NOMURA ASSET MANAGEMENT ("NAM" or "we" hereafter) accepted the "Principles for Responsible Institutional Investors (Japan's Stewardship Code; the "Code" hereafter)" on 23rd May 2014 and has undertaken various stewardship activities since then.
In support of the objectives of the Code as revised for the second time on 24th March 2020 (Revised Code), we made some corresponding revisions effective 7th August 2020 to certain items that we had previously published.
In this revised version, we describe our policy for stewardship activities as well as specific measures, based on the relevant organizational structure and regulations that we have established and improved. By effectively and efficiently using these structures and regulations, we will continue our efforts to promote corporate value enhancement and sustainable growth among investee companies. We will also conduct periodic self-assessments of these efforts and publicly disclose the progress and results to ensure continued improvement.
Based on the full understanding of our duties as an investment management institution operating within the investment chain, we will fulfill our stewardship responsibilities so as to foster the sustainable growth of investee companies and enhance the medium to long term investment returns for our clients and beneficiaries.
While the following presumes that investments are made in shares listed in Japan, the same approach shall be applied even when conducting stewardship activities with respect to other assets in consideration of the characteristics of the assets.
NAM serves as an investment manager to its clients, and bears a fiduciary duty (Note 1) to enhance returns for its clients. In order to fulfill this duty, we undertake the following initiatives:
While our investment management strategies are comprised of active management (Note 4) and passive management (Note 5), we believe there is no difference between the two for the purpose of establishing a virtuous cycle of investment growth in consideration of sustainability.
NAM is obligated to prevent situations in which the interests of our clients are unduly impaired as a result of actions that give a higher priority to the interest of others, including NAM, over the interest of our clients. In order to appropriately manage transactions and other activities that may involve potential conflicts of interest, we have established a "Conflict-of-Interest Management Policy." The outline of this Policy as it pertains to stewardship activities is as follows:
"Group subsidiaries and affiliates" are Nomura Holdings, Inc. and Japanese and foreign companies belonging to the Nomura Group (excluding NAM) that engage in banking business, financial instruments business, or other financial services and that, in the opinion of the Chief Conflict Officer of NAM, need to be managed from the perspective of conflict of interest management.
Regarding the monitoring and knowledge of investee companies, NAM prescribes that it shall:
We strive to make sure that appropriate structures are in place to put the above rules into practice. We have our own in-house research team consisting of several experienced analysts with diverse backgrounds. In addition, in April 2016 we established the Responsible Investment Department, which specializes in stewardship activities and ESG research.
Our analysts and ESG specialists conduct more than 5,000 meetings with companies per year, including interviews with the most senior management. We are visited by a number of top executives, including those of leading Japanese companies and growth companies that will be the next generation of leaders. When we visit companies, we are often met by their top executives themselves. Through these top executive meetings, we gain knowledge of their management strategy, corporate philosophy, risks and revenue-generating opportunities, etc. Based on the information obtained, active discussions are held between analysts/ESG specialists and portfolio managers. In this way, we strive to monitor the status of investee companies effectively given the knowledge of their characteristics and to identify any concerns that might impair their corporate value at an early stage.
NAM considers that engagement (constructive and purposeful dialogue) with investee companies is an effective way to fulfill its stewardship responsibilities. NAM has adopted and is actively undertaking a basic approach to engagement as follows:
Having defined the following as characteristics of an ideal form of business management, we engage with investee companies in a sound, fair and consistent manner. When engaging in dialogue on issues of sustainability, we make a conscious effort to translate it into medium- to long-term increase of corporate value and sustainable growth of companies. As necessary, we also engage in dialogue with board members who are not involved in business execution, such as outside directors, and thereby share our understanding of high-priority management issues.
We select companies with which we will conduct engagement activities from among companies whose shares are held in portfolios under both active management and passive management. Engagements are conducted efficiently based on careful consideration of their materiality and other relevant issues.
If a company's corporate value is likely to be impaired, we aim to reach a mutual understanding and encourage the company to implement measures for improvement through further engagement. At the same time, we do not believe that asking for improvements in companies with management issues is the only objective of engagement. We believe it is also very important to reassure well-managed companies of our support as investors.
NAM has established the "Responsible Investment Department", which specializes in stewardship activities and ESG research, among others, and conducts engagement activities in collaboration with analysts and portfolio managers.
We regard collaboration with other institutional investors in engagement (collaborative engagement) as a way of increasing the effectiveness of our efforts to encourage change in investee companies and we will make appropriate efforts in this regard. However, we will carefully determine whether such collaboration is appropriate on a case-by-case basis, considering the duty of confidentiality in investment management.
In the course of engagement, NAM may obtain sensitive corporate information, or information that is deemed "suggestive" (Note 1), or information that may fall within the definitions of such information. If we receive such information, we will treat it properly and in accordance with laws and regulations, and in line with applicable industry and internal rules.
