SPARX refers to SPARX Group Co., Ltd., itself and the following affiliates: SPARX Asset Management Co., Ltd.; SPARX Asset Trust & Management Co., Ltd.; SPARX Green Energy & Technology Co., Ltd.; SPARX AI & Technologies Investment Co., Ltd.; SPARX Asset Management Korea Co., Ltd.; and SPARX Asia Investment Advisors Limited.

Since its inception in 1989, the vision of SPARX has been to be "the most trusted and respected investment company in the world." With that in mind, we have worked to contribute to society by developing its core investment business model and growing its client's assets through an innovative and cutting-edge investment style.

Major advances have been made in global prosperity since the rise of the free market economy. In its backdrop, the market has helped shape new social, economic, corporate, and governance systems. As a result of rapid development of society and the consequent rising complexity of these systems, there have been inevitable disruptions, shortcomings, and misalignments in the free market model. As an investment company, we recognize our responsibility to constantly reevaluate and contribute to improving inefficient or outdated systems via capital allocation.

SPARX's objective is "to make the people of the world wealthier, healthier, and happier through investment," and aims to contribute to societal development by fulfilling our commitments.

To determine if these goals have been met, SPARX uses ESG issues as its fundamental framework of business principles (Figure 1).

(Figure 1) About ESG (Environmental, Social, Governance)


To SPARX, "responsible investment" means taking part in long-term value creation processes for its investments.

SPARX does not classify responsible investment as a special investment style. Instead, we view responsible investment as an essential element that asset managers must incorporate into all of the firm's investment strategies.

SPARX uses ESG principles as its basis for choosing investments. When investing in equity, we help corporations improve ESG issues as necessary as a shareholder. When investing in real assets, we pay special heed to ESG issues while executing investments that contribute to its improvement.


At SPARX, the purpose of responsible investment is to provide investment returns that exceed the expectations of its clients.

SPARX believes that investments that contribute to the resolution of ESG issues are an effective approach to maintain high long-term investment returns. However, achieving high returns often requires making investments that are relatively unknown. Thus, we do not singularly target investments that have already-proven ESG track records.

SPARX believes in producing high returns in investments through a best-effort approach, thus investments may initially appear to have subpar ESG records. We conduct independent research to identify investment opportunities that demonstrate future improvement potential or room for improvement through shareholder support.

Investment Period

In practicing responsible investment, SPARX believes that the most effective long-term investment approach is to invest in assets that have substantive value to society.

When examining an asset's value, it is essential to look at how it creates added value for all of its stakeholders such as employees, business partners, shareholders, customers, clients, and any others. When a company prioritizes only some stakeholders, it is challenging to sustain its business over the long-term. To bring about sustainable, long-term value-added creation for all stakeholders, companies need to perpetually innovate while maintaining excellent governance.

SPARX approaches long-term value from a global perspective, especially when considering the current international climate. We look beyond the countries where its business is conducted, and recognize contribution to society as it relates to the entire world, the changing climate, and other countries.


SPARX has a strong interest in the sustainability of the global environment

SPARX begins every medium- to long-term investment decision by considering its impact on sustainability of the global environment. Human activity, in the form of both corporations and consumers, has significant direct and indirect effects on the environment. Because we believe in a sustainable society, we actively pursue solutions that reduces negative influences and invests in those that enhance the positive aspects of humanity's impact on the environment.

SPARX recognizes that breaking fossil fuel dependence is one of the most promising environmental solutions. As a result, we are actively involved in building and operating renewable energy power-generation facilities throughout its funds.


SPARX proactively engages in raising awareness and finding solutions to social issues

Since business operations often involve intricate global complexities, it is becoming increasingly difficult to unilaterally understand and resolve social issues. SPARX approaches these issues through its bottom-up research methodology, which is the foundation of its decision-making processes. Our asset managers resolve problems by engaging in first-hand discussions and confirming circumstances on the ground with respect to all related parties.

Along with engaging in dialogue with its clients and investment targets, SPARX engages in dialogue with governments and local communities when necessary. Based on the information gleaned from these discussions, we determine investment opportunities that can generate both economic and social value.

SPARX actively engages in educational activities throughout Japan to communicate with local communities. In addition to publishing books, holding seminars, and providing complete management reports with the goal of improving investment literacy, we hold educational events concerning renewable energy. SPARX is dedicated to supplementing the development of local communities with the knowledge gained through its research and operation activities.


