Sumitomo Mitsui Trust : 2019-2020 ESG Report- 1／4

ESG REPORT

2019/2020

Editorial Policy

Editorial Policy of the ESG Report

This report primarily brings together in one compilation our initiatives contributing to both the delivery of value to our stakeholders and the Sumitomo Mitsui Trust Group's (SuMi TRUST Group) pursuit of corporate value over the long term based on the concept of "Creating Shared Value" (CSV). The SuMi TRUST Group regards shared value as conceptually parallel to the environmental, social, and governance (ESG) concepts investors focus. In view of the surge in ESG investment in the past few years both in Japan and overseas, we have published the Integrated Report highlighting important linkages between ESG information and financial information since fiscal year 2017, upgrading our annual report. In contrast, the ESG Report is meant to provide comprehensive ESG information disclosures to investors and other stakeholders seeking more detailed ESG information. From this perspective, we view the ESG Report as having attributes that complement the Integrated Report.

The report is organized around six sustainability policies of the Group's basic policy regarding social responsibility (the "Sustainability Policy"). Themes introduced in Sustainability Policy 1 have been also featured in three booklets on Climate Change, Natural Capital, and Environmentally Friendly Property. We also publish the Stewardship Report and a digest report for seniors which contain their original information.

The report references GRI G4 standard.

Scope of This Report

Sumitomo Mitsui Trust Group (comprised of Sumitomo Mitsui Trust Holdings, Inc., Sumitomo Mitsui Trust Bank, Limited, and other group companies)

Target Readers

All stakeholders, including customers, shareholders and investors, employees, business partners, local communi-

ties, NPOs, governments, international institutions, etc.

Period Covered by This Report

October 1, 2018 to September 30, 2019

*This report also includes the most recent information on activities before fiscal year 2018 as well as after October 2019.

Reference Guidelines

GRI (Global Reporting Initiative) Standard

"Sustainability Reporting Standard"

*For tables comparing GRI guidelines and information in our ESG report, please refer to the section from page 195.

We publish a variety of reports in several formats in response to reader needs.

[Integrated Report]	[ESG Report]				[Stewardship Report]

[Booklets with Featured Themes]	[Digest Report for Seniors]

Financial Non- financial

Our website carries extensive information on the Sustainability activities that Sumitomo Mitsui Trust Group does not cover in this report.

Specifically, the website provides more detailed information on our initiatives related to issues such as successful aging and support for the environment and living creatures.

We issue a regular report on

social contribution activities ("With You" activities).

The quarterly journal "SuMi TRUST With You" reports on the "With You" social contribution activities of SuMi TRUST Bank (four issues per year).

Sustainability in Sumitomo Mitsui Trust Group https://www.smth.jp/en/csr/index.html

Process of Creating Shared Value

Identifying Materiality

PRI

UNEP FI

Creation of

Shared Value

Creating Shared Value through Sustainability Activities

"Creating Shared Value" (CSV) is the concept of companies creating social value by addressing society's needs and challenges while simultaneously creating their own economic value.

Sumitomo Mitsui Trust Group's (the "Group") pursuit of CSV
is based on its Management Principles ("Mission"), Ideal Model		Sustainability Policy
("Vision"), and Codes of Conduct ("Values"), as well as its	Principles for		United
Sustainability Policy-basic policy on the social responsibility of
	Nations
Financial Action
the Group. These policies identify our approach to creating eco-	for the 21st	Mission, Vision, Values	Global
Compact
Century
nomic value and social value.	(Dedication and Development)

While pursuing CSV, the Group aims to maximize the positive impact (and minimize the negative impact) across the three dimensions of the Sustainable Development Goals (SDGs): environmen-

tal, social, and economic. In this way, while creating a direct impact on our stakeholders, we indirectly support our stakeholders' impact on a sustainable society.

The Group is a signatory to the United Nations Global Compact, a global policy framework for corporate sustainability, and the "Principles for Financial Action towards a Sustainable Society (Principles for Financial Action for the 21st Century)," a set of voluntary guidelines established by Japan's major financial institutions. The Group aims to create shared value while respecting these principles and guidelines, including the above two, related to social responsibility.

Management Principles ("Mission")

1. Swiftly provide comprehensive solutions to our clients by fully utilizing the significant expertise and comprehensive capabilities.

1. Adhere to the principles of sound management based on a high degree of self-discipline with the background of fiduciary spirit and estab- lish strong credibility from society.

(III) Strive to fulfill all shareholder expectations by creating distinct values through fusing the various functions featuring the trust bank group.

(IV) Offer a workplace where the diversity and creativity of its employees are more fully utilized to add value to the organization and where employees can have pride and be highly motivated in fulfilling their missions.

Ideal Model ("Vision")

-Towards "The Trust Bank"-

Based on the fiduciary spirit and with significant expertise and comprehensive capabilities, the Sumitomo Mitsui Trust Group will create distinct values by leveraging a new business model, combining its banking, asset management and administration, and real estate businesses, and will move onto the global stage as a leading trust bank group which boasts the largest and highest status in Japan.

Codes of Conduct ("Value")

In order to pursue the Management Principles of the Sumitomo Mitsui Trust Group, the executives and employees commit themselves to comply with the six Codes of Conduct described below.

Completely Client-oriented-­Truthfulness and Loyalty

We will adhere to the highest degree of "Truthfulness and Loyalty" as well as credibility and sureness, and will carry out all our responsibilities for client satisfaction and comfort as our top priority.

Contribution to Society-Dedication and Development

We will remain dedicated in all our efforts, with "Frontier Spirit," and continue to contribute to society.

Realization of Organizational Capability-Trust and Creativity

We will realize our organizational capabilities with full of mutual trust and creativity through improvement by mutual learning and continuous personal transformation of various people who share the enthusiasm for trust.

Establishment of Individuality-Self-help and Self-discipline

With a spirit of self-help and self-discipline as well as a sense of ownership, we will carry out our responsibilities.

Strict Compliance with Applicable Laws and Regulations

We will strictly comply with all applicable laws, rules and regulations, and will ensure that all our corporate activities meet the highest standards of social norms.

Resolute Stance against Antisocial Forces

We will continue to take a resolute stance against antisocial forces, which may threaten public order and the security of civil society.

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Sumitomo Mitsui Trust Group's

Basic Policy on Social Responsibility

(Sustainability Policy)

At Sumitomo Mitsui Trust Group, based on our Management Principles ("Mission"), our Ideal Model ("Vision") and our Codes of Conduct ("Value"), we respect dialogue with all stake- holders, such as clients, shareholders, investors, employees, business partners, local communities, NPOs, government authorities and international institutions, and play an active role in building a sustainable society.

1 Contribute to Solving Social and Environmental Problems through Business

010

2 Serve Clients with Sincerity

082

3 Earn the Trust of Society

096

4 Address

Environmental Issues

138

5 Respect the Individual

144

6 Participate in and

Contribute to the

Community164

C o n t e n t s

Sustainability Policy 1

We aim to enhance our earnings by developing and marketing products and services that help address social and environmental problems.

Sustainability Policy 2

A basic premise of corporate activities is obtaining the trust of customers. We work to improve client protection and customer satisfaction and ensure product reliability.

Sustainability Policy 3

We are bolstering the foundations of corporate value creation such as corporate governance, CSR, compliance, and risk man- agement.

Sustainability Policy 4

We are working to reduce our environmental burden with the aim of building a circular society where nature co-exists with human communities.

Sustainability Policy 5

We value people that form communities. We create workplace environments that enable people to achieve peak form in putting their capabilities to use.

Sustainability Policy 6

We believe sound local communities underpin a healthy client base. We contribute and participate in the communities where we do business through our local "With You" activities.

004 Top Commitment

006 Materiality Management for Creating Shared Value at the SuMi TRUST Group

008 Initiatives for Sustainable Development Goals (SDGs) of the SuMi TRUST Group

1. Signatory to the Principles for Responsible Banking

1. Total Solutions for Solving Clients'ESG/SDGs Challenges

1. Addressing Climate Change Using Our Financial Capabilities

1. Natural Capital related Initiatives Using Our Financial Capabilities

046 Addressing the Issues of a Super-Aging Society by Using Our Financial Functions

1. ESG-themedInitiatives in Our Asset Management Businesses

1. ESG-themedInitiatives in Our Real Estate Businesses

1. Financial Inclusion Initiatives

1. Trust Future Forum

083 Initiatives to Earn the Trust of Clients

1. Initiatives Aimed at Becoming Our Customer's Best Partners

1. Initiatives Related to Fiduciary Duties

1. Client Protection Management

097 Corporate Governance

1. Compliance and Conducting Business Activities Fairly

1. Compliance with International Financial Regulations
2. Risk Management

1. Information Security Risk Management
2. Consideration for Borrowers' Environmental and Social Impact

132 CSR Procurement

(Procurement that Considers the Environment and Society)

135 Multi-stakeholder Partnership

139 Environmental Burden Reduction Measures

1. Enhancing Human Capital to Increase Corporate Value
2. Diversity & Inclusion

1. Gaining & Shaping a Population of Diverse Human Resources

1. Initiatives concerning Human Rights

1. Meaning of Providing Value to Communities
2. Supporting Education for Children to Grow into Next-Generation Leaders

1. Education for Sustainable Development (ESD) Projects

1. Our Activities Supporting National Trusts

1. Challenge for SDGs!

1. SuMi TRUST Bank "With You" Activities Carried Out across Japan

1. Initiatives at Overseas Branches and Group Companies

1. GRI Content Index

1. Financial Review
2. Basic Information of the SuMi Trust Group

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Top Commitment

Integrating sustainability into management and developing sustainability initiatives as our business

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Tetsuo Ohkubo

Sumitomo Mitsui Trust Holdings, Inc.

Director, President

(Representative Executive Officer)

Principles for Responsible Banking and Promotion of Sustainable Finance

Recent abnormal weather fueled by global warming is being recognized in every corner of the globe as a climate change risk. In Japan too, climate change risk is no longer considered a topic concerning the future-it has become a pressing issue-particularly highlighted by the extensive damage to many regions caused by the repeated visitation of powerful typhoons. While much discussion was made focusing on climate change at the United Nations General Assembly held in New York in September, the Principles for Responsible Banking (PRB) launched the same month call on banks to align their business strategies with the goals of the Paris Agreement, which is an international agreement on climate change, and the UN Sustainable Development Goals (SDGs). Together with around 130 banks in 49 countries, the SuMi TRUST Group signed up to the Principles and renewed its commitment to utilize the significant expertise of a trust bank group to support the creation of new business models among our clients and make every effort to find solutions to

the issues expressed in the SDGs and the Paris Agreement. The idea of "sustainable finance," which is to use finance as an effective driver to popularize sustainability initiatives in the wider economy, is gaining traction mainly in Europe, and new rules on finance continue to emerge one after the other. We think this movement calls on finance sector to yield more concrete results to help solve the challenges, especially considering that ESG (environment, social, and governance)-which appeared on the scene in 2006- enjoys broad-based support among financial institutions and that ESG considerations are now mainstream in the industry. So-called "impact investing" is also on the rise in the finance sector. These investments seek to have a beneficial impact on society alongside standard investment returns. The Principles for Responsible Banking (PRB) also call on banks to amplify positive impacts and limit the negative ones. The sustainable finance our Group encourages

aims to create these optimum impacts.

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Materiality Management and Sustainability Business Strategies

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For our Group to promote sustainability, the following three factors are key: strengthening our management foundation with materiality management; pursuing highly competitive sustainable finance in our businesses; and enhancing information disclosure. With respect to materiality (defined as priority issues for management), we recently took new steps to integrate financial risk items with non-financialESG-related items so that a balance between economic value and social value is placed at the core of our growth strategy. In terms of concrete action on climate change, we kicked off TCFD (Task Force on Climate-related Financial Disclosures) initiatives and started performing scenario analyses. In addressing Japan's super-aged society, we are transitioning to and enhancing a business model that can accurately accommodate the diversified needs of each generation as we enter an age of 100-year-life. While we offer products and services suited to people in the asset formation stage of life, clients that will retire or have retired, and the senior generation, we also propose optimal products and services based on our significant expertise to meet the growing demand among seniors for asset administration and succession services. Our 100-Year Life Solution Trust-also known as the 100-Year Passport- is one such example. Our Group also positions human

resources as the biggest source of our competitiveness and we are constantly striving to strengthen our pool of human capital. In recognition of these activities, SuMi TRUST Bank was selected as a winner for the first time in the Ministry of Economy, Trade and Industry's (METI) New Diversity Management Selection 100 program and as a Semi-Nadeshiko Brand under the METI's Nadeshiko Brand initiative, the latter of which aims to encourage the empowerment of women in the workplace.

Our Group's policy is to integrate sustainability into management, develop sustainability initiatives as our business, and strengthen the approaches in this field. In our midterm management plan slated to kick off next fiscal year we intend to incorporate the concept of sustainability into our management strategy. I look forward to the continued warm support of all our stakeholders.

December 2019

Tetsuo Ohkubo

Sumitomo Mitsui Trust Holdings, Inc.

Director, President (Representative Executive Officer)

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Materiality Management for Creating Shared Value at the SuMi TRUST Group

Materiality (priority issues) refers to events that have a material impact on a company's value creation process. The SuMi TRUST Group promotes materiality management that identifies materiality issues to be addressed as priorities from a medium- to long-term viewpoint and dealt with at the top level of management.

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Our Group's policy is to push ahead with a growth strategy that balances the pursuit of both economic and social value. More specifically, we aim to conduct business by making efficient use of the six capitals that underpin our management foundation within a risk appetite framework (RAF) and seek profits by maximizing the positive impacts surrounding our stakeholders. Maximizing the positive impacts that surround our stakeholders means pursuing the enhancement of stakeholder value, but at the same time, it also leads to an improvement in value of the Group itself (return on the six capitals and creation of shared value).

The items that significantly impact this kind of medium- to long-term value creation process constitute what is known as materiality. Materiality comprises financial risk items that traditionally investors attach importance to, as well as non-financial items that ESG (environmental, social, and governance) investors and other stakeholders consider important. The optimal management of materiality combining both financial and non-financial elements holds the key to a business model that strikes the right balance between the pursuit of economic value and social value.

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The SuMi TRUST Group's Value Creation Process

Mission, Vision and Value

GroupthesurroundingEnvironment

Monitoring

capitaloftypessix

toReconversion

RAF Framework)Appetite(Risk

Financial Capital

Sumitomo Mitsui Trust

Contribute to maximizing value

Holdings

Creating

for each stakeholder

Human Capital

Optimal allocation of

Shared Value

Clients

six types of capital

Intellectual Capital

Shareholders and

Impact

Investors

Manufactured

Capital

Group companies

Employees

Social and

Realizing sustainable growth

Communities/

Relationship Capital

by effectively leveraging

Public Sector

Natural Capital

allocated capital

Monitoring

Materiality

Related capitals

Materiality

Financial Capital

Preserving financial capital

Acquiring sustained earnings

Human Capital

Nurturing employees and maintaining workplace environments

Protecting personal information and client data

Intellectual Capital

Safety of financial products

Pursuing sustainability-themed business opportunities

Technological (digital) innovation

Manufactured Capital

Systems maintenance and combatting cyber attacks

Corporate governance

Compliance

Social and

Client-orientated approach / fiduciary duty

Considering impacts on society and the environment of investees and borrowers

Relationship

Stability of financial system

Capital

Risk management and resilience

Financial inclusion

Population decline and issues of a super-aged society

Natural Capital

Climate change

Reviewing Materiality

Thus far our materiality management* practices were mainly focused on non-financial items. At the same time, we identified and managed top risks as high-level risk events (assumed losses of ¥10bn or more) likely to have a significant impact on management. However, we now believe that integrating these two approaches is indispensable (see below) if we are to execute a growth strategy that balances the pursuit of both economic and social value.

In October 2019 a new materiality plan determined by the Executive Committee was deliberated on by the Risk Committee (advisory body to the Board of Directors) and then approved by the Board of Directors.

• Previous materiality management: In 2015 non-financial items thought to have a serious impact on the value creation process were identified by the Executive Committee and reported to the Board of Directors. As part of the identification process, the Executive Committee took into account both the Group's impact on society and the impact on the Group's corporate value over the medium to long term.

						New materiality (17 items)
Previous top risks		Previous materiality			Sort out duplicate or similar items
			1
(7 items)		(14 items)			Review names if necessary
			2
					Add latest items
					3

1. Technological innovation; (2) Population decline and issues of a super-aged society; (3) Financial inclusion;
2. 1. Pursuing sustainability-themed business opportunities; and (5) Climate change

Areas covered under	Financial perspectives			Non-financial perspectives
new materiality
		Growth strategy that balances the pursuit	Earnings		Business seeds that contribute to
	Opportunities	feasibility
		of both economic and social value				solving ESG issues (achieving SDGs)
	Risks	Top risks			Risks peculiar to ESG

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*Blue background represents new materiality

Internal Engagement

Owing to the introduction of Japan's Stewardship Code in 2014, active engagement (purposeful dialogue) between institutional investors and investee companies has been commonplace. That said, the topics of such engagement usually revolve around financial matters and there are not many opportunities for parties to engage in dialogue about wide-rangingnon-financial topics.

Accordingly, our Sustainability Management Office of the Corporate Planning Department engages in dialogue (internal engagement) with relevant departments with respect to the non-financial materiality topics in the finance sector that ESG investors are most interested in

and for which the Group's initiatives may face challenges in order to improve our approaches and enhance information disclosure. The details of such dialogue and how improvements have been made are reported once a year to the Board of Directors.

Engagement in FY2019 (as of end-November 2019)

• Corporate governance
• Information security risk management
• Enhancement of information disclosure pertaining to human capital

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Internal Engagement
		Evaluation/engagement		Financial
	(Non-financial matters are given lower priority)	matters
				Non-financial
Investors				matters
Evaluation	ESG research institutions
			Corporate Administration
			Department
			Human	Non-financial
		Engagement	Resources
		matters
		Department
	Sustainability
		Risk management-related
	Management Office
		departments, etc.
	in-housequasi-investor

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Initiatives for Sustainable Development Goals (SDGs) of the SuMi TRUST Group

The Sustainable Development Goals (SDGs) adopted at the United Nations Sustainable Development Summit in September 2015 comprise 17 goals and 169 targets that bring together global-scale priority issues that should be addressed collectively around the world toward 2030. The SuMi TRUST Group, which became a signatory to the United Nations Global Compact in 2005, has pursued various initiatives related to sustainability, and will continue working to provide value to our stakeholders, including from the perspective of addressing issues raised by the SDGs.

Sustainability Policies and SDGs

Policies

Linkages with SDGs

1	Contribute to Solving Social and	From the three SDG perspectives of economy, society, and the environment, we aim to
Environmental Problems through Business
	maximize the positive impacts (and minimize the negative ones) surrounding our clients
2		and contribute to solving social and environmental challenges, all the while enhancing cli-
Serve Clients with Sincerity	ent value.

The Board of Directors addresses environmental and social issues linked to sustainability (the

3 Earn the Trust of SocietyBasic Policy on Corporate Governance, Article 3-4). In our lending and investment activities, we recognize themes relating to SDGs such as climate change and land and water-based ecosys-

tems as risks, and have strengthened our approach to managing them.

Through the operation of environmental management systems (EMS), we limit the negative

4 Address Environmental Issuesimpacts from our business activities relating to SDG-linked themes such as energy, climate change, water, and paper resources.

5	Respect the Individual	Initiatives relating to human resources strategy and human rights are also linked to SDGs; we
are advancing such initiatives based on a broad-based view given global discussions.
6	Participate in and	As a good corporate citizen, we actively promote environmental activities and social contribu-
Contribute to the Community	tions which are highly relevant to SDGs, centering on sales offices in each region.

Two approaches to the creation of shared value with stakeholders (including clients)

Approach 1: Maximizing direct positive impact on stakeholders

The Group aims to maximize positive impact (minimize negative impact) on stakeholders from economic, societal, and environmental perspectives via investments and loans, dialogue with investors, human resources measures, and social activities.

Approach 2: Supporting stakeholders as the starting point for maximizing positive impact

The Group supports stakeholders maximizing positive impact (minimizing negative impact) on a sustainable society from economic, societal, and environmental perspectives via investments and loans, dialogue with investors, human resources measures, and social activities.

	Approach 2
	Approach
	1
The Group	Creating Shared Value
	Maximize positive impact
	(and minimize negative impact)

The Group's Stakeholders

Clients
Shareholders and Investors					Sustainable
	Maximize positive
		impact		Society
Employees
	(and minimize negative
		impact)
Communities/
Public Sector

Impact Perspectives: Economic, Societal, Environmental (three aspects of SDGs)

Sustainability Initiatives in Our Businesses Sustainability Policy 1

Our Group has hitherto leveraged the functions of a	environmentally friendly property, sustainable (ESG)
financial group specialized in trust banking to offer	investment, and issues in a super-aged society. Moreover,
broad-ranging support on solving the social challenges	as part of our total solutions, we are stepping up our ser-
faced by our clients. In light of this track record, we	vices in the areas of positive impact finance and ESG/
currently focus on five key themes in our sustainability	integrated report consulting.
business: climate change, natural capital (biodiversity),

Background of initiatives to establish business model

Building business

foundation

Building business

model

2003

Around 2004

2006

Launched ESG investment

Launched environmental

Began "With You"

(Developed SRI fund)

finance initiatives

activities

Developed total solutions

in each business from an

ESG investment perspective

Promoted initiatives to resolve envi-

Established management systems for "With

ronmental problems through trusts

You" activities, including budgets, point sys-

tems and communications (branch blogs, etc.)

Around 2010

Made super-aging

society issues a theme

Focused on themes related to issues unique to the elderly, such as dementia and residential options

Mitsui Sumitomo

Establishment of business model related to sustainability

Five major themes

Climate change

Natural capital

Environmentally

Sustainable investment

Super-aging society

(biodiversity issues)

friendly property

(ESG investment)

Clients

Two total solution services

Positive Impact Finance

ESG Total Consulting

(Support for maximizing client value,

(Support for maximizing positive impact through clients' own businesses)

such as information disclosure from an ESG perspective)

Offering Value to Communities Sustainability Policy 6

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The ultimate objective of the value companies create is to contribute to building a healthy, sustainable society. Since offering value to communities, which constitute the society, contributes to maintaining a sound business foundation, we regard this as a social license necessary for business operation. In view of this, the Group offers value to communities in an array of ways while

taking in SDG perspectives. Group affiliated companies and branches carry out of their own accord a variety of social and community contribution initiatives. The CSR Promotion Office uses SDGs as a way to categorize each of the many activities that provide value to communities, and it will also work to deepen its analysis of the impacts Group activities have over time in the future.

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Formulation

of SDG

Declarations

This initiative of formulating SDG declaration involved all 134 branches of SuMi TRUST Bank drafting their own action plans for achieving two of the SDGs-one of which is Goal 17 (Partnerships for the goals), while the other is the branch's choosing from Goals 1-16. KPIs to measure progress were also formulated. By the end of August 2019, each branch had announced their respective goals (see page 174 for details).

Specific

Actions

With You activities

Information dispatch through "WithYou" branch blog

One of the Goals 1-16

Sustainability Policy 1

Sustainability Policy 2

Sustainability Policy 3

Sustainability Policy 4

Sustainability Policy 5

Sustainability Policy 6

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Sustainability Policy 1

Demonstrating leadership towards achieving

a sustainable society

Masaru Hashimoto

Sumitomo Mitsui Trust Bank, Limited

President (Representative Director)

Helping solve social and environmental issues through business activities

• We will adopt a global perspective and work on resolving social and environmental issues through our core business.
• In aiming to solve the challenges faced by society and the envi- ronment, we will take steps to develop innovative products and services and new business models that fuse together the wide array of functions unique to a trust banking group.

Sustainability Policy 1

Sustainability Policy 2

Sustainability Policy 3

Sustainability Policy 4

Sustainability Policy 5

Sustainability Policy 6

There are numerous issues worldwide that threaten the realization of a sustainable society, including abnormal weather caused by global warming, marine plastic pol- lution, deforestation, and an increase in conflict-torn regions. In Japan meanwhile, social structures are changing considerably mainly as a result of issues surrounding a super-aged society, the advancement of digital innovation, and lifestyle diversification. At the same time, countries and people are now coming together under the common global language of the SDGs (Sustainable Development Goals) in an effort to further strengthen their ties with the goal of achieving a sustainable society. In aiming to realize a sustainable society, we provide total solution services with highly specialized products and services that accurately meet the needs of both corporate and individual clients in order to solve the various economic, social, and environmental challenges they face.

For corporate clients, we have implemented positive impact finance (PIF), a solution whereby we comprehensively analyze and assess the impact of a client's corporate activities on the economy, society, and the environment. We then work together with the client to set goals that they commit to achieving. The PIF solution does not specify how loaned funds are to be used; it is an initiative through which clients and our Group work together to overcome challenges in realizing a sustainable society. The disclosure of ESG (non-financial) information is also key to implementing PIF, which is why we provide total support to clients to enhance their information disclosure practices by, for example, providing advice on creating ESG information disclosure tools like integrated reports, which prove useful for communicating with investors.

Japan has entered an age of 100-year-life and seniors aged 65 or older now account for 25% of the population.

For individual clients, we think it is important that we safeguard the personal assets of our senior clients, ensure that they have sound living arrangements, and make sure that seniors and their families can lead stable lives. More spe- cifically, that they maintain good health, can live without any financial concerns, and can choose a place to live with peace of mind. To this end, it is necessary that we understand the varied requests and potential needs among clients and ensure that our client-oriented approach is more thorough than ever before so we can propose the best solution to each and every client. Furthermore, so that we can cope with the rapid rise in the number of seniors suffering from dementia, we are acquiring first-hand knowledge and beefing up our service capabilities mainly by having our employees attend dementia support training courses and undergo gerontology exams. We are also participating in the government-ledcommunity-based comprehensive care system as a way of getting involved in the building of a community that extends support to senior citizens.

This fiscal year, all of our 134 branches across Japan formulated and announced their own SDG declarations. In short, this is an initiative that each branch selects the SDGs they want to commit to achieving, formulates action plans to meet those goals, and identifies KPIs to measure their progress. As part of this initiative, each branch will team up with local organizations to roll out their own sustainability activities.

Going forward, we will continue to provide total solutions based on our significant expertise and client-oriented fiduciary spirit-Company strengths that remain unchanged since our founding-and demonstrate leadership as our cli- ents' "best partner" as we work towards the goal of achieving a sustainable society.

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Masaru Hashimoto

Sumitomo Mitsui Trust Bank, Limited President (Representative Director)

Sustainability Policy 1

Sustainability Policy 2

Sustainability Policy 3

Sustainability Policy 4

Sustainability Policy 5

Sustainability Policy 6

Trust Mitsui Sumitomo

Signatory to the Principles for Responsible Banking

We became a founding signatory to the Principles for Responsible Banking (PRB) advocated for by the United Nations Environment Programme Finance Initiative (UNEP FI) and launched on September 22, 2019. We are committed to collaborating with 130 banks worldwide- which collectively hold USD47 trillion in assets-to strategically align our business operations with the SDGs and the Paris Agreement on climate change. The signing of the PRB means we promise to be transparent about the positive and negative impacts our banking business has on people and the environment. By focusing on the areas in which our core business has a great impact, setting

September 22, 2019: Signing ceremony we also attended at the United

Nations Headquarters in New York (Source: UNEP FI website)

goals for specific initiatives, and taking action, we hope to make significant contributions towards achieving the targets of the SDGs on both a global and local level.

Holdings,

Status of Our Implementation of the Principles for Responsible Banking

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The Principles for Responsible Banking (PRB) require us to disclose the status of our implementation of the principles in our existing reports. Specifically, signatory banks need to report on their implementation of the Principles and self-assessment the first time within 18 months of signing (by March 2021 in our case) and annually thereafter. Within four years, we are required to fully implement the necessary steps, including impact analysis, target setting

and implementation, and accountability as outlined in this report. The Group's policy is to disclose its implementation status through its ESG reports. This ESG Report 2019/2020 reports on our implementation status using the format of UNEP FI's "PRB Reporting and Self-Assessment Template" with the aim of clarifying our current position for future full- scale implementation (this is not intended to serve as the first report required within 18 months of signing).

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Principle 1: Alignment

We will align our business strategy to be consistent with and contribute to individuals' needs and society's goals, as expressed in the Sustainable Development Goals, the Paris Climate Agreement and relevant national and regional frameworks.

