Action through Product Development and Distribution

For Addressing Social Issues and Contributing to Future Development of Society and Financial and Capital Markets

Impact Investment

Impact Investment is a type of investment that not only pursues economic benefits, but also uses funds raised solely to solve social issues, such as poverty and environmental problems. Daiwa Securities Group sells SDG bonds (impact investment bonds),* which are issued by public organizations, financial institutions, and other issuers for the purpose of solving social issues, to customers in Japan as a pioneer for Impact Investment bonds in the country.

  • *A generic term for bonds the proceeds of which are used for projects that contribute to SDGs (including conventional Impact Investment bonds)

Initiatives in FY2020

Climate change has become a serious threat to all countries. It is said that developing countries are being impacted first and with the gravest results. Climate change may destroy the social initiatives for poverty issues that have been steadily carried out over the last several decades, and it is impossible to separate it from poverty issues.
In the past few years, initiatives for SDGs have spread worldwide, and along with the expansion of the market for related bonds, customers’ interest in SDGs has been growing. As a pioneer for Impact Investment bonds in Japan, Daiwa Securities provides customers with opportunities to invest in bonds issued by public organizations, financial institutions, and other issuers for the purpose of solving social issues.
In September 2018, we sold MOL Blue Ocean Environmental Bonds, the first green bonds issued by an operating company in Japan (sold by two securities companies—Daiwa Securities and Nomura Securities). These were green bonds issued in Japan following the Tokyo Green Bonds (foreign currency-denominated) issued by the Tokyo Metropolitan Government in FY2017. Through the underwriting and sale of these bonds, Daiwa Securities aims to help expand trends towards utilizing precious funds from retail investors for environmental measures, and to this end, we continued with our initiatives.
Daiwa Securities Group will continue to contribute to solving social issues through its business activities, including the underwriting and sale of Green Bonds and other SDG bonds.

SDG Bonds for Retail Investors Sold by Daiwa Securities (FY2020)

* Sold by multiple companies including Daiwa Securities (the sales amounts shown above are those underwritten by Daiwa Securities).

Issuers Use of funds Sales amount(estimate)
Orient Corporation* Applied to refinancing funds procured to provide educational loans (tuition support plan) offered to retail customers in collaboration with universities, vocational schools, and other institutions ¥500 million
Mitsubishi UFJ Financial Group , Inc.* Used for financing green projects (green buildings and renewable energy) and social projects (job creation and maintenance, healthcare, education, and public housing) ¥10 billion
The Asian Development Bank Support for health and medical related businesses in the Asia-Pacific region through investment ¥4.2 billion
AEON REIT Investment Corporation* Used to refinance existing loans obtained to acquire AEON MALL Ishinomaki and AEON MALL Mitouchihara, which are special assets meeting the criteria for eligible sustainable assets ¥6.0 billion
The Tokyo Metropolitan Government* Used to promote greening of wetlands, park development, and development of automobile driving areas ¥2.1 billion
Crédit Agricole Corporate and Investment Bank Lending to companies and projects that contribute to development of an environmentally friendly economy and society ¥42.4 billion

Results of SDG bonds for retail investors

  • Daiwa Securities cumulative sales: ¥800.4 billion
  • *Figures have been rounded off
  • *Source: Daiwa Securities (From March 2008 to March 2021)
  • Daiwa Securities' share in the Japanese market: 45%
    Total ¥1,765.3 billion
  • *Figures have been rounded off
  • *Source: Daiwa Securities (From March 2008 to March 2021)
  • SDGs related to SDG bonds sold in the past
SDGs related to Impact Investment bonds sold in the past「1」「3」「5」「6」「10」「13」「15」

SDG Private Placement Bonds for Domestic Institutional Investors Sold by Daiwa Securities (FY2020)

* Data based on press releases

Issuers Bond name Date of issuance Currency Issuance amount
(In units of millions of the issuance currency)
International Finance Corporation (IFC) Social bonds April 2020 AUD 200
Inter-American Development Bank (IADB) Sustainable development bonds May 2020 AUD 50
European Bank for Reconstruction and Development (EBRD) Pandemic bonds August 2020 USD 50
Vasakronan Green bonds October 2020 USD 10
Central American Bank for Economic Integration (CABEI) COVID-19 vaccine bonds November 2020 USD 50
International Bank for Reconstruction and Development (IBRD) Sustainable development bonds November 2020 USD 48
International Finance Corporation (IFC) Social bonds November 2020 AUD 50
European Bank for Reconstruction and Development (EBRD) Green transition bonds January 2021 AUD 280
Banco Santander Chile Women SME bonds February 2021 USD 50
Inter-American Development Bank (IADB) Sustainable development bonds March 2021 AUD 60
  • Daiwa Securities' share in the Japanese market: 16% (based on press releases)
    Only private placement bonds for which the arranger is clear are counted.

