Initiatives for Socially Responsible Investing and Lending
The Resona Group has established the Resona Group CSR Policy, the Resona Group Environmental Policy, and the Resona Group Human Rights Policy, among others.
We carry out investing and lending fully conscious of environmental and social impacts and in conformity with internationally recognized rules and norms, including the UN Global Compact and Principles for Responsible Investment (PRI).
Initiatives in Lending
Approach to Social and Environmental Considerations during Lending
The Resona Group has established the Basic Stance on Lending with the goal of carrying out lending that contributes to sound and sustainable socioeconomic growth and growing together with customers in a sustainable manner.
The Resona Group recognizes that financial institutions have an important responsibility to actively support customers’ initiatives to address social and environmental issues through the development and provision of products and services mindful of society and the environment, in order to contribute to the creation of a sustainable society.
Basic Stance on Lending
(1) Basic Stance
We will engage in lending fully considerate of the basic principles of human rights, labor, environment and anti-corruption in the Global Compact advocated by the United Nations. In the course of lending, we will similarly remain conscious of initiatives to address such social and environmental concerns as those specified by the UN Sustainable Development Goals (SDGs) and environmental, social and governance (ESG) issues, including climate change. We will strive to contribute to customers’ sustainable growth and medium- to long-term enhancement of corporate value by actively supporting initiatives for resolving these social and environmental issues through lending.
The intention of this basic stance is to contribute to the sound and sustainable socioeconomic development of local communities through lending.
(3) Specific Actions
We will implement the following initiatives from the standpoint of actualizing this basic stance.
- In our capacity as a financial institution we will actively support the initiatives of borrowers to resolve social and environmental issues via, for example, the development and provision of products and services that are mindful of social and environmental concerns.
- We will use engagement to lobby customers who have not yet fully committed to initiatives for resolving social and environmental issues.
- In accordance with our "Stance on Lending to the entire Businesses or Sectors" and our "Stance on Lending to Specific Businesses or Sectors" described below, we will exercise careful judgement regarding transactions in sectors that may negatively affect society and the environment. To this end, we will properly assess the status of risks requiring attention and dealing with being undertaken to mitigate such risks prior to lending.
Stance on Lending to the entire Businesses or Sectors
- We will not lend to companies recognized as being directly or indirectly complicit in human rights violations such as human trafficking or those involved in child or forced labor.
- We will not lend to businesses that exert a seriously negative impact on wetland sites designated by the Ramsar Convention or the World Heritage Sites designated by UNESCO, neither will we provide lending to businesses in violation of the Washington Convention.
- We will take a cautious stance toward lending to businesses that negatively affect indigenous local communities and other areas of high conservation value and also exercise caution in lending to businesses that entail the involuntary resettlement of residents. To this end, we will give due consideration to their social, environmental and other impacts and confirm the status of dealing with to mitigate risks prior to lending.
Stance on Lending to Specific Businesses or Sectors
- We will not lend to prospective clients involved in the development, manufacture or possession of weapons of mass destruction, such as nuclear weapons, chemical weapons and biological weapons, and / or inhumane weapons such as landmines and cluster bombs. Furthermore, we will not lend to prospective clients subject to, or likely to become the subject of, regulations or sanctions either domestically or abroad.
- We will not lend to a development project that could exert a seriously negative impact on society and the environment.
- We will handle requests for lending to businesses that may negatively affect society and the environment in accordance with the following policies.
- (a)Coal-fired thermal power generation
- Coal-fired thermal power generation emits a large volume of greenhouse gases and other harmful substances, helping to precipitate climate change, causing air pollution and otherwise affecting the environment in a seriously negative impact. Therefore, we will not engage in project finance for new coal-fired thermal power generation projects except where there are compelling reasons, such as to realize restoration following a disaster.
- (b)Large-scale hydroelectric power generation
- Amid a growing shift toward a decarbonized society, hydroelectric power generation is deemed a promising power generation method thanks to its ability to stable supply renewable energy. However, hydroelectric power generation necessarily entails dam construction. This could also impact the environment in a negative way or result in confrontation with local communities in the vicinity of dam sites. Accordingly, we will confirm the status of dealing with being undertaken by prospective clients to mitigate risks and take a cautious stance toward lending.