NAM serves as an investment manager to its clients and bears a fiduciary duty to enhance returns for its clients. As a general rule, we exercise voting rights for all shares under management. The Responsible Investment Committee has established NAM's "Global Proxy Voting Policy" and the Committee has also established the "Proxy Voting Standards for Japanese Companies", specifically for Japanese equities but based on the Global Policy. These Policies and Standards are periodically revised and published by the Responsible Investment Committee. In order to fulfill our roles and responsibilities for proxy voting, we apply the Policy and Standards to properly exercise proxy rights for securities held in client accounts. In this manner, we will encourage appropriate management practices in both domestic and overseas investee companies, leading them to enhance corporate value and achieve sustainable growth.
We regard proxy voting as part of our engagement activity and strive to make judgments based on our knowledge of the actual status of these investee companies.
We have organized and summarized our proxy voting results for Japanese equities based on major proposal categories and published them as "Proxy Voting Results" on our website together with the main reasons for voting for or against each proposal. In addition, commencing from the proxy voting for the January-March 2017 period, we have begun to disclose voting results for each investee company and proposal (i.e., individual disclosure). After having disclosed the reasons for voting for or against some proposals from the April-June 2019 period, we have not only disclosed the reasons for voting for or against all proposals but also provided a detailed explanation of such reasons with respect to proposals that were particularly deemed to require an explanation by us since the October-December 2019 period. In this way, we strive to improve the visibility of our proxy voting activity.
For the purpose of verifying a diverse range of issues and ensuring more appropriate proxy voting, we employ several proxy advisory firms from whom we obtain opinions. Our Responsible Investment Committee refers to the opinions of these advisory firms (Note 1) when making proxy voting decisions, but will ultimately make independent decisions from the perspective of shareholder and client interests in accordance with our basic policy for proxy voting. We not only obtain necessary materials from advisory firms but also have a meeting with them periodically, thereby getting a grasp of their process of formulating advice, including their advisory approach and system.
There are cases in which we perform transactions involving the lending of shares across the determination date of the voting rights. When performing such transactions, we give due consideration so that they will contribute to the medium- to long-term growth of our clients' assets, including being mindful of securing the voting rights.
NAM will continue to fulfill its duty of accountability through information disclosure and reporting to clients.
For example, in addition to sorting and summarizing proxy voting results by major proposal categories and publishing them, we disclose the voting results for each investee company and the reasons for voting for or against each proposal on our website, which are updated on a quarterly basis. We also publish case examples of engagement in our Responsible Investment Report, which summarizes our stewardship activities.
We maintain records of stewardship activities such as proxy voting and engagement, and have policies to conduct such activities in an orderly manner.
Our analysts and portfolio managers who are responsible for making investment decisions hold dialogue with investee companies on a daily basis. This is a core part of their research and analysis process to understand corporate fundamentals and to gain an accurate understanding of the status of investee companies and their business environment, sustainability, etc. NAM has also established the "Responsible Investment Department", which specializes in stewardship activities and ESG research. We strive to secure the necessary resources to properly promote stewardship activities and to strengthen the coordination between Responsible Investment Department, analysts and portfolio managers. We also actively participate in, for example, external study groups on stewardship activities as part of our efforts to maintain sufficient capabilities to fulfill our stewardship responsibilities as an investment manager.
Our senior management teams have the required skills and experience to fulfill the stewardship responsibilities of an investment manager. They undertake to resolve any issues on stewardship activities, recognizing their important roles and responsibilities concerning the execution of stewardship activities. More specifically, management has endeavored to strengthen governance as an investment manager to prevent the interests of our clients from being impaired as a result of conflicts of interest by, for example, appointing independent outside directors from outside the Nomura Group and establishing the Responsible Investment Council where a majority of members comprise persons in positions independent from NAM, etc., including independent outside directors. Proactive efforts in stewardship activities include NAM's decision, ahead of other companies, to publish proxy voting results for Japanese equities for each investee company and proposal (i.e., individual disclosure) for the purpose of increasing the visibility as to whether voting rights have been exercised appropriately.
NAM conducts periodic reviews and self-assessment on the stewardship and other activities mentioned above, together with its own governance structure and conflict of interest management policy and explains the results to clients and publishes them also on its website. Since 2018, we have prepared and published "Responsible Investment Reports" that summarize our self-assessment, combined with our stewardship activities. By establishing a PDCA cycle (Note 1) and making better efforts, we will continue to fulfill our stewardship responsibilities as an investment manager and to contribute to the sustainable growth of investee companies.
As NAM is not a service provider for institutional investors, this Principle does not apply to NAM. Please refer to Principle v) for information on service providers in the form of proxy advisory firms.