SPARX commits the utmost attention to governance, as it believes it is crucial in both achieving high investment performance and the sustainability of its investment activities

When considering governance, SPARX focuses on reality more than formality, and continually searches for a governance that benefits medium- to long-term investors. Among the numerous factors for assessing governance, we focus specifically on the quality of the management teams who are responsible for maintaining and improving the value of its assets. Through in-depth conversations and in-person meetings with these teams, we gauge their vision, level of sincerity, and logic to determine the condition of the governance systems. When necessary, SPARX takes part in creating new governance systems.

To successfully conduct these activities, SPARX recognizes the need for itself to maintain a first-class governance system. Being both a public and investment firm makes us unique in our position. We not only strives to achieve these internal controls, but also strives to lead the dialogue of governance and stakeholder harmony.

Responsible Investing in relation to Listed Stock Investment Strategy

The Listed Stock Investment Strategy is managed by SPARX Asset Management Co., Ltd.; SPARX Asset Management Korea Co., Ltd.; and SPARX Asia Investment Advisors Limited.

Since its inception, SPARX has worked to develop innovative investment methods under the investment philosophy that "the macro is the aggregate of the micro," and offer investment intelligence derived from its thorough bottom-up research methodology. Our approach for listed stocks refers to a process that emphasizes research on individual companies.

In addition to ascertaining past corporate performance from numerical data and written information, we also arrange to speak and engage directly with companies and management teams at opportune times, and maintains an open dialogue with these companies.

SPARX's approach to research and analysis entails measuring empirical corporate value from qualitative analyses stemming from corporate earnings quality, market growth potential, management strategy, and also from quantitative analyses that emphasizes return on equity (ROE) and cash flow.

SPARX researches whether the target companies a) generate social value, and if so, b) how that value-generation leads to the creation of economic value. "Social and Economic Value Generation (Figure 2)" refers to whether the company makes all its stakeholders healthier, wealthier, and happier, in accordance to our company motto. Accordingly, SPARX does not invest in companies that pursue only short-term profits.

The Listed Stock Investment Strategy focuses on social value generation because of its relevance to being a leading indicator of corporate economic value. It is our belief that generating economic value is essential for sustainability, thus investment decisions are not made in any companies that produce high social value but not economic value.

(Figure 2) Social and Economic Value Generation from Companies Targeted for Investment

When considering corporate value as part of the Listed Stock Investment Strategy, SPARX takes a best effort approach, focusing on the likelihood of future improvements based on information acquired through investment research, whereas ESG compliance ratings are used for reference only.

Accordingly, the Listed Stock Investment Strategy includes investment candidates that may currently have low absolute levels of social and economic value, as those companies may exhibit a course toward improvement. Moreover as a shareholder, we aid in corporate value-growth through its post-investment dialogue with companies.

After executing investments, SPARX strives to ascertain the state of its investee companies from the perspective of medium- to long-term corporate value growth. We leverage the unique features of our bottom-up approach by speaking directly with companies and management teams, while also looking at public information. Then, we carefully examine 1) whether companies are adopting effective management strategies that suit the business environment and 2) whether or not they have appropriate corporate governance structures.

SPARX's policy is to perform qualitative analyses from three perspectives when evaluating companies for stock market investment: the quality of corporate earnings, the market growth potential, and the quality of management (Figure 3). ESG compliance ratings are used for reference purpose.

(Figure 3) Corporate Valuation in Listed Stock Investing

ESG Impact on Valuation

SPARX believes that ESG factors play a crucial role in predicting future revenues and profits so we use these metrics in our long-term corporate earnings forecasts. ESG factors also play a role in determining investment risks and they are used as a variable to determine discount rates. (Figure 4)

(E) Environment

Environmental factors look at the impact that a business has on the global environment and whether it may be an investment opportunity or a major risk factor for the future of the business. Even if a company scores negatively on environmental factors, we do not refrain from investing in companies that are taking active steps toward improvement. For example, energy-related companies tend to have heavy environmental burdens, however we actively look to allocate to companies that are forward looking compared to peers or investing in new technologies and efficiencies.

Furthermore, another aspect of SPARX's policy is to continually conduct research on companies and industries involved in reducing environmental burdens. This environmental perspective looks at the overall likelihood that a business will exist over the long term, and it is inherently intertwined to the qualitative analyses of corporate earnings. The environmental factor is significant both from the positive perspectives of growth potential and business opportunities, as well as the negative perspective of growth-hindrance or risk.

