Resona Asset Management

S T E WA R D S H I P
R EPORT
2021 / 2022

Chapter

1

Resona Asset Management

Seeking to provide abundance and happinessto future generations in all we do
We are clearly aware that our reason for being, or “purpose,” is “to provide abundance and happinessto future generations as well as our own.”
We are eager to one day share in the happy stories as our smiling clients declare “I was able to build up myassets through investment services provided by Resona Asset Management,” “Transactions andrelationship with Resona Asset Management have brought me an affluent and happier post-retirement life”
and “Through investing in products provided by Resona Asset Management, I was able to contribute torealizing a better society and environment for the sake of future generations.”
In order to make this happen and in order to “provide abundance and happiness to future generations
as well as our own” at any time, we commit ourselves to acting as an asset manager focused on meeting
genuine customer needs.
Furthermore, we hereby declare our intention to be “a responsible investor” and also to be “a long-term
investor,” assisting our clients in their asset formation over the long term.
And to realize these above-mentioned objectives in a sustainable manner, we hereby make acommitment to reinforce our asset management capabilities continuously.

An asset manager that can provide abundance andhappiness 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

We believe that both investee
companies with sustainablebusinesses, and a sustainable society
and environment that constitutes thebase for corporate activities, together
help protect the assets entrusted
to us by clients, and underpin thesustainability of client lifestyles.
By practicing responsible
investment activities and seeking to
make the desirable economic systemsof the future a reality, we discharge
our fiduciary duties as an asset
manager that can provide abundanceand happiness to future generations
as well as our own.

Identity of Resona Asset Management
The purpose of Resona Asset Management is “to provide abundance and happiness to future generations as well as our own.”
To realize this purpose we have explored:
Which “values” we cherish,
What sort of “corporate culture” we require, andWhat kind of “business model” we should operate.
This year, we have articulated the “Identity of Resona Asset Management.”

Our Purpose

We contribute to the true happiness of our clientsfrom a long-term perspective towards the future.

To “provide
abundance andhappiness to future
generations as well as our own”

Our Value

We respect an “open-minded” working
environment and diversity, where we can freely
exchange views among staff members from various
generation, gender, and backgrounds.

“Open-minded” culture,long-term perspective, diversity

We aim to achieve clients’ goals as“one” professional organization, by
accepting mutual respect on
expertise and skills among eachstaff member.

Corporate Culture
1. Mutual respect,
2. Pursuit of expertise,
3. Addressing true client needs

Business Model

We operate under the “Trust bankmodel,” where we will conduct our
fiduciary duties through a commitment
to our various investment products
and management decisions from along-term perspective.

Trust bank model

Contents
Chapter 1 Resona Asset Management

48

Identity of Resona Asset Management
2

Chapter 4 Passive Investment Stewardship Activities
Engagement plan for FY2021

56

60 -71 ￨ Engagement report

Message

8Chapter 2 Governance Framework for Responsible
Investment and Stewardship Activities

72

12

Framework for governance in order tomake client interests top priority

78

Chapter 5 Responsible Investment in
Active Management for Equity

Constructive dialogue and engagement withinvestee companies (Passive investment)

16

Chapter 3 Responsible Investment and Stewardship Activities

86

20

Future materiality analysis for making
a change toward a desirable future

Chapter 6 ESG Integration and Engagement on
Fixed Income/Active Investment

88

Chapter 7 Resona’s Proxy Voting

30

Impact management

9438

Response to TCFD recommendations

Chapter 8 Assessment of Responsible Investment
and Stewardship Activities

42

Responsible investment verification committee meeting
Feature discussion

R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

1

Chapter

1

Resona Asset Management

MessageShowing the corporaterole of asset managers.

I wish to express my gratitude for your continued
support to Resona Asset Management.
We have stated in our 2020/2021 Stewardship

importance of showing Resona Asset Management’s
identity and mindset.
Nations taking part in the 26th UN Climate Change

Report that corporations are playing an increasingly

Conference of the Parties (COP26) held in Glasgow,

influential role in achieving a sustainable society. And

United Kingdom, in November 2021 reached consensus

we are aware of our responsibility to firmly support

regarding the “Glasgow Climate Pact,” an agreement onsuch aims through our involvement as an asset

pursuing efforts to limit the rise in global temperatures

manager.

to 1.5 degrees Celsius compared to the levels prior to

Looking back at the past year, it is apparent that

the Industrial Revolution. Although this constitutes ahumanity is facing increasingly severe and deeply

step forward, the conference also underscored differingintertwined challenges. With climate change being a

motives between developed and developing economies.

primary factor, this also entails developments that

Meanwhile, asset management companies and otherinclude extreme global weather conditions andfinancial institutions have apparently been conspicuously

catastrophic natural disasters. Social issues such as

involved in the process.

human rights, widening disparities, and fragmentations,This seems to indicate that financial institutions havealong with the COVID-19 pandemic are also becoming

been playing a greater role in helping bring about suchserious issues.

outcomes for the sake of taking on important anddeeply intertwined challenges.

Conveying our long-valued identity
and mindset

Last year, we have conducted various measures froma long-term perspective. I would like to take thisopportunity to introduce our three main measures.

We believe that asset managers should show a clear
corporate intention and conduct effective stewardship
activities to overcome these challenges.
Last fiscal year, Resona Asset Management
formulated its “Company purpose” based on that

Launch of the Impact Funds based onmateriality issues
Firstly, the launch of the Impact Funds (Japan Equity

premise. In the current fiscal year, we also clarified the

Impact Investment Fund and Global Impact Investment

definition of our “value,” “corporate culture,” andFund (Climate Change)).

“business model,” which we have followed when
conducting management decisions.
This was because we have realized the necessity tocooperate with the investee companies and our global

In the 2020/2021 Stewardship Report, we havepresented our policies to achieve more extensive
impact management toward “ensuring a better future.”
Accordingly, we have launched the Impact Funds on

investor allies across different platforms to overcome

both Japanese and global equities as one of our corevarious social issues. And we have also recognized theinvestment strategies. Based on the material issues

2

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

intention has become an important(materiality) to achieve the “future desirable economic

corporation” have direct obligation to clients/

systems,” we have set social impact targets on thebeneficiaries from the “fiduciary duty” perspective.

Impact Funds:

Meanwhile, the “contractual type” investment trusts(1) “ Achievement of a Japanese society oriented toare dominant in Japan, where the “asset management

sustainability and livability” under the Japanesecompany”/“trustor,” assumes direct obligation toequity fund, and,clients/beneficiaries. We accordingly seek to develop
more extensive client-oriented operations by building(2) “ Climate adaptation and mitigation” under thea framework for boards’ effective oversight to each

global equity fund.
We place emphasis on ensuring that social outcomes andfund in Japan.

value creation narratives are shared with our clients andIn this Report, we will present specific details on our

the investee companies. To such ends, we have focusedstewardship activities. Resona Asset Management willon establishing the impact assessment methodology. We

seek to achieve a sustainable society by diligently

are planning to issue the Impact Report along with theproceeding its stewardship activities as a responsible

investment return.

long-term investor. We aim to facilitate long-term value
creation of the investee companies and to develop asound capital market. Simultaneously, we will

Effective engagements utilizing the AI toolcollaborate with our stakeholders to work on deeply

Secondly, we have conducted extensive engagements.

intertwined and increasingly severe social issues.

Resona Asset Management has broadened its scopeof collaborative engagement through active participationin various platforms and collaborative engagements, towork effectively and proactively with the global investor
allies. We have also developed an artificial intelligence
tool that reads and assesses integrated reports. Use of

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

this tool has enabled us to engage more effectively. We
seek to ensure a “better future” through such initiatives.

Consideration on extensive
client-oriented operations
Finally, we have established the fund governancecommittee meeting.
The “corporate type” investment trusts are dominant
in the United States, and directors of the “investment

R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

3

Asset Management Companyof the Resona Group

Asset Management Company of the Resona Group●R
 esona 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 ofthe end of September 2021, assets under management were approximately ¥34 trillion, and there werearound 110 asset management professionals)●R esona has a track record in asset management of approximately 60 years.* Over that time it has
accumulated the know-how to provide stable and sustainable returns over the long term, primarily throughcorporate and public pension fund management.
●T he Resona Group is one of the leading commercial banking groups in Japan, and aims to be No. 1 in retail. By
combining our networks both inside and outside the Group with management capabilities developed overmany decades in pension fund management, we will provide instruments and services for which clients havea genuine need.
*Calculation includes Resona Bank period

Resona Asset Management’s investment philosophy & product strategy
In order to act in the best interest of our clients and enable more prosperous lives, we believe that the mostimportant factor for investment activity is to implement “global portfolio diversification” from long-term perspective.
In order to effectively provide a globally diversified portfolio, we think it is necessary to provide thefollowing two major products:
1) T he index investment strategy with high quality services.
2) Active investment strategy capable of generating excess returns that are reproducible on long-term horizon.
Amid the growing importance of asset management services, we will continuously conduct responsible
investment activities as one of the universal owners.

4

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Extensive product lineup
Resona Asset Management seeks to balance addressing the increasingly diverse and sophisticated investment
needs against the global portfolio diversification. To such ends, we offer an extensive product line up:
Active and index strategies for traditional assets (equities, fixed income, and REITs), as well as multi assets andalternative strategies.

Multi-asset

Risk control

Index
Third-party
partnerships

ESG

ActiveAlternative

Absolute returns

Resona Asset Management’s corporate governance structure and distinctive advantages
Point ①

The corporate governance structure has been further strengthened by ensuring the separation of businessexecution and oversight, and by appointing two independent outside directors.

Point ②

We have established four discussion forums and three committees, while also having set up a framework
for engaging in business execution in light of financial disclosures and monitoring that enlists external
third-party perspectives.

General Meeting of Shareholders

Executive Committee

Board of Directors

Six directors

Verification to ensure thatclient interests are top priority

Two executive directors andfour non-executive directors(Of which two independent outside directors)

Fund governance committee meeting(Three inside directors andthree outside directors)

Audit and Supervisory
Committee

Assumption of
responsibility for
stewardship

Initiatives to improve performance

Asset Management
Committee

Investment Evaluation
Committee

Responsible
investment
verificationcommittee
meeting
Responsible
Investment
Committee

Compliance and Risk Management Committee
InsideOutside Independent
OutsideR e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

5

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, isbased on the concept of fiduciary duties, and involves the duty of a strong and long-term
commitment to clients. As a result it aims to continuously generate profits over the long term.

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

2 Network
We leverage the network we developed as a pioneer in
responsible investment to gather information by interacting
proactively with holders of 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 asignatory to the PRI, and have been participants in the PRI Japan
network since it was first established. We have also built up a
track record in responsible investment through our work as chairof the PRI Japan WG and other roles.

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

Number ofengagement agendas

1,869

23

Number of times invited toserve as external
committee member, etc.

Number of times
participated in collaborative
engagement platforms

30

12

History of asset management

Year in which we becamea signatory to PRIApprox.

management framework/
4 AssetHuman resource development
We have built an asset management framework underpinned
by approximately 110 asset management professionals, primarily
analysts and fund managers. While pursuing specializations
matched to asset management style, we seek to share know-how
related to responsible investment.

60

years

Asset management
professionals

Approx.

2008
Number of meetings held toshare information related toresponsible investment

110

Professionals must embody attributes in three realms

Qualifying as a professionalArt○ A professional possesses knowledge mutually forgedthrough hard work
○ A professional is valued within and outside the organization○ A professional faithfully performs his or her job and takes
initiative in making decisions

Degree of professionalism

Insight, intuition andinspiration

Craf tScience

Craft

Skills path

Science, theory and Experience,technology
artisanship and skill

6

46

Resona Asset Management

S TEWA RDSH IP REPOR T

S c ie nc e

2021 / 2022Art

Trends in AUM

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

2021
Approx.

Establishmentof Asset
Management
Business

18 trillion¥

10 trillion¥

3 trillion¥

Grew share primarily
through pension funds
for SMEs

AroundAround

¥1.0 trillion,

3.0%

15.5%

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

Organizational framework
General Meetingof Shareholders

PublicpensionCorporate
pension¥5.2 trillion,

2020

Deregulation pertaining topension fund asset allocations
and scope of portfolios

Other ¥0.8 trillion, 2.2%

RetailKnow-how in diversified
portfolios of long-term global
investments accumulated
through management ofpension fund

2000

Composition of AUM

trillion

Consolidates asset
management functionsof Resona Bank

Accumulated know-how
in diversified portfoliosof global investments

1990

Expansion of corporate
pension market¥

Approx.

Approx.

Approx.

34

2019

2003

1987

Instrument development
and investment education
know-how for individual
investors

Resona AssetManagement
established

Resona Bank

1962

Resona AssetManagement2015¥26.6 trillion,

Balance/percentage
by client

79.3%

Board ofDirectors

Audit and Supervisory
Committee
Internal Audit
OfficeRepresentative
Director and President

Executive
Committee

Responsible Investment
Committee
Asset Management
Committee

Other

Global fixed income ex. Japan¥3.2 trillion, 9.5%

¥16.8 trillion, 50.0%

Japanese
fixed income¥2.1 trillion,
6.3%
Globalequities ex.
Japan

Investment Evaluation
Committee

Balance/percentage
by asset type¥2.3 trillion,

6.7%

Fund governancecommittee meeting

Compliance and Risk Management Committee

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¥9.2 trillion, 27.5%

Responsible investment
verification committee meeting

Compliance Office(As of March 31, 2021)

R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

7

Chapter2

Governance Framework
for Responsible
Investment and
Stewardship Activities

Resona’s responsible investment
Changes in the social and economic environment, and roles of an asset manager (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

ClimatechangeAdverse effects
on the sustainabilityof socioeconomic
systems

Environmental
issuesIncomeinequality

HumanrightsThe notion of responsible investment
is an indispensable aspect ofsustainable development

An asset manager 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 acrosssociety by identifying responsibilities forsocial sustainability.

(ii) F ulfill its role in acting as a responsible
investor with respect to providing
support of universal ownership as along-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

8

2006

Establishmentof PRI

Resona Asset Management

2010

Establishmentof PRI JapanS TEWA RDSH IP REPOR T

2011

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

Adoption of Principles for Financial
Action for the 21st Century

2021 / 2022

Chapter

1

Chapter

Chapter23Chapter

Chapter4

Chapter5

Chapter

6

Chapter7

8

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

Basis(Principles, International Standards)

The unexplored “desirable economic systems of the future”

Policy of Resona AssetManagement (Purpose)

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

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
and Investment Banking
Working Group of the
Principles for Financial
Action for the 21st Century

2015

2016

2015

• Adoption of the 2030 Agenda for
Sustainable Development• Adoption of the Paris Agreement

Joined Institutional
Investors Collective
Engagement Forum(IICEF)

2017

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

2018

Multinational Enterprises

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

2019

Joined Climate Action 100+2019

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

Joined ICGN,ACGA and AIGCC

Participation in Access to
Nutrition Initiative (ATNI)
Endorsed and supported
the Finance for
Biodiversity Pledge

2020
2020

2021

• Japan to vow carbon neutral by 2050
• L aunch of Japan’s National Action Plan
on Business and Human Rights(2020-2025)

R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021

COP26

2021 / 2022

9

2

Governance Framework for Responsible
Investment and Stewardship Activities

Framework of responsible investment
and stewardship activities
The Responsible Investment Committee spearheads efforts to engage in activities employing the collective
knowledge of Asset Management Unit of Resona Asset Management, with the aims of appropriately fulfilling ourstewardship responsibilities as a trustee, engaging in initiatives that help to bring 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
Each Division(Equity Investment and Fixed
Income Investment)

External expert:
Professor Takeshi Mizuguchi■■

Knowledge
Checking function■

Responsible Investment Division
 ecretariat of Responsible
S
Investment Committee■ Passive engagement function■ Proxy voting■

Active engagement function

Compliance Division■

Meeting of the Responsible
Investment Committee hecking and supervisingCfunction

Responsible Investment Division

Discussions will be reflected to the proposalsof the Responsible Investment Committee

Viewpoints and information on
passive engagement function

Responsible investment meeting(on a weekly basis)

Equity Investment Division
Fixed Income Investment Division

President and key members including executive
officers responsible for Asset Management Unit,
and general managers of related divisions

Investees

Chapter

Viewpoints and information on
active engagement function

Responsible investment meeting• The responsible investment meetings are held on a
weekly basis to regularly share information andexchange opinions on–R esponsible investment, news flow as it pertains
to ESG issues, and– Progress made in dialogue with companies.
• Through its meetings and other forums, theResponsible Investment Division–S hares information and exchanges opinions with
relevant divisions, and– Accordingly submits action policies and documents
to the Responsible Investment Committee.

10

Resona Asset Management■ Topics covered at responsible investment meetings (March to November 2021)• Participation in– The 2021 CDP Non-Disclosure Campaign and the Science-Based Targets Campaign– Access to Nutrition Initiative (ATNI)• Consideration given to becoming a member of the Finance for Biodiversity Foundation• Impact assessment on ESG bonds, Sustainable Finance Disclosure Regulation(SFDR), EU Taxonomy• 2022 revision of proxy voting guidelines, regarding:Japanese equities/independence of board composition

S TEWA RDSH IP REPOR T

2021 / 2022

Chapter

Chapter

12

Chapter3

Chapter4

Chapter5

Chapter

6

Chapter

7

Chapter8

Responsible Investment Committee
The Responsible Investment Committee conducts basic policies on responsible investment, which are 1) ESG incorporation,2) Constructive engagements, and 3) Proxy voting. As such, it plays an important role in acting as a control tower for verifying thereasonableness of initiatives with respect to the Principles for Responsible Institutional Investors and the Principles for
Responsible Investment (PRI), and continually devising solutions and improvements.
The committee consists of President, executive officers and general managers from the asset management and thecompliance unit. The committee harnesses its members’ collective experience and expertise to carry out stewardship activities
to enhance positive contribution towards sustainable growth of the investee companies. The committee also considers ways tosecure oversight on internal controls. Since May 2017, Professor Takeshi Mizuguchi, President at Takasaki City University of
Economics was welcomed onto the committee as an external expert and leading authority on responsible investment. He has
been furnishing opinions and advice from an outsider’s perspective to the activities of Resona Asset Management, based on his
extensive knowledge.
The Responsible Investment Committee reports on the three efforts included in the “basic policy on responsible investment,” andalso takes on various types of review and discussion particularly by deliberating on changes and proposals on proxy voting guidelines.
■ Specific initiatives to the “basic policy on responsible
investment”• Incorporation of ESG into investment process• Constructive dialogue and engagement• Resona’s proxy voting■ Primary items discussed and reported• Amendments to proxy voting guidelines• Voting decision to certain AGM proposals• Voting results for Japanese and global equities• Engagement progress and plans• Stewardship activities and self-assessment• 2021 PRI Reporting

We aspire to fulfill our stewardship responsibilities to a greater extent by incorporating the following elements derived fromthe Responsible Investment Committee, which are:Discussions, suggestions for improvements, and self-assessment on stewardship activities.
■ Activity cycle to enhance corporate value
Incorporate ESG issues into investment
process, and devise solutions andimprovements.

ESG incorporation

Constructive dialogue
and engagement

Actively carry out dialogue andengagement to enhance corporate
value from the medium- to long-term
perspective.

Conduct self-assessments on progress
made in taking action with respect tothe stewardship code.

Self-assessments on
stewardship code

Proxy voting

Conduct proxy voting by considering
company dialogue/engagement andinvestment analyses.

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

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

Major items reviewed
Appropriateness of 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 eighth committee meeting (held in February 2021) Changes to proxy voting guidelines for Japanese and global equities• The ninth committee meeting (held in August 2021)
Proxy voting results for shareholders meetings during July 2020 to June 2021
The suitability of the topics subject to review was verified at the responsible investment verification committee meeting sessions listed above.
R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

11

Chapter2

Governance Framework for Responsible
Investment and Stewardship Activities

Framework for governance in order to makeclient interests top priority
1

Fiduciary duty
Basic policy
As a fiduciary entrusted by customers, we will, with our high specialization and ethics, continuously provide
high-quality financial services with customers’ best interest in mind, while placing the greatest value in the joy andhappiness of customers.
We will strive to provide truly customer-oriented, high-quality financial services and pursue the most optimal profits
for customers to continuously grow our customer base and further enhance the existential value of the Resona Group.
■ High-quality asset management1• We will pursue stable medium- to long-term added-value through consistent investment strategies based on careful research
and analysis in order for customers to benefit from the performance of diversified investments made with a long-term time
horizon. At the same time, we will strive to provide low cost, high-quality asset management services in a sustainable manner.
• We will enhance our specialized skills through daily self-refinement and pursue profits for customers with a high level of ethicalvalues and integrity without being satisfied with the status quo, aimed at achieving higher quality assets under management
and a robust asset management structure.
•W e will aim to be a group of professionals that live up to the trust of customers by facilitating two-way communication across organizations.

2• We will act as a responsible institutional investor, including holding constructive dialogue for improving the corporate value of
portfolio companies and encouraging their sustainable growth, in order to pursue the profits of customers (beneficiaries).
• We endorse and embrace the principles of the “responsible institutional investor” in Japan’s Stewardship Code and share ourcommitment to acting as a responsible institutional investor.
• We will strive to maximize added-value through the improvement of corporate value and sustainable growth with a medium- tolong-term perspective based on sufficient understanding and analysis of not only the financial information of portfolio companies,
but also non-financial information as well, including response to Environment, Social and Corporate Governance (ESG) issues.

Note: Excerpt from the “Resona Basic Policy on Fiduciary Duty” of the Resona Group

Implementation policy

Active investment

For the sake of making our clients’ lives more
affluent and happier (i.e. to realize outcomes in the bestinterests of our clients), we Resona Asset Management
believe that, with respect to investment management,
the most important point is to maintain diversified
portfolios of long-term global investments.
We believe that, to provide diversified portfolios of
long-term global investments effectively, it is necessary
to offer “active investment capable of generating
reproducible excess returns in the long run” as well as“high-quality index investment.” Moreover, we willfurthermore promote responsible investment activities
incorporating the concept of universal ownership amid
the growing importance of asset management.

We seek to generate higher excess returns based on the solidly
designed philosophies by formulating investment procedures andmonitoring investment effectively.
Balanced investment
We seek to achieve performance aligned with risk and return
expectations of our clients through asset allocation strategies
drawn up based on continuous market research and analysis.
Index investment
We are persistently seeking greater efficiency in fundoperations and engaging in research on investment approaches inorder to provide top-quality products at lower cost.
Responsible investment
We contribute to increasing the value of investee companies
and raising the level of the overall equity markets through ongoing
dialogue and opinion exchange with investee companies. We seek
to maintain an appropriate number of engagement activities witha focus on the quality of such activities so as not to impose
excessive burdens on companies.

■ Providing services suitable to our clients
In establishing funds, we aim to provide our clients with long-term fund management on a continuous basis. To such ends, weestablish carefully-selected funds that are, we believe, able to satisfy real needs of our clients, and we do not add new funds suchas of overlapping characteristics with existing ones or based on passing trends to our fund line-up recklessly.
In addition, when establishing funds, the Asset Management Committee engages in discussions upon having defined theintended client demographic and rationale thereof. After the establishment, the fund governance committee meeting consistingof outside directors verifies whether or not the fund maintains the characteristics intended at the time of the fund establishment.
Note: Excerpt from the “Policy on Implementation of Customer-Oriented Business Conduct” of Resona Asset Management

12

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Chapter

Chapter

12

Chapter23Chapter4

Chapter

Chapter

56Chapter

Chapter

78Fund governance committee meeting
Overview of the fund governance committee meeting
In April 2021, Resona Asset Management established the fund governance committee meeting exclusively
consisting of outside directors for the purpose of verifying adequacy of governance with respect to individual
funds managed by the Company.

In managing trust assets and other investments, we verify from external third-party perspectives
that client interests are assigned top priority with respect to establishing and managing funds,
with the aim of strengthening governance such as management on conflict of interest.

PurposeMembers

Number of attendees

Operations

Schedule:
Generally held twice a year
(May and November)Three outside directors
Chairman: Director Otsuki

Matters forverification

President, executive officers responsible for respective divisions andoffice of the Investment Planning Division, Responsible Investment
Division, Client Services Division, Investment Risk Administration
Division, and Corporate Administration Division’s Compliance Office, as
well as relevant individuals nominated by the committee chairman

Secretariat:
Investment Risk
Administration Division

Characteristics of newly established funds(at every meeting)

Investment quality of each fund(at every meeting)

The following five matters and appropriateness of discussions
are subject to verification from a client-oriented perspective.

With respect to management of each of the funds, thefollowing five matters and the appropriateness of discussions
are subject to verification from a client-oriented perspective.

(i) Background and purpose of establishment(ii) Target clients(iii) Appropriate scale of investment(iv) Anticipated risks and returns(v) Trust fees(i) Investment performance(ii) Estimated tracking error(iii) Fund balance(iv) Number of investment securities(v) Turnover ratio

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

Investment Evaluation Committee

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

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

ChairmanPresident

ChairmanPresident

Members

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

President, and executive officers responsible for theInvestment Planning Division, Responsible Investment
Division, Investment Risk Administration Division, Corporate
Administration Division’s Compliance Office, Client Services
Division, and Asset Management Client Services Division

Schedule

Quarterly and as necessary(20 scheduled and ad hoc sessions held in FY2020)

Schedule

Quarterly and as necessary(Four scheduled sessions and no ad hoc sessions held in FY2020)

Secretariat

Investment Planning Division

Secretariat

Investment Risk Administration Division

R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

13

Chapter2

3

Governance Framework for Responsible
Investment and Stewardship Activities

Management on conflict of interests
In carrying out responsible investment, Resona Asset Management should be mindful of certain types oftransactions 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 other investments, and situations thatinvolve dialogue and engagement with investee companies.
When carrying out proxy voting on investee companies, with which the corporate banking divisions of thegroup companies maintain business relationships, decisions and actions taken to discharge fiduciary duties could
be substantially affected under a scenario where the corporate banking divisions of group companies interferewith Resona Asset Management’s decision to vote for 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 for othercases are carried out appropriately(i) 	Those carrying out proxy voting for the parent company and other such entities (Resona Holdings) 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
Responsible investment verification committee meeting

Third-party
verification

Proxy voting/Dialogue and engagement

Risk
Management
Division
Monitoring

Responsible Investment Division

Companies

Group companies

Prohibitedinterference

Conflicts ofinterest

Businessrelationship

Corporate banking divisions

14

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Chapter

1

4

Chapter2

Chapter

Chapter3

Chapter4

Chapter

56Chapter

Chapter

7

8

Governance frameworks• Experienced asset management professionals belonging to each investment division take charge of managing trust assets.
• We ensure substantial transparency and accountability in managing trust assets by verifying investment activities andperformances of the respective investment divisions, proxy voting activity, and others. We accomplish this throughmonitoring performed by our internal administration divisions and various internal committees responsible forinvestment risk administration and compliance.
• We build governance frameworks that assign top priority to client interests through establishing the fund governancecommittee meeting and the responsible investment verification committee meeting exclusively consisting of outside
directors and outside experts, and the verification process with respect to the appropriateness of establishing andmanaging individual funds and also with respect to the appropriateness of stewardship activities from an external third
party perspective.

