Head on this page.

Font size

Stewardship responsibilities and ESG investment

Initiatives in Asset Management One

At the same time that Asset Management One, which is the Mizuho Group company responsible for asset management, began operations in October 2016, it newly established its Responsible Investing Department and proceeded with initiatives for active engagement in discussions with its investee companies regarding environmental, social, and corporate governance (ESG) issues and exercise of its proxy voting rights.

Moreover, with the aim of strengthening its capabilities for engaging in productive dialogue that will lead to sustained growth in corporate value, Asset Management One expanded its staff of ESG analysts who are responsible for engagement with passive investments both in and outside Japan. In April 2017, it also concluded an alliance with Hermes EOS, which is a leading engagement company with established processes in this area, and began a program of engaging with overseas companies.

image

Approach to engagement activity

At Asset Management One, we select companies for developing close relationships and then conduct engagement activities.

In our passive asset management activities, which account for the majority of our equity investing, after taking into account the level of impact on the market, we select companies for ongoing dialogue regarding their initiatives to address their ESG issues and other matters.

In our active portfolio management, after considering the corporate issues and effect on corporate value of these issues at the time when they are solved, we then conduct our engagement activities.

Actual engagement activities*

Weighting given to engagement activity themes (FY2017)

image

  • *Number of companies with which we conduct engagement activities: 852

You can scroll left and right with your finger to view the table contents.

  • imageCorporate strategy
Management strategy, business planning, etc. that contribute to medium– to long–term corporate value
  • imagePerformance
Changes in performance and their causes, etc.
  • imageCapital structure
Financial strategy, capital policy, etc. for improving capital efficiency and enabling sustainable growth
  • imageGovernance
Management systems, etc., Corporate Governance
  • imageSocial/ Environment
Response to factors that will have a major impact on corporate management, such as climate change and work lifestyle reforms

Examples of engagement on various themes (Fiscal 2017)

Corporate strategy

Examples of cases where, from the perspective of active asset management, our sector analysts with ample experience and top corporate managements who have driven increasing corporate value with their strong leadership have discussed the corporate governance structure of the company going forward and the importance of their management succession plans.

You can scroll left and right with your finger to view the table contents.

Analysts' awareness of issues If a smooth succession is judged to be difficult, measures are necessary because there may be a risk that the company's stock valuation premium will be reduced.
Dialogue with management Looking to long–term management objectives, discussion of whether the governance structure, including succession plans, will be convincing to investors.
Company A's response We sensed that top management thought it would be desirable to yield company operations to younger staff and then they would take charge of the overall strategy for long–term management of their corporate group. Subsequently, it was announced that a younger person was to be promoted to president. This was evidence that, first, the chairman and new president would work together and then gradually move toward greater delegation of authority to the new president.

Environmental issues

Against a background of concerns about the exhaustion of fishery resources, in–depth discussions regarding sustainable fishery resources and enhancing the corporate value of an investee company in the fisheries industry yielded an example in which a long–term vision was announced to raise sustainability from the company side.

You can scroll left and right with your finger to view the table contents.

Analysts' awareness of issues While building a growth story around the procurement of fishery resources takes a position of importance to increase industry's sustainability, it was pointed out that there are major differences between the profitability of resources accessible in the Japanese domestic market versus overseas markets. In order to enhance sustainability of the industry, it was necessary to have a discussion around whether there is scope for improved profitability for those who have access to the Japanese resources.
Dialogue with management Discussions were also held on the necessity of improving resource access and, in parallel with this, how to deal with the poor profitability of business operations in Japan.
Company B's response The securing of ecological certifications in the Japanese fishery products industry has lagged, making it difficult to sell products in markets outside Japan. Japanese companies in the fishery products industry must take the initiative both in obtaining such certifications and securing access to overseas resources to increase their corporate value.

Social issues

An example of where a company was confronted with structural reforms due to rapid changes in the business environment. In this case, an ESG analyst, the person in charge of proxy voting matters, and a sector analyst worked together to take a multifaceted approach to increasing corporate value.

You can scroll left and right with your finger to view the table contents.

Analysts' awareness of issues Along with rapid changes in the business environment, the company was obliged to implement structural reforms. A multifaceted approach was necessary to increase corporate value.
Dialogue with management Discussions were held regarding the basic approach to structural reforms and identification of what is material for the company taking into account SDGs and other matters. Discussions also covered the value creation process and consistency with business strategy. To gain greater investor confidence, it was pointed out that corporate strategy would have to be more specific and that a road map for further development would have to be prepared.
Company C's response Decided to work to increase corporate value through the development of a specific and highly convincing business strategy, including technological innovation and external collaboration.

Development of products with a view to ESG

In recent years, interest has risen in "ESG Investing," among institutional investors, which considers environmental, social, and corporate governance (ESG) issues, which form the basis for medium–to–long financial information. To continue to be an asset management institution that contributes to the development of its customers and society as a whole, Asset Management One is strongly aware of the importance of ESG information as a foundation for financial information in the medium–to–long term and is working to integrate this into its ESG investment strategies.

Domestic ESG Bond Fund

As part of Asset Management One's investment strategy, which integrates ESG evaluations, Asset Management One established its "Domestic ESG Bond Fund" in August 2017 and began to offer it to institutional investors. This fund fuses Asset Management One's research capabilities, its know–how in ESG investment, its proxy voting database (covering about 2,000 companies each year), and the ESG data analysis model of Mizuho Daiichi Financial Technology. Using these integrated capabilities, Asset Management One eliminates stocks that have high risk from an ESG perspective and aims to reduce downside risk and secure stable return.

"Sustainability Research Strategy Fund" Concentrating on CSV* issues

Asset Management One carefully selects companies where growth in income is possible through initiatives to address social issues and offers its "Sustainability Research Strategy Fund" which concentrates on securing income. In selecting companies, this fund not only takes account of ESG assessments, but also gives more emphasis to return and carefully selects companies that are expected to report growth in income through initiatives to address and solve social issues. When establishing this fund, Asset Management One takes account of the Sustainable Development Goals (SDGs) and other sources including research on trends in social issues and corporate assessments from an ESG perspective and works in collaboration with Mizuho Information and Research Institute which has abundant CSR consulting experience for corporations. For companies to practice CSV management in the long term, we think it is important for their management philosophies to be in accord with CSV and for their management to insist on CSV ideals. The stance of potential investee companies toward CSV management is determined through constructive dialogues.

  • *CSV stands for Creating Shared Value, and it was developed by Harvard University professor Michael Porter in 2011 as a management model to enable companies to create simultaneously both economic value and social value.