050
s National Action Plan
・G20/Osaka Blue Ocean Vision ・Launch of Japan’
based on the UN Guiding Principles on
Business and Human Rights

Resona Asset Management

7

Stewardship Repor t 2020/2021

Chapter

1

Resona’s Responsible Investment

What do stewardship activities mean to Resona?
We aim to achieve sustainable society through actively engaging in both enhancing medium- tolong-term corporate value and finding solutions to social challenges.

Framework of responsible investment andstewardship activities
The Responsible Investment Committee spearheads efforts to engage in activities employing thecollective knowledge of Asset Management Unit of Resona Asset Management, with the aims ofappropriately fulfilling our stewardship responsibilities as a trustee, engaging in initiatives that help tobring about growth of investee companies, and helping to achieve a sustainable society.

Responsible investment verification committee meeting
Monitoring function

Responsible Investment Committee
Central platform for promoting PDCA cycle
Chairman: President
Committee members▪Knowledge▪Checking function

Each Division(Equity Investment and Fixed
Income Investment)▪Active engagement function

Responsible Investment Division▪Secretariat of Responsible
Investment Committee▪Passive engagement function▪Proxy voting

Compliance Division

Meeting of the Responsible
Investment Committee▪Checking and supervising function

Discussions will be reflected to the proposalsof the Responsible Investment Committee

Responsible Investment DivisionViewpoints and information on
passive engagement function

Responsible investment meeting(on a weekly basis)

Equity Investment Division

President and key members including
executive officers responsible for AssetManagement Unit, and generalmanagers of related divisions

Resona Asset Management

Fixed Income Investment DivisionViewpoints and information on
active engagement function

8

Stewardship Repor t 2020/2021

Investees

External expert:
Professor Takeshi MizuguchiResponsible Investment Committee
The Responsible Investment Committee conducts basic policy on responsible investment. As such, it plays animportant role in acting as a control tower for verifying the reasonableness of initiatives with respect to the
Principles for Responsible Institutional Investors and the Principles for Responsible Investment (PRI), andcontinually devising solutions and improvements.
The committee consists of President, executive officers responsible for Asset Management Unit, generalmanagers of related divisions and from the perspective of internal controls, executive officers responsible forcompliance. The committee takes action in a manner that entails enlisting the collective experience andknowledge of such individuals in order to carry out initiatives that contribute positively to the sustainable growthof investee companies. Moreover, in May 2017 Professor Takeshi Mizuguchi, Vice President at Takasaki City
University of Economics was welcomed onto the committee as an external expert and leading authority on
responsible investment. He has been furnishing opinions and advice from an outsider’s perspective in relation to
the activities of Resona Asset Management, based on his extensive knowledge.
The Responsible Investment Committee reports on three specific efforts included in basic policy on
responsible investment, and also takes on various types of review and discussion particularly by deliberating onchanges and proposals on proxy voting guidelines.
▪Specific initiatives with respect to basic
policy on responsible investment
・To incorporate ESG issues into
investment process・Constructive dialogue and engagement
・Resona’s proxy voting▪Primary discussions and reporting of the Responsible Investment Committee
・Discusses changes on proxy voting guidelines
・Discusses self-assessment on stewardship activities
・Deliberates on proposals for which a definitive decision is not possible
・Reports on stewardship activities
・Results and review of proxy voting for Japanese and global equities
・Reports on 2020 PRI Reporting・Discusses plans for dialogue and engagement, and reports on the results

We aspire to fulfill our stewardship responsibilities to a greater extent by improving our stewardship activities
drawing on efforts of the Responsible Investment Committee in terms of discussions, opinions on improvements
and self-assessment regarding the status of action being taken with respect to the stewardship code.
▪Cycle of activities geared to enhancing corporate value
We incorporate ESG issues into ourinvestment process, and continuallydevise solutions and improvements.

ESG incorporation

Constructive dialogue
and engagement

We conduct self-assessments to evaluate
progress made in taking action withrespect to the stewardship code.

Self-assessments on
stewardship code

Proxy voting

We actively carry out dialogue andengagement with the aim of enhancing
corporate value from a medium- tolong-term perspective.
We conduct proxy voting by considering
analyses of surveys encompassing
dialogue and engagement withcompanies as well as investment process.

Responsible investment
investment meeting
Responsible
meeting・The responsible investment meetings are held on a
weekly basis to regularly share information andexchange opinions on matters related to responsible
investment, news flow as it pertains to ESG issues,and progress made in dialogue with companies by
respective divisions.
・Through its meetings and other forums, theResponsible Investment Division shares informationand exchanges opinions with each relevant division,and accordingly submits action policies and otherdocuments to the Responsible Investment Committee.

Resona Asset Management▪Topics covered at responsible investment meetings(September to November 2020)

・Biodiversity Pledge
・Climate Action 100+ Net-Zero Company Benchmark
・ISS Global Policy Surveys Stewardship Code and Corporate・Follow-up meetings for Japan’
Governance Code・Press release regarding Asia Investor Group on Climate Change(AIGCC) keynote speech by Japanese government

9

Stewardship Repor t 2020/2021

Chapter

1

Resona’s Responsible Investment

Responsible investment verification committee meeting
Established in November 2017, the responsible investment verification committee meeting was set up toenhance the governance framework as it relates to matters such as management on conflict of interests in therealm of managing trust assets. To such ends, the meeting acts as a forum for gaining an external third-party
perspective in verifying that stewardship activities encompassing the proxy voting are conducted appropriately.
Operations
Schedule: Held at least twice a year
Secretariat: Business Administration Group, Investment Risk Administration Division
Members
Chiharu Baba
Ryo Tsuchida
Shoichi Tsumuraya

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

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

Reviewed content
・The sixth committee meeting (held in February 2020)

Changes to proxy voting guidelines for Japanese and global equities

・The seventh committee meeting (held in August 2020)

Proxy voting results for shareholders meetings during July 2019 to June 2020

The suitability of the topics subject to review was verified at the responsible investment verification committee meeting sessions listed above.

Collaboration aimed at the common objective of enhancing
corporate value, and verification of responsible investments
Asset owners, institutional investors including us, and the management of investee companies all
have the same objective, namely enhancing corporate value over the medium to long term.
However, at the same time, it is well known that the agency problem exists between shareholders

and company management, and between asset owners and institutional investors, and it is also
widely understood that precisely because of the existence of the agency problem, company
management is considered to have a fiduciary duty to shareholders, and institutional investors havea fiduciary duty to asset owners. While in responsible investment the objectives are shared there is
still a structural conflict of interests, and we see our role as verifying whether or not Resona, as an
institutional investor, is discharging its responsibilities to the asset owners appropriately.
Over the past few years, and even after the launch of the responsible investment verificationcommittee meeting, the environment for responsible investment has changed dramatically. Nowadays,
the guidelines of proxy voting have been expressed more clearly, and results have been disclosed at anindividual company level. In the midst of these changes, we are being required not only to perform
simple verification of our voting results and their guidelines, but also to hold forward-looking
discussions on what should be done to achieve the shared goal of raising future corporate value.
At every meeting of the responsible investment verification committee, in addition to verifying
proxy voting guidelines and the individual voting results, we put time aside to discuss thesignificance of shareholders meetings, governance mechanisms, the ideal approach to executive
compensation and other fundamental themes of corporate governance, which results in lively
exchanges of views between the committee members and the Resona Asset Management team.
We do not always reach conclusions easily, and neither do these discussions have an immediate
impact on proxy voting policies, but they do form part of the foundation for Resona to achieve its
goal of“GOOD Governance.”

Resona Asset Management

10

Stewardship Repor t 2020/2021

Ryo Tsuchida
Member of
responsible investment
verification committee
meeting
Outside Director of
Resona AssetManagement Co., Ltd.

Management on conflict of interests
In carrying out responsible investment, Resona Asset Management should be mindful of certain
types of transactions that are prone to conflict of interest. Such transactions conceivably include
situations that involve proxy voting with respect to shares owned through trust assets and otherinvestments, and situations that involve dialogue and engagement with investee companies.
When carrying out proxy voting on investee companies, with which the corporate banking
divisions of the group companies maintain business relationships, decisions and actions taken todischarge fiduciary duties could be substantially affected under a scenario where the corporatebanking divisions of group companies interfere with Resona Asset Management’s decision to votefor or against a proposal, or in terms of voting results.
We appropriately endeavor to avoid such situations by taking the actions as follows:・Interference by the corporate banking divisions of group companies is prohibited and personnel reassignments are
subject to restrictions
・Proxy voting activity is monitored by the Risk Management Division
・Compliance Division and Risk Management Division act as member of the Responsible Investment Committee
・Appropriateness of proxy voting activity is verified by the responsible investment verification committee meeting,which is composed of external experts
・Risk Management Division checks that all proxy voting for the parent company and other such entities and forother cases are carried out appropriately(i)	Those carrying out proxy voting for the parent company and other such entities (Resona Holdings and theKansai Mirai Financial Group) do so upon seeking advice from an external, third-party proxy advisor pursuant
to proxy voting guidelines of Resona Asset Management(ii) All proxy voting cases other than (i)▪Management framework
Resona Asset Management

Third-party
verification

Companies

Proxy voting/Dialogue and engagement

Group companies

Prohibitedinterference

Conflicts of interest

Responsible Investment Division

Business relationship

Corporate banking divisions

Resona Asset Management

11

Stewardship Repor t 2020/2021

Risk Management
Division

Responsible investment verification committee meeting

MonitoringChapter2

Responsible Investment and
Stewardship Activities at
Resona Asset Management

Future Taker
External
diseconomies

DialogueEconomic activities

ClimatechangeEngagementand dialogue

Support onproxy voting

Incomeinequality

Top-down
approach

Human rights

Code of conductof Resona AssetManagement

Aging society
with a lowbirth rate

Cybersecurity

Anticorruption

Network

Disclosure

Basic policy on responsible
investment

AgendaProxy voting+Collaboration

Naturaldisasters

・・・

Awareness

Efforts for enhancing corporate value and medium- and long-term
investment return of beneficiaries
Future Taker	 ：	Practice an engagement strategy geared to finding solutions to ESG issues
across society by identifying responsibilities for social sustainability.

Future Maker	 ：	Fulfill its role in acting as a responsible investor with respect to providing
support of universal ownership as a long-term investor

Resona Asset Management

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Enhancement ofcorporate value

Future Maker
New form ofcapital markets

Unexploredeconomic system

Inclusive socioeconomy
Universal
ownership

Enhancement of
medium- andlong-term return

Framework

Creation of anew paradigm

Collaboration

Sustainable environment

Corporate culture, purpose

Resona Asset Management

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Chapter2

Responsible Investment and Stewardship Activities at Resona Asset Management

Resona Asset Management’s goalNew forms of capital markets andunexplored economic systems
Resona Asset Management’s contribution to the creation of new forms of capital

market is based on the following approach.

Basic approach

As participants in capital markets, we will contribute as investors to thedevelopment of sound capital markets. In addition, we will discharge our broad
fiduciary duties, by actively supporting the financial and capital markets in thedesirable economic systems of the future.

Given the long-term global issues posed by external diseconomies, we have positioned

the unexplored“desirable economic systems of the future”as the realization of(1) Inclusive socioeconomy, (2) Sustainable environment, and (3) Corporate culture and purpose.

Long-term global issues
ClimatechangeEnvironmental
issuesIncomeinequality

The unexplored“desirable economic systems

Humanrights1◦Global population growth◦Further poverty, food shortages, environmental
degradation, water shortages, decreased public
security, and migrants and refugees in developing
countries2◦Loss of biodiversity, and severity of impacts fromclimate change◦Greater global health risks◦Shortcomings of social safety nets, wealth andincome inequality◦Rapid digitalization, utilization of AI, and automation3◦Work style reform, and increasing non-regular
employment◦Growing complexity of supply chains, and risingnumber of migrant workers

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14

Inclusive socioeconomy
Social and economic systems that canrealize a sustainable society through fairand just transition

Sustainable environment
Transition from the linear production,
consumption, disposal model to a“Circularmodel”with long-term perspective

Corporate culture, purpose
Understand the corporate culture and philosophy of
the investee company Re-recognize the goals androles of the company, and board’s functional role

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Inclusive socioeconomy
Corporate culture, purpose

Sustainable environment

By linking the externalities such as sustainable environment and inclusive socioeconomy
with the internality such as corporate culture and purpose, we believe that we can realize
the desirable economic systems of the future.

of the future”

Engagement agenda◦Address child labor and forced labor issues in supply chain
management, improve working conditions����������������

P46・49◦Healthy and safe lifestyle (Sustainable food supply chain)��������

P48◦Diversity and inclusion �������������������������

P50◦Workplace health and safety, employee wellbeing �����������

P52◦Biodiversity and forest conservation �������������������

P44◦Effective utilization of resources, and resource circulation(marine plastic waste)��������������������������

P47◦Climate change�����������������������������

P51◦Corporate ethics/Fair business conduct and anti-corruption �������

P50・53

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Chapter

Responsible Investment and Stewardship Activities at Resona Asset Management

Re-consideration of prioritizing our materiality
In 2020 we have re-considered our“Materiality”towards realization of the“desirable economic systemsof the future”(please see page 12 to page 15 for details).
▪Selection of our materiality issues
In addition to the annual ESG issues selection process, we have prioritized our ESG issues by mapping them into 2
dimensions, which are“Importance to Long-term Investment performance,”and“Importance to Sustainability.”▪Selection process of our materiality issues
Listing up materiality
issues

Output

List of ESG issues

Selection of ESG issues(Approx. 30)

Established assessment criteria & method on:・The“Importance to long-term investment performance,”X axis, and・the“Importance to sustainability,”Y axis.

Assessment
framework

Materiality
assessment

Assessment criteria & method

Materiality assessment

Prioritize ESG issues.

(Results of materiality analysis)▪Materiality Mapping and long-term changes in importanceThe below map shows the result of prioritized Material Issues. We have also taken the impact on Covid-19 Pandemic into
considerations. Issues with arrows are ESG issues, of whose importance (materiality) has risen from the Covid-19 Pandemic.
This“Materiality Mapping”was conducted by the advice of BSR.
●Governance●Environment●Society/Human capital●Society/Community●Society/Products, services and society

Importance to sustainability

12Importance to long-term investment performance* This“Materiality Mapping”was conducted by the advice of BSR

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▪Definition of material issues selected
Climate change

E

S

Biodiversity and forest
conservation

・Impact on deforestation, diversity of animal/plant species & genetic, natural ecosystem throughby corporate activities (such as harvesting natural resources, land development & land use).
Impact that can adversely affect the integrity of a geographic area or region, either directly or
indirectly, by substantially changing its ecological features, structures, and functions across its
whole area, and over the long term, so that habitat, its population levels, and the particularspecies that make the habitat important cannot be sustained.

Child labor and forced labor・All work and service that is exacted from any person under the menace of any penalty and forwhich the said person has not offered herself or himself voluntarily. Involvement on child laborand forced labor through corporate activities and throughout the supply chain.
・It is applicable to both permanent and temporary employment contract.

Product quality and safety, social
impact of product and services

・Ensuring product quality and safety.
・Fair and responsible marketing communications to enable consumers to make decision with
sufficient information.

Diversity and inclusion

G

・GHG emission from corporate activities and value chain・Use of renewable and non-renewable energy
・Adaptation, physical risk assessment and risk management

Anti-corruption

・Diversity and opportunity in all levels of the company, including board of directors.
・Discrimination and harassment.
・Bribery, facilitation payments, fraud, extortion, collusion, money laundering.
・Includes involvement at corporate activities and value chain.

Human capital▪Covid-19 effect on ESG issues
Child labor and forced labor

・COVID 19 is impacting more on the economically vulnerable workers. A number of workers
who are more vulnerable to potential human rights abuses are increasing.

Workplace health and safety,
employee wellbeing・The concept of occupational safety and hygiene which used to be emphasized mainly in the
manufacturing industry became more important for the non-manufacturing workers, especiallythose of essential workers (medical, retail, life-related services, etc.) regarding infection prevention.

Employment

・The economic downturn has put further pressure to employment, and the unemployment
rate is worsening.
・In particular, the negative impact is higher for non-permanent workers, Gig workers, andmigrant workers. Further to that the situation is severe, as remedies may not be fully applied.

Products, services
and society

Community

Labor practices

・As a side effect, the safety nets issue for non-regular workers is apparent.
Social expectation for the review the working conditions will likely arise.

Community development andrights of indigenous people

・COVID 19 is impacting more severely to countries and regions with vulnerable health care system.
Risk on negative chain reaction such as poverty, food shortages, and security deterioration is increasing.
・Expectation towards improvement of resilience of corporate value chains and corporate
contribution to the local community is expanding.

Inclusive community

・The economic downturn is forcing a greater negative impact on SMEs and micro-enterprise(such as the tourism, restaurant, and service industries), and there are concerns towards
further economic disparity.

Resilience on living foundation

・Unprecedented risks have shown to threaten the living foundation.
Necessity for higher resilience to natural disasters and various risks in the future, maintaining
socio-economic/living foundation has been strongly recognized.

Access to products & services
and affordability

・There is an urgent need for a stable and fair supply of daily necessities such as medical careand food.
With the progress of digitalization on education and various social services, improvement onaccess to products/services for vulnerable groups of citizens is becoming more important.

Privacy and data

Product quality and safety, social
impact of product and services

・Due to the rapid progress of digitalization and the strengthened monitoring of personal
activities & information by the governments, the risk on privacy invasion is increasing.
・Solution for social issues and society contribution by making the best use of corecompetencies (such as products/services, technologies, business models) are becoming
more important, as the importance of corporate value is more recognized.

* Shaded ESG issues are those where there have been significant changes in importance.

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Chapter2

2

Responsible Investment and Stewardship Activities at Resona Asset Management

Addressing climate change (response to TCFD recommendations)
In November 2020 we have donated supports to the recommendations of the Task Force on Climaterelated Financial Disclosures (TCFD). In this section, we will disclose our climate-related governancestructure, strategy, metrics & targets, and risk management. We will strengthen our recommended
framework and improve our climate-related disclosures going forward.

Governance
Governance structure・The TCFD information is periodically reported at the Board of Directors meeting, which includes two
independent directors.
・Climate risk, integration, engagement activities, and engagement plans are reported and discussed at
the Responsible Investment Committee.
Operational flow
・The Responsible Investment Division conducts climate risk analysis.
・The Climate risk & opportunity analysis and the strategy is shared and discussed within the investment
function.

Governance structure
Board of Directors(Two independent outside directors)
ReportSupervise

Executive Committee
Responsible Investment Committee

・Identify, assess, and discuss climate-related risks and opportunities
・Report on integration process and engagement activities on climate-related risks and opportunities
Responsible Investment Division

Equity Investment Division

Fixed Income Investment Division

Index Investment Division

Investment Planning Division

Investment Risk Administration Division

Carbon metrics・W e are calculating four carbon metrics of our portfolio to analyze climate-related risk and opportunities.
・O n page 19, we have disclosed the climate metrics of our equity and corporate bonds in our Japaneseand global portfolios.
・W e are calculating benchmark values in alignment with the same monetary sums as those of ourinvestment portfolios.
We are using GHG emission data and tools from Institutional Shareholder Service (ISS).
Benchmarks (BM)Japanese
equities

Globalequities

Japanese fixedincomeGlobal fixedincome ex. JapanTOPIX

MSCI ACWI(ex. Japan)

NOMURA-BPI(corporate bonds)

Bloomberg Barclays Global
Aggregate Bond Index(corporate bonds)

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▪Metrics
Weighted average
GHG emissions
Carbon footprint(Note 1) Carbon intensity(Note 2)
carbon intensity(Note 3)(tCO2e/M USD)
(tCO2e/M USD)
Including scope 3 (tCO2e)(tCO2e/M USD)

GHG emissions
Scopes 1&2 (tCO2e)

Assets

16,803,729

54,548,921

BM of Japanese equities

16,679,614

54,155,544

238.25

175.65

85.96

Global equities ex. Japan

2,326,896

9,616,925

121.51229.56204.36

9,541,564

120.97229.67187.00Japanese equities

240.02177.7887.97

BM of global equities ex. Japan

2,316,547

Japanese fixed income, corporates

322,947

853,483275.61386.34371.26

BM of Japanese fixed income

443,358

1,175,412

378.36463.75514.15Global fixed income, corporates

39,710187,24473.72

186.97188.40BM of global fixed income

52,692

237,82387.82

212.63247.66(Note 1) [GHG emission (Scope 1&2)]/Portfolio value(Note 2) [GHG emission (Scope 1&2)]/Σ(Amount invested/Market cap * Sales revenue)(Note 3) Σ[Portfolio weight * GHG emission (Scope 1&2)]/Sales revenue* Market cap and enterprise value (Market cap + debt) are used for metrics calculation for equities and fixed income, respectively.