Fund governance committee meeting● To verify appropriateness of funds as marketable products● To verify appropriateness of funds in terms of their investment quality

Asset Management Committee

Investment Evaluation Committee●T o discuss establishment andredemption of funds●T o discuss important matters related
to asset management●T o discuss appointments of external
investment managers● To evaluate and to analyze investment performance● To confirm status of fund risk administration, etc.

Investment Planning Division● To plan and to design investment products

Investment Planning Division/
Equity Investment Division/
Fixed Income Investment Division/
Index Investment Division● To formulate investment plans● To execute investment● To monitor investment results

Investment Risk Administration Division● To evaluate status of investment operations● To track status of investment operations● To monitor compliance of investment
restrictions, etc.

Execution of
investment

Trading Division● To execute trades of marketable securities, etc.
● To allocate and to reconcile results of trade execution

Corporate Administration Division (Compliance Office)● To monitor the company-wide status of compliance with laws and regulations, etc.
● To formulate plans and to implement controls for preventing conflicts of interest

Compliance and Risk Management Committee● To discuss policies and rules regarding company-wide risk management● To verify matters of complianceR e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

15

Chapter

Responsible Investment
and Stewardship Activities

3

Future Taker
External
diseconomies

DialogueEconomic activities

Climate change

Engagementand dialogue

Support onproxy voting

Incomeinequality

Top-down
approach

Human rights

Network

Code of conduct ofResona AssetManagement

Aging society
witha low birth rate

Cybersecurity

Disclosure

Enhancement ofcorporate value

Basic policy on
responsible investment

AgendaProxy voting

Anti-corruption+Collaboration

Naturaldisasters•••

Awareness

Efforts for enhancing corporate value andmedium- 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.

16

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Chapter

1

Chapter2

Chapter3

Chapter4

Chapter

Chapter

56Chapter

7

Chapter8

Future Maker
New form ofcapital markets

Unexploredeconomic system

Inclusive socioeconomy
Universal
ownership

Enhancement of
medium- andlong-term return

Framework

Creation ofa new paradigm

Collaboration

Sustainable environment

Corporate culture, purpose

R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

17

Chapter

3

Responsible Investment and
Stewardship Activities

Resona Asset Management’s goal

New 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 the developmentof sound capital markets. In addition, we will discharge our broad fiduciary duties, byactively supporting the financial and capital markets in the desirable 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

ClimatechangeIncomeEnvironmental inequality
issuesThe unexplored “desirable economic systems

1

Human
rights● Global population growth● Further poverty, food shortages, environmental
degradation, water shortages, decreased public security,and migrants and refugees in developing countries● Loss of biodiversity, and severity of impacts fromclimate change

2● Greater global health risks● Shortcomings of social safety nets, wealth and income
inequality● Rapid digitalization, utilization of AI, and automation● Work style reform, and increasing non-regular
employment● Growing complexity of supply chains, and risingnumber of migrant workers

18

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

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

3

Understand the corporate culture and philosophyof the investee company
Re-recognize the goals and roles of the company,
and board’s functional role

Chapter

1

Chapter2

Chapter3

Chapter4

Chapter5

Chapter

6

Chapter

Chapter78Inclusive 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● Healthy and safe lifestyle (Sustainable food supply chain) �������������������������������������

P62● Address child labor and forced labor issues insupply chain management, improve working conditions ����������������������������������������● Diversity and inclusion ����������������������������������������������������������������������������������������������������

P66•67
P68● Workplace health and safety, employee wellbeing ��������������������������������������������������

P70● Biodiversity and forest conservation ���������������������������������������������������������������������������

P60•64● Effective utilization of resources, and resource circulation(marine plastic waste) �����������������������������������������������������������������������������������������������������

P65● Climate change �����������������������������������������������������������������������������������������������������������������

P69● Corporate ethics/Fair business conduct and anti-corruption ��������������������������������

P68•71R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

19

3

Responsible Investment and
Stewardship Activities

Future materiality analysis for making
a change toward a desirable future
Materiality based on long-term scenario
In order for stewardship activities of Resona Asset Management to lead to the realization of “desirable economic
systems of the future,” we believe that it is necessary to identify desirable economic systems for the future and theassociated issues they entail, and then bring about change in the direction from the probable future to the desirable
future. To this end, in FY2021, we have drilled down into the materiality analyses conducted during FY2020, andconducted an investigation of our materiality based on a long-term scenario.
Based on three future scenarios:
the Conventional Development Model, the Regional Rivalry Model, and the Sustainable Model, we discussed how social issues
would change in relation to the unexplored “desirable economic systems of the future,” namely (1) inclusive socioeconomy,(2) sustainable environment, and (3) corporate culture, purpose. As a result, we identified issues to be important in the future.

■ Issues to be examined for analysis of future materiality

Inclusive socioeconomy

Sustainable environment

Food production / Aging society
with a low birth rate & Health /Income inequality / Development& Poverty / Human rights

Water risk / Natural disasters /Climate change / Biodiversity

Corporate culture, purpose
Technological innovation &Digitalization (Cybersecurity) /Corporate ethics & Anti-corruption /Diversity

Adding a time axis to Materiality Matrices
Previously, we assessed each ESG issue along two axes:
importance to sustainability and importance to long-term investment performance. Now, through the long-term
scenarios analysis, we have attempted to add a time axis. An image of the assessment is presented below.

Present

ProbablefutureDesirable
futureGovernance●★

Environment●★

Society●★

●

Passage of time

★ Improvement and proposals●Governance ●Environment●Society/Human capital●Society/Community●Society/Products, services and society

Improve impact throughengagement

Importance to sustainability

Chapter

There are some issues for which it isdifficult to improve the impact onsustainability (e.g., water risk);
however, it is possible to promoterisk management throughengagement efforts, thereby
mitigating the financial impact.
* Conducted by the advice of BSR

Importance to long-term investment performance20

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Chapter

1

Chapter2

Chapter3

Chapter4

Chapter

Chapter5

Chapter

6

Chapter

78Long-term scenario analysis
Conventional Development Model
Projected implications
2050 global population:

Low projection of 8.5 billion people• Emphasis on economic growth• High technology development• Digitalization

Global GDP growth:

Rapid economic growth at 5% CAGR

• Free trade fueled by carbon-intensive fuels

2050 global GHG emissions increase:

This world places increasing faith ininnovation and participatory societies to
produce rapid technological progress.
Conversion to capitalist values that assess
the value of potential for innovation.

Temperature rise by the end of this century:

75% or more (compared to 2020)
High at 5°C, but full adaptation
measures for natural disasters(IPCC SSP5 baseline)

Material issues• Human rights for the sociallyvulnerable• Safety and quality of newtechnologies• Biodiversity• Land rights• Disparity in access totechnology• Human rights violations due to
AI ethics and monitoring

Regional Rivalry Model
Projected implications
2050 global population:• A low international priority• Low technology development• Slow economic growth• Inequalities persist or worsen (over time)• Delayed development of systems• Conventional shareholder capitalism will bemainstream• Environment and social goals not a priority

Material issues• Natural disasters

10 billion people• High population growth(IPCC SSP3 baseline)• Poverty

Notable increases in India and
Sub-Saharan Africa• Access to resources• Access to foodGlobal GDP growth:• Water risk

2050 global GHG emissions increase:• Sustainable procurement• Business conducted incountries with conflict/high risk

Low at 2% CAGR

30% or more (compared to 2020)• Human rights of workers

Temperature rise by the end of the century:

4°C

Serious impacts will be unavoidable

Sustainable Model(IPCC SSP1 RO1.9 baseline)

Projected implications
2050 global population:

Low projection of 8.5 billion people

Rapid advance in systematic changes
emphasizing sustainability. The world shifts
gradually, but pervasively, toward a moresustainable path, emphasizing more inclusive
development that respects perceived
environmental boundaries.
• Global cooperation• Internalization of social and environmental
impacts into the market economy• Development based on co-creation

Global GDP growth:

Gradual growth of 4% CAGR

Material issues• Tolerance for the burden ofsustainability issue solutions on
economic society and fair andjust transition• Governance• Partnership• CO2 emissions cut to net zeroaround 2050
• Universal adoption of carbon tax• Promotion of new competition
to drive creation of innovativetechnologies

Temperature rise by the end of the century:
Within 1.5°C• Pivot to stakeholder capitalism• The SSPs have been used to help produce the IPCC Sixth Assessment Report on climate change, published on August 9, 2021.
• Shared Socioeconomic Pathways (SSPs) are scenarios of projected socioeconomic global changes up to 2100. They are used to derive greenhousegas emissions scenarios with different climate policies.
R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

21

3

Responsible Investment and
Stewardship Activities

Discussion based on future scenarios
In the discussion based on “future scenarios,”
our expectation of the “probable future” wascloser to the Conventional Development Modeland the Regional Rivalry Model, where:
The future generations will struggle to achieve
current levels of abundance and happiness,
although some elements of the Sustainable
Model were foreseeable.
From a long-term perspective, sustainability
issues may exceed the responsiveness ofsociety, which could affect business continuity
and resilience of the whole value chain.

Future scenario

Probable future

Likely actual future
Expected future
At present

Desirable
futureTime
The image provided by BSR.

In the desirable future;• The sustainability impacts are internalized into the market economy.
• Stakeholder capitalism is formed, and diverse values are assessable. In order to alleviate the economic burden entailed
by the shift to such a desirable future,• Stakeholder dialogues need to be well implemented, where technological innovation and business model creation is
encouraged.
Changes to government policies are essential to functionalize and transit to stakeholder capitalism. Consequently, we
have recognized that we asset managers are able to contribute towards this transition.

Gap between the probable future and the desirable future/Role of asset managers
Probable future
Proportion image

Desirable future
Conventional Model

Proportion image

Sustainable Model

Conventional Model

Sustainable Model
Regional Rivalry Model

Regional Rivalry Model• Difficult to provide future generations with current levels ofabundance and happiness• A society that can provide future generations with current
levels of abundance and happiness• Sustainability efforts to end up into two pillars, as sustainability
impacts are not internalized into the market economy, although
long-term value creation is accepted in the capital markets.

• Sustainability impacts to be internalized into the market economy:– Stakeholder capitalism which accepts diverse values– Sustainability issues to be directly linked to management issues• Impacts on companies:– Sustainability issues exceeding social ability/responsiveness– Deterioration of business continuity and resilience• There needs to be an economic system that further encourages
technological innovation and business model creation in order
to alleviate socioeconomic burden on transition.

• Poverty and inequality• Human rights ofworkers and thesocially vulnerable• Biodiversity• Access to resources,
food, and water• Climate change,
natural disasters• Business in conflict-affected
and high-risk areas• Supply chain resilience• Safety and quality of
new technology• Human rights violation
due to new technology• Disparity in access totechnology• Issues contributing toinnovation and development(diversity and resource
circulation, etc.)

Impact on long-term investment performance

Discernment to assessmanagement strategies andgovernance (is sustainability
integrated into management
strategy and linked tocompetitive advantage?)

Need for policies which
will internalize
sustainability impacts
into the market economy

Establishment offrameworks fortechnology innovation
and business model
creation, which help solve
sustainability issues

Impact on sustainability

Stewardship activities
which tackle withsustainability issues directly
linked to business risks(before it is too late)

Impact investment thatconsiders issues whichwere left behind in themarket economy (= burden
on future generations)

Impact on sustainability

Chapter

Ability to identify
problems leveraging asset
management experience

Adaptation toa sustainable
society(transition risk)

New issues

Improvement of accuracy
and transparency of
impact assessment

Impact on long-term investment performance* Conducted by the advice of BSR

22

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Chapter

1

Chapter

Chapter2

Chapter

34Chapter5

Chapter

6

Chapter

7

Chapter

8

Issues in each scenario based on future projections
Conventional Development Model• Diversity:
Sustainability issues, which consist of technological innovation, will be
integrated into business strategy.

New issues posed byuse of new technology• Risk mitigation on food and natural disaster will be made possible fromtechnology innovation.
Issues contributing toinnovation and development(diversity, etc.)
Income inequality, etc.

• Inequality, human rights for the socially vulnerable will be severe issues
for the society.
• Following issues will emerge as a result of prioritization on economic andtechnological development– Safety and quality of new technology, such as food tech and automation– Land ownership– Disparity in access to new technologies– Human rights violations due to lack of ethical monitoring of AI• These scenarios assume:
The free market economy, where assessment on potential innovation istied to corporate value.

Regional Rivalry Model
Issues impacting on
business continuity(disasters, water
shortages)• Intergenerational inequality:
Inequities (lack of fairness or justice) between generations with regard to
standards of living
Resource
conflicts, etc.

• Further concern towards sustainability issues will cause direct impact on
business continuity and “supply chain resilience” due to:
The unstable society derived from poor responsiveness on sustainability.
• Priorities on sustainability issues which do not affect business continuity
will be lower because:
Sustainability management and investment are not rewarded.
• Difficulties to achieve sustainable procurement because of:Clash of civilization and competition among regions on mineral resources,
food, and water.
• T he above scenarios are based on conventional shareholder capitalism.

Sustainable Model• Emphasis on equality among generations
Adaptation to a sustainable society(transition risk)• T he current generation to accept a burden for the later generations• Conventional sustainability issues will be progressively internalized into
the market economy• Directly linked to management issues• On the other hand, the economic burden for sustainability will increase, anddelays on initiatives will be directly linked to business risk (= transition risk)• T he most important issue will be to:– Incorporate sustainability into business strategy– Connect to competitive advantage• Requiring increased sensitivity to sustainability issues• Strengthening governance and partnership frameworks• Stakeholder capitalism which accepts diverse values (conditional on
impact assessment being internalized in the market economy)• Resona Asset Management’s intention:– Not only to engage on sustainability issues/defensive action, but also to– Aim for a society which promotes innovation and competition necessary
for sustainability.

R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

23

Chapter

3

Responsible Investment and
Stewardship Activities

Scenario analysis viewed by issue
Inclusive socioeconomy

Food production

Conventional Development Model

Regional Rivalry Model

Sustainable Model

Solving food shortages through technologicalcapabilities• Monoculture• Industrial agriculture• Genetic modification• Alternative protein (cultured meat, etc.)

Food shortages due to climate change• Surge in food prices• Global competition for food• Worsening starvation in the poorest countries• Ecosystem degradation due to developmentof agricultural land
• Water shortages / Promotion of the “Local
Production for Local Consumption” model

Emphasis on conversion to low-environmental
impact food production (plant-based protein)and equal food supplies• Strengthening of regulations for future
generations• Promotion of the “Local Production for Local
Consumption” model

IssuesIssues• Access to food/nutrition• Loss of ecosystem / Deforestation• Right to free consumption (meat, sugar, etc.)• Safety of plant-based protein sources

Issues• Food quality and safety based on new foodtech
• Antibiotic resistance• Animal welfare• Degradations of biodiversity/genetic
resources• Access to technology / Access to nutrition• Loss of ecosystem / Deforestation

Inclusive socioeconomy

Aging society witha low birth rate & Health24• A griculture in 2050 will need to produce almost 50% more food than it did in 2012 tomeet demand.
• However, given the agriculture sector’s dependence on climate, the increase in
weather-related events is of significant concern to agriculture, adding to the vulnerabilityof individuals and challenging their food security. (FAO/2012)• Due to projected climate change by the mid-21st century and beyond, global marinespecies redistribution and marine-biodiversity reduction in sensitive regions will
challenge the sustained provision of fisheries productivity and other ecosystem services(high confidence). (IPCC/2014)• Under a climate scenario analysis by FAO, global food and agricultural productions areprojected to decline by 0.28% on average by 2050, due to climate-induced crop yield
losses• Consistent with the production decline, global calorie intake, an indicator of foodavailability, is expected to decline by 0.28%.
• T his is connected with a worldwide decline of food purchasing power (2.9%), an indicatorof food accessibility. (FAO/2018)

Global population aging: The global average lifespan is increasing in every area of theworld and is expected to reach 77.1 years in 2050. On the other hand, the total fertility rateis declining, mainly in advanced countries, and the world population aged 65 or over is
expected to more than double between 2019 and 2050.
Aging society with a low birth rate in Japan: In 2029, the population of Japan is expected
to fall below 120 million, breaking through 100 million to 99.24 million in 2053. The
proportion of the total population aged 75 or above will exceed 25%, that is, approximately
one in four people aged 75 or above in 2065. With the impact of the declining birthrate,
the working aged population will fall below 70 million in 2029 and is expected to fall toabout 45 million in 2065.
Labor shortage in Japan: The number of employed persons in Japan may fall from about
67 million in 2019 to about 52 million in 2040. The labor shortage will grow more
pronounced, particularly in small and medium-sized companies. In a breakdown byindustry, the labor shortages will become severe for regular employees in the
manufacturing and construction industries and for part-time employees in thelifestyle-related service industry.

Conventional Development Model

Regional Rivalry Model

Sustainable Model

Expanded acceptance and deregulation of
immigrant workers, and changes to workstyles

Expanded acceptance of immigrant workers,
and increase in vulnerable workers following
increase in refugees

IssuesIssues• Human rights of newly immigrated workers
and lack of inclusive measures• Human rights of non-regular workers and gig
workers• Competition between domestic vulnerable
workers and immigrant workers, andresistance among domestic workers• Financial collapse or disappearance of
depopulated areas of Japan• Human rights of immigrant workers• Financial collapse or disappearance of
depopulated areas in Japan

Expanded acceptance of immigrant workers,changes in workstyles, increase in employment
of seniors, and further advancement in Japanof distributed economy and workers living inregions

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Issues• Intergenerational gap• Labor shortages in Japan• Occupational health and safety due toincrease in senior-aged workers

Chapter

Chapter

12

Chapter3

Inclusive socioeconomy

Income inequality

Chapter4

Chapter

Chapter

56Chapter

Chapter78

Economic inequality: Income inequality in OECD countries has reached its worst level inthe past 50 years, with the average income of the highest paid 10% reaching approximately
9 times the average income of the lowest paid 10%.
Safety net: In low-income countries, around one in five people in poverty worldwide
remain outside the protection of a safety net.
Health care: The ratio of the global population able to access essential health care is
projected to improve from 33–49% in 2017 to 39–63% in 2030. However, 3.1–5.2 billion
people worldwide are still expected to have no access to necessary health care.
Digital divide: In areas with weak internet connectivity and low line capacity, the utilizationof AI and IoT technology will be limited, impacting productivity. The vicious cycle ofinequality in employment opportunities and economies due to gaps in education andcapabilities will worsen even further.
Increase in refugees: Over the past 10 years, 10 countries and regions have experienced
emigration of over one million people (outflows due to worker migration, conflict, or
safety). In 2030, as the global population increases, refugees due to climate change andother new causes will increase. The increase in low-skilled, low-paid workers in somecountries will have a significant impact on global labor supply.

Conventional Development Model

Regional Rivalry Model

Sustainable Model

Disregarding the issue of inequality• Increase in domestic economic inequality ofincome, education or employment• Developing countries will develop as a resultof supplying resources and labor

Disregarding the issue of inequality• Halt in development aid• Increase in refugees• Increasing dissatisfaction of citizens will giverise to populism• Political tension and destabilization

Emphasis on equality• Ensure living wage
• Increase income and wealth taxes• Need to pivot away from monopolistic
business models through fair distribution of
resources

IssuesIssuesIssues• Digital divide (education disparity, capability
disparity), and access to technology• Reeducation and capability development ofworkers•D ecrease in opportunities for participation by
the socially vulnerable and minorities, lack ofboard diversity• Deterioration of human rights issues due toincrease in refugee, immigrant workers andvulnerable workers• Education and capability development of
low-skilled workers•D ecrease in supply chain resilience due todestabilization of developing and emerging countries• Reduced health care access and increased
risk of infection disease• Increase in social contribution and social
impact• Collaboration with stakeholders• Reeducation and capability development ofworkers• Increased economic burden on high income
earners (wealth tax), and corporations (wageburden, tax burden)

Inclusive socioeconomy

Development & Poverty

Increased population in under-developed countries: Over half of the global population
increase up to 2050 will be concentrated in nine countries:
India, Nigeria, Pakistan, the Democratic Republic of the Congo, Ethiopia, Tanzania,
Indonesia, Egypt, and the United States.
Around 2027, India’s population is expected to overtake that of China, making it the mostpopulated country in the world. Population growth in under-developed countries is asignificant issue for sustainable development.
Increased population in extreme poverty: Global food production is expected to decrease
even as food demand increases due to population growth, making the issue of foodsecurity more severe. The proportion of people worldwide living in extreme poverty is
expected to increase from 8.6% in 2018 to a maximum of 12% by 2030, corresponding to
1.065 billion people.

Conventional Development Model

Regional Rivalry Model

Disregarding development issues• Increase in demand for mineral resources due
to high economic growth, leading to rapid
growth in resource countries

Disregarding development issues• Famine in developing countries due to climatechange• Deterioration of poverty issues• Concentration of poor regions• Increase in refugees• E xploitation of resources and labor indeveloping and emerging countries

Emphasizing development issues• Strengthen aid for developing countries• Encourage development of developing
countries

IssuesIssuesIssues• E xploitation of resources of developing
countries• Increased conflict minerals risk

Sustainable Model• E xploitation of resources of developing
countries• Human rights violations of refugees andimmigrant workers• Decrease in supply chain resilience due todestabilization of developing and emerging
countries

R e son a A sse t M a n a ge m e n t• Right to free consumption (meat, sugar, etc.)• Safety of plant-based protein sources

ST E WA R D SH I P R E P OR T

2021 / 2022

25

Chapter

3

Responsible Investment and
Stewardship Activities

Scenario analysis viewed by issue
Inclusive socioeconomy

Human rights

In Europe, directives mandating human rights due diligence are expected to be
formulated. The following communities are vulnerable in the area of human rights.
Immigrant workers: International immigrants made up 3.5% of the world’s population in
2019, at 272 million people. According to the International Labour Organization (ILO),
around 60% of the people relocating globally are immigrant workers. Occupational risks intheir work are considered quite high since working environments are characterized by the
3Ds (Dirty, Dangerous, and Demanding) and a high proportion of work is concentrated,
temporary, or seasonal.
Indigenous peoples: With the focus of public attention on protest movements concerning
infringements of rights of indigenous people in the North American pipeline development
project, in recent years, awareness of respecting the rights of indigenous people is also
spreading in Asia and Oceania.
Non-regular employment and gig workers: Work-sharing will become popular, and evenas the vulnerability of non-regular workers become apparent, the gig economy andnon-regular workers will continue to increase.
Workers facing high health and safety risks: According to the ILO, there are around 1,000
occupational accidents and about 6,500 people dying from work-related accidents ordiseases every single day. The proportion of fatalities is markedly high in Africa and Asia,and given the expected increase in working population in these areas in the future, theissue is considered extremely serious.

Conventional Development Model
Disregarding human rights issues• Priority on technology advancement•W orkstyle changes (project-based employment)

Issues• Long working hours among white-collar workers• Mental health•H uman rights of non-regular workers and gig workers• Human rights violations associated withadvance in digitalization (personal information
protection), human rights violations associatedwith the use of AI (AI monitoring, infringement
on freedom of expression, hate and humanrights violations on social media)• Violation of indigenous peoples’ rights due toprioritizing development

Sustainable environment

Water risk

Regional Rivalry Model

Emphasizing human rights issues• Reduced freedom due to excessive respectfor human rights

IssuesIssues•R isks related to workers’ human rights (forcedlabor, child labor, health and safety)• L and rights violations (forced transfer)• Violation of indigenous peoples’ rights• Harms arising from excessive respect forhuman rights• Increase in corporate burden (slowdown in
new business development due to high riskof lawsuits)

Water shortages: In the major mining regions of Chile, Australia, Indonesia, and South
Africa, water shortages and drought issues are projected to worsen. Under the World
Wildlife Fund (WWF) scenario analysis, the proportion of global GDP attributable to areasof high water risk may increase from 10% in 2020 to 46% in 2050. Currently, 33% of theworld’s population lives in areas of water shortage. However, a 4°C temperature rise is
projected to increase this figure about 1.5 times to 47–50% (under the IPCC’s Fifth
Assessment Report WGII), while the World Resources Institute (WRI) projects that water
shortages will grow worse in the West and South of the U.S., China, Southeast Asia, and the
Middle East. Water shortage is an issue that is closely tied to issues in developing countries
such as food shortages and poverty.

