Designing an affluent future through
responsible financing
DBJ's sustainability certification loan programs use a proprietary screening system to select outstanding companies based on an evaluation of their non-financial information. Through dialogue with companies we try to see that non-financial information is reflected in corporate value. In this way, firms conducting sustainable activities will be fairly evaluated by their stakeholders and the financial market. We want our multifaceted, objective assessments of environmental and CSR management, disaster prevention and business continuity management, and health management to promote effective PDCA (plan-do-check-act) cycles for our clients.
Shining light on the source of corporate value
For a mid-to-long-term evaluation of a company, we must consider not only the financial elements including sales and financial soundness, but also such questions as whether the firm can sustain its current profitability and whether there are reputational or other latent risks that could damage its value. The figure compares corporate performance to an iceberg Financial performance is but a small part of company’s value – no more than the iceberg’s tip. Under the water’s surface lie a variety of factors, including environmental initiatives, human resource development, innovation, and business continuity, which exert an influence on financial performance. These give rise to financial performance and form the source of corporate value.
Progress to date
ESG investment is a growing presence in stock investment, bond investment, and elsewhere in the world of direct finance. But in Japan, where a relatively large proportion of financial transactions are indirect, the banks must play a significant role if they are to support firms in their practice of sustainability management.
Based on expertise acquired from more than forty years’ investment of over three trillion yen in environmental projects, DBJ launched the Environmentally Rated Loan Program in 2004, the Enterprise Disaster Resilience Rated Loan Program in 2006; renamed the BCM Rated Loan Program in 2011, and the Employees’ Health Management Rated Loan Program in 2012. Each was designed to make non-financial information visible and to give it its proper place as an element of corporate value.
Dialogue for growth
The assessment process, which emphasizes direct dialogue with companies, is the most important feature of Sustainability Certification Loan Programs.
The key process is face-to-face interviews (dialogue) with customers. At these interviews we confirm any issues brought to light through the screening sheet, as well as the thinking behind the firm’s activities, the degree of penetration of its initiatives, and other details that cannot be determined from published information alone.
DBJ continues to focus on dialogue even after making rating decisions. Upon request, we provide face-to-face, third-party feedback on evaluation results, helping our customers to identify outstanding issues and upgrade their management.
Companies that have received a rating may use the rating logo only for the duration of the loan period. By using the logo mark in investor relations materials, sustainability reports, and other media, companies can publicize their outstanding efforts in sustainability to business partners and other stakeholders.
To ensure the validity of evaluations, we have introduced a lead manager system comprising persons with expertise in environmental and CSR management, disaster prevention and business continuity management (BCM), and health management. The objectivity of evaluations is ensured by an Advisory Board consisting of outside experts. Augmenting this is a system to ensure parity with future government policies through regular exchanges of information with government authorities and participation in government committees, led by each lead manager.
Ensuring that good companies
are fairly appraised
The business world is changing rapidly. The conversation about climate change in particular is at such a turning point as to indicate a paradigm shift. Since its effects extend far beyond listed companies, firms must be proactive and strategic in their response. For instance, in addition to disclosing the costs entailed in policies taken to discharge their social responsibilities, firms are expected to proactively disclose information focusing on how they create social value. Companies should also identify societal issues which fit well with their own activities and address them after setting appropriate goals and guidelines. By publicizing these measures, they would be sending out a vital message on the importance of value creation story.
Through dialogue based on our evaluation- and certification-based lending programs, DBJ will be supporting such initiatives. And by throwing light on companies putting serious effort into the practice of sustainability management, we will be working to ensure that such firms are duly evaluated in the financial markets.