(S) Social

Growing inequality in wealth is an unfortunate reflection of the current global social climate. Recruiting, hiring, and optimizing the utilization of a high-quality workforce is one of the most vital organizational priorities within management teams. We believe that it is extremely difficult for companies that have unequal or unfair working conditions to survive over the long-run. In this way, an important factor in analyzing the state of corporations over the long term is to take a look at their social contributions and activities. The impact that potential investments have on their local communities has great correlation to their long-term investment returns. Worldwide, there is an emphasis placed on corporate roles in society, and whether companies are able to fulfill their social responsibilities heavily influences corporate competitiveness.

Accordingly, the Listed Stock Investment Strategy is based on the idea that a key condition for investment is whether a company is meeting its social responsibilities and providing appropriate working conditions. Moreover, SPARX actively considers investments in corporations that formulate strategies focused on social responsibility and ones that have a positive impact on their local communities and society.

From a social perspective, the quality of corporate earnings is a direct result of upholding social value in its supply chains, workforce, and productivity. Even in the analyses of the quality of corporate managers, the way that management teams view social contribution and where they position their business in society has a significant impact on the evaluation of the quality of management.

(G) Governance

Governance is the most important factor in evaluating the quality of corporate managers.

We believe that managers are a crucial factor to corporations maintaining their long-term competitiveness. Since its founding, SPARX has operated under the belief that speaking with management teams and analyzing their qualities is a crucial process when deciding whether to make an investment. Every year, we conduct more than 2, 800 research activities and strive to improve our capacity to analyze management.

Governance policy is a crucial point of discussion when speaking with corporate managers. Governance is a core function of a social system that realizes a functional differentiation between management and capital in a capitalist society. Managers being aware of and executing this role is essential, not only for corporate shareholders but for all stakeholders. It is vital that managers appropriately carry out their decision-making processes, strategy formulation, and monitoring, both in terms of corporate management and investment selection.


After evaluating companies from these three major qualitative perspectives, SPARX rates those it considers investment candidates. The ESG metric is used in calculating corporate value and in evaluating risk and premium factors in long-term corporate valuations.

(Figure 4) An Example of ESG Factors that Impact on Corporate Value

Active Ownership

Active Ownership is adopted to Listed Stock Investment Strategy. The Listed Stock Investment Strategy is managed by SPARX Asset Management Co., Ltd.; SPARX Asset Management Korea Co., Ltd.; and SPARX Asia Investment Advisors Limited.

1.Conflicts of Interest

SPARX Group Co., Ltd. is an independent company without capital ties to any other financial group. We are also Japan's first listed company whose subsidiaries operate mainly asset management businesses, so we have completed numerous efforts to establish a code of conduct sufficient to earn a high degree of trust from the market. Half of SPARX Group's Board of Directors is occupied by independent outside directors, giving the firm a governance structure that allows for the proper management of conflicts of interest. SPARX thoroughly manages its subsidiaries to ensure the utmost transparency.

In principle, we prohibit a priori investment activities that could lead to a conflict of interest with our investors. Furthermore, conscious of the fact that we operates a type-1 financial instruments business, SPARX has stipulated the types of transactions involving conflicts of interest that need managing, and how they will be managed as a part of our policy for managing conflicts of interest. An outline of these rules (see note) are available on SPARX's website

2.National Stewardship Code

SPARX Asset Management Co., Ltd. has established a policy in alliance with Japan's Stewardship code published and updated by the FSA in 2017.

3.Assets covered by Active Ownership Policy

SPARX's active ownership policy applies to all Listed Stock Investment Strategies. SPARX believes that engaging in dialogue and shareholder voting is a tool of value creation over the mid- and long-run.

4.Expectations and Objectives

After researching current conditions of medium- to long-term business prospects for investee companies and investment candidates, we conduct on-site company inquiries as part of our Listed Stock Investment Strategy. We execute investments in companies if they are deemed to have rational operations and the potential for improved corporate value.

The engagement process is aimed at providing support for improving corporate value. SPARX speaks with management teams to understand management issues, and voices its opinion. These conversations are aimed not only at companies in which we invest in, but also potential investments. Discussions about ESG-related topics are meant to resolve both current and potential future issues.

SPARX's bottom-up approach in the Listed Stock Investment Strategy contributes to increased value in investee companies, while also improving investment returns over the medium- to long-term. SPARX has a policy to adequately meet its stewardship responsibilities in order to qualitatively improve and enhance its bottom-up approach.