Conventional Development Model

26

Sustainable Model

Disregarding human rights issues• Increase in vulnerable workers associatedwith increase in refugees• Resource grabbing and uncontrolled landdevelopment

Regional Rivalry Model

Sustainable Model

Competition to secure land in relation to water
resources due to prioritization of the economy

Global competition for water resources• Industrial decline due to water shortage(Australia)

Strengthening of regulations emphasizing
water risk, such as water withdrawal limits• Water footprint• S oaring values of land and assets with low
water risk due to consideration of water risk inassessment by financial markets

IssuesIssuesIssues•S oaring agricultural commodity prices due todepletion of groundwater• Degradation of ecosystems due tointensification of land development in areasof low water stress• Risk of land rights violations•S oaring agricultural commodity prices due todepletion of groundwater• Increase in business continuity risk forbusiness sites in areas of high water risk andreduction in supply chain resilience• S oaring value of land and assets where waterrisk is low• Water footprint

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Chapter

1

Chapter2

Chapter

Chapter3

Sustainable environment

Natural disasters

4

Chapter5

Chapter

6

Chapter

Chapter78Natural disaster risk: The 2018 revision of World Urbanization Prospects includes:
Estimates and projections for 1,860 urban agglomerations with 300,000 inhabitants or more (as of mid-2018).
• It has been estimated that:
The direct losses from all disasters in the period 1998-2017 totaled $2.9 trillion, which is 2.3 times as much as theoverall losses of $1.3 trillion in the period 1978-1997.
• New analysis from WRI (World Research Institute) on Aqueduct Floods finds:– The number of people affected by floods will double worldwide by 2030.
– T he amount of urban property damaged by riverine floods will increase threefold — from $157 billion to $535 billion
annually.
– Urban property damaged by coastal storm surge and sea level rise will increased tenfold — from $17 billion to $177
billion annually.
According to the National Institute for Environmental Studies, when calculated based on the 2011 Statistical Survey on
Flood Damage of Ministry of Land, Infrastructure, Transport and Tourism, an annual average flood damage cost in thisresearch’s base period (1981-2000) represents approximately ¥200 billion, and it possibly results in double increase at
the end of the century from the present (around 2013).
Sea level rise: Land inundation due to sea level rise will force people living in small island nations and countries withextensive coastlines to relocate.
Heat stress: Projections with the RCP8.5 scenario indicate:• Annual mean temperature at the end of the 21st century will rise throughout Japan.
• Projected at 3.4 to 5.4°C (suggested greater increase at higher latitudes), with the number of hot summer days
increasing by more than 50 and extremely hot days increasing by around 20.
Human health, Industrial/Economic activity, Life of citizenry and Urban life
• Under the RCP8.5 scenario, the projected number of cases where heat illness patients will be carried by an ambulance will:– Increase nationwide in the mid-21st century (2031-2050).
– At least double in eastern and northern Japan.
Synthesis Report on Observations, Projections and Impact Assessments of Climate Change, 2018
“Climate Change in Japan and Its Impacts” (Ministry of the Environment, et al.)Conventional Development Model

Regional Rivalry Model

Sustainable Model

As natural disaster risk increases, the states’ resilience
will strengthen• Natural disaster risk assessment will advance in financial
markets such as insurance• S oaring prices for safe land

Natural disaster risk will become more severe due toworsening climate change, international cooperation will bedelayed and disaster resilience will be decreased•H uman damage will increase in areas vulnerable to disaster• Increase in climate refugees

Focus on increasing the resilience of states and cities• People living in high-risk areas will be encouraged torelocate to safe areas, and natural disaster risk
assessment will be advancing in financial markets suchas insurance

IssuesIssuesIssues• Rise of business continuity risk of supply chains indeveloping countries• Widening inequality due to soaring land prices andhousing costs• Disparity of resilience among states and cities• Business continuity risk from natural disasters• Business continuity risk in supply chains in developing
countries• Decline in resilience of supply chains due to geopoliticalrisk in non-developed countries.
• Increase in labor safety risk due to heat stress• Increased risk on infectious disease from temperaturerise• Increased burden for infrastructure investment (publiccharges, tax burden)• Increase in costs of corporate resilience measures• Disaster measures for operation sites and value chains• Safety confirmation of employees and suppliers

Sustainable environment

Climate change

The IPCC Special Report on Global Warming of 1.5°C (SR15) (October 8, 2018)• SR15 shows that, for global warming to be limited to 1.5°C, “Global net human-caused emissions of carbon dioxide (CO2)
would need to:– Fall by about 45% from 2010 levels by 2030,– Reach 'net zero' around 2050.”• T he reduction of emissions by 2030 and its associated changes and challenges, including rapid decarbonization, was a
key focus on much of the reporting which was repeated through the world.
This means a more rapid and marked change compared to the emissions pathway for keeping the temperature rise within 2°C.
The 1.5°C emissions pathway requires:• Increasing the proportion of low-emission energy sources. This entails a significant improvement and spread ofrenewable energy and electricity storage technologies, with the proportion of electricity provided by renewableenergy projected to be around 50% by 2030 and 85% by 2050 (IPCC 2018 table 4.1).
The share of primary energy from renewables increases while coal usage decreases across pathways limiting warming
to 1.5°C with no or limited overshoot (high confidence). By 2050, renewables (including bioenergy, hydro, wind, andsolar, with direct-equivalence method) supply a share of 52–67% (interquartile range) of primary energy in 1.5°C
pathways with no or limited overshoot; while the share from coal decreases to 1–7% (interquartile range), with a large
fraction of this coal use combined with carbon capture and storage (CCS).
Emissions from the industry sector need to be reduced by:• 40% by 2030, and• 65–90% by 2050.
Efficiency gains in energy and processes alone will not be sufficient. Heavy industry will need to introduce alternative
fuels, circular usage, and carbon capture and storage technologies (IPCC 2018).
The 1.5°C pathways would require:• Rapid and far-reaching transitions in energy, land, urban and infrastructure (including transport and buildings), andindustrial systems.
• Technical measures and practices enabling deep emissions reductions include various energy efficiency options. In thetransport sector, the share of low-emission final energy should rise from 2035 to 2050.
(IPCC SR15, October 2018)

Regional Rivalry Model

Sustainable Model

Increases in energy demand and GHG emissions• Active innovation on next-generation vehicles andhydrogen fuel cell technology

Conventional Development Model

Increases in energy demand and GHG emissions• Halt in climate assistance to developing countries• Industry relocation to the relaxed regulation countries

GHG emissions will be reduced 40% by 2030 and to net
zero by 2050
• Introduction of universal carbon tax• Ban internal combustion engine vehicles•M andatory requirement towards zero emission buildings• Penetration of hydrogen energy

IssuesIssuesIssues• Increase of GHG emissions, severity of climate change
impacts• Worsening air pollution in developing countries• Increase of GHG emissions, severity of climate change
impacts• Industry relocation to countries with cheap energy
prices (coal reliant) and carbon leakage• Conflict between countries due to differences in stanceon climate change countermeasures• Worsening air pollution in developing countries• Stable supply of electricity and energy security•N uclear power safety and the risk to next generation• Increase in economic burden for investment in hydrogen
infrastructure and investment in renewable energy,
hollowing out of the economy due to strengthening ofcarbon pricing and emissions regulations•S tranding of fossil fuel assets and dissatisfaction of highemission sector workers due to overly rapid transition• Just transition (reeducation of workers and smooth
employment transition)

R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

27

Chapter

3

Responsible Investment and
Stewardship Activities

Scenario analysis viewed by issue
Sustainable environment

Biodiversity

Land degradation: The quality of land and soil is being degraded by environmental pollution,
overuse of agrochemicals, over grazing, erosion, climate change, and deforestation of land
belonging to indigenous communities. Competition for acquisition of land to cultivate food andbiofuels is also becoming more intense. According to the FAO, over 33% of land in the world isalready degraded, and over 90% of land in the world could be degraded by 2050.
Biodiversity risk: The UN reports that its 20 international goals to be achieved by 2020
under the Convention on Biological Diversity have not been fully met. The naturalenvironment and survival and diversity of the living organisms are being destroyed at a ratethat is several tens to hundreds of times faster than the average over the past 10 million
years. Ecosystems are thought to have declined by 47%. Remedying this situation requiresa radical transformation of society overall. The UN warns that, without such atransformation, there is a risk that approximately 1 million species of animals and plants– the largest number in history – could face the risk of extinction within decades.
Deforestation: The current area of the world’s forests is around 68% of the estimated areaprior to the industrial revolution. The global area of intact forest landscape declined by 7%(919,000 km2) from 2000 to 2013.

Conventional Development Model

Disregarding biodiversity• Advance of land development anddeforestation to support resource demand

IssuesIssues• Decline of biodiversity and worsening of
deforestation• Loss of access to natural resources andtourism resources for future generations• Increased risk from viruses and infectious
diseases due to decrease in species diversity
and increased uniformity

Corporate culture, purpose

Technological innovation &Digitalization (Cybersecurity)• Decline of biodiversity and worsening of
deforestation• Food shortages due to massive pest
outbreaks and so forth• Loss of access to natural resources andtourism resources for future generations• Increased risk from viruses and infectious
diseases due to decrease in species diversity
and increased uniformity

Sustainable Model
Emphasizing biodiversity• Prohibition of deforestation• E xpansion of designated protected areas• Strengthening of regulations on trading in
biological resources• Promotion of investment for recovering
biodiversity

Issues• Inability to use nature as a tourism resource
resulting from tighter regulation of tourism
resources due to expansion of protectedareas and strengthening of regulations

Advance of automation and smartification driven by robotics and AI: Companies need tominimize worker unrest by cooperating with governments and other industry-related
entities. As secondary impacts on workers from the industrial use of robotics, the ILO
indicates the risk of accidents arising from loss of understanding, control, and knowledgeof work processes and over reliance on the certainty of robots and AI.
Techno-nationalism and cyberattack risk: Companies’ digitalization strategies are heavily
reliant on technologies such as cloud computing and 5G, which increases cybersecurity
risks. There is a potential impact on the growth of certain markets from a halt in transfer oftechnologies between regions.
Impact of monitoring technologies: Monitoring technologies are advancing rapidly, andtheir application has accelerated under COVID-19. While they lead to increases in plant
efficiency and health and safety, sales of software for monitoring workers working at homehave risen sharply and could have a negative impact on employees’ privacy. Moreover, thelonger the period that emergency measures remain in place, the greater the risk thatgovernment monitoring of citizens’ movements and bio-information become normalized.
Impact on labor markets: Automation could have disproportionate impacts on certain
groups, such as African Americans and women.

Conventional Development Model

Regional Rivalry Model

Advancing digitalization and automation, increasing
competition in technology development, andincreased protection of intellectual property rights

Increasing disparity in technological innovationand digitalization between regions(techno-nationalism)• Unintended use of digital technologies byhigh-risk national governments

Co-creation based technological innovation• Increased regulation of monopolistic use of
intellectual property rights

IssuesIssues•D ata usage and personal information protection• S erver attack risk
• Human rights violations by surveillancesocieties (monitoring of citizens bygovernments, infringement on freedom of
expression)• Increase in importance of partnerships
between companies• Need to pivot away from monopolistic
business models

Issues•D ata usage and personal information protection• Server attack risk
• Violation of the rights of workers inlabor-intensive industries due to automation
and robotization• Worker safety and product safety inconjunction with the use of automation
technologies (automated driving vehicles)• Human rights violations in surveillancesocieties (monitoring of workers by companies,
monitoring of citizens by governments)• AI weapons• AI ethics (when used in hiring and customer
differentiation, etc.)• Transparency of taxes of multinational
corporations based on ICT platforms

28

Regional Rivalry Model

Disregarding biodiversity• Advance of land development anddeforestation to support resource demand

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Sustainable ModelChapter

Chapter

12

Chapter3

Corporate culture, purpose

Corporate ethics &Anti-corruption

Chapter4

Chapter

Chapter

56Chapter

Chapter7

8

In the global market economy, the issue of uneven wealth distribution by lone winners has
been pointed out and demands on major companies to demonstrate corporate ethics are
growing stronger.
Corruption risk: Longstanding involvement of multinational corporations in structuralbribery schemes has been pointed out. In particular, in countries that are home to the head
offices of multinationals, there are concerns that implementation of the OECD Convention
on Combating Bribery of Foreign Public Officials in International Business Transactions
may be withheld. Enhancing the efficacy of the convention has become an issue. A reportby the OECD Working Group on Bribery points out that in Japan the implementation statusof bribery prevention laws is particularly poor.
Tax transparency: Automatic information exchange and offshore taxation surveys toeradicate bank confidentiality for the purpose of tax evasion are yielding significant resultson the issue of offshore tax evasion. Going forward, the OECD plans to advancecollaboration between governments focused on preventing tax evasion in emerging
countries and increasing tax transparency.
Involvement in government: Corporate spending related to lobbying in the United States
has risen to $3.1 billion per year. Lobbying can result in preferential treatment of aparticular profit-making entity, so it is extremely important to ensure transparency. In
addition, there is an increasing number of cases where company CEOs have been required
to offer opinions that are critical of a particular government in countries and regions where
human rights are not respected, or conversely, be criticized for not expressing an opinion.

Conventional Development Model

Regional Rivalry Model

Sustainable Model

Competitive society and growth of major
multinational companies• Emergence of issues related to uneven wealthdistribution

Disregarding corporate ethics• Polarizing ESG company evaluations bymarket and region

Emphasizing corporate purpose and corporate
ethics• A polarized market in which best practicecompanies receive higher assessments

IssuesIssuesIssues• Tax transparency of multinational
corporations• Transparency of involvement in government• Fair competition• Discovery of bribery causing major damage
to corporate value• Corruption risk
• Discovery of bribery causing major damage
to corporate value• Increasing importance of corporate
governance• Discovery of bribery causing major damage
to corporate value

Corporate culture, purpose

Diversity

Racial justice: The Black Lives Matter (BLM) movement in the United States has grown toan unprecedented scale. Racial justice groups in the United States collected an estimated$5.9 billion in funds in 2020 from aid foundations and high value donors. This trend isdeveloping into a global movement calling for the elimination of structural oppression,
driving an increasing need to include people who have suffered any form of discrimination,
based on gender, race, ethnicity, or disability and so forth. Furthermore, in addition todiversity and inclusion (D&I), there is also a rising demand for equity (DEI).
Gender diversity: Companies that lack gender diversity suffer negative effects on diversityof thinking and ideas, risk management, and decision making. There are numerous analyses
showing that their financial results are lower than those of companies that have highgender diversity, creating stronger selection pressure from institutional investors. In Japan,
the wage disparity between men and women is such that in terms of the average pay ofgeneral workers, women make only 73.3% of what men make (2018 figures). The ratio of
female executives is 14.8% for all companies, while for listed companies, women make up
only 5.2% of corporate officers (2019), an extremely low level compared with othercountries.

Conventional Development Model

Regional Rivalry Model

Sustainable Model

Promoting diversity to drive corporate
competitive capability and innovation• Changes in workstyles and employment• Increased entrepreneurial activity by CEOs
with minority backgrounds

Disregarding diversity• Conflict between management and labor

Emphasis on DEI• Promotion of affirmative action• Increased entrepreneurial activity by CEOs
with minority backgrounds• Changes in workstyles and employment, suchas workers’ collectives

IssuesIssuesIssues• Emphasis on capability development andemployee retention• Halt to diversity and inclusion (discriminationand structural disparity)• Drop in employee retention• Increase in employment costs due toaffirmative action and enhancement ofeducation for low-skilled workers.
• Emphasis on employee engagement• Emphasis on diversity in supply chainsR e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

29

3

Responsible Investment and
Stewardship Activities

Impact management■ Impact measurement
In this report, we 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. Intentionality
2. Financial Returns

Impact3. Applies to Multiple Asset Class
4. Impact Measurement

Risk■ Process image of impact management on sustainability bonds

ESG
investment

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

Integration

Input

RAM’s image on impact andimpact pathway *RAM

Engagement

Fine-tune the image gap

Proxy voting

Issuers’ image on impact andimpact pathway *Issuers

Intention

Impactmeasurement

Responsible investment

Chapter

Impact management (PDCA cycle)

Impact pathway

Activities

OutputAvoided andreduced GHG
emissions

Biodiversity
preservation andenhancement

Outcome

Impact

Jobs createdDerivingmonetary values
for impacts* Impact pathway: A
 n impact pathway maps the causal linkages between inputs and the activities they support (e.g. the funding and projects it
supports) and ‘real world’ outcomes and impacts.

30

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Chapter

1

Chapter2

Chapter3

Chapter4

Chapter5

Chapter

6

Chapter

7

Chapter

8

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

Importance to sustainability

We conducted impact measurements on sustainability bonds, focused on 5 issuers and 3 indicators, by considering
the feasibility of assessment, importance of sustainability projects, and our material engagement issues (page 20).

Environmental
metrics
Avoided andreduced GHG
emissions
Biodiversity
preservation andenhancement
Importance to long-term investment performance

Social metrics

Feasibility of assessment

Jobs created

Importance of sustainability projects■ Impact measurement on sustainability bonds
We have taken traditional environmental and social metrics and converted them intomonetary values that measure a change in wellbeing for people, by referring to various
studies on methodology.

R e son a A sse t M a n a ge m e n t

Deriving monetary values
for environmental orsocial impacts

ST E WA R D SH I P R E P OR T$

2021 / 202231

3

Responsible Investment and
Stewardship Activities

Impact management
Impact pathway

Avoided and reduced GHG emissions

We have referred to the methodology of Social Cost of Carbon, SCC. We have communicated our approach regarding
impact pathways to issuers and have confirmed that there are no major discrepancies in terms of awareness.
Activities

OutputOutcome

Project activities, e.g.

ImpactReduced/Avoided impact of:Energy efficiency

Built environment

Reductionin energy
consumption

Sustainabletransport
Resilientinfrastructure, built
environment & other

Carbonsequestration

Green banking

Agriculture,
land use, forests &ecological resources

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

Productionof clean/green energy

Rising mean
temperatures,
heat stress
Shifting climate
patterns, e.g.
droughts andfloodsIncreasing
extremeweather
eventsRenewable energy

Market damages

Avoided negative
outcomes:

Damage from extreme weather events, expenses
on coastal protection, increased load on energy
systems due to energy demand caused 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 and yields;
desertification leading to a loss of productive andhabitable land

Non-market damages

Input

Financing provided

Chapter

Global social
cost of carbon
per tonne
CO2e

Human health

Increased malnutrition or loss of life due toincreasing frequency of droughts and floods,
reduced agricultural output, spread of disease,poverty and heat wave

Other ecosystem services(e.g. biodiversity; climate regulation)

Widespread changes affecting biodiversity andmany associated ecosystem services(Note) BAU: No particular countermeasures taken (Business as usual)

Impact pathway

Biodiversity preservation and enhancement

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 based ona 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
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 fromchanges in biodiversity

Averagemarginal cost(($/ha/yr)of land use
resulting fromecosystem
services(the cost will
be presented
as oneaggregatednumber))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

OutputRenewableenergyJobs created

Induced jobs
Jobs supported by workers
spending money in thenational economy

Resona Asset Management

Increased worker
purchasing power

Gross earnings,
PPP adjusted(Country specific value)

Mental health and wellbeingfrom employment

Subjective wellbeing value(Country specific value)

Gross wages from project

Sustainabletransport

32

ImpactTotal 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

OutcomeS TEWA RDSH IP REPOR T

2021 / 2022

Increased worker purchasing
power (Induced)

Chapter

1

Chapter2

Chapter3

Chapter

4

Results of sustainability bond assessment

Chapter5

Chapter

6

Chapter

Chapter

7

8

Results by project category

Whereas sustainability bond issuers have made progress with disclosures on climate change, those on biodiversity
and job creation have been inadequate.
Avoided and reduced GHG emissions

Biodiversity preservation and enhancement

Jobs created* We did not determine “additionality”(Note) or negative impact.
Note: 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.

Geographic
distribution of
impacts

Avoided and reduced
GHG emissions

The impacts are largely attributable toprojects involving renewable energy. The
impacts are widely distributed across various
regions. There are numerous large projects
particularly in Asia.

ImpactLow High

Geographic
distribution of
impacts

Biodiversity preservationand enhancement

Large projects in Belarus account for about
half the total monetary contributions, followed byprojects in Uruguay, Brazil, and Mexico.
ImpactLow High

Geographic
distribution of
impacts

Jobs created

A majority of the projects involve renewableenergy. While a substantial amount of monetarycontributions is associated with agriculture andland use, most of it is attributable to a single
large project in China.

ImpactLow High■ Dialogue with companies• We perceive risks through confirming whether there are any projects excluded from eligible sustainability projects.
There were no excluded projects in this assessment.
• Ongoing dialogue has led to better information disclosure relative to last year with respect to many issuers and indicators.
• We have also conducted engagement with the issuers who were not eligible for impact assessment, encouraging more
information disclosure.

R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

33

3

Responsible Investment and
Stewardship Activities

Initiatives related to impact investment
Resona Asset Management has embarked on impact investment entailing listed shares, which serves as oneof its progressive initiatives. Establishing intentions is an important aspect of impact investment. We have set up
impact investment initiatives involving Japanese and global equities, and have accordingly spelled out intentions
that take into account matters of importance and urgency to Resona Asset Management’s clients and investee
companies.
■ Embarking on impact investment
We have embarked on impact investment in Japanese equities and impact investment in global equities (climatechange) upon having spelled out intentions in that regard based on identified materialities.
Key issues addressed by impact investment●Governance ●Environment●Society/Human capital●Society/Community●Society/Products, services
and society

Climate change

Importance to sustainability

Chapter

Resilience on living foundation

Inclusive community

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

Intentions

Impact investment in Japanese equities

Impact investment in global equities(climate change)

Achieving a Japanese society oriented tosustainability and livability

A sustainable world where climate change and its
effects do not pose a threat to anybody’s life or healthCreating sustainable androbust living conditions

Creating a society
where everyone isable to live in comfort

Topics of engagement

Mitigating climate change

Adapting to climate change

Topics of engagement■ Creating next-generation
communities■ Maintaining and improving
functions of lifeline utilities■ Preventing and mitigating
disasters■ Industrializing and improving
reliability of food production■ Utilizing sustainable energy(Decarbonization and recycling)■ Reducing burdens of houseworkand childcare■ Diversifying and improving
education■ Achieving sustainable medical
and long-term care
■ Addressing managerial
challenges of SMEs
■ Encouraging personal
empowerment■ Reducing GHG emissions toachieve the goal of limiting global
warming to 1.5°C■ Taking a structured approach toaddressing individual challenges
through categorization of supplyside and demand-side issues■ Promoting behavioral change
across society■ Addressing issues involving
measures for coping withcatastrophic events attributable
to climate change, procurementof food and water, and other suchmatters■ Addressing issues caused bytransformation of social structures
brought about by measures forcoping with climate change■ Important considerations for impact investment
1. Clearly articulate social changes to be facilitated through the investment portfolio.
2. E
 ngage in ongoing dialogue with respect to awareness of social challenges and means of addressing such challenges
in a manner that involves sharing with investee companies aspirations for producing a positive impact.
3. Share a visual depiction of impacts on society with stakeholders.
4. Seek financial returns premised on producing a positive impact on society.

34

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Chapter

Chapter

1

Chapter2

Chapter3

Chapter4

Chapter5

Chapter

6

Chapter

78Impact investment in global equities (climate change)■ Accelerated efforts needed to reduce GHG emissions
It will be necessary to reduce annual CO2 emissions by at least 25 gigatons by 2050 even under the sustainable
development scenario goals of the Paris Agreement (strive to limit global temperature rise to 1.5 degrees Celsius in
keeping global warming to sufficiently below 2 degrees Celsius). Moreover, an emissions reduction of 35 gigatons issimilarly necessary in order to achieve the scenario of 1.5 degrees Celsius. Countering climate change will call for non-linear
pathways to social transformation entailing substantial changes with respect to conventional modes of human activity.
Climate change simulations by policy scenarios°C

Required levels of CO2 reduction by policy scenarios

Gt CO240

3Stated Policies Scenario

Stated Policies Scenario

35

2.5

Announced Pledges Scenario

Standards set in linewith Paris Agreement

2

Sustainable Development Scenario

1.5

Announced Pledges Scenario

25

20

Net Zero Scenario

Net Zero Scenario

15

Maintaining a climate change level of 1.5°C is only
possible with the Net Zero Scenario.

130

Historical

10

There are significant discrepancies between the scenarios
based on the current policies and pledged values.

0.5
5

0

2000

2010

2020

2030

2040

2060

2050

2070

2080

Sustainable Development Scenario

0

2090

2100

2000

2005

2010

2015

2020

2025

2030

2035

2040

2045

2050

Source: World Energy Outlook 2021, International Energy Agency (IEA)■ Investment philosophy
We believe it is possible to attain excellent performance while helping to achieve social sustainability by investing incompanies that act to interrupt and decelerate (mitigation) processes attributable to climate change, and are capable ofminimizing adverse effects of climate change on society (adaptation).
Achieving a sustainable world where climate change and its effects do not pose a threat to anybody’s life or health
Mitigation■ Stave off climate change by reducing GHG emissions■ Analyze and examine the energy supply-side in seeking to establish and develop a model for energy infrastructure that minimizes
environmental loads■ Analyze and examine the energy demand-side in facilitating efforts to decrease energy consumption and promoting environmentally-sound energy

Adaptation■ Facilitate measures to prevent adverse societal effects that cannot be addressed solely through mitigation initiatives (enlisting measures thatinvolve disaster prevention and mitigation, disease control and prevention, and water resources management, etc.)■ Deal with adverse effects on society that may emerge in the course of addressing climate change■ Approaches to addressing challenges
We categorize processes attributable to climate change as either demand-side or supply-side concerns, andfurthermore assign them to more specific groupings on the basis of industry and sector.

Demand-side■ Core technology■ Innovative technology■ Behavioral change

MitigatingclimatechangeDemand-side
issues (KPI: GHG,
electric power,
consumption
volume offossil fuels)

Industrial motors(ratio of dissemination of highly efficient motors)

Electrification(low carbonization)and efficiency
improvementsof energy use
in buildings
and homes
Electrification(low carbonization)and efficiency
improvements ofenergy use in
the transportation
sectorSustainably
utilize energy
in the fields ofagriculture
and livestock
Waste■ Core technology

FA/FEMS

Bioplastic
Scientificprocess
ZEH

Power
generationfrom renewableenergyHydrogenreduction
steelmaking

Steel

Biologicalsynthesis,
hydrogen,etc.

Photovoltaic
power
generation

Micromanagement
using inverters, etc.

■ Innovative technology

Powerelectronics

Efficiency
improvements
of industrial
energy use
Replaceindustrial
fossil-derived
materials

Supply-side

Electric
furnace

Change industrial
energy used toelectricity(low carbon)
or hydrogen

Recycled
materials

ZEB

Behavioral
changeMolecular
recycling
Shift tohydrogenLow carbonization andefficiency improvements ofenergy use in automobiles(consumption volume of fossil fuels)

Shift to EV(penetration
rate of EV)

Low carbonization andefficiency improvements ofenergy use in airplanes, etc.
(consumption volume of fossil fuels)

Renewable
fuel

Carbon offset

Shift to EV/hybrid

Selective
breeding

Renewable fuel(consumption
volume,penetration
rate (share))

Optimize feed forruminants and manure™

MitigatingclimatechangeSupply-side
issues (KPI: GHG,
consumption
volume offossil fuels)

R e son a A sse t M a n a ge m e n t

Smart grid

Regulate supply
and demand andsecure backup
power source

Wind power

Increase size

Hydrogen(Power to Gas)

Water power,
geothermy,etc.