The Group's Business Portfolio (FY2018 Gross Business Profit by Segment)

Business	Gross Profit	Main Products and Services
(¥100 million)
Retail Total Solution (TS) Services	1,998	Bank deposits, loans to individuals, sales of investment trusts and insurance,
will trusts, asset inheritance services, etc.
Wholesale Financial Services	1,938	Corporate credit, real estate loans, etc.
Stock Transfer Agency Services	370	Stock Transfer Agency Services
Real Estate	543	Real estate brokerage, real estate securitization
Fiduciary Services	1,721	Management and administration of pension trusts, securities, etc.
Global Markets	456	ALM, fixed income investment
Other	195	-
Total	7,226	-

* Gross profit for Wholesale Financial Services is the sum of the Wholesale Total Solution Services Business and the Wholesale Asset Management Business.

Loan Balances in the Banking Business in Japan and Overseas (End of March 2019)

In Japan

¥24,931.5 billion

Overseas

¥4,094.1 billion

Related Information: Financial Data Section, 2019 Annual Report (URL https://www.smth.jp/ir/disclosure/2018/f_03.pdf)

Sustainability Policy 1

Sustainability Policy 2

Sustainability Policy 3

Sustainability Policy 4

Sustainability Policy 5

Sustainability Policy 6

Alignment with SDGs and Paris Climate Agreement

In the Group's sustainability work, we set out initiatives including five major themes to address and ensure that each business is engaged in activities aimed at realizing the relevant SDGs. One of the five major themes is climate change. In line with the intent of the Paris Agreement, we are promoting initiatives in accordance with the Task

Force on Climate-related Financial Disclosures (TCFD). In addition, in our total solution services, we help client companies transition in a sustainable direction aligned with the realization of the SDGs through Positive Impact Finance, ESG & Integrated Report Consulting, and the Governance Support Program.

Relationship between the Group's Main Businesses and Sustainability Business Themes

Retail TS	Wholesale	Stock Transfer			Fiduciary
	Global	Services
Financial	Agency	Real Estate
Services	Markets	(including
Services	Services
			Investment)

Climate Change

Natural Capital (Biodiversity Issues)

Environmentally Friendly Property

Sustainable Investment (ESG Investment)

Super-aging Society Issues

Positive Impact Finance

ESG & Integrated Report Consulting

Related information: ESG Report 2019/2020 pages 16-75

Principle 2: Impact & Target Setting

We will continuously increase our positive impacts while reducing the negative impacts on, and managing the risks to, people and environment resulting from our activities, products and services. To this end, we will set and publish targets where we can have the most significant impacts.

Status of the Group's Main Businesses

Business	Indicator	Amount or Number	Universe	Ranking
	Balance of loans to individuals	¥9 trillion	Domestic banks	4th
Retail TS Services	Total sales of investment trusts and	¥0.9 trillion	Domestic banks	1st
discretionary investments
	Number of wills held in custody	32,000	Trusts	2nd
Wholesale Financial Services	Balance of loans to corporations	¥19 trillion	Domestic banks	5th
Stock Transfer Agency Services	Number of shareholders under administration	26,700,000	Trusts	1st
Real Estate	Real estate-related revenue	¥54.3 billion	Trusts	2nd
Entrusted balance of securitized real estate	¥16 trillion	Trusts	1st
	Assets under management	¥93 trillion	Domestic financial	1st
	institutions
Fiduciary Services
		Domestic financial
(including Investment)	Assets under custody	¥211 trillion	1st
institutions
	Entrusted balance of corporate pension funds	¥12 trillion	Trusts	1st

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Sustainability Policy 1

Sustainability Policy 2

Sustainability Policy 3

Sustainability Policy 4

Sustainability Policy 5

Sustainability Policy 6

Impact Analysis, etc.

Based on the Group's business portfolio (see page 12), loan balances in the banking business in Japan and overseas (see page 12), and the status of the Group's main businesses (see page 13), it is assumed that the six core businesses, particularly in Japan, have an impact of reasonable size and strength on the three dimensions of sustainable development: economic, social, and environ- mental. Given that the Principles for Responsible Banking apply to banking principles, this impact analysis excludes

the Fiduciary Services Business, which has a large impact on asset management, and the Global Markets Business, whose impact is difficult to assess.

In the future, we plan to carry out specific impact and target setting and formulate plans for implementation and monitoring of targets. Meanwhile, the following are examples of impact areas that are considered reasonably large at this time and examples of how the impact can be addressed.

Retail TS Services Business

More than 40% of SuMi TRUST Bank's individual clients are over 65 years of age. The contribution to maintaining the Quality of Life (QOL) of our elderly clients is one of our significant duties and can be considered an area of impact.

As Japan faces extreme population aging, dementia has become a serious social prob- Example of minimizing the negative impact lem. Concrete policies (standards) therefore need to be adopted to ensure that sales of

risk products to elderly clients take into account their decision-making capacities.

It is also a serious social problem that people whose judgment is reduced due to demen- Example of maximizing the positive impact tia and other age-related problems are unable to carry out financial transactions. From the perspective of financial inclusion, we should help these clients manage their property and build a strategy to develop comprehensive services that contribute to maintaining QOL.

Wholesale Financial Services Business

We are analyzing SuMi TRUST Bank's lending portfolio to identify significant areas (industries) of relative negative impact and systematically engaging with clients to mitigate these negative impacts. Meanwhile, we are identifying priority social and environmental

014 issues and building total solution-type business models for solving them.

201 Report ESG

Prohibition of lending to companies that manufacture cluster bombs, ban in principle Example of minimizing the negative impact of project financing of newly constructed coal-fired power plants, development of sector -specific policies for major industries with negative impact, and efforts to address the

Equator Principles

Development of Positive Impact Finance and construction of its sales strategy, develop- Example of maximizing the positive impact ment of ESG & Integrated Report Consulting and construction of its sales strategy, estab-

lishment of a support framework for ESG & SDGs in Corporate Finance

Principle 3: Clients & Customers

We will work responsibly with our clients and our customers to encourage sustainable practices and enable economic activities that create shared prosperity for current and future generations.

The Group has developed a wide range of products and services that contribute to building a sustainable society for our clients. Details are provided in this ESG Report 2019/2020.

• We provide products and services under the theme of "Climate Change" mainly in the Wholesale Financial Services Business, Real Estate Business, and Fiduciary Services Business (see pages 24-39 for details).
• We provide products and services under the theme of "Environmentally Friendly Property" in the Real Estate Business (see pages 67-75 for details).
• We provide products and services under the theme of "Natural Capital" mainly in the Wholesale Financial Services Business (see pages 40-45 for details).
• We provide products and services under the theme of "Sustainable Investment" mainly in the Retail TS Services Business and the Fiduciary Services Business (see page 57 for details).
• We provide products and services under the theme of "Super-aging Society Issues" mainly in the Retail TS Services Business (see pages 46-56 for details).
• We introduced "Financial Inclusion" as a new theme and started initiatives in this area mainly in the Retail TS Services Business (see pages 76-80 for details).
• In the Wholesale Financial Services Business, we are developing financial products that do not specify the use of funds (Positive Impact Finance) in accordance with the Principles for Positive Impact Finance (see pages 17-18 for details).
• In the Wholesale Financial Services Business, we are deploying ESG & Integrated Report Consulting to support corporate ESG and SDG initia- tives (see page 19 for details).
• Since our clients are the foundation of these business operations, we interact with them in good faith without exception (see pages 82-95 for details).

Sustainability Policy 1

Sustainability Policy 2

Sustainability Policy 3

Sustainability Policy 4

Sustainability Policy 5

Sustainability Policy 6

Principle 4: Stakeholders

We will proactively and responsibly consult, engage and partner with relevant stakeholders to achieve society's goals.

The Group has been working with a wide range of stakeholders to address a wide range of social and environmental issues to achieve a sustainable society, as described below.

	Cabinet Office, Ministry of the Environment, Ministry of Land, Infrastructure, Transport and
Policy Authorities	Tourism, Ministry of Economy, Trade and Industry, Forestry Agency, Tokyo Metropolitan
	Government (Bureau of Environment), etc.
	United Nations Environment Programme Finance Initiative (UNEP FI)
	Principles for Responsible Banking (PRB)
United Nations-Related Organizations	Principles for Responsible Investment (PRI)
United Nations Global Compact
	UNEP FI Property Working Group (UNEP FI PWG)
	Natural Capital Finance Alliance
	Principles for Financial Action towards a Sustainable Society (Principles for Financial Action
Cooperation among Financial Institutions	for the 21st Century (PFA21))
Equator Principles
	Institute of International Finance (IIF)
	(Biodiversity) Business and Biodiversity Initiative (Biodiversity in Good Company)
Cooperation among Industry,	(Aging Society Issues) International Longevity Center Japan
(Dementia problem) COLTEM (Collaboration center of Law, Technology and Medicine for
Government and Academia
	autonomy of older adults), which offers support for all stages of elderly community life from
	healthy to dementia

(Examples where we have contributed proactively to the improvement of sustainability in Japan)

• We participated in the development of CASBEE for Real Estate as an organizer of the subcommittee examining CASBEE property appraisal. CASBEE (Comprehensive Assessment System for Built Environment Efficiency) is a method for evaluating and rating the environmental perfor- mance of buildings developed by the Institute for Building Environment and Energy Conservation (IBEC) under the auspice of the Ministry of Land, Infrastructure, Transport and Tourism (MLIT).
• We implemented a study into the economic impact of buildings with CASBEE® evaluations as the leader of a working group examining eco- nomic benefits under the aegis of the Japan Sustainable Building Consortium's Smart Wellness Office Research Committee under the leader- ship of the Ministry of Land, Infrastructure, Transport and Tourism.
• In collaboration with COLTEM, we published a Guide for Dementia Friendly Financial Services aimed at improving capabilities for handling dementia across the entire financial industry (September 2017).
• We participated in the "strategy to be taken in order to become an ESG financial superpower," a joint proposal from the Ministry of the Environment and the Principles for Financial Action for the 21st Century (PFA21) (March 2019).
• We participated in the "urgent recommendations on financial behavior towards de-carbon society," from the PFA21 Steering Committee (October 2019).

Principle 5: Governance and Culture

We will ambitiously and transparently implement our commitment to these Principles through effective governance and a culture of responsible banking and by setting and announcing targets in areas where we have a significant impact.

• SuMi TRUST Holdings has established a system for promoting sustainability with the Board of Directors at the top. The Sustainability Promotion Committee, which is held as part of the Executive Committee, manages the status of implementation of the Principles for Responsible Banking and gives status reports to the Board of Directors (see page 110 for details).
• The Sustainability Promotion Office of the Corporate Planning Department is responsible for bringing the entire Group together to imple- ment the Principles for Responsible Banking. Going forward, we intend to keep sustainability at the core of our management. We will continue to strengthen our strategic and organizational sustainability efforts and continue to spread the philosophy of the Principles for Responsible Banking, for example through documents such as the Integrated Report (Employee Version).

Principle 6: Transparency & Accountability

We will periodically review our individual and collective implementation of these Principles and be transparent about and accountable for our positive and negative impacts and our contribution to society's goals.

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To be disclosed in our ESG reports going forward.

9/2020.Inc Holdings, Trust Mitsui Sumitomo

Sustainability Policy 1

Sustainability Policy 2

Sustainability Policy 3

Sustainability Policy 4

Sustainability Policy 5

Sustainability Policy 6

Total Solutions for Solving Clients' ESG/SDGs Challenges

By leveraging the various functions of a trust banking group, and building on our experience actively tackling sustainability issues since 2003, the Group is able to offer total solutions to our clients' comprehensive ESG and SDG challenges.

The Group's total solutions contribute to maximize the positive impact of our clients as well as the Group across the economic, social, and environmental dimensions required to create a sustainable society.

016The Group leverages investments and loans, trust products, and consulting services to solve client

challenges and contribute to the improvement of client's own value.

201 Report ESG

Financial institutions can create positive impacts in two ways, direct and indirect. Investments and loans that contribute to achieving the 17 SDGs are examples of the direct approach. The indirect approach is to encourage the transformation of the business activities of companies at the core of the economy. Under the banner of our five major sustainability

themes, we are working towards the SDGs individually while strengthening our efforts to contribute to the realization of the SDGs through Positive Impact Finance solutions, ESG & Integrated Report Consulting, and other total solution services for our corporate clients.

SDGs		ESG

Build a sustainable society (overcome obstacles to the environmental society)

Direct

approach Project finance, private equity, etc.

Interconnected Transform the behavior of stakeholders such as

the companies at the core

of the economy

Engagement with companies

• Investment in listed stocks
• Loans with unspecified use of funds, etc.

Indirect

approach

Financial institutions (banks, investors, etc.)

Sustainability Policy 1

Sustainability Policy 2

Sustainability Policy 3

Sustainability Policy 4

Sustainability Policy 5

Sustainability Policy 6

Positive Impact Finance Initiatives

What is Positive Impact Finance?

Positive Impact Finance is a type of financing that comprehensively analyzes and evaluates the impact (positive and negative) of business activities on the economy, soci- ety, and the environment, sets targets for mitigating the negative impacts and expanding the positive impacts, and then conditions the loan on a commitment to the achievement of those goals.

Specifically, it is based on the Principles for Positive

Principle 1 (Definition):

Positive Impact Finance serves to deliver a positive contribution to one or more of the three pillars of sustainable development (economic, environmental and social), once any potential negative impacts to any of the pillars have been duly identified and mitigated.

Principle 2 (Frameworks):

To promote the delivery of Positive Impact Finance, banks and investors need adequate processes, methodologies, and tools, to identify and monitor the positive impact of the entities to be financed or invested in.

Impact Finance set out by the United Nations Environment Programme Finance Initiative (UNEP FI), and carried out in accordance with UNEP FI's guidelines for implementation of the Principles. The most distinctive feature of Positive Impact Finance is the use of assessment metrics (KPIs) to explicitly disclose the degree to which a com- pany's activities, products, and services contribute to achieving the SDGs.

Principle 3 (Transparency):

Banks and investors are required to ensure transparency and disclosure on:

• The positive impacts intended by the entities financed or invested in (as per Principle 1);
• The processes they have in place to determine eligibility, and to monitor and to verify impacts (as per Principle 2);
• The impacts achieved by the entities financed or invested in (as per Principle 4).

Principle 4 (Assessment):

The assessment of Positive Impact Finance delivered by banks and investors should be based on the actual impacts achieved.

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017

Transaction with FUJI OIL HOLDINGS INC.

(1) Overview of Initiatives

In March 2019, SuMi TRUST Bank concluded the world's first loan agreement for Positive Impact Finance (Unspecified Use of Funds) with Fuji Oil Holdings Inc., a producer of vegetable oils, fats, and other food ingredients.

Before lending to the company, we identified the upstream, midstream, and downstream impacts of the company's supply chain, set targets for maximization

of the positive impacts and minimization of the negative impacts, and incorporated those commitments into the loan agreement. In concluding the Agreement, we obtained a third-party opinion from Japan Credit Rating Agency (JCR) on compliance of the assessment procedures with the Principles for Positive Impact Finance and on the reasonableness of the assessment metrics used.

201 Report ESG

Minimize	Sustainable sourcing of key raw	Reduction of the impact of pro-
materials with consideration for	duction activities on the environ-
negative
human rights and the environ-	ment including climate change,
impact
ment	water, and waste management

	Upstream	Midstream
	(Sourcing activities from
	(Production activities)
	raw material production sites)
Maximize	Unspecified use of funds: support eligible company transitions
positive
Specified use of funds: support social transitions resulting from activities
impact

Include impact categories and targets (KPIs) in loan agreement (Obtain third-party opinion from JCR)

Downstream

(Marketing activities)

Initiative to solve the world's food problems with plant-based food material

Sustainability Policy 1

Sustainability Policy 2

Sustainability Policy 3

Sustainability Policy 4

Sustainability Policy 5

Sustainability Policy 6

(2) Overview of Impact Analysis

In our comprehensive analysis of the impacts of Fuji Oil Holdings Inc. along the three dimensions of sustainable development (economic, social, and environmental), we used impact radar* to identify potential positive and negative impacts on the supply chain that occur upstream (in

sourcing of raw materials), midstream (in the activities of factories engaged in production and sales), and downstream (in consumption).

* Tool for impact identification developed by UNEP FI.

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018

	Theme	Goal	Related SDGs
Upstream	Sustainable Sourcing	Sourcing of main raw materials (palm oil, etc.) that is	12, 14, 15
considerate of human rights and the environment
Midstream	Reduction of the impact of production	Climate change, water, and waste management in the	6, 11, 12, 13
activities on the environment	Fuji Oil Group Environmental Vision
Downstream	Creation of food to deliver solutions and	Plant-Based Food Solutions (initiative to solve global	1, 2, 3, 9
ensure food safety, security, and quality	social issues with plant-based food material)

(3) Identified Impacts and Impact Indicators (KPIs)

As noted above, SuMi TRUST Bank utilized the UNEP	the negative impacts to be minimized, as well as a set
FI impact radar to identify the supply chain impacts. It	of impact indicators (KPIs) for monitoring them, all orga-
established the positive impacts to be maximized and	nized according to the three stages of the supply chain.

Upstream of the supply chain (sustainable sourcing of palm oil)

Impact Category Employment, Climate, Biodiversity and Ecosystem Services, and Inclusive and Healthy Economy

• Sustainable sourcing that considers the environment and human rights

Contents • Supply chain improvement activities and RSPO initiatives aimed at NDPE (No Deforestation, No Peatland development, No Exploitation) in the sourcing process

• Improve traceability while promoting human rights and environmental concerns among suppliers by communicating Fuji

Action Plan

Oil's intentions through third-party audits, two-party audits, etc.

ESG

KPI

• Traceability scores all the way back to the oil extraction plant

• Number of incidents registered in the grievance mechanism

201 Report

Midstream of the supply chain (reduction of the impact of production activities on the environment)

Impact Category Climate, Water, and Waste

Contents	• Reduction of utilities such as energy and water, etc. used primarily in the manufacturing process by each Group company,
as well as reduction of CO2, water, and waste
Action Plan	• Promote initiatives to achieve the goals of Environmental Vision 2020 and its successor, Environmental Vision 2030 (for-
mulated in fiscal 2018, launched in 2019)
	• CO2 emissions
KPI	• Annual water consumption per unit output
• Total waste emissions per unit output
	• Recycling rate (in Japan)

Downstream of the supply chain (creation of food to deliver solutions and ensure food safety, security, and quality)

Impact Category Food, Health & Sanitation

Contents	• Promote Plant-Based Food Solutions (initiative to solve global social issues with plant-based food material) and ensure
food safety, security, and quality
	• Further refine proprietary sorting, separation, and readjustment processing technologies, which are a source of value
Action Plan	creation, while strengthening cooperation with external parties to accelerate global co-creation
• Delicious ingredients for extending healthy life expectancy
	• Establishment of a system to ensure food safety and quality and to earn certifications
	• Vegetable proteins with low global environmental impact that contribute to addressing the shortage of food resources
	• For the spread of vegetable protein sources, pursuit of taste and creating a mechanism for consumers to understand the
KPI	significance of their choice
• Promotion of the development of healthy oils and fats (stabilized DHA/EPA) and soybean peptides
	• Establishment of a group-wide quality assurance system and acquisition of FSSC 22000 or ISO 2200 at all plants of Fuji
	Oil Co., Ltd. by the end of March 2020

Sustainability Policy 1

Sustainability Policy 2

Sustainability Policy 3

Sustainability Policy 4

Sustainability Policy 5

Sustainability Policy 6

ESG & Integrated Report Consulting

With the expansion of ESG investment globally, the corporate and capital market investment chains in Japan are also undergoing major changes. For example, Japan's Government Pension Investment Fund (GPIF) now pursues ESG investment, and the introduction of Japan's Stewardship Code has stimulated a healthy dialogue between companies and investors.

SuMi TRUST Bank is able to combine its perspective and experience promoting sustainability (which it practices itself as an issuer company) with its perspective as an institutional investor with analysts who have been involved in the asset management business for many years. This perspective and experience allow SuMi TRUST Bank to offer total solutions that support the cycle of information disclosure, engagement, and integration into management that is key to promoting sustainable management and achieving a sustainable society.

• Support for Information Disclosure

We support disclosure of non-financial information through advice on the construction of various tools for

communication with investors and other stakehold- ers, including integrated reports and ESG reports, and advice on ideas and processes to appropriately disclose necessary information in each individual tool.

• Support for Engagement

By leveraging our own network with institutional investors in Japan and overseas, we are able to offer indirect and direct support for investor dialogue (engagement), for example by providing various kinds of information or arranging meetings.

• Support for Integration into Management

We support building mechanisms to extract issues at the management level based on investor perspectives (including analyses by ESG assessment organizations), identify priority issues (materiality) that have a substantial impact on corporate value creation, and promote various initiatives aimed at strengthening the management foundation based on these identified issues.

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Total Support for Sustainable Management through ESG & Integrated Report Consulting

019

Information

Disclosure

Sustainable

Management

Practices

Integration

intoEngagement

Management

Information • Study sessions for executives and Sustainable

provision Management Secretariat staffs

Analysis and	• Analysis of challenges in ESG initiatives based on the
evaluation	evaluations by ESG assessment organizations
• Comparative analysis against benchmark companies
Support for	• Support for the materiality identification process
improvement	• Support for materiality management practices (including
efforts	proposals for strengthening management)

	• Support	for development of a framework for non-financial
Disclosure	information disclosure
	• Advice on the composition and content of integrated reports
Engagement	• Support for dialogue with institutional investors in Japan
	and overseas

Consulting Example

ESG Advisory Services

Integration into Management

In light of the latest trends of ESG investment market and investor viewpoints, we support efforts to strengthen and enhance the management foundation, such as organizing issues in ESG-related initiatives and integrating ESG themes into management.

Integrated Report Support Services

Integration into Management Information Disclosure

Based on our investor's perspective cultivated over many years of ESG investment practice and our wealth of practical experience in promoting sustainability management, we can offer powerful support for the creation of integrated reports, including the formulation of value- creation processes, the identification of materiality, and advice on the overall structure and content of the integrated report.

Integrated Report Review Services

Information Disclosure

Based on our investor's insight and our knowledge in promoting sustainability management, we review the integrated reports of our clients and contribute to their future improvement by making sugges- tions, as appropriate.

Research on ESG Trends of Major Shareholders Engagement

We conduct research on the ESG initiatives of major shareholders, analyze their impacts on issuing companies, and support the construction of a platform for healthy dialogue.

ESG-IR Support Services for Overseas Investors Engagement

We provide one-stop support services, starting with investor targeting for ESG-IR activities right through to the arrangement of investor engagement sessions.

Governance Support Program

Integration into Management

We help companies improve their autonomous governance by providing up-to-date information and a forum for corporate interaction on the topic of governance and by conducting evaluations of the effectiveness of the Board of Directors to improve its function.

201 Report ESG

Sustainability Policy 1

Sustainability Policy 2

Sustainability Policy 3

Sustainability Policy 4

Sustainability Policy 5

Sustainability Policy 6

Governance Consulting in Stock Transfer Agency Services Business

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020

Corporate governance reforms in Japan have strengthened governance by both companies and investors through the introduction and revision of the Stewardship Code and the Corporate Governance Code. Based on the revised Codes and various guidelines and guidance, companies are now expected to move from "formal" to "substantive" governance. The Group's Stock Transfer Agency Services Business offers solutions for strengthening governance based on our Governance Survey and Executive Compensation Survey, which leverage the industry's leading client base.

The Governance Survey, now in its third year, received the participation of approximately 1,500 companies, which makes it Japan's largest. More than 40% of all listed companies in Japan participated in the Governance Survey, and the distribution of the participating companies is similar to the distribution of all listed companies. The Survey is supervised by Professor Kunio Ito and provides data that is compared to governance INDEX data, which is indexed to substantive progress. The Executive Compensation Survey, conducted in collaboration with Deloitte Tohmatsu Consulting, is also in its third year and is also the largest in

Number of participating listed companies (end of September 2019)

1,622 companies

(42.5%)

Industry's No.1

client base

Japan in terms of company participation, with over 10,000 executive compensation data points broken down by company attribute. In addition to compensation levels, the Survey intensively reviews compensation decision policies and the practical operation of the compensation system and compensation committee. Building on the data in the Governance Survey and the Executive Compensation Survey, the Group is able to partner with client companies to identify their specific challenges, deliver optimal solu- tions, and provide continuous and multifaceted support aimed at enhancing governance.

PDCA Cycle of the Group's Solutions

201 Report ESG

Objectively compare STEP1 relative status to business

partners

Governance Survey (once a year)

• Japan's largest collection of survey data
• Also provided to client's contractors at no cost

Executive Compensation Survey (once a year)

• Japan's largest collection of executive compensation-related survey data

Aggregate inspection and STEP2 fixed-point observation of

the governance system

Aggregate inspection

CGC Comprehensive Support Services

CG Report Check Services

Fixed-point observation

Survey to identify substantial shareholders

in Japan and overseas

Support for evaluating the effectiveness

of the Board

STEP3	Consulting on individual issues to
enhance governance

Menu selection according to each company's challenges

	Governance				Executive compensation
	Consulting on transitioning				Consulting on executive
	to a "company with commit-
				compensation system
	tees" governance structure
	Consulting to support the				Consulting on introduction
	fostering of successors				of stock compensation

	IR/SR				Cross-shareholding shares
	Analysis of results of				Trusts for the bulk sale of
	exercise of voting rights				shares
	SR support services for over-
	seas institutional investors

Partner with client company to continuously deliver solutions for further enhancement

The Group views governance consulting as an oppor-	team and provide further solutions.
tunity for close communication and interaction with the	Examples of the kinds of total solutions that benefit
management of client companies, and thus continues	from Group strengths include M&A advice, business suc-
active dialogues with them. This enables us to capture a	cession support, real estate brokerage and effective uti-
wide range of management challenges that go beyond	lization, support for introducing and changing corporate
the governance challenges facing the management	pension schemes, and wealth management.

Sustainability Policy 1

Sustainability Policy 2

Sustainability Policy 3

Sustainability Policy 4

Sustainability Policy 5

Sustainability Policy 6

Solution services that link the client's aspirations to social contributions

Charitable Trusts

A charitable trust is a system in which funds are entrusted to a trust bank that administers and manages the funds to carry out charitable activities in a pre-determined way. For example, these trusts may be used by individuals wishing to provide funds for charitable activities or by companies that wish to return a portion of their profits to society. They have been used in a wide range of fields, including the provision of academic scholarships, support of environmental protection activities, and promotion of international cooperation and international exchanges.

Charitable trusts are often named for the trustor, so his or her aspirations can be remembered for years to come by many people. Moreover, to ensure the public interest is served in accordance with the client's inten- tions, a charitable trust can be "order made" to fit the

client's instructions. What public interest is it to serve and what sort of granting process will it implement? The trust can be arranged to reflect the client's instructions on the monetary size of the grants (scholarships), the number, the regional scope, or the terms of eligibility.

Since Sumitomo Mitsui Trust Bank ("SuMi TRUST Bank") began managing its first charitable trust in 1977, the number of trusts under its management has steadily risen, and they fund grants in various charitable fields.

As of March 2019, there are 187 charitable trusts with total assets of 31.3 billion yen under our management. In fiscal year 2018, grants from charitable trust totaling 1.26 billion yen were provided to 2,788 bodies in total (includ- ing individuals) for activities that serve the public interest.

Trust Mitsui Sumitomo

Mechanism of Charitable Trusts

Client

(fund provider = trustor)

Grant recipient

Conclusion of

Consultation

Grant recipient

Implementation of

a charitable

Grant recipient

trust agreement

public-interest activity

Day-to-day management

Grant recipient

Provision

Sumitomo Mitsui

Financial management

Grant recipient

of grants

Trust Bank

(trustee)

Exercise of the authority

Nomination of a grant

granted under the

Permission

recipient and advice and

Trust Act and

recommendations

Supervision

consent in

Application

concerning

important

Submission of a

important matters

matters

report on the

status of trust

assets

Trust executor

Government ministry

Management

committee, etc.

List of Charitable Trusts by Donation Type (as of March 2019)

Type	Number of trusts
under management
Scholarship	70
Promotion of natural science research	35
Promotion of human science research	4
Promotion of education	18
Social welfare	9
Promotion of arts and culture	9
Protection and propagation of animals	1
and plants
Conservation of the natural environment	6
Development and maintenance of the	18
urban environment
Promotion of international cooperation	12
and exchanges
Other	5
Total	187

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201 Report ESG

TOPIC

Suntory Fund for Bird Conservation

The Suntory Fund for Bird Conservation was established in 1990 by Suntory Holdings with the aim of enhancing bird conservation activities. Over the past 29 years, the fund has supported various bird protection activities in Japan and overseas. In recent years, the fund has granted around ¥40 million every year to NGOs and other entities in and outside of Japan for bird conservation group activities, for community bird activities, and for riparian large bird conservation.

