Amova Asset Management (Amova AM) adopts the "Principles for Responsible Institutional Investors", also known as "Japan's Stewardship Code", in relation to our investments in publicly traded Japanese stocks. We also accept and promote the principles of the Code for other investment assets, especially fixed income securities issued by Japanese companies.
Acceptance of the Stewardship Code
"Japan's Stewardship Code" was established under the auspices of the Financial Services Agency in February 2014 as a guide for institutional investors to "promote sustainable growth of investee companies and enhance the medium- and long-term investment return for clients and beneficiaries." In light of the contents of statements released by the Council of Experts Concerning the Follow-up of Japan's Stewardship Code and Japan's Corporate Governance Code and other such changes, a revised version of the Code was released about three years later in May 2017. Amova AM takes a global approach to the Code, focusing on the core components of stewardship.
The council later released a new statement in April 2019 based on continued discussions regarding further enhancements to corporate governance reforms after the above-mentioned revision. This led to the announcement of a further revision of Japan's Stewardship Code in March 2020.
In accordance with Japan's Stewardship Code, Amova AM aims to increase medium- and long-term returns on the assets entrusted by investors mainly by analysis of and appropriate engagement with investee companies and the exercising of voting rights. Amova AM's engagement with companies also takes into consideration their medium- and long-term sustainability, including ESG*1 factors, in accordance with its investment management strategies. As an asset manager, Amova AM places fiduciary principles*2 at the heart of all its values and business activities. It also constantly prioritizes the interests of its customers as their chosen fiduciary. Amova AM believes that the concept of ESG is essential to putting fiduciary principles into practice and works to fulfill its fiduciary duty at all stages of investment decisions.
Japan's Stewardship Code adopts established international practices in its "Principles-Based Approach" (as opposed to Rules-Based), and its "Comply or Explain" provision allowing institutional investors to explain why they may not comply with some aspects of the Code. Moreover, the fact that "constructive dialogue" with investee companies can be based on public information is an effective measure, in Amova AM's view.
*1: "ESG" means Environment, Social and Governance. An ESG Investment Strategy is a strategy that evaluates corporate value by taking into account ESG factors.
*2: The general term for a wide range of roles and responsibilities assumed in order to perform certain services for others.
Views and Policies on the Stewardship Code
Institutional investors should have a clear policy on how they will fulfill their stewardship responsibilities, and publicly disclose it.
Amova AM is a global multi-asset manager providing clients with various investment strategies. Its top priority is to serve the interests of its clients through long-term investments in all asset classes. As indicated in Amova AM's Code of Conduct Regarding Fiduciary & ESG Principles, the inclusion of ESG factors and promotion of stewardship activities in investment processes is consistent with Amova AM's work to fulfill its fiduciary duty in terms of creating long-term value. In order to be sustainable, all organizations need to meet current needs by addressing the issues and risks of today without harming the prospects of future generations. Amova AM's practice of realizing sustainability in its own organizational management is in line with its sustainability policy, while its Code of Ethics and Business Conduct expresses Amova AM's thinking on its core values, its social responsibility as a firm, and how to be a global citizen.
Amova AM became a signatory to the United Nations' Principles for Responsible Investment (PRI) in 2007. By signing up to the PRI soon after they were launched, Amova AM demonstrated its commitment to seriously addressing all six of them as part of its fiduciary responsibility. Amova AM incorporates ESG factors in the processes for all of its investment strategies.
⮚ Corporate Missions and Fiduciary & ESG Principles
Code of Conduct Regarding Fiduciary & ESG Principles
Fiduciary & ESG Principles⮚ Sustainability Initiatives
Corporate Sustainability⮚ Amova AM's Commitment to Responsible Investing
Commitment to Responsible Investing Policy⮚ Code of Ethics
Code of EthicsAmova AM fulfills its stewardship duties by ascertaining the statuses of the firms it invests in, engaging with them and exercising voting rights in their shareholder meetings based on publicly available information. The sustained growth of a company is influenced by various factors, such as company culture, management vision, business and financial strategies, corporate governance and relationships with stakeholders. The degree of influence of each factor differs depending on the company's growth phase. Through appropriate engagement and analysis, Amova AM has an investment management process with which it makes decisions on corporate value. With regard to management strategies, shareholder return policies and ESG strategies, Amova AM engages in research appropriate to each company's growth phase. In accordance with its emphasis on the exercising of voting rights as an opportunity to express its opinion to investee companies, Amova AM established the Stewardship and Proxy Voting Committee and created the Stewardship and Voting Rights Policy Oversight Committee as a body to oversee the former committee. Through monitoring, oversight and advice based on the Guidelines on Exercising Voting Rights and the Standards for Exercising Voting Rights on Japanese Stocks, the Stewardship and Voting Rights Policy Oversight Committee works to ensure that Amova AM exercises its voting rights appropriately after first establishing whether or not the proposed agenda items will contribute to medium- to long-term growth in corporate value. From its perspective as a body composed of a majority of external members with no special interests in Amova AM, the Stewardship and Voting Rights Policy Oversight Committee monitors and oversees whether Amova AM's exercising of voting rights and other stewardship activities are in line with its objectives and whether it is making the proper efforts to fulfill its fiduciary duties consistently. The committee also provides necessary advice from a fair and neutral standpoint.