Grid balancing

Storagebattery

Control oftransmission
anddistribution
systemDemandenergymanagement

EV charger
electric power
management

Reduce loss ontransmitted
power(percentage oftransmission
loss)

High voltage
DCtransmission

Carbon neutral
thermal power

CarboncaptureNuclear power

Other(smart meter,
etc.)

HydrogenHigh-efficiency
thermal power

ST E WA R D SH I P R E P OR T

2021 / 2022

35

Chapter

3

Responsible Investment and
Stewardship Activities

Impact investment in Japanese equities■ Cascading nature of social challenges
With social challenges in Japan becoming increasingly severe amid a cascading chain of events, we aim to disrupt thatprocess through this fund.
Japan’s social challenges becoming increasingly
severe amid a cascading chain of events
Global issues

The fund aims to disrupt the chain of events

Food issues,energy issues, etc.

Global issues

Inclusive community
Increasing
obligations
for future
generations

Increasing
uncertainties
for future
generations
Chain ofuncertainties

Decliningbirth rate

Increasing
obligations
for future
generations

Bleak picture
for future
generations

Chain ofobligations

Labor shortage
Shortageof leaders

Decliningbirth rate

Labor shortage
Shortageof leaders

Aging society

Increased
lifespans

Aging society

Resilience on living foundation

Increased
lifespans■ Investment philosophy
We carry out investment based on our investment fundamentals and investment policy, underpinned by the aim ofachieving a Japanese society oriented to sustainability and livability.

Investment fundamentals
Private-sector companies that are not publicly funded are increasingly called on to take on a role of addressing social
challenges in the course of their business activities. Companies that contribute to resolving social challenges in response
to such societal demands are likely to achieve substantial returns over the long term as they encounter persistent growthby tapping into an abundance of business opportunities.

Investment policy
We carefully make choices to invest in companies capable of leveraging synergies toward producing a positive impact
on society and increasing their corporate value through originality and ingenuity. This involves rallying management
resources and support for addressing challenges from various stakeholders. We achieve a greater likelihood of producing
positive impacts through dialogue and engagement focused on specific thematic goals.

Scope of the fund
Addressing social challenges throughthe power of business

Addressing social challenges throughfinancial contributions and public policy■T he fund greatly advances solutions to social challenges
by enlisting synergies derived from integrating
professional talent, management resources, andtechnologies.

Complementary
relationship■T he fund maintains potential in terms of ripple effects
across various realms of society including job creationand industrial transformation.

36

Resona Asset Management

S TEWA RDSH IP REPOR T■ The fund makes it possible to seek solutions
by drawing on ethical values and goodwill
even when it comes to fields not prone tocommercialization.
■ The fund holds promise of helping to achievesocial stability through effects of income
redistribution.

2021 / 2022

Chapter

1

Chapter2

Chapter

Chapter3

Chapter4

Chapter5

Chapter

6

Chapter

78■ Impact measurement and logic modelThis section presents actual examples of impact measurement. We achieved a greater likelihood of producing positive
impacts by conducting engagement based on impact measurement.

Example of investment
holdings assessment

Philosophy

ImpactOisix ra daichi Inc.

“Farm for Tomorrow, Table for Tomorrow”
Taking a business approach to addressing social issues related to food
Reducing burdens ofhousework and childcare

Industrializing and improving
reliability of food production■ Women tend to assume a greater burden ofhousework in the home

Issues■ T here is a need for food and distribution alignedwith diversifying lifestyles

Value proposition

Support for diverse lifestyles

Business model■ T he farming population is rapidly declining due
to aging of the agricultural worker demographic
accompanied by closure of such operations■ Market volatility has given rise to increasing
business instability among producers and foodloss at production sites

Promotion of independent farming

Meal kits

Quality food production■ T he meal kits contain main and side dishes
that can be prepared in 20 minutes, thereby
reducing workloads of those in double-income
households with children■ Increasing prevalence of a subscription-based
business model makes it possible to securea consistent supply of agricultural products
through long-term contracts■ T he meal kits make it possible to prepare
proper meals featuring safe and reassuring
ingredients along with extensive menu options■ T he meal kit service creates a market for
distribution and sales of quality meals that arehighly distinctive made with organic ingredientsthat are low in pesticides■ T he meal kits contain appropriate foodquantities thereby resulting in less food loss

Food delivery business■ T he food delivery service enlists nationwide producers who make good
food and connects them with family dining tables■ T he food delivery business addresses diversifying lifestyles through useof home delivery services;
The food delivery service differs from the “CO-OP” Japanese Consumers’
Co-operative Union and other such scheduled home delivery services whichlack flexibility when it comes to delivery dates and times
Bottom-up

Logic model

Impactmeasurement

Activities

Outputs

Qualitative•F ood delivery business

Qualitative• Increase in membershipcounts of three homedelivery brands• E xpanded scope ofvalue proposition→ Dietary education,veganism, etc.
Quantitative KPIs
• Fiscal year-end
membership count

Quantitative KPIs
• Amount of capital
investment• Number of employees

Fiscal year ended
March 31, 2020
Capital investment:¥1.25 billion
No. of employees:  860

Top-down

Intermediate
Outcomes

SocialOutcomes

Qualitative• A gricultural producers
Agreements to makepurchases involving
quantities and pricing
set 3 to 6 months inadvance• Customers
Provision of services
aligned with lifestyles
and values
Quantitative KPIs
• Number of contracted
producers• Number ofmanufacturing
affiliates

Membership count as ofMarch 31, 2021

415,000 members

R e son a A sse t M a n a ge m e n t

ImpactQualitative• Increased production
sentiment ofagricultural producers• Development of highly
distinctive products• Sustainable foodproduction anddistribution• Food loss reduction• Support for diverse
lifestyles
Quantitative KPIs
• Reduced volume offood loss• Reduced volume of
GHG emissions

No. of contracted
producers
Approx.

Societal vision• Industrialized andmore reliable foodproduction• Reduced burdensof housework andchildcare

Reduced volume of food loss
Waste generated in
the distribution process

4,000 producers

0.2%

ST E WA R D SH I P R E P OR T

2021 / 2022

37

Chapter

3

Responsible Investment and
Stewardship Activities

Response to TCFD recommendations
In November 2020 we declared support for the recommendations of the Task Force on Climate-related
Financial Disclosures (TCFD). In this section, we disclose our climate-related governance structure, strategy,
metrics & targets, and risk management. We strengthen our recommended framework and improve ourclimate-related disclosures going forward.

Governance
Governance structure• Board reviews management’s performance of climate-related strategy.
• 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 analysis and strategy related to climate risks and opportunities are shared and discussed within theinvestment function.

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

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

Metrics• We are reporting four metrics of our portfolio to analyze climate-related risks and opportunities.
• On page 39, we have disclosed the climate metrics of our equity and corporate bonds in our Japanese andglobal portfolios.
• We are calculating benchmark values in alignment with the same monetary sums as those of our investment
portfolios.
We are using GHG emission data and tools from Institutional Shareholder Service (ISS).
Benchmarks (BM)38

Japanese equities

Global equities

Japanese fixedincomeGlobal fixedincome ex. JapanTOPIX

MSCI ACWI(ex. Japan)

NOMURA-BPI(corporate bonds)

Bloomberg Barclays Global
Aggregate Bond Index(corporate bonds)

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Chapter

1

Chapter2

Chapter

Chapter3

Chapter4

Chapter

56Chapter

Chapter

7

8■ Metrics
GHG emissions
Scopes 1&2(tCO2e)

GHG emissions
Including scope 3(tCO2e)17,765,083

56,794,960

203.4918,000,222

57,470,895

206.19181.0893.62

1,904,333

7,778,466

91.23

222.52167.88BM of global equities ex. Japan

1,940,997

8,065,694

92.99

223.31160.46

Japanese fixed income, corporates

2,922,138

7,798,938

1,596.74

713.77380.70BM of Japanese fixed income

3,641,696

8,948,323

1,989.93

920.05489.66

Global fixed income, corporates

67,581

310,959

124.8296.88

222.81

BM of global fixed income

76,407

327,008

141.12179.63231.80AssetsJapanese equities
BM of Japanese equities
Global equities ex. Japan

Weighted average
Carbon footprint(Note 1) Carbon intensity(Note 2)
carbon intensity(Note 3)(tCO2e/M USD)
(tCO2e/M USD)
(tCO2e/M USD)

180.85

94.24(Note 1) [GHG emissions (Scopes 1&2)]/Portfolio value(Note 2) [GHG emissions (Scopes 1&2)]/Σ{(Value of holding/Portfolio value) × Sales revenue}(Note 3) Σ{(Value of holding/Portfolio value) × (GHG emissions (Scopes 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 weighted average carbon intensity of the equity portfolios is 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 ofsector contributions are similar between TOPIX and MSCI ACWI, but the weighted average carbon intensity of
the utilities and materials 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 cover 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

Global equities
ex. Japan

4%Consumer staples 3%
Energy 5%
Industrials 14%
Information technology 2%
Materials 36%

Consumer discretionary

Utilities 36%

Utilities 36%

2%
3%Energy 19%
Financials 1%
Industrials 7%
Information technology 2%
Materials 30%

Consumer discretionary
Consumer staples* Global Industrial Classification Standard (GICS) sector classifications■ 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 1.7 times of that of the Japanese equity portfolio.
Japanese
equities

Benchmark(TOPIX)
0

Global equities
ex. Japan■ Communication services ■ Consumer discretionary■ Consumer staples■ Energy■ Financials■ Health care
■ Industrials■ Information technology■ Materials■ Real estate■ Utilities

Japanese equity
portfolio

20

40

60

80

Global equity
portfolio
Benchmark(MSCI ACWI)
0

50

100

150

R e son a A sse t M a n a ge m e n t■ Communication services ■ Consumer discretionary■ Consumer staples■ Energy■ Financials■ Health care
■ Industrials■ Information technology■ Materials■ Real estate■ Utilities

ST E WA R D SH I P R E P OR T

2021 / 2022

39

3

Responsible Investment and
Stewardship Activities

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 2035, and the average temperature is assumed torise by 2.2°C in 2050.
• A s of 2020, our Global equity portfolio has already reached the SDS emission budget, and the average temperature isassumed to rise by 3.1°C in 2050.
(1) S ustainable 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■SDS ■STEPS ■CPS

Portfolio

BenchmarkBenchmark SDS

Benchmark STEPSBenchmark CPS

140%
120%
100%
80%
60%
40%
20%

2049

2050
2050

2047

2046

2045

2044

2043

2042

2041

Benchmark STEPS

2048

Benchmark SDS

2040

2039

2038

2037

2036

2035

2034

2033

Benchmark2049

Portfolio

2032

2031

2030

2029

2028

2027

2026

2025

2024

■SDS ■STEPS ■CPS

2048

Global equities
ex. Japan

2023

2022

2021

0

Benchmark CPS

140%
120%
100%
80%
60%
40%
20%

40

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

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

0
2021

ChapterChapter

1

Chapter

Chapter23Chapter

Chapter4

Chapter5

Chapter

6

Chapter

7

8

Risk management
Climate risks consist of transition risk and physical risk.

■ Transition 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

12%
9%

12%
9%

For a decarbonized future economy,

19%
21%

the energy generation mix is likely to shift

20%
21%

40

Utilities relying on fossil power production

67%

60
80%

from fossil fuel to renewable sources.

48%

without a substitute plan might be subject
to higher risk towards climate change

11%

79%
60%

59%
41%

20

regulatory measures and reputational
damages.

12%■ Fossil fuels

21%0Japanese equity Japanese equity
portfolio
benchmarkGlobal equity
portfolio

Global equity
benchmarkSDS(2030)■ Nuclear power

SDS(2050)■ Renewable energy■ Physical risk
In the global equity portfolio we analyze physical risk by geographic region and business sector. In terms ofgeographic distribution, we estimate the impact of six climatic hazards (tropical cyclone, costal floods, river floods,
wildfire, heat stress, droughts) on corporate finances by the location of property, plant and equipment and also by thearea for which sales are recorded.
Utilities

3%

Real estate

3%
8%

Materials

Information
technology

22%

Industrials

6%

Communication
services

13%

Consumer
discretionary

22%
Consumer staples

5%
7%
Financials 6%
EnergyHealth care

Very highHigh

Moderate

Low

5%

None

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 isdisclosing their emission data, and its reliability on the disclosures differs by each company.
• Improve reliability on Climate Risk Analysis tools which eventually leads to a better and interactive engagements between
the investors and the portfolio companies.
• We will encourage the investee companies on following measures such as:• Disclose GHG emissions data through Sustainability Reports, Integrated Reports, CDP platform and TCFD disclosures• Declare support for TCFD and enhance disclosure• Commit to the SBTi.
Best practice sharing through engagements• We will support the investee companies that have high exposure to climate-related risk by sharing best practice cases
through various collaborative initiatives, such as Climate Action 100+, and individual engagements.
R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

41

Responsible investment verification committee meeting Feature discussion

To realize Resona’s “GOOD Governance”
through leveraging diverse perspectives anddeepening forward-looking discussions
A roundtable discussion was held between responsible investment verification committee meeting members;
Chiharu Baba, the committee meeting chairman, Ryo Tsuchida, the corporate law expert, and Shoichi
Tsumuraya, the expert of financial accounting and corporate disclosures, to discuss the committee meeting’s
significant role of enhancing the governance framework and verifying the stewardship activities from thethird-party perspective, the evaluation of its current activities and also its future outlook.

Ryo Tsuchida

Chiharu Baba

Shoichi Tsumuraya

Member of responsible investment
verification committee meeting
Outside Director of
Resona Asset Management Co., Ltd.

Chairman of responsible investment
verification committee meeting
Outside Director of
Resona Holdings, Inc.

Member of responsible investment
verification committee meeting
External expert

42

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Repeating the PDCA cycle and making
a verification committee meeting work
proactively, with an awareness ofthe different time frames of various issues
Tsuchida: Due to the nature of my profession, I participate
in various meetings including the board of directors
meetings, and I think this meeting is the one where I reallyrack my brain. Although I am a scholar of corporate law, we
often engage in conversation that is slightly outside theperspective of a corporate law expert, and I am grateful forthese excellent opportunities to expand the horizons of mythought and knowledge.
Moreover, the discussions with persons concerned
before the meeting are extremely fruitful, and in themeetings, Professor Tsumuraya gives a range of commentsfrom a completely different perspective. Meaning nodisrespect to Professor Tsumuraya, but I am surprised how
well our conclusions align. I am most interested to find that
he has drawn the same conclusions in his mind. The
meetings are an excellent opportunity to compare andcontrast our perspectives on the company.
Tsumuraya: I am keenly aware of the change over time, andI feel that with each meeting the quality of our discussion is
improving. The quality of the proxy voting guidelines has
improved, along with the quality of meeting materials andoperation. In addition, there has been a dramatic drop-off in
the numbers of telephone inquiries from sales divisions ofgroup companies. These and other factors demonstrate thatthe independence of the Responsible Investment Division
has also been strengthened. Frankly speaking, I think that
we have passed a milestone and that we are now changing
to a better direction every meeting.
Baba: This meeting has the principal objective of postverifying stewardship activities in general, mainly focusing
on proxy voting and the proxy voting guidelines. At the sametime, the meeting is also intended to give opportunities todiscuss as wide a range of themes as possible through themeeting. Stewardship activities and the corporate
governance that they target are still under discussion, and I
believe it is extremely important to discuss them with anawareness of a wide range of diverse issues.
In the actual meeting operation, there are two main
points to consider in order to have a discussion while
recognizing various issues. The first is to allocate time forexchanging opinions formally in addition to the so-called
discussion for verification. The second is conscientious“inventory management” of the various opinions and issues
that are brought up.
The recognition of newly emergent issues, opinions andcomments have a range of different time frames, from thosethat need to be attended to right away to those that need tobe discussed over the medium term. I think it is important towork through a PDCA cycle in the broader sense of the term,
making sure to manage these items outside of the meeting
as well, deciding on how to deal with them, and reporting onthem at the meeting.
In the meetings, the first item for discussion is always areport on the details of opinions and issues that have arisen
up to the previous meetings and the response to them. Thismethod of operation makes the verification committee
meeting extremely unique, and it also contributes overall toensuring that the meeting is a proactive one.

Verifying the stewardship activities is an important
activity that has a positive impact on a company
Tsumuraya: I have been very impressed by Professor
Tsuchida’s comment. He said that voting on the proposal forelection of director is conducted on an individual basis, but
in the end, it is a vote to create a team. To give an analogy
from baseball, a team comprised entirely of clean-up hitters
cannot win. I think this is quite true. Since hearing that, I
have been thinking deeply about the diversity of the boardof directors. Considering the condition of the overall team,even if a candidate is a high performing individual, andconversely thinking about situations where a person may nothave outstanding individual performance, but plays animportant role in the team, and so forth.
Tsuchida: I remember very well what Professor Tsumuraya
said about how to present and draft the proxy voting
guidelines. From the perspective of a legal expert, there is areason for having rules in place, and I think first about thedetailed meaning of the proxy voting guidelines. On theother hand, Professor Tsumuraya’s perspective is to consider
that the standard will be conveyed to each company and to
consider what the effect of that may be. Ultimately, we havedifferent perspectives, but the reasons that we verify
stewardship activities are because we want to have apositive impact on each company. I learned that we must
consider matters from this perspective.
This kind of meeting has a tendency to become stiff andformal, but with each meeting that we hold, our meetings
continue to improve in quality of discussion because while
presiding over the meeting, the chairman is always eager torealize substantial discussion, which motivates everyone
tremendously.

Regarding multitiered proxy voting,
we will continue deep discussion
Tsuchida: What I noticed myself as a corporate law expert
was that it is not always the best choice to reject a proposal.
For certain proposals I must prevent situations that would
hinder the resolution, even if I cannot agree with them. It
means those proposals have multilayered roles. Consequently,
the discussion is becoming deeper on multitiered proxyvoting, rather than simply approving or rejecting.
In corporate law, proxy voting is just a matter of black orwhite, like an Othello game, but my impression is that there
is a discussion taking place in which we are constantly
considering how to act in the gap between black and white.
Tsumuraya: I think we really explore everything in our
discussions, but it is not the kind of discussion that produces
a clear conclusion. We initially planned one hour for theverification committee meetings, and that soon became two

R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

43

Responsible investment verification committee meeting Feature discussion

Chiharu Baba
Has long involvement with corporate management, including
experience as Deputy President of Mizuho Trust & Banking Co.,
Ltd. and appointments as outside director at other companies.
Concurrent appointment as Outside Director of Resona
Holdings, Inc. (Chairman of the Audit Committee).

hours. Time is always running short, and I think that we havedeep ongoing discussions.
Baba: When we look back at the discussion overall, the gap
between the current status and the ideal has emerged as anunderlying issue. From the perspective of my involvement inmanagement, I can say that corporate management is aliving thing, and no aspect of it can ever be “all or nothing.”
However, in proxy voting, it ultimately comes down tochecking the left or right box. Consequently, the root
challenge of our discussions is to establish the best approachin order to reach that choice in an appropriate andconstructive manner.
In the sense of issues to be addressed going forward, I
think that how we incorporate such considerations into ourdecisions will be a major point for our discussion overall, andsoft law is one example. At the same time, I think thatengagement is extremely important, not only in the matter ofproxy voting, but also as a means for investors to express theirintentions to and communicate with investee companies.

Through shared attentiveness to“GOOD Governance,” we will conduct
forward-looking discussions witha constant, keen awareness of issues
Tsuchida: One issue I can think of is that we need a little
more time. It is not because the number of themes isincreasing, but rather because each individual theme iscomplex and requires deep discussion.
Up until now the main focus of asset management has

44

Resona Asset Management

S TEWA RDSH IP REPOR T

been on returns, but now I think that things such as the
SDGs are going to change the way we measure returns. I
understand that originally qualitative aspects were forced
into a quantitative form and included as costs in calculating
the returns, but various methods of calculation haveemerged. Estimates can be rigorous or loose, broad or
selective, and so forth. There are various views on things.
And this means that going forward, asset managementcompanies should become more diverse. I think it will
become extremely important that an asset managementcompany considers what kind of viewpoint it will adopt, what
direction it will take, and what it will value in selecting andengaging with investees.
Looking ahead, I think that as an issue to be consideredover the long term, we must consider what kind of position
Resona Asset Management will take, how it will make an
appeal of itself to asset owners, and how it will fulfill its
social responsibilities.
Tsumuraya: Regardless of whether the number of meetings
is increased, there are many themes emerging that requiretime to discuss, and the number of matters that need to betaken up is also increasing. For example, we are seeing events
now that would have been unthinkable a few years ago, suchas the case of a TOB of a certain bank, where the president of
the acquisition target explained the bank’s response to the
proposal in a video. Given the need to practice responsible
investment based on this situation, the discussion becomescomplex, and there is always a shortage of time.
It is also important to think about our own succession.
Because responsible investment and verification thereof willcontinue indefinitely, it is important that we create a systemthat can lead into the next generation while maintaining
quality. It is a major undertaking to create a succession plan,but from another angle I think it is also significant in that it
will continue to have a ripple effect on the Japanese
economy overall.
Baba: As I mentioned at the start, discussions at themeeting become extremely fruitful. The meeting discussion
has good content, and the meeting itself has become unified
in terms of operation and procedure. The participants arerecognizing issues very proactively, and we have deeper andforward-looking discussions.
Thinking again about the reasons for the excellent
progress of this meeting so far, I think that the biggest factor
is that all of the participants share a common awareness of
how to realize “GOOD Governance” for Resona AssetManagement.
The second point is that the members, or participants,
particularly the two professors, make a great combination.
Since Professor Tsuchida is an expert in corporate law andProfessor Tsumuraya is an expert in accounting anddisclosure, they are able to have proper discussions firmly
based on their expertise.
The third point is that greater awareness of issues can be
had by taking a frontline approach. Resona Asset Management
seems to have a keen day-by-day sense of the gap between
the reality and the ideal and is able to clearly identify thoseissues. This is always on the table at our discussions.

2021 / 2022

Tsumuraya: We have used the word “forward-looking,” but I
recall that our discussions fell short of this for the first fouror five meetings. Having worked through the issues such asrevising wording, looking at compatibility with othercompany’s standards, and amending contradictions
between global equities and Japanese equities, we have now
reached a stage where we can consider what to do next.
I think that the themes that we discuss now should be
forward-looking ones. Leaving aside whether or not thesewill be reflected in the proxy voting guidelines, it isimportant that these themes are constantly developed
inside the minds of each of the management team, and I
think that such experience of discussions will become avaluable management asset for Resona Asset Management.

Engaging with timely themes continuously
while making our forward-looking structure
known publicly
Tsumuraya: I think that we have now got enough room inthe structure for such forward-looking discussion. Whenmatters arise, rather than immediately going to the proxyvoting guidelines, it will become important to build a
responsible investment structure that is always able to stay
one step ahead. And also it is important to make it known
that we have such a structure. I think it is important that weare not simply verifying.
Tsuchida: The proxy voting guidelines are one of our rules,
but rules themselves do not have any intrinsic value; rather,
they are a reflection of society. The rules are always updated
a small step behind society. Soft law has the effect of
reducing costs by reducing the time lag and changing therules in line with social change, and I think this is why theconcept of stewardship is currently under the spotlight.
We must be prepared to detect movements in society
early and reflect them in the rules. For example, if there is atrend for Board 3.0 to become the mainstream, then our
information up to now (Board 2.0) is out of date. I believethat the role of the verification committee meeting is tocarefully monitor such movements in society, discuss themwith other parties that are monitoring society on the front
lines, and decide what to reflect in the mirror byincorporating it into the rules, and prepare our foundation.
Baba: Up until now, we have brought up and discussed
issues and problems at the time as quickly as possible.
However, I would like to avoid letting the good points of theverification committee meeting become hampered byfocusing on one particular theme. While the social situationis continuing to change with time, unique characteristics areconstantly popping up in both the economy in the macro
perspective and corporate management in the micro
perspective. I think that the theme will change with time as
we focus on which approach is best for which issue.
In the martial art of kendo, there is a saying that one
should be constantly changing between offense anddefense, forward and back, and not fixated on protecting
one part only. In other words, in the continuously-changing
situation, it is not realistic to be constantly attacking or

Ryo TsuchidaHas a deep insight into corporate law, particularly in Japan, theU.S., and Europe, from his dual standing in both academia andfrontline work as a law scholar (Professor, Sophia Law School)
and a lawyer. Concurrent appointment as Outside Director of
Resona Asset Management Co., Ltd.

constantly defending. While we do have rules, how we
respond within these rules is a separate issue. I do not meanthat I am thinking about academic perspectives and thefrontlines as a dichotomy, rather that it is important to pickup on what is important with regard to the current themes at
the time.
Within the exchange of opinions at the verificationcommittee meeting, there are large themes, such as thestatus of the board of directors and that of the shareholders
meetings, and there are also themes such as how to handle
the shareholders meetings amid the various restrictions
imposed by COVID-19. To give an interim summary at thisstage, the fact that the discussions have been constantly
converging rather than diverging means that ultimately there
is some common ground at the root of them. I would like us
to take a relativistic approach when picking up the problems
that are relevant at the time as themes and digging deeper
on them.

