SPARX Group ("the Group") formulated this Sustainability Policy to achieve a sustainable environment and society. In line with this goal, we share with our stakeholders the Group's approach to sustainability in light of global trends in sustainability issues, as well as our challenges and responses concerning environmental, social, and governance (ESG) factors.

1. Background to Formulating a Sustainability Policy

In September 2015, the United Nations adopted the Sustainable Development Goals (SDGs), which set international goals for a better world, including eradicating poverty and hunger and ensuring global environmental sustainability. Then, in November 2021, the UN adopted the Glasgow Climate Pact, whose signatories agreed to pursue efforts to achieve a global 1.5 ℃ target, accelerating efforts to reduce carbon emissions. This new target is a step up from the 2 ℃ target（*）, a common long-term international goal set before the December 2015 Paris Agreement. To achieve these targets, the world has an ever-greater need for global economic growth based on consideration of environmental and social issues. Meanwhile, climate change, natural disasters, epidemics, biodiversity loss, educational opportunity inequalities, and so forth are occurring on a global scale, negatively impacting growth in the worldwide economy. In response, we recognize the need to resolve these issues.

• 2℃ target: An international climate-change target limiting the global temperature increase to well below 2℃, which is considered the most challenging goal to achieve. It was adopted at the 15th session of the Conference of the Parties (COP15) to the United Nations Framework Convention on Climate Change held in Copenhagen, Denmark, in December 2009.

2. SPARX's Approach to Sustainability

Since its founding in 1989, the Group has aimed to become "the most trusted and respected investment company in the world." It places the highest value on making its clients and other stakeholders wealthier, healthier, and happier. To continue generating value in finance, SPARX respects "creating value through investment and providing returns to our clients. Investments remain positive only as long as our clients and other stakeholders are satisfied." With this in mind, we strive to realize our corporate purpose, "to make the world wealthier, healthier, and happier (through investment)."
In light of this perspective, we believe that the Group "sustainability" means that as an investment company doing business in capital markets, we must make investments that suit our corporate philosophy. Doing so allows us to continuously generate economic value to make people wealthier and social value to make people healthier and happier. At the same time, such investments make the Group's medium- to long-term growth sustainable. As Japan's first independent investment company listed on the Tokyo Stock Exchange Prime Market, the Group is responsible for realizing sound capital markets and a sustainable society.
In step with the market economy's development, many frameworks have emerged in society, the economy, and corporations. While humankind is achieving dizzying progress, these frameworks are becoming even more complex, with the occasional case of the market economy failing to function correctly. Under these circumstances, one of the Group's top priorities is to address ESG and other sustainability issues to help realize our purpose. We also strive to strengthen governance, the most critical element of the Group's management. Moreover, each and every SPARXSON shares, inherits, and protects these values as the foundation of everything we do.

3. Governance and Management Structure

The Group recognizes that addressing ESG and other sustainability-related issues is one of the most crucial aspects of management. Thus we have built a governance structure based on the Board of Directors and a Management Meeting. The Board of Directors debates and decides on sustainability-related issues and supervises the Management Meeting, the central decision-making body for day-to-day corporate operations. The Management Meeting discusses and decides on specific sustainability policies and promotion strategies at least annually and when otherwise necessary and reports its activities to the Board.
The Board of Directors, consisting mostly of outside directors, also verifies and discusses the progress of these specific policies and promotion strategies to ensure appropriate management and continuous improvement through the PDCA cycle. The Management Meeting, which includes all full-time directors and executive officers at the core of corporate operations, meets at least once a month and promptly reports its activities to the Board of Directors. We have also established a Sustainability Planning Department to facilitate specific discussions on sustainability management at the Management Meeting.

Moreover, the Group upholds its purpose of (through investment) "making the world wealthier, healthier, and happier." We identify and manage apparent and latent risks and opportunities related to all client assets to realize this purpose. Furthermore, we have established a separate Responsible Investment Committee, chaired by the Group CIO, as an advisory body to our Board of Directors in order to fulfill our responsibility for oversight and accountability for responsible investment. The Responsible Investment Committee, which includes all full-time directors and Group executive officers, meets at least once a quarter and promptly reports its findings to the Board of Directors. In addition, we have established responsible investment promotion department to promote concrete discussions on the implementation of PRI (principles for responsible investment) in the Responsible Investment Committee.
The Committee hears reports from the Group companies' investment policy committees (and equivalent organizations) on their responsible investment practices, approves changes to the Responsible Investment Policy and other policies, and endorses annual reports on responsible investing. Responsible Investment Committee meetings are attended by external advisor who provide independent advice on the reports and deliberations while sharing their thoughts on the latest trends in responsible investing.

4. Sustainability Issues

The Group recognizes the following sustainability-related issues, especially concerning the environment, society, and governance, it must address to realize its purpose.

Environment

The Group recognizes that maintaining a sustainable global ecosystem and environment is essential for the medium- to long-term management of client assets. In particular, the Group sees that as vital in addressing the problem of climate change.