Second-year elementary school students bird watching from the banks of the Tama River in spring

TOPIC

ENEOS Hydrogen Trust Fund

The ENEOS Hydrogen Trust Fund was established by JXTG Nippon Oil & Energy Corporation in 2006 to contribute to the realization of a hydrogen energy society by subsidizing basic research on the provision of hydrogen, an energy source in harmony with the global environment.

The fund is one of the largest in Japan, providing grants of up to 10 million yen per project. Each year, the fund invites the researchers who are receiving a grant and those who have received a grant in the previous year to an awards ceremony where they present their research results.

Sustainability Policy 1

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Social Contribution Donation Trusts

SuMi TRUST Bank offers social contribution donation trusts (also referred to as "Bridge to Tomorrow") intended to make donations to charitable organizations

List of Donation Recipients (as of August 14, 2019)

Environment	World Wide Fund for Nature Japan (WWF Japan)
Environment	Ecosystem Conservation Society-Japan
Education	National Federation of UNESCO
Associations in Japan
Medicine	Japan Cancer Society
Medicine	Center for iPS Cell Research and Application,
Kyoto University
Medicine	Médecins Sans Frontières Japan
Social welfare	Japan Guide Dog Association
Academics	The Japan Prize Foundation
Culture	Japan Arts Council
Disaster reconstruction	Central Community Chest of Japan
support
Support for children	The Nippon Foundation
Support for sports for	Special Olympics Nippon Foundation
people with disabilities
Humanitarian support	Japan for the Office of the United Nations High
Commissioner for Refugees (UNHCR)

etc. engaged in social contribution activities. Through the trust, clients can choose donation recipients from a list of organizations that SuMi TRUST Bank provides and donate one-fifth of the original trust principal once a year. (Donors can change donation recipients each year.) These clients receive reports from the recipient on how the donations were used and what activities were conducted.

SuMi TRUST Bank supports activities regarding not only the environment but also various themes including education, medical care, academia, and culture through social contribution donation trusts.

Mechanism of Social Contribution Donation Trusts

Application for social
contribution
donation trust	Donation transferred
Designation of recipient	(in November of each year)

Client								Recipient
	Sumitomo Mitsui Trust Bank
			(trustee)
			Receipt for donation sent
			Activities report sent

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Social Contribution Scheme Using Treasury Shares

SuMi TRUST Bank offers trust schemes for companies to donate dividend income from their treasury holdings to public interest foundations etc., as a way to contribute to society.

In fiscal year 2014, SuMi TRUST Bank implemented this scheme between Toyota Motor Corporation (trustor) and the Toyota Mobility Foundation (beneficiary). In this case, the dividend income is used to tackle many issues, such as eliminating the mobility disparity in emerging and developing nations, activities that promote the healthy development of the auto industry, and the funding of research into cutting-edge technology and systems in developed markets.

Trusts for Managing Loaned-Out Shares

SuMi TRUST Bank offers trusts for managing loaned-out shares so shareholders can donate dividend income tax free to public interest foundations etc. Using this trust, shareholders lend shares without compensation to NPOs etc. in a scheme that enables them to offer ongoing support to the designated stock borrower in the form of tax- free dividend income from the shares.

In fiscal year 2014, SuMi TRUST Bank commenced efforts to encourage interested parties to set up such trusts with the Center for iPS Cell Research and Application at Kyoto University as the designated stock borrower.

Holder of shares	Actual loan of shares	Public entity, etc.
(lender)		(borrower)

• Allocation of treasury shares

• Dividends

Trust dividends

(trustee)

(beneficiary)

(trustor)

Non-profit

Sumitomo

general or

Issuing

Mitsui

public interest

company

Trust Bank

incorporated

foundation

Shares

Entrustment of shares	Receipt of trust dividends in the
form of money (donations)
	Shares

Sumitomo Mitsui Trust Bank

("trusts for managing

loaned-out shares" trustee)

*The stock's name is "Japan Trustee Services Bank (trust account)."

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TOPIC

Center for iPS Cell Research and Application at Kyoto University

The Center for iPS Cell Research and Application (CiRA) at Kyoto University is a world-leading core research institution specializing in iPS cell research. Led by Director Shinya Yamanaka, the 2012 Nobel Prize winner in Physiology or Medicine, the center aims to harness iPS cell technologies to develop more effective medical treatments for patients hoping for them.

Professor Yamanaka has often mentioned that the U.S. research center he belongs

to receives many donations from individuals and corporations, and such donations Human iPS cells provide a solid financial basis for research centers. We agree with this view and have

designated CiRA as a support recipient of "social contribution donation trusts."

Designated Donation Trust

Based on a scheme established following amendments	with the trust principal can be donated to a charitable
to Japan's taxation system in fiscal year 2011, SuMi	organization. Donations can be made regularly over a
TRUST Bank also offers a "designated donation trust."	5-year or 10-year period to any organization, not just
Investment gains in the trust are tax free and together	those listed by SuMi TRUST Bank.

Social Contribution as Business Activities

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Making Financial Assets Useful to Society

SuMi TRUST Bank helps people who want to use their property for the social and public good to make a bequeathed donation by means of will trusts.

As part of this, in November 2019, SuMi TRUST Bank invited multiple social contribution organizations to give talks at a special seminar for the purpose of sharing

perspectives in the field of social contribution activities and points to keep in mind regarding bequeathed donations.

The seminar, which was very well received by partici- pants, presented an overview of social contribution activities in Japan and shared examples of how to donate more reliably and securely.

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Program

Theme		Lecturer/Guest
Current status and future prospects of social		Service Grant Japan (Certified NPO)
contribution organizations		Ikuma Saga, Founder and President
		Family House (NPO)
Talk session		Yoko Ueda, Trustees / Chief Executive Officer
Way of living by "facing someone's problems"		D Cafe Community Development Network "D Cafenet" (NPO)
		Hiromichi Takeuchi, Director
Benefits, considerations, and specific		SuMi TRUST Bank Nihonbashi Business Department
examples of donations made by wills		Satoshi Inaguma and Toshiharu Ueki (Fellow Supervisor Financial Consultants)

	Family House (NPO): Established about 30 years ago as a "family house" where parents and families can stay when chil-
	dren with difficult conditions receive advanced medical care. It aims to reduce the psychological and economic burden
Guests and	on families of patients who are forced to fight long-term illnesses such as childhood cancer. In recent years, it has been
running facilities where children can stay with their families.
their activi-
D Cafe Community Development Network: D Cafenet is a "dementia café" run by people with nursing care experience
ties
as a place to discuss dementia. It is expanding in Meguro District as a multi-site venue for people with dementia, their
	families, people working in the field of medical and nursing care, and anyone interested in dementia. (10 locations as
	of April 2019)

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Addressing Climate Change Using Our Financial Capabilities

Climate change is the most serious environmental issue in the world today-it is already affecting people's lives and economic activity in a number of ways as a result of abnormal weather, rising sea levels, and other phenomena. Moreover, the negative impacts of climate change are affecting developing countries and vulnerable people the most, which in turn is creating additional problems for societies, such as inequality and poverty.

At the same time, measures taken to ease or adapt to climate change are leading to improvements in ecosystem services through the enrichment of natural capital, while the migration of social systems driven by investment promotion and technological innovation is generating economic growth. Global sustainability now hinges on how quickly societies can achieve net zero CO2 emissions.

The pursuit of societies resilient to climate change will likely lead to the construction of sustainable societies through the eradication of poverty and reduction of inequality.

Challenges for Achieving the Goals

• Constructing carbon-free societies well before 2050 by realizing net zero CO2 emissions
• Visualizing risks and opportunities arising from the rapid migration of social systems
• Constructing business models that transcend sectors to combat climate change
• Expanding financial transactions that contribute to climate change adaption and mitigation

Initiatives for Solving the Challenges

• Provide solutions for the construction of societies with net zero carbon emissions by leveraging banking, trust, and real estate functions.
• Provide capital through investments and loans to promote renewable energy and energy conservation.
• Provide financial products that meet the investment needs of investors with a strong interest in climate change.
• Promote climate change measures in real estate markets and cities with financial and environmental performance evaluations.
• Promote the dissemination of finance that takes its impact on climate change seriously in accordance with the Principles for Responsible Banking.
• As a responsible institutional investor, promote stewardship activities related to climate change.
• Make improvements to the disclosure of information related to climate change.

KPIs for Solving the Challenges

	2018/2019 results			2019/2020 targets
	In principle, no engagement with		Promotion of impact finance	10 "positive impact finance" projects
Climate change	coal-fired power generation
mitigation
145 renewable energy finance projects	Climate change mitigation	Further build up renewable energy finance
	totaling 15,140 MW	portfolio in and outside of Japan
Disclosure of climate-	Launch of TCFD project team	Disclosure of climate-related	Better support for TCFD through
related information	information	initiatives such as scenario analysis

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Governance

SuMi TRUST Group's Climate Change Governance

The SuMi TRUST Group recognizes that its response to climate change issues is important for building the Group's corporate value and a sustainable society, and its solutions businesses contribute to addressing climate change issues.

High Priority Issues concerning Climate Change (Materiality)

From a management perspective, the Group recognizes it is important as a financial institution to reduce climate change impacts arising from companies and projects in its loan and investment portfolios. We also recognize the importance of reducing CO2 emissions from the Group's business activities.

It is our belief that helping to address climate change issues by harnessing our trust function is a matter of critical importance that will direct more business opportunities to the Group.

The Group's climate change-related materiality issues

• Taking into account how borrowers and investees impact society and the environment
• Pursuit of sustainability-based business opportunities
• Climate change
• Risk management and resilience

Trust Mitsui Sumitomo

Action Guidelines for Mitigating Climate Change

1. Implementation of Measures and Support to Help Mitigate Climate Change
   In addition to actively taking measures to reduce greenhouse gas emissions in our own business operations, we are making efforts, as a corporate citizen, to support activities that mitigate and adapt to climate change.
2. Provision of Products and Services
   We are working on developing and providing products and services that help mitigate climate change. Our financial func- tions are being leveraged to promote energy conservation and encourage the use of renewable energy.

1. Collaboration with Stakeholders
   We engage in dialogue and cooperation with our stakeholders as we work to mitigate climate change.
2. Education and Training
   We will ensure that these guidelines are fully implemented at Group companies, and will actively conduct education and train- ing to mitigate climate change.
3. Information Disclosure
   We will actively disclose information related to our efforts to miti- gate climate change.

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Climate Change-related Materiality Management

Through internal engagement, the Group endeavors to improve initiatives and enhance information disclosure regarding climate change issues identified as items of materiality.

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Materiality Identification and Practice

STEP1		STEP2
Identifying	Interviewing
Materiality Issues	Stakeholders

STEP3		STEP4		STEP5
Drawing	Implementing Internal	Initiatives for Increasing
Materiality Map	Engagement	Corporate Value over Long-Term

We emphasize the views of ESG investors who pursue corporate value from a long-term perspec- tive. Based on reporting guidelines such as GRI and SASB, we select bank materiality issues emphasized by ESG research companies (MSCI, FTSE, SAM, etc.) that provide information to investors.

The issues identified in step 1 are evaluated from two per- spectives: 1) the impact on corporate value in the medium to long term, and 2) the impact on stakeholders. The degree of impact is assessed with a score between one and five. The former is conducted by all our external directors, external auditors, and relevant internal departments, while the latter by external directors, external auditors, and external experts.

The point scores from step 2 are plotted on a scatter diagram (mate- riality map) with the two perspectives assigned either the horizontal or vertical axis. The issues that fall into the highest materiality zone on the map are considered to be highest priority ESG issues. In 2015, these issues were resolved by the Executive Committee and reported to the Board of Directors. Since 2017, the Risk Committee (an advisory committee of the Board of Directors) has examined the appropriateness of these issues and offered recommendations to the Board of Directors.

Of the issues with the highest materiality, our Sustainability Management Office engages in dialogue (engagement) with relevant departments with respect to the topics investors are most interested in and for which the Group's initiatives may face challenges. Reports are submitted to the Executive Committee and the Board of Directors on the progress of initiatives.

The Board of Directors receives recommendations from the Risk Committee and reports on internal engagement and facilitates multilateral discussions on the future course of action. These actions are in line with the provisions of Article 3-4 of the Group's Basic Policy on Corporate Governance, which prescribes matters regarding environmental and social issues concerning sustainability that the Board of Directors is obligated to address.

Results of internal engagement on climate change

• Adoption of the Equator Principles in project finance
• Formulation of a financing policy for coal-fired power generation project finance
• Launch of TCFD project team

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Strategy

Aiming to Limit Temperature Increase to 1.5°C

Paris Agreement and Special Report on Global Warming of 1.5°C

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Under the Paris Agreement that came into force in November 2016, signatory nations aim to "hold the increase in the global average temperature to well below 2°C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels," in order to ensure sustainability. The world

If current temperature rise continues

temperatureglobalaverageinChange 1900)-1850foraverageto (scaled	Limit global warming as soon as possible
As of 2017					Limit global warming
					as much as possible
	Temperature changes
	owing to
	human activities		If temperature increase is
				kept below 1.5°C
				(scope of uncertainty)
(°C)		Observed
temperature changes

Source: IPCC Special Report on Global Warming of 1.5°C; corrections to frequently asked questions

is now taking further steps in an attempt to transition from a low-carbon society to one with net zero carbon emissions.

In October 2018, the Intergovernmental Panel on Climate Change (IPCC) published its Special Report on Global Warming of 1.5°C. The report highlights the need to reduce greenhouse gas emissions to net zero as soon as possible in order to secure sustainability and eradicate poverty.

Key points in Special Report

• The global average temperature has already increased by 1°C when compared to pre-industrial levels, and at the current pace of emissions, global warming is likely to reach 1.5°C by 2040.
• The harmful effects of the current 1°C temperature increase are serious, but will increase in severity when the temperature increase reaches 1.5°C and become significantly harmful at 2°C.
• Global warming is significantly affecting ecosystems and humans owing to abnormal weather conditions, rising sea levels, and other phenomena.
• Many more countermeasures will be required if our response to global warming is slow.
• Aiming to limit the temperature increase to 1.5°C will also have a positive impact on meeting the objectives of the SDGs.

201 Report ESG

In 2019, following the publication of the Special Report on	at the UN Climate Summit held in September 2019, the
Global Warming of 1.5°C, the IPCC published its Special	Secretary-General of the UN called on member countries
Report on Climate Change and Land and Special Report	to commit to limiting the temperature increase to 1.5°C,
on the Ocean and Cryosphere in a Changing Climate,	and 65 countries vowed to achieve net zero greenhouse
which indicate that the impacts of climate change are	gas emissions by 2050.
even more serious than previously thought. In response,

2018

1.5°C Special Report

2013

IPCC Fifth

to

Assessment

Special Report on Climate Change and Land

2014

Report

2019

Special Report on the Ocean and Cryosphere

in a Changing Climate

2016

Paris Agreement

2019

Climate Summit

2°C target

1.5°C!

2021	IPCC Sixth
to
Assessment
2022
Report
(planned)

Net zero

2050 emissions

Special Report on Climate Change and Land

• Compared to before the Industrial Revolution, global temperatures rose by an average of 0.87°C and land temperatures by an average of 1.53°C between 2006 and 2015.
• Climate change is affecting livelihoods, biodiversity, human health, infrastructure, food systems and more, exacerbating existing risks in those areas.
• The land-related climate adaptation and mitigation response options face barriers and can make only limited contributions.
• Sustainable land and forest management can reverse the negative impact of climate change on land degradation.

IPCC Special Report on the Ocean and Cryosphere in a Changing Climate

• The global ocean has warmed unabated since 1970, the rate of ocean warming has more than doubled since 1993, and marine heatwaves have doubled in frequency since 1982 and are increas- ing in intensity.
• By absorbing more CO2, the ocean has undergone increasing sur- face acidification, which is adversely affecting ecosystems.
• Due to a combination of the disappearance of the Greenland and Antarctic ice sheets and the thermal expansion of the ocean, historically rare (once-per-century) extreme sea level rises are expected to start occurring more than once a year in the tropics.

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Risks and Opportunities Relating to Climate Change

In the area of climate change, financial institutions are	and the responsibility for the latter are larger. Moreover,
responsible not only for direct impacts arising from their	an important element for financial institutions in their
own business activities but also for indirect impacts aris-	corporate growth strategies is factoring in the transition
ing from investee and borrower companies and projects,	to a net-zero emission society into their business models.

Risks Relating to Climate Change

Risk categories*	Risk concepts	Attributes of risks linked to climate change
Transition risks	• Risk that stricter regulation and technological advances affect industries and companies and lead to	• High social expectations that lenders and
	value impairment in the Group's loan and equity portfolios	investors will seek to avert or mitigate risks
	• Risk that business models and corporate strategies may be affected by the regulatory response to	from indirect impacts arising from the
	reach the goal of staying below 2ºC	activities of investee and borrower compa-
	• Risk that carbon pricing may impact market economies and economic competitiveness across multiple	nies or projects
	nations	• Climate-related risk impacts on the whole
	• Risk that companies may face calls to consider climate change problems in procuring financing and	supply chain, so risk management in the
	services	upstream supply chains of investee and
	• Risk that low carbon-oriented market may lead to volatility in supply-demand relationship for products	borrower companies will be important
	and services and corporate earnings	• Establishing quantitative risk assessment
	• Reputational risk from assessments that climate change-related disclosures and initiatives are	measures will be important
	inadequate
Physical risks	• Risk that natural disasters damage the Group's assets and social infrastructure and puts business continuity
	at risk
	• Risk that natural disasters damage the assets of investee and borrower companies
	• Risk that climate change affects land use, resource procurement, and the productivity of primary industries
	• Risk that progression in global warming increases the likelihood of heat stroke and pandemics

Business Opportunities Relating to Climate Change

Opportunity categories*	Opportunity concepts	Attributes of opportunities linked to climate change
Opportunities	• There may be more opportunities to offer advisory services and finance to projects and companies that are	• Climate-related businesses promoting a
in resource	helping to slow or mitigate climate change	switch in social systems in areas such as
efficiency, energy,	• Switch in social infrastructure, such as spreading renewable energy, may open up profitable opportunities	energy and transportation may become
over the medium- to long-term	the economic mainstream
products and
• There may be more opportunities to provide finance for infrastructure and technological development that	• A social infrastructure changeover in the
services, markets,
enhances capacity to adapt to climate change	medium- to long-term on the spread of
and recovery
• Positive social evaluations as a financial institution helping to address climate change may translate into	renewable energy, etc. may translate into an
resilience	more business opportunities	increase in stable profit opportunities for the
	• Greater social awareness of climate change may support sales of the Group's finance products that factor	Group over the medium- to long-term
	in environmental considerations

* Categories based on the recommendations of the TCFD

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Support for TCFD Recommendations

In recognizing the risks financial markets face from climate change, the Financial Stability Board released the recommendations of the TCFD in June 2017, calling on companies to disclose climate change-related information with even more transparency. In addition to the volume of greenhouse gas emissions their own business activities generate, financial institutions are required to monitor and disclose information about the climate change impacts of the companies and projects they

extend investments and loans to, and ensure that proper risk management is in place.

SuMi TRUST Holdings supports the recommendations of the TCFD and has joined the TCFD Consortium established in May 2019. To accelerate support for the TCFD recommendations, we have established a TCFD Project Team (TCFD PT) led by the officer in charge of corporate planning.

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Status of SuMi TRUST Bank's Carbon-related Assets

In light of the possibility that the borrowers may be affected by climate-related transition risks, our carbon-related asset exposure* as measured by the TCFD definition represents 5.6% of loans (as of the end of March 2019).

• Covers the sectors "Energy" and "Utilities" in the GICS (Global Industry Classification Standard). Excludes water utilities, independent power producers, and renewable energy power producers. Total comprises SuMi TRUST Bank, Limited and Sumitomo Mitsui Trust Bank (Thai) Public Company Limited.

To understand the impact of climate change risks, including physical risks, on our credit portfolio, we have initiated a climate change scenario analysis.

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Climate-related Portfolio Analysis by Sumitomo Mitsui Trust Asset Management (SMTAM)

As part of a comprehensive evaluation of the assets under our management, SMTAM is assessing the risks posed by climate change to its portfolio by asset class. Our assessment methods comprise (1) fixed point analysis based on the disclosures and performance of our portfolio holdings; and (2) transition path analysis based on future climate change scenarios. The results of our analyses will then be applied to our ongoing engagement activities.

Fixed-Point Analysis of SMTAM's Climate-related Portfolio

Comparison of	Proportion of greenhouse gas emissions
annual greenhouse gas emissions	by industry in our portfolio

For the entire portfolio of Japan-listed companies managed by SMTAM, we estimated the

Mitsui Sumitomo

(in million tCO2e)	97.0
100	96.3
80
60		Scope 3
40
20		Scope 2
		Scope 1
0	Our	Benchmark
	portfolio	(TOPIX)

Utilities 37%

Consumer discretionary 5%

Consumer staples 3%

Energy 4%

Industrials 15%

Materials 33%

Information technology 3%

(Industry sectors based on the Global Industry Classification Standard (GICS))

status of greenhouse gas emissions as of the end of June 2019 based on information disclosed by the investee companies. The greenhouse gas emissions of all investee companies total 96.3 million tCO2e, which is slightly lower than the total emissions of the benchmark (TOPIX) portfolio of the same size and stock composition ratio.

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Comparison of greenhouse gas emissions per unit sales*

* Scope 1 and 2 combined

Our

portfolio

Benchmark

(TOPIX)

0

20

40

60

80

100

120

140

(in tCO2e / million US dollars)

Communication services

Consumer discretionary

Consumer staples

Energy

Financials

Health care

Industrials

Information technology

Materials

Real estate

Utilities

By industry, the Utilities and Materials sectors account for 70% of the total, although in terms of emissions per unit sales in the portfolio, these two sectors contribute almost 60%.

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Climate-related Portfolio Transition Path Analysis by Sumitomo Mitsui Trust Asset Management (SMTAM)

201 Report ESG

Estimates of portfolio's future greenhouse gas emissions compared to emissions under each climate change scenario

(in million tCO2e)				6°C scenario
80
70						4°C scenario
60
50
40			2°C scenario
30
20		Our portfolio
10
			Exceeds allowable emissions in 2037
0
2020	2025	2030	2035	2040	2045	2050

(Year)

• For details, see Sumitomo Mitsui Trust Asset Management STEWARDSHIP REPORT 2019/2020.

Transition path analysis evaluates how the portfolio's climate change risk changes under future climate change scenarios. We evaluated the portfo- lio's compatibility with different climate change scenarios (climate resilience) in a time-sequence manner by comparing estimates of the portfolio's future greenhouse gas emissions to the "carbon budget" (allowable emissions) under each scenario. Specifically, in addition to the 2°C scenario, which is the benchmark of the Paris Agreement, we evaluated the portfolio under the 4°C scenario and the 6°C scenario. We have confirmed that, assuming the status quo, the portfolio's emissions will reach the levels permitted under the 2°C scenario in 2037 and will likely exceed them thereafter.

Climate-related Portfolio Analysis by Nikko Asset Management

Weighted Average Carbon Intensity of Nikko Asset Management's Portfolio

Weighted average carbon intensity of portfolio1), 2)				Portfolio
Aggregate portfolio						133.95				Benchmark
Aggregate portfolio		31.34
(non-benchmarked funds only)										196.29
Aggregate portfolio
(benchmarked funds only)										202.31
0	50	100	150	200	250
							(t-CO2e/US$M sales)

1. Assets under management (AUM) of reported portfolios covers 68% of core active strategies.
2. Figures are generated from MSCI ESG Research. Figures may be derived from company disclosures and/or estimates by MSCI ESG Research.

* For details, see Nikko Asset Management TCFD Report 2018.

Nikko Asset Management's aggregate portfolio weighted average carbon intensity is 133.95 t-CO2e per million US dollars of sales, with coverage of 68% of assets under management (AUM) of its active equity strategies. This aggregate portfolio includes both benchmarked and non-benchmarked funds. When calculated on an aggregate portfolio comprising only benchmarked funds, the total weighted average carbon intensity is 196.29 t-CO2e per million US dollars of sales, which is 3.0% below the aggregate bench- mark. The figure for the aggregate portfolio of non-benchmarked funds is 31.34 t-CO2e.

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Risk Management

Climate Change Risk Management for Portfolio Investments

As a basic policy, Sumitomo Mitsui Trust Asset Management (SMTAM) and Nikko Asset Management (Nikko AM) do not categorically exclude specific securities from investment unless directed to do so by the trustor or client. Our policy is rather to use engagement, exercise of voting rights, and other stewardship activities to encourage our investee companies to disclose climate change information and take concrete action on climate

change issues in order to improve their own sustainability and the sustainability of the market as a whole.

Participating in Climate Action 100+

SMTAM and Nikko AM participate in Climate Action	Summit in December 2017. Under this framework, insti-
100+, an initiative established by the PRI and four global	tutional investors jointly engage with the world's top 100
institutional investor organizations at the One Planet	greenhouse gas emitters.

Cases of Climate Change-related Engagement (SMTAM)

In August 2019, we engaged with PTT Public Company	collaborative managers. In October 2019, we engaged
Limited (the Thai state-owned oil and gas company)	with three major Japanese manufacturing companies in
as lead manager, and in September 2019 we engaged	partnership with CalSTRS (the California State Teachers'
with POSCO (the South Korean iron and steel com-	Retirement System) and CalPERS (the California Public
pany) and KEPCO (Korea Electric Power Corporation) as	Employees' Retirement System).

Domestic: Non-manufacturing Company A	Greenhouse gas emissions reduction
Opinion from SMTAM	Company Response and Action	Evaluation by SMTAM
The truck-centric transportation sector accounts for a large portion of CO2 emis-	Although there are a variety of different environment-related indica-	We approve of the company's announce-
sions volume by industry. With the company currently in discussion over its	tors, medium-to-long-term CO2 reduction is a priority for which we are	ment of specific CO2 emissions reduction
medium-term business plan, it seems to us that the required course of action	committed to investing the necessary costs to achieve. We will look into	targets. Moving forward, we will monitor
is for it to capitalize on its expertise with various shipping modes (including	incorporating it into our next medium-term business plan. With a view	the progress being made to reduce CO2
trains, ships and airplanes) so it can set Scope 3-focused (i.e., emissions volume	towards realizing its long-term vision, the company announced specific	and to improve the profitability of domestic
encompassing manufacturing, shipping, etc.) medium-to-long-term CO2 reduc-	CO2 emissions reduction targets as KPI to be achieved by fiscal year 2023.	logistics business.
tion targets while also actively expanding sales to customers.

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Global: Resource Mining Company B (Europe)	Greenhouse gas emissions reduction
Opinion from SMTAM	Company Response and Action
Globally speaking, this company is seen as having a major impact on green-	As you have pointed out, we have significant exposure to the coal industry
house gas emissions and is a target company of the CA100+ initiative. It is our	and are aware of the risks presented by a transition to a low-carbon soci-
view that (1) disclosure and implementation of plans to reduce greenhouse gas	ety, particularly the potential stranding of coal assets. Our intention is to
emissions to the levels set under the Paris Agreement; (2) disclosure of infor-	put greater emphasis on high-quality coal, whereby we can increase our
mation in line with the recommendations of the TCFD (Task Force on Climate-	profitability without increasing our production volume, while at the same
related Financial Disclosures); and (3) creation of climate-change related	time reducing our contribution to global warming. In February 2019, the
governance systems and structures are needed.	company announced limits on the size of its coal production.

Evaluation by SMTAM

We approve of the company's expressed intentions to optimize its coal business and assets. We will continue to engage the company in dialog about measures it can take to help mitigate climate change.

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Cases of Climate Change Considered in the Investment Process (Nikko AM)

Case 1 For an integrated energy company in North America: Despite being a leader in environmental management in the oil sands industry, the company's stock price did not appear to reflect its expected regulatory burden. We therefore placed a higher discount rate on the stock, lowering its long-term alpha score.

Case 2 Risk of stranded assets in Australia's power sector: Focusing on listed companies, we analyzed the impact on valuations under a variety of scenarios assuming different policy directions and technological advances.