Expecting to accumulate discussions on“what should be talked about” including
the position of the company, and tocommunicate this outcome to asset owners,
institutional investors, and society
Tsuchida: Among the issues that companies are bound tocome up against, there are external diseconomies, such as
the climate change issue. I am sure that at some point wewill come under pressure to internalize these external
diseconomies. Sometimes when I think about internalized

R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

45

Responsible investment verification committee meeting Feature discussion

Shoichi Tsumuraya
Has detailed knowledge of corporate activities such as
financial accounting, disclosure, and corporate governanceas a Professor, Graduate School of Business Administration,
Hitotsubashi University, and a member of the follow-up
committees for the SS Code and CG Code.

costs including environmental ones, I wonder as whose
representative we should act at the end of the day. Currently
we are acting as the representative of asset owners, but I
have an academic view that ultimately it may come full circle
and settle on the conclusion that we are the representativeof citizens. I cannot predict when this will be implementedsocially, but I want to keep my eyes constantly open to suchthings as we engage in our discussions.
Moreover, since asset owners will become lesshomogenic going forward, a kind of factionalism will arise,
and the situation may take on a structure similar to party
politics, where certain types of asset owners invest in certain
asset management companies. This will lead toconsideration about the character of the various asset
management companies, and it will be increasingly
important to talk about whether Resona Asset Management
will make some kind of public communication about whatkind of asset management company it is and what kinds ofinvestment it makes. I think an important role for theverification committee meeting going forward will beverifying the kind of understanding of the social environment
and the kind of logic supporting the details ofcommunication on such topics.
Tsumuraya: As members of the verification committee
meeting, we understand the responsible investment policyof Resona Asset Management. However, in my meetings
with corporate IR people, I have felt that the penetration ofthis policy is limited among investee companies.
I think it is only when we communicate to companies thepoints of difference about how Resona thinks about

46

Resona Asset Management

S TEWA RDSH IP REPOR T

investing that we will be able to establish concrete dialoguethat can encourage changes in their management approachor have them take certain opinions on board. I often hear IR
people talking about how individual analysts may be focusedon asking about short-term performance, but I do not hearthem talking about an asset management company and its
investment approach. I do not think this problem applies
only to Resona Asset Management; rather, it’s a medium- tolong-term issue for investors considered as institutional
investors.
Baba: I hope for two things. The first is that we should talkabout even more about “what should be talked about.” I
believe that it is going to become increasingly important forcompanies to communicate their corporate philosophies andapproaches going forward. In the operation of theverification committee meeting so far, we have verified
matters while discussing as widely as possible issues insociety that should be talked about, and we will continue tofocus on this going forward.
For the second, I also think communication is key. I think
this concurs with what Professor Tsumuraya said. Namely,that it is going to be increasingly important that Resona
Asset Management demonstrates the ability tocommunicate its thinking properly to investee companies,
asset owners, and to the market overall.
“What should be talked about” sounds extremely
prosaic, however, I think that it is extremely important that
we thoroughly pursue our ideas regarding stewardship
activities and corporate governance and enhance our ability
to communicate them properly to the right audience. I hopethat Resona Asset Management will fulfill its duty ofdemonstrating leadership in the discussion about
responsible investment in general going forward.

By respecting diverse opinions,the discussion becomes more heated,leading to deeper discussion
Tsuchida: This year, there has been a case in proxy voting
where Resona Asset Management approved a proposal for
an amendment to the articles of incorporation. It was a rarecase where I took an opposing position to your approval. As
an academic, my position is that it is better not to insert
detailed management policies in the articles of incorporation
to avoid excessive restriction on the discretion of company
management. I therefore felt strongly opposed to inserting acommitment to management in response to climate change
in the articles of incorporation. Subsequently, after various
discussions, at the recent shareholders meeting the matter
was not clearly positioned as an advisory vote, and it was
explained that the company was obliged to insert it in thearticles of incorporation after carefully examining its
responses and disclosures. It seemed to me that there arediverse views on this. Going forward, I would like to haveeveryone clearly communicate their different views without
restraint.
Tsumuraya: I feel that there is an issue regarding thedisclosure of proxy voting results.Since the results are2021 / 2022

announced after the verification by the verificationcommittee meeting, the disclosure is made two months
later. Since the proxy voting results themselves do notchange even after being verified, I think it would be better toprovide preliminary disclosure in June to July, or, if individual
disclosure is difficult, to disclose the aggregate results only
preliminarily. Considering the social obligations of Resona
Asset Management as a major asset management company,
if institutional investors require companies to proactively
disclose information, then it seems fitting that they should
also demonstrate their commitment to doing the samethemselves.
Baba: I do not mean to sound self-satisfied at all; but I do
not think there are many issues with the current state ofcommittee meeting operations. Looking back on theminutes of the meetings, I can see that we have proactively
introduced different opinions into the microcosm of
meeting, and we have had some truly heated discussions.
Rather than simply adhering to form, this meeting holds
diverse opinions, and I believe this will support constructive
discussions going forward.

As asset management increases its importance,
it is also expected to become a significant asset
to society
Tsumuraya: I will communicate to my students and tosociety even more that Resona Asset Management isinternally conducting proper objective verification of its

responsible investment and stewardship activities. I consider
it one of my roles in society to communicate widely to themass media and at university lectures and so forth that IR
and the capital markets are not a world that is restricted tocertain people. And I will continue to do so.
Tsuchida: My research has always been in the field of hardlaw. And I have been very impressed by the depth of soft
law. I think soft law has diverse functions, not only making
up for imperfections in the law, but also having a kind of newlaw creation aspect. In fact, considering its importance,
research into soft law has not really advanced in the field ofcorporate law. The overall positioning of soft law, including
the foundational spirit and the underlying way of thinking
influenced by corporate law and the securities market, has
not really been well defined. Eventually, I would like to define
this properly and present it to everyone. Right now, I am in a
fortuitous environment for engaging in this, and I aim to givesomething back to society from the experience I gain here.
Baba: The themes that we discuss in various ways are all ofgreat importance in social and economic activities. I think that
asset management is set to become an increasingly important
domain, not only in terms of individual corporate
management, but also from the perspective of the overall
capital markets and financial system. Going forward, it will be
important to further enhance our practical capabilities, and I
hope that as one of these functions, the verification committee
meeting will become a significant support for Resona AssetManagement. I hope that the activities of Resona AssetManagement will become a significant asset to society.

R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

47

Chapter

4

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
approach that leverages the strengths of Resona Asset Management, our longstanding experience and discussions withstakeholders have given rise to our current stewardship activities for passive investment. This section introduces ouroverall stewardship activities, and approaches and details of activities undertaken.

■ Basic approach to stewardship activities on passive investment● Determine how Resona should meet asset manager expectations pertaining to
stewardship activities.

Awareness on issues●D etermine how to maintain engagement geared to a super-long-term investment
perspective in carrying out passive investment, leveraging our strengths.

Our aims: Stewardship
activities on passive
investment

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.

Perspective on
passive investment

1• We undertake engagement geared to finding solutions to ESG issues of society overall (mitigating
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.

Long-term investor perspective(importance)2• Addressing global and local issues• GHG emissions, supply chain management,
board composition, etc.

48

Resona Asset Management

S TEWA RDSH IP REPOR T

Possibility of change in companies perspective(effectiveness)• Awareness → disclosure → dialogue → monitoring• Collaboration with other investors(Collaborative engagement)

2021 / 2022

Chapter

Chapter

12

Chapter

Chapter3

Chapter

45Chapter

Chapter

6

Chapter

78Overview 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/local issues
E (Environmental)(Integration ofJapanese andglobal assets)

G (Governance)

D (Disclosure)Integration of Japanese andglobal assets & shared vision2
Process

Action plan of
Responsible
Investment
Division

S (Social)

Top-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, collaborative and index) on a per-asset basis andaccording to the topic
Selection of target companies: quantitative and qualitative

PDCA cycle

Path of engagement

Proxy voting

3
Collaborative engagement

In-house engagement

Index engagement

Investee companies

Activity assessment

R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

49

Chapter

4

Passive Investment Stewardship Activities

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

1

2

Network

Effectiveness and efficiency
in information collection

1

3

Top-down
approachfor 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 apioneer in responsible investment, we initiate
proactive interactions with experts, NGOs,
government officials, long-term overseas investors,
labor unions, various organizations and youth, andgain insight into their advanced knowledge.

Experts
NGOs

Youth

Experts

When promoting corporate governance and ESG initiatives, wework with university professors and other experts on a regularbasis to gather information and exchange opinions.

NGOs

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

Government
officials

We serve as the joint chair and steering committee member ofthe 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.”

Long-term
overseas
investors

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

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 asa signatory organization since the establishment of the PRI Japan
Network in 2008, working as an advisory committee member.

Youth

We invited activists from the youth to attend the CSR Review
Forum-Japan and exchanged opinions.

ResonaVariousorganizations

Labor unions

Government
officials

Long-term
overseas
investors

Dialogue with the youth that will carry future generations
Our purpose is to be “an asset manager that can provide
abundance and happiness to future generations as well as ourown.” We added the youth to our dialogue as an important
stakeholder.
We invited the media and opinions leaders from the youth
to attend the CSR Review Forum-Japan, a regular event that
we hold for exchanging opinions with NGOs and experts. Our
young employees also joined in and exchanged opinions.
We could really feel the importance of having dialogue withdiverse stakeholders, and by enabling members of the youth tofind out about our activities, we came up with ideas for new
activities, making it a meaningful time for both parties.

50

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Chapter

Chapter122Chapter

Chapter3

Chapter4

Chapter

56Chapter

Chapter78Top-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 that entails
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 2UN 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

Engagement agenda(global issues) and KPIs

Actionplans

Stakeholder dialogue
Encountering knowledge globally

STEP 3

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.
We have conducted engagements covering various material issues, such as climate change, forced labor,anti-corruption, and diversity & inclusion. (For further detail, please refer to the materiality matrices on page 20.)
Since 2020, we have also conducted engagements focusing on coronavirus response, such as human capitalmanagement.
The next page 52 contains a list of respective approaches we have used for individual issues pertaining to ESG+D.

R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

51

4

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 are requesting
information disclosure in line with the TCFD Guidelines and climate change information disclosure
guidance (investor expectations)
A five-year initiative to engage in curbing GHG emissions, strengthen climate-related financial
disclosures and improve governance on climate change risks.
The initiative is run by the PRI, IIGCC (Europe), Ceres (North America), IGCC (Australia & NZ),
and AIGCC (Asia). This has involved persuading 160 major companies worldwide (including 10
Japanese companies) to make commitments with respect to risks relating to climate change(The Paris Agreement), and to establish frameworks and disclose information.

CDP Non-Disclosure Campaign/Science-Based Targets Campaign

Engagements requesting disclosure of environmental information in response to CDP disclosure requests
Engagements requesting a response to the Science-Based Targets initiative (SBTi)

Plastic (circular economy): Plastic Investor Working GroupThe main goal of this dialogue is to call on the global target companies to accelerate their work on the‘plastic transition’ (to reduce, replace and re-use), to reduce the environmental burden (pollution) of
plastic production and use.

S (Social)

S (Social)

E (Environmental)

E (Environmental)

Participation in Climate Action 100+/AIGCC AUEP

Global/local issues

Sustainable palm oil procurement

Support the investee companies to understand and to define policies on “Sustainable procurement on palm oil.”

PRI Sustainable Commodities Practitioners’ GroupA practitioners’ group, which aims to 1) address deforestation as a systemic risk, and 2) discussand align asks, metrics, and practices in collaboration with technical experts and advisors.

Zero-Deforestation Engagement Phase 2

Collaborative engagement established by ACTIAM, a Dutch asset management company and PRI signatory.
Collaborative engagement, which aims to reduce company-specific deforestation using
Satelligence analysis.
Satelligence is a geodata-analytics company which partners with ACTIAM. Plans to engage with
21 target companies already made.

Global Investor Engagement on Meat Sourcing

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

Sustainable Protein Supply Chains

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

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.

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

Collaborative engagement focusing on three key themes, which are:1) board accountability, 2) human capital management, and 3) long-term value creation andfinance strategy, within the COVID-19 pandemic environment.

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)

Chapter

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

Integrated reporting

Urging companies to provide clear and concise information
disclosure and supporting them in such efforts
Endorsement and support of statement of collaboration of
the International 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 and dialogue
by promoting disclosure.

(Note 1) AAFA: American Apparel & Footwear Association

52

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Chapter

Chapter132Chapter

Chapter3

Chapter4

Chapter5

Chapter

6

Chapter78+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 and six
asset management firms including
Resona Asset Management

Preliminary discussions
among the participating
institutional investors

Institutional
investor

Listedcompany

Send letters summarizing
common views to companies
targeted for engagement

Listedcompany

Hold meetings withcompanies targeted forengagement, attended bymultiple participating
institutional investors

Institutional
investor

Institutional
Investors
Collective
Engagement
ProgramInstitutional
investor

Holding
meetings, etc.

Listedcompany

Set agenda and agree oncommon views■ Engagement agenda of the Institutional Investors Collective Engagement Program
GovernanceMateriality/Disclosure of
non-financial information
Handling misconduct

TopicsObjectives

Initiatives on ESG issues for businesssustainability

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

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
Shareholders meeting
general shareholder meeting proposals that(high ratio of opposing votes)
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

Listed parent companies
and subsidiaries

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

Encouraging the maintenance of governance, information disclosure,and enhanced accountability for companies with listed parent
companies and subsidiaries

Resona’s main external activities from November 2020 through November 2021
30% Club

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

METI/MOE

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

Japan SDGs Action Promotion Council

Auditing

Co-hosted by FSA/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 forAdvancement of 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”

MOE

Member of the “Study Group for Revision of Guidelines for Private Sector Engagement in Biodiversity”

METI

Member of the “Dialogue Towards Long-Term Management and Investment for Sustainable Corporate Value Creation Study Group”

Cabinet Office Member of the “Discussion Group on Effective Disclosure and Governance of Investment and Utilization Strategies for Intellectual Property”
METI

Member of the “Study Group on Methods for Evaluating Market Formation Capability and Capability Development”

MOE

Member of the “Discussion Group for Greenhouse Gas Emission Calculation, Reporting, and Announcement Systems Based on
the Revised Act on Promotion of Global Warming Countermeasures”

MAFF

Member of the “Discussion Group on the Food Industry and ESG Investment”

Japan Association for the 2025 World Exposition

Member of the “Sustainability Expert Committee”

R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

53

Chapter

4

Passive Investment Stewardship Activities

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.

Collaborative engagement — For companies around the world
Resona Asset Management has cultivated several platforms such as PRI, as a pioneer of responsible
investor in Japan. In FY2021, Resona Asset Management conducted engagements with global companies, andin addition to one-on-one engagements, this also included various collaborative engagements.

E■ Scope of platforms

D

S

G

■ Participating collaborative engagement

Engagement on PRI platform
Global Investor Engagement on
Meat Sourcing

Global Investor Engagement on
Sustainable Protein Supply Chains

Sustainable Commodities
Practitioners’ Group

Climate Action 100+/☆AUEP(Note 1)

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

Pandemic Resilient 50 (COVID-19)
Palm (Palm, ASEAN Banks)☆IAST APAC(Note 3)

CDP Non-Disclosure Campaign
CDP Science-Based Targets Campaign
CDP Forest Champions☆ACTIAM Zero-Deforestation Engagement
Plastic Engagement Working Group(Note 4)☆: New collaborative engagement

30% Club JP IG
30% Club UK IG☆Access to Nutrition Initiative(Note 1) AUEP: Asian Utilities Engagement Program(Note 2) KTC: KnowTheChain(Note 3) IAST APAC: Investors Against Slavery and Trafficking Asia-Pacific Collaborative Engagement(Note 4) A chmea IM, ACTIAM: Asset management companies in the Netherlands that are signatories to the PRI, and which are involved in thecoordination of the plastic engagement group.

54

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Chapter

Chapter

12

Chapter

Chapter

34Chapter5

Chapter

6

Chapter

Chapter78■ Global Platform
Platform

Description

Date Joined

PRI: Principles for
Responsible Investment

Established in 2005, a UN-supported network of investors, works to promote sustainable investment through theincorporation 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 tomanage 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

AIGCC: The Asia Investor
Group on Climate Change

Established as part of the Global Investor Coalition (GIC) in Singapore in September 2016. An initiative to createawareness among Asia’s asset owners and financial institutions about the risks and opportunities associated withclimate change and low carbon investing.

May 2020

FAIRR: Farm Animal
Investment Risk & Return

Established in 2015 by the Jeremy Coller Foundation. A collaborative investor network that raises awareness of theenvironmental, social and governance (ESG) risks and opportunities brought about by intensive animal agriculture.
FAIRR’s collaborative mission is to build a global network of investors who are aware of the issues linked to intensive
animal production and seek to minimize the risks within the broader food system.

Jan. 2020

BSR: Business for Social
Responsibility

Established in 1992, headquartered in San Francisco. BSR™ is an organization of sustainable business experts thatworks with its global network of the world’s leading companies to build a just and sustainable world. With offices in
Asia, Europe, and North America, BSR™ provides insight, advice, and collaborative initiatives to help you see achanging world more clearly, create long-term business value, and scale impact.

Nov. 2019

ACGA: Asian Corporate
Governance Association

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

May 2020

ICGN: International Corporate
Governance Network

Established in 1995 in Washington DC. The ICGN is an investor-led organization whose mission is to promote
effective standards of corporate governance and investor stewardship to advance efficient markets and sustainableeconomies worldwide.

Apr. 2020

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 for morediverse boards and senior management teams;
exercise ownership rights, including voting and engagement, to effect change on company boards and within senior
management teams;
encourage all investors to engage on the issue of diversity with chairs of boards and senior management teams.

Dec. 2019☆TNFD Forum

Established in June 2021. To develop and deliver a risk management and disclosure framework for organizations toreport and act on evolving nature-related risks, which aims to support a shift in global financial flows away fromnature-negative outcomes and toward nature-positive outcomes.

Nov. 2021

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■ Collaborative Engagements and Working Groups
Platform

Project Name

Global Issue

Date Joined

Climate Change

May 2018

PRI

Climate Action 100+

CDP

CDP Non-Disclosure Campaign

Climate Change/Disclosure

Apr. 2020

CDP

CDP SBT Campaign

Climate Change/Disclosure

Sept. 2020

PRI (Ceres)☆Sustainable Commodities Practitioners’ Group(Former IISF: Investor Initiative for Sustainable Forests)

Environment/Deforestation/Supply Chain

July 2021(Sept. 2017)

PRI☆Sustainable Commodities Practitioners’ Group(Former Sustainable Palm & Soy)

Environment/Deforestation/Supply Chain

July 2021(Oct. 2018)

Achmea IM/ACTIAM Plastic Engagement Working Group

Environment/Deforestation

Aug. 2020

Global Investor Engagement on Meat Sourcing

Sustainable Food Supply Chain/Climate ChangeDec. 2019

FAIRR

Global Investor Engagement on Sustainable Protein Supply Chains

Sustainable Food Supply Chain/Climate ChangeJan. 2020

PRI

Pandemic Resilient 50 Investor Working GroupCOVID-19

Aug. 2020

FAIRR-Ceres

PRI-ICCR

Apparel & Footwear Engagement using the KTC BM

30% Club UK

30% Club UK Investor Group☆ACTIAM

Zero Deforestation Engagement -Phase 2☆IAST APAC

Investors Against Slavery and Trafficking Asia-Pacific Collaborative Engagement☆AIGCCAsian Utilities Engagement Program (AUEP)☆ATNI

Access to Nutrition Initiative

Social/Human Rights/Labor Practices/Supply Chain

Apr. 2019

Governance/Board Diversity

Dec. 2019

Environment/Deforestation/Supply Chain

Feb. 2021

Social/Human Rights/Labor Practices/Supply Chain

Mar. 2021

Climate Change/Disclosure

Apr. 2021

Social/Nutrition

June 2021

Global Issue

Endorsed andSupported■ Investor Statements Endorsed and Supported
Platform

Statement

PRI

PRI Just Transition on Climate Change

Climate Change

Nov. 2018

PRI/CA100+

Investor Expectations on Climate Change for Airlines and Aerospace Companies

Climate ChangeDec. 2019

FAIRR

Global Investor Statement on Antibiotics Stewardship

Sustainable Food Supply Chain

Oct. 2018

KTC/ICCR/PRI

Investor Statement on Coronavirus Response

COVID-19 Response

May 2020

PRI

UNGP Reporting Framework Investor Initiative

Human Rights/Labor Practices/Supply Chain

Oct. 2016

PRI

Investor Expectations on Labour Practices in Agricultural Supply Chains

Human Rights/Labor Practices/Supply Chain

Feb. 2018

KTC/PRI-ICCR

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

Human Rights/Labor Practices/Supply Chain

May 2019

VRF (IIRC/SASB)

Supports business and investor decision-making with three key resources:
Integrated Thinking Principles, Integrated Reporting Framework and SASB
Standards. These tools help businesses and investors develop a sharedunderstanding of enterprise value and how it is created, preserved or eroded.

Governance/Disclosure

June 2018☆FfB Pledge

Finance for Biodiversity Pledge

Environment/Biodiversity

May 2021☆Investor Agenda

The Investor Agenda for Government Action on the Climate Crisis in 2021

Climate Change

May 2021

Climate Change/Disclosure

June 2021

Climate Change

Oct. 2021☆PRI

Public Comment to the SEC on Climate Change Disclosure☆FAIRR

Where’s the beef?

☆: NewR e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

55

Chapter

4

Passive Investment Stewardship Activities

Engagement plan for FY2021
We aim to achieve sustainable society through actively engaging in both enhancing medium- to long-term
corporate value and finding solutions to social challenges.

Dialogue and engagement plans (from July 2021 to June 2022)
We will persist in our efforts to conduct engagement for our equity/passive and active investment, and fixedincome/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
and female 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 andmarine plastic issues, while simultaneously preparing to choose some new topics.

Equity/Passive
investment(Chapter 4)

We will decide on topics pertaining to non-financial factors that effectively help
increase long-term corporate value, drawing on sources of added value developed overmany years by each of our strategies. We also aim to keep enhancing and maintaining
our dialogue with investee companies focused on their management teams,
simultaneously improving the quality.

Equity/Active
investment(Chapter 5)

Fixed income/Active
investment(Chapter 6)

We plan to enhance our dialogue and engagement with respect to medium- tolong-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 to participate
in collaborative engagements by using
platforms of PRI and the Institutional Investors(IICEF) Collective Engagement Program.

Responsible Investment Division

56

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Chapter

1

Chapter

Chapter23Chapter4

Chapter5

Chapter

6

Chapter

7

Chapter

8

Engagement agenda for FY2021
Climate change / Decarbonization• Consideration to committing to the Net Zero Asset Managers Alliance, and continuation of
the Climate Action 100+ and AIGCC Asian Utilities Engagement Program (AUEP)
Investors are encouraged to disclose climate change strategy on their investment portfolios.
In addition to our activities through Climate Action 100+, CDP engagement projects and the
AIGC AUEP, we are considering committing to the Net Zero Asset Managers Alliance.

Sustainable food supply chains (FAIRR) / Food sustainability (ATNI)•C ontinue activities on Access to Nutrition Initiative (ATNI)Collaborative engagement with 20 global target companies using the 2021 ATNI global index.
• Continue collaborative engagement on the FAIRR initiative
We will continue our following activities:• “Global Investor Engagement on Meat Sourcing,” which calls for activities to mitigate
1) the supply chain risk for meat and dairy products, 2) climate change and water safety risks.
• “Sustainable Protein Supply Chains” to promote the formation of sustainable food supply
chains by diversifying protein sources.

Biodiversity pledge / Zero-deforestation• Participation in Finance for Biodiversity Pledge working group and the TNFD ForumWe are having various discussions regarding the evaluation systems for biodiversity.
As we participate in various working groups and the TNFD Forum in endorsement and supportof the Finance for Biodiversity Pledge, we aim to gather more information.
• In Japan, we will continue dialogue about procurement of sustainable palm oil and timber.
• Continuous knowledge and information gathering from the PRI Sustainable Commodities
Practitioners’ Group

Labor practices / Human rights• Continue engagements on Investors Against Slavery and Trafficking APAC (IAST APAC) and
KnowTheChain
We will ascertain labor practices in corporate supply chains and promote corporate information
disclosure and ascertainment of risks.

Circular economy (Marine plastic)•C ontinue activities on Plastic Engagement Working GroupThe engagement issues on plastic recycling are expanding from recycling, to climate change,
and to zero-deforestation.

R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

57

4

Passive Investment Stewardship Activities

Determining issues and action plans
In FY2022 we will take action that connects internalities and externalities geared to both global and local
agendas, with an ongoing focus on external diseconomies.
Whereas we ensure that each of our activities embraces 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 thehorizontal axes.
FY2017FY2018FY2019FY2021

FY2020

FY2022AIGCC
Asian Utilities Engagement
Program(Note 4)
CDP Non-Disclosure Campaign
CDP Science-Based Targets Campaign

2012
Signing the CDP

Achmea IM/ACTIAM
Plastic Engagement Working Group

Marine plastic issue

Endorsing the Finance for
Biodiversity Pledge andparticipating in the working group
Initiation ofpalm oil issue
analysis andengagements
jointly with
NGOs in Japan

In Japan: Sustainable palm oil procurement(Companies in the palm oil supply chain)

PRI Sustainable Palm Oil IWG
IISF (PRI/Ceres) Cattle & Soy

S (Social)

E (Environmental)

E (Environmental)

Climate Action 100+
Climate change-related
disclosure
Endorsement of joint statement on
2021 Investor Agenda
a Just Transition to a low-carbon economy(Note 1)
Endorsement ofinvestor statements
Endorsement of GISGCC(Note 2) (Investor Agenda(Note 3))

PRI Sustainable Commodities
Practitioners’ Group

Deforestation/ACTIAM ZeroDeforestation Engagement

Sustainable food supply chain
FAIRR(Note 5)(Factory farming andantibiotic resistance)

S (Social)

ChapterEndorsement of
UNGP Reporting
Framework

Meat Sourcing
Sustainable Protein

Responsible employment
KTC BM Apparel & footwear IWG
Governance addressing forced labor
Endorsement andsupport of statement
on labor practices inagricultural supply
chains (PRI)

COVID-19/PRI Pandemic Resilient 50 (Note 6)

Access to Nutrition
Initiative (Note 7)
Investors Against Slavery andTrafficking Asia-PacificCollaborative Engagement(Note 8)

58

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Chapter

1

Chapter2

FY2017

Chapter

Chapter

34

FY2018FY2019Chapter

Chapter5

Chapter6

FY20207

FY2021

Chapter8

FY2022

Promotion of anti-corruption measures

G (Governance)

Governance/diversity of US and Chinese companies

Enhancement of governance• Business model• Board composition• Capital productivity, cross-shareholding
and cost of capital• Anti-takeover measures• Disclosure• Anti-social behavior

30% Club
Investor Group(Diversity)

30% Club UK Investor Group

IICEF(Handling misconduct, high ratio of opposing votes, anti-takeover measures,cross-shareholding, listed parent companies and subsidiaries)

D (Disclosure)

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

IICEF(Note 9)(Enhancement of disclosure on non-financial information)

Endorsement and support of statement of collaboration of the IIRC
(Integrated reporting)(Note 1) Just Transition: The preamble of the Paris Agreement contains the goal of achieving a Just Transition to ensure effectiveness of the Paris Agreement.
The joint statement endorsing and supporting a Just Transition is intended to facilitate more extensive understanding as to the importance offactoring in employment concerns and accordingly implementing comprehensive measures to address social challenges involving the prospect of
unemployment and diminishing working conditions as a result of shifting to a carbon-free society.
(Note 2) G ISGCC: Global Investor Statement to Governments on Climate Change. A joint statement announced before the G20 Osaka Summit in June 2019that called on government leaders worldwide to set voluntary emission reduction targets (NDCs) to keep climate change to 1.5ºC. Participatingorganizations comprised 477 institutional investors, with combined total of US$34 trillion in assets under management.
(Note 3) I nvestor 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) AUEP: Asian Utilities Engagement Program, a collaborative engagement to promote five commitments among five Asian utility companies targeted.
(Note 5) FAIRR: Farm Animal Investment Risk and Return(Note 6) COVID-19/PRI Pandemic Resilient: 10 companies participate, including CalSTRS. An engagement working group targeting 50 global companies.
(Note 7) A TNI: Suppresses negative impacts on the working population and economy associated with malnutrition (under and over nutrition) and explores
risks and opportunities.
(Note 8) I AST APAC: Requires companies to identify modern slavery in their businesses and supply chains and take a range of measures to deal with it.
(Note 9) I ICEF: Institutional Investors Collective Engagement ForumR e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

59

AgendaEngagement report1

Sustainable palm oil procurement

In August 2017, we initiated engagements pertaining toenvironmental 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, detergents andother household items, and cosmetics. However, palm oil underlies many
problems in the major producer countries of Malaysia and Indonesia,
particularly in terms of deforestation accompanying development ofpalm plantations, child and forced labor, and conflicts 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, incomparison 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

Margarine

Ice creams

Frozen foods

Powdered milk

Detergents andcosmetics

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
Loans

Risk
management

Supply chain

Upstream

Operators of oil palm plantations
Companies handling oil extraction and primary refining

6 oil and chemical companies

Downstream• A sk the seven major companies that are constituents of the
MSCI-ACWI Index to disclose progress made with their initiatives
geared to the NDPE policy(Note 1).
(Note 1) N DPE policy refers to policy with respect to “No Deforestation, 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 forpalm oil-based power generation.

