ESG Investment


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ESG Investment

  1. 1. ESG Investment CEO message The primary role that Sumitomo Mitsui Asset Management (SMAM) is required to fulfill as an asset management company is to deliver strong investment management performance, and we believe that enhancing our research capabilities is vital for doing so. When selecting companies to invest in that can achieve sustainable growth, we consider it important to analyze non-financial factors of the companies, including intangible value such as brand value, development capabilities, and employee motivation among others. At SMAM, we have incorporated financial factors as well as non-financial factors in our analysis and evaluation of companies, aiming to ensure higher quality research and better investment performance. Recently, environmental, social and corporate governance (ESG) factors have been focused as non-financial factors that impact a company’s value over the medium to long term. The idea that non-financial factors influence medium to long-term corporate value is consistent with our research approach. We believe that we would be able to make our research more sophisticated by explicitly analyzing non-financial factors such as ESG and to improve investment performance. As the companies know that SMAM is doing such analysis, they could be encouraged to address ESG issues and might be able to improve their business performances over the long term by doing so. We also believe that improving the long-term performance of companies will contribute to the sound development of society. We intend to continue to improve the quality of our research and investment management performance, including through analysis of non-financial factors, and by doing so contribute to the medium to long-term growth of our customers’ assets.
  2. 2. ESG Investment The UN Principles for Responsible Investment (PRI) The United Nations Principles for Responsible Investment (PRI) are a set of principles for institutional investors to incorporate environmental, social and corporate governance (ESG) issues in their investment analysis and decision-making processes as well as ownership policies and practices, aiming to improve long-term investment returns for their beneficiaries. The PRI were announced in April 2006 by former UN Secretary General Kofi Annan. SMAM endorsed and became a signatory to the PRI in March 2010. •i The Principles for Responsible Investment•j 1. We will incorporate ESG issues into investment analysis and decision making processes. 2. We will be active owners and incorporate ESG issues into our ownership policies and practices. 3. We will seek appropriate disclosure on ESG issues by the entities in which we invest. 4. We will promote acceptance and implementation of the Principles within the investment industry. 5. We will work together to enhance our effectiveness in implementing the Principles. 6. We will each report on our activities and progress towards implementing the Principles.
  3. 3. ESG Investment ESG products SMAM offers the Japanese Equities ESG Active Fund, which is focused on achieving superior investment performance, to its institutional customers. For details, please contact International Marketing Department•i +81-3-5405-0537•j or send messages to ‘contact us’. For information about SMAM, please visit our website at the following URL. Independent ESG evaluation focused on the possible impact on the share price Stock selection through a combination Aiming to of fundamental analysis of companies’ results, outlook, valuation, and so forth, steadily outperform and ESG analysis the market Increase investment opportunities by conducting theme-based analysis of various ESG-related issues Our Equity Research Group analysts carry out ESG evaluation. By combining fundamental analysis and ESG evaluation, and also pursuing high returns through the use of ESG theme-based analysis, we are aiming to improve our investment performance.
  4. 4. Risks and expenses Notes regarding investment advisory contracts and discretionary investment management contracts Risks relating to investment advisory contracts and discretionary investment management contracts Financial products and financial derivatives products invested in under discretionary investment management contracts or those products advised in invest under investment advisory contracts may incur losses resulting from changes in the market indices of those products interest rates, foreign exchange rates or other indicators in financial instruments markets. Factors subject to change include: risk of fluctuations in prices of marketable securities, etc.; credit risk of issuers, etc.; risk of fluctuations in interest rates and financial markets; liquidity risks, etc., such as the inability to execute a transaction under conditions of sufficient liquidity (and with regards to investments denominated in a foreign currency, foreign exchange rate risk, etc.). Accordingly, the client's investment principal amount is not guaranteed. A decline in the value of financial instruments, etc., could cause a loss of principal. Fees, etc., relating to investment advisory contracts and discretionary investment management contracts To a client who is a foreign entity, management fee under an investment advisory contract or a discretionary investment management contract is to be agreed individually upon completion of the contracts. Under certain contracts, a performance fee is applicable. These fees, to be agreed individually, cannot be specified beforehand. With regard to charges and commissions other than management fees, there may be variable additional costs incurred, including sales commissions, operational fees for investment trust funds and other applicable charges. There may be other costs incurred depending on the specifics of contracts, including
  5. 5. variable costs by investment performance or costs determined by trust banks. The total costs can not be specified beforehand due to the aforementioned reasons. Note: The above risks, and fees, etc., vary according to the contract details, investment conditions, etc. Thus, before entering into a contract, prospective clients are requested to first confirm all relevant items within the "Documents to be read prior to the conclusion of a discretionary investment management contract."
  6. 6. Notes regarding investment trust products Investment trusts: risks Investment unit trusts mainly invest in securities that are subject to price fluctuations of indices of domestic and overseas equities and public and corporate bonds, and thus the unit prices of such funds may also fluctuate depending on changes in the market indices of such assets, and changes in foreign exchange rates in case of assets denominated in foreign currencies. The price of the unit is therefore exposed to: the risk of fluctuations in the price of marketable securities, etc.; risk of fluctuations in interest rates or financial markets; liquidity risk, such as the inability to execute a transaction under conditions of sufficient liquidity; credit risk of the issuer of the market securities, etc., and with regards to investments in assets denominated in a foreign currency, foreign exchange rate risk. Accordingly, the client's investment principal amount is not guaranteed. A mutual fund is not protected by Deposit Insurance Corporation of Japan. When you buy a mutual fund from a financial instruments firm other than security companies, it is not protected by Japan Investor Protection Fund. Investment trusts: expenses The following expenses are to be borne by the client. Expenses to be borne directly Subscription fee Maximum 3.675% (3.5% before tax) Redemption (cancellation) fee Maximum 1.05% (1.0% before tax) Trust asset custody fee Maximum 0.50% Expenses to be borne indirectly during the holding period Management fees Maximum 1.995% (1.9% before tax) Other expenses The following fees and commissions are also charged from the trust assets: audit fees; brokerage commissions and other charges on traded securities, derivative transactions, etc; and charges, etc., for the custody, etc., of assets overseas. Furthermore, when the fund invests into other funds, asset management fees and other expenses of those funds are charged indirectly.
  7. 7. As the amount of such charges depends on the condition of transactions, etc., SMAM cannot provide an upper limit or method of calculation for them. * For similar reasons, SMAM cannot provide the total amount or its upper limit of the fees, charges or expenses charged to the fund or the client, or the method of calculation thereof. Note: The above risks and charges pertain to investment trusts in general. As regards the Subscription fee and other fees, the rates listed above are the highest among all investment trusts managed by SMAM. Sumitomo Mitsui Asset Management is licensed and registered in Japan. Registered Number: Kanto Regional Finance Bureau (KINSYO) No.399 Member of Japan Securities Investment Advisors Association and The Investment Trusts Association, Japan