- (c)Coal mining
- As the use of coal and other fossil fuels inevitably emits greenhouse gases, coal-related businesses could become stranded assets due to the growing shift toward a decarbonized society. In addition, harmful waste emitted from coal mines may negatively affect local communities and the environment. Therefore, we will confirm the status of dealing with being undertaken by prospective clients to mitigate risks as we take a cautious stance toward lending. With regard to coal mining projects employing the Mountain Top Removal (MTR) method, We will not provide new financing to such projects because of a seriously negative environmental impact arising from them.
- (d)Palm oil farm development
- Palm oil is widely used as a raw material for foodstuffs, detergents and other living essentials. On the other hand, the development of palm oil farms could entail a major environmental burden arising from large-scale deforestation. Moreover, development projects of this kind sometimes involve the violation of workers’ rights or result in confrontation with surrounding local communities. Therefore, we will confirm the status of dealing with being undertaken by prospective clients to mitigate risks as we take a cautious stance toward lending.
- (e)Oil and gas extraction and pipeline construction
- Oil and gas constitute the main energy source supporting our society and are essential to our daily lives. On the other hand, there are concerns about negative environmental impacts arising from oil and gas extraction and pipeline construction as these projects entail risks of the leakage of gas and oil. These projects may also result in confrontation with local communities near extraction and construction sites. Therefore, we will confirm the status of dealing with being undertaken by prospective clients to mitigate risks as we take a cautious stance toward lending.
- (f)Wood and paper pulp production and timber harvesting
- Wood and paper pulp constitute an essential resource supporting our society and daily lives. On the other hand, should the pulp production process involve large-scale deforestation, there could be concerns about negative environmental impact or confrontation with local communities in and around deforestation sites. Therefore, we will confirm the status of dealing with being undertaken by prospective clients to mitigate risks as we take a cautious stance toward lending.
To actualize the above stance, in our Credit Policy that lays out the fundamental principles of the Resona Group’s credit risk management, we specify our approach taking into account social responsibilities and consideration toward the environment. We have also established a system and procedures for appropriately identifying and evaluating the impacts that large projects have on society and the environment and the initiatives being undertaken by customers to address social and environmental concerns.
Going forward, in our capacity as a financial institution we will continue to support the activities of borrowers that are mindful of society and the environment. In addition, through in-house education we will strive to continually raise the awareness of employees regarding the importance of contributing to a sustainable society through lending.
Also, we will review our "Stance on Lending to the entire Businesses or Sectors" and "Stance on Lending to Specific Businesses or Sectors," which are components of our "Basic Stance on Lending," on an as-necessary basis in light of changes in the external environment, findings from our engagement with customers, and other inputs. In a similar manner, we will strive to upgrade methods for putting our stance on lending into practice.
Initiatives in Investment
Approach to Social and Environmental Considerations during Investment
Since becoming a signatory to the UN’s PRI in 2008, Resona Bank has carried out initiatives with an eye toward ESG as an institutional investor. We stated our acceptance of Japan’s Stewardship Code, and as a responsible institutional investor, we have established the Responsible Investment Policy, recognizing that investments have long-lasting effects on society and the environment.
When investigating and analyzing individual companies, we make holistic investment decisions striving to not only understand corporate strategy, performance, risk and capital structure, but also challenges in terms of ESG. Resona Bank regularly engages its existing investment targets regarding the fulfillment of their social responsibilities following Japan’s Stewardship Code, shares its understanding of the situation, and requests improvements where needed. In addition, Resona Bank exercises all of its shareholder voting rights taking into account the results of ESG investment and analysis as well as engagement.
Regarding whether these initiatives are being implemented appropriately or not, the Responsible Investment Committee, which consists of managers responsible for divisions that manage trust assets, determines our response based on the expertise of members.
To foster greater understanding of our approaches and initiatives for stewardship activities, we publish a stewardship report compiling in detail examples of our dialogue and engagement.
We aim to further expand initiatives for corporate value and social and environmental value creation through engagement and for company evaluations based on ESG elements.