Case 3 Given that the environment is heavily influenced by Chinese government initiatives, we closely monitor and analyze companies that are in a position to benefit from China's policies over the medium to long term. Examples of Chinese initiatives currently underway include the transition from coal to gas to address air quality issues and the transition to electric vehicles called for under the "Made in China" plan.

Case 4 For a Japanese machinery manufacturer that produces mining equipment: We are closely monitoring the future of the coal industry and the risk of stranded (related) assets as a climate change-related risk for the company. We regularly engage with the company's management team and know that they are constantly making business decisions to improve profitability with an awareness of a variety of risks, including climate change. We assess that the company is adequately managing its significant climate change risks.

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Sumitomo

Climate Change Risk Management for Loans

Equator Principles

Because the SuMi TRUST Group has identified "Taking into account how borrowers and investees impact society and the environment" as a sustainability-related priority issue (materiality), we incorporate risk management procedures based on the Equator Principles into our project finance decision-making process to ensure that due consideration is given to each project's impact on the natural environment and local community. In fiscal year 2018 (Apr 1, 2018 - Mar 31, 2019) there were 22 projects to which we applied the Equator Principles.

The fourth revision of the Equator Principles was adopted at the Equator Principles Association Annual

Meeting in November 2019. The principles were expanded in scope to include refinancing and certain other transactions and updated to strengthen commitments to Indigenous Peoples in developed countries, among other changes. Efforts to address climate change were strengthened by updating the due diligence requirements to include physical risk analysis when the project's impact is likely to be significant and transition risk analysis under TCFD, as well as consideration of alternative proposals, for projects with annual greenhouse gas emissions exceeding 100,000 t-CO2.

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Systems and Processes for Evaluating Environmental and Social Considerations

		Information on			Screening Form	Social &
		projects subject to
		Equator Principles			Categorization	Environmental
						Risk Assessment
						Environmental Impact
Client				Branch		Team
				Assessment etc.
						Structured
		Covenants				Environmental and
				Finance
		Monitoring
				Social Impact Review	Department

Credit supervision departments

Application processes: Following internal policies based on procedures for evaluating social and environmental considerations, the Equator Principles Department carries out assessments of environmental and social impacts relating to individual projects.

Implementing environmental and social impact reviews: Reviews of the environmental and social impacts of a project proposed by developers take into account its industry, the country where it is sited, and whether it meets the standards called for by the Equator Principles, and from there, a comprehensive risk is judged.

Monitoring compliance: Compliance with important items concerning environmental and social impacts have been reflected into loan agreements, and compliance with these is regularly confirmed through such methods as reports on project compliance status on these fronts.

Company training programs: Regular training sessions are provided for employees in departments and sections relating to sales, assessment, and screening to foster a thorough understanding of internal operations supporting environmental and social impact reviews and raise their awareness about related concepts.

201 Report ESG

Climate Change-related Policies for Specific Sectors

Project Finance for Coal-fired Power Generation

With climate change being such an important issue for the international community, SuMi TRUST Bank has continued to carefully consider its own actions by setting internal standards on power generation efficiency and environmental load for coal-fired power generation projects that emit relatively large amounts of CO2. Given that initiatives aimed at realizing low-carbon societies in developed countries are key management issues for financial

institutions, SuMi TRUST Bank's basic policy going forward is not to participate in any new coal-fired power generation projects being considered for construction. That said, the Bank may make exceptions by carefully and comprehensively considering the background, attributes, and other factors of each individual project if it meets strict environmental standards, such as OECD guidelines and power generation efficiency performance.

Risk Management for Tropical Rainforest Logging and Peatland Development

SuMi TRUST Bank has established sector-specific poli-	a sector policy in fiscal 2019 for sectors where there are
cies for sectors that have a significant social impact, for	concerns that climate change is being impacted by activ-
example cluster-bomb manufacturing, and has banned	ities such as peatland development and illegal logging in
or curbed investments and loans to companies and proj-	tropical rainforests for the purpose of harvesting palm oil
ects that have a negative impact. We plan to formulate	and procuring raw materials from forests.

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Metrics and Goals

SuMi TRUST Group's CO2 Emission Reductions

SuMi TRUST Bank is committed to reducing CO2 emissions by reducing power consumption. We have significantly reduced our power consumption through business efficiency and work style reforms. We plan to establish long-term targets for ourselves for 2030 and beyond.

SuMi TRUST Bank's medium- to long-term environmental targets

CO2 reduction	To reduce power usage intensity (power consumption / total floor area) in FY2020 by 10.5% compared
(reduction of power consumption)	to FY2009. (SuMi TRUST Bank)

Achievement of medium- to long-term environmental targets for power usage intensity

		FY2009	FY2015	FY2016	FY2017	FY2018
Power usage intensity	kWh/m2	213.31	168.14	161.06	152.60	151.32
Change from FY2009	-	-21.2%	-24.5%	-28.5%	-29.1%

Energy usage							CO2 emissions volume
(TJ)					(million kWh)	(thousand t-CO2)						(t-CO2/m2)
1,000								100	50										0.12
800								80	40										0.11
600								60	30										0.10
400								40	20										0.09
200								20	10										0.08
0								0	0										0.07
		FY2014	FY2015	FY2016	FY2017	FY2018				FY2014	FY2015	FY2016	FY2017	FY2018
		Total volume of energy usage (heating value) (left axis)		Electrical power (right axis)				Greenhouse gas emissions volume (left axis)			Emissions intensity (right axis)

Scope of calculations: SuMi Trust Bank facilities in Japan subject to the Act on the Rational Use of Energy; SMTAM and other Group companies are tenants in some facilities.

Calculation method: Calculations conform to the method in the Act on the Rational Use of Energy.

Business Opportunities

Efforts as a Trust Banking Group to Contribute to Climate Change Mitigation and Adaptation

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Impact-Focused Finance

SuMi TRUST Bank has contributed to the spread of renewable energy through project financing for wind power generation and mega-solar power in Japan and abroad.

As a signatory to the Principles for Responsible Banking (PRB), which went into effect in September 2019, SuMi TRUST Holdings promotes the "positive

impact finance" approach advocated by the Principles, which emphasizes how the companies and projects to be financed will impact society and

incorporates these impact assessments into lending decisions

(see page 35).

Finance to Promote the Spread of Renewable Energy

Society is undergoing rapid changes due to the mobility revolution in electric vehicles and autonomous driving, the transition to zero emission buildings and cities, and technological innovations based on artificial intelligence and FinTech.

In the transition process, the "decarboniza- tion" of power through reduction of fossil fuel consumption and the use of renewable energy is key to achieving the 1.5°C target.

To support this goal, the SuMi TRUST Group will continue to offer a diverse array of financing such as project finance, funds, leases, and home renovation loans.

Capacity (kW) 1GW=106

105

104

1MW=103

102

101

1

Wind

Mega-solar

generation

PV* sites

Renewable

Renewable

energy funds

Woody

energy funds

Project

Hydro

Waste-to-

Project

finance

biomass

generation

finance

energy

Corporate

generation

lease-type

Rooftop

PV

lease PV

Hot spring

Micro-hydro

binary cycle

PV for SMEs*

Biomass gas

generation

generation

PV for

households

Wind power

Biomass

Hydro power

Other

Solar power

* SMEs: small and medium-sized enterprises;

Graph includes projects in the planning

PV: photovoltaic

stage and under construction

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Climate-related Green Finance

Through green finance, SuMi TRUST Bank not only supports the procurement of funds by businesses implementing projects that mitigate climate change, but also strives to provide services to meet the investment needs of ESG investors with a keen interest in climate change issues.

Launch of Domestic Renewable Energy Business Investment Fund for Institutional Investors

Mitsui Sumitomo

SuMi TRUST Bank was the first in Japan to utilize trust assets to launch a fund (SuMi TRUST Renewable Energy Trust Fund: Brown No.1) that invests in anonymous partnerships for domestic solar power generation projects already in operation. This investment product provides investors with trust beneficiary rights (non-pecuniary trust assets) and relies on stable cash flow backed by long-term, steady electricity sales revenue under the feed-in tariff system (fixed-price purchasing of renewable energy). The fund meets the needs of investors

who seek stable income gains unaffected by economic conditions despite the harsh investment management climate dominated by negative interest rates and the like. The trust was established in April 2018 and closed to new investment one year later at ¥12.7 billion in total AUM. The trust also includes investments in projects for the renewable energy funds SuMi TRUST Bank has set up and manages (see page 35). SuMi TRUST Bank also earmarks up to 10% of the fund's AUM (¥1.2 billion) for same-boat investments.

Trust

Green Jointly Operated Designated Money Trust

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SuMi TRUST Bank has been working to connect investors who manage environmentally friendly funds with borrowers (such as J-REITs) who need financing to pursue environmentally friendly property projects. In September 2018 we launched a Green Trust, a jointly operated designated money trust that is used to raise funds for the new acquisition of green buildings* and the refinance of existing debts. It was the first initiative of its kind in Japan. New Green Trusts were launched again in March 2019 and October 2019. The Green Trust launched in October 2019 is used to fund green buildings that have

been awarded the CASBEE S rank. SuMi TRUST Bank supports the acquisition of certification by buildings in the trust. The Green Trusts we have launched to date comply with the Green Bond Principles and received the highest possible rating of "Green 1" in the Japan Credit Rating Agency (JCR) Green Bond Evaluation. Loans from the Green Trust also comply with the Green Loan Principles and received the highest possible rating of "Green 1" in JCR Green Loan Evaluation.

• Eco friendly real estate with good environmental performance and good management that has acquired external certification by CASBEE for Real Estate or a similar rating system

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Green Bonds

In September 2018, SuMi TRUST Bank issued its first euro-denominated green bond for overseas markets. The 2-yearfloating-rate green bond targeting mainly ESG investors and asset managers in Europe raised €500 million. The proceeds from the green bond have been fully allocated to loans for 16 renewable energy projects involving wind power and solar power, contributing to a reduction of 178,685 tons*1 of CO2 per year (as of the

end of March 2019). The status of the appropriation of funds from the proceeds of the green bond issuance and the environmental improvement results are disclosed on the website of SuMi TRUST Holdings*2 and have been certified by a third-party certification body.

*1 Figure calculated by multiplying the CO2 reduction effects of the projects by SuMi TRUST Bank's loan ratio.

*2 https://www.smth.jp/en/csr/greenbond/index.html

Issuing and Selling the Trust Beneficiary Rights backed by Project Finance Receivables of Renewable Energy Projects

In September 2018, SuMi TRUST Bank established a framework for issuing and selling the trust beneficiary rights backed by project finance receivables of renewable energy power generation projects.

As project finance for renewable energy expanded as a way to combat climate change, securing liquidity in the secondary market for project financing and providing ESG investors new investment opportunities became problematic. SuMi TRUST Bank has decided to utilize self-created trusts whereby the trustor themselves becomes the trustee and a notarial deed or other

official document designates the activities (in this case, collection of receivables) the trust is required to perform in order to fulfill its purpose. By entrusting solar power generation project finance receivables and obtaining a green finance evaluation for the trust beneficiary rights, SuMi Trust Bank made it easier for those investors who were eager to ESG investments to access project finance. The trust beneficiary rights comply with the Green Bond Principles and received the highest possible rating of "Green 1" in JCR Green Bond Evaluation.

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Positive Impact Finance

Positive Impact Finance to Assess and Support the Impact on Climate Change Mitigation and Adaptation

SuMi TRUST Holdings is a founding member of the Principles for Responsible Banking (PRB), which was officially launched in September 2019. The purpose of PRB is to evaluate how the companies and projects to be financed will impact the SDGs and the Paris Agreement goals as part of the lending decision to ensure that the positive impacts are maximized and the negative impacts

are minimized.

In March 2019, SuMi TRUST Bank concluded the world's first contract for Positive Impact Finance (Unspecified Use of Funds). By helping companies address climate change, we aim to enhance both the corporate value and the social value of our business partners.

		Business Partner's Value Creation Process
Source of value creation	Input	Business model	Output		Outcome	Value to be created	societysustainableaBuild and valuecorporateincrease	Holdings,TrustMitsuiSumitomo
Financial capital			SocialFinancial valuevalue
Manufacturing capital		Governance					Improved
					performance
Intellectual capital		Risks and		Goods
Human capital		opportunities		Services
		Resource
Social and relationship						Solving
capital		allocation
		Flow of			social issues
Natural capital
			positive impact finance					9/2020.Inc
	Positive impact financing to support		Assess contribution to solving social issues
			• Maximize positive impact
	business activities across the enterprise
		• Minimize negative impact
									033

Scoring Climate Change Risks in Supply Chains

Environmental Rating Loans with Evaluation of Natural Capital Preservation

ESG

Procurement risks for inputs such as resources, raw materials and energy are a source of business continuity risk. Procurement risk management for natural capital in a global supply chain is a high priority issue (materiality) in management strategy.

Since April 2013, SuMi TRUST Bank has quantitatively scored the natural capital dependence and environmental impacts of companies, and offered environmental rating

loans with an optional service for natural capital evaluation that provides a basis for identifying risk management scope. With this service, greenhouse gas emissions, as a factor relating to climate change, are calculated for each category of procured input and each region where the input is procured in a borrower's supply chain. We provide risk information such as procured inputs with significant risks and countries where the suppliers are located.

201 Report

Environmental rating loans

Natural capital evaluation (optional)

Evaluation items for environmental rating

Five elements of natural capital

Strategy and environmental management

Fauna

Climate change/global warming mitigation efforts

Introduction

Flora

Resource recycling/pollution countermeasures

of

qualitative

Water

Soil

Air

evaluation

Environmental friendliness of products and environmental business

related

Environmentally friendly properties

to

natural

capital

Three items targeted in natural capital evaluation

Biodiversity

Water usage

Land usage area

GHG

volume

emissions volume

Terms of loan decided based on environmental rating		Reporting on environmental burden and risk
	information in upstream supply chains

Note: "Optional" refers to ESCHER calculations provided by PwC Sustainability LLC that are not available without loan products.

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Renewable Energy Finance

Sumitomo

SuMi TRUST Bank promotes the adoption of large- scale projects such as wind and solar power generation through project finance and it has set up renewable energy funds and manages for the purpose of investing exclusively in large-scale renewable energy projects.

In project finance, both offshore and onshore wind power generation projects overseas are increasingly large- scale endeavors. In Japan, the number of mega-solar projects to which we provide project finance has further increased. The total potential generation capacity of projects where SuMi TRUST Bank has been involved in supplying project finance comes to 15,140MW. These projects,

with annual power output of 38,775GWh, reduced annual CO2 emissions by 18.50 million metric tons.

Total potential generation capacity of projects supported by renewable energy funds came to 463MW, with annual power output of 549GWh and annual CO2 emission reductions of 300,000 metric tons.

In financing for installations, Sumitomo Mitsui Trust Panasonic Finance Co., Ltd. mainly provides support for mega-solar projects. Since the feed-in-tariff (FIT) system was introduced, it has supported 30 mega-solar installations with total potential generation capacity of 52MW.

Contributions to CO2 Reduction via Renewable Energy Finance Subtotals may not add up to totals due to rounding.

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034

Category of power	Number of	Potential capacity	Annual output	CO2 reduction effect
generation	projects	(MW)	(GWh/year)	(10,000t/year)
Solar	99	4,314	7,405	375
Wind	24	4,110	8,723	410
Offshore wind	12	6,138	19,502	909
Biomass	8	447	3,038	151
Other	2	131	107	5
Total	145	15,140	38,775	1,850

Eligibility inclusion: Project financing involving SuMi TRUST Bank (inside and outside Japan)

Capacity calculations: Numerical values of potential generation capacity, gigawatt hours of output per year, and CO2 reduction effect cover all projects in each category.

Subtotals may not add up to totals due to rounding.

Calculation Method for CO2 Reduction Effect

Annual CO2 reduction (CO2 metric tons per year)

• • annual power output (kWh/year) x emission coefficient (CO2 metric tons/kWh)
• As a general rule, we use the forecast value for annual power output.
• As a general rule for domestic projects, we use the most recently calculated emission coefficient of each electricity supplier in the electricity supply system of the region where each project is located.
• As a general rule for overseas projects, we use the Interna- tional Energy Agency (IEA) calculation tools provided at the GHG protocol website to calculate reduction equivalents.

201 Report ESG

Renewable Energy Project Finance

As renewable energy has become more widely adopted, the capital costs and operating costs for such projects have declined. Overseas, power generation costs for renewable energy are nearing parity with those for other power generation sources, increasing the attractiveness of renewable energy in terms of economic rationality.

Case 1

Wind and Solar

This is a large-scale project that combines solar power
with seven wind power projects to reach a total capac-
ity of 1,192MW. The individual power plants are distrib-	United States of America
uted across 10 states in the United States, supplying
renewable energy to local power companies.

Site of power plant

Case 2

Overseas Offshore Wind Farm

This offshore wind power generation project-located 20km from the mouth of the River Thames in the UK- is one of the world's largest with the capacity to generate 630MW. 175 turbines each with the capacity to generate 3.6MW are spread out across an area roughly 100km2 in size. With considerable potential for offshore wind farms, the UK is driving the increase in offshore wind power generation in Europe.

United

Kingdom

London

funds supplied total equity investment of ¥23.5 billion. These projects generate annual power output of 550GWh, commensurate to CO2 emission reduction of over 300,000 metric tons.

* For CO2 emission reduction calculations, we use the emission coefficient of each electric- ity supplier in the electricity supply system of the region where each project is located.

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Renewable Energy Funds and Investment Products for Investors

SuMi TRUST Bank manages renewable energy funds it has set up for the purpose of investing exclusively in large- scale renewable energy projects.

As of September 2018, these funds have supplied equity funding for 28 mega-solar power generation projects and 2 wind power generation projects with total potential generation capacity of 463MW. Of the ¥187.3 billion in aggregate equity investment directed into these projects, our

Renewable energy fund scheme

Generation project PJ 1				N-REIF No. 1 Investment
						Limited Partnership
	Nonrecourse	Investment from				Investment from
	loans	an anonymous				an anonymous		Limited		Sumitomo Mitsui
	partnership (1)				partnership (1)
								liability		Trust Bank, Limited
						Investment from
						an anonymous
Generation project PJ 2				partnership (2)
							Sumitomo Mitsui Trust
						Investment from		Unlimited		Investment Co., Ltd.
						an anonymous
	Nonrecourse	Investment from				partnership (3)		liability
	loans	an anonymous				…				ITOCHU ENEX Co., Ltd.
	partnership (2)

• We contribute by providing equity-like funding for the spread of renewable energy projects.
• We are expanding assets under management in our funds and building up an investment track record in solar and wind power, and plan to broaden the scope of our renewable energy in- vestments to include biomass and other sources.

Trust Mitsui Sumitomo

In April 2018 SuMi TRUST Bank launched a domestic renewable energy business investment fund for institutional investors. This investment product seeks to generate long-term, stable income gains based on the track record of solar power generation projects already in operation.

	• Managed assets include anonymous partnership investments in already-operating domestic solar power
Characteristics
generation projects (no development risks)
of Trust Account
• Benefits from stable cash flow based on the feed-in tariff (FIT) system whereby renewable energy is pur-
Renewable Energy
chased at a fixed price
Brown No. 1
• Projects that take steps to address global warming also contribute to the SDGs, ESG, and regional revitalization

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Mega-Solar Projects Using Leases

Using leases to fund solar facility installations keeps the upfront investment costs for mega-solar project construction at zero, and projects can earn stable income by using the feed-in-tariff (FIT) system to wholesale at a fixed price the electricity it generates to the power supply grid. Leases are thus an effective method of financing for mega-solar projects that ensures business plan soundness. In addition to new projects, Sumitomo Mitsui Trust Panasonic Finance also provides lease-basedfinancing options for fully operational projects that have been put up for sale to investors (sec- ondary transactions). And it also started a leasing and installment plan support service for offshore floating mega-solarpower plants.

The Group will continue to fuse its extensive know-how honed thus far with financial services to offer schemes that best meet the needs of increasingly sophisticated renewable energy projects.

Onsite Self-consumption Solar Power Generation

We launched a service to supply renewable energy for self-consumption
through solar power equipment installed on-site (on grounds or roof).
Sumitomo Mitsui Trust Panasonic Finance formed a partnership with
an experienced solar power equipment manufacturer to help compa-
nies develop an optimal investment plan based on their power utiliza-	Onsite solar power
tion performance and to reduce their initial costs through subsidies.	generation equipment
This venture helps companies reduce their own CO2 emissions and
their "scope 3" greenhouse gas emissions, meets the needs of those
participating in the SBT and RE100 initiatives, and contributes to the
Japanese government's Low Carbon and Decarbonization initiatives.

Self-

consumption

Premises

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Sumitomo

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Micro-Power Generation in Water Supply Systems

Sumitomo Mitsui Trust Panasonic Finance proposes ideas for adopting micro-power generation systems in water supply systems across Japan, and promotes global warming mitigation measures and the use of natural energy in the regions.

In Japan's water supply systems, there is an enormous	power generation systems under a leasing system.
amount of energy that can be used from unutilized verti-	As of November 2019, the highly efficient power gen-
cal drops in non-pressure flow pipes, surplus pressure in	eration systems used in this scheme have been installed
pumped supply pipes, and reduced pressure from pres-	at 18 water facilities (including those scheduled to be
sure-reducing valves. The Group borrows water facilities	installed) across Japan to produce a total 480kW of power.
from local governments to deliver a business financing	We expect annual power generation to reach 3,581MWh
scheme with no upfront investment costs by installing	and annual CO2 emissions to be reduced by 1,970t-CO2.

Characteristics of micro-power generation systems		Characteristics of leasing system
High efficiency: Efficient power generation system developed with inverter controls		(advantages for local governments)
Low cost:	System configuration uses general-purpose pumps, low-cost magnets, and standardized parts		• No upfront investment costs on project launch
Compactness:	Power generator and control device are stacked on top of each other to minimize installa-		• Power provider manages and maintains the system
	tion space		• Stable lease revenue and receipt of property tax

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036

Newly developed micro-power generation		Schematic diagram
system for water supply systems			Invests
	Generation
Permanent mag-									system makers
net synchronous
generator
										Lease contracts
							Controller with
							integrated power
							generator
Water pipes							Sumitomo Mitsui
							Pump-reversing		Trust Panasonic
							water turbine		Finance

				Purchases
			electricity at fixed	Power
				price	transmission
Power provider				and distribution
	operator
	(maker subsidiary)
project order/consignment
¥	Pays facility use fee,
Project
Pays water flow fee
						contractor, O&M
						provider

Public water

authority

201 Report ESG

Small and Mid-sized Power Generation in Rivers

Japan's river systems have the potential to generate 14GW of electricity through the installation of small or mid- sized generators and its agricultural water supply channels 300MW, according to the results of a Ministry of the Environment survey. Sumitomo Mitsui Trust Panasonic Finance is helping to revitalize regional communities through joint initiatives with regional banks aiming to use each region's untapped hydropower potential.

Schematic diagram of collaboration with regional banks

Power trans-

Purchases

electricity at

mission and

fixed price

Power provider

Sumitomo

Provides

distribution

Parts and machinery

lease

Mitsui Trust

operator

water turbine,

Panasonic

O&M

generator,

Finance

machine gates

O&M provider

consignment

Civil engineering

Provides

work

loan

Regional bank

etc.

Project contractor

Design firm

Small and mid-sized hydropower potential, actual adoption capacity

	Potential aggregate output	Breakdown by category
Maximum aggregate	14.3GW	River systems		14GW
potential in Japan*1	Agricultural supply channels	300MW
Potential with FIT	1.06 4.3GW	River systems	900M	4.06GW
system*1	Agricultural supply channels 160	240MW
Approved for	1,240MW
installation post-FIT
adoption*2
Installations post-FIT	460MW
adoption*2

*1 Ministry of the Environment's fiscal 2010 survey report on the adoption potential for renewable energy

*2 Agency for Natural Resources and Energy's website (accessed in June 2019)

Hydropower generator for
steep-slope rivers	River
Water conduit pipe
Generator

Water discharge port

Hydropower generation could be a source of renewable energy for Japan, which is blessed with many high-flow,steep-slope riv- ers. In cases where the feed-in-tariff (FIT) system is used, the maximum aggregate potential from installing small and mid- sized hydropower generators is estimated at 4.3GW.

Small and mid-sized power generators approved for installation since the FIT system's introduction have total output of 1,240MW, and of those, the ones in use have 460MW, indicating there is still scope for new installations.

It is possible to install hydropower generators that factor in the environment such as run-of-the-river small and mid-sized hydro- power generators that use the shape of rivers or existing agricultural water supply channels and do not require building large dams.

* Case example in fiscal 2019

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Biomass Gas Generation

We support adoption of biomass gas generation facilities that convert food waste and other organic waste into biogas for electricity generation.

At a biomass gas power generator, organic waste-such as	of heat from food waste is recognized as a form of recycling
food waste, livestock urine and manure, and organic sludge	provided certain conditions are met, and the power gener-
from sewage and wastewater-is fermented and combustible	ated can be resold at a fixed price using the FIT scheme. The
gases, mainly methane, are extracted and used as fuel to gen-	value of biomass gas systems is in improving overall energy
erate electricity. Under the Food Recycling Law, the recovery	efficiency through the effective use of both electricity and heat.
	• Curtails volume of waste produced, reduces waste disposal costs		• Food waste, food residues
	Wastes
	• Earns income from reselling electricity via the FIT system		• Livestock urine and manure
Merits		eligible for
• Curtails putrid odors due to fermentation, reduces release of bad smells to nearby areas	• Organic sludge, etc. from
	• Byproducts like post-fermentation, digested slurry can be recycled as a liquid fertilizer	usage	sewage and wastewater

Flow diagram of a Biomass Gas Generation System

Methane

fermentation tank

Receiving tank (right)

(built-in gas holding tank)

Resell

electricity

Desulfurizing units

Power generator

Digestive fluids tank		Wastewater
(left)		processing facilities
		(in front, below ground)			Solid and liquid
				Concentrated sludge, liquid fertilizer storage	fertilizers

Response to Freon Regulation

We support the introduction and increased use of appliances that do not use chlorofluorocarbons (CFCs) in order to curtail the use and emission of CFCs into the atmosphere and promote a low-carbon society. CFCs cause global warming and harm the ozone layer.

CFCs used in industrial freezers and refrigerators for food retail-	Sumitomo Mitsui Trust Panasonic Finance supports the
ers, food manufacturing plants, and refrigerated warehouses	introduction of energy-efficient refrigerators and freez-
cause ozone layer depletion and also contribute to global	ers that use agents found in the natural world as refriger-
warming; the greenhouse effect of CFCs is up to 20,000-30,000	ants, such as ammonia, hydrocarbon, and carbon dioxide.
times greater than CO2 emissions. With the aim of tightening	The introduction of appliances that do not use CFCs are
restrictions on the use of CFCs, the Act on Rational Use and	expected to reduce environmental burdens, lower elec-
Proper Management of Fluorocarbons was fully enforced on	tricity and management costs, and prevent overlapping
April 1, 2015. This law calls on the users of appliances to imple-	investment in measures to address tighter regulations on
ment proper management of appliances and CFCs.	refrigerants in the future.

Businesses accelerating the introduction of energy-efficient natural refrigerant equipment for the purpose of eliminating harmful CFCs and realizing a low-carbon society as soon as possible (subsidies offered by the Ministry of the Environment, etc.)

Purpose: To promote reduction of emissions of energy-derived carbon	Eligible businesses: Businesses that adopt energy-efficient natural refrig-
dioxide and CFCs through the spread of energy-efficient natural refriger-	erant equipment with cutting-edge technology
ant equipment.	Subsidy rate: Half of expenditure for small and medium-size firms and
Targeted businesses: Refrigerated warehouses, food manufacturing	one-third for large companies for refrigerated warehouses; one-third for
plants, food retailers	food manufacturing plants and food retailers

Kigali Amendment to Montreal Protocol to Regulate

Freon Alternatives (Developed nations)

Base year	2011-2013
Baseline value	Avg. HFC volume in each year
(CO2 equivalence)	+ 15% of HCFC* baseline value
Launch year for regulation	2019
Target year	2036
Target reduction	85%

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A non-freon freezer unit and a non-freon freezer showcase

* HCFC: Hydrochlorofluorocarbons

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Support for CO2 Reduction of Buildings

Consulting to Support Applications for "CASBEE for Real Estate" Certification

CASBEE for Real Estate is an environmental performance evalu-	decision-making. There is extensive use of the system, espe-
ation system developed with the aim of increasing the stock of	cially among REITs and real estate companies, and SuMi TRUST
buildings with superior environmental performance in real estate	Bank has consulting businesses that support property owners
market and promoting its use among investors for investment	applying for the CASBEE for Real Estate certification.

