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Recycled Paper
TBLI Conference Europe 2010
November 12, 2010
Mitsubishi UFJ Trust and Banking Corporation
Case Study~ Integrating ESG into Portfolio ~
- Page 2 -
Corporate StructureCorporate Structure
■ MUFG is the largest financial group in Japan by assets (as of end Mar 2010)
■ Major MUFG companies – Trust Bank’s asset management is institutional / Pensions
Source: Annual Report
Total Assets (bln Yen) (bln USD)MUFG 204,107 2,268
A 123,160 1,368B 156,254 1,736
Mitsubishi UFJ Financial Group
Mitsubishi UFJ Trust & Banking
Mitsubishi UFJ Morgan Stanley Securities
Bank of Tokyo-Mitsubishi UFJ
Mitsubishi UFJ Asset Management (Domestic Retail)
100%
100%100%
55%
30% 15%
- Page 3 -
Asset Under ManagementAsset Under Management
One of the largest pension managers in Japan with $309 billion in AuM (as of Mar 2010)
(US$ billion)Japanese Equity 64.5 Japanese Bonds 157.2
Active 15.3 Active 37.4Passive 42.4 Passive 81.5
Enhanced 4.7 Enhanced 9.0Absolute Return 1.8 Other 29.3
Other 0.3 International Bonds 27.1International Equity 30.8 Active 8.3
Active 12.0 Passive 15.2Passive 18.2 Enhanced 3.3
Enhanced 0.6 Other 0.2Other 0.0 Other 29.4
Convertibles 0.1 Total 308.9
- Page 4 -
The SRI Environment ~ SRI funds in Asia~The SRI Environment ~ SRI funds in Asia~
ASrIA SRI Funds Portal SRI Funds SummaryLatest Update: October 2010
Total Number of SRI Funds in Asia (including faith-based funds): 418Total Number of SRI Funds in Asia (excluding faith-based funds): 260
Public Funds Private EquitySRI Pension
MandatesFaith-based
CountryTotal
China 3 0 0 0 3 Hong Kong 56 0 0 1 57 Japan 70 1 0 0 71 Korea 61 2 6 0 69 Taiwan 25 0 0 0 25 Singapore 26 1 0 8 35 Malaysia 0 0 0 146 146 Indonesia 1 1 0 1 3 India 1 1 0 1 3 Thailand 2 0 0 1 3 Segment Total 248 6 6 158 418
- Page 5 -
OverviewOverview ① Market Size
Total SRI Market Size as of December, 2009 : Approximately US$ 8B ⇒ US$ 7B from Retail investors ⇒ US$ 1B from Pension funds
② Pension Fund Survey Awareness of SRI : 55 % = Know 29 % =
Heard Investment to SRI : 7 % = Invested 25 % =
Considering
Negative Reasons : 31 % = Lack of Information : 15 % = No Establishment as
Investment Style: 15 % = No Incentives on SRI
Positive Reasons : 27 % = Assent on SRI Concept: 23 % = Accepted Proposal from
Asset Management: 17 % = Effectiveness of
Diversified Investment
(Source : SIF-Japan, The Research Institute for Policies on Pension and Aging).
- Page 6 -
Recognition through “ Materiality Workshop ”
Examples of Investor Viewpoint
< Evaluation > CSR is effective criterion on “ Quality of Management ”
< Approach > “Logic” is the key to connect CSR with “Value”
< Method > Evaluate importance of CSR to “Value” = “ Materiality”
CooperationCooperation
Investor Point of View Company Point of View
First Priority Performence=
Don't Use CSR Report Too Wide=
Keen on Value "Materiality" is Important=
CurrentSituation
"Materiality" Spreading now=
Do CSR for Various Stakeholder Wide=
Few Company No Active on "Value" Disclosure=
(Source : Materiality Workshop).
- Page 7 -
ESG Efforts ~ Change in priorities ~ESG Efforts ~ Change in priorities ~
Change of corporate ESG efforts from the “Cost” to the “Investment” category
CSR Efforts
Defensive CSR
Offensive CSR through the company’s own business(Consideration of Materiality)
Time axis/Economic Returns
Infrastructure investment to prevent occurrence of unforeseen
expenses
Forward investment in sustainable business growth
Responsible corporate investment in sustainable
socioeconomic growth
Risk reduction investment to prevent illegality, etc.
Time axis/Social Returns
(Source) Prepared by Mitsubishi UFJ Trust and Banking Corporation
- Page 8 -
ESG Efforts ~ Example of management resource distribution ~ESG Efforts ~ Example of management resource distribution ~
経営資源
(例:人材、資本など)
設備投資 研究開発 広告宣伝 CSR・・・・ ・・・・ ・・・・
能力増強効率化
有形固定資産
売上増減減価償却費増減
新技術開発新設計開発
無形固定資産
売上増減研究開発費増減
フ ラ゙ント イ゙メー シ 向゙上
固定資産繰延資産
売上増減広告宣伝費増減
無形固定資産
売上増減費用増減
評判リスク・事業機会環境・社会貢献
(Investee)
(Goal)
(貸借対照表)
(損益計算書)
Management Resources(Ex.: Personnel, capital, etc.)
