Resona Group Integrated Report 2022

A Framework for Promoting SX

The Relationship between Our Three Long-Term Sustainability Targets

Our Long-Term Sustainability Targets, announced in June 2021, consist of three target categories. These targets were not formulated separately.

The Retail Transition Financing Target is associated with our efforts to provide our customers with needed solutions determined through robust dialogue with them, and is a direct target vis-à-vis our vision of SX for both customers and the Resona Group.

Meanwhile, the Carbon Neutrality Target is meant to establish our position as a pioneer in this area. We need to lead the way by first pursuing carbon neutrality—a difficult challenge—ourselves if we are to help our customers understand the importance of carbon neutrality initiatives and help them navigate the various difficulties that will come their way.

As for the third target, for us to steadily support customers’ SX in the face of the accelerating shift in the business environment, we need to be capable of constantly creating and delivering new solutions. To this end, we aim to push ahead further with women’s empowerment, building on the outcomes of the ongoing empowerment efforts that lend the Resona Group a distinctive strength in terms of diversity-driven value creation. Thus, we have established Targets for the Empowerment and Promotion of Women.

1Retail Transition Financing Target →Provide customers with needed solutions based on robust dialogue

Review of FY2021 Accomplishments and Future Initiatives

Over the course of the first year since the establishment of the target, we have extended a consolidated total of approximately 846.0 billion yen, with the progress ratio amounting to 8.4%.

Our final target of extending 10 trillion yen was set with the intention of raising the cumulative balance of funds to approximately 1.4 to 1.9 times the amount previously extended in similar financing.

In this regard, our first-year results were approximately 1.4 times to 1.7 times as large as the previous cumulative balance of similar funding for a single fiscal year, suggesting that the current pace of expansion in such funding is mostly in line with our initial plan.

Looking at a breakdown of the financing, funds extended to support or facilitate initiatives to address environmental issues totaled 198.0 billion yen, accounting for one fourth of the overall balance. In addition, the total balance of funds extended in financing in conformity with external sustainability standards, such as the Green Loan Principles and Sustainability-Linked Loan Principles, stood at 287.0 billion yen. This indicates a higher growth rate compared with past operating results.

In light of the above described accomplishments, we have concluded that through in-depth customer engagement and the provision of enhanced solutions, we were able to make a certain degree of progress in extending transition finance to SME customers to help them update their awareness and transform their modes of behavior.

On the other hand, we have discovered that there are a number of SME customers who have yet to take tangible SX action due to a diverse range of underlying issues. For us to empower as many customers as possible to steadily move forward from their current situation, we deem it essential to update our internal and external best practices while endeavoring to further enhance our dialogue and solution capabilities.

With this in mind, in FY2022 we will step up the development of human resources and the enhancement of our organizational capabilities. For example, we will consolidate know-how regarding customer dialogue and solutions based on successful cases of SX assistance, including those employing methods for assessing the degree of customer commitment to addressing ESG issues through businesses and a simplified CO₂ emission calculation service, and roll out such know-how throughout our organization.

For individual customers, we will similarly work to strengthen various solutions designed to assist their SX efforts.

Engaging in in-depth customer dialogue is the starting point of Retail Transition Financing. To this end, each Group bank conducted customer interviews on SX-related issues throughout the second half of FY2021.
In the course of these interviews, approximately 31,000 corporate customers shared the current status of their SX initiatives with us.

As a result, we have discovered that the status of SX initiatives undertaken by SMEs varies widely by the size of their operations. Specifically, smaller businesses tend to lag behind other companies in terms of launching initiatives. Moreover, approximately 80% of interviewees were found to have been facing such issues as “lack of employee understanding and insufficient employee awareness” or “No idea what to do.”

To support these customers, we aim to act as their “running partner” and have developed a new framework for assessing the degree of customer commitment to addressing ESG issues through business operations in FY2021. This framework is being utilized by every Group bank in customer dialogue from FY2022 onward and focuses on assessing the customer’s approach to and the status of their initiatives addressing environmental and social issues in order to establish a shared recognition of these matters and thereby enable us and the customer to think together what can be done going forward and find optimal solutions.

In addition, more than half of the SME customers interviewed showed interest in launching initiatives to measure and reduce CO₂ emissions from their operations. Based on this finding, in April 2022, Resona Research Institute, a Group subsidiary, began offering a simplified CO₂ emission calculation service free of charge.^*2

The status of sustainability efforts undertaken by SMEs and the management resources they can afford to allocate to such efforts vary greatly by company. Accordingly, we recognize that our solution lineup must be diverse and capable of assisting each SME seeking to push ahead with sustainability initiatives according to their current situation.

With this in mind, in FY2021 we expanded the lineup of services offered under the SDGs Consulting Fund while releasing new loan products designed to ensure that the Resona Group and each borrower share data on the latter’s ESG targets and the progress status of its relevant efforts. In these ways, we executed one measure after another to enhance solutions offered by each Group bank.

