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Japanese giant pledges billions to impact

The parent company of Sumitomo Mitsui Trust Bank, a gatekeeper for Japanese pension funds, is transforming its purpose to ‘balanced creation of both social value and economic value’.

Sumitomo Mitsui Trust Holdings, an investor and fund services provider for Japanese pension funds, plans to deploy ¥500 billion ($4.1 billion; €3.8 billion) into impact by 2030.

The capital is earmarked for “businesses and companies that contribute to solving various social issues, including those in the areas of carbon emission reduction and various types of infrastructures”, according to a statement from SMTH subsidiary Sumitomo Mitsui Trust Bank. “This action would invite in ¥2.5 trillion in institutional investors equity,” the statement continued.

SMTH is a ¥63.3 trillion company comprising a long list of subsidiaries in asset management, retail banking and other areas of financial services. It is not clear from the press release through which companies the ¥500 billion will be deployed and whether this will be client capital, balance sheet capital or a mixture of both. SMTH was unavailable to comment at press time.

“We aim not only to contribute to the resolution of social issues through a virtuous circulation of funds, assets, and capital, but also to achieve sustainable and stable growth for SuMi TRUST Group,” SMTH said in the statement.

Since 2020, SMTH has been reforming its management model to “place the balanced creation of both social value and economic value at the core of our management principles,” SMTH president and director Toru Takakura said in a June 2021 letter.

This is echoed by SMTB president Kazuya Oyama, whose April 2021 letter stated that the bank is “tackling the issues confronting Japan’s financial and social sectors head-on” under the new management plan. “Our clients’ needs are becoming increasingly diverse, with individual clients preparing for an age of 100-year life and corporate clients taking on ESG initiatives… We aspire to… work towards solving various social issues,” Oyama’s letter continued.

SMTB has made a number of impact-related investments this year. Earlier this month it announced a commitment to the New Forests Tropical Asia Forest Fund 2, a forestry fund “with a special focus on impact activities such as climate change and biodiversity preservation.” The forestry fund is “actively working towards” SDGs 8 (Decent Work and Economic Growth), 13 (Climate Action) and 15 (Life on Land), SMTB’s statement said. Other investors in the $300 million-target fund include TotalEnergies, the Asian Development Bank and Singaporean state-backed investor Temasek Holdings.

And so far this year, the bank has issued three “positive impact finance loan agreements” – funding provided on the basis of the borrower’s positive contributions to the UN’s Sustainable Development Goals. These loans have been issued to Japanese real estate trust Hulic Reit, construction company Kajima Corporation and Nankai Electric Railway. The loans are in line with the United Nations Environment Programme Finance Initiative’s Principles for Positive Impact Finance, according to SMTB’s statements.