⮚ Guidelines on Exercising Voting Rights
Guidelines on Exercising Voting Rights⮚ Standards for Exercising Voting Rights on Japanese Stocks
Standards for Exercising Voting Rights on Japanese StocksInstitutional investors should have a clear policy on how they manage conflicts of interest in fulfilling their stewardship responsibilities and publicly disclose it.
When conducting analysis, appropriate engagement or exercising voting rights, for example, if Amova AM invests in an affiliated company, an investee company or a client (including companies with connections to a client), the possibility of conflicts of interest cannot be ruled out.
Amova AM Group companies and related parties provide a variety of services. In order to ensure that the interests of customers are not unduly harmed, Amova AM has publicly disclosed a summary of its Conflict of Interest Control Policy in accordance with laws and regulations. Amova AM ensures that business is conducted appropriately by properly managing transactions and other such conduct with possible conflicts of interests based on the Policy. Amova AM manages transactions and other such conduct with possible conflicts of interests in order to ensure that customer interests are not unduly harmed by identifying the conduct as transactions that need to be managed based on classifications stipulated in internal regulations.
Amova AM manages conflicts of interests in stewardship activities including engagement and exercising voting rights based on its classification of such activities as "exercising influence". Specifically, it works to prevent Amova AM Group companies and other such entities from exercising influence, and to ensure that stewardship activities are conducted appropriately, by stipulating reasonable decision-making standards for such activities and ensuring that they are conducted under the supervision of the Stewardship and Proxy Voting Committee. Stewardship activities are also monitored and overseen by the Stewardship and Voting Rights Policy Oversight Committee, the majority of whose members are from outside Amova AM.
Amova AM envisages that conflicts of interests may arise when it exercises voting rights in regard to the entities listed below. In order to avoid conflicts of interest and enable objective decision making in its exercise of voting rights, it has established the following control framework to maintain appropriate voting decisions pursuant to Item 4 of Article 3 of the Company's Guidelines on Exercising Voting Rights.
Parent company: Amova AM refers to the opinions of external third parties when making voting decisions regarding its parent company. It also ensures that its judgments are neutral and transparent by having them deliberated over by the Stewardship and Voting Rights Policy Oversight Committee.
Distributors: The exercise of voting rights regarding listed financial institutions that distribute Amova AM's products creates a risk of conflicts of interest regardless of whether Amova AM has a capital relationship with the entity. When exercising voting rights regarding one of its distributors, Amova AM not only refers to the opinions of external third parties, but also confirms whether its voting decisions give the highest priority to the interests of its clients and beneficiaries and fulfill Amova AM's stewardship responsibilities by reporting all proposals it votes on to the Stewardship and Voting Rights Policy Oversight Committee in order to receive fair and neutral advice and oversight.
Clients with which Amova AM has a business relationship: Exercising voting rights regarding listed clients and entities with which Amova AM has a business relationship also carries the risk of conflicts of interest arising. Therefore, when voting regarding clients and entities with which it has a business relationship, Amova AM also refers to the opinions of external third parties and reports all proposals it votes on to the Stewardship and Voting Rights Policy Oversight Committee in order to receive fair and neutral advice and oversight.
⮚ Conflict of Interest Control Policy
Conflict of Interest Control Policy⮚ Guidelines on Exercising Voting Rights
Guidelines on Exercising Voting Rights⮚ Standards for Exercising Voting Rights on Japanese Stocks
Standards for Exercising Voting Rights on Japanese StocksInstitutional investors should monitor investee companies so that they can appropriately fulfill their stewardship responsibilities with an orientation towards the sustainable growth of the companies.
