Article 1.(Purposes and Positioning)
1.Marunouchi Capital Inc. (“we,” “us” or the “Company”) makes investments mainly targeting stable companies or growth companies in Japan. The Company considers a wide range of companies as investment targets, with a focus on business reorganizations including carve-outs of major companies and business succession in medium-sized companies. The Company strives to improve corporate value through its strengths in multi-stakeholder coordination by taking advantage of the Company’s and its sponsors’ diverse business contacts in various industries and global business networks. Recognizing the impact of environmental, social, and corporate governance (ESG) issues on the corporate value of our portfolio companies and our investment performance, we incorporate consideration and understanding of ESG issues as a key component of our investment activities. In line with this objective, we have established an ESG Policy and ESG rules to meet the expectations of our stakeholders and to fulfill our fiduciary responsibilities to our investors.
2.We will contribute to the achievement of the Sustainable Development Goals (SDGs) by considering sustainability, renewable energy, greenhouse gas emissions reduction, and other relevant factors in our investment activities and in the business operations of our portfolio companies.
3.In accordance with our declaration of acceptance of the Stewardship Code, we will keep abreast of regulatory and other developments related to ESG issues in Japan and overseas, and incorporate them into our investment activities as appropriate. In order to fulfill our stewardship responsibility, we seek to positively impact ESG issues through active dialogue with management teams of investee companies, investors, and other stakeholders, with the aim of developing them into sustainable and competitive companies that deliver long-term benefits to investors and beneficiaries even after they leave our funds.
Article 2.(Definition of ESG)
In considering investment targets and in our efforts to enhance the corporate value of portfolio companies, we will consider the risks (“ESG risks”) and opportunities associated with the ESG issues listed below.
(a) Environment – Environmental conservation
– Prevention of pollution (air, water and soil pollution, noise, vibration, land subsidence, odor)
– Improved energy efficiency
– Response to natural disasters
– Waste management and handling of hazardous substances
(b) Social issues – Compliance with labor standards
– Ensuring occupational health and safety, and appropriate labor management relations
– Consideration of human rights
– Prohibition of illegal sale of products
– Ensuring product safety
– Avoidance of all forms of forced labor and child labor
– Elimination of discriminatory labor practices
– Avoidance of involvement in the manufacture of inhumane weapons and tobacco products
(c) Corporate Governance – Elimination of relationships with antisocial forces
– Prohibition of money laundering
– Ensuring corporate ethics (prevention of misconduct, negligence, and bribery)
– Compliance with domestic laws and regulations (accounting and tax standards, etc.)
– Appropriate management structures
– Prohibition of anti-competitive behavior
– Establishment of internal reporting systems
– Establishment of appropriate auditing systems
– Appropriate executive compensation
(d) Climate change We recognize the potential impact of risks and opportunities arising from climate change on the Company and our portfolio companies, and strive to manage significant risks in our investment activities.
Article 3.(Scope of Application)
This Policy applies to investment activities and information disclosure by the Company. In cases where the Company does not have a controlling interest in a portfolio company, the Company shall encourage the management of the portfolio company to identify and address ESG risks in its operations and opportunities to enhance corporate value, in accordance with this Policy. However, if the Company determines that ESG activities must be limited, this Policy will be applied to the extent possible.
Article 4.(Laws, Regulations and Guidelines to Form Basis Concerning ESG)
We will comply with the laws and regulations of the countries and regions in which our portfolio companies and their affiliates, etc. operate. In addition, we will consider ESG risks and opportunities in our investment decisions and portfolio management, and will work to preserve and enhance the value of portfolio companies, thereby stabilizing and improving investment returns over the medium to long term.
Article 5.(ESG Structure)
The structure and division of responsibilities regarding ESG are as follows:
(a) Board of Directors The Board of Directors shall establish important matters and policies, including this Policy and other policies related to ESG, and shall receive reports and make necessary decisions regarding those ESG activities of the Company that the Investment Committee or the ESG Manager deems important.