Japanese and global equity portfolios・The carbon footprints and the weighted average carbon intensity of the equity portfolios are higher
compared to the benchmarks, because:・Some of the Japanese equity fund has high weighted average carbon intensity characteristics.
・The global equity portfolio has a higher percentage of emerging markets compared to the BM.
Japanese and global equity comparison
・The weighted average carbon intensity of MSCI ACWI is higher compared to TOPIX. The carbon
footprints of sector contributions are similar between TOPIX and MSCI ACWI, but the weighted averagecarbon intensity of the materials and utilities sectors is higher for MSCI ACWI.
Fixed income (Japanese and global) portfolios・Carbon footprints and the weighted average carbon intensity are lower compared to the benchmark,because the lower allocation to the utilities and materials sectors.
・Carbon intensity is higher compared to the equity portfolio, because the higher allocation to the utilities sector.
▪Sector contributions to GHG emissions (including Scope 3)
・Contributions on utilities and materials sectors covers about 70% for Japanese equities.
・The largest sector contributions are similar with the global equity portfolio, but the weightings on energy sector is higher.
Japanese
equities

4%
Consumer staples 2%
Energy 6%
Industrials 13%
Information technology 2%
Materials 35%

Consumer discretionary

Utilities 38%* Global Industrial
Classification Standard(GICS) sector classifications

2%
3%
Energy 20%
Financials
1%
Industrials
6%
Information technology
2%
Materials 28%

Consumer discretionary

Global equities
ex. Japan

Consumer staples

Utilities 38%▪Weighted average GHG intensity sector contributions
The weighted average GHG intensity sector contributions from the utilities and materials sectors on the global equity
portfolio is 2.3 times of that of the Japanese equity portfolio.
Japanese
equities

Japanese equity
portfolio
Benchmarks(TOPIX)

0

Global equities
ex. Japan

20

40

60

80

Global equity
portfolio
Benchmarks(MSCI ACWI)

0

50

100

150

■ Communication services ■ Consumer discretionary■ Consumer staples■ Energy■ Financials■ Health care
■ Industrials■ Information technology■ Materials■ Real estate■ Utilities■ Communication services ■ Consumer discretionary■ Consumer staples■ Energy■ Financials■ Health care
■ Industrials■ Information technology■ Materials■ Real estate
200 ■ Utilities* Global Industrial Classification Standard (GICS) sector classifications

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Chapter2

Responsible Investment and Stewardship Activities at Resona Asset Management

Strategy
We will try to understand the risks and opportunities of the investee company in depth, and plan to
conduct continuous engagement with the investee companies.
▪Scenario analysis

・The analysis is based on % alignment and includes scenario budgets and pathways for the portfolio and the benchmark. The% alignment is normalized at a 100% for the portfolio SDS.
Main findings
・Both of our Japanese and Global equity portfolios are not in line with the SDS scenario.
・Our Japanese equity portfolio will reach the SDS scenario budget in 2031, and the average temperature is assumed to riseby 2.4°
C in 2050.
・As of 2020, our Global equity portfolio has already reached the SDS emission budget, and the average temperature isassumed to rise by 2.8°
C in 2050.
(1) Sustainable Development Scenario (SDS):
SDS pathway is fully aligned with the Paris Agreement by holding the rise in global temperatures to“well below 2°C.”(2) Stated Policy Scenario (STEPS):(3) Current Policy Scenario (CPS):

Japanese equities

160%
140%
120%
100%
80%
60%
40%

2049

2050

2047

2046

2045

2044

2043

2042

2041

2040

2039

Benchmark STEPS

2050

Benchmark SDS

2038

2037

2036

2035

2034

2033

2032

2031

Benchmark2048

Portfolio

2030

2029

2028

2027

2026

2025

2024

■CPS

2049

Global equities ex. Japan■STEPS

2048

■SDS

2023

2022

2021

2020

20%

Benchmark CPS

180%
160%
140%
120%
100%
80%
60%
40%

■SDS

■STEPS■CPS

Portfolio

BenchmarkBenchmark SDS

Benchmark STEPS

2047

2046

2045

2044

2043

2042

2041

2040

2039

2038

2037

2036

2035

2034

2033

2032

2031

2030

2029

2028

2027

2026

2025

2024

2023

2022

2020

0

2021

20%

Benchmark CPS▪Subsequent actions to take based on scenario analysis, etc.
・GHG emission reduction is inevitable for our portfolio holdings to align with the SDS scenario.
Encourage additional disclosures
・We plan to encourage the investee companies to improve their climate related disclosure.
・Not every company is disclosing their emission data, and its reliability on the disclosures differs by each company.
・We will encourage the investee companies on following measures such as:・Disclosures through Sustainability Reports and CDP platform, TCFD disclosures
・Donate supports to the TCFD recommendations and TCFD disclosures
・Commitments to the SBTi.
・Improve reliability on Climate Risk Analysis tools which eventually leads to a better and interactive engagements between
the investors and the portfolio companies.
Best practice sharing through engagements
・We plan to support the investee companies that have high exposure to climate-related risk based on scenario analysis, etc.
・We will support them by sharing best practice cases through various collaborative initiatives, such as Climate Action 100+,and individual engagements.

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Risk management▪Transition risk
Climate risks consist of transition risk and physical risk.
・A decarbonized world needs to address both the demand side (fossil fuels) and the supply side (i.e. fossil fuel reserves) offuture emissions.
・The graph below shows the absolute share of % GWh produced from different sources by power generators in the portfolio.
・The graph below compares the energy generation mix of the portfolio with the benchmark and a Sustainable Development
Scenario (SDS) compatible mix in 2030 and 2050, estimated by the International Energy Agency.
・The two right-most bars are static and illustrate a 2°
C compatible generation mix in 2030 and 2050, according to theInternational Energy Agency.

100
80

11%
7%

11%
8%

16%

18%

21%

20%

For a decarbonized future economy, the

48%

60
40

82%

81%

63%

62%

41%
Japanese equity Japanese equity
portfolio
benchmarkGlobal equity
portfolio

relying on fossil power production without a67%

substitute plan might be subject to higher
risk towards climate change regulatory
measures and reputational damages.

11%

20
0

energy generation mix is likely to shift fromfossil fuel to renewable sources. Utilities

Global equity
benchmarkSDS(2030)

12%■ Fossil fuels

21%■ Nuclear power■ Renewable energy

SDS(2050)▪Physical risk
We analyze physical risk by geographic region and business sector, divided into the categories chronic risk and acute risk.
The global equity portfolio’s exposure to risk is generally low in terms of the geographic distribution (right-hand side), but
relatively high (acute) in terms of business sector (bottom). Geographic exposure of our global and Japanese portfolio isrelatively low.

■Low risk ■Medium risk ■High risk

Physical risk: Chronic
Utilities

4%

Real estate

3%

Others0%

Materials

5%

Information technology 22%
Industrials

8%

Physical risk: AcuteCommunication services

9%

Consumer discretionary 12%
Consumer staples

8%

Energy3%

Financials 13%
Health care 12%

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21

Utilities

4%

Real estate

3%

Others0%

Materials

5%

Information technology 22%
Industrials

8%

Stewardship Repor t 2020/2021

Communication services

9%

Consumer discretionary 12%
Consumer staples

8%

Energy3%

Financials 13%
Health care 12%

Chapter

Responsible Investment and Stewardship Activities at Resona Asset Management

Impact management▪Impact measurement
In this report, we will define“Impact Measurement”as an assessment methodology to measure the value of the social
impacts created by each project.

ReturnFour Factors of Impact Measurement

1. Intention
2. Financial Returns
3. Applies to Multiple Asset Class

Impact

4. Impact Measurement

Risk▪Process image of impact management on sustainability bonds

Impact measurement

ESG investment

Resona Asset Management (RAM) uses the following impact management process on sustainability bonds.

Responsible investment

32Integration

RAM’s image on impact andimpact pathway *RAM

Engagement

Fine-tune the image gap

Proxy voting

Issuers

Intention

Issuers’image on impact andimpact pathway *Impact management (PDCA cycle)
Avoided andreduced GHG
emission

Impact pathway

Improved land/
Reforestation

Jobs created* Impact pathway: Impact pathway is the mapping of the causal linkages between inputs and the activities they support, and‘real world’outcomes
and impacts.

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Intention and impact measurement on sustainability bonds
・Out of the 4 factors on impact measurement, we consider Intention as most important factor.
・It is important to construct the PDCA cycle on top of aiming financial returns, by additionally connecting
intention and impact.
・We have chosen the approach, to present the lifetime impact, that impacts occur over multiple years.

▪Intention and scoping, selection of 3 major indicators
We have conducted scoping on our sustainability bonds holdings, and have selected and conducted
impact measurement for 4 issuers on 3 indicators.
Avoided and reduced
GHG emissions

Improved land/
Reforestation

We have referred to“Social Cost of Carbon (SCC),”which values the damage resulting from current
and future climate change attributable to each tonne of carbon dioxide equivalent (CO₂e) released
in a given year.
The improved land / reforestation projects involve restoring an area of land from a degraded(pre-intervention) state to an improved or post-intervention state.
We have referred to the difference in the value of ecosystem service flows provided by land in theserespective states to estimate the value of these projects. In the present analysis, we applied thismethodology to measure the monetary values (expressed in $/hour per year) of ecosystem services“obtained”through enhancements, generated by reforestation and land improvement, that return
existing (degraded) land to a natural or primeval state.
In addition to the direct jobs supported on each project, we assumed that there will be further jobs

Jobs createdsupported. When the employees of the projects spend money in the local economy, they generate
economic activity and support“induced”jobs.

▪Impact measurement on sustainability bonds
We have taken traditional environmental and social metrics and converted them into monetary

Deriving monetary
values for environmental
or social impacts

values that measure a change in wellbeing for people, by referring to various studies on methodology.

Results ofassessment$

Overall valued impact on sustainability bonds by project category

Avoided and reduced GHG emissions

Jobs created

Improved Land/Reforestation

RenewableenergyGreenbanking
Energyeﬃciency
Sustainabletransport
Agriculture
OthersPoints to note
・We did not determine additionality(Note 1)
・We did not determine negative impact.
Note 1: Additionality is the added value that could be generated only for the project in question through such impacts as job creation. It refers to the (net)value excluding any value that would likely have been generated even if there had been no investment in the project.

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Chapter2

Responsible Investment and Stewardship Activities at Resona Asset Management

Impact management▪Impact pathway
An impact pathway maps the causal linkages between inputs and the activities they support (e.g. thefunding and projects it supports) and‘real world’outcomes and impacts.

Input

Activities

Impact pathway

OutputOutcomeDerivingmonetary values
for impacts

ImpactAvoided and reduced GHG emissions

We have referred to the methodology of Social Cost of Carbon, SCC.
OutputOutcome

ImpactProject activities, e.g.

Reduced/Avoided impact of:Energy efficiency
Reductionin energy
consumption

Sustainabletransport
Resilient infrastructure,
Built environment & Other
Financing
provided

Green banking
Agriculture,
land use,
forests & ecologicalresources

Carbonsequestration

Results ofassessment

Sea level rises
Reduction inconcentrationsof atmosphericGHGs
compared tobaseline/BAU(Note 1)

Rising mean
temperatures,
heat stress
Shifting climate
patterns, e.g.
droughts and floods

The impact pathway is supported
by evidence from IPCC. For thisassessment, we have referred tothe methodology of Social Cost of
Carbon.

Damage from extreme weather
events, expenses on coastal
protection, increased load on energy
systems due to energy demandcaused by extreme temperatures

Economic disruption

Economic loss and conflicts caused
by production and supply
disruptions, particularly for
manufacturing and agricultural
supply chains

Agriculture and land productivity
Crop losses; changes in growth andyields; desertification leading to aloss of productive and habitable land

Increasing
extremeweather events

Production ofclean/
green energy

Renewable energy

Built environment

Avoided negative
outcomes:
Market damages

Activities

Non-market damages

Input

Global social
cost ofcarbon per
tonne CO2e

Human health

Increased malnutrition or loss of life
due to increasing frequency ofdroughts and floods, reduced
agricultural output, spread of
disease, poverty and heat wave

Other ecosystem services (e.g.
biodiversity; climate regulation)
Widespread changes affecting
biodiversity and many associatedecosystem services

Value of GHG emissions avoided or reduced

For the majority of the impacts, the contribution of renewable energy, in particular wind energy, is significant. In terms ofgeographical distribution, the individual projects are dispersed across their respective countries, but the impacts transcendborders and are perceived at a global level.

Reductions in GHG emissions by category
Sustainabletransport, etc.
Greenbanking2%

Renewableenergy59%

22%

ImpactSmall Large

Energyeﬃciency

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Impact pathway

Improved land / reforestation

Only the output, the state and the area of the pre and post-intervention was available from the issuers’impact report.
Therefore to estimate the value of these projects, we have examined the difference in the value of ecosystem service flows
provided by the degraded (pre-intervention) and the improved (post-intervention) state.
Input

Activities

OutputOutcome

ImpactProject activities, e.g.

Financing
provided

Agriculture, land use,
forests & ecologicalresources

Waste & water
management

Ecosystem services
Area of land
restored /enhancedfrom previously
converted land

The impact pathway is supported by evidence fromWWF and other institutions. For this assessment, wehave referred to values of different land types basedon a meta-analysis of multiple studies.

Impact pathway

Change in provisioning
services, e.g. timber supply
Change in regulating
services, e.g. carbon
sequestration and storage
Change in cultural
services, e.g. recreation

Economic impacts:
E.g. mitigation of property damage
resulting from flooding; changes inagricultural production

Averagemarginal cost(($/ha/yr) ofland use
resulting fromecosystem
services(the cost will bepresented as
one aggregatednumber))

Health impacts:
E.g. altered assimilation capacity
resulting from changes in water or
air quality
Cultural impacts:
Impacts on recreational services or
educational opportunities resulting
from changes in biodiversity

Jobs created

Only the output (number of jobs created) was available from the issuers’impact report. Therefore we have referred tosecondary data to estimate the outcome (total salary from the projects).
Input

Activities

OutputImpactTotal change in welfare brought about by $1 of spending differs by country. Consequently, we
have adjusted wage payments in each country for the differences in purchasing power parity(PPP) between countries.

Project activities, e.g.
Financing
provided

OutcomeRenewableenergyGross wages
from project

Jobs createdSustainabletransport

We did not determine additionality. For thisassessment, we calculated the gross-baseoutcome of job creation.

Induced jobs
Jobs supported by workers
spending money in thenational economy

Increased worker
purchasing power

Gross earnings, PPP
adjusted(Country specific value)

Mental health and wellbeingfrom employment

Subjective wellbeing
value(Country specific value)

Increased worker purchasing
power (Induced)

Challenges to impact management

・Further refinement & update on the methodology and coverage expansion is necessary.
・Implementation on investment decision: Current impact assessment result is used as a“consideration factor”to our investment. But going forward, we would like to consider to takemore in-depth measures towards using these assessment results.
・Dialogue with the issuers: Improved effectiveness on focused dialogue is inevitable. We would
like to share these assessment results with the issuer to conduct focused dialogues, and to findout the potential risk of each project. We aim to conduct the dialogue to close the gaps between
the issuers’and our intention on the social impact.

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Featurediscussion

Taking responsibility and acting torealize our vision for the desirable
economic systems of the future
A discussion was arranged between Takeshi Mizuguchi, professor at Takasaki City University of
Economics, who is a leading authority on responsible investment, and Minoru Matsubara, executive
officer and general manager of the Responsible Investment Division at Resona Asset Management.
They discussed the purpose of investment managers and the history of responsible investment, theeconomic model under stakeholder capitalism, Resona’s efforts to undertake impact investment, andother topics.

and the environment have not necessarily been safeguarded.
Why might that be? And what do you think we should do going
forward?
Matsubara: Our hypothesis is that the 20th century economic
model and the 21st century economic model differ. The factors
contributing to this difference are the explosion in the global
population, the fact that we are now paying the price for our
mass production hitherto, and the danger signals that are now
flashing with regard to these risks and other aspects of the
Earth’
s sustainability. We think factors such as these operate asstrong forces driving us to orient ourselves toward the 21st
century economic model.
If these forces are considered with reference to capitalism, thetransition from shareholder primacy to stakeholder capitalism wasperhaps already inevitable. We believe that the three key pillarsof the economic model under stakeholder capitalism are:“aninclusive social economy,”“a sustainable environment,”and“corporate purpose.”We regard these three pillars as the keys to

The purpose of investment managers
Mizuguchi: How would you sum up what“stewardship”means
for Resona?
Matsubara: It means that we should demonstrate readiness toengage with the capital markets and the environmental andsocial issues surrounding them to fulfill our purpose as aninvestment manager.
Mizuguchi: Society and the environment receive both positive
and negative impacts from capital markets. That being thecase, you seem to be saying that Resona intends to use its own
power for positive ends.
Matsubara: First, I think we need to be aware that our assets
under management are not our proprietary funds, but are
entrusted to us by our clients. It is our role to manage those
funds and ultimately contribute to our clients’asset formation.
From that perspective, it is our clients’sustainability that is ofprimary importance. This is followed by the sustainability of theinvestee companies. And another important element is thesustainability of the society providing the structure that
supports the corporate operating environment. We believe thatin order to support the sustainability of our clients, we mustensure the sustainability of companies, society, and thelinking social sustainability and corporate sustainability.

Our plan to collaborate with otherinvestment managers
Mizuguchi: So, you are saying that Resona intends to act inaccordance with the 21st century economic model. In thatcase, what is the difference between Resona and other market
players? In other words, what makes Resona distinctive?
Matsubara: I think that what differentiates us is that we plan tocooperate with other investment managers. Like any company,
we feel a certain compulsion to win when competing withothers, but when it comes to protecting and developing thecapital markets, it is crucial to be willing to collaborate.

environment at the same time.
Demonstrating the role that financial institutions andinvestment managers can play is what we are mandated to doby the public and companies, as well as by the clients who
entrust us with their funds, and is our responsibility in terms ofstewardship.

The economic model understakeholder capitalism

Mizuguchi: Are you referring to collaboration among investment
managers?
Matsubara: That is right. Collaboration has been ourwatchword for more than five years. We are strongly
committed to playing a kind of“adhesive”role, and we believethat this will enable us to differentiate ourselves.

Mizuguchi: I believe Resona’s long-term view is that thoroughsafeguarding of society and the environment will protect thefoundations underpinning economic activities, resulting in
improved investment performance. In reality, however, society

Resona Asset Management

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Minoru
Matsubara

TakeshiMizuguchi

Executive Officer, General
Manager of Responsible
Investment Division,
Resona Asset Management
Co., Ltd.

External expert member ofResponsible Investment
Committee
Vice President, Takasaki
City University of Economics
Professor, Faculty of
Economics

networks at first. But once they experienced firsthand how amajor movement can form as a result of investment managers
getting together, they became capable of building cooperative
relationships.
Later, the IICEF was established, and there too major
investment managers began to gather and tackle issues
together, such as corporate governance. We regard this as a
virtuous cycle of collaboration-based development that follows
the establishment of a framework for increasing and sharing
successful outcomes leading to advancement in capital markets
and society.

Leading initiatives within Japan
Mizuguchi: It is certainly true that Resona has demonstrated
leadership in furthering collaboration among investment
managers. For example, Resona has been leading various
initiatives in Japan including the Principles for Financial Action
for the 21st Century and the Institutional Investors Collective
Engagement Forum (IICEF).
Matsubara: We became involved with the Principles for
Financial Action for the 21st Century around five years ago.
Our first involvement in collaboration was through participationin the PRI Japan; I believe we were one of the companies that
initially established the network. Resona has served as chair of
the PRI Japan Network’s advisory committee and its corporate
Working Group (WG), which is a network with the involved
companies. We have continuously been involved since theearly days of the network, and I think we were one of the few
investment managers that understood what collaborationmeans these days in a practical sense.
Mizuguchi: What spurred Resona to get involved in initiatives
such as these?
Matsubara: The international PRI network was launched in
2006, and we became a PRI signatory in 2008. It was in 2008

Establishing a unique position throughoverseas networks
Mizuguchi: I understand that Resona also participates in quite anumber of overseas networks. What sorts of networks is
Resona involved in?
Matsubara: Resona participates in FAIRR, KnowTheChain,
CA100+, AIGCC, and ICGN, among others, and we are working
hard to extend our networks that extend overseas.
Mizuguchi: Active participation in overseas networks seems
quite progressive for a Japanese financial institution.
Matsubara: We first participated in the PRI Japan Network in
2010, so I think we joined relatively early. At the time, we set
three key topics for WG activities: ESG integration,
engagement, and reporting.

that Lehman Brothers collapsed, followed by a period when thefinancial industry’s raison d’être was called into question. But
becoming a PRI signatory made us be keenly aware that therole of financial institutions is to contribute to society bydedicating themselves to social, environmental, and governanceAs far as engagement was concerned, we were required toactively appeal to other members to cooperate with entities
overseas, and to take the initiative in setting an example, so I
think it was easy to build the PRI network and other networks
with overseas connections.
Mizuguchi: Was there anything you learned, or anything you
came to understand better in the course of your involvementwith overseas activities?
Matsubara: Five years ago, the key topic in Japan was
corporate governance. But overseas the focus was on
externalities such as climate change and human rights.

causes, and that we had been entrusted with that role. Our
involvement with the Principles for Financial Action for the 21stCentury included chairing its Investment WG, and while serving
as a Member of the Committee I think we have succeeded indemonstrating leadership in various ways, including
participation in a range of platforms.
Mizuguchi: Have the networks and cooperative relationships
among participants developed?
Matsubara: As you would imagine, there must have been someinvestment managers that were skeptical about the value ofResona Asset Management

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Feature discussion

Taking responsibility and acting to realize our vision for the desirable economic systems of the future

happening in the world as a whole. At the same time, it plays acrucial role by acting as a buffer, to employ an approach suited
to Japan. It seems to me that Resona has forged a uniqueposition in the ESG investment market.