Amova AM formulated and publicly released the Amova Asset Management Group Engagement and Stewardship Strategy in March 2022. The document is intended to describe engagement with investee companies undertaken by investment management teams throughout the Amova Asset Management Group in Japan and overseas, including Objectives, Methods and execution, Prioritisation, Documentation monitoring and reporting, Collaborative engagement, and Escalation. Engagement for asset management strategies provided by Amova AM and all other companies in the Amova Asset Management Group is conducted based on this strategy.
⮚ Amova Asset Management Group Engagement and Stewardship Strategy
Engagement and Stewardship StrategyAmova AM's fund managers and analysts endeavour to accurately assess investee companies based on publicly available information. Their research covers financial information, such as earnings trends and capital structures, as well as non-financial information like management strategies and firms' ESG strategies.
Amova AM assesses the corporate value of Japanese listed stocks based on comprehensive analyses that cover non-financial factors in addition to financial information such as earnings forecasts. For example, evaluations of major investee companies include "CSV assessments" that cover non-financial factors including competitive advantages such as brand power as well as ESG values. As part of its efforts to provide enhanced analyses of companies' ESG strengths, Amova AM also analyses and assesses how firms are likely to be impacted by developments such as climate change, particularly the transition to a carbon-free society. Amova AM's initiatives in this area include the in-house development and implementation of an application that enables it to calculate the impact of carbon pricing on individual companies, identify the opportunities and risks involved in transitioning to a carbon-free society, and visualize the extent of portfolio carbon risk.
Institutional investors should seek to arrive at an understanding in common with investee companies and work to solve problems through constructive engagement with investee companies.
Amova AM defines engagement as working and communicating with investee companies, based on publicly available information, in order to contribute to their sustainable, long-term growth, primarily through meetings with their management teams aimed at encouraging the companies to discuss and solve the overall challenges they face in enhancing their corporate value. Amova AM expanded and strengthened its Active Ownership Group by newly establishing it as the Japan Sustainable Investment Department in 2023. The department drives forward Amova AM's equity stewardship activities through engagement with investee companies both in Amova AM's active and passive investment management strategies. Engagement is conducted through an organizational approach in which the Equity Research Group and various investment management strategy teams work with the Japan Sustainable Investment Department on engagement with the companies they research. Specifically, the fund managers and analysts in these groups and teams identify the issues an investee company needs to address in order to enhance its corporate value in the medium and long term, as well as to grow sustainably, based on an accurate understanding of the company's characteristics, including its management philosophy, its business and financial strategy, and its ESG and risk approaches. They then share their thinking with the investee company and engage with it constructively to resolve the issues identified. Amova AM engages with a large variety of people ranging from the top managements of firms to employees responsible for finance, corporate planning and other such business managers. Particular efforts have been made recently to include companies' sustainability departments and outside directors in engagement activities. The results of these activities are shared where appropriate among fund managers and analysts in the relevant groups and teams, and can be useful in corporate value assessments and investment decisions.
Amova AM also applies PDCA cycles to its engagement with investee companies for which a PDCA policy can be established in advance (milestone management). Under this approach, engagement is limited to activity for which certain items can clearly be established in terms of the engagement themes before engagement is started. These include the identification of issues, goal setting, the details of action to be requested, schedules, and the details of expected results. The specifics of these items are then managed as engagement progresses. Amova AM intends to enhance the effectiveness of its engagement as well as the transparency of verifications of its results through this approach.
Amova AM also assigns CSV assessment ratings to major investee companies. CSV assessments determine the extent to which companies create value both for society and their shareholders while also striking the right balance between addressing ESG issues and enhancing their profitability and competitiveness. The assessments are also used for setting engagement themes. In addition, Amova AM has established key ESG themes as issues it believes are important to many companies and includes these themes in its engagement.
⮚ Amova AM's Key ESG Themes
Key ESG ThemesAmova AM has a policy to avoid receiving any undisclosed material facts and takes the utmost care to ensure that it does not receive any undisclosed material facts through its stewardship activities. It continuously implements education and training to prevent the acquisition of undisclosed material facts. In the unlikely event that undisclosed material facts are acquired, countermeasures are immediately implemented to prevent insider trading from occurring in accordance with Amova AM's internal rules for the management of insider trading.