(b) Investment Committee The Investment Committee shall oversee the implementation of ESG activities and be accountable for such activities.
(c) ESG Manager The ESG Manager, as the person in charge of ESG activities at the Company, shall verify whether a framework has been established under the Investment Committee to promote appropriate ESG activities and whether appropriate ESG activities are being promoted, and issue instructions for improvement, etc., as necessary. The ESG Manager shall also report to the Board of Directors on matters that the Investment Committee determines to be serious issues concerning the promotion of ESG activities. The ESG Manager is responsible for promoting the Company’s ESG activities, including the implementation of ESG training for officers and employees.
(d) All officers and employees All officers and employees of the Company shall continuously deepen their knowledge of ESG through orientation upon joining the Company, internal and external training, and other means.
Article 6. (Specific Efforts)
1. We will take ESG-related matters into account in our fundraising and investment activities as follows:
(a)Screening Negative screening is used to identify companies that should be excluded from investment from an ESG perspective. Investments will not be made in companies that are excluded under the screening criteria or that are primarily engaged in the following sectors or activities.
Excluded sectors: – Production, sale or engagement in pornography or prostitution
– Production of inhumane weapons
– Gambling, casino, and similar activities
– Businesses that violate public policy and standards of decency
– Production of tobacco products
– Racist and anti-democratic media
Excluded activities: – Production of or trade in radioactive materials (with the exception of medical devices, metering devices, measuring instruments, etc.)
– Production or sale of asbestos fibers
– International trade in waste that does not comply with the Basel Convention and other regulations
– Use of explosives and large floating objects in fishery
– Destruction of endangered species habitat and high conservation value areas
– Relationships with antisocial forces (extortionists, criminal groups and their members, or companies found to have relationships with them or their equivalents)
– Production and activities using forced or child labor
– Production or activities on land of indigenous people where consent for use is not documented, and on land in dispute
(b) Due Diligence We identify material ESG risks through due diligence at the investment consideration stage. In the investment decision process, we evaluate ESG-related matters that will lead to increased corporate value.
(c) Investment (structuring) Prior to entering into an investment agreement, we will require potential portfolio companies to address and continuously improve material ESG issues identified during due diligence and to comply with ESG-related laws and regulations.
(d) Support and monitoring of portfolio companies If material ESG issues are identified in the due diligence process, we will support the portfolio company’s management in developing a corrective action plan, as necessary, and will continuously monitor the progress of remediation of such issues. We will also assist portfolio companies in developing action plans to appropriately address identified ESG risks and opportunities, and further, will support them in reporting externally and internally on their ESG activities.
(e) Exit When we sell securities held by us, we will confirm, as necessary, that ESG risks identified through due diligence and monitoring of the portfolio company have been mitigated or eliminated, and that ESG-related value creation opportunities have been fully exploited in the management of the portfolio company. As part of a responsible exit process, we will also appropriately provide ESG-related information about the portfolio company to potential buyers.
2. The Company shall include its overall policy on ESG in its prospectus (PPM).
3.The Company shall include a formal ESG commitment in the limited partnership agreement (LPA) or side letter.
1. In order to understand how ESG-related issues are managed by portfolio companies, we require portfolio companies to develop ESG action plans for ESG issues identified through the pre-investment screening process, and receive appropriate reports from portfolio companies on their ESG activities. The format, content, and frequency of the reports will be determined through discussions between the persons in charge at the Company and the portfolio company. The ESG Manager will also monitor the progress of improvement initiatives.
2. In the event of a serious accident or a major ESG-related incident due to environmental issues or legal violations at a portfolio company, the incident will be reported immediately to the Company’s management to determine the significance of the incident. The incident will then be reported to the Investment Committee taking into consideration its significance.
Reporting to investors on ESG activities of portfolio companies is based on the relevant investment limited partnership agreement. In the event of an ESG-related incident occurring at a portfolio company, the incident will be reported to the limited partners taking into consideration its materiality.
Article 9.(Revision and Abolition)
Any revision or abolition of this Policy shall be made by resolution of the Board of Directors.