Green Money & Social Entrepreneurs

The Green Leaders Forum #4

Monday May 10, 2010

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My background;   1992 Encountered the article on “Eco Banking”.

  1995 Proposed “Eco Banking Strategy” to Sumitomo Bank and launched “SAFE project”.

  1999 Started screening service for “UBS Japanese Eco fund”.

  2003 Started screening service for Japanese corporate pension funds.

  2003 Started screening service for “STAM Good Company fund”.

  2008 Made JRI as a rating argency for "SMBC loan evaluating environment-friendliness"

  2009 Started screening service for a Japanese public pension fund.

  2010 Started screening service for “STAM China Good Company fund”.

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What sustainable banking is.   Banks are the most important intermediaries in an economy.

  This intermediary function centres on bringing together and coordinating savings and investments.

  As a financial intermediary between entities in the market, a bank has four functions: transforming money by size, duration, place and/or time, and risk.

  It is particularly this last function (the distribution and management of risks) that will probably be the most important one for attaining a sustainable society.

  Between borrowers and lenders of money what develops is information asymmetry, including that which concerns environmental aspects.

  By in principle having a solid view of environmental and financial risks, banks fulfil a key role in reducing information asymmetry between entities in the market.

(source) Marcel Jeucken, "Sustainability in Finance"

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(Continued) What sustainable banking is.

  For example, a bank can attach a value or price to reduce that uncertainty.

  Interest rate differentiation among sustainability aspects is justified from this risk perspectives.

  The scope for interest rate differentiation increases if banks can raise funds more cheaply because they have a relatively ‘well qualified’ credit portfolio.

  Banks can go a critical step further by applying interest rate differentiation on the basis of the will to stimulate sustainable development.

  By means of their financing policy, banks can then take specific measures to contribute to sustainable society.

(source) Marcel Jeucken, "Sustainability in Finance"

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What socially responsible investment is.

  Investing as commissioned by clients (in which the same risks as previously described are generally applicable) are becoming increasingly more important activities for asset management firms.

  In cases where clients are interested not only in financial rewards but also in ecological and social rewards, an interesting market develops.

  The market for funds that invest exclusively in companies demonstrating progressive environmental care, for example, is growing dramatically.

  Also available are funds specialising in solar energy, wind energy and environmental technology.

  It is no longer pure idealism, however, that is driving the success of these funds since the financial yields of several of the more ‘sustainable’ funds are above the market average.

  This is linked to a sweeping monitoring, sometimes conducted by external agencies, of the financial and environmental aspects of companies that are usually listed on the stock exchange.

(source) Marcel Jeucken, "Sustainability in Finance"

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Our ESG research works;   Number of rated companies: about 2,000 companies (listed companies at

Tokyo Stock Exchange Market and other large companies by market value）   Information source

  Feedback to our annual questionnaires “Research of CSR management trend in Japan”

  Sustainability report, Environmental Report   Press release information, information released at web site, information from

media   Information based on interview

  Select about 300 companies that are best in each of 33 industry sectors.   Provide the company list, detailed company profiles covering company’s

advantages and disadvantages)   Providing the information to The Sumitomo Trust and Banking Co, Ltd.,

Sumitomo Trust Banking Asset Management Co., Daiwa Asset Management Co. Ltd. and Sumitomo Mitsui Asset Management Company, Limited.

  Support customers by holding regular meetings with analysts and fund managers.   Update positive information on company’s action and CSR trends   Update negative information on companies

  Annually updates of universes (October) and continuous enlargement of research universe due to client specific requirements.

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Criteria in our ESG research;

1.Environmental performance 2.Environmental measurement for supply chain management 3.Environmental management 4.Environmental communication 5.Biodiverisity 6.Environmental measurement as business opportunities

1.Corporate governance 2.Fair economic transactions 3.Customer services 4.Labor practices 5.Work and life balance 6.Appropriate corresponding to global market 7.Social contributions 8.Social contributions by products and services

Supporting 7 core issues of ISO26000

  Research on 2 dimensions and 14 categories (2009)   Questionnaires have 6 categories on environmental aspect and 8 categories on

social and governance aspects   Questionnaires are revised every year to reflect trends of companies

measurements and changes of social issues.

【Environmental aspect】 categories

【Social and governance aspect】 categories

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An example of dispersed scores among companies;

Electrical equipment sector in 2006 research result; Social and governance score

Environmental score

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Procedure for applying our results for SRI products;

Decide universe（300 stocks） by “Rating committee”

Decide sector weight Select stocks & decide weight

Portfolio (50 to 100 stocks)

Asset Management Companies

JRI

Sector bias from viewpoint of SRI e.g.) overweight environmental conscious sector Selection of stocks by best in class approach

Integrating “economic” aspect and research information by asset management companies

Risk control

Company profiles Company list Update whole universe once a year （monitoring through the year and

revising as needed)

Updates universe reflecting new actions (positive) and misconduct (negative)

Approx. 2000 companies（Listed companies at Tokyo Stock Exchange Market the first section or other large companies by market value）

“Environment”, “Social and Governance” questionnaires

Environmental/ Sustainable report

Direct contacts Press information

Update whole universe once a year （monitoring through the year and

revising as needed)

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Global SRI market;

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What Principles for Responsible Investment (PRI) is.

  The Principles for Responsible Investment, convened by UNEP FI and the UN Global Compact, was established as a framework to help investors achieve better long-term investment returns and sustainable markets through better analysis of environmental, social and governance issues in investment process and the exercise of responsible ownership practices.

  In early 2005 the United Nations Secretary-General invited a group of the world’s largest institutional investors to join a process to develop the Principles for Responsible Investment (PRI). Individuals representing 20 institutional investors from 12 countries agreed to participate in the Investor Group. The Group accepted ownership of the Principles, and had the freedom to develop them as they saw fit.

  On 27 April 2006, United Nations Secretary-General Kofi Annan was joined by a group of the world’s largest institutional investors at the international launch of the Principles for Responsible Investment.

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Signatories to PRI; From 362 signatories and US$14.778 trillion in April 08 to 538 signatories and US$18.087 trillion in May 09.

(source) Annual Report of the PRI Initiative 2009

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(Continued) Signatories to PRI;

As of 31 December 2008. A total of 375 signatories were invited to participate in the assessment. (source) Annual Report of the PRI Initiative 2009

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  Triodos Bank is a European bank registered in The Netherlands.

  The Bank has five branch offices: in the Netherlands (www.triodos.nl), Belgium (www.triodos.be), the UK (www.triodos.co.uk) Spain (www.triodos.es) and Germany (www.triodos.de).

My role model;

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They ignored "Lehman Shock" at all.

(source) Triodos Review 2008

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Just for reference;

 ソーシャル・ファイナンス―ヨーロッパの事例に学

ぶ“草の根金融”の挑戦

  トラスト60 (編集)

 出版社: 金融財政事情研

究会 (2006/04)

 価格： ￥ 1,890 （税込）

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More Information;

Eiichiro Adachi

Research Chief

Head of ESG research center

The Japan Research Institute, Limited

16 Ichibancho, Chiyoda-ku, Tokyo

102-0082 JAPAN

Tel: ++81/3/3288/4624

Fax: ++81/3/3288/4689