Institutional investors should have a clear policy on the voting and disclosure of voting activity. The policy on voting should not be comprised only of a mechanical checklist; it should be designed to contribute to the sustainable growth of investee companies.
Amova AM established the Stewardship and Proxy Voting Committee and created the Voting Rights Policy Oversight Committee as a body to monitor, oversee and provide advice to the former committee. The Stewardship and Voting Rights Policy Oversight Committee ensures that voting is carried out in accordance with the Guidelines on Exercising Voting Rights and the Standards for Exercising Voting Rights on Japanese Stocks, which the committee administrates to ensure proper voting. Based on the rationale that increased corporate value in the medium- to long-term from sustained growth of investee companies will lead to increases in assets that Amova AM manages for clients and beneficiaries, Amova AM votes in favour of agenda items that support this rationale, but will vote against agenda items that do not.
When exercising its voting rights, Amova AM fully considers the circumstances and initiatives of investee companies as well as the details of its engagement with the companies, and aims to ensure that its voting decisions help each company to grow sustainably and enhance its medium- and long-term corporate value.
⮚ Guidelines on Exercising Voting Rights
Guidelines on Exercising Voting Rights⮚ Standards for Exercising Voting Rights on Japanese Stocks
Standards for Exercising Voting Rights on Japanese StocksAmova AM's carries out Japanese stock lending transactions in accordance with an investment management policy formulated by an internal committee whose members include managers in its investment management, compliance and risk management functions. When lending stocks, Amova AM strives to make appropriate decisions on securing its voting rights in order to help grow the medium- and long-term investment returns of clients and beneficiaries in light of its aim to promote greater corporate value.
Amova AM discloses individual results of its voting on the Japanese stocks in which it invests on its website and in press releases every quarter. In addition to records of whether it has voted for or against each proposal, Amova AM also provides the reasons for its voting decisions on any proposals for which it deems explanations necessary. It also publicly releases the results of voting regarding investee companies by proposal type quarterly and annually. The information includes the total number of proposals voted on as well as whether Amova AM voted for or against the proposals.
⮚ Voting Rights Results
Proxy Voting ResultsInstitutional investors in principle should report periodically on how they fulfill their stewardship responsibilities, including their voting responsibilities, to their clients and beneficiaries.
Amova AM's Stewardship Policy is regularly reviewed. In addition to publishing the results of its exercise of voting rights regarding Japanese equities on its company website, Amova AM not only discloses how it voted on individual proposals but also provides to individual clients information on voting for stocks held as assets if requested, and the reasons for voting decisions in respect of those stocks.
To contribute positively to the sustainable growth of investee companies, institutional investors should develop skills and resources needed to appropriately engage with the companies and to make proper judgments in fulfilling their stewardship activities based on in-depth knowledge of the investee companies and their business environment and consideration of sustainability consistent with their investment management strategies.
In order to appropriately and efficiently implement stewardship activities, Amova AM has established a Stewardship and Proxy Voting Committee. This committee is mainly comprised of employees in management positions in Amova AM's fund management and compliance departments and is charged with formulating and periodically reviewing Amova AM's policy on stewardship activities and the use of voting rights. The committee also formulates and reviews Amova AM's overall decision-making process for exercising voting rights, its Guidelines on Exercising Voting Rights and its Standards for Exercising Voting Rights on Japanese Stocks based on the principles in Japan's Stewardship Code.
Amova AM also established its Stewardship and Voting Rights Policy Oversight Committee in June 2016 in order to increase transparency in its stewardship activities and strengthen its governance. From its perspective as a body composed of a majority of external members with no special interests in Amova AM, the Stewardship and Voting Rights Policy Oversight Committee monitors and oversees whether Amova AM's exercising of voting rights and other stewardship activities are in line with its objectives and whether it is making the proper efforts to fulfill its fiduciary duties consistently. The committee also provides necessary advice from a fair and neutral standpoint.
The ESG Global Steering Committee was established with the approval of Amova AM's Global Executive Committee as a body to oversee how Amova AM puts its commitment to ESG initiatives into practice. Chaired by the Chief Investment Officer, the committee consists of equity and fixed income investment management team leaders in Amova AM's investment offices around the world. The committee assesses the effectiveness of Amova AM's approaches to ESG issues and PRI principles, and considers the best methods to realize those approaches.
Amova AM consistently assesses its own implementation of the principles and policies included in the Code, which helps it to further enhance its stewardship activities. Amova AM will continue to provide periodic updates of these assessments on its website.
January 24, 2025