5 general trading companies

21 food manufacturers• Improve frameworks for management and information disclosure of
ESG risks for companies involved in the palm oil supply chain.

10 toiletry manufacturers

19 companies in retail, restaurant & service industries• Check on actual progress made by RSPO-member companies. Gain anunderstanding regarding challenges of increasing the supply of
RSPO-certified palm oil.
• Gain an understanding of initiatives carried out by progressive
companies and gain a shared view of issues with companies that ought
to take action.
• Gain an understanding of initiatives regarding procurement ofsustainable palm oil and provide support for drawing up plans.
• Support progress of those initiatives from the retailers to the food
manufacturers upstream.

Consumers

60

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Engagement process
CSR-based approaches to procurement are becoming more commonplace as a means of addressing risks with respect tochallenges such as environmental, labor and human rights issues throughout total supply chain. First, we have started conducting
engagement that involves 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 todeforestation, child labor and forced labor. Subsequently, we recommend that they use RSPO-certified palm oils, have them
disclose their policies on sustainable procurement 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 61 companies targeted, and progress made.
Start

Step (i)Become aware of risks
palm oil poses in relation
to deforestation andhuman rights issues

54/54

61/61

Step (ii)

Step (iii)

Step (iv)

Step (v)

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

Determine suppliers of
raw materials related topalm oilCome to understand
RSPO-certification
schemes

Encourage suppliers toensure traceability of
raw materials related topalm oil

48/54

53/61

44/54

46/61

54/54

60/61

18/54

20/61

Goal

Step (vi)

Step (vii)

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

Disclose sustainableprocurement policies
related to palm oil, etc.

10/54

12/61

35/54

Step (viii)
Purchase RSPOcertified palm oil

36/61

37/54

Step (ix)

Step (x)Disclose targets andresults with respect toprocurement of
RSPO-certified palm oil

Incorporate NDPE
practices into policies
for procuring palm oil,
etc.

41/61

19/54

28/61

6/54

11/61

(Note 1) This includes not only palm oil but also CSR-based procurement policies, etc.
(Note 2) S urvey by Resona Asset Management. Confirmed for companies engaged with up to June 2021 either at the time of visit, or by checking websites,
integrated reports, or CSR reports, etc.
indicates results for FY2020,
indicates results for FY2021.

During the 12-month period between July 2020 and June 2021, four of the 61 companies withwhich we engaged joined the RSPO.
[What is the RSPO?]

Number of Japanese corporate RSPO members
300■ Number of member companies ■ Cumulative number of companies
273

250

235

200

178

150
117
100
76
50

0

36

49

28
22 25
8 10 12 10
7
8
8 13
3
3
22 13 36 1
2
2
1
0

27

61
41

57
38

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

(As of October 31, 2021)

Seven affiliated organizations
including the World Wildlife
Fund (WWF) spearheaded
efforts to establish theRoundtable on Sustainable
Palm Oil (RSPO) in 2004 in
response to a mounting chorus
worldwide of voices calling foruse of sustainable palm oil out of consideration forenvironmental impact. It aims to promote production anduse of sustainable 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 affiliatedstakeholders from seven sectors of the palm oil industry: oilpalm producers, palm oil processors or traders, consumer
goods manufacturers, retailers, banks and investors,
environmental NGOs, and social or developmental NGOs.

R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

61

AgendaEngagement report

2

Food sustainability(Sustainable food supply chain)

From June 2021, we have participated in collaborative engagement facilitated by Access to Nutrition Initiative(ATNI). This involves conducting engagement with approximately 20 global target companies following the assessment
conducted by ATNI.
The aim of the engagement is to persuade the companies rated by ATNI to improve their performance on nutritionand demonstrate their positive impact on consumers’ health by improving their products and business practices.

Resona’s actions
Engagement with global companies
September 2021: Commenced first round engagement with global companies

June 2021: Participated in Access to Nutrition Initiative

Assessment

Collaborative engagement

In the 2021 Global Index, ATNI assessed twenty five leading food and beverage manufacturers on theircommitments, practices, and disclosure for seven categories: governance, products, accessibility, marketing, lifestyles,
labeling, and engagement. The assessment included product profile assessment and a marketing index regarding
breast-milk substitutes and complementary foods.

Investor Expectations
on Nutrition, Diets
and Health• Governance• Strategy• Lobbying• Transparency

Investee companies
Using the assessment results, identify specific requests
and conduct engagement.

Tokyo Nutrition for Growth Summit 2021
At the Tokyo Nutrition for Growth Summit 2021 (N4G), held on December 7-8, 2021,
Resona Asset Management President Akihiko Nishioka announced the N4G Investor
Pledge on behalf of signatory investors.

62

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

We used the FAIRR platform to participate in engagements aimed at mitigating livestock product supply chain
risks and associated climate change and water safety issues.

December 2019: Joined the engagement on meat sourcing
Engagements requesting six major fast food companies to take urgent action to mitigate risks
associated with climate change and water in relation to farm animal and dairy supply chains.
Collaborative
engagement

Provide encouragement to six major
restaurant and fast food companies

Board-level control of risks associated with the protein supply chain• Skills development for corporate sustainability managers• Selection of disclosure framework• Encourage the investee companies to engage with major suppliers to addressenvironmental issues• Setting SBT(Note 1) with regard to climate change and water

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

Provide encouragement to 25companies in the food supply chain

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

Engagement case

Dialogue with an Australian retail chain

Resulting in improvement of assessment regarding materiality and strategy■ 2020Materiality score• The improved materiality score reflects an assessment that the new strategy aims at atransition of the product portfolio.

Strategy• The implementation of TCFD-aligned Scenario Analysis is also highly rated.

Product
Portfolio

Strategy score• With the approval of the Scope 3 targets by the SBTi in 2020, the strategy score has increased.
• In the previous year, the company did not express any intention to set Scope 3 targets.

Traditional procurement of protein through livestock and poultry

CO2

O2

CO2•CH4

Livestockexhalations also
contribute to GHG

O2

Destruction of forests, which
absorb greenhouse gases(GHG) and emit oxygen, in
Use of land and waterorder to create grazing land resources on a huge scale

GHG emitted
during processing
and preparation

Consumer
Engagement
Tracking &Reporting

Procurement of substitute protein
Plant protein

Shift tosustainable
protein■ 2021

Materiality

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 withthat required by the Paris Agreement (which seeks to control the rise in global temperatures from pre-industrial levels to well below 2°C, andpreferably 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 to 1.5°C under the Paris Agreement, in which the increase in average temperatures is limited to 1.5°C above pre-industrial levels.

R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

63

AgendaEngagement report3

Biodiversity
We have received numerous benefits from biodiversity…

Pollinators andfood sustainability

Microorganisms
and medicine

Deforestation andthe rise of newtransmissible
diseases

Deforestation andchanges inregulating services(water sources, etc.)

August2020

February
2021

Participated as a member of the Ministry of Agriculture, Forestry and Fisheries“New MAFF Biodiversity Strategy Study Group”
Participated as a member of the Ministry of Environment “Study Group for
Revision of Guidelines for Private Sector Engagement in Biodiversity”
Participated in Zero Deforestation Engagement/Phase 2 led
by Dutch asset management company ACTIAM

April
2021

• Engagement requiring action to stop deforestation and strengthening of traceability.
• Recommends disclosure of information aimed a zero deforestation to investee companies from a perspective of financial risk due toclimate change, biodiversity loss, and deforestation.
• Specifically, recommends disclosure of supplier lists and disclosure of information pertaining to transactions with companies related
to palm cultivation in Malaysia.
• ACTIAM receives satellite images related to deforestation provided by Satelligence. It conducts collaborative engagement withinvestees that disclose supplier lists using satellite image data.
• T he engagement is with 20 global food and consumer finance companies.
• There are 13 participating companies, with total of EUR2 trillion in assets under management.

May

Endorsed and supported Finance for Biodiversity Pledge

2021• At the 15th Conference of the Parties (COP 15, Phase 1 held in October 2021 and Phase 2 to be held in Spring 2022) to theConvention on Biological Diversity (CBD), world leaders have been asked to agree with effective measures for reversing nature loss
in this decade in order to ensure ecosystem resilience.
• A s a financial institution we have pledged our dedication to collaboration and knowledge sharing, engaging with companies,
assessing impact, setting targets and reporting publicly by 2024 at the latest.

DecemberParticipated in TNFD Forum2021• L aunched in June 2021. A forum endorsed or recognized by the G7 Finance Ministers, the G20 Sustainable Finance Roadmap andthe G20 and G7 Environment and Climate Ministers.
• Participating organizations include 250 companies and asset managers.

Mission• To develop and deliver a risk management and disclosure framework for organizations to report and act on evolving nature-related risks.
• To support a shift in global financial flows away from nature-negative outcomes and toward nature-positive outcomes.

64

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Agenda4

Engagement report

Circular economy(Policy engagement in Japan)

Engagement on marine plastic issue
We continued the dialogue on the marine plastic issue with retailers that are heavy users of polyethylene bags, andbeverage manufacturers that produce and sell drinks packaged in PET bottles. We conducted interviews to confirm thestatus of each company’s efforts to reduce the use of plastic, and we actively encouraged information disclosure.

Participation in the Plastic Engagement Working Group
Since August 2020, we have joined Plastic Engagement Working Group, a collaborative
engagement working group which was set up by Achmea Investment Management and ACTIAM.
The main goal of this dialogue is to call on the 12 global target companies to accelerate
their work on the ‘plastic transition’ (to reduce, replace and re-use), to reduce theenvironmental burden (pollution) of plastic production and use.

Resona AssetManagement

Engagement case
Sustainability strategy
for 2030

Major theme:“Plastic recycling”

Company C

CircularAction on climate

Zero deforestation

Multinational
packaging andpaper group,
which hasproduction sites
across more than
30 countries.

100% of thecompany’s
products to bereusable,
recyclable orcompostable by2025

Set a sciencebased Scope 3
reduction target
by 2025

Maintain 100%
FSCTM
certification in thecompany’s own
forestrylandholdings

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.
Furthermore, in January 2021, the 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 madestatement summarizing its position on “The Status of Plastic Resource Recycling Measures Going Forward.”In order toincrease the efficacy of these initiatives going forward, we will conduct activities in accordance with the guidelines.

PHA(Note 1)
PHBH(Note 2)

O2
Photosynthesis

HO
2

Bioplastic

Marinebiodegradable
plastics

Production
RecycleUse
Disposal

CO2(Note 1) PHA: Polyhydroxyalkanoates(Note 2) PHBH: Biodegradable polymers

Microbial degradation

R e son a A sse t M a n a ge m e n t

Even if washed into the ocean,these special plastics will
degrade harmlessly

ST E WA R D SH I P R E P OR T

2021 / 2022

65

AgendaEngagement report

5

Grievance mechanism

What is the grievance mechanism (mechanism for processing complaints related tohuman 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 werelimits to the grievance mechanisms at the respective
individual-company 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 tointroduce 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 their business 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

66

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Investeecompanies
Share goodpractice cases

Agenda6

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 a collaborative
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 assessedby KTC BM.

2018

2019

Company X

Measures not known because theinformation was not disclosed on
the English websites

May 2019
Joined the collaborative
engagement
Resona AssetManagement

Conducted engagement
as Lead Investor
Information collection

Actual measures taken were
top-class in Japan
Implementation of responsible
procurement policy on raw materials
to reduce forced labor risks
Ascertained engagement with their
suppliers to conduct direct
employment

Resona Asset Management endorsed andsupported the ICCR’s Investor Statement onCoronavirus Response. It urges the business
community to consider the following five steps:

2020

KTC BM(Assessments on forced labor risks)

Its scores were underestimated compared to theactual efforts

We have confirmed several
points based on the 2021
KnowTheChain Benchmark
assessment.

1 Provide paid leave
2 Prioritize health and safety
3 Maintain employment
4 Maintain supplier/customer relationships
5 Financial prudence

KTC Benchmark Assessment for Company X• In May 2021, the 2020/2021 KnowTheChain apparel & footwear
benchmark was released.
• Four out of the seven indicators have improved for Company X,
and were ranked among the top 20 companies.
Indicator Elements

Assessment KPIs for 2018

Company score

Industry average

Assessment KPIs for 2020

Company score

Industry average

Commitment & GovernanceThe company publicly demonstrates its commitment to addressing
forced labor and human trafficking.

Traceability & Risk Assessment• T he company demonstrates an understanding of the suppliers and theirworkers throughout its supply chains.
• The company has a process to assess forced labor risks.
• It publicly discloses forced labor risks identified in different tiers of its
supply chains.

2021

Recruitment

The benchmark assesses whether:• T he company has a policy that requires direct employment in its supply
chains, and• T he company requires employment and recruitment agencies used byits suppliers to respect the ILO core labor standards, which include theelimination of forced labor.

Worker Voice• T he company takes steps to ensure that its forced labor and humantrafficking policies are shared among workers in its supply chains.

Points that led to an improved assessment• Company X reported that it received two reports from migrant workers via this mechanism in 2020 relating to harassment and overtime
work, which were solved in collaboration with the NGOs.
• Strengthened its supplier code of conduct, the “Policy of Engagement,” responding to a migrant workers issue.
• Company X has disclosed a supplier list that includes the country, facility name and address, parent company name, product type, numberof workers within ranges, percentage of migrant workers, and gender ratio per facility.
• The disclosures have also included a limited number of second-tier suppliers on its supplier list.
• In addition to its publicly available grievance mechanism that its suppliers’ workers and other stakeholders may use, Company X discloses
that it has introduced a grievance mechanism for migrant workers in Thailand and Japan, in collaboration with a Japan-based NGO.

(Note 1) K nowTheChain: A collaborative partnership between the four organizations of Business & Human Rights Resource Centre, Humanity United,
Sustainalytics, and Verité. Each organization has expertise in addressing forced labor risks within the companies’ global supply chains.
(Note 2) I CCR: The Interfaith Center on Corporate Responsibility has 300 management institutions as members, which have combined assets undermanagement of approximately ¥40 trillion. The ICCR is an organization consisting of institutional investors who manage pension funds associatedwith 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.
R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

67

AgendaEngagement report

7

Board diversity
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 to increase the proportion of female
directors. It has expanded into 18 regions and countries, including Japan, andhas made a significant contribution to raising the percentage of female directors.
Gender diversity in top-level corporate management

Investor Group

Establishing andsharing best practices
to achieve goals

Institutional
investor and asset
owner community

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 andshared with investors the state ofgender diversity at board meetings,
and shared the progress towards
achieving the goals.

Achievedachieve 10 % representation ofJuly 2019

women on the boards of TOPIX100

July 2021

10.5%

companies by 2020, and 30 %

2030

14.3%

To 30%

representation by 2030

Participation in Japan Investor Group (IG) since June 2019
Major activities during 2021
Held meetings for exchanging
opinions under the leadership ofthe Best Practice Sub-GroupWe have held/conducted three meetings with female directors who were registered to the Japan
Federation of Bar Associations and the Japanese Institute of Certified Public Accountants. The
purpose of the meeting was to gather information on how the board of directors is working tostrengthen their governance and penetrate gender diversity at the front line of management.

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 presenterswith expertise in engagement and governance.

Released an annual report, with the Best The 30% Club Japan IG compiled engagement case studies and the contents of progress reports,
Practice Sub-Group taking leadand 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
Board of directors
awareness

15/15

20/23

Use of external consultantsin relation to hiring

2/15

2/23

Setting of board of
directors targets

1/15

1/23

Appointment of women on
the board

7/15

indicates results for FY2020,

21/23

Commitment to appointing
individuals to director/
management

3/15

12/23

Department withresponsibility forappointing individuals to
director/management

4/15

Disclosure of pay gap

Educational program

0/15

3/15

0/23

In the United Kingdom, the proportion of women on boards of directors at FTSE350 companies
reached 35% in September 2019.
In international markets, there is an increasing focus not only gender diversity, but also racial
diversity.
Initiatives on racial diversity have also started at the 30% Club UK Investor Group. The investor
statement, “Statement on Addressing Racism and Call to Action,” was released in November 2021.

Resona Asset Management

3/23“Diversity is desirable
for efficient oversightof management”

indicates results for FY2021.

Participation in UK IG since December 2019

68

5/23

Resona Global
Governance Principles

S TEWA RDSH IP REPOR T

2021 / 2022

Trends in proportion of female directors in
the United Kingdom

2016

12.0%

2019

35.0%

AgendaEngagement report

8

Climate change/TCFD/
Climate Action 100+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 investor action will focus on the most substantial greenhouse gas emitters(considering emissions across the value chain), as well as those companies that investors
believe present the greatest climate related risk to their portfolios. Resona AssetManagement has engaged with the target companies in Japan.

Collaborative engagement

Goals of
Climate Action 100+GovernanceImproving governance in climate change policies of the investee companies

ActionReducing CO2 emissions throughout the entire value chain

Disclosure

Enhancing climate-related financial disclosures

Climate change

Endorsement andsupport of investor
statement on
Just Transition toa low-carbon economy

Information disclosure on the risks andopportunities based on TCFD recommendations

Companies

ESG issue:
Asset managers

Resona AssetManagement

E (Environmental)

Work with investee companies to ensure that they assess
the risks and the opportunities of climate change, ascertain

Oil and gas companies

the financial impact, and disclose such findings.

Overseas investors

Climate Action 100+ engagements/Sent letter to companies on Net Zero Company Benchmark
Progress
Medium-term target

CompanyA

Long-term target(2030)(2040)▲40% CO2 emission reduction fromnew cars by 2022
(compared to 2000 for Japan, US, EU, China)–(2050)▲90% CO2 emission reduction fromnew cars compared to 2000 by 2050
Achieve carbon neutrality

100% electrified new vehicle by early 2030s

CompanyB

2/3 electrification on
global automobile sales by 2030:
Developed countries’ sales ratio of EV/FCV to 40%

Global sales
ratio of EV/
FCV to 100%▲50% total corporate
CO2 emission reduction(compared to 2000)
Achieve carbon neutrality

Scenario analysis

Accreditation under
Science Based Targets
initiative (SBTi)• Strategy developed for
2°C and 4°C scenarios• Risk/opportunity
analysis processed for
1.5°C scenario

AIGCC Asian Utilities Engagement Program (AUEP) (April 2021)
Collaborative engagement targeting 5 of Asia’s “systematically important utility emitters” outside of Climate Action 100+.
Seeks commitments from boards and senior management of target companies to take the following 5 actions.
Consists of total 13 institutions, with total AUM of 8.8 trillion USD.
• Implement a strong governance framework that clearly articulates the board’s accountability and oversight of climate change risks
and opportunities.
• Reduce GHG emissions across the value chain, consistent with the Paris Agreement. We expect companies to have a clear
decarbonization strategy for the 2030, 2040 and 2050 time frames including commitments to no fossil fuel generation, with coalphase out by 2040. No new coal domestically or overseas.
• Enhance corporate disclosure in line with the final recommendations of the TCFD or SASB.
• Outline physical risks to the company and relevant adaptation strategies to mitigate these risks.
• Public policy engagements and lobbying activities:
Board-level oversight of public policy positions regarding environmental legislation and of any lobbying activities, with full
disclosure of such positions and activities undertaken either directly or indirectly via industry associations

R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

69

Agenda9Engagement report

COVID-19

Governance after the pandemic

Collaborative engagement “Pandemic Resilient-50 (PR-50)” (Since August 2020)
The coalition is comprised of nine institutional investors with more than $3.8 trillion assets under management.
The coalition has planned to conduct a multiyear engagement to the 50 target companies which were thought tobe affected by the COVID-19 pandemic.
Although the group was initially established under the PRI platform, the engagement strategy and the target
companies were determined by the participants.
The coalition has identified the three key themes, which were board accountability, human capital management,
and long-term value creation and finance strategy.

Members of Pandemic Resilient-50• Achmea Investment Management (Netherlands)• APG Asset Management NV (Netherlands)• BNP Paribas Asset Management (France)• British Columbia Investment Management Corporation (BCI, Canada)• California State Teachers’ Retirement System (CalSTRS, US)• Domini Impact Investments LLC (US)• Etica Funds (ETICA SGR S.p.A., Italy)• Legal & General Investment Management (UK)• Resona Asset Management (Japan)

By October 2020: Initial letters sent to 34 companies
By mid-August 2021: First round engagements conducted with 35 companies

Engagement themes (topics) & characteristics

Engagement caseCompany A (Electronic components)

Board accountability/
Holding boards
accountable for:• Board considerations to the contingency plan andreputational risk.
• How does the board obtain an independent view of
workforce health and wellbeing, including supply
chain workers, subcontractors and/or independent
contractors?
• Good governance and best practice under the
pandemic.

• No large influence by the pandemic.
• The management has learned the necessity of virtual
communication network. Has established the Task
Force at head office, and set up a system to monitor
world-wide remote ratio and utilization rate.
• Seeking for a new business model.
• Conducting re-organization for responsible executives
to set management objectives and strategy.
• Diversity of the board compositions and inclusions ofexecutives is in progress.

Human capitalmanagement• Which employee benefits and/or workplace healthand safety practices adopted during the pandemic
will be made permanent (e.g., leave policies, hazard
pay, childcare benefits)?
• Does the company have communication channels
and grievance mechanisms in place for its workforcealigned with international standards?
• Status of governance of the board regarding diversity
and management of human capital, and introductionof best practice examples.

• The group implements measures in accordance with
the Fundamental Human Rights Convention of the ILO
and other international conventions. Good
considerations on paid leave, fair wage structure,
diversity, equity and inclusion.

Long-term value
creation - financialalignment• Considerations related to executive compensations,capital expenditures, dividend, as well as stockbuybacks, mergers and acquisitions.
• Considerations related to debt reductions andgovernment assistance.
• How the company is structuring its capital allocation
to provide for long-term resilience.

• Established remuneration committee, equity grant,
has set ROE target.
• Negligible impact on business due to sound financial
structure already in place. Shareholder returns are
overall at usual level.
• No receipt of subsidies.

Closing of theengagements• In December 2021 the formal collective engagement
phase of the Pandemic Resilient-50 came to a close.
• Each investor will continue their engagements on an
individual basis after 2022.

70

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

AgendaEngagement report

10Disclosure on anti-corruption
practice (Anti-bribery)Anti-corruption initiatives
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 anticorruption to Japanese companies as part of the Siemens Integrity Initiative worldwide project on collective action tocombat corruption. Through our activities, we are encouraging the formulation and disclosure of policies by companies.

ResonaAgendaDraw up anddisclose policies on
anti-corruption

TargetCompanies thathave 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 withrisk exposure to bribery, toformulate policies and to
make relevant disclosure

Risks involving economic
sanctions and reputation• Suspension from bidding for
public projects• Cancellation and termination of
Avoid thebusiness transactions by businessfollowing
partners and/or financial institutions
risks• 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 aimed at:
Mapping the follow-up to promote anti-corruption activities and ensuring 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”

September
2021

Speech at GCNJ’s anti-corruption seminar

October2021

Speech at GCNJ Anti-corruption Subcommittee

Medium-term goal Promoting information disclosure related to anti-corruption based on the Tokyo Principles
Promote anti-corruption activities and ensure information disclosure based on the Tokyo Principles
Investors to apply the Tokyo Principles to their investment process
End of
FY2021

Promoting regular workshop
dialogues among companies
and investors

Anti-corruption workshopswith experts

Anti-corruption enhancementmonth campaign andsymposium (every October)R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

71

Chapter

4

Passive Investment Stewardship Activities

Constructive dialogue and engagement withinvestee companies (Passive investment)
At Resona Asset Management we distinguish the definitions between the dialogue and engagement:
Dialogue: Promoting mutual understanding through communication with the companies, andEngagement: Achieving results by deciding on issues to be addressed and discussing such issues with the aimof finding solutions.
The Responsible Investment Division actively conducts dialogue and engagement to encourage the companies
to increase corporate value and to achieve sustainable growth from a medium- to long-term perspective. In orderto overcome this objective, we monitor financial and non-financial aspects of the investee companies.

Equity/Passive
investment

We conduct dialogue and engagement over a long-term trajectory with our sights set
on helping to elevate markets overall. This is because we, passive managers, engage
under the policy to extensively maintain the equity positions, and that there are limited
possibilities to sell the position.

During July 2020 to Jun 2021, the Responsible Investment Division initiated approximately 4,000 cases ofcontact with investee companies. Out of such contact, the number of dialogues and engagements with theinvestee companies is stated in the table below.