Capital investment R&D Advertising CSR・・・・ ・・・・ ・・・・
Skill improvementStreamlining
Tangible fixed assets
Sales increase/decreaseDepreciation allowance increase/decrease
New technologydevelopmentNew design development
Intangible fixed assets
Sales increase/decreaseR&D costincrease/decrease
Brand image enhancement
Fixed assets / deferred assets
Sales increase/decreaseAdvertising cost increase/decrease
Intangible fixed assets
Sales increase/decreaseCost increase/decrease
Reputation risk / Business opportunityEnvironmental / Social contribution
(Balance Sheet)
(Income Statement)
(Source) Prepared by Mitsubishi UFJ Trust and Banking Corporation
- Page 9 -
Approach ComparisonApproach Comparison
=
<Example of Extra Financial Approach>
Macro AnalysisClimate change, demographics, globalization, etc.
Sector Analysis
Industry regulations, business characteristics, etc.
Company AnalysisEnvironmental products, technical ability, CSR policies, etc.
+CSR strategy, results of efforts, promotional structures, etc.
Attention to categories emphasized in company evaluation is important in the extra financial approach as well
<Example of Financial Approach>
Macro Analysis
Economic growth rate, fiscal revenue and expenditure, demographics, etc.
Sector Analysis
Sector growth rate, price trends, competition, technological trends, etc.
Company AnalysisSales growth rate, profit rates, balance sheet analysis, etc.
+Quality and policies of management lineup, actual results, organizational structures, etc.
Evaluation of categories emphasized in judgments of both quantitative and qualitative aspects of future results
(Source) Prepared by Mitsubishi UFJ Trust and Banking Corporation
- Page 10 -
MovementMovement
View of Target
CSR Impact Shift CSR activities could have impacts on Company Earnings. We think that it is important to evaluate CSR activities from Earnings viewpoint.
Company Value = EPS( Earning Per Share ) × Valuation( PER )
Relevant MaterialityX
(Source) Prepared by Mitsubishi UFJ Trust and Banking Corporation
- Page 11 -
Our SRI Philosophy: Focusing on Factors Impacting EarningsOur SRI Philosophy: Focusing on Factors Impacting Earnings
Impact of Extra Financial Factors Extra Financial Factors on corporate earnings varyWe focus on materiality, those corporate social responsibility activities, which help grow corporate
earnings in the mid to long term.
We invest from a longer term viewpoint by focusing on such Extra Financial factors, in addition to the
purely financial outlook.
+非財務要素
弊社SRIファンド
=業績寄与度高い要素にフォーカス
“マテリアリティー”
Environment
SocialGovernance
+Extra Financial Factors
Financials
Our SRI Fund
Existing Investment Process
=
“Materiality”Large
Small
Impact on earnings
+非財務要素
弊社SRIファンド
=業績寄与度高い要素にフォーカス
“マテリアリティー”
Environment
SocialGovernance
+Extra Financial Factors
Financials
Our SRI Fund
Existing Investment Process
=
“Materiality”Large
Small
Impact on earnings
(Source) Prepared by Mitsubishi UFJ Trust and Banking Corporation
- Page 12 -
CSR Evaluation ProcessCSR Evaluation Process
Evaluate the companies who are able to combine earnings growth with CSR.
Set important theme by focusing on longer term trend of social changes as macro environments of corporate activities
Evaluate the companies by focusing on Extra Financial Factors which have strong contribution to corporate earnings through various CSR activities.
Social Structure changes and
Social trends as macro environments
Determine themes which contribute
to corporate earnings growth
Extract Extra Financial Factor which
helps corporate earnings growth
(Source : Mitsubishi UFJ Research & Consulting Co., Ltd).
- Page 13 -
Determination of Important Theme in CSR EvaluationDetermination of Important Theme in CSR Evaluation
Analyze macro environment trends
(Source : Mitsubishi UFJ Research & Consulting Co., Ltd).
Globalization of economy, Diversification of stakeholders, Society facing with a low birth rate, International cooperation on environmental issue, Rapid growth in developing countries, ・・・ .
( Reviewing properly considering social trends )
Importance of companies’ role from social problems point of view / Importance of social problems from companies point of view.