5.Engagement Approach


SPARX conducts engagement activities to build good relations with listed companies. Through discussion, we are dedicated to understanding a company's priorities and strategies of ESG in a case-by-case basis and voicing our opinion accordingly. When voicing an opinion, we focus on qualitative strategies instead of strictly financial numbers. We believe that the sustainability of the relationships of all stakeholders of the listed company is important, including but not limited to; shareholders, employees, customers, partners, local communities, and the environment.

Prioritization of Engagement

Engagement activities have two purposes and two effects. The first purpose is to research listed companies. Discussion allows for the exposure of key knowledge that is often unavailable from presentations or the company's website. The second purpose is to share opinions as a shareholder and management expert such that the listed company can consider an outside perspective of itself.

The first effect of engagement is improved fundamentals, such as the business model or ESG. Since these aspects are deeply rooted in overall company strategy, this engagement strategy is effective in both encouraging top management to change strategy, or supporting and further justifying its current strategy. The second effect of engagement is to shrink a company's value gap. Listed companies often trade at a discounted value to its true intrinsic value for a multitude of reasons such as bad disclosures of strategy, business model, or ESG.

Methods of Engagement

Through countless discussions with corporate management teams, SPARX has worked to acquire expertise not only in a financial context but literacy related to the operations of these companies. SPARX demonstrates its support for activities that promote corporate value growth through continual research activities. By investing in such companies, we simultaneously express constructive criticism to encourage changes in companies that have room for improvement.

Transparency of Engagement Activities

SPARX reports on its engagement activities and provides basic policy on stewardship responsibilities through its investment management reports, discussions with clients, various types of seminars, and websites. When describing the state of investment management, we strive to fully disclose proprietary information gained through our bottom-up research approach, as well as our thoughts on corporate value and our efforts to support corporate sustainable growth.

Due diligence and Monitoring Process

SPARX pursues to understand corporate strategy to maximize value over the medium- to long-term. Through bottom up research, SPARX analyzes not only public information, but also actively engages in discussion with top management to determine the appropriate corporate strategy and governance.

Analysis and monitoring of a company utilizes more than just financial data, and includes qualitative structures and relationships with all stakeholders including clients, employees, partners, communities etc.

Insider Information

SPARX's insider information compliance structure prohibits all securities trading activity based on material non-public or insider information in accordance to the Securities and Exchange Surveillance Commission. While SPARX aims to eliminate any discovery of insider information, if any insider information is gained during engagement, the information is recorded and monitored according to company policy, and appropriate compliance actions are put in place.

Escalation Strategies

SPARX proactively invests in companies where management strategy is improving corporate value. In contrast, to protect the interest of beneficiaries, a disinvest decision is made if management employs policies which inhibits sustainable growth. Separately, SPARX operates specialized strategies in which funds actively promote change to corporations by exercising shareholder rights.

6.Voting approach

ESG Issues

SPARX aims to increase shareholder returns by exercising proxy voting, and influencing improvement in mid- to long-term corporate value. The investment manager is the final decision maker for each proposed resolution, and the manager takes into consideration whether or not the investee's ESG program serves to improve corporate value.

Prioritization and scope of voting activities

SPARX executes investments after researching and understanding target companies' management policies, growth potentials, business models, corporate governance issues, and other matters through a bottom-up approach within the core of its listed stock investment strategy. When exercising voting rights, we make decisions based on whether any given agenda item contributes to corporate value-growth over the medium- to long- term. The voting guidelines and management processes for each type of shareholder vote are defined in SPARX's internal bylaws, and the basic policy is publicly available.

The SPARX stewardship code has guidelines for the following issues:
1. Financial Statements and earnings distribution
2. Capitalization
3. Reorganization including mergers, acquisitions, and transfers of business
4. Board of Directors elections
5. Auditors elections
6. Executive compensation
7. Executive stock options
8. Amendments to articles of incorporations
9. Poison pill plans
10. Shareholder proposals

Methods of Voting

SPARX takes a fully active approach to manage listed stock investments, with investment managers researching all investee companies and only acquiring stocks after ascertaining the quality of their management teams. Leveraging this unique approach, we do not establish external or quantitative voting criteria for exercising shareholder voting rights as a part of the Listed Stock Investment Strategy. Instead, our investment managers individually decide whether to vote for all shareholder votes based on their understanding of said company's situation and on the question of whether the proposal contributes to corporate value growth. Our strategy requires disclosure of any votes against a proposal.

Transparency of Voting Activities

Since disclosing all voting activities is equivalent to disclosing a full investment portfolio, SPARX discloses only votes of oppositions to company proposals and votes in favor of shareholder proposals. SPARX Asset Management Co., Ltd.'s voting record can be found on our website.