“Good companies”within the 21st
century model of capitalism
Matsubara: We are required to continuously invest in goodcompanies in order to increase assets stably. Good companies

are defined according to a variety of investment philosophies,
such as companies that have future growth potential, as well ascompanies that are currently growing. Our integration
approach defines good 21st century model companies thatfully incorporate ESG elements.
Mizuguchi: So good companies differ between the 20th century
and the 21st century models of capitalism? And you are saying
there is a sound investment philosophy to support this.
Matsubara: That is where I think Resona differs from otherinvestment managers. The reason for communicating Resona’sintentions is that, as an institutional investor, we aretargeting a certain form of society and we have our own
vision for desirable economic systems. We believe thatrealizing these aspirations will enable us to discharge ourfiduciary duties—that is, our duty of loyalty and our duty ofcare—over the long term. We are convinced thatsustainability for society leads to sustainability forcompanies, which results in sustainability for everybody. Thatis the key message we want to tie in with our fiduciary
duties. The good companies of the 21st century model,
whether they are growing companies or companies with
future growth potential, will all share a common concern:
how to tackle the issue of society’s sustainability. I believethat this will lead to ESG integration.
Mizuguchi: Toward the beginning, this Stewardship Report
indicated that Resona is seeking to create new forms of capital
markets. So, I take that to be Resona’s overall intention, andindicative of the type of society that you are aiming for.

Minoru Matsubara
Has served in his current position since April 2020. Joined Resona Bank in
April 1991 and was assigned to the Pension Trust Business Planning Division.
Was subsequently assigned to operational management, planning, andresponsible investment in the Investment Development Office, as well as the
Public Funds Business Planning Division, the Pension Trust Business Planning
Division, the Asset Management Business Planning Division, etc.
His public offices have included committee positions in the Ministry of theEnvironment, the Ministry of Economy, Trade and Industry (METI), theMinistry of Agriculture, Forestry and Fisheries, the Cabinet Office, etc. Has
frequently lectured on ESG and responsible investment, among other topics.

Seeing with my own eyes the difference between Japan with
its focus on G (governance) issues and overseas with theirfocus on E and S (environmental and social) issues had ahuge impact on me.
Mizuguchi: Engagement by overseas financial institutions andinstitutional investors gives the impression of being quite
combative. What do you think of their approach of saying
exactly what needs to be said, without necessarily taking theother side’s feelings into account as we do in Japan?
Matsubara: When we are working on the CA100+ initiative, forexample, people do tell me that Japan’s actions are very
amicable compared with those of Western countries. I think
the approaches differ according to whether an investment
manager confronts investee companies, or aligns itself withthem.
But if an investment manager confronts an investee company
without having first shared its goals, the only result will be an
impasse. This shows that it is important for both the investor

Holding weekly responsible investment
meetings
Mizuguchi: The ideal form of investment ultimately comes
down to so-called investment philosophy, and individual
investment managers invest according to their own
philosophies. Would you agree that putting those philosophies
into practice requires both knowledge and a methodology todiscern whether individual investee companies fit with theinvestment manager’s intentions or not?
Matsubara: Sharing information on current thinking with regard

and the investee to ultimately arrive at their goals as planned.
A distinctive feature of Japanese culture is the supportive
approach to engagement, so I found many situations
bewildering at first.
Mizuguchi: So, overseas investors do not want to attack
investee companies either; it is just that their approach is moredemanding, although they share the same goals.
Matsubara: There are aspects of that approach we could learn
from other countries, while Japan’s own approach is also valid.
It is very important to maintain a balance between the two.
Not only do we sometimes need to say,“That is a specificallyJapanese issue, so please let us deal with it in Japan.”We also

to ESG issues is a key element in this. The responsible
investment framework including ESG investment provides aplatform for individual investment managers to share
information. We are constantly building the necessary
awareness by regularly arranging occasions for knowledge
sharing. We provide opportunities to gain insights by holding
responsible investment meetings once a week at 9 a.m. on
Monday mornings, when people’s brains are at their mostflexible. We believe that there is a point to hold the meetingsneed to constantly reflect the speed and the direction that theworld is heading in. If Japan is starting to lag behind, we needto think what is required.
Mizuguchi: So you are saying that Resona does not forget theworldwide perspective and keeps a close watch on what isResona Asset Management

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first thing on Monday mornings, rather than on Friday evenings.
Mizuguchi: Who participates in these meetings?

Matsubara: They are organized as high-level meetings, where

the president and executive officers responsible for the AssetManagement Unit, as well as general managers of theinvestment divisions, attend. Professionals directly involved ininvestment decisions also take part, and recently more of themare participating online.

Mizuguchi: I see; so the participants gather every Monday
morning to share and exchange information about ESG-related
topics. As a result, the president is well-informed about ESG,

while investment professionals also understand the ESG issues.

From now on, I think that levels of ESG literacy will make thedifference between winning or losing, so it is important to havea mechanism for spreading understanding to more people

Takeshi Mizuguchi

within the company.

Vice President, Takasaki City University of Economics. Professor, Faculty of
Economics. Chairman of FSA Expert Panel on Sustainable Finance. Ph.D.
(Business Administration; Meiji University). Has served in his current
position since 2008. After working at a trading company, an audit firm,etc., became a lecturer at Takasaki City University of Economics in 1997.
Specializes in responsible investment and disclosure of non-financial
information. Main books authored include ESG Investment: A new form ofcapitalism (Nikkei Publishing Inc.; published in Japanese) and Responsible
Investment: Changing the future with capital flows (Iwanami Shoten,
Publishers; also published in Japanese).

The team and stakeholder dialogue that
underpin responsible investment
Mizuguchi: As introduced in the Engagement Report section,
Resona is extremely energetic on engagements on the palm oil
issue. I sometimes meet with the professional who actually
undertakes such engagement, and he is very enthusiastic andknowledgeable about the palm oil issue. Has he always been
so enthusiastic and knowledgeable?
Matsubara: He was an analyst specializing in the food industry
who was transferred to the Responsible Investment Division.
Where engagement is concerned, it is most important to: (1)be familiar with the industry, (2) be capable of financial
analysis, and (3) be able to communicate with companies. We
asked for the analyst to join our team, as we thought thatengagement should be undertaken by someone who had
already been dealing directly with companies for some time.
Mizuguchi: So, engagement on the palm oil issue requires afood-sector professional. And that is why you had a food-sector
analyst join the Responsible Investment Division.
Matsubara: We asked him to use both his industry knowledge

NGO is something else that puts it in a unique position.
Matsubara: We are also holding discussions with those who
we can share common objectives with, even if their values
differ from ours. They are representatives of various
policymaking authorities and labor unions; experts including
you, Professor; and members from overseas networks. During
these discussions we always receive tips about areas where
we are not doing enough, or about issues offering potential for
deeper, broader engagement.

Intentions on impact management
Mizuguchi: Resona will also invest effort in impact management;
please explain the company’s initiatives in this regard.
Matsubara: There are four key elements involved inundertaking impact investment; they are (1) intentions, (2)and his faculties as an analyst, and we shared all the necessary
information with him. But despite having a former analyst
working with us, we still have some organizational challenges.
We need to bring more diversity into our organization. Unless
we incorporate greater diversity, our sensitivity to theexternalities that give rise to social and environmental issues
will not genuinely increase.
Mizuguchi: But, even if that food analyst was knowledgeable
about the industry, he probably did not start off knowing agreat deal about environmental and social issues such as
forestry-related issues or palm oil. So he managed to change
considerably as an individual.

financial returns, (3) wide-ranging asset classes, and (4) impact
assessment.
We believe that the element of intentions is the mostimportant of these. The reason we set out our aspirations forourselves as a company and for society, as well as our 21st

century model of capitalism, is that we believed these would
serve as the premises upon which to build solid intentions. As aresult, we have now set the three intentions of GHG emissions
reduction, forest regeneration, and job creation.
When assessing impact, it is extremely important to create a
PDCA (plan, do, check, act) framework for understanding how
our intentions link to the effects measured. In concrete terms,
this means we must create a logic model, and a PDCA cycle. A
logic model is a hypothesis for how our intentions will manifest
fully in line with a temporal pathway. This is what is referred toas an impact pathway.
We would like to present how we set timelines andMatsubara: I think the regular meetings with CSR Review
Forum, the NGO you introduced to us, played a major role inthat. He attended every meeting and learned about what are
the social issues, and what are the palm oil issues. And it wasvery valuable for us that he was also able to discuss how theseissues should be resolved. I think the interaction with people
who have a diverse range of values ended up strengthening his
own individuality.
Mizuguchi: I have certainly met various professionals at CSR
Review Forum. I think the fact that Resona is in contact with an

Resona Asset Management

approaches, and how we assess impacts.

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Feature discussion

Taking responsibility and acting to realize our vision for the desirable economic systems of the future

important. We have endeavored to determine the impact

Impact investment as the next levelof responsible investment

pathways, which are the routes along which effects spread tothe point where actual impacts manifest, and to measure theportfolio’s impacts along these pathways. We will check which
geographical areas have the most pathways, and compare our

Mizuguchi: Resona was already practicing responsible

investment, so what is the relationship between responsible

estimated impact assessments with the issuers’impact

investment and impact investment?

assessments, for engagement.
Mizuguchi: So Resona will actually assess several green bonds,

Matsubara: Our idea of responsible investment essentiallycomprises integration, engagement, and proxy voting. We have
now added our intentions to these elements.

and compare its impact assessments with those of the issuers,
using its own assessments as the basis for engagement. What

century model of capitalism?

Matsubara: The topic of initial engagement meetings will be

Mizuguchi: Did Resona already not intend to create a 21stform is that engagement likely to take?

Matsubara: Yes, but we had no mechanism for setting that
intention in motion. The aim of the impact management is toemphasize how we can use our intentions to influence thecapital markets and change the nature of finance itself.
I do not know whether we can actually manage this on ourown, but I do think it is important to communicate ourdetermination to take this practical action.

the degree of consistency between our version and the issuer’sversion of how impacts will manifest from these impact
pathways. That is to say, I think that discussions andengagement will address the processes and timelines on which
impact-related figures are based, rather than focusing onwhether the figures themselves are correct.

Mizuguchi: So, it is about management involving clearer
intentions and explicit measurement of impacts. In other words,
it takes Resona’s existing responsible investment to the nextlevel by also closely monitoring impacts as part ofmanagement. So, methodologically speaking, it seems thatapproaches such as integration and engagement would alsoamount to impact investment. It could be argued that the mostimportant element of impact investment is engagement, sodoes that mean it is not simply about providing money?
Matsubara: We will not simply be providing funds; we will also
be engaging with investees to fulfill our responsibilities toinvesting. We will ensure that expectations are aligned byengaging companies in dialogue to resolve any differences
between what they are envisaging and what we are envisaging
in terms of impacts. This is how we will put impact investment
into practice, as a successive process.

Taking on the challenge of impact
investment in equities
Mizuguchi: How will Resona expand this current initiative
targeting green bonds?
Matsubara: As you would expect, we will be targeting equities
next. The challenge with equities is that, unlike with green
bonds, we will be dealing with companies that operate a whole
range of businesses. The same company could have both
positive and negative impacts. So, it is extremely difficult toquantify these impacts in monetary terms. I think it is reallychallenging to work out using the existing framework.
Mizuguchi: When green bonds are issued, the purposes of thefunds usage are specified, but with equities the use of funds is
up to the companies. Money is used for all kinds of things, but
it seems that Resona is trying to evaluate those usages.
Matsubara: I think it will be a case of discussing withcompanies how they view their impact pathways just before
quantifying their impacts in monetary terms.
Mizuguchi: So you will be keeping impacts more clearly in mind
when engaging with companies.

Engagement by making use of impact
pathways
Mizuguchi: It is difficult to understand the specific forms that
impact investment might take, but would it be right to regard
investment in green bonds as the first step?

Demonstrating Resona AssetManagement’s character by
establishing impact funds

Matsubara: If all we do is to establish a framework forinvesting, it is nothing more than pie in the sky. The point is,green bonds provide the means for us to develop impact
management.
Mizuguchi: Do you mean that, rather than simply putting funds
into green bonds, Resona itself will assess their impacts?
Matsubara: We have been monetizing the impacts on green
bonds, rather than assessing the investment performance. I
think that is one of the key things that sets us apart. When you
are trying to manage an entire portfolio, you need some formof standardized yardstick. For instance, hours worked cannot
be compared against GHG emissions volumes. Benchmarks are

Matsubara: We are planning to create“impact funds”of listed
equities. Their sole purpose is to achieve our intentions. We
will be focusing our efforts on how we can get closer toachieving our intentions through investing in equities. We areplanning to establish two listed equity funds: one for Japaneseequities and one for global equities.
Mizuguchi: That should raise the visibility of investment’s role inmaking society a better place. Let us hope that these funds will
come to symbolize Resona’s stance toward investment.
Matsubara: Our objective is not simply to create these funds;
every year, our Stewardship Reports will disclose to the public
how we are getting closer to achieving our stated intentions.
I think that until now investment managers have appeared
completely characterless from the client’s perspective. It seems toneeded, so we created a mechanism for monetizing theimpacts across the portfolio.
Mizuguchi: So Resona wants to properly assess whether its
investments are genuinely having an impact, as well as thescale of that impact.
Matsubara: It is the impact pathways that we regard as

Resona Asset Management

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me that, even if they have a prestigious company name,ensure that these environments remain sustainable fortype of company they are. But we believe it is our intentions thattaking responsibility and acting to realize our vision for thedesirable economic systems of the future.

investment managers have made no impression in terms of thecompanies, and for everybody. I think our character involves

lend us character. And we want potential clients to decide
whether our character appeals to them. In other words, we hope

to change our role so that potential clients choose us for the type

Speed and communication is called forof manager we are, rather than for the funds we invest in.

Mizuguchi: The idea of lending character to an investment

Matsubara: Finally, could you explain what you think Resona’smanager is a good way to put it. I take this as a declarationthat from now on Resona will be competing on the basis ofremaining issues are, and what you expect of us in future?

Mizuguchi: I think Resona’s efforts are making steady progressyear by year. I would like to commend you personally forwhether potential clients choose its character. Are the impact
funds aimed at individual investors or pension funds?

Matsubara: We intend to offer both. We want to show an
aspect of our character to individual clients too, in the form of
our impact funds.

aspiring to turn Resona into a“Future Maker,”and for what you
have done so far to put that into practice. I am looking forward
to seeing Resona make 21st century model of capitalism areality. If I were to point out any issues, perhaps they would be
speed and communication.
The world’s environmental and social issues have now reallyreached the limits of what can be endured; and our societies
could head in undesirable directions if no actions are taken. I
think that the Western investors are already aware of theserisks. I am sure Resona is also working hard to address theseissues, but it could perhaps do more to transmit its messages
to the public.
For example, institutional investors in Europe and the UnitedStates responded promptly to the COVID-19 pandemic bycollaborating to issue various statements. Yet, there are no
obvious messages coming out from Japanese institutions.
Resona is already playing a key role, not least by facilitating
collaboration among Japanese institutional investors. But I
would like to see Resona play a role to react proactively andrapidly in response to these urgent environmental and social
issues globally.

Aspiring to be a manager that can
provide abundance and happiness tofuture generations as well as our own
Mizuguchi: So, what will Resona Asset Management’s characterbe? What is the company’s message?
Matsubara: Our message is that we want to change the current
society; we have a job to do for the next generation. I believethat the point of long-term investment is not only to make thecurrent generation affluent, but also to make the next
generation affluent, and that is the responsibility we have been
charged with.
We aspire to be a manager that can provide abundance andhappiness to future generations as well as our own. To achievethis, we need to preserve the current natural and social
environments, and to further develop them. And we need toResona Asset Management

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Chapter3

Passive Investment
Stewardship Activities

・We will practice an engagement strategy geared to finding solutions to ESG issues across society byidentifying responsibilities for social sustainability.

・We will fulfill our role in acting as a responsible investor with respect to providing support of universal
ownership as a long-term investor.

In order to make our vision as described above a reality, the Responsible Investment Division maintains dialogue andengagement with investee companies, and conducts proxy voting based on our basic policy on responsible investment.
In terms of the types of stewardship activities, we engage in as a long-term investor and our passive engagement approachthat leverages the strengths of Resona Asset Management, our longstanding experience and discussions with stakeholders
have given rise to our current stewardship activities for passive investment. This section introduces our overall stewardship
activities, and approaches and details of activities undertaken.

▪Basic approach to stewardship activities on passive investment
Awareness on issues

Our aims: Stewardship
activities on passive
investment◦Determine how Resona should meet asset manager expectations pertaining to
stewardship activities.
◦Determine how to maintain engagement geared to a super-long-term investment
perspective in carrying out passive investment, leveraging our strengths.

Objectives

Boosting overall equity market value — efficiency & continuity

Path

Determine global issues and local issues as a universal ownerEngagements
Resona’s proxy voting▪Passive investment dialogue and engagement
We will strive to help boost the overall equity market, which will involve undertaking engagement on the basis ofappropriately determined issues as we assess corporate sustainability from the perspective of ESG and take a processcentered approach to hastening improvement.
・We undertake engagement geared to finding solutions to ESG issues of society overall (mitigating

Perspective on
passive investment

risks and rectifying discounts) under the assumption of maintaining holdings over the long term.
・We undertake engagement with respect to global issues.
・We select topics and engagement targets that will maximize effects of engagement amid a scenario
where the number of investee companies varies widely.

1Long-term investor perspective(importance)

2

Possibility of change in companies perspective(effectiveness)

・Addressing global and local issues

・Awareness → disclosure → dialogue → monitoring

・GHG emissions, supply chain management, board

・Collaboration with other investors (Collaborative engagement)

composition, etc.

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Overview of passive engagement
Basic policy on responsible investment
Building sustainable social systems

1

Enhancing corporate value of investee companies

Information obtained from the network and knowledge as a frontrunner of responsible investment

Input

Knowledge of external experts and information exchanged with overseas asset owners, NGOs, etc.
Fully leveraging information obtained from the global network by means of collaborative engagement

Determination of materiality (material issues)(i) Determine global issues(i) Determine local issues

E (Environmental)

G (Governance)

S (Social)

D (Disclosure)Integration of Japanese andglobal assets & shared vision(Integration ofJapanese andglobal assets)

2
Process

Action plan of
Responsible
Investment
DivisionTop-down
approach

Bottom-up
approach(ii) Determine topics of activities“Disclosure of action taken to risks andopportunities on climate change”“Sustainable palm oil procurement”“Enhancement of governance”“Promotion of anti-corruption measures”“Disclosure of non-financial information”(iii) Select a path of engagement
Engagement methods (direct, collective and index) on a per-asset basis andaccording to the topic
Selection of target companies: quantitative and qualitative

Path of engagement

PDCA cycle

Proxy voting

3
Collaborative engagement

In-house engagement

Investee companies

Activity assessment

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Index engagement

Chapter3

Passive Investment Stewardship Activities

Three distinctive aspects of passive engagement
The Responsible Investment Division carries out passive engagement that balances low cost andeffectiveness, underpinned by the three distinctive aspects of network, top-down approach, and+Collaboration.

1

2

Network
Effectiveness and efficiency
in information collection

1

Top-down
approach3

for selection of topics andtarget companies+Collaboration
Effectiveness and efficiencyof engagement activities

Network (Effectiveness and efficiency in information collection)
Stakeholder dialogue
Utilizing the network we developed as a pioneer
in responsible investment, we initiate proactive
interactions with experts, NGOs, government
officials, long-term overseas investors, labor unions
and various organizations, and gain insight into
their advanced knowledge.

Experts

Variousorganizations

Experts

When promoting corporate governance and ESG initiatives,
we work with university professors and other experts on aregular basis to gather information and exchange opinions.

NGOs

Through the CSR Review Forum-Japan, we study diligently
and work to raise our awareness with NGO personnel andexperts both in Japan and overseas.

Government
officials

We serve as the joint chair and steering committee memberof the Asset Management/Securities/Investment Banking
Working Group in the Ministry of Environment’s Principles
for Financial Action for the 21st Century, as well as amember of METI’s“Study Group for Discussing Approaches
to Making More Substantial the Dialogues for Creation of
Sustainable Corporate Value.”

Long-term
overseas
investors

We cooperate with overseas investors in relation tocollaborative engagement and individual themes.

NGOs

ResonaGovernment
officials

Labor unions
Long-term
overseas
investors

Labor unions

We work as a member of the Research Institute For
Advancement Of Living Standards’“Research Committee
Investigating Information Disclosure For‘Better Companies’
And The Promotion Of Principles For Responsible
Investment From The Viewpoint Of Working People.”

Variousorganizations

We have proactively participated in the PRI Japan Working
Group as a signatory organization since the establishmentof the PRI Japan Network in 2008, working as an advisorycommittee member.

Information collection activities in 2020
・Following the spread of the coronavirus pandemic in 2020, alarge number of webinars and online meetings were held.
・We participated in the“COVID-19 Series”of webinars held by
ICGN in June.
In November we participated in the two-day ICGN Global
Virtual Summit, and gathered information on the state ofgovernance in Europe, the Americas and Asia, as well as on ESG
activities.
・With regard to the response to climate change, we attended
monthly information-sharing meetings hosted by the AIGCC, ofwhich we became a member in May 2020.

Resona Asset Management

34・At the ACGA, of which we became a member in May 2020, we
participated in quarterly online meetings, and also pursued
engagement with individual (financial) companies in South Korea.
・We worked with US-based CalPERS on collaborative
engagement for PRI in relation to climate change, and with
US-based CalSTRS on collaborative engagement for PRI in
relation to COVID-19.
・In terms of engagement aimed at Japanese companies, we
implemented dialogues on multiple occasions with European
asset owners.
・We worked with Achmea Investment Management and Actiam,based in the Netherlands, on individual dialogues for the PRI’s
Plastic Investor Working Group.