Evaluation categories in CASBEE for Real Estate

Energy/		Use of	Biodiversity/	Indoor
Greenhouse	Water	resources/	Sustainable
environment
gases		Safety	site

Construction-Phase Support for Environmental Considerations

Improving energy efficiency is the most important theme in the environmental performance of buildings. SuMi TRUST Bank in its construction consulting business provides advisory services on how to improve in a comprehensive manner the environmental performance of buildings in ways such as installing energy-saving systems, taking into account landscapes and ecosystems, extending building life spans, and adopting recycling systems.

There are some projects we advised that have been recognized and awarded subsidies by the "leading projects" program for sustainable buildings (formerly known as "leading projects for promoting CO2 reduction" program for housing and buildings), sponsored by the Ministry of Land, Infrastructure, Transport and Tourism (MLIT), and the "net zero energy building" experimental pilot program, sponsored by the Ministry of Economy, Trade, and Industry (METI).

An example of a building where we provide construction-phase support for environmental considerations HIROSHIMA ORIZURU TOWER (major renovation)

(Selected as a "leading project for promoting CO2 reduction" for housing and buildings by the Japanese Ministry of Land, Infrastructure and Transport)

Home Renovation Loans for Smart Houses

Homes have advanced so that they can wisely use electricity generated onsite; through our home renovation loans, we support remodeling homes into "smart houses."

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A smart house can efficiently generate and store its own power supplies by combining solar PV panels, storage battery units, and household fuel cells. Energy-saving functions that enable dwellers to control electricity consumption to match their lifestyles and weather conditions have improved. From 2019 there will be a huge influx of household solar power generation equipment for which the surplus electricity purchasing scheme has ended, therefore the conversion of existing homes into "smart houses" will become a key topic in addressing global warming.

With the liberalization of retail sales of electricity and gas to households in Japan, energy and telecommunication sector companies are increasingly partnering to provide bundled

services such as combined sales of telecom or broadcast with electricity generated from various sources. There has also been progress in developing products that have multiple functions of housing, home appliances, and vehicles.

Since the system for purchasing surplus electricity from solar panels was established, Sumitomo Mitsui Trust Panasonic Finance has contributed to the adoption and spread of household solar panels with its solar loans. The cumulative sum of solar loans it has executed as of September 2019 is ¥73 bil- lion. Through our partnerships with equipment vendors and installers, we support remodeling homes into "smart houses" with our renovation loans.

Equipment for Upgrading to a Smart House

A solar PV module

HEMS monitor

A lithium-ion storage	Household fuel cells	Electric vehicles,	A smart house
battery unit	(Ene-farm home fuel cell)	EV chargers

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Financing for ESCO Service Adoption

Sumitomo Mitsui Trust Panasonic Finance collaborates with energy service companies (ESCOs) to provide comprehensive energy conservation services from installation of energy-saving equipment to maintenance and management.

ESCOs provide comprehensive services for energy saving	subsidies can be utilized. ESCOs propose ideas that both
and guarantee a level of energy savings. Through the use	help preserve the environment via energy conservation
of leases, aging facilities can be replaced at zero upfront	while reducing the costs of utilities such as water, lighting,
cost and, in cases where certain conditions are met,	and heating as well as operating and maintenance costs.

Outline of ESCO concept
	Proposal,			Client profits
capital investment plan,			Savings that
	funding plan		Guarantee
	Finance	or lighting,	go to ESCO
	Repayment investment
	Sumitomo			vendor as fees
Client	Mitsui			Interest
Trust	Energy
	Panasonic	consumption		Initial
	ESCO	heating, and
	water utility
	service
	expenses
	Equipment		Energy
	lease			consumption
Service fee				or lighting,
			heating, and
				water utility
	ESCO			expenses
	vendor

Prior to adoption	After start of
of ESCO project	ESCO project

* Case where a client adopts a shared model, one form of an ESCO project

Example: ESCO Proposal for a General Hospital

Energy conservation menu

Heat source: Construct hybrid heat source system, install high-efficiency steam boiler

Air conditioning: Improve air conditioning control system, install variable air volume controls, install inverters

Lighting: Install LED lighting

Monitoring: Add energy management functions

Energy conservation subsidy (initial)	¥176,591,000
Projected boost to earnings (annual)
Lower water, lighting, and heating costs	¥80,468,000
Fees paid for ESCO project	¥77,598,000
Annual boost to earnings	¥2,870,000

Reduction to environmental impacts (annual)

CO2 reductions: 1,459t-CO2 (down 19.0%)

Electricity use reductions: 172,473kWh (down 7.7%)

Gas use reductions: 598,102 (down 44.7%)

Water use reductions: 9,892m3 (down 41.9%)

(environmental impacts are estimates)

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One-Stop Services for Energy-Saving Investment: Subsidy-Eligible Leases

We offer one-stop services that support all processes from planning for energy-saving investments to asset operation.

• Our one-stop service menu ranges from energy-saving assessments, examinations to identify energy-saving measures, equip- ment selection, subsidy applications, and securing financing to maintenance services.
• The use of leasing means energy-saving equipment can be installed with no upfront investment costs.
• Securing subsidies lowers upfront investment costs, enabling recipients to benefit even more from energy savings and cost reductions.
• We offer tailored proposals through partnerships with manufacturers and installers.

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Flow Chart Mapping Out the Use of Subsidies

National government/local public authority

	1 Joint application							5	Collection of
	for subsidies								transferred subsidy
	Client						Sumitomo Mitsui
		2 Lease				Trust Panasonic
								Finance
				contract
Select vendor				4 Payment for	3 Equipment sale
				equipment	contract

Vendor A	Vendor B	Vendor C
	Equipment vendors

Main subsidy systems

• • Subsidy support for rationalizing energy use at SMEs
  • Subsidy for businesses that promote net zero energy buildings (ZEB) and decarbonization at institutional facilities
  • Subsidy for businesses that support the construction of decentralized energy systems by private operators
  • Subsidy for businesses accelerating the introduction of energy- efficient natural refrigerant equipment for the purpose of eliminating harmful CFCs and realizing a low-carbon society as soon as possible
• Certain conditions must be met to be eligible to apply for subsidies
• Subsidy systems are subject to change

Stages in the Subsidy Application Process

Examination of	Energy-saving	Examination of	Management	Preparations
	assessment	optimal energy-	Board, etc. decide		Subsidy
energy-saving		to apply for
	Energy-data	saving secondary	on energy-saving		application
primary proposal		subsidies
	provision	proposal	investment
6-12 months before public		3-6 months before public	1-3 months before public	1 month before public		1 month to 2 weeks before public
		application announcement
application announcement		application announcement	application announcement	application announcement
		(through public application period)

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Natural Capital related Initiatives Using Our Financial Capabilities

The global environment is the foundation for sustaining the life of various living creatures. It comprises of natural capital, such as water, air, soil, as well as marine and terrestrial fauna and flora that are grown in such resources under the blessings of the sun. Humans also depend on natural capital and have utilized it to build social systems and develop the economy. In this process, however, humans have also caused significant consequences.

Natural capital is not inexhaustible. Supplies may be exhausted sooner or later unless we accurately track and manage our dependence and impacts on natural capital. This is closely interlinked with humans' day-to-day activi- ties. For this reason, all SDGs are connected with natural capital. Primarily from the perspective of corporate activi- ties, the Group focuses on natural capital in Japan, where we lay our business foundation, as well as natural capital outside Japan, where we rely on highly for the procurement of raw materials and parts. We have selected goals that

040 contribute to proper dependence on and management of such natural capital.

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Challenges for Achieving the Goals

• Deepening understanding of the importance of natural capital
• Establishing approaches for tracking companies' dependence and impact on natural capital
• Visualization of natural capital risks that lead to damaging corporate value
• Expanding financial transactions that contribute to solving companies' challenges related to natural capital

Initiatives for Solving the Challenges

• Appeal the concept and importance of natural capital through various opportunities, such as proposals and seminars for clients.
• Contribute to establishing methodologies for appropriately managing dependence and impacts on natural capital, such as natural capital protocols.
• Identify natural capital risks that have serious impacts on the continuation of overseas procurement, businesses, and projects, and incorporate them into investment and loan processes from the ESG perspective.
• Taking into account that land is the foundation of natural capital in terrestrial ecosystems, strive to restore ecosystems that are suitable for vari- ous areas, ranging from mountainous regions to cities, and contribute to the formation of ecological networks.
• Promote related businesses, such as increasing sales of Environmental Rating Loans with Evaluation of Natural Capital Preservation and devel- oping the forestry trust.

KPIs for Solving the Challenges

2018/2019				Target
Promotion of activities	At least 20 times
through proposals and
		a year
seminars for clients
Credit policy concerning	Introduction
natural capital	in fiscal 2018
Development of forestry trust	Launch in fiscal 2019

Result

24 times

Not achieved

(slated for introduction

in fiscal 2019)

On target

2019/2020	Target
Promotion of activities
through proposals and	At least 20 times a year
seminars for clients
Examination of green	Submission of
infrastructure finance	proposals to clients

Promotion of forestry trust	Expansion of forestry trust
business assessments

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Natural Capital Initiatives and Policies of the SuMi TRUST Group

What is Natural Capital?

Natural capital is made up of diverse living creatures and the water, soil, and air that sustain them. These are the foundation sustaining life on earth and conserving them needs to be prioritized ahead of everything else. The way we live depends on natural capital and the ecosystem services they provide. We thus feel continued wise use of natural resources which constitute natural capital over the long run goes beyond mere environmental conservation. It must extend to putting communities on a solid social foundation to enable sustainable economic development.

Five elements of natural capital

Biodiversity

FaunaFlora

WaterSoilAir

Regulating services		Cultural services
Regulating climate, controlling floods,
	Aesthetic, spiritual, educational, etc.
purifying water, etc.
Supporting services		Provisioning services
Nutrient salts cycle, soil formation,		Food, fresh water, wood, fiber, fuel,
primary production, etc.		etc.

Four categories of ecosystem services

Trust Mitsui Sumitomo

Natural Capital Finance Alliance (formerly the Natural Capital Declaration)

SuMi TRUST Holdings became a signatory to the Natural	in Japan to have signed the
Capital Declaration (NCD) proposed by the United	declaration when it originally
Nations Environment Programme Finance Initiative (UNEP	promulgated. The initiatives
FI) at the United Nations Conference on Sustainable	of NCD signatories have been
Development "Rio+20" held in Rio de Janeiro in June	expanded through NCD's reorganization into Natural
2012. SuMi TRUST Holdings is the only financial institution	Capital Finance Alliance (NCFA).

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Commitment of Financial Institutions under the Natural Capital Finance Alliance (Excerpt)

We will support the development of methodologies that can integrate natural capital considerations into the decision-making processes for all financial products and services including loans, investment, and insurance policies.

1. We will apply a holistic approach to the evaluation of bonds and stocks by integrating natural capital considerations in environmental, social, and governance (ESG) risk analysis in short-,medium-, and long-term growth forecasts of investee companies.
2. We will systematically incorporate the consideration of evaluating natural capital into the credit policies of specific sectors, including commodities, that have a major impact on natural capital, either directly or indirectly through the supply chain.

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SumitomoMitsui Trust Holdings Action Guidelines for Preserving Biodiversity

1. Implementing Measures and Providing Support for Biodiversity Preservation
   We will strive to actively protect rare and native species. In our role as a corporate citizen, we will work to support activities for the pres- ervation of biodiversity.
2. Providing Products and Services
   We will endeavor to develop and provide products and services that contribute to the preservation of biodiversity, by conducting appropriate economic and social evaluations of the ecosystem and encouraging the sustainable use of living resources through our financial functions.

1. Collaboration with Stakeholders
   We will engage in dialogue and cooperation with our stakeholders while working to preserve biodiversity.
2. Education and Training
   We will ensure thorough implementation of these action guidelines at all Group companies and will work to provide education and training aimed at the preservation of biodiversity.
3. Information Disclosure
   We will actively disclose information about our efforts to preserve biodiversity.

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Business and Biodiversity Initiative: Our Initiatives as a Leadership Declaration Signatory

SuMi TRUST Holdings signed a leadership declaration under the Business and Biodiversity Initiative "Biodiversity in Good Company" at the ninth meeting of the Conference of the Parties (COP 9) to the Convention on Biological Diversity held in May 2008 in Germany. Since then, we have continued to carry out activities in line with the principles of the declaration, which was led by the German government.

Declaration	Initiatives in 2018-2019
	Not only did we continue to provide environmental rating loans with natural
1. Analyzing corporate activities with regard to their impacts on	capital evaluation, we also kicked off positive impact finance solutions to assist
the initiatives of companies by comprehensively analyzing and assessing the
biological diversity
impact of their activities on the economy, society, and the environment, includ-
	ing natural capital.
2. Including the protection of biological diversity within their envi-	In our Sustainability promotion system, we draw up a plan for each fiscal year
ronmental management system	on efforts related to natural capital and review their performance semiannually.
3. Appointing a person in the company responsible for steer-	The Chief Sustainability Officer steers all activities and reports to the Executive
ing all activities in the biodiversity sector and reporting to the
Committee.
Management Board
4. Defining realistic, measurable objectives that are monitored	Following on from last fiscal year, we established SDG-linked objectives for our
and adjusted every two to three years	natural capital initiatives and stepped up our activities.
5. Publishing activities and achievements in the biodiversity sec-	We publish a yearly Natural Capital feature report. We disclose our biodiversity
tor in the company's annual, environmental, and/or corporate
initiatives in our ESG report and at various events.
social responsibility report
	We continue to pay attention to procurement of copier paper and office sup-
6. Informing suppliers about the company's biodiversity objec-	plies linked to illegal logging in tropical rain forests, which has large detrimen-
tal impacts on biodiversity. In our fiduciary services business, we engage as a
tives and integrating suppliers accordingly and step by step
shareholder with investee companies on activities that contribute to natural
	capital destruction and voice our concerns.
7. Exploring the potential for cooperation with scientific institu-	We became a signatory to the Principles for Positive Impact Finance of the
tions, nongovernmental organizations (NGOs) and/or govern-
United Nations Environment Programme Finance Initiative (UNEP FI) and
mental institutions with the aim of deepening dialogue and
actively participated in initiatives aimed at establishing and enhancing meth-
continuously improving the corporate management system
ods for evaluating natural capital impacts.
vis-a-vis the biodiversity domain.

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Natural Capital Study Group

Launched in April 2013 by the SuMi TRUST Group and chaired by Masahiro Sato, an associate professor at the Graduate School of International Cultural Studies of Tohoku University, the Natural Capital Study Group regularly brings together members of companies, national and local governments, universities, research institutes, and NGOs for the purpose of facilitating multilateral discussions regarding their topics of research.

Symposium Address

In January 2019 we took part in the panel discussion of a national forum on waterside ecological networks hosted by the Ministry of Land, Infrastructure, Transport and Tourism and presented some examples of the initiatives of financial institutions that aim to find value in natural capital. Then in July we gave a lecture at a seminar about greenery and the SDGs jointly organized by construction firms Sumitomo Forestry and Kumagai Gumi. In particu- lar, we talked about how buildings constructed with bio- diversity issues in mind, for example those with rooftop gardens, can enhance property value by boosting office worker productivity.

Booth at EcoPro

Held every year in December at Tokyo Big Sight, EcoPro is Japan's biggest exhibition on the environment. Since 2007, SuMi TRUST Bank has exhibited at EcoPro in collaboration with the Ecosystem Conservation Society- Japan and the Association of National Trusts in Japan with a booth that primarily focuses on natural capital and biodiversity issues.

EcoPro visitors and a SuMi TRUST Bank employee

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Natural Capital Products and Services

Evaluating Supply Chain Impacts on Natural Capital

Natural Capital Evaluation

Natural capital evaluation is a service that calculates nat-	item and for each country and region, tracing back
ural capital dependence arising from corporate activities	through supply chain.
and estimates the degree of impact for each procured

Example of output from a Natural Capital Evaluation Tool

Breakdown of water usage volume in each region by sector

Ratio of land usage area by region

25%
20%
15%
10%
5%
0
Agriculture, forestry,
and fisheries
Coal, oil, gas, other minerals
Electrical equipment
Energy

Service industries Shipping equipment parts Industrial products Heavy industries

5%10%

18%18%

14%13%

7%15%

Japan

China

Asia (ex Japan and China)

Oceania

USA

Americas (ex USA)

Europe

Africa

GHG* emissions volume is likewise calculated by sector and region.

* GHG stands for greenhouse gases

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Benefits of Natural Capital Evaluation

1. Gaining quantitative risk data related to the supply chain that can be used for management judgments
   Can obtain previously hidden risk data related to environmental impacts and the use of resources that are essential to global supply chain management
2. Obtaining quantitative data on environmental impacts that can be used for information disclosure
   Can use the data for scope 3 responses to surveys such as the Carbon Disclosure Project (CDP) survey and for disclosures in integrated corporate reports

Initiatives for Loans

Environmental Rating Loans with Evaluation of Natural Capital Preservation

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The sustainable use of natural capital as resources is vital for a company to continue its business. There is a growing awareness that natural capital-related procurement risk management across the global supply chain is an indispensable part of management strategy.

In April 2013, SuMi TRUST Bank launched its Environmental Rating Loans with Evaluation of Natural Capital Preservation, which embed the concept of

evaluating impacts on natural capital and a company's initiatives into the environmental-rating evaluation process that assesses its environmental measures. This is the world's first attempt to incorporate natural capital evaluation into loan criteria, and the Bank's efforts have been cited in Japanese government environmental white papers and European Commission reports as an example of leading-edge practice.

Environmental rating loans

Evaluation items for environmental rating

Strategy and environmental management
Climate change/global warming mitigation efforts	Introduction
Resource recycling/pollution countermeasures	of	qualitative
Environmental friendliness of products and environmental business	evaluation
related to
Environmentally friendly properties	natural capital
Biodiversity

Terms of loan decided based on environmental rating

Natural capital evaluation (optional)

Five elements of natural capital

Fauna

Flora

Water		Soil		Air

Three items targeted in natural capital evaluation

Water usage volume		Land usage area		GHG emissions
		volume

Reporting on environmental burden and risk information in upstream supply chains

Note: "Optional" refers to ESCHER calculations provided by PwC Sustainability LLC that are not available without loan products.

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Natural Capital Risk Management for Loans

Natural Capital Risk Management for Loans

SuMi TRUST Bank is a signatory to the Equator Principles, a set of international guidelines for private financial institutions that requires project proponents to give due consideration to the impact on the natural environment and the regional community when approving project finance and other loans.

In addition, we have established policies for specific

sectors that promote business activities with significant environmental and social impacts and restrict loans and investments to companies and projects with negative impact. We also intend to establish a policy for sectors that are considered to be involved in the manufacture of palm oil and the illegal logging of tropical rainforests during fiscal 2019.

Trust Mitsui Sumitomo

Natural Capital Risk Management for Investment (Asset Management)

Sumitomo Mitsui Trust Asset Management (SMTAM)	decision-making processes.
and Nikko Asset Management have become signato-	Through engagements, SMTAM requests investees to
ries to the Principles for Responsible Investment (PRI),	establish guidelines and policies on the use of and risks
which was established in 2006. The PRI calls on insti-	related to natural capital, covering supply chains, and to
tutional investors to take into account environmental,	control risks from a long-term perspective.
social, and governance (ESG) factors in their investment

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Case	Engagement Concerning Palm Oil Production
	Dialogue overview						Company response
Through its participation in a joint engagement by way of a PRI working group,						Based on its sustainability policy, the bank has committed to
SMTAM calls on palm oil production companies to incorporate the criteria of the						implementing stricter compliance rules for palm oil producers
RSPO (Roundtable on Sustainable Palm Oil) into their production operations.						and strengthening its monitoring of their operations. As a bank,
This time around, SMTAM is engaging with Kuala Lumpur-based CIMB, an						it is also developing an environmental policy in an effort to pre-
influential Malaysian bank, and urging it to strengthen its compliance rules for,						vent negative environmental impacts from occurring as a result
and monitoring of, palm oil producers from a financial institution standpoint by						of palm oil production.
incorporating a sustainability policy into its lending guidelines.

SMTAM's policy

Collaboration with investors, banks, and other stakeholders in the region is key to resolving environmental issues and SMTAM's policy going forward will be to engage with other financial institutions (not just CIMB) that do business in Southeast Asia.

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Initiatives in the Real Estate Business

Construction Consulting on How to Foster Biodiversity and Ecosystems

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Through the use of CASBEE for Real Estate*1 and JHEP*2 together, the environmental performance of properties can be improved across many dimensions, helping to increase overall property value.

At SuMi TRUST Bank, biodiversity considerations are included in our menu of construction consulting services.

*1 CASBEE for Real Estate: The comprehensive assessment system for built environment efficiency (CASBEE) certification is an environmental performance evaluation system for buildings being developed and promoted in Japan under the guidance of the Ministry of Land, Infrastructure, Transport and Tourism (MLIT). SuMi TRUST Bank is involved in the establishment of criteria.

*2 JHEP: Japan Habitat Evaluation and Certification Program is a system is

CASBEE for Real Estate

(CASBEE: the comprehensive assessment system for built environment efficiency)

Key focus points for evaluation certification

• Better energy efficiency and environ- mental sustainability
• Better intellectual and labor productiv- ity, better indoor environments

Evaluation items in CASBEE for Real Estate

1 Energy/greenhouse gases

1. Water
2. Use of resources/safety
3. Biodiversity/sustainable site
4. Indoor environment

JHEP

(JHEP: Japan Habitat Evaluation and

Certification Program)

Key focus points for evaluation certification

• Improve natural value of biodiversity versus pre-project situation
• Habitat well suited to native flora/fauna

JHEP certification requirements for new evaluations

1 No net loss in natural value of biodi- versity

2 Quality of biodiversity exceeds the minimum specified level

3 No use of specified foreign invasive species

1. system developed by the Ecosystem Conservation Society-Japan to quantitatively evaluate and certify efforts to contribute to the conserva- tion and restoration of biodiversity.

Increases Overall Property Value

A building's environmental performance is evaluated on many dimensions such as energy savings, global warming mitigation measures, biodiversity, durability, and resource efficiency.

The value of buildings decline with age but the biodiversity value increases every year as the ecosystem surrounding it forms. These offsetting lifecycle patterns can maintain the combined value of the building and site together as a whole. Ecological networks can be created through the connection of local communities, neighboring buildings and green nature reserves.

Change in Property Value with Age (image)

Property		Property value
Biodiversity value
value	Building value
	Time

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Forestry Trust

Approximately two-thirds of Japan's land is covered in forest. Although these forest resources, which consist mainly of artificial forests developed after the Second World War, are now ready for full-scale use, in reality, many have been left untended.

SuMi TRUST Bank is developing a forestry trust scheme that will consolidate and enhance the efficiency

of forestry operations by accepting entrustment of for- ests-where operations are non-existent because the owners are in old age or live far away, for example-and entrusting forestry operations to a forestry entity. We are working to revitalize Japan's forestry industry by improving productivity of operations and invigorating the domestic timber market.

Forestry trust and SDGs activities

Our forestry trust initiative is linked to many of the SDGs, but in particular, Goal 15: Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss.

• Land conservation and watershed protection functions of forests
  Contributing to Goal 6: Clean water and sanitation; and Goal 11: Sustainable cities and communities
• Prevention of global warming Contributing to Goal 13: Climate action
• Raise wages for forestry workers by turning forestry into a growth industry Goal 8: Decent work and economic growth
• Shorten wood mileage (distribution distance) through wood distribution reforms Goal 12: Responsible consumption and production
• Recycle forest resources by promoting use of timber
  Contributing to the achievement of multiple goals, including Goals 8, 11, and 15

Forestry trust initiative in Okayama Prefecture's Nishiawakura village

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SuMi TRUST Bank has kicked off initiatives in its forestry trust business in the village of Nishiawakura in Okayama Prefecture.

95% of the land area of Nishiawakura village is forest, of which 84% is plantation. The entire village continues to take up the challenge of growing a magnificent 100-year-old forest with trees planted roughly 50 years

Overview of forestry trust scheme

ago based on its 100-year Vision of Forest. Our forestry trust business is a solutions proposal unique to a trust bank in which we hope to support the village's 100-year Vision of Forest with the use of a trust scheme.

Nishiawakura village was selected as an "SDGs Future City" in 2019.

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						Administration
Forest owner			trust		Trustee
	(settlor)							SuMi TRUST Bank
					Beneficiary
							rights
		Inheritance		Dividends
Sale	of						Dividends
beneficiary					• Fixed asset tax
rights	New
					• Other
		beneficiary
					(insurance premiums,
Beneficiary				trust fees)
			Investors
rights purchase				Investment	Public-private funds
	fund				Other (property owners)

SDGs Future City Initiative

Business

management

				Forestry business operator	Nishiawakura village
Business revenue
	100-year Forest of Nishiawakura
				Today's forest	50 years from now
	Year 1	25 years	50 years	75 years	100 years
	In the region	The dense	The density of	Owing to the thick tree	In the well-
	that once thrived	concentration of	the forest will be	trunks and well-extended	established hillside
	on the forestry	planted saplings	thinned out to	roots, the forest will	forest, creeks will
	industry, saplings	grew quickly to	some degree so	retain moisture to allow	form naturally
	were planted for	become towering	that more sunlight	undergrowth to thrive.	and flow through
	the future gen-	tall trees.	can reach the	Slowly but surely, birds	the trees. Wildlife
	eration roughly		forest floor.	will begin to make their	will also make its
	50 years ago.			home in the forest.	home here.

Source: 100-year Vision of Forest, Nishiawakura village office website

Okayama	100-year forest business powered by forestry fund and forest RE Design - Ver. 2.0
Prefecture	We aim to maximize and optimize the value of forests for the entire region through consolidation in a forestry trust business and turn privately-owned
Nishiawakura
forests unsuited to forest management into publicly-owned forests after assessing their economic value. In financing this business, a forestry fund will be
village	set up, which will also have a positive impact on businesses tasked with improving the sustainability of the region by involving investors as key parties.

Source: July 1, 2019 Cabinet Office press release on SDGs Future City selection

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Addressing the Issues of a Super- Aging Society by Using Our Financial Functions

201 Report ESG

As Japan becomes a super-aging society, social-economic systems such as pensions and social insurance programs that support people's lives are getting increasingly feeble, and responses in providing adequate financial services to elderly people with dementia, etc. are being delayed. As a result of such trends, there is an increasing number of risks that may interfere with people's safe livings.

The Group promotes high value-added solution businesses harnessing its skills and functions as a trust bank group, and contributes to ensuring the security of individual assets, stability in housing for clients, and livelihood security for seniors and their families.

Challenges for Achieving the Goals

• Spreading the "productive aging" approach whereby seniors de- cide how they want to live their life.
• Expanding support for extending the age to which people can maintain good health ("healthy life years") and the age to which people can live without financial difficulty ("wealth span").
• Developing a decision-making support system that respects the wishes of the individual as much as possible even after the onset of dementia.
• Providing housing and a support system to enable seniors to con- tinue leading their own lives (community building).

Initiatives for Solving the Challenges

• Supporting productive aging by providing client-oriented financial services and extensive financial information.
• Supporting asset formation and the smooth transfer of assets to the next generation with comprehensive consulting for both assets and liabilities.
• Enhancing employee literacy regarding dementia, stepping up community and industry collaboration initiatives, and expanding as- set management services.
• Contributing to the development of housing and providing options to clients so that seniors can maintain quality of life.

KPIs for Solving the Challenges

• Enhancing our total solution model that includes expanded prod- ucts for elderly clients in an age when many people will live to be 100 years old.
• Expanding collaboration between branch offices and nearby inte- grated community support centers.
• Strengthening our ability to serve clients with dementia, including the enhancement of asset management services.
• Promoting industry collaboration and demonstrating leadership on dementia-related issues.

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Trust Banks Offer a Rich Variety of Problem-Solving Functions

1. Being Our Clients' "Best Partner" in an Age of 100-year-life

By harnessing the significant expertise and broad	take into account the attributes of assets and liabilities
range of products and services that only a dedicated	that change in accordance with the lifecycle of our indi-
trust bank group can provide, we aim to be our clients'	vidual clients.
"best partner" by offering total consulting services that

	Lump-sum retirement allowance	Wage income for rehired retirees
Main		Income from private pension
income	Wage income	Income from public pension

Medical and nursing

MainLiving expenses (repayment of home mortgage etc.)care costs expenses

Mitsui Sumitomo

of Amount assets household

Collection of retirement benefits

Growth in assets by leveraging real estate

(liquidation sale, moving house, reverse mortgage, etc.)