[Total number of dialogues and engagements conducted]

368

Equity/Passive investment[Responsible Investment Division]

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

61 (55)307 (239)

Supporting universal ownershipResponsible
investment

Finding solutions to
ESG issues across society

Framework/Cooperation

72

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Passive investment
dialogue and engagement

Chapter

1

Chapter2

Chapter

Chapter3

Chapter4

Chapter

56Chapter

Chapter78Equity/Passive investment – Dialogue
Passive investment for Japanese equities involves investing in a wide range of companies and maintaining
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) and corporate governance toconduct proxy voting more appropriately.
In FY2020, dialogues on management strategy and environment increased as a result of coordination with
the Equity Investment Division. Dialogues with the companies on shareholder proposals have increased as more
proponents (groups of shareholder filing the proposals) have filed proposals at the AGMs. In many cases they
were asking for better disclosures on management measures towards climate change. Meanwhile, we have also
held dialogues with the proponents to discuss the background of filing the proposals.

Topics of dialogue

Social issues

Others

Women’s empowerment;
human rights issues in the supply chains;

Joining the UN Global Compact as Participant

whistleblowers;
grievance mechanisms;
working condition reforms;
health & safety management;

Prevention of misconduct

5%

Information disclosure
Disclosure and enhancementof integrated report andnon-financial information;

Initiatives to prevent recurrence

3% 2% 1%

human rights DD;
sustainable procurement

30%

Management strategies
Medium-term (MT) management plan;
long-term (LT) vision;
capital allocation;business reforms;
business models;materiality;

12%

TCFD disclosurebusiness revitalization plan

Corporate governance

18%

Board composition diversity;
reduction of cross-shareholdings;
parent-subsidiary listings;
skills matrix; skill sets;
independence of outside directors;(MT & LT) performance-linked stock compensation;
voluntary committees;
assessment of board effectiveness;
shortening the directors’ terms of office;succession plans

29%

AGM proposals
Shareholder proposals;
ROE standards

Environmental issues
Environmental vision & plan;
TCFD disclosure;
CDP disclosure assessment;sustainable procurement;
palm oil & marine plastic issues;
RE100; environmental policy;
CO2 emission reduction

R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

73

Chapter

4

Passive Investment Stewardship Activities

Equity/Passive investment – Engagement■ Corporate governance and ESG disclosure
The Responsible Investment Division conducts shareholder relations (SR) meetings with corporate directors andmanagers in charge of general affairs. During FY2020, engagement cases on the creation of skills matrix, which forms thebasis of necessary skill sets in the board composition, have increased. Additionally, we have engaged on further diversityof gender and nationalities in the board composition, as well as reduction of cross-shareholdings. We have also engaged
on further disclosure of non-financial information in the integrated reports.

■ Engagements focused on environmental and social issues
During FY2020, we have conducted engagements on sustainable procurement of materials that are subject toenvironmental, human-rights, and labor risks in the supply chains. In addition to palm oil, we have included pulp & paper,
lumber, soy beans, and cacao beans in our scope. Engagements calling for further disclosure in accordance with the
TCFD recommendations are increasing. Following the announcement of the “Action Plan on Business and Human Rights”
in October 2020, we have conducted engagements on human rights due diligence and the establishment of grievancemechanisms in the supply chains.

Topics of engagement

Anti-takeover measures

Prevention of misconduct

Abolition of anti-takeover measures

Initiatives to prevent recurrence

AGM proposals

OthersShareholder proposals;

Joining the UN Global Compact as Participant

ROE standards

Corporate governanceCapital policy
Cash allocation; cost of capital;
shareholder return policy;
financial strategy; capital efficiency;
reduction in cross-shareholdings;
ROE & ROIC improvements

Management
strategies

3%2%1%

5%

5%

Board composition & diversity;

28%

reduction of cross-shareholdings;
parent-subsidiary listings;
skills matrix; skill sets;
independence of outside directors;(MT & LT) performance-linked stock compensation;
voluntary committees;
assessment of board effectiveness;
shortening the directors’ terms of office;succession plans

12%

MT management plan; LT vision;
capital allocation; business reforms;
business models; materiality;business revitalization plan

13%

16%

Information disclosure
Disclosure and enhancement of integrated report;
disclosure and enhancement of non-financial information;
TCFD disclosure

15%

Social issues
Women’s empowerment; human rights issues in the supply chains;whistleblowers; grievance mechanisms; working condition reforms;
health & safety management; human rights DD; sustainable procurement

74

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Environmental issues
Environmental vision & plan;
TCFD disclosure;
CDP disclosure assessment;sustainable procurement;
palm oil & marine plastic issues;
RE100;
environmental policy;
CO2 emission reduction

Chapter

1

Chapter2

Chapter3

Chapter

Chapter

45Chapter

6

Chapter

Chapter7

8

Index investment – Engagement
The Index Investment Division actively exchanges opinions with index providers to ensure that indexes havethe market representativeness and transparency required as a benchmark, and are highly reliable from theperspective of long-term investment. Furthermore, towards achieving a sustainable society, we invest in green
bonds and social bonds as a way of funding SDGs projects, and strive to promote the popularization ofsustainability bonds.
■ Index engagement
Index providers for each asset also conduct consultations to gather diverse opinions from market participants such as
asset managers and also provide opportunities to exchange opinions in order to strengthen “index governance.” Resona
Asset Management voluntarily participates in these opportunities and strives to make indexes even better throughmarket representativeness and functionality.

Exchange of opinions with index providers[Tokyo Stock Exchange][FTSE][MSCI]

Benchmark for Japaneselisted equities

Benchmark for listed global
fixed income (ex. Japan)

Benchmark for global listed
equities (ex. Japan)

TOPIX

WGBI

MSCI-KOKUSAI

Consultations conducted

Consultations conducted

Consultations conducted•R evision of TOPIX, etc.
•R evision of calculation procedures for
the JPX-Nikkei Index 400, etc.

• Inclusion of Chinese government
bonds in the WGBI

• Proposal to stagger the
implementation of periodic index
reviews

Resona Asset Management’s opinion

Resona Asset Management’s opinion

Resona Asset Management’s opinion• Expression of opinion recommending
establishment of measures to reducethe market impact from revision of
the methodology for the free float
weight ratio of TOPIX and policy of
excluding low-liquidity stocks• Expression of opinion regarding
inclusion of Chinese government
bonds that the decision should bemade carefully, understanding andgiving adequate consideration to thestatus of the bond and foreignexchange markets, liquidity, andother issues• Expression of opinion regarding
merits and demerits of proposed
split execution of periodic index
reviews with regard to market
impact, transaction cost, andturnover rate, etc.

Participation in committees

Participation in committees• Tokyo Stock Exchange“Index Advisory Panel”•F TSE Asia Pacific Fixed Income
Advisory Committee

Benchmarks with better market representativeness and functionality

R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

75

Chapter

4

Passive Investment Stewardship Activities

Index investment – Engagement■ Investment in sustainability bonds
As a responsible investing initiative of the Index Investment Division, we aim to realize a sustainable society by
investing in green projects, social projects, and so forth. In the Index Investment Division, we invest in sustainability bonds
such as green bonds considering investment efficiency on an economic front.
In addition, Resona Asset Management invests in sustainability bonds issued by the World Bank, the European
Investment Bank, and other international institutions, and supports funding of projects for realizing a sustainable society.

Investment in green bonds and social bonds in compliance with guidelines
International Capital Market
Association (ICMA)

Green Bond Principles, Social Bond Principles

Ministry of the Environment

Green Bond Guidelines

Financial Services Agency

Social Bond Guidelines

The Financial Services Agency called for public comments with a view to

Submission of
opinions on
public comments

formulating social bond guidelines. Resona Asset Management submitted opinionsfrom a perspective of promoting the spread of social bonds, as well as bringing theguidelines into alignment with the ICMA standard (Social Bond Principles) and theGreen Bond Guidelines formulated by the Ministry of the Environment.

Collaboration with Responsible Investment Division on monitoring
green bonds and social bonds after investment
Monitoring use of funds and business content, etc., throughreports, etc., published by bond issuers

Monitoring
Meeting with international
issuing institutions, etc.
Conducting impact
measurement

Direct confirmation of issuers’ initiative policies and issues, etc.
towards realizing a sustainable society
Monetizing the changes (impacts) brought about by projects on society
and assessing whether the intended effects have been achieved

Aiming to realize a sustainable society by promoting investment ingreen projects and social projects, etc.

76

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Chapter

Chapter

12

Chapter

Chapter3

Chapter4

Chapter5

Chapter

6

Chapter

7

8

Resona’s activities

Topics

Implementation of AI for information disclosure engagement
Engagement based on integrated reports
AI analysis of integrated reports

Quantitative assessment score of integrated reports (AI)As a criteria of “management strategy
formulation process to increase corporate
value” in integrated reports, Resona AssetManagement developed quantitative evaluation
models for integrated reports using text mining
technology (AI) and attributed quantitativescores to integrated reports of approximately
550 companies. For quantitative scores, total
scores are calculated from four items of values,
governance, business models and KPIs.

Item

Company A Company B Company C Company D Company E

Total score

71.67

70.64

68.57

68.43

68.38

Values

76.23

56.59

66.22

65.26

66.13

80.76

52.56

64.71

63.49

Purpose

70.28

67.58

67.06

64.06

71.15

65.09

53.91

64.05

64.41

63.24

Values

81.32

47.68

63.38

64.21

60.07

64.32

71.54

68.80

63.73

65.28

Governance framework

61.55

64.16

62.99

58.00

58.76

Skills matrix

60.63

65.30

68.70

59.52

72.38

Continuity of directors

64.13

60.84

60.45

63.72

72.31

Director compensation

65.01

64.58

58.20

66.94

73.14

Diversity

56.06

70.69

65.14

66.15

61.21

Governance

Sustainability committee
Business models
Analysis of business environment

67.19

80.43

57.14

63.01

63.11

66.59

63.35

60.61

59.18

56.54

62.78

60.76

56.62

56.86

56.04

55.92

61.59

60.80

Identification of social issues and management issues

65.97

62.29

55.67

56.75

56.70

Determining materiality

72.70

61.48

58.74

55.24

60.52

Corporate strategy and capital allocation

61.76

60.88

65.49

65.24

51.81

Building medium- to long-term plans

65.49

64.64

62.30

58.93

50.78

73.15

73.39

72.32

Identification and evaluation of key risks and opportunities

59.92

56.65

70.15

76.71

Financial performance

68.76

76.35

71.73

72.07

71.75

Non-financial KPIs and acceptability

65.78

65.37

66.02

65.24

71.80

Cost of capital, ROE and ROIC

69.18

79.56

73.92

74.98

66.38

KPIs

Engagement

63.51

VisionMissionWe promote issuance of integrated reports among companies that have yet to issue them. For companies that are issuingthem, we disclose our analyst engagement sheet featuring objective integrated report evaluation scores calculated by the AI
quantitative model (along with qualitative judgment by analysts) to the companies and engage in dialogue to deepen thediscussion of the companies’ management strategies and eliminate the recognition gap between investors and investee
companies regarding their value creation story.

Promotion of corporate disclosure
Promotion of non-financial information disclosure (integrated reports) and increase in corporate value through quality
improvement are issues in the capital markets. Resona has established promotion of disclosure and quality improvement ofintegrated reports as intermediate targets and triggers. We will support improvement of corporate value by companies throughfruitful engagement based on objective integrated disclosure assessment scores of integrated reports by AI analysis.
Path toward corporate value increase
Intermediate targets
and triggers
Promotion of disclosure
and increase in qualityof integrated reports

Accurate comprehension of upside opportunities and downside risks to business continuity by investors
Sharing of value creation story
Elimination ofrecognition gap
between companies
and investors

Specific action bycompany side

Cultivation of trustfrom investors

Reflection in
valuation

Increase incorporate value

Building of win-win relationships between companies and investors

Resona Asset Management’s approach
Engagement

AI analysis of integrated reports• In-house modeling (Quants Team, Index Investment Division)• S et multiple assessment items for integrated reports andcalculate AI score.
• Realize major reduction in work for analysis operations throughuse of AI technology. Accelerate issue analysis and engagement
theme setting for each company based on objective assessment
from a unified perspective.
• Submit the assessment result to the target company andencourage more active dialogue to improve integrated reportquality and increase corporate value.

• Team formation and integration of internal knowledge by the Responsible
Investment Division (passive engagement function) and the Equity
Investment Division (active engagement function)• Engagement based on analysis of integrated reports (for non-disclosing
companies, awareness) intended to contribute to increasing corporate value• We identify the target company’s materiality regarding environmental andsocial issues from an investor perspective. We then require the company toreflect this in its medium- to long-term growth strategies as business
continuity risks and opportunities currently and in the future (e.g. businessmodel construction, value creation, competitive advantage), and promote
appropriate disclosure of these through integrated reports.

R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

77

Chapter

5

Responsible Investmentin Active Management
for Equity

As an asset manager whose purpose is to provide abundance and happiness to future generations aswell as our own, Resona Asset Management is taking positive steps to broaden the scope of its Equity/Active
Investment endeavors in order to respond effectively to the expectations of clients and the demands of society.
We recognize that the role that companies are being required to play is widening beyond enhancing theirown corporate value to incorporate contributing through their business activities to the sustainability of thesocioeconomic system, as exemplified by addressing the problem of climate change. We expect companies
in which we invest to promote growth strategies that are in harmony with the sustainable development ofsociety and to enhance their risk management, and we are strengthening our engagement with them fromthat perspective. We place particular emphasis on deepening discussions with them about how they canbetter explain their value creation story by clarifying their purpose and the material issues (materiality) in the
integrated reports and other materials, and about how they can enhance risk management.
■ ESG initiatives based on the independent investment philosophy in each active investment

78

The Four Strategies

Materiality ininvestment philosophy

Main paths toperformance

Topics of dialogue and engagement

Research active teamProfit growthsustainability

Integration• Corporate involvement in social needs and problems• Dialogue with the capital market

Global equity teamContinuous
improvement incompetitivenessIntegration• Strategies that are suitable for corporate identities• Strategy execution frameworks and corporate culture• Initiatives toward continuous improvement

Value teamCorporate structurereforms

Engagement• Motivation of enhancing corporate value among
the management team
• Corporate governance• Recognition of issues and effectiveness ofcountermeasures

Small-cap teamSustainable growththat captures
structural changes
in society

Integration• Changes in social structure• Corporate philosophy shared among
the management team

QuantsMateriality ininvestment philosophy

Main paths toperformance

Topics of dialogue and engagement

Quants value strategy

Corporate earnings
sustainability

Integration• Degree to which ESG is incorporated into the value
creation process

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Chapter

Chapter

12

Chapter3

Chapter4

Chapter5

Chapter

6

Chapter

Chapter

78Constructive dialogue and engagement with investee 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 with the 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.

Equity/Active
investment

We conduct engagement with investee companies tailored to their circumstances toenhance their corporate values, and dialogue with them in order to gain greater
confidence in our investment process, in addition to performing analysis of such entities
in accordance with our own investment philosophy.

We initiated approximately 4,000 instances of contact with investee companies for the year spanning July
2020 to the end of June 2021. Of that number, such contact included instances of dialogue and engagement
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 and number of companies are asstated in the table below.
[Total number of dialogues and engagements conducted]

1,423
■T
 opics of engagement(Previous year in parentheses)

16.5%
(9%)

66.5%
(69%)

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

Equity/Active investment[Fund managers and research analysts]

1,344 (609)

79 (30)■ Key points

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 thatlead to enhancements in corporate value.

2. I ntensifying our engagement in relation to
information disclosure

17.0%

(22%)

• Increasing dialogue on explaining corporate philosophy and the value
creation story.
• Deepening discussions related to the publishing of integrated reports
and enhancing their content.

3. D iscussions on the importance of intentions• Beginning impact investment.
■ Profitability improvement / Business model /Business strategy• Strengthening dialogue on the social intentions of investee companies.

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

R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

79

Chapter

5

Responsible Investment in
Active Management for Equity

Equity/Active investment
Strategy

Materiality in investment philosophy

Focus fields

Research active teamProfit growth sustainability

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

We conduct ESG evaluation along two axes to assess the long-term growthpotential of companies and the sustainability of their earnings.
Size of social benefit = social need × company’s ability to respondSocial benefit loop originating with customer

Strength of the social need

Companies thatgenerate significant
social benefits

Customers<Satisfaction><Satisfaction>
The greater the degree of engagement by thecompany in areas where the social need is strong,
and the greater its ability to respond to those needs,
the larger its ability to create social benefit(Drawing together of corporate philosophy, corporate culture,vision, strategy, governance and other factors)

Company’s ability to respond

Shareholders

Socialbenefits

Stakeholders(employees,
business
partners, etc.)<Satisfaction>
With regard to social benefits, we believe it is importantthat social benefits lead to the maximization of
stakeholder value through business activities.

Dialogue example: Enhancement of disclosure focused on non-financial information
Dialogue with companies: Major logistics services provider Company A
Situation

Company A is a logistics services provider that has grown consistently over the years, with major customers in
the retailing industry such as general merchandise stores and drugstores as well as the housing and building
materials industry and chemical industry. In recent years it has acquired industry peers with strengths in the cold
chain, and is accelerating the expansion of its food distribution business. In addition to cost-related pressure from
customers in such areas as improving efficiency and converting costs from fixed to variable, the logistics industry isfacing rapidly diversifying social needs, including dealing with structural labor shortages and work style reforms,
moving to smaller lots and higher frequency, responding to the rise of e-commerce, and reducing environmental
impacts. Company A’s strengths include management techniques designed to encourage the use of ingenuity on thefront line, as well as a full array of facilities and systems for education and training. Through its development of
human resources it has succeeded in addressing the needs of society, and in achieving sustainable growth in sales.

Dialogue and engagement

In dialogue with Company A, we noted the fact that the stock price valuation has remained at low levels in thelight of our analysis of its track record of growth and the sustainability of that growth into the future, and the main
theme of our engagement has been to request fuller disclosure of information aimed at resolving this situation.
Recently, we have been requesting that Company A recognizes the spirit of the times and the needs of consumers
that provide the backdrop to long-term growth in demand. We have also asked that it discusses some of the uniqueinitiatives it has taken to address these issues, so as to express the factors that support its sustainable growth interms of non-financial information, which is the value it provides to society. At such times, our policy is to introduce
material to offer pointers to the company as it considers specific measures for improvement, such as case studies
from other companies in the same industry that are communicating effectively with stakeholders.

Company A’s initiatives and our expectations

In the past Company A had gradually enhanced the information it discloses, with a focus on materials for thefinancial results briefing held every fiscal year. In addition, a department dedicated to investor relations wasestablished in 2020, and more human resources were allocated. The company responded positively to dialogue
pertaining to the disclosure of non-financial information, and after sharing our awareness of this problem withmanagement, Company A is now moving forward with the consideration of specific proposals.
For our part, in the new medium-term management plan scheduled to begin next fiscal year, we hope to see signsof an accelerated development of specific measures that are in harmony with the spirit of the times. By balancing fuller
information disclosure with a sophisticated growth strategy in this way, we believe the company can achievesustainable expansion in corporate value and contribute to the performance of the research active team fund.

80

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Chapter

1

Chapter2

Chapter

Chapter

34Chapter

Chapter

56Chapter

Chapter78Strategy

Materiality in investment philosophy

Focus fields

Global equity teamContinuous improvement incompetitiveness

Strategies that are suitable for corporate identities
Strategy execution frameworks and corporate culture

We support enhancements to corporate value by assessing and discussing sustainableimprovements in competitiveness.
Vigorous discussions based on a thorough ISDK analysis (as shown in the diagram below)
lead to sustainable improvements in competitiveness.
Strategy execution process analysis (ISDK)
1 I (Identity)
Does the company recognize areasof expertise where it can leverage
its strengths, and is it focused onthese areas?

2 S (Strategy)
Validity of strategies formulated based on
this recognition (Organization responsible forformulating strategy, company information,competitor information, market information, other)Specific examples of evaluations• Even if the strategy is generally considered tobe superior, we do not rate it highly if it is not
rooted in the company’s identity.
• With regard to the ability to execute, we do
not only assess the system of corporate
governance, but instead take acomprehensive approach that evaluatescompatibility with strategy, and how it ties into corporate culture, which is closely
associated with identity.

• Different outcomes for companies with the similar strengths andstrategy• Different outcomes for the same company with the same strategy,
depending on the timing
Why?
Companies that continue to beat the competition build a sustainable
competitive advantage by consistently repeating the following:• Rather than restricting ourselves to objective
assessments of common quantitative metrics
such as net sales, operating profit margin,
and ROE, we additionally consider whether
the KPIs are the optimal metrics for thecompany based on its identity.

( I ) Share a clear identity within the company(S ) Build a differentiated strategy based on this identity(D) 	E xecute the strategy through highly compatibleorganizations and processes(K) 	Measure outcomes, and continue to improve over long
periods of time
4 K (KPI & Kaizen)

Are the outcomes of the strategy being
monitored appropriately, and do theylead to improvements?

• In cases where facts emerge that areincompatible with the integrated ISDK flow,
we conduct an analysis with a view todisposing of the position before coming to a
judgment on whether to continue theinvestment.

3 D (Develop & Deliver)

Validity of mechanisms for executing
strategy and delivering outcomes(the ability to execute of organizations
involved in R&D, sales and marketing,production and other areas)

Dialogue example: Discussing the importance of continuously strengthening the source of competitive advantage
Dialogue with companies: Major automobile manufacturer Company B
Situation

Company B has enjoyed considerable success as a world-leading manufacturer of automobiles, and is now
facing new challenges as part of a major transformation of the kind that occurs only a century. The background to its
success hitherto is arguably the way it has continuously implemented a set of improvement (kaizen) activities,
known as “TPS,” that have generated a variety of competitive advantages. However, there has been a sense thatkaizen activities at manufacturing sites have in the past tended to lead those in other parts of the company.

Dialogue and engagement

We first conveyed to the company our view that this culture of improvement (kaizen) is a large part of its sourceof competitiveness. We also drew to their attention the example of a US company that had been profoundly
impressed by Company B’s kaizen approach. Based on this, the US company had introduced kaizen activities
throughout the organization, improved its competitiveness, and succeeded in recording double-digit average rates
of growth in profits for more than 20 years. Company B commented that it was proud that there was a company that
had used its thinking to generate such excellent results. It also noted that even within Company B it was felt that thekaizen activities at the factory locations were outstanding, and that it motivated those working in administrative
functions to try harder still. We then communicated our hope that kaizen activities would continue to bestrengthened across the company, and that they would include administrative functions.

Company B’s initiatives and our expectations

Company B subsequently began considering introducing TPS across the entire company, including
administrative and technical functions, and strengthening kaizen activities. After various investigations andsmall-scale trials, this initiative was launched in the summer of 2020, and it appears that there have already been
examples of work volumes being cut by 10%. Large-scale, eye-catching innovations are also important, but we
expect the refinement and continuation of kaizen activities, which may appear at first glance to be sober andunexciting, to provide support for Company B’s competitiveness over the long term.

R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

81

Chapter

5

Responsible Investment in
Active Management for Equity

Equity/Active investment
Strategy

Materiality in investment philosophy

Focus fields

Value teamCorporate structure reforms

Motivation of enhancing corporate value among
the management team

We develop understanding of the factors behind the stock price discount and clarify
which points need improvement, including ESG perspectives.
We visualize the issues, and engage constructively with the aim of improving andresolving management issues.

• Making effective use of the “Corporate Analysis Library”
that we have accumulated (more than 1,500 companies)

Neglected companies with
undervalued stock(companies with some kind of issue)• Visualizing issues through the use of discussion papers

Dialogue■ Share awareness of
issues■ Verify measures toresolve issues■ Encourage executionof measures

Resona’s “Undervalued Stocks(Value Up)” Fund

Enhancementof corporate value(Expansion of
investment returns)
Win-win situation forcompanies, employees,
and investors

Dialogue example: Exchanges of views with a company whose corporate value is underappreciatedDialogue with companies: Food company Company C
Situation

A food company with strengths in development, Company C is an organization that has achieved growth bydeveloping globally competitive products. However, over the past few years increases in R&D investments and a risein SG&A expenses have led to stagnation in earnings, and ROE remains at a low level.

Dialogue and engagement

We focused on the possibility that the latent corporate value of this company, with its differentiated businessmodel, was not being properly valued by the stock market, and attributed this to the way up-front investment
periods had lengthened, leading to stagnation in earnings, and the fact that there was also room for improvement in
information disclosure, governance, capital policy, and other areas. We communicated these opinions to Company C,
and have repeatedly exchanged views through a process of dialogue.

Company C’s initiatives and our expectations

Recognizing that Company C had a similarly high level of interest and awareness in this problem, we engaged
with them to explore practical actions to resolve these issues.
In fact, we were able to verify specific developments such as raising the proportion of outside directors andbuying back shares to improve capital efficiency. Going forward, we intend to continue dialogue with the aim offurther enhancing corporate value, including strengthening strategies for sustainable growth, bolstering information
disclosure, and other measures.

82

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Chapter

1

Chapter2

Chapter3

Chapter4

Chapter

Chapter

56Chapter

7

Chapter8Strategy

Materiality in investment philosophy

Focus fields

Small-cap teamSustainable growth that captures
structural changes in society

Demand creation and expansion with thestructural changes in societyManagement team/corporate philosophies

We generate investment ideas with an awareness of changes in social structure, including ESG.
Corporate evaluations are seasoned with an assessment of the strength of management purpose.
We discuss enhancements to information disclosure that lead to improvements in corporate value.
Changes in social structure
Low birthrate and aging population,
diversification in values, development oftechnology, environmental regulation,social responsibility, legal compliance, etc.

Demand-side needs
What does society want?

Map of promising markets based on changes in social structure

Promisingmarkets

Evaluationofindividualcompanies

Analysis of management (focus on intentions)

Dialogue example: Dialogue aimed at converting temporary phenomena to structural and sustainable factors
Dialogue with companies: Life insurance company Company D
Situation

Since it was founded as a pioneer of online life insurance, Company D has been establishing a position as one of
the leading companies in the industry, providing products and services that are inexpensive, convenient, and easy tounderstand.
This market, which had grown by capturing the highly computer-literate consumers who originally bought
insurance via their personal computers, and who form the customer base of the company, has been slowing slightly.
However, the COVID-19 pandemic that occurred in 2020 triggered an acceleration in the digital shift of finance,
which centered on smartphones, and has now entered the structural growth phase. This led to the number of newpolicyholders hitting a record high for the company.