Stewardship Repor t 2020/2021

Top-down approach for selection of topics and target companies
There is a growing need to incorporate universal principles such as environment, society, labor andanti-corruption into the long-term strategies of companies, in order to enhance corporate sustainability.
As such, we take a top-down approach to addressing ESG issues, drawing on an external perspective
through passive engagement.
More specifically, we provide support for ensuring corporate sustainability through a process thatentails narrowing down topics using a top-down approach which involves back-casting from a desirable
future scenario as envisioned by the SDGs, the Global Compact, and the Paris Agreement.

STEP 1

Back-cast from a desirable future scenario
Long-term global issues

Unexplored economic system“Desirable economic systems of the future”
Inclusive social economy
Sustainable environment
Paris
Agreement

Corporate culture, purpose

STEP 2

Action plans

Stakeholder dialogue
Encountering knowledge globally

STEP 3

UN Guiding Principles on Business and Human Rights
OECD Guidelines for Multinational Enterprises

Narrow down and focus on topics

Pipeline of leaders in responsible investment

Input

2

Engagement agenda(global issues) and KPIs

Select target companies from a unique perspective
Relevance to the important topics
Degree of impactetc.

With our investee companies
diversifying, we have selected
targets for which we can maximize
engagement effects and are
implementing planned engagement.

We are formulating our engagement policy based on the above.
In 2020 we began engagements related to management of human capital during the coronavirus crisis,
in addition to existing initiatives that include climate change disclosure, Climate Action 100+, supply chain
risk management centered on palm oil and food, the marine plastic issue, risk engagement, enhanced
corporate governance, prevention of corruption, forced labor, non-financial information disclosure anddiversity.
The next page 36 contains a list of respective approaches we have used for individual issues pertaining
to ESG+D.

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Chapter3

Passive Investment Stewardship Activities

Issues determined
Climate change: Information disclosure on risks and opportunities in line with the TCFD

For high-risk industries such as automotive, steel, chemicals, and electric power, we arerequesting information disclosure in line with the TCFD Guidelines and climate change
information disclosure guidance (investor expectations)

CDP Science-Based Targets Campaign

Engagements requesting a response to the Science-Based Targets initiative (SBTi)

Marine plastic issue Plastic Investor Working GroupEngaged with food & beverage manufacturers and retailers, which have a large impact on
the marine plastic issue

S (Social) E (Environmental)

E (Environmental)

CDP Non-Disclosure Campaign

Engagements requesting disclosure of environmental information in response to CDP
disclosure requests

Sustainable palm oil procurement

Procurement and policies concerning certified palm oils
・Collaborative engagement on palm-oil-related companies to encourage ESG risk
disclosure and management improvements.
・The IWG also engaged with the ASEAN regional banks, which are the significant lender
to the palm-oil-related companies.

Deforestation risks and human rights issues (Investor Initiative on Sustainable Forests, IISF)・PRI – Ceres led Investor Working Group (IWG) to eliminate deforestation and address other ESG issues related
to soft commodity (beef, soy, and timber) production such as poor working conditions and land rights.
・Declared endorsement of“Investor Statement on Deforestation and Forest Fires in the
Amazon,”which requested companies to urgently redouble their efforts and demonstrate
clear commitment to eliminate deforestation within their operations and supply chains.

Global investor engagement on meat sourcing

S (Social)

Global issues (Top-down approach)Participation in Climate Action 100+Engaged in five-year activity to support corporate initiatives for addressing climate change
by PRI and a global coalition of investors*.
*Consists of IIGCC (Europe), INCR (North America), IGCC (Australia & NZ) and AIGCC (Asia).
This has involved persuading 100 major companies worldwide (including 10 Japanesecompanies) to make commitments with respect to risks relating to climate change (TheParis Agreement), and to establish frameworks and disclose information.

Engagements conducted under the joint guidance of FAIRR and Ceres, requesting six
major restaurant and fast food companies to take steps to mitigate risks associatedwith climate change and water in relation to livestock product supply chains.

Apparel & Footwear Engagement using the KnowTheChain Benchmarks

Investor Working Group encouraged the 43 target companies that have been assessed by
KnowTheChain, to sign the“AAFA(Note 1)/FLA Apparel & Footwear Industry Commitment to
Responsible Recruitment”to improve efforts to address forced labor risks in the supply chain.

Sustainable protein supply chains

Promotion of corporate information disclosure in relation to a shift to plant and other protein
products as substitutes for livestock protein products.

PRI Pandemic Resilient 50 Working group for matters related to management of human capital during the coronavirus outbreak

G (Governance)

Enhancement of corporate governanceContinue engagements aimed at:
effective monitoring of corporate management by the board, ensuring high independence of board composition, ensuring
equal rights among all shareholders, including minority shareholders, and disclosure transparency

Promotion of anti-corruption measures

Promoting actions centered on key industries (construction, trading company and finance)and global corporations, particularly involving use of the Anti-Bribery Assessment Tool
released by GCNJ.

30% Club Japan/UK Investor Group (Board diversity)

Group which consists of asset owners and asset managers. Aiming to hold constructive dialogues withinvestee companies’boards to collaborate with them on effective pathways to increase gender
diversity and equality at all levels of the organization.

Enhancement of disclosure of non-financial information [Undisclosed entity]

D (Disclosure)

Local issues (Bottom-up approach)Collaborative engagement targeting 50 global companies
Business Continuity Planning (BCP): collaborative engagements putting the focus on the way
employees, suppliers and communities are dealt with, on employee health and welfare, andon compatibility with long-term value creation covering the resilience of the company

Promoting awareness as to the importance of non-financial information, approaches with respect to ESG, and theimportance of dialogue.

Integrated reporting

Urging companies to provide clear and concise information disclosureand supporting them in such efforts
Declared endorsement of statement of collaboration of theInternational Integrated Reporting Council (IIRC)

Enhancement of disclosure of non-financial information [Leading company]

Encouraging an awareness of the“materiality”demanded by investors among companies and adding efficacy to initiatives.
Aiming to enhance the long-term corporate value of Japanese companies by encouraging enhanced transparency anddialogue by promoting disclosure.

(Note 1) AAFA: American Apparel & Footwear Association

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3+ Collaboration: Effectiveness and efficiency of engagement activities
The Responsible Investment Division mainly takes a direct engagement approach and draws on multiple
paths of engagement (collaborative engagement and index engagement), thereby making stewardship
activities more effective and efficient.

Collaborative engagement — For companies in Japan▪Institutional Investors Collective Engagement Forum

Since October 2017 we have been taking part in theInstitutional Investors Collective Engagement Programorganized by the Institutional Investors Collective Engagement
Forum (IICEF). IICEF is a general incorporated association(ippan shadan hojin) in Japan established to provide support
that facilitates constructive and purposeful dialogue withcompanies that institutional investors engage with collectively(collaborative engagements) by helping to ensure that suchinvestors carry out their stewardship activities appropriately.
Collaborative engagement activities carried out by theInstitutional Investors Collective Engagement Program do not
aim to pursue short-term shareholder profits, but rather aim
for long-term corporate value expansion with sustainablegrowth. Having set the engagement agenda for the current
fiscal year, letters are sent to targeted companies, and we
arrange meetings to talk directly with executive officers andgeneral managers responsible for the divisions in question.

◦Participating institutional investors:
The Pension Fund Association andfour asset management firms
including Resona Asset Management
Institutional
investor
Institutional
investor

Institutional
Investors
Collective
Engagement
ProgramInstitutional
investor

Holding
meetings, etc.

Listedcompany
Listedcompany
Listedcompany

Preliminary discussions
among the participating
institutional investors
Set agenda and agree oncommon views
Send letters summarizing
common views to companies
targeted for engagement
Hold meetings withcompanies targeted forengagement, attended bymultiple participating
institutional investors▪Engagement agenda of the Institutional Investors Collective Engagement Program
Governance

TopicsObjectives

Materiality/
Business model

Materiality identification and disclosure
regarding business model sustainability

Encouraging awareness and improving initiatives and disclosure for themateriality demanded by investors

Handling misconduct

Information disclosure and collaborative
engagement with outside directors at
companies committing misconduct

Information disclosure at companies committing misconduct andsupporting corporate culture and governance reforms by outside directors

Causal analysis and taking action regarding
general shareholder meeting proposals that
incur a considerable number of opposing votes

Causal analysis and issue awareness for agenda items to elect membersof top management with high opposing vote ratios

Anti-takeover measures

Disclosing the need for takeover defense
measures in light of risks of declining capital
market valuations

Awareness of management issues through the evaluation of the need tocontinue anti-takeover measures

Cross-shareholding

Collaborative engagement with companies
engaged in cross-shareholding

Encouraging clear disclosure of the objectives and policies of crossshareholding and improving the governance associated with that response

Collaborative engagement on the governancesystems of companies with listed parent
companies and subsidiaries

Encouraging the maintenance of governance, information disclosure, andenhanced accountability for companies with listed parent companies andsubsidiaries

Shareholders meeting(high ratio of opposing votes)

Listed parent companies
and subsidiaries

Participation in policymaking, etc.
We serve as the joint chair and steering committee member of the Asset Management/Securities/Investment Banking
Working Group in the Ministry of Environment’s Principles for Financial Action for the 21st Century, as well as a member of
METI’s“Study Group for Discussing Approaches to Making More Substantial the Dialogues for Creation of Sustainable
Corporate Value.”・Member of the Impact Investment Study Group jointly hosted by the Financial Services Agency / GSG-NAB Japan.
・Member of the Ministry of Agriculture, Forestry and Fisheries’“Investigative Committee for the Practice and Visualization of
Decarbonization in the Food Supply Chain.”・Member of the Research Institute For Advancement Of Living Standards’“Research Committee Investigating Information
Disclosure For‘Better Companies’And The Promotion Of Principles For Responsible Investment From The Viewpoint Of
Working People.”Index engagement
Through our investment, we persuade companies to more fully disclose ESG-related information by undertaking passive
investment that uses MSCI’s governance-quality and ESG indexes as benchmarks.

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Chapter3

Passive Investment Stewardship Activities

Collaborative engagement — For companies around the world
Based on the network it has cultivated as a pioneer in this kind of responsible investment in FY2020,
Resona Asset Management continued to utilize the PRI and other platforms to participate in collaborative
engagements for the global companies.

E▪Scope of platforms

D

S

G

▪Collaborative engagement we are committed to
Engagement on PRI platform

Global investor engagement
on meat sourcing

Global investor engagement onsustainable protein supply chains

Investor Initiative on
Sustainable Forests(Note 1)

Apparel & Footwear
Engagement using the KTC(Note 2) BM

Plastic Engagement Working Group
Climate Action 100+
/Oil & Gas

CDP Non-Disclosure Campaign
CDP Science-Based Targets
Campaign(Note 3)

COVID-19
Palm (Palm, ASEAN Banks)Brazil Anti-Corruption

30% Club JP IG
30% Club UK IG(Note 1) IISF: Investor Initiative on Sustainable Forests(Note 2) KTC: KnowTheChain(Note 3) Achmea IM, Actiam: Asset management companies in the Netherlands that are signatories to the PRI, and which are involved in the coordination of
the plastic engagement group.

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▪Global Platform
Description

Date Joined

PRI: Principles for
Responsible Investment

Platform

Established in 2005, a UN-supported network of investors, works to promote sustainable investment throughthe incorporation of environmental, social and governance factors into investment decision-making.

Mar. 2008

CDP

A not-for-profit charity that runs the global disclosure system for investors, companies, cities, states and regions
to manage their environmental impacts. Over the past 20 years CDP has created a system that has resulted in
unparalleled engagement on environmental issues worldwide.

Apr. 2017

IIRC: International Integrated
Reporting Council

A global coalition that provides an investors statement of support for integrated reporting as a route to better
understanding of performance

June 2018

BSR: Business for Social
Responsibility

BSR™ is a global nonprofit organization that works with its network of more than 250 member companies andother partners to build a just and sustainable world. BSR™ develops sustainable business strategies andsolutions through consulting, research, and cross-sector collaboration.

Nov. 2019

30% Club UK Investor Group

Established in 2011. Its purpose is to:co-ordinate the investment community’s approach to diversity, in particular to explain the investment case formore diverse boards and senior management teams;
exercise ownership rights, including voting and engagement, to effect change on company boards and withinsenior management teams;
encourage all investors to engage on the issue of diversity with chairs of boards and senior management teams.

Dec. 2019

FAIRR: Farm Animal
Investment Risk & Return

Established in 2015, the initiative is a collaborative investor network that raises awareness of the environmental,social and governance (ESG) risks and opportunities brought about by intensive livestock production.

Jan. 2020

ICGN: International Corporate
Governance Network

Established in 1995 as an investor-led organization, the ICGN’s mission is to promote effective standards of corporate
governance and investor stewardship to advance efficient markets and sustainable economies worldwide.

Apr. 2020

AIGCC: The Asia Investor
Group on Climate Change

An initiative to create awareness among Asia’s asset owners and financial institutions about the risks and opportunities
associated with climate change and low carbon investing. AIGCC provides capacity for investors to share best practiceand to collaborate on investment activity, credit analysis, risk management, engagement and policy.

May 2020

ACGA: Asian Corporate
Governance Association

An independent, non-profit membership organization dedicated to working with investors, companies andregulators in the implementation of effective corporate governance practices throughout Asia. ACGA wasfounded in 1999 from a belief that corporate governance is fundamental to the long-term development of
Asian economies and capital markets.

May 2020▪Collaborative Engagements and Working Groups
Platform

Project Name

Global Issue

Date Joined

Climate Change

May 2018

Climate ChangeFeb. 2018

PRI

Climate Action 100+

PRI

Climate change transition for oil and gas

CDP

CDP Non-Disclosure Campaign

Climate Change/Disclosure

Apr. 2020

CDP

CDP SBT Campaign

Climate Change/Disclosure

Sept. 2020

PRI-Ceres

IISF: Investor Initiative for Sustainable Forests

Environment/Deforestation/Supply Chain

Sept. 2017

PRI

Sustainable Palm & Soy

Environment/Deforestation/Supply Chain

Oct. 2018

PRI

Plastic Engagement Working Group

Supply Chain

Aug. 2020

FAIRR

Global investor engagement on meat sourcing

Sustainable Food Supply Chain/Climate ChangeDec. 2019

Sustainable Food Supply Chain/Climate ChangeJan. 2020

COVID-19 Response

Aug. 2020

Human Rights/Labor Practices/Supply Chain

Apr. 2019

FAIRR

Global investor engagement on sustainable protein supply chains

PRI

COVID-19 Investor Working Group/Pandemic Resilient 50

PRI-ICCR

Apparel & Footwear Engagement using the KTC BM

30% Club UK

30% Club UK Investor Group

Governance/Board Diversity

Dec. 2019

PRI

Brazil Anti-Corruption

Governance/Anti-Corruption

Dec. 2019

Global Issue

Support Endorsed▪Signed Investor Statement
Platform

Statement

PRI

PRI Just Transition on Climate Change

Climate Change

Nov. 2018

Investor Agenda

Global Investor Statement to Governments on Climate Change

Climate Change

June 2019

Climate ChangeDec. 2019

PRI/CA100+

Investor Expectations on Climate Change for Airlines and Aerospace Companies

PRI-Ceres

Investor Expectations on Deforestation in Cattle Supply Chains

Environment/Deforestation

Oct. 2017

PRI-Ceres

Investor expectations on deforestation in soybean supply chains

Environment/Deforestation

Feb. 2019

PRI-Ceres

Deforestation & forest fires Amazon

FAIRR

Global Investor Statement on Antibiotics Stewardship

Environment/Deforestation

Oct. 2019

Sustainable Food Supply Chain

Oct. 2018

PRI, KTC/ICCR
PRI

Investor Statement on Coronavirus Response

COVID-19 Response

May 2020

UNGP Reporting Framework Investor Initiative

Human Rights/Labor Practices/Supply Chain

Oct. 2016PRI

INVESTOR EXPECTATIONS ON LABOUR PRACTICES IN AGRICULTURAL
SUPPLY CHAINSHuman Rights/Labor Practices/Supply Chain

Feb. 2018

PRI, KTC/ICCR

KnowTheChain Investor Statement
Investor Expectation on Addressing Forced labor in Global Supply Chains

Human Rights/Labor Practices/Supply Chain

May 2019

IIRC

A global coalition that provides an investors statement of support for
integrated reporting as a route to better understanding of performance

Governance/Disclosure

June 2018

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Chapter

1

3

Passive Investment Stewardship Activities

Engagement plan for FY2020
We aim to achieve sustainable society through actively engaging in both enhancing medium- tolong-term corporate value and finding solutions to social challenges.

Dialogue and engagement plans (from July 2020 to June 2021)
Going forward, we will persist in our efforts to conduct engagement for our equity/passive and active
investment, and fixed income/active investment, and concurrently will further strengthen cooperation
among divisions, aiming to raise the bar. We also plan to keep carrying out collaborative engagement
geared to companies in Japan and overseas.

In addition to the dialogue and engagement issues we have been addressing, we plan to
conduct engagements to further improve the ratios of independent outside directors andfemale directors in the board. With respect to our engagements on environmental and social
issues, we will continue addressing issues such as the palm oil issues and marine plastic
issues, while simultaneously preparing to choose some new topics.

Equity/Passive
investment

We will decide on topics pertaining to non-financial factors that effectively help increaselong-term corporate value, drawing on sources of added value developed over many years
by each of our strategies. We also aim to keep enhancing and maintaining our dialogue withinvestee companies focused on their management teams, simultaneously improving thequality.

Equity/Active
investment(Chapter 4)

Fixed income/Active
investment(Chapter 5)

We plan to enhance our dialogue and engagement with respect to medium- to long-term
ESG issues in order to keep building awareness of potential risks involving such corporate
issuers.

As for collaborative engagements to Japanand overseas companies, we plan toparticipate in collaborative engagements byusing platforms of PRI and the Institutional
Investors (IICEF) Collective Engagement
Program.

Responsible Investment Division meeting

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Engagement agenda for FY2020
Climate change・Climate Action 100+ Net Zero Company Benchmark Rollout
Letters sent to the investee companies on setting goals in line with the Net Zero Company
Benchmark.
・CDP Non-Disclosure Campaign｜Science-Based Targets Campaign
In March 2020 we have encouraged the companies to disclose comparable environmental
information to investors using the CDP platform.
In September 2020 we have committed to the global network of investors engaging withcompanies around the world to set SBTs.
・As for impact assessment, we will try to further understand the assessment methodology, and touse the assessment in engagement tools.

COVID-19・Pandemic Resilient 50 (Participation by ten companies, including CalSTRS, Legal & General, Dutch
APG, and Achmea)
In response to the COVID-19 pandemic, CalSTRS and a group of institutional investors formed acollaborative initiative.
We will commit to the Pandemic Resilient 50 which engages companies to understand the impactof those most affected by the pandemic and focuses on Board Accountability, Human CapitalManagement, and Long-Term Value Creation and Resilience.
・Investor Statement on Coronavirus Response (ICCR, KnowTheChain)
We have donated our support to the Investor Statement.
This is a statement which urges the business community to take whatever steps they can, inparticular:“Provide paid leave,”“Prioritize health and safety,”“Maintain employment,”“Maintain
supplier/customer relationships,”and“Financial prudence.”

Marine plastic pollution
・In FY2019, we engaged with 20 companies on marine plastic issue with the retailers that wereheavy users of polyethylene bags, and beverage manufacturers that produce and sell drinks
packaged in PET bottles. We conducted interviews to confirm the status of each company’s efforts
to reduce the use of plastic, and we actively encouraged information disclosure. In FY2020 weengaged with two chemical companies on chemical recycling. We have also continued our
dialogue with the policy makers.
・Plastic Engagement Working Group, Led by Achmea Investment Management and Actiam
We will continue our commitment to the Plastic Engagement Working Group.

Sustainable food supply chain
・Global Investor Engagement on Meat Sourcing, Phase 2
In 2019/2020 we have committed to participation in collaborative engagements targeting 6 fast
food and restaurant brands with the aim of reducing supply chain risk relating to meat and dairy
products.
・Sustainable protein supply chains, Phase 4
We have committed to participate in collaborative engagements targeting 25 global food
manufacturers to encourage diversification of protein sources. In 2021 we plan to continue ourcommitment to the next phase of the engagement.

Biodiversity Pledge・As a new engagement agenda, we are planning to endorse our support to the“Biodiversity Pledge.”

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Chapter3

Passive Investment Stewardship Activities

Determining issues and action plans
In FY2020 we will take action that connects internalities and externalities geared to both global andlocal agendas, with an ongoing focus on external diseconomies.
Whereas we ensure that each of our activities embrace individual topics pertaining to ESGD issues, we
also accordingly link each of our agenda objectives with one or more of the other agenda objectives. In
addressing the ESGD issues, we will take a comprehensive approach that involves interconnecting
elements of the following tables, with the vertical axes representing timelines that provide a framework
for initiatives listed along the horizontal axes.