Supporting planned asset formation in old age

mainly through savings, investments, and insurance

Collection of inherited and gifted assets

Planned drawdowns and continued investments

Extending the wealth span through asset growth and management mainly by leveraging real estate and smooth asset inheritance

Succession of assets Inheritance

.Inc Holdings, Trust

Housing		Current residence
		Conveniently located condo				Home for
	Working-age generations		Retirement-age		Senior generations			elderly
		generations
30	40	50	60	70	80

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100-Year Life Solution Department

Given the advent of an age in which more and more people will likely live to be 100 years old, SuMi TRUST Bank established a Longevity Support Department with the goal of providing suitable solutions to address the various issues faced by our individual clients.

The Longevity Support Department will aim to identify the increasingly diverse and complex needs of clients caused by changes in time horizons as a result of longer living and develop and successively roll out a whole host of solutions by harnessing the Group's unique know-how cultivated over many years in an effort to deliver security, safety, and enjoyment to our clients.

Establishment of Sumitomo Mitsui Trust Future Assets Institute

SuMi TRUST Bank established the Sumitomo Mitsui Trust Future Assets Institute for the purpose of examining and conducting research into the various needs and concerns pertaining to the building and utilization of assets required in an age when many people will likely live to be 100 years old. This new institute will aim to provide

information about these activities to not only the Group's clients, but to broader society.

Thus far the SuMi TRUST Group, including SuMi TRUST Bank, has continued to implement initiatives with a primary focus on providing products and services that address the issues and needs of clients, guided by action plans formulated in accordance with our client-oriented policies. With the establishment of the Sumitomo Mitsui Trust Future Assets Institute, however, we intend to disseminate from a neutral and objective standpoint information about the formation and use of assets to not only individual clients of different age groups, but to wider society, including corporate clients that struggle to assist their employees in creating wealth, educational institu- tions, and other various organizations.

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2. Ensuring Stability in Housing for Senior Generations

Housing holds the key for the elderly to maintain their quality of life and feel safe in their everyday routines. SuMi TRUST Bank provides information about housing that matches the needs of senior generation clients and supports them in securing stable housing using the Group's array of functions. Moreover, in our

digest report for seniors (Considering Senior-GenerationHousing- V2.0), we go into more detail about the following three options. Japanese URL: https://www.smth.jp/csr/report/2018/all5.pdf

Inc Holdings, Trust Mitsui Sumitomo

Housing Options for Seniors

Issues to consider when thinking about housing options

Current home

Do you live with other family members?

Can you afford to keep paying housing operation and maintenance fees?

What will you do when nursing care becomes

in live to Continue home current

Option 1

Stay at present address

Option 2

Relocate to

1. comfortable residence

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necessary?

Relocate

Option

3 Relocate

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Where would you like to see out your final days?

Supporting seniors

at key decision-points

in their lives

Relocate to

1. residence for seniors

YourLast Bank

The SuMi TRUST

Group supports housing for senior generations

Our lineup of products and services that provide housing assistance to seniors

Renovation Loans

Sumitomo Mitsui Trust Panasonic Finance offers renovation loans that provide the funds necessary to make such renovations as barrier-free improvements as a way to support elderly clients to live comfortably in their old age.

Housing assistance loans for seniors

SuMi TRUST Bank offers clients aged 60 years or older a housing assistance loan that can be used to purchase a home. This product helps clients reconsider their living arrangements in order to prolong their healthy life expectancy. For example, by renovating their current dwelling to make it barrier free, or moving to a more user-friendly house that is also closer to their children.

Services relating to Real Estate

Sumitomo Mitsui Trust Realty provides brokerage services that ensure secure, reliable property purchases and sales to clients looking to relocate, leveraging the consulting capabilities and broad- based information network of our Group. We assist with sales and effective use of assets such as residential property, inherited property, idle prop- erty, and real estate owned for business or investment purposes.

Reverse Mortgages

SuMi TRUST Bank offers reverse mortgage loans whereby the client puts up their home as collateral to borrow funds for retirement. The funds can be used for various purposes, such as home renovations or for the deposit when moving into a nursing home.

Consultations on Taxes and

Estate Planning relating to Housing

Each SuMi TRUST Bank branch has been assigned experienced financial consultants with expertise in real estate, taxes, and inheritance and succession that can provide consultations relating to various housing options.

Bridge Loans for Sales of Real Estate

Sumitomo Mitsui Trust Loan & Finance offers bridge loans for real estate sales to clients who are considering a move to a conveniently located condominium or a residence for seniors so they do not have to rush to sell their precious property, providing them with support as they seek a new home that suits their lifestyle in their golden years.

Website URL: http://www.smtb.jp/csr/withyou/successfulaging/

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3. Initiatives to Increase Housing for Seniors

The senior cohort in Japan's population is increasing rap- idly, with seniors over the age of 65 now accounting for over one-fourth of the total populace. The senior cohort will continue to increase over time, and within this trend, the segment of seniors living to very advanced ages is projected to climb rapidly. In particular, this trend is expected to become more conspicuous in major urban centers.

Attendant with this trend, the number of seniors who require nursing care is growing along with the deterioration of their mental and physical well-being, thus leading to further shortage of high-quality nursing care facilities, which are already undersupplied.

In contrast, there has been a gradual increase in seniors that seek the option of relocating to safe, secure housing for seniors while they are healthy enough to do with little difficulty.

SuMi TRUST Bank strives to amass know-how on market trends and business feasibility relating to nursing care facilities and housing for seniors. Leveraging that knowledge base, we support a variety of formats that advance the supply of facilities and housing for seniors in ways that respond to the aforementioned needs of seniors.

(1) Accumulated Know-how

SuMi TRUST Bank uses the tools listed below that it has prepared within its organization.

It also actively exchanges information with the many companies involved in nursing care facilities and homes for seniors such as facility operators, construction firms, and real estate companies.

Through these efforts, we work to amass specialist knowhow about the market trends and business feasibility relating to this business domain.

Database on regional information

• This database collects from each local authority demo- graphic data such as population and households in its respective region.

Database on senior housing

• This database collects data on nursing care facilities and housing for seniors across Japan as well as specific information about sales and operating entities.

Market analysis tools

• We apply market analysis tools to the aforementioned information. This enables us to ascertain demand trends at specified locations.

Operating income and expenditure program

• Using the program, we estimate the operating income and expenditures for each business type relating to nursing care facilities and housing for seniors.

1. Support for Nursing Care Facilities and Housing for Seniors

Effective Use of Land

We collaborate with facility operators and construction firms as one kind of proposal we offer to individual and corporate clients that are investigating land-use options, and we propose plans for funding and offer various advice on the construction of properties such as paid nursing care facilities for seniors, housing for seniors with care services, and group homes for seniors with dementia.

We also provide specialist proposals for using subsidies and improving facilities on land that is in a designated "productive greening" zone.

Executing Business Feasibility Loans

SuMi TRUST Bank is promoting business feasibility loans (apartment loans) relating to the construction of housing for seniors and nursing care facilities. It has executed 31 such loans through November 2019, and the number of inquiries regarding such loans has continued to trend upwards in the past few years.

Together with the aforementioned proposal for effective use of land, we will proceed with the initiatives for executing business feasibility loans.

Finance for Healthcare REITs

SuMi TRUST Bank actively provides finance to healthcare REITs, which are a source of stable, long-term funding for healthcare facilities such as residences for the elderly and medical malls. Healthcare REITs raise funding for use in healthcare facility acquisition fees and related expenses. We have made two loans to healthcare REITs with the number of facilities linked to these loans coming to 58 as of November 2019.

Securitization Business for Healthcare Facilities

SuMi TRUST Bank is actively engaging in the securitization business relating to healthcare REITs and privately placed funds. As of November 2019, total healthcare REIT assets held in trust at SuMi TRUST Bank came to 220.8 billion yen, with the number of facilities standing at 101. In the securi- tization business related to REITs and privately place funds, SuMi TRUST Bank uses the scheme of a real estate administration and disposal trust. This scheme refers to transfer of real estate ownership from the trustor (real estate owner) to the trustee (trust bank) followed by administration, management and disposal of the real estate by the trustee based on directions given by the beneficiary and the distribution of profits thus generated (mainly rent revenue minus expenses) as dividends to the beneficiary.

Moreover, in addition to engaging in the real estate secu- ritization business, SuMi TRUST Bank is also REIT-related asset custodian and general administrative work agent. Healthcare & Medical Investment Corporation (SuMi TRUST Bank entrustment), established in December 2014, provides various support services in cooperation with customers.

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4. Dealing with Dementia-related Problems

The number of people with dementia in Japan is rising sharply as the population continues to age-roughly one in seven people aged 65 or older are diagnosed with dementia, or around one in four if including those that show signs of the early stages of dementia known

Improving Literacy at Branches

as mild cognitive impairment. From the viewpoint of nor- malization, SuMi TRUST Bank implements various initiatives with the aim of creating a society in which clients with dementia can still lead a life that is not dissimilar to normal individuals.

9/2020.Inc Holdings, Trust Mitsui Sumitomo

Problems caused by dementia, such as the frequent loss of account passbooks and requests for their reis- suance, occur daily at our branches, therefore we need to fully understand the characteristics of dementia and improve our literacy so that we can respond flexibly and adequately. Based on its New Orange Plan, a policy to build friendly communities for elderly persons with dementia, the Japanese government is implementing an initiative to train people to provide support to dementia sufferers and their families. At SuMi TRUST Bank too, we are instructing employees at our branches to attend this training course so they can acquire basic dementia knowledge and better respond to problems when they first occur (as of end-September 2019, 3,118 people have

undertaken this training course).

Furthermore, because the dementia supporter training course does not focus on the finance industry, we have sent all of our branches copies of the booklet entitled Guide for Dementia Friendly

Financial Services and instructed them to strengthen their practical approach to dealing with dementia issues by holding study sessions during which employees that have already acquired the basic knowledge can read through the content of the booklet together.

050 Participating in Community-based Comprehensive Care System

201 Report ESG

The problems of dementia concern not just financial institutions-they must be addressed by the community at large. From this perspective, SuMi TRUST Bank participates in the government-ledcommunity-based comprehensive care system and we think we can play a unique role within the framework of this system. Based on this

thinking, our branches across the country have made initial contact with nearby community-based comprehensive support centers (the core organizations tasked with providing comprehensive community care) and are implementing initiatives aimed at building a foundation for collaboration.

Community Building Agreement with Tokyo Metropolitan Government

In February 2018, our Group concluded an agreement with the Tokyo Metropolitan Government with the aim of building a community to support senior citizens and the like. Under the agreement, we aim to (1) provide gentle

watch over seniors, (2) cooperate on building a community to support those with dementia and their families, (3) prevent consumer damage among seniors, and (4) provide assistance to other community activities.

COLUMN

Collaboration with COLTEM

SuMi TRUST Bank is implementing dementia-related initiatives by collaborating with COLTEM (collaboration center of law, technol- ogy, and medicine for autonomy of older adults), which receives assistance from MEXT's Japan Science and Technology Agency, as well as the graduate school of Kyoto Prefectural University of Medicine, a leader in dementia research (in particular, Professor Jin Narumoto, Department of Psychiatry). The publication of our Guide for Dementia Friendly Financial Services in September 2017 is one such accomplishment of our initiatives. We have also contributed to improving the entire financial industry's response to dementia issues by taking the lead in hosting symposiums with a focus on finance and dementia. The knowledge gained from these activities have greatly helped SuMi TRUST Bank develop its own products and services.

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Asset Management for Clients with Dementia

Once a person loses his or her ability to make decisions because of dementia or some other reason, they struggle to manage their deposits and savings or stay on top of various financial agreements. This makes them easy targets for bank- transfer scams or unscrupulous business practices. In asset management, needless to say, the safeguarding of finances must be prioritized before anything else. Next required is daily living support in asset management. They may require help in managing their day-to-day finances, for example, collecting pension payments, paying taxes and utility bills, or paying money when they go shopping. And offering support to help them communicate their intentions is also key. Even though someone with dementia may find it difficult to communicate their thoughts, what they want to do or what they want done remains the same. However, there is a limit to how much they

can rely on the considerations of their supporters, so particularly with regard to legal procedures, such as contracts, they will need a way to communicate their intentions under a private contract while they are still capable of making decisions. In our digest report for seniors (Considering the Problems of Dementia), we provide easy-

to-understand explanations of the adult guardianship system and other public support schemes, as well as our financial products and services that complement

those schemes. Japanese URL: https://www.smth.jp/csr/report/2019/all5.pdf

Mitsui Sumitomo

Lineup of asset management services for addressing dementia

Trust

Has no problems making decisions

Hasthe capacity to conclude contracts

Feels insecure about

making decisions

Need to implement

a way of communicating intentions in preparation for decreased decision- making capacity

Conclude a contract prescribing matters	Conclude a discretionary guardianship	Safe-	Daily	Commu-
on the delegation of a representative	for	contract with delegated representative	guarding	living	nicating
physical custody and asset management	support	intentions

SuMi TRUST Bank's Discretionary Guardianship System Support Trust	Safe-
guarding
(entrust additional safeguarding which is not covered under discretionary	(addi-
guardianship contract to trust bank)	tional)
Trust product integrating	SuMi TRUST Bank's			Safe-	Daily	Commu-
numerous functions and				living	nicating
	Centenarian Support Trust	guarding
various services	support	intentions
Limit withdrawal requirements					Safe-	Commu-
and entrust asset management		SuMi TRUST Bank's Anshin Support Trust	nicating
	guarding
to trust bank						intentions
Entrust asset management to						Commu-
Conclude a civil trust agreement with family members	nicating
family members under contract
					intentions
Prevent fraud damage with trust	SuMi TRUST Bank's Security Trust			Safe-
with termination limitations				guarding
Receive daily living support from	Utilize the support program for		Safe-	Daily
public agencies (Japan National			living
	self-reliance in daily life			guarding
Council of Social Welfare)			support
		Min.			Max.

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201 Report ESG

Capacity to make decisions

has decreased considerably

Receive support according to one's level of	Application of legal		Assis-	Guard-	Safe-	Daily
decision-making capability from an adult guardian	Support	living
guardianship system	tance	ianship	guarding
appointed by the family court		support
Trust bank's guardianship system support trust		Safe-
	guarding
(for some guardianships, the trust bank manages assets pursuant to the decision
(addi-
of the family court)		tional)

Security Trust

Key Point Safeguards precious assets from malicious scams with two-tier account security.

The concerns of our clients and their children (many of whom live apart) are growing as more crimes targeting the elderly, such as bank-transfer scams, are becoming increasingly sophisticated. Our Security Trust safeguards the assets of our clients from such financial crimes. The product is structured so that funds can only be withdrawn after approval of the previously nominated consenting party (a relative within the third degree of kinship to the client) has been obtained. The trust can also be utilized in conjunction with the regular fixed-amount payment method.

Lump-sum

payment method

Under this structure, funds held in the trust cannot be withdrawn without the approval of a previously nominated family member.

This prevents the client from being drawn into a scam because it provides the client with an opportunity to first discuss any planned withdrawals with family members.

Regular fixed-amount

payment method

A fixed amount of the funds held in the security trust can be withdrawn periodically to pay for living expenses (up to ¥200,000/month).

*No management fees

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		Support
	Fortune protection/	Services
	legal action		Estate
	Estate management	management
	functions
Discretionary Guardianship System Support Trust	Safeguarding	Daily living
(additional)	intentions
	support Communicating

Key Point Under the discretionary guardianship system, a separate money trust provides an extra level of safeguarding.

This money trust supports the discretionary guardianship system by managing the assets of its users. It safely and soundly protects assets held in the money trust because after the discretionary guardianship contract takes effect, funds can only be released (lump-sum payment) with the consent of the discretionary guardianship supervisor. Funds required for day- to-day living expenses can also be released periodically (regular fixed-amount payments), which alleviates the burden of asset management on the discretionary guardian. Until the discretionary guardianship contract comes into effect, the client or their nominated representative can take charge of procedures for lump-sum or regular fixed-amount payments. An authorization form signed by the client must be submitted each time the representative wishes to take charge of procedures on behalf of the client.

Sumitomo

After application but before

discretionary guardianship contract takes effect

After discretionary guardianship contract takes effect

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052

Client	Signing of
application forms

(trustor and beneficiary)

Submission of application forms

Money entrusted

Money disbursed (lump-sum or regular fixed-amount payments) according to instructions of client

Nominated discretionary guardian

Sumitomo Mitsui

Trust Bank

(trustee)

Client

(trustor and beneficiary)

Discretionary	Payment consent	Discretionary
guardian		guardianship
(representative)		supervisor
Notice of nomination of
discretionary guardianship
supervisor

							Sumitomo Mitsui
							Trust Bank
Money disbursed (lump-sum or regular
						(trustee)
fixed-amount payments) according to
instructions of discretionary guardian

201 Report ESG

		Support
	Fortune protection/	Services
		Estate
	legal action
	Estate management	management
Anshin Support Trust	functions
Safeguarding	support
	Daily living	Communicating
					intentions

Key Point Even after the onset of dementia, the trust bank can preserve the client's assets and ensure intentions are communicated by prescribing in advance the requirements for asset disbursement.

Our Anshin Support Trust leverages the unique functions of the trust bank to offer clients and their families longer-term and customized support for the preservation and management of their precious assets.

Not only is money entrusted to SuMi TRUST Bank, the Anshin Support Trust helps clients communicate their intentions well in advance by legally prescribing the requirements for the disbursement of assets and

Structure of Anshin Support Trust

	Payment of living
	or medical
Money entrusted	expenses

to whom remaining assets should be distributed upon termination of the trust. The trust also safeguards the client's assets because any withdrawals must meet the prescribed requirements for asset disbursement and require the approval or instruction of the designated authorizing person.

If there is no suitable relative who can serve as the person authorized to give directions for the trust, the client can conclude a discretionary guardianship contract with a responsible attorney or judicial scrivener authorizing them to perform such duties.

*In addition to the money trust described above, the Anshin Support Trust is also available in the form of a life insurance trust.

Client

(trustor)

Establishment of trust (contract or will)

Jointly operated designated money trust with special clause attached

Sumitomo Mitsui Trust Bank

(trustee)

Distribution of remaining trust assets upon termination of the trust

Family member/charity (person entitled to assets)

Client/family member

(beneficiary)

Giving consent and directions with respect to disbursement of assets to beneficiary

Person authorized to give directions

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						Support
				Fortune protection/	Services
					legal action		Estate
					Estate management	management
					functions
Guardianship System Support Trust		Safeguarding	Daily living
	(additional)	intentions
				support Communicating

Key Point The trust bank safeguards the client's assets pursuant to instructions of the family court to prevent guardian dishonesty.

This is structured so that the savings and deposits needed for day-to-day payments for a person receiving assistance under the legal guardianship system are managed by a guardian while money not ordinarily used is entrusted to the trust bank.

When utilizing this trust, written instructions issued by the family court in advance are required in order to withdraw the trust assets or cancel the trust contract. In principle, a professional guardian such as an attorney or judicial scrivener will act on behalf of the client to make decisions regarding the entrustment of assets, including the trust bank to which the assets are entrusted and the amount of trust assets, and conclude a trust contract with the trust bank pursuant to instructions of the family court.

This trust provides appropriate protection from the misuse of the client's assets by an adult guardian.

Submission of application forms						Cumulative number of users of guardianship system support trusts
Money entrusted

			30,000
	Jointly operated								24,409
Client	designated money							21,523
trust with special		20,000
(trustor and beneficiary)					16,971
	clause attached
	Money disbursed		10,000			10,008
	according to written	Sumitomo Mitsui
	instructions of family court	Trust Bank			3,405
	Report	(trustee)
Related guardian/	Management	98	638
professional	Instructions	of money	0
guardian		2012.12	2013.12	2014.12	2015.12	2016.12	2017.12	2018.12
(legal representative)			Source: Jan-Dec 2018 data on use of guardianship system support trusts,
	Family court
			Family Bureau of General Secretariat of Supreme Court of Japan

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053

Consultations and Inquiries related to Adult Guardianship System

SuMi TRUST Bank has entered into agreements with various associations of professional services that are active in the area of adult guardianship and refers the consultations regarding the adult guardianship system and those clients who wish to utilize the system to these professional associations.

201 Report ESG

Clients that need to
Sumitomo Mitsui
discuss or utilize the adult
guardianship system		Trust Bank

Professional industry associations (as of August 1, 2019)

Legal-Support Adult Guardian Center

Eight bar associations

Dai-Ichi Tokyo, Dai-Ni Tokyo, Tokyo, Kanagawa, Aichi, Kyoto, Osaka, Hyogo

Certified tax accountant associations

13 certified public tax accountant associations from across Japan and the Japan Federation of Certified Public Tax Accountants' Associations

In the case of legal guardianship:	In the case of discretionary guardianship:
Professional association introduces client to discre-
Petition to family court
tionary guardian (delegated party) candidates

Petition

Hearings,

inquiries, and as-

sessments

Judgment

(start of guardianship and appointment of adult guardian)

The petition requires forms such as a written application and petition fees.

Some family courts require that the day and time of visit is booked over the telephone.

After the petition is filed, the court staff may inquire about the circumstances of the petitioner, guardian candidates, or the person subject to the guardianship, or seek the opinions of the person's relatives regarding the guardian candidates. In addition, the judge may ask about these circumstances, if required.

The person's decision-making capacity may need to be assessed.

The family court judges when the guardianship shall begin and also appoints an adult guardian thought to be the most suitable candidate.

If no objections are filed, the court's judgment is confirmed two weeks after the adult guardian takes receipt of the written judgment. During this two-week period, the person subject to the guardianship, their spouse, or a relative within the fourth degree of kinship (excluding the petitioner) can file a petition for objection (immediate appeal) against the court's judgment.

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		Support
	Fortune protection/	Services
	legal action			Estate
	Estate management	management
	functions
Centenarian Support Trust (100-Year Passport)	Safeguarding	Daily living
intentions
	support
					Communicating

Key Point Incorporating a number of useful features in preparation for decreased decision-making capacity among many clients in the future when more people are likely to reach the age of 100, this trust product has been designed to help clients feel at ease and enjoy a productive life.

A money trust armed with a host of useful features to combat the problems elderly clients may face, such as withdrawing from their bank account, when the ability to make decisions has declined because of dementia or other similar symptoms. Along with tie-up solutions under the adult guardianship system and broad-rangingclient-focused consulting, the Centenarian Support Trust is the product best suited to an age when more people will likely live to be 100.

Four features in one package

	Safeguar-	Daily living
Delegation of payments (pension deposits and other payments as needed)	ding	support

In preparing for dementia or other health concerns, another person can be designated in advance to take care of payment procedures. A relative within the third degree of kinship, lawyer, or judicial scrivener can be nominated.

During dementia or ill health:

Monthly living expenses (up to ¥200,000/month) can be paid into the trust account. This amount can be increased once a year (up to ¥200,000).

The trust can also be used to pay large sums that might arise from medical fees, nursing care expenses, or housing costs. A person approving withdrawals can also be set up in advance.

	Safeguar-		Daily living		Communi-
Security	Pension collection	Considerate inheritance	cating
ding	support
intentions
To avoid falling victim to the many types of	Monthly living expenses can be deposited	Inheritance money of up to ¥5 million can be
scams-of which there are up to 16,000*	on a periodic basis. This money can also be	smoothly paid out to heirs designated in
cases annually-a person approving		used to pay for additional creature comforts	advance.
withdrawals can be set up in advance.		or gifted to loved ones.

*According to the Metropolitan Police Department, 16,496 cases of fraud occurred in 2018 for a total loss of roughly ¥36.39 billion.

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Special Donation Trust

The special donation trust is a product for the purpose of contributing to stable living into the future for specified persons with disabilities. With this trust, funds donated are managed securely by SuMi TRUST Bank through jointly operated designated money trusts and other instruments, and disbursed to the specified person with disabilities by the bank on behalf of the client.

"Specified persons with disabilities" who become beneficiaries are divided into "special persons with dis- abilities" and "other specified persons with disabilities" according to the degree of disability. Special persons with disabilities may receive up to 60 million yen tax-free in periodic installments to cover living costs or medical expenses, while other specified persons with disabilities may receive up to 30 million yen without paying tax.

Structure of Special Donation Trusts

		Special		Payment of
		donation		living, medical
		trust		and other
Client	contract		expenses	Special	Beneficiary's
		Sumitomo
trustor					disabled person	representative
and			Mitsui Trust			beneficiary	Concurrence,
donor			Bank			and	communi-
				recipient	cation, etc.
				(trustee)			of bequest
		Money
		entrusted
							Acting as an agent, giving
				Deemed donations
				concurrence and directions with

respect to various transactions on behalf of beneficiaries

Family Consideration Trust (Lump Sum)

In the event of a bereavement, family members have to deal with various procedures, including arrangements for the funeral and inheritance-related procedures. The Family Consideration Trust (Lump Sum) is a product that, in the event of a client's death, pays out the deposited assets in trust to a recipient designated in advance by the client from among their legal heirs so as to cover interim expenses and funeral costs.

	•Apply for Family Consideration Trust (Lump Sum)
Client	•Money entrusted
(trustor and	•Designate recipient of assets in trust
beneficiary)					Sumitomo
			Client's death	Mitsui
					Trust
Family	•At SuMi TRUST Bank Head Office, apply for payment	Bank
	from Family Consideration Trust (Lump Sum)	(trustee)
member
(recipient of			•Advice regarding payment method
assets in trust)
		•Payment of assets in trust

The recipient of the assets in trust receives them as a lump sum.

	Application			Deposit into	Death
		(Lump Sum)	money trust		(Lump Sum)
			(principal
			Trust fund			Trust fund
			guaranteed)

The recipient of the assets in trust receives them as a lump

sum, as a payment for interim expenses or funeral costs.

Illustration

• Along with the lump-sum Family Consideration Trust shown above, we also offer an annuity- type product from which the assets in trust are paid to a beneficiary on a regular basis.

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6. Ensuring Heirs Inherit Family Wealth

Helping Still-Living Clients to Give to the Next Generation

Annual Donation Support Trust

Annual Donation Support Trust is a service that supports the implementation of procedures for lifetime donation to relatives, such as compilation of a donation contract. Each year, SuMi TRUST Bank provides customers with information on documents necessary for the donation, helping them to not miss the opportunity for donation. This service makes it easy to execute lifetime donations. Once each year, SuMi TRUST Bank sends a donation report to both the donor and recipient.

Tuition Fund Endowment Trust

An exemption from the gift tax has been created for lump- sum donations to cover tuition funds, allowing grandparents to make a tax-freelump-sum donation to grandchildren, etc. aged under 30, to help with tuition fees and other educational costs (up to ¥15 million per grandchild, etc.).

SuMi TRUST Bank pays for the cost of education with this product in accordance with payment requests from grandchildren, etc.

Wedding and Child-Rearing Support Trust

As a tax incentive, up to 10 million yen can be given as a tax-freelump-sum donation for wedding or child-rearing purposes to a child or grandchild who is at least age 20 up until he or she turns age 50. As disbursements are made from a "money trust" that requires receipts confirming payments for wedding or child-rearing purposes, this product can clearly be the answer for donors who want their gifts to be used for marriage or child-rearing purposes.

Social Contribution Donation Trust

SuMi TRUST Bank offers products and services meant to support building a prosperous future for the next generation by enabling donation activities that serve the public interest. One such product is the social contribution donation trust, where clients select recipients every year from a list of organizations that SuMi TRUST Bank provides, and we process the donations (see Page 22).

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Helping with Smooth Planning for Inheritances

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Estate Planning

Estate planning is a service that provides support (con- sulting) aimed at summing up the client's wishes regarding the succession of their assets and drawing up a specific plan for this. Using the know-how that we have built up over decades in the field of asset management, inheritance, and will-related services, SuMi TRUST Bank offers the following consultation services.

Will Trusts

SuMi TRUST Bank offers a will trust service to assist the inheritance of deposits, securities, real estate, and other assets by the next generation in accordance with the wishes of the client. In October 2019

we launched an online will trust service with which clients can prepare their own draft of a will by following the on-screen instructions.

https://www.smtb.jp/personal/entrustment/succession/webwill/

Meanwhile, SuMi TRUST Bank provides information about the bequeathal donation system that some clients may wish to utilize in order to leave their estate for public benefit and the good of society.