Dialogue and engagement

The issue at hand was what would be required to make this positive consequence of the external environmental
factor of the COVID-19 pandemic a structural and sustainable feature rather than a temporary phenomenon, we
entered into dialogue with the current president of the company on the following three issues.
1) Capturing the needs of the so-called smartphone generation who are expected to become policyholders going forward2) Committing funds to effective advertising to raise brand name and awareness3) Providing careful explanations to shareholders of the phenomenon by which, under existing accounting
legislation, rapid growth in new policyholders results (superficially) in increased losses

Company D’s initiatives and our expectations

Partly due to distinctive television commercials, awareness of the company’s products has already risen. Goingforward we will support the expansion of the white label business using technology as a weapon (such as therecently announced alliance with Money Forward, Inc.) rather than being devoted entirely to advertising, as well as
the company’s strategy for significant and rapid growth, which is being implemented with an eye on transforming
itself into an online platform operator.

R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

83

Chapter

5

Responsible Investment in
Active Management for Equity

QuantsStrategy

Materiality in investment philosophy

Focus fields

Quants value strategy

Corporate earnings sustainability

Degree to which ESG is incorporated into
the value creation process

In order to practice ESG effectively, it must be incorporated into the company’s value
creation story by including ESG in the business strategy formulation process.
In quantitative investment, we have implemented ESG integration in accordance with Resona Asset Management’s“Basic policy on responsible investment.” Here we will highlight one example of the investment philosophy of ESG analysis
and how it is incorporated into the process.
Because sustainability (ESG) means the sustainability of future corporate profits, it is important to take ESG into
account when thinking about investment philosophy. Price-earnings ratio (PER) is an example of an indicator ofundervalued stocks that expresses the attractiveness of the stock. Two different stocks for which the most recent
corporate profits are the same, and that have the same market capitalization, will have the same PER. However, if theirsustainability is different, the downside risk to future profits will also be different. For that reason, the stock with thehigher level of sustainability is the more attractive. Accordingly, it is important that ESG is taken into account whencalculating the attractiveness of a stock.
Meanwhile, in order to practice ESG effectively, it is important that it is incorporated into the company’s value
creation story by including ESG in the business strategy formulation process. To achieve this, we use text mining ofintegrated reports to analyze the degree to which ESG is incorporated into the value creation process, and thus tocalculate sustainability factors. When performing these calculations, we utilize concepts such as the SDGs and ESG issues
based on Resona’s Materiality Matrices (the details of engagement for quantitative investment are the same as for thoseof the passive investment).

Example of the investment philosophy and process utilizing ESG analysis
If the market capitalization is the same, the PER based on the most recent earnings will be at the same level, but
corporate value in the upper example is higher.
Structuralchanges insociety

Structuralchanges insociety

Structuralchanges insocietya Case in which corporate profits are sustainable

Profit1 yearlater

Profit2 years
later

Profit3 years
later

Profit4 years
later

Profit5 years
later

Profit10 years
later

Profit20 years
later

Profit30 years
laterb Case in which corporate profits are vulnerable to sustainability risk

Downside risk
Profit1 yearlater

Profit2 years
later

Profit3 years
later

Profit4 years
later

Profit5 years
later

Profit10 years
later

SDGs
2030

“E” (earnings) denominator
used when calculating PER

84

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Chapter

Chapter

12

Chapter

Chapter

34Chapter

Chapter

56Chapter

Chapter

7

8

Example of ESG analysis being incorporated into the investment process
Incorporated into the investment process by performing text mining on integrated reports in order to calculate
sustainability factors.
Calculating

Selection of❶ investment universe

Portfolio❷ attractivenessof stock (alpha)❹ execution

calculation

Resona Alpha Model (Value)
Attractiveness of value stocks

Resona Rebalancing
Model

Price-to-book ratio
Dividend yield

Integrated
reportCompany A

Profit-based indicatorsof value stocks

Composite alphaAsset-based indicatorsof value stocks

Investment
universe

Integrated
reportCompany BTrade❸ weights

Rebalancing
plan
Optimalportfolio

Price-to-earnings ratio

Integrated
reportCompany C

Price-to-sales ratio
Price-to-cash-flow ratio

Tradeexecution

EBITDA/EV ratio…
Supplementary factors
Financial soundness
Corporate size
Momentum

ESG analysis(text mining)

Sustainability factors
(ESG)

…

ESG integration
Materiality Matrices

Importance to sustainability

Material issues identified
Material issues
identified

E

Climate change…

S

Diversity…

G

Anti-corruption…

Resona engagement agenda
Importance to long-term investment performanceR e son a A sse t M a n a ge m e n t(+SDGs)ST E WA R D SH I P R E P OR T

2021 / 2022

85

Chapter

6

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 avoid
unpredictable volatility in cash flows and maintain sustainable growth, and that if they are well prepared for a rangeof risks they can avoid damage to their corporate value, thereby helping to increase 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 and monitoring of securities
held, we supplement quantitative analysis such as financial analysis and assessment 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, and discuss the investment process with fund managers.
Fixed income investments with long maturities in particular 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 throughcollaboration between internal resources such as the Responsible Investment Division and the Equity
Investment Division, there are becoming able to take a more multitiered approach.
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 themedium to long term, in addition to topics related to business results and financial strategies. By doing so wehope to avoid unanticipated credit risk that could materialize during our investment period until redemption

Selection of individual bonds(non-government bonds)
List investment
candidate bonds
Shortlist securities
offering value
Conduct qualitative
analysis
List candidate bonds
for trading

86

Resona Asset Management

S TEWA RDSH IP REPOR T

Gather information and prepare data on offerings by securities firms (including bondnames, 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

2021 / 2022

ESG evaluation(i) E (Environmental responsibility)(ii) S (Social responsibility)(iii) G (Corporate governance)Chapter

Chapter

12

Chapter3

Chapter4

Chapter5

Chapter

6

Chapter

Chapter

7

8

by recognizing potential risks involving such issuers, gaining a shared awareness of challenges, and persuadingthem to address ESG issues.
Our ESG engagement involves 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 theperspective of fixed income investment. As we pursue engagement, we are focusing on the issuers of thosebonds 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, we areliaising with the Responsible Investment Division and the Equity Investment Division, among others, to be able
to pass the opinions of bond investors on to senior management at issuers.
It is important for bond investors that a stable cash flow is generated for the period up to redemption, forwhich reason it is essential that good relationships are maintained between the issuer and various stakeholders.
For example, electric power companies account for a significant portion of the value of Japanese corporate
bonds issued, and as providers of important infrastructure they maintain economical and stable supplies ofelectricity. At the same time, these companies must take a balanced approach to changing their energy mix in
preparation for the shift to a carbon-neutral society, and we believe that the use of dialogue with stakeholders
to enable society to understand the vision of these companies is important for the generation of stable cash
flow. Taking this viewpoint, we have consistently argued that when procuring funds using corporate bonds, theissuers must disclose sufficient information and enter into sufficient dialogue with corporate bond investors.
[Total number of dialogues and engagements conducted]

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

July 2020 to June 2021

78

Fixed income/Active investment

45 (38)[Fund managers and research analysts]

33 (22)

Fixed income/Active investment – Examples of dialogue and engagement[Governance, information disclosure] Company A (electric power company)
To Company A, we proposed that it fulfill its responsibility for providing explanations after misconduct has occurred
more effectively, and conducted further engagement in relation to the issuing of labeled bonds.

Company A

ResonaIt has improved communication with the capital markets, suchas by providing prompt explanations of the situation to market
participants as the issuer of the bonds when the Consumer Affairs
Agency imposed administrative sanctions on an electricity retailingsubsidiary for misconduct at a sales agent, and on other occasions.

In relation to a string of incidents of misconduct regarding
nuclear power plants and other issues, we proposed that thecompany should promptly provide explanations to the capital
markets, giving details of the events that occurred and how it
intends to address them going forward.

Renewable energy subsidiaryissued a green bond after
repeated discussions withourselves on the subject ofsustainability bonds.

In terms of social engagement, we continue
to hold discussions about the possibilityof the company considering othersustainability bonds, such as social bonds
or transition bonds.

[Decarbonization] Company B (insurance company)
To Company B, we conducted engagement in relation to its environmental agenda, and particularly its initiatives inrelation to coal-fired power generation.

Company B

ResonaThe company responded that in any case it
intends to disclose its policy in relation towithdrawing the provision of insurance for
new coal-fired power projects, and othermeasures in response to climate change.

In September 2020, it prohibited in principle theprovision of insurance, investment, and financing
for coal-fired power generation, and in June 2021 it
formally announced the prohibition of all insurance
for new coal-fired power generation facilities.

With regard to its ESG policy, we pointed out that, among other problems,
there were few mentions of environment issues, and that its approach toinitiatives in relation to coal-fired power generation was unclear.

R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

87

Chapter

7

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 thosechanges also affect our investment results.
We have set up Global Governance Principles encompassing Japanese and global equities in conducting
proxy voting based on that awareness, and have established proxy voting guidelines for respective Japaneseand 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 management decisions by the executive managers.
• The board should be sufficiently independent from management (and significant shareholders) to ensure that
it is able and motivated to effectively supervise management’s performance for the benefit of all shareholders,
including in setting and monitoring the execution of corporate strategy, with appropriate use of shareholder
capital, and in setting and monitoring executive compensation programs that support that strategy.

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

■ Information disclosure (financial & non-financial), and ensuring reliability• The board ensures reliability of financial and non-financial information disclosed by the company, andaccordingly assumes oversight responsibility for providing such information to the respective stakeholders.
• The board should disclose highly reliable information in a timely manner so that shareholders are able tofully exercise their voting rights upon having sufficiently understood content of proposals, and so thatshareholders are able to effectively conduct engagement on issues which may affect their interest.

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

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

88

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Chapter

Chapter

1

Chapter23Chapter4

Chapter

Chapter

56Chapter

Chapter7

8

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 updated byconsidering factors such as legal revisions, required standards under Japan’s Corporate Governance Code, andprevailing circumstances affecting governance of a given enterprise.
We periodically consider the prospect revising the proxy voting guidelines no less than once per year. In
addition, proxy voting details for Japanese equities are posted on our website every quarter. Each proposal for
all the investee companies is disclosed in the voting details, including the reasons for each voting result.
Approach to proxy voting ▶ https://www.resona-am.co.jp/english/responsible-investment/voting.html■ Revised proxy voting guidelines (revisions applicable for the annual general meetings (AGMs) held from 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 controlling shareholder,we will vote against if:
The company does not appoint two or more outside directors, comprising at least 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 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 or the corporate auditor is an outside director or corporate auditor 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

Japanese equities(retirement bonuses)

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

Revisions applicable for the AGMs held after January 2022 onward
Board composition
Director compensation(retirement bonuses)

We will vote against appointments of representative directors if:
The board independence is lower than one-third without reasonable and compelling explanations.
We will basically vote against retirement bonuses.

Anti-takeover measures

In principle, we will vote against the introduction / continuation of prior warning-based anti-takeover measures.
However, we may vote in favor of such anti-takeover measures as long as:• The company has a majority of independent outside directors, and• The company has provided a reasonable and compelling explanation
We will decide on the “emergency anti-takeover measures” on a case-by-case basis by:Comparing and considering management strategies of takeover bidder and management from an enhancement ofcorporate value perspective.

Shareholder proposals

We will thoroughly consider whether:
The proposal would contribute to enhancing shareholder value over the medium to long term, or
It would better protect the shareholder rights. Amendments to the articles of incorporation:
We may vote in favor of amendments and inclusion of items after consideration of:• Information disclosure on climate change risk
• Reduction of cross-shareholdings• Abolition of anti-takeover measures• Director compensation that we consider particularly necessary

Other matters

We will consider voting against director appointments if:
We were not able to confirm any intention nor improvements on the agreed ESG issues after several continuous
engagements.

■ Expected upcoming amendment (To be applied from 2023 AGMs)

Cross-shareholding• We will vote against appointments of representative directors of the companies with:
No policies and achievements on cross-shareholdings reduction, without compelling explanations, and 20% or morecross-shareholdings against its consolidated net assets, and low capital efficiency (ROE lower than 8%).
As for the cross-shareholding ratios, we will refer to the consolidated net assets from the 2022 Annual Securities Report (“Yuho”).
(We will also refer to relevant cross-shareholding information on the most recent AGM supplemental documents, if applicable/disclosed.)

Appointment offemale directors• We will vote against appointments of representative directors if:
We are unable to confirm the presence of any female directors, corporate auditors, or executive officers (in the case ofcompanies with three committees), without reasonable and compelling explanations on gender diversity policies.
But we will not vote against relative proposals, if we are able to confirm the presence of female directorship from the 2022 Yuho.
We will be confirming the presence of female directorship, by using the AGM supplemental documents and the 2022 Yuho.
• T his proxy voting guidelines will be applied from 2023 AGMs to the listed companies on the Prime Market. We will consider
extending this guidelines to more companies after 2024.

R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

89

Chapter

7

Resona’s Proxy Voting

Proxy voting results for Japanese equities (from July 2020 to June 2021)
The following provides details on Resona’s proxy voting results for Japanese equities during the period from
July 2020 to June 2021. We often decide how to vote on proposals based on details released in convocation
notices and other such disclosures. However, there are also cases where we weigh the pros and cons ofproposals after having gained an extensive mutual understanding of the matter at hand through dialogue andengagement with the respective company.
Opposition ratio

Management proposals

11.7%

Support ratio

Shareholder proposals

5.7%(Previous year)

Total number of proposals

22,259(9.8%)

2,597
Voted for(Previous year)

193(11.4%)

Voted against

11

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

Corporate bodies
Appointment and dismissalof directors
Appointment and dismissalof corporate auditors

Opposition ratio(Previous year)

11.7%(9.1%)

17,26914.8% (13.4%)

1,704

Appointment and dismissalof accounting auditors

0.0%

Director compensation

Opposition ratio(Previous year)

Director compensation (*1)

13.5% (11.5%)
80.6% (47.4%)

Capital policy

Opposition ratio(Previous year)

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

2.0% (5.9%)
0.0% (0.0%)
100.0% (93.5%)
2.3% (0.0%)

Articles of incorporation

Opposition ratio(Previous year)

Articles of incorporation

2.0%

Other proposals
Other proposals

72(0.0%)

Payments of retirement
bonuses for retiring officers

Appropriation of surplus

Total number of
proposals

Total number of
proposals

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

960

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

124

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

Total number of
proposals

1,423
54
56
87

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

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

Total number of
proposals

507(2.0%)

Opposition ratio(Previous year)

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

Total number of
proposals

33.3% (42.9%)

3*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.

90

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Chapter

1

Chapter2

Chapter3

Chapter4

Chapter

Chapter

56Chapter

7

Chapter

8

Proxy voting results for global equities ex. Japan (from July 2020 to June 2021)
The following provides details on Resona’s proxy voting results for global equities during the period from
July 2020 to June 2021.
Opposition ratio

Management proposals(Previous year)

10.0%

37,217(8.8%)

Support ratio

Shareholder proposals

Total number of proposals

1,781(83.8%)

3,707
Voted for(Previous year)

85.0%

Voted against

1,514

Of the total number of proposals:
Proposals related to written consent and proxy access accounted for 40%;Disclosure on political contributions and lobbying activities accounted for 20%;and Appointment of an independent chairman accounted for 10%.
• Proposals on climate change disclosure rose to 23. (Resona Asset Management’s support ratio: 87%) (Previous year: 11, with support ratio at 72.7%)• 33 proposals requesting for independent chairman (support ratio: 64%).

Corporate bodies

Opposition ratio(Previous year)

Total number of
proposals

Appointment and dismissalof directors

6.7%(5.9%)

13,384

Appointment and dismissalof corporate auditors

4.0%(0.6%)

479

Appointment and dismissalof accounting auditors

1.0%(0.9%)

2,027

Director compensation

Opposition ratio(Previous year)

Director compensation (*1)

Payments of retirement
bonuses for retiring officers

Capital policy
Appropriation of surplus

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

26.4% (23.0%)
0.0%(0.0%)

Opposition ratio(Previous year)

Opposition ratio(Previous year)

Articles of incorporation

7.2%

Other proposals

1

1,377
2,979
90
5,987
Total number of
proposals(4.6%)

Opposition ratio(Previous year)

7.8%

3,965

We were not able to support many of the management
proposals on/for US companies, because of:• The inconsistency on CEO compensations with earnings
performance and shareholder returns.
• Lack of disclosure on remuneration policy amendments.

Total number of
proposals

0.7% (1.3%)
18.4% (18.7%)
14.4% (3.9%)
10.2% (11.2%)

Articles of incorporation

Other proposals

Total number of
proposals

The increase in opposition ratio was caused by a higher
opposition ratios in India and the United States.
In India many companies did not meet the independence
requirement on board compositions.

908
Total number of
proposals(7.3%)

6,020*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.

R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

91

Chapter

7

Resona’s Proxy Voting

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

Governanceframeworks
Votingguidelines

Enhancement 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 our standards 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 to enhancing shareholder value over the medium to long term, and whether it
would better protect the shareholder rights.

▶ Case1: Company X

Caseoverview

Company X’s largest
shareholder, Company A,
viewed cyclicaltransactions andfictitious transactions
involved by Company X’s
subsidiary as
problematic, andpresented a shareholder
proposal at the AGM
putting forward a
candidate for the positionof outside director.

As Company X was suspectedof pressuring major
shareholders to not exercise
their voting rights, and voting
ballots were counted
incorrectly, among otherirregularities, Company A
demanded an investigation bya third-party committee.
However, Company X refused,
so Company A requested thatan extraordinary general
meeting of shareholders be
held.

The extraordinary general
meeting of shareholders
approved a third-party
investigation.
The investigation report
indicated reason to suspectthat a former executive
adviser to the Ministry of
Economy, Trade andIndustry had put pressure
on Company X’sshareholders to not
exercise their voting rights.

Following the report,
Company X concluded thatthe previous year’s AGM“could not be described ashaving been conducted
fairly.” Ahead of the AGM,
it announced theretirement of two directors
and amended its proposal
for election from 13
directors to 11.

Management proposal
Election of 11 directors

Proposal

Election took place for a total of 11 candidates; of these, seven were directors who were members of theboard that had supervisory responsibility for the series of problems, as well as being audit committee
members and nomination committee members, and four were new candidates for election as directors.

Designated Company X as a company that had engaged inanti-social behavior
We held all directors in office at receipt of the internal reportaccountable, and voted against their reappointment.
Logic andvotingdecisionManagement proposal

Voted against
reappointment■ We judged that the board of directors had exercised insufficient supervision because:With regard to the so-called pressurization issue (news reports alleging that Company X had pressured its major
shareholders to not exercise their voting rights), Company X itself effectively acknowledged that it had been involved.
■ We designated Company X as a company that had engaged in anti-social behavior, judging that its behavior was
problematic in terms of the social responsibility-related aspects of the criteria for determining such companies.
Considerations that informed our decision included the facts that (i) the infringement of certain shareholders’ rights(through pressure) constituted inappropriate behavior, (ii) Company X was extremely influential within society andthe matter had attracted considerable attention among the public, and (iii) the board of directors could be expected
to have known about this matter, and Company X’s behavior could therefore be described as systematic.
■ We voted against reappointment of the directors responsible (all candidates for reappointment), holding themaccountable for the anti-social behavior.

92

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Chapter1▶ CaseChapter2

Chapter3

Chapter4

Chapter5

Chapter

Chapter

67Chapter8

2: Company Y

Caseoverview

City K, a shareholder in Company Y, iscommitted to bringing about a society
utilizing sustainable energy that does notdepend on nuclear power generation. To
this end, since FY2012, City K has presented
shareholder proposals to Company Y on anannual basis regarding matters such as
freeing the company from its dependence
on nuclear power, ensuring transparency inthe way the company is managed, andreforming its business model.

In October 2020, theJapanese government
declared its commitment toachieving net zero GHG
emissions by 2050.

In April 2021, City K presented ashareholder proposal because (i) it
believed that, in a situation where theJapanese government was moving
toward carbon neutrality by 2050,
Company Y should also head in the same
direction as a corporate entity, and (ii) it
had engaged in regular dialogues with
Company Y, but these discussions
remained mere formalities, and were notreaching Company Y’s management.

Shareholder proposal
Partial amendment to the Articles of Incorporation
Proposal to include in the Articles of Incorporation provisions for business model reform to contribute to acarbon-free society (i.e., decarbonization of the power generation business)
City K’s reasons for presenting the proposal• Energy suppliers have an important role to play in achieving carbon neutrality by 2050.

Proposal• City K welcomed the fact that Company Y had shown itself to be a leading company in achieving zero-carbon energy,
such as by formulating its Zero Carbon Vision 2050 to reinforce measures to combat global warming. For Company Y
to actually achieve carbon neutrality by 2050, it would need to operate its business in a manner consistently alignedwith the Paris Agreement’s 1.5°C target for preventing global warming.
• Not only should Company Y avoid building new coal-fired power plants that emit CO2, it should also target existingcoal-fired power plants, switching to an electricity supply system that does not emit CO2 by promptly adopting
technologies for capture, storage, and utilization of CO2 as soon as such technologies become practicable. Moreover,in light of climate change-related risk, Company Y should take measures to achieve sustainable growth with new value
creation and a medium- to long-term perspective focused on decarbonization while actively disclosing financial
information related to climate change.

We voted in favor of the shareholder proposal, given thatbusiness model reform to contribute to a carbon-free society
is an important task to be tackled by energy suppliers

Voted in favor ofshareholder proposal

Discussion points and voting decision
We voted in favor of the shareholder proposal because:
Although the proposal involved partial amendment to the Articles of Incorporation, energy suppliers have an
important role to play in achieving carbon neutrality by 2050, and reinforcing their measures to reduce CO2
emissions is an important task they must tackle.

Logic andvotingdecision

Circumstances leading to voting decision■ In April, City K presented a shareholder proposal to Company Y. In May, we held meetings with both parties.
■ May 12: In our meeting with City K, we heard that it had presented a shareholder proposal because (i) City K
believed that, in a situation where the Japanese government was moving toward carbon neutrality by 2050,
Company Y should also head in the same direction as a corporate entity, and (ii) City K had engaged in regulardialogues with Company Y, but these discussions remained mere formalities, and were not reaching Company
Y’s management.
May 24: In our meeting with Company Y, we established that it had a long-term target in the form of its Zero
Carbon Vision 2050, but it was still in the process of working toward concrete measures, along with a director
compensation system and TCFD disclosure to enhance their effectiveness.
■ T he shareholder proposal, which called for formulation of effective plans in line with the Paris Agreement alongwith disclosure, was by no means an unusual proposal. Furthermore, we judged that enabling Company Y topursue initiatives such as formulating a more concrete strategy to adapt to climate change and improving its
related disclosure would help to enhance its corporate value over the long term.
■ After the AGM, we held separate meetings with Company Y and City K. We explained the circumstances that
led us to vote in favor of this proposal, and discussed our logic with regard to climate change-related proposals,
among other matters.

R e son a A sse t M a n a ge m e n t

ST E WA R D SH I P R E P OR T

2021 / 2022

93

Chapter

8

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 andstewardship activities. External assessment is carried out withthe aim of bringing about qualitative improvement with respect
to our responsible investment and stewardship activities throughefforts that involve determining issues that must be addressed inorder 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+

Listed equities - Active ownershipA

A

Engagement

A+

A+

Proxy voting

A

A

A+
A
A+
A

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

B

A

A

Bank debentures

B

A

A

Corporate bonds

B

A

A

Fixed income

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, the highest
rank, since 2015.

• Under PRI annual assessment, the PRI Secretariat assesses PRI signatory institutional investors particularly on
their efforts to carry out responsible investment, thereby granting them scores on the basis of six performancebands (A+, A, B, C, D, E), with A+ being the highest possible score on a global basis.
• In 2021, PRI launched a pilot Reporting Framework and new Reporting Tool. Following the launch of the newreporting framework, PRI is planning to release the 2021 public Transparency Reports and private Assessment
Reports by June 2022, alongside an updated assessment methodology and new features in the Data Portal.

94

Resona Asset Management

S TEWA RDSH IP REPOR T

2021 / 2022

Chapter

Chapter

12

Chapter3

Chapter4

Chapter5

Chapter

6

Chapter

7

Chapter8

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 specific initiatives(i.e., ESG incorporation, constructive dialogue and engagement, proxy voting). We also perform self-assessments
on a regular basis in order to further heighten the level of such initiatives. These self-assessments 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 in fulfilling Resona AssetManagement’s responsible investment and stewardship responsibilities.
We administered a tiered-assessment and open-ended surveys where members of the committee
furnished their thoughts with respect to: whether they feel that we are taking sufficient efforts with respect toinitiatives 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 for2020/2021 is determined as from July 2020 to June 2021.
Self-assessment was proposed at the September 2021 Responsible Investment Committee meeting. The
countermeasures conducted in response to the previous 2019/2020 assessment were reported, together with the
new 2020/2021 assessment results. The new countermeasures for the 2020/2021 assessment were discussed.

Results of self-assessment(i) Our stewardship activities• For the 2020 PRI Reporting assessment, we were able to achieve/maintain high scores (A+). This was due to theimplementation of our stewardship activities under the clear policies. (PRI is currently working to release the final“2021 Transparency Report,” i.e., the assessment scores to be disclosed in June 2022.)• A new “purpose” has been drawn up by Resona Asset Management. We have managed to specify our material
engagement issues by establishing the Materiality Matrices. In addition, in November 2020 we endorsed andsupported to commit to the TCFD recommendations, and have commenced TCFD disclosure. We have conducted
impact assessments on ESG bonds, and simultaneously released our basic intention on impact management.
• The Responsible Investment Division will collaborate with the investment function (Equity and Fixed Income Investment
Divisions), by jointly conducting engagements and sharing various information and engagement issues, to improve ESG
integration capability. In FY2020 we established a local impact fund as part of this collaboration. We are also deepening
the relationships between the different investment divisions in order to implement engagement effectively.

(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. On the other hand, some committee members
voiced their opinion that issues still remain regarding the internal acknowledgement of our stewardship activities andcommitment to the stewardship activities as one organization. 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.
– Establish “company’s purpose,” which leads to consistent “investment philosophy”– Improve disclosure on outcomes of ESG integration and engagement– Improve public disclosure even further to become one of the leading asset management company
For policies regarding Japan’s Stewardship Codes, please refer to the following.
https://www.resona-am.co.jp/english/responsible-investment/activity.html

Resona Asset Management

STEWARDSHIP REPORT

2021 / 2022

95