Filing / Co-filing Resolutions

SPARX recognizes collective engagement as an effective part of the listed stock investment strategy, especially in terms of having dialogue with companies and shareholders. When other institutional investor shareholders request assistance with companies held within SPARX's portfolio, we carefully examine the importance and appropriateness of these discussions as part of the strategy. If or when SPARX has determined engaging in dialogue with investee companies would be more effective in collaboration with other shareholders, then we may ask other shareholders to participate in collective engagement.

Decision Making Processes

Shareholder voting is finalized by an internal investment committee at SPARX Asset Management Co., Ltd. The investment committee is constituted by division heads of investment and research, risk, legal, and compliance, appointed by the board of directors. The investment committee creates guidelines for voting, while also monitoring and finalizing votes that investment managers propose. All voting is proposed by the investment manager that is invested in each firm. This allows for flexibility in the decision in a case-by-case basis by the most knowledgeable individual.

Securities Lending Processes

While SPARX does engage in securities lending as per request from clients, securities are recalled prior to proxy voting to exercise voting rights.

SPARX Renewable Energy Investment Strategy

For the Renewable Energy Investment Strategy, power generation consulting is handled by SPARX Green Energy & Technology Co., Ltd. Asset management is handled by SPARX Asset Management Co., Ltd. and SPARX Asset Trust & Management Co., Ltd.

The SPARX Renewable Energy Investment Strategy contributes to energy, finance, and capital markets in Japan and other countries around the world by upholding the following principles.

1.Increasing Japan's energy self-sufficiency ratio and reducing the environmental burden through the expansion of renewable energy (Environment)

Considering Japan's uncommonly low energy self-sufficiency ratio, alongside the environmental burden of fossil fuel consumption, we see the expansion of renewable energy power generation facilities as one of Japan's most crucial investment needs. However, achieving the goal of supplying 20% of Japan's energy demand via renewable energy will require enormous funding. Our Renewable Energy Investment Strategy aims to address this funding gap: supplying financing to areas where the demand is the greatest, while expanding renewable energy power generation facilities. We aim to contribute to a more stable energy supply globally, a higher energy self-sufficiency ratio in Japan, and the creation of a carbonless society.

2.Revitalizing local communities through renewable energy (Society)

Renewable energy sources can be found in abundance all over the world. SPARX believes that precious natural resources, such as land and forests, should benefit the local community in which it is located. Solar and wind power generation have the advantage of short development periods. Additionally, geography and climate conditions make it easy to estimate the scale of projects. On the other hand, biomass power generation can be expensive and time consuming to set up, however, has the advantage of job creation and less exposure to economic fluctuations. We aim to skillfully combine the distinctive characteristics of different types of renewable energy to maximize the benefit to the local area.

3.Contributing to the improvement of investment efficiency in Japan (Governance)

In Japan, owners of physical assets, or "infrastructure-related assets," have traditionally been governments and businesses, and such assets were maintained on their respective owners' balance sheets. However, going forward, the paring down of these asset heavy balance sheets will be a key component of the Japanese government's strategy. Similarly, the private sector carrying long-term infrastructure-related assets prevents new investments and slows money velocity. The use of a fund for infrastructure-related investments can address this liquidity need while increasing transparency through disciplined operations and disclosures, while pursuing reasonable returns.

Giving back to local communities

Renewable energy plants, which are likely to operate for the next twenty years, are investments for the future generation.

Accordingly, we believe that an important aspect of creating renewable energy infrastructure through the Renewable Energy Investment Strategy is community building that includes environmental education with local children.

SPARX organizes environmental education programs to discuss the benefits of renewable energy, the different forms of renewable energy needs of the future, and give children a chance to interact first-hand with renewable energy power plants.

The Energy Summit

This program aims to foster children's creativity to solve society's future energy needs through understanding the renewable energy plants operated by SPARX's Renewable Energy Investment Strategy and other renewable energy ideas and examples around the world.

Tour Look and listen Participants will begin with a tour of a mega solar facility to learn about its role and how it works.
Learn Participants will learn about energy from various perspectives through a fun quiz game.
Easy-to-understand "food for thought" examples will be outlined and form the basis of thinking about energy and energy solutions for later.
Hands-on experience Participants will try out various methods of generating power themselves. The interaction based examples of power generation will be fun while highlighting educational energy material.
Creative time Think Participants will have an opportunity to come up with their own creative solution to power the future.
A number of participants are asked to present their ideas.

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