One-Stop Inheritance Service

SuMi TRUST Bank offers a One-Stop Inheritance Service to ensure that complex inheritance procedures proceed smoothly. More specifically, upon application by an heir, we will provide support and carry out the following procedures on their behalf, according to their request.

• Confirmation of the legal heirs
• Investigation and identification of inherited property
• Advice in discussions concerning the division of the estate
• Change of name on savings and securities and/or their con- version into cash (we will carry out the procedures prescribed by each financial institution on the heir's behalf)
• Change of name on real estate
• Advice concerning allowances to pay tax obligations, such as income tax and inheritance tax

Trust for Single Old Age (launched in December 2019)

This is a one-stop service, based on a final letter of instruction, for clients worried about those around them if by some chance they die and certain matters need to be taken care of after their death, such as a funeral ser- vice, so-called "digital remains," household belongings, obituary, and pets. We are now entering an era where a recorded final letter of instruction can be put into action. SuMi TRUST Bank started offering this service in December 2019 at selected branches.

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7. Initiatives to Improve Gerontology Literacy

Gerontology examines the various issues that occur as people age and is a field of study characterized by interdisciplinary viewpoints aimed at investigating ways to help people lead better lives. At SuMi TRUST Bank, we are focused on studying gerontology together with our clients and aim to realize the concept of productive aging whereby seniors stay in control of their own lives right to the very end and remain an integral part of society despite their old age. At SuMi TRUST Bank since 2014 it has been mandatory for all branch managers to sit and pass a gerontology

exam, an accreditation that is put to good use when providing services to and consulting with elderly clients. From February 2020 employees holding a position of responsibility (section managers, team leaders, and above) in the head office and branches & departments of the Retail Total Solution Services Business will also be required to pass this exam. We plan to have these managers and leaders utilize the knowledge gained when providing guidance and training to their subordinates. As of the end of November 2019, 327 employees had successfully passed the exam.

Holdings, Trust Mitsui Sumitomo

Partnership with ILC-Japan

SuMi TRUST Holdings is a member of ILC-Japan, the Japanese branch of the International Longevity Center, a global alliance of organizations focused on gerontology. And since fiscal 2017 we have also chaired a research group hosted by ILC-Japan that studies lifestyles in

societies characterized by longevity. In fiscal 2019 we invited external experts to come and discuss what kind of role companies should be fulfilling in regions where populations are rapidly aging.

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Silver College Seminars

Since 2012, SuMi TRUST Bank has hosted Silver College	assist them. Topics covered have included money,
seminars at its branches across Japan in order to pro-	health, dementia, and housing, while the lectures given
vide easy-to-understand information about gerontology	by our group of first-rate instructors have been favorably
to the senior generation and our clients that currently	received on every occasion (see page 181).

COLUMN

Opening of Centenarian Anshin Plaza

Sumitomo Mitsui Trust Life Partners, the insurance sales arm of SuMi TRUST Bank, opened a new Centenarian Anshin Plaza office in Shinjuku in September 2019. The company plans to open up a new face-to-face consulting channel primarily focusing on clients that are currently part of the working gen-

eration by blending SuMi TRUST Bank's specialist products, services, and consulting capabilities with its own insurance consulting know-how. The Group will look to utilize this consulting channel to promote the kind of insurance business model only a trust bank can deliver-one that offers comprehensive proposals while taking into account taxation, social security, and pension systems. In this way, we aim to be the financial institution chosen by our clients as their "best partner" for a long and fulfilling life.

Please visit our website for more information.

https://www.smtb.jp/corporate/release/pdf/190823.pdf

COLUMN

Establishment of Anshin Support Corporation

The Anshin Support Corporation was established by SuMi TRUST Bank in November 2018 and having since become part of the Bank, it offers estate management and inheritance-related services to clients with no living relatives. By combining the numerous functions of the trust bank with the services of this corporation, we hope to help alleviate the concerns elderly clients may have about the future, particularly with regard to housing, healthcare, and nursing care. SuMi TRUST Bank will utilize this corporation to provide solutions so that elderly clients can use their own assets appropriately for themselves.

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ESG-themed Initiatives in

Our Asset Management Businesses

With the aim of strengthening its asset management business and seeking to become an asset manager in step with the times, Sumitomo Mitsui Trust Asset Management (SMTAM) integrated the investment management function of Sumitomo Mitsui Trust Bank into its organization on October 1, 2018. In doing so, it became Japan's largest asset manager with AUM of ¥60 trillion. As a responsible institutional investor, SMTAM will continue to pursue initiatives befitting of this position for its clients in the area of ESG investment.

Website:

https://www.smth.jp/en/csr/report/index.html

Topics of focus for ESG activities (FY2019-2020)

Topics	Specific activities	Relevant SDGs
Climate change	• Pursuit of engagement activities through the framework of the CA100+
	initiative.
	• Pursuit of engagement activities in collaboration with LGIM.
	• Continued engagement with major greenhouse gas-emitting companies
	both in Japan and overseas.
Water resources	• Continued call for policies aimed at addressing marine plastic pollution.
and marine	• Explanation of the need for greater awareness of water resource risks and
pollution	for publicly disclosing a water resource management code of conduct, along
with encouragement for action in line with the code of conduct.
Backing	• Support for higher levels of independence on company boards and the pro-
governance	motion of diversity, such as higher ratios of female directors.
• Pursuit of engagement activities in collaboration with LGIM.
reforms
• Promotion of efforts to disclose information and prevent conflicts of inter-
	est with regard to the issues of publicly listed parent/subsidiary pairs and
	cross-shareholding.
	• Promotion of sustainable improvements in "earnings power" and appropri-
	ate capital allocation (balance between growth investments and surplus cash
	returns).
Promoting ESG	• Encouragement of companies to disclose information regarding the attain-
information	ment of the SDGs (i.e., their contributions to solving ESG issues and how
those, in turn, contribute to earnings).
disclosure
• Promotion of identification of materiality and disclosure via integrated
	reports as information for investors (engagement activities through IICEF).
	• As an asset management corporate supporter of the TCFD (see the next
	page for more information), promotion of effective corporate information
	disclosure as well as initiatives aimed at appropriately linking this informa-
	tion disclosure with investment decision-making.

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Stewardship Activity Initiatives

Improving Investee Corporate Value and ROE via Engagement

Trust Mitsui Sumitomo

By this point, we have engaged with a broad range of companies representing roughly 90% of the total market capitalization of TSE1. This fiscal year, our challenge is to further expand the scope of companies with which we engage and to qualitatively deepen those engagements. We are working to achieve this in a variety of ways, including applying a top-down approach to engagement on prescribed focus topics and conducting in-depth analyses on companies with which we have ongoing engagement.

Moving forward, we will continue to pursue activities which contribute to better medium-to-long-term corporate value and ROE, thereby improving the overall market and securing excess returns which will help us in

maximizing medium-to-long-term investment returns for our clients. We are also focused on making our engagement activities more efficient and effective by identifying the challenges that each of our investee companies faces. Improving the ROE of investee companies requires helping them rethink capital allocation, restructure business portfolios and improve corporate governance; at the same time, it requires helping them focus on challenges which could undermine ROE in the future, such as climate change or labor practices that need to be addressed. At SMTAM, we comprehensively ascertain each and every "E," "S" and "G" challenge trustee companies face before pursuing engagement activities.

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(Company) Number of Companies Engaged

800
	729	760
600	612
400
	357
200	255
0

End of June	End of June	End of June	End of June	End of June
2015	2016	2017	2018	2019

(Company) Number of Companies Taking Corporate Action*

250
200	201
150
	141
100	99
50	64
	35
0

End of June	End of June	End of June	End of June	End of June
2015	2016	2017	2018	2019

Company numbers are cumulative

*Corporate action aligning with opinion expressed by SMTAM

SMTAM Engagement Process

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Prepare opinions

To achieve effective engagement, our analysts use non-financial information analysis results and the like to help them identify management issues and formulate effective and coherent opinions.

Check in advance

We first submit the opinions formulated by each analysts to an internal review. This both helps improve and standardize opinion quality among the analysts.

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Activities conducted in line with the above process are counted in our total number of engagements

(simply being in contact with a company is not counted as an engagement)

Express opinions

Our analysts meet with investee company executives and express their opinions. At each meeting, a written oath stating the analysts will not make any material proposals nor acquire insider information is signed and mutually recognized.

Record and monitor

After the meetings, we record investee companies' responses to the analysts' opinions. We monitor the companies for any changes in management and then utilize this information when identifying management issues for the next engagement.

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Engagement Example Cases - Domestic

CASE 1	Climate Change
Non-manufacturing	• Greenhouse gas emissions reduction
Company A	• Business strategy

Analyst's Perspective

As a logistics company whose business expansion is highly likely to create an increased environmental load, it is essential that environmental targets be included as mid-term planning KPI in order to enhance the sustainability of corporate value improvement. Also, with a growing, quantitative contraction in materials handling taking place over the medium-to-long-term in Japan, limiting the risk this poses to profitability (when Japanese business accounts for a high proportion of business assets and sales) will be a key challenge.

CASE 2	Water Resources and Marine Pollution
Manufacturing Company B1	• Addressing marine plastic pollution
Manufacturing Company B2	• Business strategy

Analyst's Perspective

Asia is at the center of the marine plastic pollution problem, particularly because of the large volume of PET bottles, straws and other disposable plastics. Ideally, the problem would be handled with the establishment of a recycling system in Asia, but because Asia takes in garbage from developed countries, including Japan, this problem is not just the responsibility of Asia. It is becoming increasingly important that Japanese companies, particularly the chemical companies that produce the plastic and the food companies that utilize it, get involved in addressing this problem.

Sumitomo

Opinion from SMTAM

Opinion from SMTAM

The truck-centric transportation sector accounts for a large portion of CO2 emissions volume by industry. With the company currently in discussion over its medium-term business plan, it seems to us that the required course of action is for it to capitalize on its expertise with various shipping modes (including trains, ships and airplanes) so it can set Scope 3-focused (i.e., emissions volume encompassing manufacturing, shipping, etc.) medium-to-long-term CO2 reduction targets while also actively expanding sales to customers.

We view the medium-to-long-term contraction in materials handling to be the largest business risk facing the domestic logistics segment, which accounts for 60% of consolidated sales. In our opinion, the company needs to perform a detailed revision of its business portfolio to reduce business in less populated regions and increase it in the three major metropolitan areas.

Because it is disposable plastics that are the problem when it comes to marine plastic pollution, we predict the impact on business performance would be negligible. On the other hand, we believe that in order to avoid having an environmental stigma also applied t o automotive industrial plastics and other plastics we are focusing on (as there is growing business potential), the chemical industry as a whole needs to take action.

Marine plastic pollution is a problem that gets talked about, but plastic usage remains high, including among beverage manufacturers that use it to manufacture PET bottles. Although a growing number of companies are switching from plastic to paper straws, are similar alternatives being explored for PET bottles? Also, similar to the situation in the logistics field, is collaboration with competitors needed in order to catalyze action to address this problem?

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Company Response

Company Response

ESG

Although there are a variety of different environment-related indicators, medium-to-long-term CO2 reduction is a priority for which we are committed to investing the necessary costs to achieve. We will look into incorporating it into our next medium-term business plan.

As you have pointed out, we need to perform a revision of our medium-to-long-term business portfolio for the domestic logistics segment. In less populated areas we will undertake a balanced contraction of business tailored to the local characteristics of each area, and, in turn, we will make the three major metropolitan areas of Japan our primary focus. Towards this end, we are discussing making revisions to our corporate group personnel system to allow personnel transfers between areas, and we are considering introducing ROIC targets for each area.

We feel that the impact on business performance accompanying a reduction in the usage of disposable plastics would be negligible. As for measures to address the risk of an unfounded souring of public opinion with regard to industrial plastics, the chemical industry as a whole, through the industry groups which represent it, is committed to combating marine plastic pollution. Furthermore, we recognize that the lack of established recycling systems in Asia presents a fundamental challenge to any effort to address the marine pollution problem.

• Although complete elimination of PET bottles is an unrealistic goal, the question is how much reduction is achievable? We are aware of biodegradable plastic technology, but applying this technology will require an industry-wide effort.
• First, the recycling rate needs to be brought as close to 100% as possible. A new office has been established to study the feasibility of switching to paper containers. Also, similar
  to the situation in the logistics field, we think of containers as an area of non-competition for manufacturers. The industry as a whole needs to review and revise the supply chain.

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Company Action

With a view towards realizing its	In its mid-term business plan released
long-term vision, the company	in February 2019, the company
announced specific CO2 emissions	announced that it would fundamentally
reduction targets as KPI to be	reform its less profitable business by
achieved by fiscal year 2023.	strengthening its Japanese business
	and revising its business portfolio.

Company Action

The "Japan Initiative for Marine Environment" has been established by five organizations representing the chemical industry. In order to address the marine plastic problem, the company adopted an approach involving (1) organizing and disseminating information, (2) responding to trends within Japan, (3) engaging with Asia, and (4) accumulating scientific findings.

Evaluation by SMTAM		Evaluation by SMTAM
We approve of the company's announcement of specific CO2 emissions		We will monitor bioplastic and recycling technology development trends
reduction targets.		as well as the status of chemical industry group-led initiatives to address
Moving forward, we will monitor the progress being made to reduce CO2		the marine plastic problem. Additionally, we will continue to pursue dialog
and to improve the profitability of domestic logistics business.		with beverage manufacturers and other plastic users to encourage them to
		address the marine plastic problem.

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CASE 3	Promotion of ESG Information Disclosure
Manufacturing	• Social issues
Company C	• Capital productivity

Analyst's Perspective

With drug-resistantbacteria-related problems such as nosocomial infection becoming more severe worldwide, major antibiotics manufacturers have an opportunity to contribute to society by actively addressing these problems rather than treating them as social responsibility-related risks to avoid. Also, another issue is the reduction of cross-shareholdings, primarily those with wholesalers, which are a legacy of past business practices implemented as part of efforts to increase capital efficiency.

Opinion from SMTAM

Drug-resistant bacteria are becoming a serious problem worldwide within the	Regarding cross-shareholdings with client pharmaceutical wholesalers, it is
field of infectious agents which t he company puts extra focus on. Given how	our opinion that, from the standpoint of capital efficiency, these need to be
little awareness there is in Japan about this growing danger, we feel a more	reduced further.
proactive and visible stance in addressing this problem is needed.

Company Response

Addressing the problem of drug-resistant bacteria is our mission. And we are	Regarding our cross-shareholdings policy, a rapid and substantial sell-off is
committed to actively communicating our intentions and specific initiatives for	made difficult by the impact that the gains from such a sell-off would have on
addressing it as a company.	our profit and loss statement; nevertheless, we intend to continue reducing
	our cross-shareholdings with wholesalers.

Company Action

In May 2019, the company issued a public commitment and plan of action	The annual securities report released by the company in June 2019 for the
for addressing the problem of drug-resistant bacteria. It declared that, at	financial year ending March 2019 confirmed that the company reduced its
a time when numerous other pharmaceutical companies were diverting	cross-shareholdings by 20% compared with the end of the previous financial
resources away from research and development in the field of infectious	year.
disease, the company was looking to the future by taking on a leading
role in the development of antibacterial agents and the promotion of their
correct usage and distribution.

Evaluation by SMTAM

We approve of the company's public commitment and plan of action for addressing the problem of drug-resistant bacteria, which has been backed up by its proactive and visible stance.

We also approve of the reduction in cross-shareholdings which has been undertaken by the company but will continue to engage in dialog with it to encourage even further reductions.

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Engagement Example Cases - Global

At SMTAM, our emphasis on ESG engagement activities extends worldwide. We focus on (1) engagement activities that are based on action principles or guidelines, such as the PRI, (2) activities aimed at addressing misconduct and other problems in accordance with international norms, and (3) independent activities aimed at promoting greater efficiency in corporate management

and the establishment of outstanding corporate gover- nance. For example, our (1) engagement activities that are based on action principles or guidelines, like the PRI, include active efforts to help companies with ESG issues limit their risk, such as by serving as the lead manager handling PRI working group promotion.

CASE 4

Glencore Switzerland Resource Mining Company (CA100+ target company)

Climate Change

• Greenhouse gas emissions reduction

Engagement Specialist's Perspective

Among mining and resource extraction companies, those whose business involves coal mining have financial exposure which requires mitigation. Scenario-based business planning, such as for future capital rationing or stranded asset risk avoidance, needs to be disclosed.

Opinion from SMTAM

Globally speaking, this company is seen as having a major impact on greenhouse gas emissions and is a target company of the CA100+ initiative. It is our view that (1) disclosure and implementation of plans to reduce greenhouse gas emissions to the levels set under the Paris Agreement; (2) disclosure of information in line with the recommendations of the TCFD (Task Force on Climate-related Financial Disclosures); and (3) creation of climate-change related governance systems and structures are needed.

CASE 5

Copart USA Low-quality used vehicle online auction company (Thirty Percent Coalition target company)

Backing Corporate Governance Reform

• Diversity

Engagement Specialist's Perspective

As the company works to expand its business operations, having a diverse Board of Directors will help ensure the effectiveness of business management decisions and requires hiring a broad range of human resources.

Opinion from SMTAM

Of the S&P 500 Index companies, Copart is the only company without any female directors on its Board of Directors. We believe that hiring more women and increasing diversity in general will contribute to better management efficiency and more effective personnel hiring and business decision-making. We recommend making concerted efforts to expand diversity.

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Company Response	Company Response
As you have pointed out, we have significant exposure to the coal industry	Our personnel hiring is handled primarily on the basis of merit. Although
and are aware of the risks presented by a transition to a low-carbon society,	we cannot provide a specific time-frame, we are aware of this issue and will
particularly the potential stranding of coal assets. Our intention is to	announce our diversity enhancement plans at an appropriate point in the
put greater emphasis on high-quality coal, whereby we can increase our	future.
profitability without increasing our production volume, while at the same
time reducing our contribution to global warming.

Company Action

In February 2019, the company announced limits on the size of its coal production.

Evaluation by SMTAM

We approve of the company's expressed intentions to optimize its coal business and assets. We will continue to engage the company in dialog about measures it can take to help mitigate climate change.

Company Action

In July 2019, the company appointed a woman to the position of Outside Director.

Evaluation by SMTAM

While this issue is not one which can be evaluated with a one-size-fits-all approach, Copart's response addresses it only at a bare minimum and does not meet the ideal level of at least 30% female representation among directors. We will continue to engage Copart in dialog about expanding its hiring of female personnel and improving the diversity of its Board of Directors.

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CASE 6

Elbit Systems Israel Military and defense-related company

Promotion of ESG Information Disclosure

Sumitomo	• Information disclosure related to concerns
about cluster bomb manufacturing
Mitsui
Engagement Specialist's Perspective
Trust
Because of the exposure to humanitarian concern-related reputational risks
that cluster bomb manufacturing presents, it would be preferable that the
Holdings,
company withdraw from this line of business.
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Cluster bombs are classified as inhumane weapons under the Oslo

062 Convention and other international conventions, and their manufacture and use is prohibited. We are concerned that the purchase of national defense companies risks exposing Elbit Systems to cluster bomb-related business. We feel that the corporate reputational risks are too great to justify any involvement in cluster bomb manufacturing. At the very least, Elbit Systems needs to clarify and disclose its risk and future plan of action with regard to

this line of business.

CASE 7

BAYER Germany Agrochemical and Pharmaceutical Company

Social Issues

• Handling of lawsuit risks

Engagement Specialist's Perspective

Bayer needs to implement measures to mitigate the risks of and effects from potential lawsuits related to the agrochemical products of a purchased company.

Opinion from SMTAM

Following its purchase of an agrochemical business that was announced in 2015 and concluded in 2018, lawsuits over the issue of weedkiller carcinogenicity were launched against Bayer. Because of this, we think it is essential that Bayer disclose relevant information to investors, such as the maximum anticipated compensation, in order to dispel any lingering uncertainty.

Company Response

With regard to having no involvement in cluster bomb-related business or any business which conflicts with international conventions, we intend to make a clear and open announcement of our policies moving forward.

Company Response

At the time that we made our purchase, we determined that we would be able to adequately manage the risk of lawsuits, and we do not believe that the law suits are indicative of management problems.

Because this matter is still being dealt with in court, it would be inappropriate to disclose monetary amounts at this time.

Company Action

In January 2019, Elbit Systems announced a policy of having no exposure to this line of business.

Evaluation by SMTAM

We approve of Elbit Systems' prompt approval and disclosure of this policy. We have removed it from our ESG screening list of investment exclusion stocks.

Company Action

In August 2019, Bayer held an investors' meeting to try and dispel any lingering uncertainty, and among the information provided was that pertaining to Bayer's settlement with the weedkiller-related victims.

Evaluation by SMTAM

Given how rigidly Bayer responded to investors previously, this clarification of the company's handling with regard to areas of lingering uncertainty, including lawsuit settlements, is a step in the right direction and shows that it is listening to shareholders' concerns. We will continue to encourage Bayer to take action to dispel investors' concerns about the company, including the status of the ongoing legal situation.

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ESG Integration Enhancement

Since 2015, we have sought to apply ESG integration to the active management of domestic shares, domestic corporate bond investments and other operations by incorporating MBIS®, our proprietary developed non- financial information evaluation tool, into traditional investment methods. As soon as these efforts got on track, they immediately started producing results; so, in order to further accelerate them, we have worked to enhance ESG integration by expanding our methods and target assets (see Figure 1-4 below).

We are currently also revising our approach to ESG- minded stock screening. With regard to the stock of

New initiative		Revision (updated)

companies which manufacture Controversial Weapons, specifically cluster bombs and anti-personnel mines, it has always been our policy to remove them as active fund investment candidates when their corporate situation does not make engagement possible. We have added biological and chemical weapons as reasons for exclusion, and this now extends not only to the compa- nies' stocks but also bonds. Japan has signed and ratified conventions prohibiting the development, production and stockpiling of these four categories of weapons, as well as governing their destruction.

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1		ESG Materiality
ESG screening		All active products: ESG-minded stock screening

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ESG integration	ESG investment evaluation (non-financial information)

Reflection

in investment

decisions

Enhancement target process

External ESG data vendors, etc.Sumitomo Mitsui Trust Research Institute

Quantitative assessment based on proprietary and external data in light of SMTAM materiality

Domestic shares Domestic bonds Foreign shares Foreign bonds J-REIT

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evaluation

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ESG monitoring		Management and risk committee

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Identification of ESG Materiality

We have performed identification of ESG materiality. Previously, we have used the UN Global Compact as our ESG guidelines when developing our response policies for ESG issues; however, based on a review of the SDGs, the SASB (Sustainability Accounting Standards Board), etc., we have reorganized our ESG investment evaluation items and response policies within a framework of "ESG materiality."

	E (Environmental)	S (Social)	G (Governance)
	Climate Change	Human Rights &	Behavior
	Community
Risks	Natural Capital	Human Capital	Structure
	Pollution & Waste	Security & Liability	Stability & Justice
Opportunities	Environmental	Social	Governance
Opportunities	Opportunities	Improvement

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MBIS® Evaluation Enhancement

The MBIS® is our proprietary, non-financial information evaluation tool which we have used since 2015 to evaluate domestic shares and bonds. Our analysts use MBIS® to help them gather, analyze and evaluate non-financial information which cannot be expressed in terms of financial data for the companies they cover; such information includes the level and sustainability of added value for a company's products and services, the governance system which supports the added value the company provides, and the company's impact on the societal and environmental foundations which sustain its growth.

MBIS® is an acronym which stands for "Management" (M), "Business Franchise" (B), "Industry" (I) and "Strategy"

(S). It is the "M" which comes into play when evaluating

efforts aimed at risks associated with ESG issues, and it is the "S" which comes into play when evaluating efforts aimed at commercializing and capitalizing the opportunities associated with ESG issues.

Now, in line with the newly established ESG materiality framework, we are reorganizing and revising the MBIS® evaluation items pertaining to ESG issues and are working to enhance MBIS® evaluation through, among other means, the use of external ESG data vendor-driven ESG evaluations. Although the concept of the SDGs has already been a part of our evaluations, we are working to bolster it further so that we incorporate the 17 goals more fully into our engagement and evaluation.

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Checklist (20 items)

• Strategy execution capabilities

M

Management

• ESG initiatives

ESG Materiality (new)

• Improvement and innovation capabilities

• Capital and investment efficiency

*

etc.

E (Environmental)

S (Social)

G (Governance)

B

Business Franchise

data,

Climate Change

Human Rights &

Behavior

Community

ESG

Risks

Natural Capital

Human Capital

Structure

I

Industry

External

Pollution & Waste

Security & Liability

Stability & Justice

S

Strategy

Opportunities

Environmental

Social

Governance

Opportunities

Opportunities

Improvement

Strengthen Connection with SDGs

https://www.un.org/sustainabledevelopment/

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Utilization for In-house ESG Scoring and Stock Selection

Clarifying core ESG evaluation factors as part of establishing ESG materiality has made it possible to perform in-house ESG scoring, even in regards to the stocks of foreign companies and other assets outside the scope of MBIS® evaluation. Using ESG materiality as a base, we identify the ESG issues of investee companies and then utilize external ESG data and other resources to perform three-tiered,in-house ESG scoring. This score is taken into account when qualitatively assessing earnings

and valuation in the case of shares, or creditworthiness or spread in the case of corporate bonds, and it is thus reflected in stock selection.*

Also, amongst domestic shares, in-house ESG scoring enables ESG evaluation of companies not covered by our analysts. For domestic corporate bonds as well, in- house ESG scoring is used for stock selection in addition to the traditional MBIS® evaluation.

* Evaluations conducted by analysts using external ESG data and other resources for reference

ESG Integration Enhancement in J-REIT Funds

ESG Integration Enhancement

Sumitomo

In order to maximize medium-to-long-term investment return for our customers, we prioritize sustainable growth in the value of investment shares. In the area of J-REIT management, it has been our practice to independently evaluate each investment corporation's ESG efforts, such as the environmental-friendliness of owned properties, and to then make investment decisions with results of this

evaluation in mind. There has been remarkable progress in the ESG efforts of the various investment corporations, and the Sumitomo Mitsui Trust Research Institute, which advises us on J-REIT management, has also developed an ESG evaluation system which provides us with ESG scores that have allowed us to enhance ESG integration in J-REIT management.

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(1) Owned property	(4) Financial status evaluation
quality screening	(5) Other qualitative evaluation

	Excess investment
(2) Managing company	return strategy
qualitative evaluation		ESG evaluation enhancement
	Portfolio decision	Sumitomo Mitsui Trust
						Research Institute
		ESG evaluation by SMTAM
(3) Individual brand
investment equity valuation
	External ESG evaluation
		Provision of ESG evaluation for all listed companies

J-REIT ESG Evaluation by Sumitomo Mitsui Trust Research Institute

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The Sumitomo Mitsui Trust Research Institute (SMTRI) is a think-tank established in 1988 which specializes in urban and real estate-related research and consulting. Thanks to the firm foundation which it has built after many years of research and study in these areas, SMTRI not only provides real estate investment evaluation-related research services but also robust consulting services for the domestic and foreign real estate markets, real estate finance and infrastructure and PPP.

With regard to J-REIT analysis, SMTRI has served as an investment advisor to institutional investors since the start of J-REIT in March 2004.

Now, SMTRI uses the J-REIT-related knowledge it has cultivated over many years to enable it to evaluate the

appropriateness of individual investor corporations' handling of ESG issues, which is based on publicly available documentation, and to provide investors with ESG scores for J-REIT.

Evaluations look at four major considerations: the ESG promotion framework and initiatives related to the envi- ronment, society and governance. Each item has its own checklist by which it is scored. The checklists are developed based on a comprehensive survey of the various initiatives disclosed by the individual investment corporations and then they are selected in consideration of how well they address SDGs as well.

* Scheduled to be completed by December 2019

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Active Involvement in the Principles for Responsible Investment (PRI)

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Established with the support of the United Nations, the Principles for Responsible Investment (PRI) encourage institutional investors to incorporate environmental, social and governance (ESG) factors into their investment decision-making processes. The 100 signatory institutions to the PRI at the time of its launch in April 2006 represented total assets under management (AUM) of US$6.5 trillion, but as of March 2019, the number of signatories had increased to 2,372, representing total AUM of around US$82 trillion and a strong indication of the growing importance of responsible investment. Since becoming a signatory to the PRI in May 2006, we have drafted policies in accordance with the six principles and implemented initiatives in light of the latest developments.

