Sompo Asset Management engages with investee companies as part of its stewardship responsibilities. Analysts and fund managers build relationships with existing and potential investee companies through which regular dialogue can be maintained. The focus of our dialogue is to understand their intrinsic value from a medium- to long-term point of view, which forms the basis for our investment decisions, and we strive to understand the investees' processes of creating and distributing added value from which their intrinsic value is derived. ESG considerations are integrated into our asset management process to facilitate dialogue on ESG. In fiscal 2019, around 700 companies were selected as potential investees and, through our analysts' research activities, 2,539 engagement opportunities were provided (of which 656 were individual dialogue and 1,883 were participation in briefings).
(2) Business Partners/ Equity Ownership
Sompo Japan also engages with business partner companies on ESG as well as management strategy and business risks. Sectors and companies highly exposed to ESG risks are identified, and engagement efforts are made to encourage risk reduction. Sompo Japan supports Japan's Stewardship Code: Principles for Responsible Institutional Investors and engages in constructive dialogue with investee companies as part of its stewardship responsibilities to enhance investees' corporate value, prevent impairment and promote sustainable growth. Between July 2018 and June 2019, companies were selected for engagement activities based on a holistic review of factors such as the market value of holdings, proportion of voting rights, financial results, ROE, dividend payout ratio and ESG/SDG initiatives. Some examples of our ESG engagement work are given below:
The company engaged in the dialogue with Company C on their environmental initiatives. The company learned that they had embarked on a number of environmental initiatives including a green power purchase agreement with a biomass power plant and the use of power derived from renewable energy in their processes. The company also discussed further environmental efforts to be made.
The company engaged in the dialogue with Bank D. The company learned of their environmental initiatives, which included the introduction of tablets to provide minutes of meetings and approval documents electronically, which cut down the use of paper by 30%; the private placement of an eco bond; and the offering of preferential interest rates to companies engaged in environment-friendly activities.
The company engaged in the dialogue with Company E on their SDG initiatives. The company found out that their efforts focused on the environment, next generation and local communities, and that they had a plan to take their business succession-related business, one of their next-generation offerings, to profitability.
The company engaged in the dialogue with Company F on empowering outside directors to play their expected role. The company learned that they have been active in their effort to address the asymmetry of information, hosting workshops to help outside directors understand their industry sector better, joining inspection visits, and providing detailed reports on meetings between officers.
Since 2020, Sompo Japan has engaged listed companies in industries with high greenhouse gas emissions and industries closely related to ESG issues (Gas, electricity, food, land transportation, fisheries, agriculture and forestry, transportation equipment, iron and steel, shipping, air transportation, etc.), such as supply chain management that includes environmental and human rights issues. The selection of individual stocks takes into account market capitalization, Climate Action 100 + engagement list, regionality, etc. In the engagement process, in addition to confirming whether or not there is a sustainability related policy, the company plans to hold hearings based on the 4 elements of TCFD, and hold dialogues regarding the establishment of GHG reduction methods and reduction targets.