Development of SRI in Japan


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Talk given by Akitsugu Era at TBLI CONFERENCE™ ASIA 2009.
Nikko Asset Management Co., Ltd.

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  • Thank you for the opportunity to speak in such a conference, and thank you all for coming. I know how difficult it is to be here. Budgets are tighter and even worse swine Flu. My name is Akitsugu Era and I am in charge of the overall corporate governance related operations including proxy voting and engagement. For some of you maybe it is easier to say that I am mainly in charge of the Governance part of ESG, but we believe ESG aspects cannot be thought separately, therefore I am here to share some of our views on other factors as well. I am also an equity analyst focusing on bottom up research, which puts me in a unique or so to say ideal position because I believe the recent trend has been focusing on integrating ESG factors into main-stream investment, and I am touching on both fields.
  • Development of SRI in Japan

    1. 1. Development of SRI in Japan 2009/5/27 Akitsugu Era Nikko Asset Management Co., Ltd. Registration Number: Director of the Kanto Local Financial Bureau (Financial instruments firms) No. 368 Member Associations: The Investment Trusts Association, Japan/ Japan Securities Investment Advisers Association
    2. 2. Corporate Data (As of End March ,2009) <ul><ul><li>AUM:   8.8 trillion JPY </li></ul></ul><ul><ul><li>Corporate history:   50yrs </li></ul></ul><ul><ul><li>Business base: </li></ul></ul><ul><ul><li>2/3 retail </li></ul></ul><ul><ul><li>1/3 institutional </li></ul></ul><ul><ul><li>Signatory of UNEPFI, PRI </li></ul></ul>Note: Consolidated Nikko AM and its overseas subsidiaries' assets under management (including advised assets). Note2: Total is less than the sum of each component due to the adjustment to eliminate double counting of investment advisory assets and investment trusts assets/fund of funds. Note3: Data of this fiscal year is disclosed on quarterly basis.
    3. 3. Nikko Eco Fund <ul><li>First Japanese Eco mutual fund launched in 1999 </li></ul>Source: As of May 2009, Nikko Asset Management, Bloomberg ( JPY) ( left axis) ( right axis) The above graphs depict historical data and make no promise of future performance.
    4. 4. History of SRI in Japan (mutual funds) <ul><li>Number of funds has shown steady growth </li></ul><ul><li>AUM was growing rapidly until…… </li></ul>Source: As of May 2009, Nikko Asset Management, Bloomberg ( right axis) ( left axis) The above graphs depict historical data and make no promise of future performance.
    5. 5. Listed Index fund FTSE Japan Green Chip 35 <ul><li>First ECO ETF launched on 2009/4/28 </li></ul><ul><li>Investment universe: Business opportunity in ECO related area, Market cap 10billion JPY over </li></ul>Source: As of April 2009, Nikko Asset Management Top 10 invested company <ul><ul><li>GHG reduction </li></ul></ul><ul><ul><ul><li>Next generation cars </li></ul></ul></ul><ul><ul><ul><li>Railways </li></ul></ul></ul><ul><ul><ul><li>Alternative energy </li></ul></ul></ul><ul><ul><ul><li>LED </li></ul></ul></ul><ul><ul><li>Water </li></ul></ul><ul><ul><li>Waste management </li></ul></ul><ul><ul><li>Recycle </li></ul></ul>Theme 3.62% Toshiba 10 3.74% Mitsubishi Electric 9 3.83% Hitachi 8 3.84% Sharp 7 4.86% Mitsubishi Heavy Ind. 6 6.51% Kyocera 5 10.41% Panasonic 4 10.47% Honda 3 10.54% Sony 2 10.68% Toyota 1 Weight Company Toshiba 10 9 8 Sharp 7 Mitsubishi Heavy Ind. 6 5 4 3 2 1 Weight Company
    6. 6. Strategy  ( Research) <ul><li>Integration of ESG factors </li></ul><ul><ul><ul><li>Economy Stimulus packages “Global Green New Deals” </li></ul></ul></ul><ul><ul><ul><ul><li>US: 150 billion USD </li></ul></ul></ul></ul><ul><ul><ul><ul><li>JP: 15 trillion JPY </li></ul></ul></ul></ul><ul><ul><ul><ul><li>⇒   1.8trillion JPY </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Eco-car tax break: 370 billion JPY </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Eco points: 290 billion JPY </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>* energy-efficient home electronics product purchase incentives </li></ul></ul></ul></ul></ul><ul><ul><ul><li>“ E” within ESG is becoming mainstream as theme. </li></ul></ul></ul>