Initiatives Taken by the Group's Overseas Offices

In April 2020, Daiwa Capital Markets Europe Limited acted as sole lead manager for social bonds issued by the International Finance Corporation (IFC).
IFC, a member of the World Bank Group, is among the world’s largest international development financing institutions that specializes in private sector support of emerging markets. IFC’s social bond program allocated funds raised by issuing bonds in accordance with social bond principles pursuant to the relevant program to projects that benefit persons who are not receiving needed services in developing countries that have been impacted by COVID-19. IFC recently set an US$8 billion COVID-19 related facility to support companies that have been impacted by the economic downturn caused by the spread of COVID-19 and their employees.

In June 2020, Daiwa Capital Markets America acted as a sole lead manager for a sustainable development bond issued by Inter-American Development Bank (IDB).
IDB is an international development financial institution aiming to contribute to the economic and social development of Latin American and Caribbean member countries. It has announced that it would direct up to $12 billion of lending to support countries in their response to the COVID-19 pandemic and its consequences. The funds raised through this issuance will be used mainly for helping countries affected by COVID-19 to strengthen their public health systems and purchase daily necessities and medical equipment. They will also be used for fiscal spending by local governments to respond to the COVID-19 pandemic and various measures for supporting economic recovery, such as job security measures.
The issuance of the bond is aimed at achieving SDG Goal 3 “Ensure healthy lives and promote well-being for all at all ages.”

In January 2021, Daiwa Capital Markets Europe Limited acted as sole lead manager for green transition bonds issued by the European Bank for Reconstruction and Development (EBRD).
Climate change is an urgent issue, and financial support will be essential for achieving the long-term goals of the Paris Agreement and carbon neutrality by 2050. The purpose of green transition bonds is to support the transition by industry sectors with high greenhouse gas (GHG) emissions, such as manufacturing, agriculture, and construction, to low-carbon business models. The priority is primarily on greatly reducing the use of fossil fuels, and attention is also being focused on improving resource use. The funds raised from green transition bonds are allocated to financing projects that will lead to substantial decreases in emissions on industrial sectors with high environmental impact for the purpose of making the transition to low carbon business models.

Daiwa Group Receives 2020 mtn-i Award in SRI Category

Daiwa Securities Group was selected as the “Power Performer – SRI Japan Distribution” of the MTN Awards 2020, which were presented by mtn-i Ltd. a leading vendor of MTN-related information.

Initiatives in FY2021

Initiatives Taken by the Group's Overseas Offices

Initiatives by the Australia Office

Daiwa Capital Markets Australia Limited regards SDGs as principle for our sustainable growth, and we aim to contribute on SDGs by creating shared value through business.
Our all divisions started taking SDGs actions that Equity sales team invited ESG related Australian corporate for Asian ESG Conference, that DCM focuses on SDGs bond for not only Australian financial institutions but also SSAs like ADB, and that PI looks for new investment opportunities of environmental-/eco-friendly building project as well as social housing project since FY2021. We hired a senior ESG analyst, and he released Pan-Asia ESG report and works closely with sector analysts and equity sales teams.
In addition, we introduce some SDGs related Australian start-ups for Japanese corporates and investors, collaborate with Daiwa Energy & Infrastructure Co. Ltd. for renewable energy investment project, and study possibility of investment in Australian agriculture project with Daiwa Food & Agriculture Co. Ltd.

DCMA Underwrites Nutrition Bonds Issued by the Development Bank of Latin America

Daiwa Capital Markets America (DCMA) acted as sole lead manager for nutrition bonds issued by the Development Bank of Latin America (CAF) in June 2021.
The CAF is a regional development financial institution funded by 19 member countries, primarily in Latin America. Its objectives are to promote economic integration, economic development, and trade finance in Latin America.
The funds raised from this bond issuance will be used through the relevant governments primarily to improve people’s nutritional status and eliminate health concerns, such as eliminating chronic malnutrition in early childhood and supporting food purchase assistance programs for children, pregnant women, and persons with disabilities.
These bonds were issued with the aim of achieving SDG 1: No poverty, SDG 2: Zero hunger, and SDG 3: Good health and well-being.