For individual customers, we launched housing loans with privileged conditions for purchasers of eco-friendly housing, making such loans available via each Group bank from the fourth quarter of FY2021.

2Carbon Neutrality Target→Lead the way in achieving carbon neutrality

In FY2021, the volume of CO₂ emissions attributable to the Resona Group’s operations decreased by 43% (provisional basis) compared with the FY2013. This also represented a year on year decrease of 4,293 t-CO₂.

Our initiatives in said fiscal year included the introduction of energy procured from renewable energy sources at key facilities run by Group companies, the upgrading of power supply facilities and a switchover to LED lighting. Since approximately 90% of CO₂ emissions from Group operations are attributable to energy use, these efforts greatly contributed to the year-on-year decrease in CO₂ emissions.

For FY2022, we will continue to promote the introduction of energy procured from renewable energy sources, targeting such energy-intensive facilities as system centers.

In addition, we are engaged in energy-saving activities on a Groupwide basis to curb the financial impact of the current surge in energy prices. These activities are also expected to help us mitigate the worsening energy demand-supply balance, which usually becomes a subject of particular public concern in summer and winter due to rises in energy demand in these seasons.

3Targets for the Empowerment and Promotion of Women →Enhance our diversity-driven organizational strength to constantly create and deliver new value to customers

As of the beginning of FY2022, the ratio of women in senior and line manager positions increased as shown above. In particular, the ratio of female line managers grew for the 10th consecutive year.

On the other hand, the ratio of women in executive officer positions at Resona Holdings dropped year on year. This was attributable to the appointment of an internal female officer who had concurrently served at Group banks, to the post of director at Resona Bank and Saitama Resona Bank. Reflecting this move, the ratio of female directors at Resona Bank and Saitama Resona Bank rose from 9% and 15% at the beginning of FY2021 to 27% and 23%, respectively. Also, as of June 30, 2022, the ratio of female directors at Resona Holdings increased from 20% to 30%.

To push ahead further with the empowerment of women, we deem it important to take on relevant initiatives on an ongoing basis, employing a medium- to long-term perspective. Such initiatives also need to be informed by input gleaned from female employees with varying job categories and ranks.

It was revealed via an in-house survey conducted in FY2021 that measures associated with the empowerment of women have, to a certain degree, taken root in the Group’s organization, while a growing number of women indicated increasing awareness regarding their own career development needs. On the other hand, the survey showed that many female employees possess business experience in only a handful of particular areas and lack the broad range of expertise typically required of those pursuing higher management positions. Moreover, we have found that, although child rearing assistance programs offered by the Group are by and large deemed sufficient, many respondents requested measures to improve other aspects of the employee assistance systems. Among these requests was the suggestion that further measures must be undertaken to secure robust understanding among the workforce toward individuals who need to utilize these programs along with the reinforcement of staffing for teams whose capacities are affected by the absence of such individuals. Others requested the additional measures to assist employees engaged in nursing care.

Based on these inputs, in FY2022, we will implement a variety of initiatives, including empowering women to gain more diverse experience over a wider range of business operations, stepping up initiatives to encourage male employees to assume a greater role in child rearing and enhancing the content of nursing care seminars for employees.

Governance

The Sustainability Basic Policy and other important policies related to sustainability, are determined by the Board of Directors.

The status of initiatives undertaken based on these policies provided by the Board of Directors is reported to the Board at least once a year, while matters deemed particularly important are reported to and discussed by it on an as necessary basis. In this way, we have secured a robust structure that ensures proper supervision over sustainability initiatives.

With outside directors constituting its majority, the Board of Directors engages in multifaceted discussion and reflects its conclusions in the Group’s business strategy, risk management and information disclosure.

In addition, the Group Sustainability Promotion Committee, chaired by the president of Resona Holdings, is tasked with exercising the consolidated supervision of and spearheading measures to address specific issues associated with sustainability and deemed important. Members of this committee include the presidents of KMFG, Group banks and Resona Asset Management as well as the heads of the Corporate Administration Division and risk management divisions in addition to officers in charge of corporate and retail banking.

This committee also invites external specialists to contribute their opinions on diverse subjects, such as the direction and pace of the Group’s initiatives. These inputs are reflected in discussions undertaken by top management.

Moreover, the Group Human Rights Promotion Committee, a subcommittee under the Group Sustainability Promotion Committee, is charged with the consolidated management of important matters associated with human rights promotion among all Group employees.

Main Content of Relevant Agenda Items Submitted to and Other Subjects Discussed by the Board of Directors (July 2021 to June 2022)

Process for Determining Compensation for Executive Officers in Step with the Evaluation of Their Sustainability-Related Achievements

The Company’s policies for the determination of compensation for directors and executive officers are determined by the Compensation Committee, whose membership consists exclusively of independent outside directors. The compensation system in place for executive officers takes into account the status of initiatives aimed at helping realize SDGs, making this one of the indicators determining the amount of annual incentives. As such, compensation for executive officers is linked to evaluations granted to the recipients in terms of sustainability initiatives.