E (Environmental)

FY2017

Climate change-related
disclosure

FY2018

Participation in Climate
Action 100+ (5 years)
Oil & Gas IWG (PRI)FY2019Endorsed support ofEndorsed support of
GISGCC(Note 2)
joint statement on a
Just Transition(Note 1) to (Investor Agenda(Note 3))
a low-carbon economy

S (Social)

E (Environmental)

Marine plastic issueTop-down approach

Endorsed support of statementtargeting Airline & Aerospaceindustries(Investor Agenda(Note 3))

Sustainable palm oil
procurement(Companies in the palm
oil supply chain)

IISF(Note 5) (PRI/Ceres)
Cattle & Soy

Plastic Engagement Working Group

Sustainable Palm Oil IWG (PRI)

Biodiversity(Note 4) Pledge

Signing of Investor Statement (PRI/Ceres)
Signing of Investor Statement on Deforestation & Forest Fires in the Amazon (PRI/Ceres)

Sustainable food supply chain
FAIRR(Note 6) platform(Factory farming and antibiotic
resistance)

S (Social)

FY2021

CDP Non-Disclosure Campaign
CDP Science-Based Targets Campaign

2012
Signing the CDP

Initiation ofpalm oil issue
analysis andengagements
jointly with
NGOs in Japan

FY2020Meat Sourcing
Sustainable Protein

Responsible employment
KTC BM Apparel & footwear IWG
Governance addressing forced labor

Signing of UNGP
Reporting Framework

Declared endorsementof statement on labor
practices in agricultural
supply chains (PRI)

COVID-19 engagement,“Pandemic Resilient 50”(Note 1) Just Transition: The preamble of the Paris Agreement contains the goal of achieving a Just Transition as one means of helping ensure effectiveness of theParis Agreement. The joint statement endorsing a Just Transition is intended to facilitate more extensive understanding as to the importance of factoring in
employment concerns and accordingly implementing comprehensive measures to address social challenges involving the prospect of unemployment anddiminishing working conditions as a result of shifting to a carbon-free society.
(Note 2) GISGCC: Global Investor Statement to Governments on Climate Change. A joint statement announced before the G20 Osaka Summit in June 2019 thatcalled on government leaders worldwide to set voluntary emission reduction targets (NDCs) to keep climate change to 1.5ºC. Participating organizations
comprised 477 institutional investors, with combined total of US$34 trillion in assets under management.
(Note 3) Investor Agenda: An initiative by institutional investors launched in September 2018 to promote carbon reduction. It comprises the United Nations
Environment Programme Finance Initiative (UNEP FI), the Principles for Responsible Investment (PRI), the CDP, and the Global Investor Coalition on Climate
Change (GIC, made up of four organizations: IIGCC, AIGCC, IGCC, and Ceres).
(Note 4) Biodiversity: Biological diversity(Note 5) IISF: Investor Initiative on Sustainable Forests. The IWG on deforestation formed by combining the former Cattle-Linked Deforestation IWG with the Soy IWG.
(Note 6) FAIRR: Farm Animal Investment Risk and Return

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FY2017

FY2018FY2019FY2020

FY2021

Promotion of anti-corruption measures

G (Governance)

Bottom-up approach

Governance/diversity of US
and Chinese companies

Enhancement of governance・Business model・Board composition
・Capital productivity, policy-oriented stocks and cost of capital・Anti-takeover measures
・Disclosure
・Anti-social behavior

30% Club
Investor Group(Diversity)

30% Club UK Investor GroupIICEF (Scandal-plagued companies, anti-corruption)
PRI/Engagement with Brazilian companies on anti-corruption
IICEF (Companies whose shareholders cast votes largely in opposition to proposals)

D (Disclosure)

Enhancement of disclosure on non-financial information(Rectifying disclosure discount)

IICEF(Note 1)(Enhancement of disclosure on non-financial information)

Declared endorsement of statement of collaboration of the IIRC(Note 2)(Integrated reporting)(Note 1)IICEF: Institutional Investors Collective Engagement Forum(Note 2)IIRC: International Integrated Reporting Council

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Engagement report

AgendaSustainable palm oil procurement

1

In August 2017, we initiated engagements pertaining to environmental
and social issues on procurement of sustainable palm oil.
Palm oil is the most commonly used vegetable oil in the world,
particularly as a raw material in numerous food products, detergentsand other household items, and cosmetics. However, palm oilunderlies many problems in the major producer countries of Malaysia
and Indonesia, particularly in terms of deforestation accompanying
development of palm plantations, child and forced labor, andconflicts with indigenous peoples of the nations.
© WWF Japan
Japan also has many companies that handle palm oil-based
products and accordingly are involved in the palm oil supply chain.
Meanwhile, in comparison with companies in Europe and the United States, we believe there is still substantial
room for improvement among companies in Japan on palm oil related issue.
The Responsible Investment Division provides support to investee companies involved in the palm oil supply chain,with respect to helping them understand and draw up policies pertaining to procurement of“sustainable palm oil.”

Products using palm oil (palm kernel oil)

Instant noodles Chocolate snacks

August2016

From

August2017
onwards

Launch of the Task Forceon Palm Oil Issue

Meetings with investee

companies involved in thepalm oil supply chain

From

January
2018
onwards
From

October
2018
onwards
From

November
2018
onwards

From

November
2018
onwards

Meetings with overseas oilpalm plantation operators

Ice creams

Frozen foods

Powdered milk

Detergents andcosmetics

In August 2016, the Responsible Investment Division organized sessions to exchange information in its Task
Force on Palm Oil Issue with the aim of spreading awareness of“sustainable palm oil”across Japan. This was donein cooperation with Professor Takeshi Mizuguchi at Takasaki City University of Economics, and representatives ofNGOs such as CSR Review Forum-Japan. The 18th meeting of the task force was held in December 2020.
Our efforts to encourage use of sustainable palm oil entail visiting investee companies that are involved in thepalm oil supply chain, thereby leveraging knowledge gained in the Task Force on Palm Oil Issue.
Specifically, we created a list of investee companies that were associated with the palm oil supply chain.
Between August 2017 and June 2020, we visited and held meetings with a total of 54 organizations, consisting of
18 companies in the retail, restaurant and service industries, 8 toiletry manufacturers, 18 food manufacturers, 5 oiland chemical companies, and 5 general trading companies. Initiatives taken during the meetings have included
providing explanations on environmental and human rights risks inherent in the palm oil supply chain, confirming
progress made with initiatives involving sustainable palm oil, and profiling examples of companies that are carryingout progressive initiatives. Moreover, we have urged people to join the Roundtable on Sustainable Palm Oil (RSPO),
recommended that companies use sustainable palm oil, and encouraged the companies to disclose their targets toaddress palm oil issue and their track records.
In a follow-up to January 2018, in March 2019 our analysts paid visits to engage with seven major palm
plantation operators based in Malaysia and Singapore. In addition to checking initiatives related to achieving
compliance with NDPE rules, we shared information aimed at resolving issues such as traceability down to the levelof small independent plantation operators.
In October 2018 the engagement working group (WG) initiated contact or sent letters to nine ASEAN regionalbanks that extend funding for palm oil operators in relation to ESG issues at the companies to which they provide
finance. With four of these banks the WG conducted engagement activities aimed at improving frameworks for
management and information disclosure of ESG risks in relation to companies in the palm oil supply chain.

Began engaging with

ASEAN regional banks

Attendance to the annual
RSPO meeting

Participation in thedrawing up of engagement
and remedy guidelines forthe supply chain

Margarine

Following our attendance at the RSPO’s Annual Roundtable Conference held at Kota Kinabalu in Malaysia in
November 2018, we participated in the Annual Roundtable Conference held at Bangkok in Thailand in November
2019, and exchanged information with those involved in the palm oil industry.
In September 2019, we collaborated with external organizations such as Global Compact Network Japan(GCNJ), and Business and Human Rights Lawyers Network Japan (BHR Lawyers) in relation to grievancemechanisms in cases where companies have difficulty complying by themselves. The result was the institution of“Engagement and Remedy Guidelines for Promotion of Responsible Business Conduct and Supply Chains(Note 1),”
whereby information is collected on the state of the workforce at targeted companies with the aim of achieving
rapid improvements. These guidelines began to be applied in December 2019. Support is provided to companies
via the engagement and remedy guidelines through such means as setting up dedicated points of contact toreceive complaints from workers at plantations and oil extractors.
(Note 1) Certified as a Tokyo 2020 Support Programme (Sustainability) by the Tokyo Organising Committee of the
Olympic and Paralympic Games

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Supply chain and engagement policy◦Numerous companies operate across the entire palm oil supply chain from upstream to downstream.
◦We have established engagement policies pertinent to the respective layers of the supply chain.

Engagement policy

ASEAN regional banks

Riskmanagement

Loansrisks for companies involved in the palm oil supply chain.

・Ask the seven major companies that are constituents of the MSCI-ACWI Index todisclose progress made with their initiatives geared to the NDPE policy(Note 1).

Operators of oil palm plantations(Note 1) NDPE policy refers to policy with respect to“No Deforestation,

Companies handling oil extraction and primary refining

Upstream・Improve frameworks for management and information disclosure of ESG

No Peat, No Exploitation.”・Share the mission of increasing use of RSPO-certified palm oil and seek
collaboration with affiliated retailers on palm oil issues.
・Facilitate a shared view of risks inherent in procuring raw materials for

Supply chain

5 general trading companies

palm oil-based power generation.

・Check on actual progress made by RSPO-member companies. Gain an

5 oil and chemical companies

Downstream

18 food manufacturers

understanding regarding challenges of increasing the supply of
RSPO-certified palm oil.
・Gain an understanding of initiatives carried out by progressive companies

8 toiletry manufacturers

and gain a shared view of issues with companies that ought to take action.

・Gain an understanding of initiatives regarding procurement of sustainablepalm oil and provide support for drawing up plans.

18 companies in retail, restaurant & service industries

・Support progress of those initiatives from the retailers to the food
manufacturers upstream.

Consumers

Engagement process
CSR-based approaches to procurement are becoming more commonplace as a means of addressing risks with respect to challenges
such as environmental, labor and human rights issues throughout total supply chain. First, we have started conducting engagement thatinvolves having companies confirm amounts of palm oil and raw materials derived from palm oil used in products they handle, upon
having gained their understanding that palm oil gives rise to supply chain risks with respect to deforestation, child labor and forcedlabor. Subsequently, we recommend that they use RSPO-certified palm oils, have them disclose their policies on sustainableprocurement and encourage them to ensure traceability. Ultimately, we aim to get companies to disclose their NDPE policy objectives.
The following diagram shows the process of engagement with the 54 companies targeted, and progress made.
Start

Step (i)Step (ii)

Become aware of risks
palm oil poses in relation
to deforestation andhuman rights issues

52/52

54/54

45/52

Step (vi)

Determine suppliers of
raw materials related topalm oil

48/54

42/52

Step (vii)

Come to understand theextent to which
traceability of palm oil
has been achieved

10/52

Step (iii)

Become aware that acompany’s own products
contain palm oil raw
materials

Disclose sustainableprocurement policies
related to palm oil, etc.

10/54

32/52

44/54

Step (iv)

Step (v)Come to understand
RSPO-certification
schemes

Encourage suppliers toensure traceability of
raw materials related topalm oil

51/52

54/54

Goal

Step (viii)

Step (ix)

Purchase RSPO-certified
palm oil

Disclose targets andresults with respect toprocurement of
RSPO-certified palm oil

35/54

23/52

37/54

17/52

15/52

19/54

18/54

Step (x)Incorporate NDPE
practices into policies for
procuring palm oil, etc.

6/52

6/54

(Note 2) This includes not only palm oil but also CSR-based procurement policies, etc.
(Note 3) Survey by Resona Asset Management. Confirmed for companies engaged with up to June 2020 either at the time of visit, or by checking websites, integrated
reports, or CSR reports, etc.
indicates results for FY2019,indicates results for FY2020.

During the 12-month period between July 2019 and June 2020,
five of the 54 companies with which we engaged joined the RSPO.
Number of Japanese corporate RSPO members
250■ Number of member companies■ Cumulative number of companies

225

200

178

150

117

100

76

50
0

2 2
2004

1 3

3 6
2006

1 7

1 8
2008

0 8

2 10
2010

2

12 10

22

2012

3

25

3

28

2014

36
8

49
13

27

41

61

47

2016
2018
2020
(As of October 30, 2020)

Resona Asset Management

45[What is the RSPO?]
Seven affiliated organizations including the World
Wildlife Fund (WWF) spearheaded efforts toestablish the Roundtable on Sustainable Palm Oil(RSPO) in 2004 in response to a mounting chorus
worldwide of voices calling for use of sustainablepalm oil out of consideration for environmental
impact. It aims to promote production and use ofsustainable palm oil by drawing up certification
standards trusted worldwide and enlisting stakeholder participation. The
RSPO is a nonprofit organization whose operations are underpinned by
the support of affiliated stakeholders from seven sectors of the palm oil
industry: oil palm producers, palm oil processors or traders, consumer
goods manufacturers, retailers, banks and investors, environmental NGOs,
and social or developmental NGOs.

Stewardship Repor t 2020/2021

Engagement report

AgendaGrievance mechanism

2

What is the grievance mechanism (mechanism for processing complaints
related to human rights infringements)?

!

Infringement of human rights occurs

Plantation
Small-scale farm

NGO/Victim

Oil extractor

Accept grievance

Supplier

Group companies

Discovers and resolves supply chain problems at an early stage bytransparent responses to environmental and human rights issues

Receive by email,telephone, report, etc.

Regular disclosure on
progress

Why are guidelines and collective action necessary for the mechanism?
While we were conducting engagements on supply
chain risk, we became aware that there were limits to
the grievance mechanisms at the respective individualcompany level.
In response to this, we have enacted the“Engagement and Remedy Guidelines for Promotionof Responsible Business Conduct and Supply Chains”“Engagement(
and Remedy Guidelines”). We owe thisaccomplishment to the advice and support from theOECD Responsible Business Conduct Unit and the ILO
Office for Japan, and the cooperation from externalorganizations such as GCNJ and BHR Lawyers.

OECD Responsible Business Conduct Unit/ILO Office for Japan
Advice and support

BHR Lawyers

Formulated“Engagement and Remedy
Guidelines”to support adoption as a policy
to introduce grievance mechanisms.

ResonaSupport the investee companies’efforts
to solve various issues throughout the
supply chain
Promote the ethos of taking collective
action(Note 1)・ Support investee companies’efforts
to improve sustainability in theirbusiness activities.
・ Take part in engagements toimprove corporate value by
strengthening their risk
management capabilities.

(Note 1) Collective action: seeking to improve business practices through group or mutual activities. In this case it means ensuring
the capability to influence upstream entities and working with experts, etc.

National Action Plan (NAP) on Business and Human Rights

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Investeecompanies
Share goodpractice cases

Engagement report

AgendaMarine plastic issue

3

Engagement on marine plastic issue
We engaged with 15 companies on marine plastic issue. The majority of those companies were retailers thatare heavy users of polyethylene bags, and beverage manufacturers that produce and sell drinks packaged in PET
bottles. We conducted interviews to confirm the status of each company’s efforts to reduce the use of plastic,
and we actively encouraged information disclosure.

Engagement cases (July 2019 to June 2020)
Confirmed the status on company’s efforts to reduce7

retailers andrestaurant companies

customer use of plastic bags, to implement the useof biomass materials as an alternative, and to reduceusage of plastic straws and food containers.

5

Confirmed the future policy on the use of PET

3

Confirmed the status on reducing the use of plastic

food manufacturers

toiletry manufacturers

materials in product containers.

containers.

Participation in collaborative engagement
We participate in the Plastic Investor Working Group led by the PRI signatories. We are recommending atransition to a circular plastics economy (reduce, replace, reuse), and encourage the 12 target companies toreduce the environmental burden (pollution) caused by production and use of plastics.

Dialogue with policymakers
We participate as a member of the Circular Economy and Resource Circulation for Plastics Finance Study Group(started in May 2020) hosted by the Ministry of Economy, Trade and Industry and the Ministry of the Environment.

In addition, at the third joint meeting between the Ministry of Environment Subcommittee on Plastic Resource
Circulation of the Working Group for a Circular Economy of the Central Environment Council, and the METI
Working Group on Resource Circulation Strategy for Plastics under the Waste and Recycling Subcommittee of theCommittee on Industrial Science and Technology Policy and Environment of the Industrial Structure Council, held in
June 2020, a number of initiatives by investors for issues caused by plastics were announced.

PHA(Note 1)
PHBH(Note 2)

O₂

Photosynthesis

Production

H₂O

Bioplastic

RecycleUse
Disposal

CO₂
Even if washed into the ocean,these special plastics will
degrade harmlessly(Note 1) PHA: Polyhydroxyalkanoates(Note 2) PHBH: Biodegradable polymers

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Engagement report

AgendaSustainable food supply chain

4

Having noted the rising awareness on a global basis of risks arising from the use of antibiotics in livestock,leading to drug residues and the emergence of bacterial strains that are highly resistant to antibiotics, we havebegun to take action.
In 2020/2021 we continued to use the FAIRR platform to participate in engagements aimed at mitigating
livestock product supply chain risks and associated climate change and water safety issues.

Investeecompanies

Resona’s actions
Information sharing, education

Began engagement with Japanese investee companies on food safety

Become aware of
supply chain risk

and requests in relation to risks
stemming from the use of

July 2018 to June 2019Engaged with five Japanese food manufacturing, retail and restaurant companies

antibiotics in livestock

Consider next steps

Farm Animal Investment Risk and Return
Encourage not to use

October 2018
Declared endorsement of investor statement on the use of antibiotics infactory farming in the FAIRR platform

antibiotics in factory farming

Repeated doses of antibiotics will run the risk of creating pathogens with antimicrobial resistance (AMR).

Provide encouragement to six major
restaurant and fast food companies

Resona’s actions
December 2019
Joined the engagement on meat sourcing
Engagements requesting six major restaurant and fast foodcompanies to take urgent action to mitigate risks associatedwith climate change and water in relation to farm animal anddairy supply chains.

January 2020
Joined the engagement on sustainable protein
supply chains
Global investor engagement focused on encouraging global food companies totransition protein portfolios away from an over-reliance on animal proteins andtowards diversified and sustainable alternative protein sources.

Collaboration
Engagement

O₂

CO₂・CH₄

Use of land and water
resources on a huge scale

Promotion of corporate information disclosure in(Note 2),
relation to a shift, under the“1.5°C scenario”
to plant and other protein products as substitutes
for livestock protein products.

Procurement of substitute protein

Livestock exhalations
also contribute to
GHG

Plant protein
Shift tosustainable
protein

O₂

Destruction of forests, which
absorb greenhouse gases(GHG) and emit oxygen, inorder to create grazing land

Provide encouragement to 25companies in the food supply chain

Collaboration
Engagement

Traditional procurement of protein through livestock and poultry

CO₂・Board-level control of risks associated with theprotein supply chain・Skills development for corporate sustainability managers
・Selection of disclosure framework
・Encourage the investee companies to engage withmajor suppliers to address environmental issues
・Setting SBT(Note 1) with regard to climate change
and water

GHG emitted
during processing
and preparation

CO₂

Insect protein

O₂
CO₂

The process of producing
plant protein emits few
GHG

Has high nutritional value, can becreated with few natural resources
and in small areas of land

(Note 1) Science Based Targets: Targets, with a 5-15 year horizon, set by corporations with the aim of reducing GHG emissions to a level congruent with that requiredby the Paris Agreement (which seeks to control the rise in global temperatures from pre-industrial levels to well below 2°
C, and preferably to 1.5°
C).
(Note 2) A scenario developed by the Intergovernmental Panel on Climate Change (IPCC) that cites and accepts the pursuit of efforts to limit the temperature increase
C under the Paris Agreement, in which the increase in average temperatures is limited to 1.5°
C above pre-industrial levels.
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Agenda5

Engagement report

Collaborative engagement on forced labor
We have participated in“Apparel & Footwear Engagement using the
KnowTheChain(Note 1) Benchmarks (KTC BM)”as the Lead Investor. This is acollaborative engagement involving a tie-up between KTC, PRI, and ICCR(Note 2),
and is aimed at labor practices and human rights at the apparel and footwear
companies that are assessed by KTC BM.

Measures not known because
the information was notdisclosed on the English websites

2018

2019

May 2019
Joined the collaborative
engagement

Conducted engagement
as Lead Investor
Information collection

Resona Asset Management(Assessments on forced labor risks)

Actual measures taken were
top-class in JapanIts scores were underestimated compared to theactual efforts

Implementation of responsible
procurement policy on raw
materials to reduce forcedlabor risks
Ascertained engagement with
their suppliers to conduct
direct employment

Based on the scorescheduled to be released
in 2021, we intend to
reopen engagement

ICCR’s Investor Statement on

Call to action to protect factories and those working in them.
(Joint statement by the IOE(Note 4), ITUC(Note 5), IndustriALL Global
Union(Note 6), and apparel industry employer organizations andbrands. A working group has been formed at the ILO(Note 3).)

It urges the business community to consider theIts objective is to urge garment industry stakeholders to work
together to protect the income, health and employment of workers.

Resona Asset Management
declared endorsement of theCoronavirus Response.
following five steps:

1 Provide paid leave

Urge companies to make emergency paid leave available to all employees, including temporary,part time, and subcontracted workers.

2020

KTC BM

Company X

2 Prioritize health and safety

Request that factories to which production is outsourced implement shift work and remote work,and execute health and safety policies within the factory.

3 Maintain employment

Request that factories to which productions outsourced pay reasonable wages, and warncompanies that are considering temporary layoffs of the risk of being deemed to commit
employment discrimination.

4 Maintain supplier/customer relationships

Urge companies to maintain timely or prompt payments to suppliers and to work with customers
facing financial challenges, in order to ensure a stable supply chain.

5 Financial prudence

Urge companies to suspend share buybacks and to show support for the predicaments of theirconstituencies by limiting executive and senior management compensation for the duration ofthis crisis.

“Better Work”joint
program between the ILO
and the International
Finance Corporation (IFC)
Better Work is a unique,pioneering investigative andresearch initiative under
way on three continents,
nine countries and 1,700
factories, which brings
together diverse groups
such as governments, global
brands, unions and workers
to improve working
conditions in the garment
industry and make thesector more competitive.

