SuMi TRUST has long believed that responding to ESG issues is an integral part of the investment process. As a committed responsible investor we launched our first SRI (Socially Responsible Investment) fund in 2003 and were one of the founding signatories of the UN Principles for Responsible Investment (PRI) in 2006.
We regard stewardship activities such as engaging with companies and exercising voting rights as vital to addressing ESG challenges. Ultimately aiming to improve corporate value of investee companies and enabling us to meet our responsibility to expand investment returns for our clients as part of our stewardship responsibilities.
In addition to financial information such as corporate earnings, we believe non-financial information including ESG initiatives and sustainability of added value for a company’s products and services can have a significant impact on corporate value over time. In April 2015, as a mechanism for looking carefully at the “earnings power” of companies, we introduced MBIS®, an in-house-developed tool for analyzing and evaluating ESG and other non-financial information.
MBIS® is an acronym which stands for Management (M), Business Franchise (B), Industry (I) and Strategy (S).
Milestones in Our ESG Activities
Establishes Japan Quality Growth Fund.
Starts incorporating the ESG concepts into the "business risk assessment" for corporate bond investment.
Wins the Award for Excellence in Sustainable Finance※３ at the 2015 Sustainable Finance Awards.※２
Establishes a dedicated department for stewardship activities.
Adopts the revised Japan’s Stewardship Code.
Establishes the Stewardship Development Department.
※１ Our activities up to September 2018 also include those conducted by Sumitomo Mitsui Trust Bank, Limited.
※２ awarded by the Research Institute for Environmental Finance (Annually).
※３ "ESG integration into domestic active management"
※４ "Global engagement activities based on international norms and rules"
MBIS®: Our Non-financial Information Evaluation Tool
Our proprietary Management, Business Franchise, Industry and Strategy (MBIS) tool seeks to qualitatively assess non-financial information (ESG information) to evaluate investee companies’ basis for sustainable growth. Drawing on this kind of information, we can evaluate the strengths companies bring and the challenges they face in achieving sustainable growth.
Through our MBIS tool, investee companies’ ESG initiatives are assessed based 12 “ESG materialities” which are described in more detail below. Through these ESG materialities, we strive to ensure ESG initiatives are aligned with the UN’s 17 Sustainable Development Goals
*MBIS® is a registered trademark of Sumitomo Mitsui Trust Bank
Status of Top-Down Engagement Initiatives
In 2019, an ESG investment policy was established at management meetings and ESG materiality was identified. Based on this materiality, in 2020, we set 12 specific ESG engagement topics and promoted top-down engagement activities after discussions at Stewardship Committee meetings and consultations and reports at Stewardship Activities Advisory Committee meetings. In June of 2022, we reviewed certain topics.
We interact with companies on an individual basis as a general rule. We believe that rigorous research and in-depth understanding of companies go hand in hand with effective engagement, this is why our Investment Research Department (IRD) are directly responsible for engagement with investee companies. They work in tandem with the Stewardship Development Department who cover engagement in issues outside the IRD’s scope
For cases where we cannot confirm post-engagement changes at companies, issues for which institutional investors have formed a shared understanding, medium- to long-term themes, and related situations, we look to harness collective engagement through a program sponsored by Institutional Investors Collective Engagement Forum (IICEF). For cases where we determine collective engagement would encourage changes we participate in IICEF activities.
ESG Engagement Around the World
We conduct a variety of engagements on ESG challenges with companies around the world. Our stewardship activities are led by a dedicated team based in Tokyo, the UK and the US, working closely with our credit and equity research analysts. In addition to actively engaging directly with investee companies, we are also proactive signatories to a number of global and domestic ESG initiatives.