World Climate Foundation
"Our pathway to Net Zero" - Sumitomo Mitsui Trust Asset Management
By David Semaya, Executive Chairman and Representative Director
Sumitomo Mitsui Trust Asset Management is a founding signatory member of UNPRI in 2006 and has been involved in various global initiatives, engagement activities serving as a leading financial actor based in Japan.
The latest IPCC report, published in August 2021, found that achieving the Paris Agreement’s target of limiting temperature rise to 1.5℃ will require robust, immediate, and sustained actions to reduce carbon emissions. The report has forecasted five scenarios between 2021 to 2040 – from strong climate change mitigation measures to business as usual. The results revealed that, regardless of the scenarios, the temperature rise is likely to exceed 1.5℃. However, it is projected that if countries can take strong and decisive actions immediately, global average temperatures could again fall below the 1.5℃ threshold in the following decades. As the Asia
Pacific region plays an important role in climate change actions due to its economic growth and current GHG emission levels, we, as a sizable investment service provider in the region, are determined to be a leading company in taking climate change actions towards the Paris Accord levels.
Climate change has become one of urgent issues to be tackled, and we have observed impact on valuations of companies. We believe that our duty to actively commit ourselves to climate change issues is our responsibility as an investment management company, as well as strengthening our investment capabilities. As a leading Asian based investment management company, we are taking a leadership role in global and local initiatives such as in CA100+, a global signatories initiative in climate change, engaging with more than 160 high GHG emitting companies globally. Likewise, we are an active member in AIGCC（Asia Investor Group on Climate Change）which is involved in Asian Utilities Engagement Project which covers major utilities companies in the region. More importantly, we have announced to become a signatory to the Net Zero Asset Managers Initiative (NZAMI)last July and set our own pathway to the Net Zero economy.
1.Our Pathway to Net Zero
Japan has made an announcement in October 2020 to achieve carbon neutrality by 2050.
In addition, Asian countries such as China, South Korea have also made similar commitments,
In realizing public policy harmonization globally. To facilitate this, the investment management industry responded by investors initiative on their investment management services
aligning themselves to Paris Accord Goals.
There are 3 areas commitments in NZAMI. These are as shown in the Fig 1, as well as 10 guidelines to achieve this. At this time, we do not envisage carbon offsets to compensate our investment carbon exposure, as we first strive to reduce carbon emissions of investees.
Fig 1. 3 areas of commitments
2. Domestic equities first
As defined in the guidelines, firstly we focus on domestic equities (Japanese equities) investment, which is 25% of our AUM, reducing carbon emission by 46%, as our interim goal by 2030 in line with Japan’s NDC. To do so, we are sharpening our engagement activities including our proxy voting actions, by assessing feasibility of emissions reduction plans and deployment of and investment into carbon emissions technologies of investees to reach net zero by 2050. We also offer products, invested in companies with positive impact on carbon emission reduction.
3. Expanding Net Zero Based Assets
Along with action in domestic equities, we shall expand our net zero assets towards global equities.
To do so we are further committing our activities in global and regional engagement projects like CA100+ or AUEP (Asian Utilities Engagement Program) guiding companies towards net zero. We also believe collaborative actions such as Investor Agenda, through its policy advocacy, encourage Policy makers to build a framework to harmonize the climate action goals.
SMT ETF Carbon Efficient Index Japan Equity
We have listed the fund in June 2021. The fund characterizes risk/return profile of the TOPIX first section, but carbon efficiency is 19% higher.
Japan Equity Impact Investment Fund
The fund focuses on solving sustainability issues including climate change, aiming to achieve both the ESG as well as financial performances.
SMT MIRAIndex Eco
The fund tracks against ”Factset Global Environmental Opportunities Index” companies involved in environmental issues such as climate change.
Zero Carbon World Equity Strategy Fund
The fund focuses on companies in low carbon technologies, aiming to achieve both the carbon as well as financial performance, covering both Japanese and global equities.
Future Focus Corporate Bond Fund
The fixed income fund focuses on companies, aiming to solve sustainability issues including climate change.
※Please also refer to the link：https://www.sumitrust-am.com/
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