Determine themes and weightings
Importance of companies’ role from social problems point of view
Globalization of economy and society ○ ○Changes of commercial custom and rule ○ ○
・・・ ・・・ ・・・Society with a low birth & aging society ○ ○
・・・ ・・・ ・・・Child labor △ ×
Safety and relief ○ ○Diversification of product choice ○ ○
・・・ ○ ○Rapid growth in developing countries × △・・・ ○ ○
Activation of regional economies ・・・ ・・・Regional activities except economy △ ×
Methodical risk management ○ ○Support of art / culture △ ×
Proper information management / disclosure ○ ○Global peace × ×
○ ○○ ○○ ○
Consumer ・Customer
Others
Society
Global Social changes / Issues
EnvironmentExhaustion of natural resources and energy
Global environmental problemsPollution
Labor
Market
Regional / International Society ・
Importance of social problems from companies point of view
- Page 14 -
Evaluating Method of the CSR Impacts to Corporate EarningsEvaluating Method of the CSR Impacts to Corporate Earnings
(Source : Mitsubishi UFJ Research & Consulting Co., Ltd).
Weight the impacts to corporate earnings by CSR activities from the following point of view.
- long / super long
- direct / indirect
Evaluate the impacts to corporate earnings from the following point of view.
- Revenue increase
- Cost reduction Legend
Revenue increase
Cost reduction
Revenue increase effect
Reduction of revenue decrease
risk
Cost reduction
effect
Corporate earnings growth
Employees’ ability progress
Practical use of excellent talent
Consideration to employees’ home
・・・・
Activities to coexist & grow with regions
Participation in making int’l rules
Information release communication
Construction of risk mgmt. system
Correspondence to trouble on services /
products
Information offer of services / products
Consideration at product development
Prevention of sexual harassment
Productivity progress of employees
Super long/direct
Super long/indirect
long/direct
Long/indirect
Reduction of cost
increase risk
- Page 15 -
Effectiveness of investment universeEffectiveness of investment universe
Financial characteristics of companies in the Investment Universe are generally favorable.
Indexes which show profitability and efficiency of a company (ROE and ROA) and an index which presents long-term profit growth potential (growth rate of operating cash flow) of the companies in the Investment Universe generally surpass those of TOPIX.
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
2006 3年 月 2007 3年 月 2008 3年 月 2009 3年 月 2010 3年 月 5年平均
TOPIX投資ユニバー ス
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
2006 3年 月 2007 3年 月 2008 3年 月 2009 3年 月 2010 3年 月 5年平均
TOPIX投資ユニハ ゙ー ス
- 4%
- 2%
0%
2%
4%
6%
8%
10%
12%
2006 3年 月 2007 3年 月 2008 3年 月 2009 3年 月 2010 3年 月 5年平均
TOPIX投資ユニハ ゙ー ス
<投資ユニバースとTOPIXの比較:2006年3月~2010年3月>
(出所)*QUICKより三菱UFJ信託銀行が作成。*各指標・数値は投資ユニバースまたはTOPIXに含まれる全銘柄を分析のうえ、算出したものです。
【ROE(自己資本利益率)】
【営業キャッシュフロー成長率】
【ROA(総資産利益率)】<Comparison between Investment Universe and TOPIX: between March 2006 and March 2010>
[ROE (Return on equity)] [ROA (Return on asset)]
[Growth rate of operating cash flow]
Investment Universe Investment Universe
Investment Universe
Mar. 2006 Mar. 2007 Mar. 2008 Mar. 2009 Mar. 2010 5 –year average Mar. 2006 Mar. 2007 Mar. 2008 Mar. 2009 Mar. 2010 5 –year average
Mar. 2006 Mar. 2007 Mar. 2008 Mar. 2009 Mar. 2010 5 –year average
N.B.: Each index and value are calculated from analyzing all brands included in Investment Universe or TOPIX.
Source: QUICK / Mitsubishi UFJ Trust and Banking Corporation
- Page 16 -
DisclaimerDisclaimer
Any opinions expressed here reflect our judgement at this date and are subject to change.
The information contained in this material is for information purposes only and does not constitute an offer or a solicitation of an offer to buy a security.
The information contained in this document has been taken from sources which we deem reliable but we do not represent that such information is accurate or complete in part or in whole. If you rely on this document, you do so at your own risk.
You may not leak any personal data concerning our employees obtained through this document to your employees or any third party, or otherwise abuse such data. You must obtain our permission in writing before disclosing such data to a third party, and require any third party not to copy or duplicate it. When the original purpose for this data has been met, you must either return this data to us or destroy it.
This document may not be reproduced without the prior express consent of Mitsubishi UFJ Trust & Banking Corp.
Contact InformationContact Information
Masahiro Kato
Mitsubishi UFJ Trust and Banking Corporation
Investment Research and Planning Division
Tel : 81-(0)3-6214-7270 / Fax : 81-(0)3-6250-4071
E-mail : masahiro_kato@tr.mufg.jp
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