Asset Management One has established itself as a leader in Japan and Asia Pacific in impact investment and ESG engagement. In December 2020 Asset Management One became Japan’s only founding signatory of the Net Zero Asset Managers initiative. The firm is a repeat winner of the Asia Asset Management Best of the Best Awards in corresponding categories. This year, Asset Management One’s achievement was recognised with the Award for Best ESG Engagement Initiative in Japan, as well as the Award for Best Performing Small-Cap Equity (3 Years).
The power of engagement
Asset Management One has multiple modes of engagement with sustainability issues, explains Takeo Omori, ESG analyst with the firm and member of its Responsible Investment Group, in accordance with its commitment to sustainability and ESG priorities, and its compliance with Japan’s Stewardship Code. His group’s responsibility “is in fact threefold,” he outlines: “the first is engagement, second is proxy voting, and the third is research and ESG integration.”
Within this framework, Asset Management One’s analysts and fund managers utilise both quantitative and qualitative information on ESG performance of investee companies. Omori continues: “Each fund manager can analyse their own portfolio by using the portfolio management tools, and they can see the ESG performance or rating at the portfolio level.”
This quantitative data combined with qualitative insights not only forms a basis for stock picking, but also helps in active engagement dialogues with companies to achieve both value creation and better ESG performance.
“We engage with companies to drive positive changes,” Omori confirms. “The fund managers can use the insights and outcomes from engagement for their investment decision-making.” Indeed, the qualitative information that Asset Management One acquires through engagement on strategic and ESG issues facing the companies and how they respond to the challenges, is made available for fund managers to enhance investment decisions. It is also vital to continuously raise awareness among Japanese companies on key ESG issues, through proactive engagement activities.
Asset Management One often engages across the ESG spectrum with each investee company on more than one ESG issue, Omori adds. However, “the impact of climate change is systemic and complex at a global scale,” he declares. “In this context, climate change is one of the most important and most material issues.”
Asset Management One has also actively participated in Climate Action 100+, a global initiative to ensure that the world’s largest corporate greenhouse gas emitters take necessary action on climate change, since its launch in 2017. Climate change is such a broad issue that global investors should work together, Omori adds.
A firm-wide commitment
Asset Management One has been a signatory of the United Nations-backed Principles for Responsible Investment Initiative (UNPRI) since 2013, abiding by its six principles. In 2015, the firm became a signatory of the Montreal Carbon Pledge (MCP), committing to measure and publicly disclose the carbon footprint of its equity portfolio on an annual basis. Asset Management One’s commitment to the Net Zero Asset Managers initiative is the latest example of its efforts and commitment to sustainable and responsible investment, and yet, as Minori Komatsu, head of the corporate sustainability office at Asset Management One, observes, it has required considerable consensus-building within the group.
“It was an initiative that involved many divisions within our company,” she explains. “We had to make a decision in a very short time. But in the past six months, we actually had extensive discussions among senior executives and employees about corporate purpose, and we established in January this year that our purpose is to create a sustainable future through the power of investment.”
This sense of purpose is what has allowed Asset Management One to reach such a decision in a very short time, Komatsu adds. The Corporate Sustainability Office she heads, established in April 2020, is further evidence of such commitment. Still, she emphasises that the pathway to achieve the firm’s ambitions is not an easy process, nor will it happen overnight.
The same is true of the broader Japanese context, Omori continues. He comments that Japanese companies as a whole, and especially the larger ones, “understand the importance of ESG and sustainability issues, but when it comes to implementing changes, they are facing some challenges and difficulties.” And while some of these may be internal, others involve regulatory issues and government policies, such as the energy mix of Japan. These areas, he remarks, would require the involvement and actions of policy makers and other stakeholder groups, which no single company can solve alone.
Nonetheless, Asset Management One’s resolve to tackle climate change challenges is exemplified by its commitment to the Net Zero Asset Managers initiative: “The world needs to take action,” he emphasises, “and everyone has a role to play. As a leading asset manager in Asia, we have a key role to play in moving the world forward.”
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