(Note 1) KnowTheChain: A collaborative partnership between the four organizations of Business & Human Rights Resource Centre, Humanity United, Sustainalytics, andVerité. Each organization has expertise in addressing forced labor risks within the companies’global supply chains.
(Note 2) ICCR: The Interfaith Center on Corporate Responsibility has 300 management institutions as members, which have combined assets under management ofapproximately ¥40 trillion. The ICCR is an organization consisting of institutional investors who manage pension funds associated with various faiths, and has a
track record of engagement in addressing the forced labor risks. Its main member organizations include signatories of the PRI, as well as groups associated with
the Jewish, Roman Catholic, and Protestant faiths.
(Note 3) ILO: The International Labour Organization. A UN agency whose goals are to improve working conditions and standards of living.
(Note 4) IOE: The International Organisation of Employers. The Japan Business Federation is also a member.
(Note 5) ITUC: The International Trade Union Confederation, which is the largest organization of its kind. Japanese Trade Union Confederation (JTUC-Rengo) is also a member.
(Note 6) IndustriALL Global Union: A global union federation headquartered in Geneva, Switzerland.

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Engagement report

AgendaBoard diversity

6

30% Club Japan (Established in May 2019)
The 30% Club was established in the United Kingdom in
2010, and is a global campaign whose objective is toincrease the proportion of female
directors. It has expanded into
many regions and countries,
including Japan, and has made asignificant contribution to raising
the percentage of female directors.

* Countries and regions in blue denote areas in which the 30% Club is active

Gender diversity in top-level corporate management

Institutional investor
and asset ownercommunity

Investor Group

Establishing andsharing best practices
to achieve goals

Sharemateriality
and objectives

Asset owners

Board of directors
Senior management

Asset managers

Improve dialogue
capabilities of all IG
members

Investee companies

Objectives
The 30% Club Japan aims to

For the sake of greatertransparency, the IG reported
and shared with investors thestate of gender diversity atboard meetings, and shared
the progress towards
achieving the goals.

Achievedachieve 10% representation ofJuly 2019

women on the boards of
TOPIX100 companies by 2020,

2030

10.5%

To 30%

and 30% representation by 2030

Participation in Japan Investor Group (IG) since June 2019
Major activities during 2020
Best Practice Sharing

The 30% Club Japan IG held sessions for sharing best practices for engagement activities, information
disclosure by companies, and the director selection process, by inviting presenters with expertise inengagement and governance.

Released an annual report, with the BestThe 30% Club Japan IG compiled engagement case studies and the contents of progress reports, andPractice Sub-Group taking lead

released an annual report.

Information sharing with 30% Club UK IG

Shared information with a UK IG for the annual report.

Progress of Resona Asset Management’s engagements
Engaged with 15 companies in FY2020, referencing the toolkit developed by the 30% Club UK.
Board of directors awarenessSetting of board of directors
targets

Commitment to appointing
individuals to director/
management

Department with responsibility
for appointing individuals to
director/management

15/15 (Yes: 15 of 15 companies)

1/15

3/15

4/15

Use of external consultants inrelation to hiring

Appointment of women on
the board

Disclosure of pay gap

Educational program

2/15

7/15

0/15

3/15

Participation in UK IG since December 2019

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Resona Global
Governance Principles“Diversity is desirable
for efficient oversightof management”

Engagement report

AgendaClimate change/TCFD/Climate Action 100+

7

Engagement in climate change issues
Climate Action 100+ is a five-year action plan set up by PRI and a global
coalition of institutional investors to support corporate climate change
initiatives on a global scale. The targets are industries producing highvolumes of GHG emissions and companies with large market caps (161major global companies and ten Japanese companies). Resona AssetManagement has engaged with the target companies in Japan.

Collaborative engagement

Goals of Climate
Action 100+

Asset managers

Resona AssetManagement

Overseas investors

GovernanceImproving governance in climate change policies of the investee companies

ActionReducing CO2 emissions throughout the entire value chain

Disclosure

Enhancing climate-related financial disclosures

ESG issue:

E (Environmental)

Climate change
Information disclosure on therisks and opportunities basedon TCFD recommendations

Signing of joint statement on
a Just Transition(Note 1) to a
low-carbon economy
Signing of statement urging
better information disclosure
by the airline industry

Work with investee companies toensure that they assess the risks andthe opportunities of climate change,
ascertain the financial impact, anddisclose such findings.

Companies

Oil and gas companies

Progress of engagements
Governance andstrategy

Medium-term target

Long-term target

Scenario
analysis

TCFD
reportingCompany A

Yes

Reduce CO2 emissions from vehicles by 2022
Reduce CO2 emissions from new vehicles by
40% (relative to FY2000: Japan, the UnitedStates, Europe, China)

Achieve a 90% reduction in CO2emissions from new vehicles by 2050
(relative to FY2000)

Yes

Yes

Company B

Yes

Achieve two-thirds electrification by 2030

Achieve net zero GHG emissions by
2050

Yes

Yes

Climate Action 100+ engagements/Sent letter to companies on Net Zero Company Benchmark
1. Asked companies to work towards providing disclosures consistent with the new Climate Action 100+ Net Zero Benchmark.
2. Asked companies to outline strategies that go beyond current NDCs, and/or implement appropriate capital investment decisions aligned
to net-zero emissions, with a view to set (or has set) an ambition to achieve net zero emissions by 2050 or sooner across all material GHG
emissions, and establish medium-term targets or goals consistent with a global reduction in emissions of 45 percent by 2030 relative to2010 levels.
3. Asked companies to work toward the development and implementation of net zero transition action plans for their sector or value chain overall.

(Note 1) Just Transition: The preamble of the Paris Agreement contains the goal of achieving a Just Transition as one means of helping ensure effectiveness of the Paris
Agreement. The joint statement endorsing a Just Transition is intended to facilitate more extensive understanding as to the importance of factoring in
employment concerns and accordingly implementing comprehensive measures to address social challenges involving the prospect of unemployment anddiminishing working conditions as a result of shifting to a carbon-free society.

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Engagement report

Coronavirus response

AgendaGovernance after the pandemic

8

Resona Asset Management’s commitment on investor actions and investor working groups
Date committed

Platform

Investor statement/

Description

Working group
Immediate investor actions

Action 1: Engage companies that are failing in their crisis management
Action 2: Engage where other harm is being hidden behind, orworsened by, the crisis

How responsible investors
March 2020

PRI

should respond to the

Action 3: Re-prioritise engagement on other topics

COVID-19 coronavirus crisis

Action 4: Publicly support an economy-wide response
Action 5: Participate in virtual AGMs
Action 6: Be receptive to requests for financial support
Action 7: Maintain a long-term focus in investment decision making

April 2020

ICGN

Governance Priorities During

The ICGN Statement of Shared Governance Responsibilities which

the COVID-19 Pandemic

broadly emphasizes the need for companies.

A statement which urges the business community to take whateverMay 2020

PRI-ICCR

Investor Statement on“Prioritize healthsteps they can, in particular:“Provide paid leave,”

Coronavirus Response

and safety,”“Maintain employment,”“Maintain supplier/customer
relationships,”and“Financial prudence.”
In response to the COVID-19 pandemic, CalSTRS and a group of
institutional investors formed a collaborative initiative.
The group of 10 investors represents $3.7 trillion in assets under

September 2020

PRI

Pandemic Resilient 50

management.

Working Group

The Pandemic Resilient 50 will engage companies to understand theimpact of those most affected by the pandemic, and focuses on
Board Accountability, Human Capital Management, and Long-Term
Value Creation and Resilience.

Example of questions raised during dialogue with companies◦What actions can you take to help ensure the sustainability of society?
◦Appropriate disclosure of risk assumptions is being requested. What kind of disclosure are you
considering for the securities report and integrated report?
◦What steps are you taking to construct a human resources management system that takes into accountwork style reforms such as remote work and flex work, and that places the emphasis on results rather
than time worked?
◦During the pandemic crisis, what kind of initiatives have you been working on for gender equality anddiversity?
◦The coronavirus situation has resulted in a significant increase in the burden imposed byhomeschooling, nursing care and childcare. We believe that providing a flexible and realistic working
style to all employees, including women, is a matter of urgency. What steps are you taking?
◦When we consider“the new normal”of the coronavirus era, what will be important to establish andimplement in terms of lifestyles, approaches to work, and the way in which companies operate, andwhich initiatives do you think should be taken?

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Engagement report

Disclosure on anti-corruption practiceAgenda9(Anti-bribery)Anti-corruption initiatives

ResonaAgendaDraw up and disclose policies
on anti-corruption

TargetCompanies that have adopted
the Assessment Tool

Collaborate with GCNJ
Advisory committee member of
GCNJ’s anti-corruption projectConduct passive engagement
using the Assessment Tool

Short-term
goal
March
2018

May
2019

June
2019

Encourage companies with risk
exposure to bribery, to formulate
policies and to make relevant
disclosure

Avoid the following risks

We have been involved in the Tokyo Principles on collective action since FY2018. As an investor, Resona
supports the Global Compact Network Japan (GCNJ) that carries out activities geared to making collective
action for anti-corruption to Japanese companies as part of the Siemens Integrity Initiative worldwide project oncollective action to combat corruption. Through our activities, we are encouraging the formulation anddisclosure of policies by companies.
Risks involving economic
sanctions and reputation
・Suspension from bidding for
public projects
・Cancellation and termination ofbusiness transactions bybusiness partners and/or
financial institutions
・Deletion from investment
universe, drop in stock price・Class actions
・Loss of social credibility andbrand deterioration

Acquire companies to support the Tokyo Principles

Official announcement of the Tokyo Principles

Current awareness and future activities

Joint meeting among GCNJ, the Anti-Bribery Committee Japan (ABCJ), and investors (Resona)
Importance of sharing current conditions and issues and promoting information disclosure

GCNJ Anti-corruption Subcommittee, GCNJ Secretariat
Meeting among ABCJ, Resona and the signatory companies: mapping the follow-up to promote anticorruption activities and ensure information disclosure based on the Tokyo Principles

September
2019

Anti-corruption Annual Forum 2019

November
2019

GCNJ Anti-corruption Subcommittee
Speech on“The importance of anti-corruption initiatives from the standpoint of investors”

September
2020

Anti-corruption Annual Forum 2020
Participated in a panel on the topic of“Use of plea-bargaining / whistleblowing systems and frontline
measures to prevent corruption - notes from the coronavirus crisis”

November
2020

Participated in an ABC (Anti-Bribery/Corruption) conference panel on the topic of“International trends inprevention of corruption overseas - issues and practice in relation to compliance countermeasures”

Medium-term
Promoting information disclosure related to anti-corruption based on the Tokyo Principles
goal
Promote anti-corruption activities and ensure information disclosure based on the Tokyo Principles
End of2020

Investors to apply the Tokyo Principles to their investment process
Promoting regular workshop
dialogues among companies
and investors

Anti-corruption workshopswith experts

Anti-corruption enhancementmonth campaign andsymposium (every October)

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Stewardship Repor t 2020/2021

Resona Asset Management

Chapter

2

3

Passive Investment Stewardship Activities

Constructive dialogue and engagementwith investee companies (Passive investment)
We clearly distinguish between the roles of dialogue and engagement. Accordingly, we define dialogue
as“promoting mutual understanding through communication with the companies”and define
engagement as“achieving results by deciding on issues to be addressed and discussing such issues withthe aim of finding solutions.”
The Responsible Investment Division monitors both financial and non-financial aspects of investee
companies, and actively undertakes dialogue and engagement by encouraging investee companies to takea medium- to long-term perspective to increase their corporate value and to achieve sustainable growth.

We conduct dialogue and engagement over a long-term trajectory with our sights set on
Equity/Passive
investment

helping to elevate markets overall. This is because we engage under the assumption that wewill extensively maintain our shareholdings of the investee companies, and that there arelimited possibilities to sell the position.

We initiated approximately 4,000 instances of contact with investee companies for the year spanning
July 2019 to June 2020. Of that number, such contact included instances of dialogue and engagement
whereby the Responsible Investment Division visited investee companies or otherwise had investee
companies visit Resona Asset Management. The number of instances of such contact (number ofcompanies) is as stated in the table below.

[Total number of dialogues and engagements conducted]

267

Equity/Passive investment[Responsible Investment Division]

Number of dialogues Number of engagements(number of companies) (number of companies)

62 (54)205 (158)

Supporting universal ownershipResponsible
investment

Finding solutions to ESG issues
across society

Passive investment
dialogue and engagement

Framework/Cooperation

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Equity/Passive investment – Dialogue
Passive investment for Japanese equities involves investing in a wide range of companies andmaintaining such holdings on an ongoing basis. The Responsible Investment Division carries out dialogue
on topics mainly related to the proposals of the companies’annual general meetings (AGMs) andcorporate governance to conduct proxy voting more appropriately.
In FY2019 there were many hostile acquisitions and takeover bids, in association with which there wasan increase in dialogues based on requests for discussions from the side proposing the takeover and thetakeover target. There was also an increase in dialogues involving the explanation of details of proposalsof AGMs received by companies from shareholders. During such dialogues, we confirmed and discussed
company strategies for improving corporate value over the medium and long term. The proportion of
dialogues related to such management strategies and shareholder proposals rose accordingly.
We have also started dialogues with REITs. In our dialogues with REITs we discussed the elimination of
conflict of interest in relation to purchasing sponsor properties, and with regard to corporate governance,
their views on the independence of individuals who serve concurrently as executive officers of a REIT and
as officers of the asset manager.

Topics of dialogue

Environmental issues

Social issues

Reducing GHG emissions; environmental vision;
TCFD response; restructuring sustainability
organizations; Climate Action 100+ response

Human rights issues (child labor, forced labor);
conflict resource issues in the supply chain

Capital policy
Cost of capital and ROE
improvement targets;
reducing cross-shareholding;capital allocation

Information
disclosure

7%

7% 1%
33%

8%

Corporate governance
Composition of boards of
directors; board diversity;
increasing and improving
independent outside
directors; medium- tolong-term performancelinked compensation for
directors

Preparation and enhancementof integrated report;enhancement of disclosure ofenvironment-related information

20%

Management
strategies
Medium-term management plan;
M&A; business structural reform

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24%

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Proposal at theshareholders meeting
Proposals; shareholder
proposals; proxy voting
guideline-related

Chapter3

Passive Investment Stewardship Activities

Equity/Passive investment – Engagement▪Engagements focused on corporate governance and disclosure on ESG and non-financial information
The Responsible Investment Division is holding shareholder relations (SR) meetings with corporate directors and managers incharge of general affairs. In FY2019 we engaged with boards of directors on the topic of requiring diversity in terms of female
and foreign directors, on the topic of increasing the number of independent outside directors, and on the topic of reducing
cross-shareholdings. We also held many meetings in which we used integrated reports to cover ESG in general. We requested
companies to further improve their ESG information disclosure, including information related to TCFD.

▪Engagements focused on environmental issues and social issues
As shown in the feature on page 44, starting in August 2017, we began engagements focused on procuring“sustainablepalm oil”related to environmental issues and social issues. In the current fiscal year, we continued to visit palm oil companies
and to promote the procurement of“sustainable palm oil.”

Topics of engagement
Capital policy
Approaches to capital policy (uses of excess cash holdings);
approaches to cash flows, investment for future growth andshareholder returns; policies on selling cross-held shares or
reducing cross-shareholding

Anti-takeover measures
Reasons for ongoing antitakeover measures; content of
discussions among boards of
directors and approaches
involving outside directors;
results of initiatives to enhance
corporate value continued frompreviously and initiatives going
forward; improvements toanti-takeover measure schemes

Management strategies
Medium-term management
plan; M&A; businessstructural reform

Prevention of anti-social behavior
State of investigations into misconduct andinitiatives to prevent recurrence

5%

Proposal at the shareholders
meeting, others

4% 4% 1%

Proposals; signing of UN Global Compact

33%

7%

Corporate governance8%

Social issues
Human rights issues in supply
chain management (child laborand forced labor); the Work
Style Reform; promotion of
women’
s empowerment

12%
Environmental issues

26%

Deforestation; reduction of
GHG emissions

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Effectiveness assessments ofboards of directors;
enhancement involving
independent outside
directors; streamlining ofboards of directors; board
diversity; shortening directors’
terms of office; medium- tolong-term performance-linked
stock compensation

Information disclosure
Preparation andenhancement of integrated
report; enhancement of
disclosure of environmentrelated information

Topics

Resona’s activities

Enhancement of disclosure on non-financial information
Support for enhancing disclosure of non-financial information for passive engagement
We organize seminars and other such forums geared to companies listed on the First Section of the Tokyo
Stock Exchange. In such forums we urge companies that have yet to disclose non-financial information to do so,and to prepare integrated reports and other such documents. We provide support to companies that disclose
non-financial information by assisting them to determine material issues (materiality) and disclose informationthat integrates business risk and materiality. Meanwhile, we provide support to companies that take progressive
action on non-financial information by assisting them with initiatives geared to enhancing their corporate value.
Elimination of
disclosure discount(Awareness)

Determination ofmaterial issues(Improvement)

Encourage companies to take action
using integrated reports and othersuch documents in seminars andother lecture forums

Targetcompanies

Companies that have yet todisclose non-financial
information

IssuesMatter of disclosing
non-financial information
under consideration(integrated reporting, etc.)

Initiatives for enhancing
corporate value(Action)

Provide support for
determining material issues
through seminars, the
GCNJ, etc.

Companies that disclose non-financial information(Annual Report, Integrated Report)

Considering to determine material
issuesBoosting overall
equity markets

Provide support for
initiatives geared toenhancing corporate value
through direct dialogue

Provide support for activities
geared to material issues andenhancement of corporate value

Shift the overall curveby index engagement

Point

Point Elimination of disclosure
discount(Awareness)
We effectively build awareness bydrawing on a network that includes
companies which furnish support for
drawing up integrated reports inconjunction with the Global Compact
Network Japan (GCNJ), government
agencies, experts and others. We also
persuade companies that have yet toprepare non-financial information of theimportance of such disclosure, andaccordingly urge them to prepare
integrated reports.

Accomplishments in
FY2019/FY2020
Late majority

Early majority

Companies that have yet
to disclose non-financial
information

Companies that
disclose non-financial
information

Early adopters

Innovators

Companies that take progressive action
on non-financial information disclosure(Apr. 2019 - Nov. 2020)

Seminars featuringlectures, panel
discussions, etc.
Number ofattendees

Approx.

76
7,325

sessions

Resona’s main external activities from November 2019 through November 2020
30% Club

Board member of Japan Investor Group and leader of Best Practice Sub-group

METI

Member of“Study Group on Realizing Dialogue to Create Sustainable Corporate Value”

MOE

Member of the“Study Group for the State of Enforcement of the Act on Promotion of Global Warming Countermeasures”

METI/MOE

Member of the“Circular Economy and Resource Circulation for Plastics Finance Study Group”

Japan SDGs Action Promotion Council

Auditing

Cohosting by Financial Services Agency/GSG-NAB Japan Member of“Impact Investing Roundtable”
MAFF

Member of“Biodiversity Strategy Study Group”

MAFF

Member of“Investigative Committee for the Practice and Visualization of Decarbonization in the Food Supply Chain”

MOE

Member of the selection panel for the“ESG Finance Awards Japan, Environmentally Sustainable Company Section”

Research Institute for Advancementof Living Standards

Member of“Research Committee Investigating Information Disclosure For‘Better Companies’And
The Promotion Of Principles For Responsible Investment From The Viewpoint Of Working People”

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Chapter

4

ESG Integration andEngagement on Equity/Active
Investment

Through our active investment in equities, not only do we seek to improve performance over the
medium to long term through ESG integration and through dialogue and engagement with the companies
in which we invest, but we also contribute to the sustainable development of stock markets.
The Equity Investment Division is responsible for four active strategies based on its independent
investment philosophy to manage the assets entrusted to us by our clients. To provide excellent
performance over the long term, the management team responsible for each strategy continuously works
to enhance investment management.
With both politics and the economy undergoing dramatic change, there are widely shared concerns
about the long-term sustainability of the current socioeconomic system. From a corporate perspective, itis necessary to control management risks based on an understanding of ESG issues as they relate tobusiness activity. It is also becoming increasingly important for companies to draw up an effective growthstrategy that is in harmony with the sustainable development of the society.
Based on this awareness, in each of the strategies of the Equity Investment Division, we will enhance
stock selection through ESG integration and conduct proactive engagement to enhance the corporate
value of our investee companies. Through these activities, we are fulfilling our duty as a responsible
investor and aiming to maximize long-term investment performance. We believe that it is not only acompany’s strengths and strategies that are important when seeking to achieve sustainable increases incorporate value, but also the existence of a corporate philosophy that is in harmony with society, and thecultivation of a distinct corporate culture. Our sense is that an increasing number of our dialogues withthe companies in which we have invested are grounded in this perspective.
The Equity Investment Division places importance on being faithful to its investment philosophy in eachstrategy. While sharing our basic policy in responsible investment, regarding specific ESG initiatives, we
respect the independence of each team to ensure compatibility with their investment philosophy. Below
we introduce the philosophy of each management team and report on the status of the initiatives inwhich they are involved. We hope this will give you a sense of the sincere and progressive approachtaken by each team as they enter into dialogue and engage with the companies in which they invest, withthe ultimate goal of achieving improvements in long-term performance for clients.
▪ESG initiatives based on the independent investment philosophy in each active investment
The Four
Strategies

Materiality in
Main paths toinvestment philosophy performance

Research active Profit growth
teamsustainability

Topics of dialogue and engagement

Integration• Corporate involvement in social needs and problem• Dialogue with the capital market• Strategies that are suitable for corporate identities• Strategy execution frameworks and corporate culture• Initiatives toward continuous improvement

Global equity
team

Continuous
improvement incompetitivenessIntegration

Value teamCorporate structurereforms• Motivation of enhancing corporate value among the management teamEngagement • Corporate governance• Recognition of issues and effectiveness of countermeasures

Sustainable growth that
Small-cap team captures structural
Integration
changes in society

Resona Asset Management• Changes in social structure• Corporate philosophy shared among the management team58

Stewardship Repor t 2020/2021

Constructive dialogue and engagement withinvestee companies (Equity/Active investment)
We clearly distinguish between the roles of dialogue and engagement. Accordingly, we define dialogue
as“promoting mutual understanding through communication with the companies”and define
engagement as“achieving results by deciding on issues to be addressed and discussing such issues withthe aim of finding solutions.”
Active fund managers and research analysts monitor both financial and non-financial aspects of investee
companies, and actively undertake dialogue and engagement with the aim of urging such investee
companies to take a medium- to long-term perspective with respect to increasing their corporate value
and achieving sustainable growth.