The PRI evaluates each signatory with respect to their commitment to and progress on implementing the six principles based on their reports. A score of A+ is the highest, while E is the lowest. As shown in the table to the right, we have collected favorable scores on the whole and received a comprehensive assessment score of A+ for the fifth year in a row. We will continue with our active involvement in the PRI going forward and will make every effort to maintain and improve our ratings.

PRI Assessment of SMTAM 2019

Strategy and governance	A+
(comprehensive assessment)
Integration status of listed equity	A+
into responsible investment
Active ownership in listed equity	A+
	Engagement	A+
	Exercise of voting rights	A+
Fixed income investment (e.g., government bonds)	A
Fixed income investment (e.g., corporate bonds)	A

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Principle 1 We will incorporate ESG issues into investment analysis and decision-making processes.

We analyze and evaluate non-financial information, such as management thoroughness, strategy execution capabilities, and capacity for reform, with the aim of identifying improvements in or maintenance of sustainable corporate value at investee companies. Furthermore, we seek to implement initiatives (ESG integration) that utilize the knowledge gained from our analyses and evaluations in our investment management operations.

Principle 2 We will be active owners and incorporate ESG issues into our ownership policies and practices.

We conduct engagements and exercise voting rights with ESG issues in mind; through these activities, we encourage investee companies to implement appropriate initiatives to tackle ESG challenges.

Principle 3 We will seek appropriate disclosures on ESG issues by the entities in which we invest.

We seek appropriate disclosure of ESG issues from investee companies.

Principle 4 We will promote acceptance and implementation of the Principles within the asset management industry.

We actively promote engagement and awareness-raising activities with investee companies so these Principles gain acceptance and are implemented in the asset management industry.

Principle 5 We will work together to enhance our effectiveness in implementing the Principles.

We collaborate with investment institutions in Japan and overseas through participation in PRI-sponsored working groups and involvement in signatory bodies established with the aim of resolving ESG issues in order to improve effectiveness in implementing the Principles.

Principle 6 We will report on our activities and progress towards implementing the Principles.

We implement these Principles and produce and issue reports that meet the requirements for signatories to disclose their activities and progress towards implementing them.

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ESG-themed Initiatives

in Our Real Estate Businesses

The amount of CO2 emitted from the construction and operation of buildings is said to account for approximately 40% of all CO2 emissions in Japan, including indirect emissions. In addition, as humans spend a long time indoors, the indoor environment affects the health and productivity of the occupants. Given the significant impact of real estate property on the three aspects of the environment, society, and the economy, integrated initiatives for achieving the SDGs are thought to be highly beneficial for improving the sustainability of the three aspects.

The Group aims to promote and increase properties that give consideration to the environment, such as cities and buildings with high energy and resource efficiency and buildings that contribute to improving production efficiency. We will advance initiatives that contribute to increasing property values through features such as high environmental performance that reduce risk and enhance income.

Challenges for Achieving the Goals

• Making the environmental performance of properties visible
• Making the added value of environmentally friendly properties visible
• Increasing awareness in the real estate market about the added value of environmentally friendly properties
• Expanding corporate initiatives toward creating added value

Initiatives for Solving the Challenges

• Support acquisition of environmental performance certifications, such as CASBEE for Real Estate and CASBEE for Urban Development.
• Support the realization of environmentally friendly construction through construction consulting and assistance to help subsidy applicants qualify.
• Promote and raise awareness of environmentally friendly properties through committees and lectures.
• Create businesses that contribute to promoting environmentally friendly properties, including green finance and environmentally friendly property funds.

KPIs for Solving the Challenges

Support acquisition of	Support environmentally	Promotion and awareness-raising of
environmental performance	friendly construction	environmentally friendly properties
certifications					(Articles, lectures, etc.)
At least 20	At least 2			At least 10
certifications a year	cases a year		activities a year
(Aggregate total so far: 140 certifications)	(Aggregate total so far: 12 cases)	(Aggregate total so far: Over 160 activities)
Environment			Society				Economy
		(Indoor environment, health/
(Energy, water, resources, biodiversity, etc.)					(Property value, corporate value, etc.)
		comfort, safety/security, etc.)

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Fundamentals Driving the Shift to Environmentally Friendly Property

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The Paris Agreement was adopted in December 2015 at the 21st Conference of Parties (COP21) to the United Nations Framework Convention on Climate Change (UNFCCC), and came into effect in November 2016. The goals of the agreement include holding the increase in the global average temperature to below 2°C above pre- industrial levels.

On the domestic policy front, new non-residential buildings with floor space of 2,000m2 or more need to comply with energy saving standards under the Building Energy Efficiency Act (publicly issued in 2015) since the law came into force in 2017. Meanwhile, there has been progress in improving and broadening programs that offer government subsidies for projects with high environmental performance such as the "leading projects" program for sustainable buildings.

Global investment and financial sectors recognize that addressing global environmental problems is essential. More than 2,000 institutions in the United States and Europe have become signatories to the Principles for Responsible Investment (PRI), a United Nations-led global platform for investment that factors in environmental, social, and governance (ESG) issues, since its launch in 2006. Under the United Nations Environment Programme Finance Initiative (UNEP FI), more than 200 financial institutions based in

Japan and overseas, including banks, insurers, and bro- kerages, are working together to integrate ESG risks into financial system functions. Furthermore, the Principles for Responsible Banking (PRB) advocated for by UNEP FI as a framework for sustainable banking practices came into force in 2019. [The SuMi TRUST Group has been a signatory to PRI, UNEP FI and PRB since their launch.]

Used for investment decision-making, Global Real Estate Sustainability Benchmark (GRESB) was created in 2009, mainly for a group of large pension funds in Europe, to measure sustainability performance in the real estate sector. In 2019, 70 companies in Japan participated in the GRESB assessment. Of those, 44 were real estate investment trusts (REITs) that together comprise about 91.5% of Japan's total REIT market capitalization.

In 2015, more than 200 institutions in Japan's asset management and finance sectors announced their adoption of Japan's Stewardship Code, which spells out principles for responsible investors. The Corporate Governance Code, which includes principles to encourage listed companies to respond to sustainability con- cerns, also took effect as an attachment to the Tokyo Stock Exchange's securities listing requirement.

For real estate, there is a growing emphasis on environmental considerations.

Report ESG

Initiatives of SuMi TRUST Bank related to Environmentally Friendly Property

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Harnessing its broad client base as a trust bank, SuMi TRUST Bank has expanded into a wide range of businesses requiring cutting-edge expertise that leverages the Group's comprehensive capabilities in fields ranging from real estate brokerage, securitization, consulting, and appraisals to property investment.

SuMi TRUST Bank has proposed many ideas relating to environmental real estate, with a focus on showing how environmental performance can create added value in ways that are readily understandable. The efforts to raise

awareness on this topic go back to a paper we published in 2005 on the added value created by environmentally friendly property.

In 2010, SuMi TRUST Bank became the first Japanese financial institution to establish a section dedicated to environmentally friendly property. In addition to the expertise-based real estate business foundation, the Bank has worked to orient its businesses toward promoting environmentally friendly property through pioneering initiatives in environmental real estate.

Main Initiatives as a Pioneer in Environmentally Friendly Property

[Inception]	[Initiatives related to CASBEE]
A commemorative paper entitled "A Note on Environmental Value Added	• Lead organizer of subcommittee examining CASBEE property appraisal since 2007; launched
for Real Estate" for the 10th anniversary of Tokyo Association of Real	"CASBEE for Real Estate" certification system in 2013 (see page 69)
Estate Appraisers received grand prize in 2005 (see page 74)
[Organizing Study Groups]	[Initiatives related to Real Estate Appraisal and Evaluation]
• Lead organizer of a sustainable real estate study group since 2007; released	• Chair of a working group on environmental added value, organized by Japan Association of Real
results of studies in 2009 and 2016	Estate Appraisers (JAREA), since 2007
• Lead organizer of a smart city study group in 2013; released results of stud-	• Member of office building performance evaluation and display manual committee; released a man-
ies in 2016	ual on office building performance evaluation and display in 2017
[Initiatives linked to UNEP]	[Initiatives with National and Local Authorities]
• Member of a property working group organized as part of the United	• Member of a MLIT-sponsored study committee on the promotion and spread of environmentally
Nations Environment Programme Finance Initiative (UNEP FI) since 2007;	friendly property; the committee launched in 2008
released a collection of case studies and a handbook for Responsible	• Member of Tokyo metro government's low carbon partnership committee for small and medium-sized
Property Investment (RPI) in sequence	buildings; the committee launched in 2012 by the Tokyo Bureau of Environment
	• Member of Smart Wellness Office Research Committee, sponsored by Japan Sustainable Building
	Consortium; announced results of a study on economic impact of buildings with CASBEE evalu-
	ations in 2015 (see page 75)

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Business Lineup for Environmentally Friendly Property

1. Consulting to Support Applications for "CASBEE for Real Estate" Certification

Initiatives related to CASBEE for Real Estate

CASBEE for Real Estate is a system developed in 2012 for the purpose of promoting widespread use of environmental building performance evaluations in the real estate market. While maintaining consistency with CASBEE® certifications for buildings (new construction and existing buildings), CASBEE for Real Estate sharply narrows down evaluation items and takes into account consistency with environmental performance items that are focused on overseas.

CASBEE for Real Estate can be also used for GRESB assessment, so use of this track is spreading, especially

among REITs and real estate companies that are sensitive to sustainability concerns.

It consists of evaluation items that help show initiatives related to the Sustainable Development Goals (SDGs) and environmental, social, and governance (ESG) issues.

SuMi TRUST Bank is a participant in developing CASBEE for Real Estate as an organizer of the subcommittee for CASBEE property appraisal, which is sponsored by the Institute for Building Environment and Energy Conservation.

Mitsui Sumitomo

Table Evaluation items in CASBEE for Real Estate (In the case of office buildings)

Energy/	Target setting and monitoring/energy saving standards/O&M*3 system, usage and emissions intensity (calculated values),
Greenhouse gases	usage and emissions intensity (actual values), natural energy forms
Water	Target setting and monitoring/O&M system, water usage volume (calculated values), water usage volume (results)
Use of resources/	Conforms to new earthquake resistance standards, high earthquake resistance/seismic isolation and vibration damping, etc.,
usage of recycled materials, service life of structure materials, necessary renewal interval for main equipment functions, higher
Safety
self-sufficiency ratio (electricity, etc.), operation and maintenance
Biodiversity/	No use of invasive alien species, enhancement of biodiversity, soil environment quality/regeneration of brownfields, public
Sustainable site	transportation access, measures in preparation for natural disaster risks
Indoor environment	Attainment of building sanitation and environmental management standards, use of daylight, natural ventilation function, view
*1	Underlined items are prerequisites (they must be met to pass an evaluation).
*2	Items in red are related to universal metrics the United Nations Environment Programme's Sustainable Buildings and Climate Initiative (UNEP SBCI) is studying.
*3	O&M: operation and maintenance

Consulting to Support Applications for CASBEE for Real Estate Certification

SuMi TRUST Bank engages in consulting services to support applications for the CASBEE for Real Estate certification.

CASBEE accredited professionals with the proper qualification support the selection of real estate applying for certification while also evaluating the environmental performance of real estate and supporting the submission of applications for certification to certifying bodies.

Problem Discovery and Proposals for Improvement via

CASBEE for Real Estate

SuMi TRUST Bank offers proposals on initiatives that work in concert with CASBEE for Real Estate evaluations to identify problems and suggest improvements aimed at bolstering environmental performance.

We will continue to provide services that use the CASBEE system in our

business promoting environmentally friendly property.	A CASBEE evaluation sheet

TOPIC

Head Office Building of SuMi TRUST Bank Received CASBEE for Real Estate "S" Rank Certification

CASBEE for Real Estate had widen its applicable scope to include commercial properties and logistics facilities from its original focus on office buildings so as to broaden the range of properties eligible for this certification, and since December 2016 this certification has become applicable to sectional owned properties. As the first property evaluated under the broader scope, the head office building of SuMi TRUST Bank (the three floors below ground, and the 13 floors above ground) received a CASBEE for Real Estate "S" rank certification.

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Examples: Consulting to Support Applications for CASBEE for Real Estate Certification

Owners

Property

Rank

Certification date

1

Isetan Mitsukoshi Holdings

Isetan Shinjuku Main Store

S

2016/3/4

Manulife Life Insurance

Manulife Place Dojima

S

2019/5/29

Company

Premier Investment

NTT CRED Okayama Building

S

2018/3/28

Corporation

Japan Retail Fund Investment

Ito-Yokado Yotsukaido

S

2018/2/28

Corporation

Activia Properties Inc.

Tokyu Plaza Omotesando

S

2019/3/29

Harajuku

AEON REIT Investment

AEON MALL Kofu Showa

S

2019/3/29

Corporation

GLP J-REIT

GLP Atsugi II

S

2019/6/30

2

3

Industrial & Infrastructure Fund

IIF Nishinomiya Logistics Center

S

2019/3/28

Investment Corporation

Extension Building

Mitsubishi Estate Logistics REIT

Logicross Atsugi

S

2019/3/29

Investment Corporation

Daiwa House REIT Investment

iias Tsukuba

S

2019/9/30

Corporation

Invesco Office J-REIT, Inc.

Kinshicho Prime Tower

S

2019/9/30

Sekisui House REIT, Inc.

Garden City Shinagawa

S

2019/3/15

Gotenyama

ORIX JREIT Inc.

Seafort Square Center Building

S

2019/2/28

Japan Prime Realty Investment

Housing Design Center Kobe

S

2019/6/21

Corporation

13

4

7

11

8

5

9
			14
		12

6

10

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2. Consulting to Support Applications for "CASBEE for Urban Development" Certification

About CASBEE for Urban Development

CASBEE® (Comprehensive Assessment System for Built Environment Efficiency) is a system for evaluating the environmental performance of buildings and urban development, which is being developed and promoted in Japan under the leadership of the Ministry of Land, Infrastructure, Transport and Tourism. It is comprised of tools, such as CASBEE for Buildings and CASBEE for Real Estate.

Among CASBEE®'s various tools, CASBEE for Urban Development is an environmental performance evaluation for assessing the overall development of housing and commercial areas (urban development).

It evaluates environmental quality from the three aspects of the environment, society, and the economy as well as reduction in the environmental footprint.

It consists of evaluation items that help show initiatives related to the Sustainable Development Goals (SDGs) and environmental, social, and governance (ESG) issues.

CASBEE for Urban	Environment	Society	Economy	Environmental
Development	(Resources, nature,	(Fairness, safety/	(Traffic, growth	Footprint Reduction
Evaluation Items	architecture)	security, etc.)	potential, etc.)	(CO2 reduction)

Related SDGs

(examples)

SuMi TRUST Bank carries out environmental performance evaluations using CASBEE for Urban Development, as well as provides advice on application procedures for certification and support services, including supports for CASBEE reviews.

Case Study A LIST GARDEN nococo-town

In July 2018, LIST GARDEN nococo-town, a large eco- town in Totsuka, Yokohama City, became the first ever recipient of the highest rank certification ("S" rank) for CASBEE for Urban Development.

CASBEE for Urban Development's certification results are made public. They are introduced in mediums such as magazines and exhibited in model rooms, and help show that the eco-town offers quality housing, promotes the neighborhood's vitalization, and proactively contributes to the local community.

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CASBEE-WO (Wellness Office)

Given the spread of ESG investment in the real estate market and the needs for health & productivity management and reforms aimed at improving intellectual pro- ductivity, a new office model assessment system known as CASBEE-WO (Wellness Office) was launched in June 2019. As part of the CASBEE scheme, this new system focuses on evaluating buildings in terms of health and comfort for office workers.

The SuMi TRUST Group has been involved in the development of CASBEE-WO through an MLIT study group tasked with promoting ESG investment and the Smart Wellness Office (SWO) Research Committee. We

also plan to expand our consulting services up ahead to support certification applications.

Assessment components under CASBEE-WO

Category	Assessment component
	Health,	Space, interior, sound, light,
	comfort	air & ventilation, refreshment, exercise
Basic	User-	Mobility & communication,
performance	friendliness	telecommunications
	Safety	Disaster readiness, countermeasures for
	harmful substances, water quality, security
Operational	Maintenance	Maintenance
management	Satisfaction	Satisfaction
Program		Exercise program

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3. Construction-Phase Support for Environmental Considerations

The first bank in Japan to develop a land trust product in the 1980s, SuMi TRUST Bank has been involved in managing and developing many buildings and condo- miniums, and it provides construction consulting services based on knowhow from such projects.

We offer advice relating to factoring in environmental considerations in our menu of construction consulting services such as on the installation of energy-saving systems in buildings, ways to take into account landscapes and ecosystems, extension of building life spans, and adoption of recycling systems.

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Examples: Construction-phase support for environmental considerations

Company Name	Location	Use	Number of Floors	Floor Area	Target Rank
Clarion	Saitama Prefecture	Headquarters office	10 floors above ground, 1 rooftop floor	Approx. 19,000 m2	A (certification completed)
		and research center
Chuo Labour Bank	Tokyo	Central branch	1 basement floor, 9 floors above ground, 2 rooftop floors	Approx. 6,000 m2	A (self-evaluation)
Kanagawa Prefecture	Office	1 basement floor, 7 floors above ground, 1 rooftop floor	Approx. 10,000 m2	B+ (notification)
AEON MALL	Tokyo	Commercial facility	5 floors above ground	Approx. 150,000 m2	A (certification completed)
FUJI	Ehime Prefecture	Commercial facility	3 floors above ground	Approx. 140,000 m2	B+ (certification completed)
Ito-Yokado	Kanagawa Prefecture	Commercial facility	4 floors above ground	Approx. 29,000 m2	B+ (notification)
Toyo Seikan Group Holdings	Tokyo	Office*1	2 basement floors, 21 floors above ground, 1 rooftop floor	Approx. 72,400 m2	S (certification completed)
Daikin Industries	Osaka Prefecture	Office, R&D facility*1	1 basement floor, 6 floors above ground	Approx. 48,000 m2	S (self-evaluation)
		Office, observation	2 basement floors, 14 floors above ground	Approx. 11,500 m2	A (notification)
Hiroshima Mazda	Hiroshima Prefecture	deck, product sales
		and dining facilities*1
Anritsu	Kanagawa Prefecture	Office*2	7 floors above ground	Approx. 28,000 m2	S (self-evaluation)
Shimane Bank	Shimane Prefecture	Central branch*1	1 basement floor, 13 floors above ground	Approx. 12,000 m2	S (self-evaluation)

*1 Selected for the MLIT-led "leading projects" program for sustainable buildings.

*2 Selected for the METI-led "net zero energy building" experimental pilot program.

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As interest in environmental issues has grown, so has the number of properties applying for CASBEE® certifica- tion* or providing notification of self-evaluation in the past several years. In addition, some projects have been selected by the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) for the "leading projects" program

for sustainable buildings and by the Ministry of Economy, Trade, and Industry (METI) for the "net zero energy build- ing" experimental pilot program.

• The comprehensive assessment system for built environment efficiency (CASBEE) certification is an environmental performance evaluation system for buildings being developed and promoted in Japan under the guidance of MLIT.

Case Study B

HIROSHIMA ORIZURU TOWER

Situated adjacent to the Atomic Bomb Dome (Hiroshima Peace Memorial), this office building underwent full-scale renovations. The existing framework was reused and the building enlarged to accommodate a higher level of earthquake resistance. A large canopy, louvers, and a "spiral slope" walking ramp were also built into the newly expanded sections. The building reduces its CO2 footprint by utilizing various energy-saving features, including solar shading and cross ventilation. Visitors to the building can access the HIROSHIMA HILL observation deck under the giant canopy on the roof, enjoy numerous activities in ORIZURU Square, and learn about its CO2 reduction initiatives.

The ORIZURU TOWER was selected for the MLIT's leading projects program for promoting CO2 reduction in housing and buildings.

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4. Making the Value of Smart Towns and Cities Visible, Supporting Concept Formulation

Developing smart towns and cities that adopt next- generation "smart community*" social systems at the local level is an important step from the standpoint of regional development. In the past few years, these towns and cities have combined a series of complex reforms from changes to citizen lifestyles and local transportation systems to the introduction of area energy networks, including the recapture of heat and unused energy, to go together with effective use of electricity.

*See METI's website for details.

To realize smart towns and cities, it is necessary to create economic value added commensurate with higher costs while establishing clear targets from the basic planning stage onward for environmental, social, and governance (ESG) issues for the city or town.

SuMi TRUST Bank supports projects for smart towns and cities on many fronts such as devising frameworks that link various initiatives on environmental contributions etc. to economic value added and formulating project concepts. Through our provision of financial functions such as home mortgages, we also help projects get executed.

Concept Diagram for Making the Value of Smart Towns Visible

Town Goals

Environmental goals

Reduce energy use (rate)

Reduce potable water use (rate) Improve resource reuse (rate)

Protect and restore natural resources

Safety and soundness goals

No. days with lifeline provisions secured in case

of emergencies

Initiatives to Achieve Goals

Securing district landscape, sunlight and

ventilation

Solar power cells, fuel cells

High-efficiency facilities, home energy

management systems (HEMS)

Storage batteries, emergency-use

power generators

Security (district-wide, individual buildings)

Creation of Environmentally

Friendly Property Value

Reduce utility costs

Reduce operation and management costs

Create safe, comfortable and healthy living

environment

Reduce risks from disasters and blackouts Lower interest rates on home mortgages

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Case Study C

Fujisawa Sustainable Smart Town

The "Fujisawa Sustainable Smart Town" is a project currently being carried out by Panasonic Corporation at the former site of Panasonic's Fujisawa factory.

Panasonic Corporation, Fujisawa City, and eleven partner companies, including SuMi TRUST Bank, are collaborating to promote the project, which marked the town's opening in spring 2014.

SuMi TRUST Bank is participating in various ways, such as designing smart town evaluation indicators (environmentally friendly property values) and creating project-specific product plans for environmentally friendly housing loans.

This project is also praised for its community-wide comprehensive CO2 reduction efforts together with town management. It was selected for subsidies under the MLIT-led "leading projects" program for sustainable buildings (formerly known as the 2013 No.1 "lead- ing projects for promoting CO2 reduction" program for housing and buildings).

201 Report ESG

Sustainability Policy 1

Sustainability Policy 2

Sustainability Policy 3

Sustainability Policy 4

Sustainability Policy 5

Sustainability Policy 6

Delivering Value

Added Value of Environmentally Friendly Property 1

-Added Value Derives from Property Profitability

.Inc Holdings, Trust Mitsui Sumitomo

It is often said environmental friendly property "costs more than usual and is difficult to invest in," but price theory in real estate investment suggests such buildings are able to generate added value equal to or greater than their additional cost.

From the perspective of profitability (how much and how long do properties generate steady profits), a prop- erty's price derives from net income (revenue minus costs) divided by the real estate capitalization rate. The greater gross income including rents is, and the lower the costs of utilities, maintenance, and building management are, the higher net income is, and so the higher the valuation of a property. In addition, stable properties with less income fluctuation risk are awarded higher valuations as investors require a lower yield from them.

Environmentally friendly property can earn higher

net income by reducing utility expenses via energy savings and maintenance and operating expenses via the enhanced durability of parts and materials. Furthermore, such buildings can also generate higher gross income on higher rents stemming from higher productivity enabled by their enhanced office environments and the cachet boost from their environmental credentials.

Furthermore, environmentally friendly property is less exposed to future environment-related tax hikes or tougher regulations, so the capitalization rate for such buildings factors in less environmental risk. A lower depreciation rate resulting from a longer life span as well as enhanced appeal as environmentally friendly can also lower the capitalization rate.

For the reasons above, SuMi TRUST Bank believes that environmentally friendly property will realize added value.

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Conceptual diagram of environmental added value (1) Prices focused on the "profitability" of real estate

Prices focused on the "profitability" of real estate

The price of real estate*=	the net income generated by real estate		Environmental added value
* In the case of direct capitalization		the real estate capitalization rate
						I Contribution to higher net income
Environmentally conscious measures				Benefits of environmentally conscious measures		II Contribution to lower
				capitalization rate
Energy conservation design				Reduction of utilities and other costs
Avoidance of toxic substances				Increase in rental income and sales
			Reduction of the depreciation ratio
Preservation and creation of biological environments
		Reduction of risk of declining income
Longer building lifespans, recycling of building materials
		Becoming a landmark
etc.
			etc.
Conceptual diagram of environmental added value (2)	Conceptual diagram of environmental added value (3)
Reflection in net income					Reflection in capitalization rate

Gross			Net Income from
	Net Income from	Real Estate
	Real Estate	Environmental
estate real from income		Taxes and
cost estate real Ordinary	Added Value
Public Dues	Taxes and
Repair Cost	Public Dues
Repair Cost
Maintenance
Maintenance
Management
	Management
Utilities Cost	Utilities Cost
Other Expenses	Other Expenses

Net income increases further if gross income increases through improvement of productivity and image

Net income increases

Reduces through enhanced durability

Reduces through energy savings

			Risk premium on
	estate real on premium risk Ordinary		environmentally friendly property
	Environmental		Net income of
rate capitalization estate Real depreciation) (before	Environmental	environmentally
Risk	friendly property
Added Value
	fluctuates less due to
	Environmental	future tax raises and
Depreciation Ratio	tighter regulations
	Risk	Lowers depreciation
Market Risk	Depreciation Ratio
ratio through
Business Risk	Market Risk	extended property
lifespan
Business Risk
	Improves image
Other Risks	Other Risks
through environ-
General Financial	General Financial	ment-consciousness
		Asset Yield	Asset Yield

Source: Partial revision of "A Note on Environmental Value Added for Real Estate," a commemorative paper written by Masato Ito in 2005 for the 10th anniversary of Tokyo Association of Real Estate Appraisers

Sustainability Policy 1

Sustainability Policy 2

Sustainability Policy 3

Sustainability Policy 4

Sustainability Policy 5

Sustainability Policy 6

Added Value of Environmentally Friendly Property 2 -Helping to Make Added Value Visible

Study on Economic Impact of Buildings with CASBEE Evaluations

Given the paucity of research in Japan showing a correla-

This suggests each point in the CASBEE scoring system

tion between the environmental performance of buildings

(adjusted so 100 points is the maximum score) equates

and economic benefits, SuMi TRUST Bank implemented

to a market rent 0.5% higher than the average. These

a study into the economic impact of buildings with

results were announced at symposiums, the Architecture

CASBEE® evaluations as the leader of a working group

Institute of Japan convention, and other events.

examining economic

benefits under

Correlation between CASBEE Score and Market Rents

the aegis of the Japan Sustainable

(Single regression analysis)

Building Consortium's Smart Wellness

Office Research Committee. The study

45,000

C

B

B+

A

S

analyzed buildings with CASBEE® cer-

tification and non-evaluated buildings

m2)

40,000

and found average market rents in

35,000

buildings with CASBEE certifications or

3.3

30,000

per

applications were about 3.6% higher.

rent: yen

25,000

20,000

(Estimated

15,000

10,000

5,000

0

50.0

60.0

70.0

80.0

90.0

100.0

40.0

(Scores of building population)

Source: Data is from a fiscal year 2014 report issued by Japan Sustainable Building Consortium's Smart Wellness

Office Research Committee.

Comparison of average rents: Yen per 3.3 m2

Tokyo's 23 wards

Yokohama

Nagoya

Osaka

25,000

20,000

15,000

10,000

5,000

24,701

15,553

13,961

11,286

12,980

9,660

14,976

8,707

0

CASBEE

Total Tokyo

CASBEE

Total

CASBEE

Total

CASBEE

Total

buildings

23-ward

buildings

urban

buildings

urban

buildings

urban

sample

sample

sample

sample

Source: Data is from a fiscal year 2014 report issued by Japan Sustainable Building Consortium's Smart Wellness Office Research Committee.

Summary of multiple regression analysis results for CASBEE buildings

CASBEE evaluations, etc.

Sample size

Coefficients

Differential in

average rent

CASBEE flag (whether or not buildings have CASBEE evaluations)

517

564.160

+3.64%

CASBEE rank (five-level evaluation rankings)

517

263.525

+1.70%

CASBEE score (evaluation score with a maximum score of 100)

183

78.974

+0.46%

Service performance (Q2) score

183

1702.667

+9.9%

Intellectual productivity evaluation

180

319.318

+1.86%

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201 Report ESG

Source: Data is from a fiscal year 2014 report issued by Japan Sustainable Building Consortium's Smart Wellness Office Research Committee.