    7. 7. Strategy  ( Engagement) <ul><li>Representative of the Minority shareholder </li></ul><ul><ul><ul><li>No. of invested Japanese companies:   1977 </li></ul></ul></ul><ul><ul><ul><ul><li>( July, 2007 ~ June, 2008) </li></ul></ul></ul></ul><ul><li>Voice > Exit </li></ul><ul><ul><ul><li>Engagement (Voice) </li></ul></ul></ul><ul><ul><ul><ul><li>Over 100 meetings per year </li></ul></ul></ul></ul><ul><li>Proxy voting </li></ul><ul><ul><ul><li>Election of directors Votes Against : 8.7 % </li></ul></ul></ul><ul><ul><ul><li>Votes against total company agendas: 19.0% </li></ul></ul></ul><ul><ul><ul><ul><ul><li> ( July, 2007 ~ June, 2008) </li></ul></ul></ul></ul></ul>
    8. 8. Challenges <ul><li>Concentration of AGM </li></ul><ul><ul><ul><li>Approx 50% AGMs are held in June. </li></ul></ul></ul><ul><li>Assessments </li></ul>
    9. 9. ■ Comprehensive Risk Information on Mutual Funds ○ Investment trusts invest in assets whose prices fluctuate (foreign currency-denominated assets contain exchange rate risk as well), so the NAV will fluctuate accordingly. It is possible that the NAV will fall below your original investment. ○ Different investment trusts invest in different asset classes, markets, and countries, and are subject to different investment restrictions, so the details of their risks differ accordingly.  Overview of fees and other costs Customers will be responsible for the following costs: <Fees collected at subscription and redemption>   Subscription fee       Maximum 3.675% (3.5% before tax)   Redemption fee       Maximum 1.05% (1.0% before tax)   Amount reserved for trust assets   Maximum 1.0%   Switching fee       Maximum 0.21% (0.2% before tax) <Costs paid indirectly by the customer for the trust assets (paid from the fund) >   Trust Fees       Maximum 2.9975% (2.95% before tax)       Some funds charge a performance fee based on investment performance, etc.   Other costs       Brokerage commission with respect to securities included in the portfolio, audit fees, interest on borrowing       and advances,   stock-loan related fees, etc.             * We cannot provide prior information on rates, maximum amounts, and other related information for other costs because they will vary depending on   investment performance.   * The total amount of fees and other costs described above will vary depending on the length of investment period   and other factors. Therefore, we cannot give a specific total.   * Please see the prospectus for details. <Disclaimer> ○ The figures listed above are the highest rates charged for fees and other costs as regards investment trusts managed by Nikko Asset Management (as of the date of creation of this material). ○ The risk information, fees and other information listed above assume investment trusts in general. Actual fees will vary for each specific investment trust. For details, please refer to the investment trust prospectus.
    10. 10.  Other matters to consider ○ Unlike bank deposits or insurance policies, investment trusts are not protected by the Deposit Insurance Corporation or the Insurance Policyholders Protection Corporation. Nor are investment trusts protected by investor protection funds when purchased at banks or other registered financial institutions. ○ Profits and losses made by the management of investment trusts all belong to the beneficiaries. The distributor will provide you with a prospectus either before or when you submit your application to this Fund, so please make an investment decision carefully after taking the time to read the contents in detail.