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Interview with SMBC Nikko Securities

Sustainable Lab Co., Ltd. continues to create businesses and expand its organization with the support of various people. We present to you our interview series "Cheer up!" introducing our cheerleaders.

This time, we have Toru Asano, Senior ESG Analyst and Science and Technology Analyst, Credit Research Division, Financial and Economic Research Department, SMBC Nikko Securities Inc., and Naoko Ito, Nikko Open Innovation Lab. Based on their sympathy for our philosophy, we received various feedback in the development of the product "TERRAST", and they have been supporting and accompanying us in various fields for a long time.

-Thank you for your time today. Please introduce yourself.

Mr. Asano-For investors who are customers of securities companies, the two traditional asset classes (types of investment) are stocks and bonds. The financial and economic research department mainly analyzes trends in bonds, exchange rates, and macroeconomics, and provides them to investors. In particular, the Credit Research Division analyzes corporate bonds, and I am personally in charge of a wide range of issues, including ESG issuer initiatives, ESG bond issuance trends, various regulations related to sustainability, and trends in science and technology related to decarbonization. We are sending reports to a wide range of investors. Recently, not only stocks and bonds, but also those who invest in alternative assets are showing great interest in the ESG field.

Mr. Ito - After working as executive secretary and research assistant in the research departments of foreign and Japanese securities companies, in October 2020 I moved to my current position, Nikko Open Innovation Lab. In a department that creates new businesses through open innovation, I am working on creating new businesses from the perspective of ESG/SDGs. In 2015, I was in charge of a report on the promotion of women's empowerment in the research department that triggered my awareness of SDGs and social contribution. I felt the possibility that the options for women's way of life will spread further in the future. I like to support my opponents so that they can improve their performance, so until then I hadn't envisioned a career where I would step forward or become a player. I made a change request and changed my career.

-The first opportunity for us to work together was when I met Mr. Ito at the Plug and Play Japan Accelerator Program. Looking back on those days, how do you feel?

Mr. Ito-In 2021, when I was fumbling around to create new businesses, I saw your company's president Hirase at a pitch contest. I really sympathized with President Hirase's philosophy of "clarification of true corporate value evaluation", and I thought, "It's really good!!", so I contacted him. “True corporate valuation” is the ultimate goal, or mission, of a securities analyst. Data is essential for analysis to fulfill that mission. At that time and even now, there are issues in acquiring data, and I think that your company is a very attractive company that cuts into it. I wanted to create a service that can be conveyed to.

- So you resonated with our philosophy and the value of data.

Mr. Ito - I think data is a treasure trove. I was analyzing data in the research department in my previous job, so I understood the importance and potential of data, and through my interviews with companies, I was aware that ESG/SDGs initiatives and data would become more important in the future. There was also. Since that time, I have seen people in charge of IR at companies struggle with how to disclose ESG and identify materiality, so I wanted to work together with them to create a service that would be a clue to solving them. .

-We were very happy that Mr. Ito approached us with enthusiasm.

Mr. Ito - Your company is attractive as a data vendor, such as using AI and including alternative data. , I thought that it was a company that would definitely grow in the future. Originally I have a supportive temperament, so I would like to support your company, which is working hard with a wonderful corporate philosophy and has tremendous potential! As soon as I want to help you. I also approached Asano, who is an ESG analyst at our company, thinking that we could make a better product by exchanging opinions together.

- Thank you. Mr. Ito introduced us to Mr. Asano, and we have received various feedback from the early development of our product "TERRAST". What part of "TERRAST" are you two interested in?

Mr. Asano-I find it very attractive that the basis of the data used for analysis is clear and that it is easy to use. The specifications make it possible to confirm whether it is the primary information disclosed by the issuer or an estimated value, and the ease of viewing the data and the user interface are also attractive. I am also grateful for the fact that the request from here is quickly incorporated into the product.

In addition to the attractiveness of the product itself, I also sympathize with the way of thinking of the management team. At a meeting with your company, I heard that you would like to build sustainability standards in Asia instead of developing ESG rules created from a European perspective as they are in Japan. I myself believe that the definition of sustainability can vary depending on the issues and values that each country faces. A rule that is good for one country may not be suitable for another country. We believe that it is necessary not only for Japan to follow the rules of the EU, which are leading in the field of ESG, but also for the creation of mechanisms and means (tools) to appropriately evaluate the sustainability of Japan. I became interested in

Mr. Ito - I think it is wonderful that "TERRAST" covers not only environmental data but also various data. We are also focusing on causal analysis, so we expect that it will lead to the enhancement of data items in the future. I think one of your company's strengths is that you can grasp trends and change the stored data.