Society

The Group recognizes the increasing difficulty in understanding and resolving social issues due to the complexities involved in global human activity. We also acknowledge that maintaining good relations with employees, clients, business partners, the local community, and other stakeholders is vital in conducting Group operations. We also understand that as supply chains expand, labor conditions which is direct related issues, but child labor, bribery, human rights, and other social matters are also becoming increasingly important worldwide.
Furthermore, to ensure sustainable medium- and long-term Group growth, we must secure our independence by developing professionals who share our investment philosophy. We must also maintain and improve our frameworks for nurturing these talented professionals.

Governance

In evaluating portfolio company's governance, the Group believes it is keen to identify the personalities, qualifications, and ability of managers and confirm whether management decision-making standards and its business execution structures are rational. We also recognize that it is vital that the Group itself establishes a better governance system.

5. Sustainability Initiatives

The Group will continue to contribute to the realization of a sustainable society by helping to solve the aforementioned environmental and social issues through its investment activities. To this end, the Group uses an ESG perspective to invest in businesses that address such issues and engage with existing portfolio companies. Furthermore, as shareholders, we support portfolio companies in improving their ESG responses when necessary. We will also conduct our investments with a greater focus on portfolio company businesses' environmental and social impact.

Environment

The Group is actively committed, through its investments, to activities that mitigate the negative aspects and enhance the positive aspects of humanity's impact on the environment, including corporate and consumer behavior.
In particular, we have contributed to realizing carbon neutrality, an important issue, by building and operating renewable energy power generation plants using the framework of investment funds. We will continue to address global environmental issues through our investment activities.

Society

Since its inception, the Group has focused on qualitatively evaluating companies before investing in them. Our analytics hinge on the three circles of business model, quality of management, and market growth potential. Through these metrics, the Group has always focused on factors vital to corporate viability, including management vision, employee motivation, and long-term relationships with suppliers. Many of these measures are consistent with the topical concepts of SDGs and ESG. In that sense, we can claim a continued pursuit of responsible investing since our founding. As society increasingly demands our tradition of responsible investing, we believe that advancing, growing, and spreading value-generating responsible investing is our natural responsibility as a long-established investment company aiming to realize sound capital markets and a sustainable society. To achieve this ideal, through our bottom-up approach, which has been a consistent basic stance since our founding, we will address and work to resolve social issues while confirming the circumstances with our own eyes (genchi genbutsu meaning "go and see"). We also engage in dialogue with government and local communities as necessary.

We also believe that we need to maintain specific conditions to solidify the foundations of our independence and realize our purpose. Namely, we must maintain high profitability to remain the first choice of our clients and other stakeholders and develop and retain the professionals needed to support these efforts. Specifically, we can create unique investment ideas and create unique strategies by sharing investment philosophies through the Buffett Club and other study sessions. In addition to conducting client-oriented operations as we unify across front- and back-division and clarifying and disseminating desirable behaviors within the company. All divisions and levels come together to package investment ideas in concrete form as we aim to establish a management structure to realize higher, more sustainable profitability than other companies with each distinctive strategy we pursue.
Furthermore, we focus on professional development to support these efforts. Our human resource development includes cultivating and conveying investment capabilities based on values the Group cherishes: diversity, equality, inclusion, and well-being among our employees and executives.

Governance

As part of our responsible investment efforts, the Group focuses on not only environmental and social issues but also portfolio company governance. Specifically, since the early 2000s, we have looked to governance more than other factors in deciding on investments.
We are also building an effective and efficient, sound, and high transparent governance structure by leveraging our strengths as an independent company. Specifically, we are building and maintaining sophisticated governance to gain support from our clients and set an example for capital markets. While developing various investment strategies, we conduct appropriate risk management, particularly in managing conflicts of interest among intercompany, investment strategies and funds. Furthermore, we are also establishing a highly transparent process that ensures appropriate financial reporting and disclosure, tax payment, and compliance with Japan's Financial Instruments and Exchange Act and similar laws and regulations in other countries.

The Group recognizes that it is also vital to gain the understanding of its stakeholders and many other interested parties regarding the importance of ESG and the influence that investments can have on solving environmental and social issues. Communicating our thinking on these issues and engaging in dialogue with stakeholders allows us to minimize risks related to ESG and other sustainability issues and identify opportunities as quickly as possible. In turn, we can continue achieving the goals of this basic policy. Specifically, the Group disseminates information through various channels, including our general shareholders' meetings, IR briefings, website, and YouTube channel. We will also continue our efforts to educate the next generation through the Children's Energy Summit and other events to promote understanding of renewable energy.

To fulfill our social responsibility as a good corporate citizen, the Group supports and participates in the below initiatives. We will continue to consider participating in specific initiatives that genuinely serve to address sustainability-related issues and participate as needed.
・ Principles for Responsible Investment (PRI)
・ Task Force on Climate-related Financial Disclosures (TCFD)

6. Revisions

The Group will revise this policy as necessary in the event of significant changes in external circumstances or stakeholder relationships, or when the Group's response to sustainability-related issues has made substantial progress.

Fin
Established on 20 June 2022