We conduct engagement with investee companies tailored to their circumstances toenhance their corporate values, and dialogue with them in order to gain greater confidence

Equity/Active
investment

in our investment process, in addition to performing analysis of such entities in accordancewith our own investment philosophy.

We initiated approximately 4,000 instances of contact with investee companies for the year spanning
July 2019 to the end of June 2020. Of that number, such contact included instances of dialogue andengagement whereby fund managers and research analysts visited investee companies or otherwise had
investee companies visit Resona Asset Management. The number of instances of such contact andnumber of companies are as stated in the table below.
[Total number of dialogues and engagements conducted]

1,515

Equity/Active investment[Fund managers and research analysts]▪Topics of engagement(Previous year in parentheses)

9% (11%)
22

%
(23%)

69

%
(66%)

Number of dialogues Number of engagements(number of companies) (number of companies)

1,434 (633)

81 (30)▪Key points and issues

1. The importance of the common goal of enhancing corporate
value over the medium to long term
・Ensuring that constructive dialogue results in corporate actions that leadto enhancements in corporate value

2.Increase in request from corporates for dialogue
・There has been an increase in requests not only to explain business results
and strategy but also to exchange opinions on ESG and other topics
・In many cases the company specifically asks for a certain fund manager
or research analyst of Resona Asset Management

3. Strengthening dialogue and engagement in order to findsolutions to social challenges
・The strong point of active equity investment is deep discussion that is■ Profitability improvement / Business model /Business strategyaligned with the corporate value of individual companies
・Investigation of impact investments, etc.

■ Capital efficiency improvement / Capital policy■ Governance / Abolition of anti-takeover measures /IR improvement

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Chapter

4

ESG Integration and Engagement on Equity/Active Investment

Equity/Active investment
Strategy

Materiality in investment philosophy

Research active teamProfit growth sustainability

Focus fields
The ability to create social benefits (the ability to increase“corporate profits”amid involvement with“social profits”)

Message from the fund manager
We believe that stock prices converge with corporate value over the medium to long term and that focusing on sustainablegrowth in corporate value allows excess returns to be captured. To expand corporate value, in addition to financial growth andsoundness in the form of sales and profits, we also believe the company’s non-financial competence is important in its
sustainable growth. We define this competence as“the ability to create social benefits”and focus on the analysis of nonfinancial information.“The ability to create social benefits”involves responding sincerely to social demands and issues throughoriginality and ingenuity and the ability of companies solving these issues to respond and find social needs.
The stronger social demands and issues become, the more proactively companies that can solve those issues will besupported by consumers, business partners, employees, and society. Those companies will see profit growth from sustainable
increases in sales and higher valuations from shareholders, which are invaluable in enhancing corporate value. We believe thatthe value of companies with a strong“ability to create social benefits”will increase over the long term. We emphasize“analysis
of market expectations”and analyze the background behind high or low stock price valuations from the market and changes inthe valuations. Another important factor during this analysis is the“ability to create social benefits.”
Recently, among companies calling for ESG management, there are more cases of companies formulating management
strategies around a thinking close to our“ability to create social benefits,”and both dialogue and corporate analysis are going
more smoothly. Furthermore, even though companies are equipping themselves with the“ability to create social benefits,”
there are cases where we believe this is not being sufficiently communicated to stakeholders, starting with shareholders. In
these cases, we are providing our opinions on the dialogue between the company and the stock market and the various
disclosure materials and proactively holding dialogue to contribute to corporate value creation.

Dialogue example: Giving concrete form to environmental initiatives and supporting improved
assessment by the stock market
Dialogue with companies: Major food manufacturer Company A
Situation

Company A is a pioneer in the field of instant noodle. While it boasts the top share in the instant noodle

market in Japan, abundant growth opportunities have been left untapped in overseas markets. It wasnecessary to communicate in more concrete form to the company’s active initiatives in relation toenvironmental issues, not least in order to further raise brand awareness among overseas consumers.

Dialogue and engagement

The unchanging values of Company A are rooted in the spirit of the founder, which is one of exploring thevarious possibilities for food, and gratifying people everywhere with the pleasures and delights that food canprovide. Our judgment was that in order to achieve its vision, Company A must set and disclose concrete
numerical targets for the long term. When we conveyed this point to Company A, it was found that they had asimilar awareness of this problem, and that they were moving ahead with related initiatives. This dialogueraised our expectations with regard to an accelerated implementation of specific initiatives.

Company A’s initiatives and our expectations

Company A announced its environmental strategy in June 2020. It included a target to reduce FY2030 CO2emissions by 30% from the FY2018 level. In addition, it incorporated commitments such as switching all
containers for its main brands to biomass ECO cups by the end of FY2021, and increasing the procurement
ratio for sustainable palm oil to 100% by FY2030. As companies all over the world are placing higher priority
on environmental issues, we are convinced that initiatives such as these will help Company A that develops its
brand overseas enhance its corporate value.

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Strategy

Materiality in investment philosophy

Global equity teamContinuous improvement

Focus fields
Strategies that are suitable for corporate identities

in competitiveness

Strategy execution frameworks and corporate culture

Message from the fund manager
Our investment philosophy is to invest in“companies that continue to beat the competition.”To facilitate this weconstructed an assessment framework called“ISDK”that focuses on the elements that companies that consistently beat thecompetition have in common.“ISDK”is a framework that assesses the consistency of the company’s self-awareness (itsIdentity), its Strategy, its ability to Develop & Deliver, and its process for evaluation and improvement (KPI & Kaizen). Use of thisframework allows us to make inferences about whether the company will be able to continuously improve its competitivenessgoing forward.
Through dialogue we have come to realize that not only do companies that consistently triumph over the competition
generate superior economic returns, but that their innovation also generates benefits, both direct and indirect, for a variety of
stakeholders, including the environment, society, shareholders, and employees. That the companies in our investment portfolio
have won awards and been ranked highly for their ESG efforts by third-party organizations, and that our portfolio has comethrough the ISS climate change risk analysis with flying colors, has only strengthened this perception.
Our view is that continuous improvement in competitiveness through ISDK and sustainability discussions exist on the same
axis. We believe that companies that consistently beat competition from similar views. For that reason, rather than performing
assessments of individual elements associated with sustainability, including ESG, we use ISDK to analyze how each element
contributes to the generation of competitiveness. When we judge that the element in question could facilitate improvements
in competitiveness for the company we are in discussions with, we actively initiate further dialogue.

Dialogue example: Supporting visualization that leads to a philosophy and strategy for achieving
the company vision
Dialogue with companies: Mid-sized cosmetics manufacturer Company B
Situation

Company B is a manufacturer of everyday goods and cosmetics with a dominant market share in styling

products for men. In recent years not only has the environment in which the company operates gone throughsignificant change, but the speed of those change has increased. In this environment, Company B worked on
sharing and instilling a vision of itself, based on how it projected itself to be in 2027, not as a generalcosmetics manufacturer but as a cosmetics supplier with unique strengths.

Dialogue and engagement

Company B was well aware of the importance of sharing and instilling its vision and had been promoting it

on a company-wide basis, but it was not known as to whether investors had gained an understanding of thisfrom the Integrated Report and the new medium-term management plan. We entered into a discourse with thecompany about its people and its strengths from a long-term viewpoint, and about the links between its
philosophy and strategy. On this occasion we used multiple approaches to further intensify the discussions,such as by giving our Responsible Investment Division a seat at the table.

Company B’s initiatives and our expectations

In the 2020 edition of the Integrated Report Company B paid particular attention to blending financial andnon-financial information, and provided careful explanations of specific value creation processes and of its“human-oriented company”philosophy. With regard to the“human”elements that Company B had often
raised in discussion with our team, we feel that it has made progress in making visible the strengths of thecompany and its people, and the links between its philosophy and strategy, such as by making available
engagement scores that it had not hitherto disclosed. We have also been told that when the 2021 editions of
the Integrated Report and new medium-term management plan are announced, the company intends toinclude information on material issues (materiality) that was not presented in the 2020 edition of the Integrated
Report, that takes into account discussions held thus far.

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Chapter

4

ESG Integration and Engagement on Equity/Active Investment

Equity/Active investment
Strategy

Materiality in investment philosophy

Focus fields

Value teamCorporate structure reforms

Motivation of enhancing corporate value among the management team

Message from the fund manager
Among Japanese companies, we believe there are many companies with the hidden potential to greatly change both theirearnings power and market valuations through improving management quality and corporate governance. In addition to

discovering these types of companies that we believe can increase their corporate value, we are holding long-term dialogues as a
stakeholder and contributing to increasing the corporate value of investee companies, aiming to maximize our fund returns.
As part of our efforts since the fund was established in 1999, we have focused on companies that have seen declines incorporate value due to weak financial results. We are holding dialogues with those companies to identify factors that hinder
increases in corporate value and evaluating means of eliminating those factors. From the standpoint of ESG, governance is oneof the critical factors that is directly connected to corporate value increase, so we place focus on it. Specifically, we arefocused on the changes of company presidents, the improvements in governance structures, the composition of boards of
directors, the use of outside directors, subsidiary management, reviewing business portfolios, cash flow management, balance
sheet streamlining, cross-shareholding policy, and anti-takeover measures, and are holding discussions to enhance corporate
value. The accumulation of successful and unsuccessful case studies in the reform of investee companies over the long term isa valuable asset for the team.
In approaching dialogue, we have created a discussion paper to visualize the essential issues faced by companies and thesolutions, using financial data, competitor analysis, and competitor case studies, and continuously hold discussions withmanagement team members. We believe in the ideal of improving corporate results in a way that energizes all stakeholders,
including the employees and business partners of investee companies, and we are working to thoroughly communicate thisapproach.

Dialogue example: Improving profitability, enhancing information disclosure
Dialogue with companies: Major household sundries manufacturer Company C
Situation

Company C is a supplier of pest control products (insecticides) with a dominant No. 1 share in Japan. Despite

this, a corporate culture centered on sales led to the normalization of inefficient use of sales promotions andadvertising, and the sale of low-margin products, resulting in a continuous decline in profitability. In addition, thedomestic market for pest control products accounted for the majority of profit, and its revenue structure wassuch that its business results were much influenced by summer weather patterns in Japan. The other hand, thecurrent president of the company is steering it towards a focus on profit, and is moving forward with reforms
such as reducing product returns (where disposal losses occur, causing damage to profits), cutting low-margin
products, and lowering the ratio of marketing (advertising and sales promotion) expenses.

Dialogue and engagement

Since we invested in 2017, we have continuously engaged the company in dialogue, including the use of

discussion papers, primarily in relation to (1) the efficient management of sales promotion expenses, (2)reductions in low-margin products, and (3) the expansion of revenue from everyday goods and the overseas
business in order to escape from the reliance on domestic pest control. In addition, we have worked for more
substantial disclosure.

Company C’s initiatives and our expectations

This fiscal year, we have seen progress in such areas as more efficient use of marketing expenses, cuts in

low-margin products, and reductions in product returns, and profit margins have improved steadily. In thehitherto loss-making overseas businesses, we have begun to see signs of growth in revenue and we expect thecompany to escape from its dependence on the domestic market for pest control over the medium to longterm. Nevertheless, there is still room for improvement in the disclosure of information related to the overseas
business, and we will continue to share our views with the company going forward.

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Strategy

Materiality in investment philosophy

Focus fields

Small-cap teamSustainable growth that captures

Demand creation and expansion with the structural changes in society

structural changes in societyManagement team/corporate philosophies

Message from the fund manager
The investment philosophy of our team is to invest in companies that capture“demand growth in line with the structuralchanges in society.”This year marks 23 years since our investment team was founded in 1997. During that time, through ourunchanging investment philosophy, we have continued to see changes in society, identified and invested in the necessary
companies, and engaged with them as necessary as we evolved over time together. Through this process, I have truly realizedthat there have been large qualitative changes in society over the past 20 years. Rather than economic growth and politicalconditions, I feel that these changes involve a deeper, spiritual level of human desire that is more emotional and sympathetic.
These types of qualitative changes are not limited to consumer behavior. There is more empathy and dialogue in areas involving
diverse parties such as individuals and society, society and operating companies, operating companies and investors, andinvestors and asset owners. I believe that these connections are beginning to grow stronger and become more interlinked. As
fund managers at an investment manager, we are aware of our role in being part of the start of large social changes. Using theknowhow, insight, emotion and passion we have accumulated as mobilizers, we will devote ourselves to realizing a better society.

Dialogue example: Building a consistent story from corporate philosophy, to management
strategy, to a vision of future society
Dialogue with companies: Sales support company Company D
Situation

Company D began life as a temporary staffing company. Company D was concerned that temporary staff were

not being used effectively by society because most of companies are turning towards more efficientmanagement. Rather than focusing on the selling of man-months, Company D sought to raise the value-added by
the business by generating a virtuous spiral through making teams responsible for their results, improving
education, growth opportunities and motivation, leading in turn to enhanced quality of life. However, with thebusiness diversifying in one direction after another, management perceived a failure to accurately convey thevalue they offered, and their vision, to the world at large.

Dialogue and engagement

As a long-term investor that had built a relationship with the company over many years, we shared

management’s perception of the problems mentioned above. In addition to communicating as market
participants our assessment of the company, how the company looks to others, and investors’needs, weorganized collaborative study meetings, led by our Responsible Investment Division, to discuss the environment
in which Company D operates from an ESG perspective, including industry trends, and the needs of society.
During the course of these discussions we developed a strengthened mutual understanding and trust. Goingforward we intend to further intensify discussions with a view to resolving the problems in question.

Company D’s initiatives and our expectations

It was Company D’s original aspirations and passions that led it to engage with social issues, and which werethen sublimated into the business, resulting in continuous growth. This makes Company D highly receptive to
ESG initiatives, and when this has been organized into the necessary forms and communicated externally, we
expect the company to be able to gather more personnel, gain support from customers, and accelerate its
growth. We anticipate that this will have a considerable social impact, and resolve certain social challenges.

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Chapter

5

ESG Integration andEngagement on Fixed
Income/Active Investment

In our active investment for Japanese fixed income, we integrate ESG issues into ourinvestment process in order to gain secure satisfactory investment income stably overthe medium to long term in accordance with our basic policy on responsible investment.
As SDGs awareness increasingly becomes part of the norms of society, we believe that the influence ofenvironmental (E), social (S), and corporate governance (G) factors with regard to creditworthiness of
issuers will grow more than ever. We believe that if bond issuers take appropriate action on ESG issues
they can control unpredictable volatility in cash flows and maintain sustainable growth, and that if they
are well prepared for a range of risks they can avoid damage to their corporate value, thereby helping toincrease the value of client assets.
We recognize the importance of making sure that bonds held do not default or fall below investment
grade before they are redeemed when investing in Japanese non-government bonds, such as corporate
bonds. When determining the creditworthiness of bonds and issuers during selection of investees andmonitoring of securities held, we supplement quantitative analysis such as financial analysis andassessment of liquidity with qualitative analysis that takes ESG factors into consideration. When
determining creditworthiness, credit analysts take ESG factors fully into account during their analysis, anddiscuss the investment process with fund managers. Fixed income investments with long maturities inparticular offer limited predictability, and we therefore believe it is important to integrate ESG issues into
analysis of creditworthiness in order to prepare for risks that could materialize in future.
When performing an ESG evaluation, experienced credit analysts with an awareness of potential
problems conduct assessments and form judgments through dialogue with issuers, amongst other means,
and through collaboration between internal resources such as the Responsible Investment Division andthe Equity Investment Division, there are becoming able to take a more multitiered approach.

Selection of individual bonds(non-government bonds)
vestment candidate bond
List ins
S h ortlist securitie soﬀering value
Conductq u alitativ e
a n a ly si s

List candidate
bonds for trading

Resona Asset Management

Gather information and prepare data on offerings by securities firms (including
bond names, spreads, and prices), new issues, and other relevant topics
For each industry, identify bonds offering attractive spreads for their credit ratings
Confirm using quantitative models such as default probability models and credit
rating prediction models
Including analysis of the macroeconomic
environment, industry characteristics,
competitive environments within industries,
management setups and external support

64

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ESG evaluation(i) E (Environmental responsibility)(ii) S (Social responsibility)(iii) G (Corporate governance)We place importance on ESG engagement with issuers in addition to integrating ESG issues into

investment process. During individual meetings with issuers, we have expanded discussions to cover ESG
issues in the medium to long term, in addition to topics related to business results and financial strategies.
By doing so we hope to avoid unanticipated credit risk that could materialize during our investment
period until redemption by recognizing potential risks involving such issuers, gaining a shared awarenessof challenges, and persuading them to address ESG issues.
Our ESG engagement involves jointly adopting with issuers the two topics of climate change and risk
management in supply chains, which are global issues espoused by Resona Asset Management, while
deciding on several subtopics from the perspective of fixed income investment. As we pursue
engagement, we are focusing on the issuers of those bonds we hold that have particularly long maturities.
The fact is that bond investors have limited means to directly exert influence over issuer companies’
management in the way that voting rights allow. To make our engagement more effective, therefore, weare liaising with the Responsible Investment Division and the Equity Investment Division, among others, tobe able to pass the opinions of bond investors on to senior management at issuers.

[Total number of dialogues and engagements conducted]

Number of dialogues Number of engagements(number of companies) (number of companies)

From July 2019 to June 2020

92

Fixed income/Active investment[Fund managers and research analysts]

70 (41)22 (17)

Fixed income/Active investment – Examples of dialogue and engagement[Corporate governance] Company A (automobile company)
Company A had governance problems, and we entered into discussions with them regarding disclosure to be improved. We
engaged with them in relation to reorganizing their framework for departments with jurisdiction, and on their approach to dialogue.

Company A

ResonaWe pointed out to Company A that the different
reporting lines to top management, i.e., its IR
department was the point of contact for equity
investors while its finance department was the pointof contact for bond investors, may be resulting inpoor cooperation in terms of dialogue with investors.
Discussed regarding
insufficient disclosure towards
bond investors.

We also pointed out to Company A
that a recent cancellation directly
before an issuance brought about
confusion in the bond market because
we felt its explanations for thecancellation had not been adequate.

The company
shared investors’
concerns, andpromised future
improvements.

Improvements requested. Based on examples of insufficient dialogue
with the bond market, we insisted that communication is essential if
mutual trust is to be maintained.

[Decarbonization and stranded assets] Company B (electric power company)
Company B, which had been spun out as the thermal power generation division, was planning its first bond issuance. With
the risk of coal-fired power generation facilities that it held becoming“stranded assets,”we engaged with the company
regarding the long-term outlook and its environmental policy.

Company B
ResonaThe company gained a new awareness of the importanceof disclosure, and ahead of the issuance announced new
initiatives regarding coal-fired power generation, including a
fade-out program for deteriorated coal-fired facilities.

First bond issuance planned.

We communicated to the company that we would not be able toinvest with confidence without clarity on the medium- and long-term
outlook for coal-fired power generation, which accounted for 13% of
its energy mix, and a clear environmental policy.

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Chapter

6

Resona’s Proxy Voting

As an institutional investor, Resona Asset Management assumes key responsibility for facilitating
corporate governance improvements of its investee companies. Accordingly, the corporate activities of
our investee companies have a significant impact on the environment and society and in turn, we
recognize that those changes also affect our investment results.
We have drawn up Global Governance Principles encompassing Japanese and global equities based onthat awareness, and have established proxy voting guidelines for respective Japanese and global equities.

Resona Global Governance Principles▪ Board responsibilities
・The board should act in the interests of company’s shareholders by promoting sustainable growth of thecompany from a long-term perspective. This involves assuming accountability to shareholders and otherstakeholders, and giving consideration to a wide range of stakeholders integrating ESG factors.
・The board should supervise execution of duties by management.
・The board should effectively assess and supervise business results and compensation with respect tomanagement.

▪ Board composition
・The board should preferably have no less than a majority of independent non-executive directors.
・The board should preferably have a sufficiently diverse mix of directors to ensure effective supervision ofbusiness activities of management.

▪ Ensuring reliability of information and information disclosure・The board ensures reliability of financial and non-financial information disclosed by the company, and accordingly
assumes supervisory responsibility for providing such information to the respective stakeholders.
・The board should disclose highly reliable information in a timely manner so that shareholders are able to fully
exercise their voting rights upon having sufficiently understood content of proposals, and also so thatshareholders are able to effectively conduct engagement regarding matters affecting their interests.