-What kind of customers do you think "TERRAST" is suitable for?

Mr. Ito - Not only Japanese companies but also major overseas companies are included, so it is also an effective tool for large companies who want to refer to overseas advanced ESG companies. I think. Recently, the data on TCFD has been enriched, and the function is steadily evolving, such as the addition of a rating simulation function.

Mr. Asano - In addition to being easy to use for an analyst like me, I think there are many other potential uses. For example, TERRAST will be useful for operating companies when using sustainability scores to compare their own situation with competitors. Investors will find it useful when evaluating and screening investment and loan recipients. TERRAST has better cost performance than the services of major foreign-affiliated major vendors, and I think there is no doubt about its merits. I also appreciate that the information is updated at least once a year.

-What kind of problems do you think can be solved by using "TERRAST"?

Mr. Asano - As an analyst, I feel value in collecting primary information. In addition to being able to use primary information in an easy-to-understand manner for each company, the specifications make it easy to process data, so it is extremely helpful from the standpoint of analysis. I have already heard that the target companies will be expanded in the future, so it is reliable. Of course, the final scoring evaluation of each company is also helpful.

Mr. Ito - The integrated report is quite large, but I think that using TERRAST will lead to more efficient analysis work. Also, in the long run, I hope that TERRAST will be able to encourage social contribution. I feel that what is necessary to promote the realization of a better society is the "essence". In other words, “visualization of social impact” is necessary. By being able to measure SDGs / ESG / social contribution with TERRAST, "visualization of social impact" comes true, people can know truly good companies and services, buy stocks and products of good companies, contribute to society I think I can encourage each person's ′′ gentle ′′ action, such as being able to do it. I would like to realize such support using TERRAST.

- Thank you. Mr. Asano also mentioned that he sympathizes with the way of thinking of our management team. Mr. Ito, who has met various members, what is your impression of our team?

Mr. Ito-First of all, you are all very nice people! And it's global. In addition, I think that each person has a specialized field such as the environment field or data science and is a professional. Professional, global, nice person!

- good people! I agree. It's a flattering miso, but it's a good person. Our CEO Hirase often says, ``Don't make your abilities your personal property.'' People who want to use their abilities for society, not for themselves, are gathering. And since there are many people who have seen the outside world as well as their own country, I think it is connected to the idea of competing from Asia while understanding the rules from a European perspective. We are also global as a team. Half of our members are foreign nationals, so we hope to create good synergies by combining diverse cultures and ideas with expertise in each field, and incorporate that into our products to deliver good solutions to our customers.

-Finally, please give us your hopes and support for the sustainable lab and the product “TERRAST”.

Mr. Asano-Decarbonization targets of companies are not sufficiently unified in terms of definitions and targets for comparison. I feel value in delivering such hard-to-reach information with good performance. If you continue to pursue that point and push forward, it will be helpful as a user.

Mr. Ito-In the ESG field, although information disclosure is progressing, I have the impression that data maintenance has not progressed yet, and I feel the need to make it easier to analyze by cross-disciplinary information. I'm here. I think your company's appeal lies in (1) research on causal relationships and evaluation methods, and (2) provision of a wide range of unique data using AI and other technologies. I believe that it is important to be able to analyze using data with originality and essence in order to "clarify true corporate value evaluation", so I would like you to continue to incorporate more essential alternative data. is. Trends are always changing, so we expect to expand into not only the decarbonization area, which is currently being focused on, but also the social area.

Again, by "true corporate value evaluation" and "visualization of social impact", people can know truly good companies and services, and buy stocks and products of good companies. Encourage each person's "gentle" behavior, such as being able to contribute to society. I would like to continue working together with your company to create a world where social returns and investment returns are compatible.

- Thank you both! We hope that you will continue to support the growth of our products and organizations, and walk together with us, aiming for "a world where social returns and investment returns are compatible."

■Non-financial data bank for financial institutions, consulting firms, and corporate planningTERRAST Beta

■ ESG/SDGs visualization tool for business companies


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