▪ Shareholder rights
・Rights of all shareholders should be equal and a shareholder’s voting rights should be directly linked to theshareholder’s economic stake.
・The board should ensure that shareholders have voting rights on key decisions and transactions of the company.

Whereas these governance principles constitute recommendations, as such companies are to draw up
voting guidelines for Japanese and global equities that are aligned with their business realities, in light ofvarying laws, regulations, business practices and corporate governance codes of the respective countries.

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Establishment and review of proxy voting guidelines
We make decisions with respect to initiatives such as the establishment and review of proxy voting
guidelines upon discussion in the Responsible Investment Committee. Proxy voting guidelines are updatedby considering factors such as legal revisions, required standards under Japan’s Corporate Governance
Code, and prevailing circumstances affecting governance of a given enterprise.
We periodically consider the prospect revising the proxy voting guidelines no less than once per year.
Please refer to Resona Asset Management’s website for information on our proxy voting guidelines. In
addition, proxy voting details (Japanese equities, individual investee companies, specific proposals) areposted on our website every quarter, and from the shareholders meetings held from April 2020 onward,
reasons for voting are also disclosed, regardless of whether the vote is for or against a proposal.
Approach to proxy voting (In Japanese only) ▶ https://www.resona-am.co.jp/investors/giketuken.html▪Revised proxy voting guidelines (revisions applicable for the shareholders meetings held from January 2020 onward)

Board composition

We will vote against if:
The company does not appoint independent outside directors to one-third of the total board composition.
However, for a company with a board of corporate auditors that does not have a parent company or a controllingshareholder, we will vote against if: The company does not appoint two or more outside directors, comprising atleast 20% of the board.

Independence criteria foroutside directors andcorporate auditors

Where outside directors correspond to any of the following, they shall be deemed to have no independence.
(i)	When the company has not filed or has no intention of filing a notification with a financial instruments
exchange to the effect the director is an outside director as independent officer(ii)	When they are associated with a major shareholder of said company that holds more than 10% of theshares (or has had an association within the past 10 years)

Director compensation

We will support compensation to the outside directors and supervisory committee members consisting of:
Fixed stock compensation and stock-based compensation (stock options with a strike price of ¥1);and Compensation that is not excessive (as a general rule, not be more than ¥5 million, and the cash to shares ratio
should not be more than 1:0.3).

(stock options, equity grants)

Japanese equities

Revisions applicable for the shareholders meetings held after January 2021 onward

Board composition

We will vote against if:
The company does not appoint independent outside directors to one-third of the total board composition.
However, for a company with a board of corporate auditors that does not have a parent company or a controllingshareholder, we will vote against if: The company does not appoint two or more outside directors, comprising atleast 25% of the board.
We will vote against a company that has a parent company or controlling shareholder if:
Independent outside directors do not comprise a majority of the board members.

Independence criteria foroutside directors andcorporate auditors

Where outside directors or corporate auditors correspond to any of the following, they shall be deemed to haveno independence.
(i)	When the company has not filed or has no intention of filing a notification with a financial instruments
exchange to the effect the director is an outside director as independent officer(ii)	When they are associated with a major shareholder of said company that holds more than 10% of the shares(or has had an association within the past 5 years)(iii) When their term of service at said company is 12 years or longer

Director compensation(retirement bonuses)

We will vote against if:
The individual payments or the total payments are not disclosed.

Capital policy

We will support a proposal of disposal of treasury stock through allocations to foundation for the purpose ofraising funds for establishing and supporting a foundation, in instances where the dilution rate would be within acertain level (1% or less), and voting rights would not be exercised.

Anti-takeover measures

We will vote against the introduction or continuation of anti-takeover measures if the company has notconducted business operations efficiently where: ROE has been less than 5% for three consecutive fiscal years;
The cash position is excessive (net cash is 25% or more of total assets); or ROE has ranked in the bottom 25% of
the industry for three consecutive fiscal years.

▪Future policy (Considering adopting for the shareholders meetings held from 2022 onward)

Board composition

・We believe it is preferable for outside directors to account for a majority of the total board composition. Hence we willconsider when to incorporate this standard into the proxy voting guidelines. In the next revision to proxy voting guidelines,
we will consider whether to: Require the number of independent outside directors to be at least one-third even for acompany with a board of corporate auditors.

Diversity・We confirm whether the company itself has determined its approach to diversity and size of the board of directors, as wellas its attitudes to gender and international representation, and we check progress made towards these initiatives. We will
focus first on greater gender diversity, and engage with the management. Going forward we will consider voting againstcompanies that do not have female executive officers.

Cross-shareholding・Under the revision to Japan’s Corporate Governance Code, companies are required to disclose their policies on reductionsof cross-shareholdings. We will consider voting against cross-shareholdings that lead to capital inefficiency or adeterioration in corporate governance quality after taking into account the individual management circumstances forcompanies whose cross-shareholdings exceed a certain level.

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Chapter

6

Resona’s Proxy Voting

Proxy voting results for Japanese equities (from July 2019 to June 2020)
The following provides details on Resona’s proxy voting results for Japanese equities during the period
from July 2019 to June 2020. We often decide how to vote on proposals based on details released inconvocation notices and other such disclosures. However, there are also cases where we weigh the pros
and cons of proposals after having gained an extensive mutual understanding of the matter at handthrough dialogue and engagement with the respective company.
Opposition ratio

9.8%

Management proposals

Approval ratio

11.4%

Shareholder proposals(Previous year)

Total number of proposals

Voted for(10.8%)

21,90819,757

237

27(Previous year)(8.2%)We thoroughly considered the notion of whether or not shareholder proposals would contribute to enhancing shareholder value over the medium tolong term, and whether or not they would better protect the rights of shareholders. Meanwhile, our guidelines on proxy voting placed consideration
particularly on the notion of whether or not respective companies meet our standards in terms of their governance frameworks and financial practices.

Opposition ratio

Corporate bodies(Previous year)

Appointment and dismissal of
directors
Appointment and dismissal of
corporate auditors

9.1%(9.7%)

16,547

13.4% (17.0%)

2,370

Appointment and dismissal of
accounting auditors

0.0%

Director compensation

Opposition ratio

Director compensation (*1)

11.5% (15.8%)(Previous year)

47.4% (45.1%)

Corporate bodies

Opposition ratio(Previous year)

Total number of
proposals

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

Articles of incorporation

Opposition ratio

Articles of incorporation

2.0%(Previous year)(Previous year)

42.9%

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

We voted against director nominees if issues arose on:
appropriateness of board compositions (independence ofoutside directors); corporate earnings and capital efficiency.

137

Regarding payments for outside directors, corporate auditors,
etc., we voted against all payments including when companies
were to discontinue such bonus payments due to terminating
their retirement bonus plans.

1,430
31
93
47

We deliberated on propriety regarding standards for shareholder
return policies and retained earnings, etc., and if we concluded
that there were issues, we voted against.

We thoroughly considered whether aims and specifics ofproposals would contribute to enhancing shareholder value, andif we concluded that a proposal’s implementation andadministration would not ensure a framework or mechanism thatwould produce objective and adequate findings from thestandpoint of minority shareholders, we voted against.

Total number of
proposals

441(3.1%)

Opposition ratio

We voted against director nominees if issues arose on:
appropriateness of board compositions (independence ofoutside directors); corporate earnings and capital efficiency.

749

Total number of
proposals

5.9% (6.4%)
0.0% (0.0%)
93.5% (75.0%)
0.0% (4.1%)

Appropriation of surplus

Other proposals

56(0.0%)

Payments of retirement
bonuses for retiring officers

Other proposals

Total number of
proposals

Total number of
proposals

7(0.0%)*1. Proposals on compensation policy, stock options plans, adoption and amendments to performance-linked compensation, and bonus plans.
*2. Proposals on mergers, transfer of business, equity swaps, equity transfers and company splits.
*3. Proposals on share buybacks, reduction on statutory reserves, third-party allotment, capital reduction, reverse stock splits and issuance of classified stock.

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Proxy voting results for global equities ex. Japan (from July 2019 to June 2020)
The following provides details on Resona’s proxy voting results for global equities during the period
from July 2019 to June 2020.

Opposition ratio

8.8%Management proposals(9.2%)

Approval ratio

83.8%

Shareholder proposals(Previous year)

Total number of proposals

Voted for33,05030,127

1,788

1,498

(Previous year)(80.6%)Of the total number of proposals: Proposals related to written consent and proxy access accounted for about one-third; Disclosure on political contributions
and lobbying activities accounted for around 20%; and Appointment of an independent chairman of the board accounted for approximately 10%.
・Shareholder proposals requesting reports on climate change rose to 11 (Resona Asset Management’s approval ratio of 72.7%). (In the previous fiscal
year, there were only two and we supported both of them.)
・There were four shareholder proposals requesting one voting right for each share, all of which we have supported.

Opposition ratio

Corporate bodies(Previous year)

Total number of
The decline in Resona Asset Management’s (RAM’s) opposition
proposals

Appointment and dismissal of
directors

5.9%(7.6%)

12,578

Appointment and dismissal of
corporate auditors

0.6%(2.2%)

490

Appointment and dismissal of
accounting auditors

0.9%(1.0%)

1,918

Director compensation

Opposition ratio

Director compensation (*1)

23.0% (22.1%)

Payments of retirement
bonuses for retiring officers

0.0% (20.7%)(Previous year)

Opposition ratio

Capital policy(Previous year)

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

Articles of incorporation

Opposition ratio

Articles of incorporation

4.6%

Other proposals
Other proposals

Total number of This was because the RAM’s opposition ratio in China rose.
proposals
The reasons for the rise in the opposition ratio in China were that:

3,017
0

(Previous year)(Previous year)

7.3%

1,178
2,310
77
5,061
Total number of
proposals

796(7.4%)

Opposition ratio

There was no information disclosure on the proposals; andDirectors who received performance shares were involved in the
management of the compensation plan.
We have opposed half of the proposals in the United States
because of dilution. Of the remaining half, we have opposed many
due to CEO compensation that was not compatible withperformance and the share price, or due to insufficient explanationsof changes or revisions to the compensation structure.

Total number of
proposals

1.3% (0.7%)
18.7% (13.6%)
3.9% (12.5%)
11.2% (2.2%)

Appropriation of surplus

ratio was caused by a fall in opposition ratios for India and theUnited States.
Opposition ratios were high in Hong Kong, the Philippines andTaiwan due to: Misgivings about the independence of the boardof directors and committees, and because there were many
individuals serving in multiple positions.

Total number of
proposals

5,625(7.8%)*1. Proposals on compensation policy, stock options plans, adoption and amendments to performance-linked compensation, and bonus plans.
*2. Proposals on mergers, transfer of business, equity swaps, equity transfers and company splits.
*3. Proposals on share buybacks, reduction on statutory reserves, third-party allotment, capital reduction, reverse stock splits and issuance of classified stock.

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Chapter

6

Resona’s Proxy Voting

Examples of qualitative judgments on proposals
Resona Asset Management conducts proxy voting in accordance with its Global Governance Principles
and proxy voting guidelines; here we present two proxy voting cases where qualitative judgments were
to be made.
Governanceframeworks
Votingguidelines▶ CaseEnhancement ofshareholder value

Protection ofshareholder rights

We thoroughly consider whether shareholder proposals would contribute to enhancing shareholder value.
In the voting process, we refer to our proxy voting guidelines to consider whether the respective companies meet ourstandards in terms of their governance frameworks and financial conditions. As shareholder proposals include diverse
matters such as environmental and social issues, we thoroughly consider whether the proposal would contribute toenhancing shareholder value over the medium to long term, and whether it would better protect the shareholder rights.

1: Company X
March 13, 2020
The proponent requested aApril 15, 2020
In order to move forward

The proponent continued
to file their proposal,

Asking for disclosure of aplan outlining the company’s

expectations of society, its
strategy as a company, andnot meet their requests
with regard to the scope

partial amendment to the
Articles of Incorporation:

Case overview

business strategy to align its
investments with the goalsof the Paris Agreement.

with initiatives that take
into account the

principles for responsiblebanking, Company X

revised its Basic Policy on
Sustainability Initiatives.

June 26, 2020
The annual generalbecause the company’s
response was deemed toshareholders meeting
was held.

of application andachieving objectives.

Shareholder proposal

Proposals

Partial amendment to the Articles of Incorporation(Disclosure of a plan outlining the company’s business strategy to alignits investments with the goals of the Paris Agreement)
A clause was to be inserted in the Articles of Incorporation as follows:“Bearing in mind that Company X has
approved the Paris Agreement and the Task Force on Climate-related Financial Disclosures (TCFD), it shalldisclose plans showing metrics for investments aligned with Paris Agreement targets, and a management strategy
that includes these targets, in an annual report.”

It was decided that information disclosure by Company X in question
met a certain level, and there was no need for this to be determined in
the Articles of Incorporation

Logic andvoting decision

Voted against
shareholder proposal▪When the shareholder proposal followed the proxy voting guideline of“because shareholder proposals include
diverse matters covering environmental and social issues, we give thorough consideration to whether the
proposal would contribute to enhancing shareholder value over the medium to long term, and whether it would
better protect the shareholder rights.”This proposal was one that could have been supported from theperspective of contributing to an increase in shareholder value over the medium and long term.
▪On the other hand, because Company X had already conducted TCFD disclosure for a certain level of
information, which the proponent had requested, it was highly likely that changing the Articles of Incorporation
would restrict its corporate behavior.
We have voted against the proposal because:
We judged that changing the Articles of Incorporation would not lead to greater protection of shareholder interests.
▪After the general shareholders meeting, we conducted separate meetings with the proponent, and after
considering the contents of the proposal, engaged on an individual basis with Company X to achieve more
substantial disclosure of information related to climate change.

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▶ Case2: Company Y
January 10, 2020

February 12, 2020

February 18, 2020

March 27, 2020

shareholder of Company Y, to

The holding of an

response to a request fromshareholders was held.

Company Y received a letterfrom Company Z, a major

Case overview

the effect that they wereconsidering implementing atender offer.
January 21, 2020

Company Z and its subsidiarybegan the tender offer.

Company Y announced its
opposition to the tender offer.
extraordinary meeting ofshareholders was announced
to consider whether tointroduce anti-takeovermeasures.

Company Z and its subsidiary
filed a revised tender offer

The extraordinary
meeting ofCompany Y, extending the tender
offer period to 60 working days,
and enabling shareholder
opinions to be confirmed at themeeting of shareholders during
the tender offer period.

Management proposal
Approval Regarding Introduction of Response Policies for the Tender Offer for
Company Shares by Company Z and Its Subsidiaries

Proposals

Introduction of response policies for the tender offer for company shares by Company Z, such as a basic policy on
the kind of party who should have control over decision-making with regard to Company Y’s finance andoperations, and measures, etc. to prevent control from being exercised by a party who is considered unsuitable incomparison to the basic policy.

Management proposal
Allotment of share options without contribution
Share options will be allotted to shareholders who satisfy the following conditions, and a holder of Share Options
may exercise the Options only if: The holder does not continue a Large-scale Purchase Action, pledges not to
conduct any Large-scale Purchase Action, and, the holding ratio of the share certificates falls below 20%.
Countermeasures against Company Z’s takeover bid

Votingguidelines

We determine whether to support or to vote against a proposal for the introduction or maintenance ofanti-takeover measures after thoroughly considering whether the purpose or specifics would contribute toenhancing shareholder value.
In principle, we will vote against anti-takeover measures if they do not meet the following standards:(i) The anti-takeover measures are proposed at a shareholders meeting.

(ii) Company Y has a majority independent board composition.
(iii) There are clear triggering requirements.

(iv) In the case where it has an independent committee, independence of all the members is ensured.

Approval for the introduction of policies in response to a tender offer,etc. by Company Z or its subsidiary, targeting shares of Company Y
Logic andvoting decision

Voted in favor ofmanagement proposal▪The criteria of the board composition required for the introduction of the response policies for the tender offer
are fulfilled.
▪We judged that supporting the management proposal would contribute to improving the corporate value over the
medium to long term, because: The takeover bid with an upper limit of 43.82% had a strongly coercive element;
It was likely even after the takeover to remain as a minority shareholder; andCompany Y had announced plans to reform the business as well as a long-term vision, in addition to committing
to raising corporate value over the medium to long term.

Allotment of share options without contribution

Voted in favor ofmanagement proposal▪We have supported the proposal, because:
The use of allotment without contribution was instead of“favorable issues”and removed the risk that existing
shareholder value for the minority holders would be diluted.

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Chapter

7

Assessment of Responsible
Investment and Stewardship
Activities

Annual assessment of Principles for Responsible Investment (PRI)
We enlist our annual PRI Reporting and Assessment processwith respect to key performance indicators in terms of our
PDCA (plan, do, check, act) cycle for responsible investment
and stewardship activities. External assessment is carried out
with the aim of bringing about qualitative improvement withrespect to our responsible investment and stewardship activities
through efforts that involve determining issues that must be
addressed in order to maintain or improve assessments.
Summary of PRI assessment scores
2018

2019

2020

Approach to responsible investment (Overall
assessment) Strategy & Governance

A+

A+

A+

Listed equities - ESG Incorporation

A+

A+

A+

Listed equities - Active ownershipA

A

Engagement

A+

A+

Proxy voting

A

A

A

B

A

A

Bank debentures

B

A

A

Corporate bonds

B

A

Supranational bonds, sovereign bonds,
Fixed income
government agency bonds, etc.

A
A+

A

The PRI Reporting Assessment evaluates Resona Asset Management’s responsible investment activities,
and the organization’s overall responsible investment approach. We have maintained an A+ score, thehighest rank, since 2015.

Under PRI annual assessment, the PRI Secretariat assesses PRI signatory institutional investors particularly on their efforts tocarry out responsible investment, thereby granting them scores on the basis of six performance bands (A+, A, B, C, D, E),with A+ being the highest possible score on a global basis.

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Self-assessment of stewardship activities
As an institutional investor serving as an asset manager, Resona Asset Management has established its basic
policy on responsible investment with the aim of explicitly stating its approach to helping enhance investment
return of its clients from a medium- to long-term perspective. Accordingly, we carry out three specificinitiatives (i.e., ESG incorporation, constructive dialogue and engagement, proxy voting). We also performself-assessments on a regular basis in order to further heighten the level of such initiatives. These selfassessments correspond to the assessments described in Guidance item 7-4 of Japan’s Stewardship Code.

Measures for self-assessment
Resona Asset Management’s Policies regarding Japan’s Stewardship Code stipulates that,“Resona AssetManagement believes that appropriately performing self-assessment with respect to its policies and initiatives
pertaining to its responsible investment is important. Under that premise, we will develop an effective
assessment framework that involves taking on tasks such as precisely determining issues in conjunction withexternal assessment, while operating on the basis of self-assessment performed by members of the
Responsible Investment Committee.”Our Responsible Investment Committee plays an important role infulfilling Resona Asset Management’s responsible investment and stewardship responsibilities.
We administered a tiered-assessment and open-ended surveys where members of the committee furnishedtheir thoughts with respect to: whether they feel that we are taking sufficient efforts with respect to initiatives
required under respective principles and guidelines of the stewardship code; whether they feel that we
maintain an organizational framework sufficient to carry out our stewardship activities; whether we areproperly implementing the cyclical PDCA (plan, do, check, act) approach with respect to stewardship activity
results, assessments and improvements; and, whether we are adequately operating the Responsible
Investment Committee in terms of its function as a responsible investment control tower. The self-assessment
period extended from July 2019 to June 2020.
In September 2020, the Responsible Investment Committee held discussions on recognized issues andmeans of addressing those issues, upon having received reports on progress made with initiatives to address
issues of the previous year and survey findings.

Results of self-assessment(i) Initiatives involving stewardship code

・We have consistently been awarded high marks by external assessors for appropriately carrying out our stewardship
activities on the basis of clear guidelines.
・We encourage increased collaboration between the Responsible Investment Division, which seeks engagement from avery long-term perspective, and each division (Equity Investment and Fixed Income Investment), in the form of joint
participation in dialogue with companies and the sharing of content and issues arising therefrom, as well as promoting
further ESG integration. We are also deepening the relationships between the different investment divisions in order toimplement engagement effectively.
・Our assessment shows that the discussions of the Responsible Investment Committee were generally effective.
However, some are of the opinion that, given that the scope of responsible investment and related activities have both
broadened and deepened, although in-depth discussions have taken place, development of understanding among
members were insufficient. At the responsible investment meetings, we share information related to responsible
investments, and deepen understanding of our activities.

(ii) Operations of the Responsible Investment Committee

・The Responsible Investment Committee reviews the proxy voting guidelines, deliberates on proposals that are difficult tojudge, and discusses matters such as engagement policy. In addition, the state of ESG integration at each investment
division and the engagement results are reported. High marks have generally been awarded for the appropriateness of
meeting frequency, time allotted, and issues selected for discussion. Going forward, we will continue to work to facilitate
more effective advice and supervision by the Committee, and to enable more efficient Committee operation.

(iii) Issues

・With the aim of more effectively carrying out Resona Asset Management’s stewardship activities, we will consider andimplement action plans geared to gaining a shared awareness of the issues listed as follows, and finding solutions.
- Continuing to raise the effectiveness of ESG integration and of engagement, while improving our ability to explainsuch issues.
- Continuing to further promote the sharing of information among the investment divisions so as to enable healthy
discussion and highly effective supervision.
For policies regarding Japan’s Stewardship Codes, please refer to the following. (In Japanese only)
https://www.resona-am.co.jp/investors/ssc.html

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