SDG Related Funds

SDG related funds are a mixture of stocks and bonds that take into account factors other than financial performance, such as ethics and social and environmental objectives, in addition to assessments of the sales and profits of the investment candidates.
We have expanded our product lineup according to the times to include eco funds that limit non-financial assessments to environmental performance and investment trusts that focus on Impact Investment and select issues from an SDG perspective. By investing in these funds, through financial markets, investors can indirectly support countries and corporations that are proactively involved in ESG and SDG initiatives.

Result in FY2020

  • Balance in Daiwa Securities Group: ¥610.6 billion
  • *Source: Daiwa Securities
  • Daiwa Securities' share in the Japanese market: 12.8%
  • *Source: Daiwa Fund Consulting (As of March 31, 2021)

Development and Provision of Superior Financial and Investment Products

While the importance of asset management in the "100-year life era" is increasingly gaining attention, Daiwa Securities considers the development and provision of superior products to be one of our major missions in society, and strives to develop new products and improve their quality.

Daiwa Next Bank’s “Support Term Deposits”

Support Term Deposits are designed to support hard-working people and organizations. Daiwa Next Bank donates an amount calculated by multiplying the balance of its Support Term Deposits by a certain rate to recipients chosen by customers. At present, it supports more than 10 organizations working on solving issues based on the following four themes: medical support to children; self-reliance support to children; support for sports for disabled people; and environmental preservation.
Feedback received from customers includes: “This was a good opportunity to learn about social issues” and “I hope similar initiatives will become more widespread.”

Since September 2020, we have been posting on the Support Time Deposit section of “Ta-me Talk” Website, a customer support site for selecting deposit products, “Support Manga” with articles on the activities of recipients and related information as well as information on how funds are used and the thoughts of the people involved. In June 2021, we created a digital book compiling all of the prior Support Manga as one initiative marking the 10th anniversary of the founding of Daiwa Next Bank.

Initiatives for Solutions Business

Many small- and medium-sized companies and small-scale enterprises are now facing the issue of business succession due to the aging of their operators. However, it is said that about half the managers exceeding the age of 70—the average retirement age—in the next 10 years are yet to decide on their successors. Moreover, even the continuity of their business activities, which support regional economies, has recently been adversely affected by the unprecedented deterioration of management environment resulting from the COVID-19 pandemic. Daiwa Securities recognizes that it is its duty, as a financial institution, to firmly support, in financial terms, small- and medium-sized companies’ efforts to pass down their valuable business resources, employment, and technologies to the next generations, thereby helping to maintain regional supply chains. We will support the growth of the Japanese economy by encouraging the continuation, development, and growth of small- and medium-sized companies of good standing by providing solutions to inheritance, business succession, M&A, and other issues.

Initiatives of Fund Wrap Services

Daiwa Fund Wrap is a service enabling even those who are busy or have no investment experience to easily start medium- to long-term diversified investment. Under a discretionary investment contract, Daiwa Securities invests and manages assets on behalf of our customers. We offer plans that enable each customer to make diversified global investments according to their investment policy, as do professional institutional investors such as those managing public pension assets. It has become more important than ever for a large number of investors to manage their assets efficiently and stably through diversified global investment, in particular as a measure to address prolonged low interest rates, which have made it difficult to find attractive investment options. Daiwa Fund Wrap is a service offered to customers over the medium to long term. We provide thorough explanations before the conclusion of a contract, report investment performance regularly every three months, and hold follow-up seminars whenever necessary. We thus ensure close communication with customers and seek to build a relationship of trust with them.
In addition, Daiwa Fund Wrap Premium (Daiwa Fund Wrap with premium benefits) now offers a more detailed service, enabling customers to have multiple investment portfolios and design them in a highly customized manner. The beneficiary designation service and the gift service that takes advantage of the calendar year taxation system are incidental services that can meet the needs customers with a strong interest in inheritance tax measures.
Moreover, Daiwa Fund Wrap Online proposes the most suitable investment style from a minimum investment amount of ¥10,000 by utilizing Robo-Advisor technology. We thus provide a service enabling customers who prefer long-term asset management to easily engage in globally diversified investments online.
To keep attracting customers over the long term, we will continue our initiatives to implement better structures and systems so as to improve our performance and the quality of our services.

  • Balance of domestic Wrap accounts: ¥11,208.5 billion (As of March 31, 2021)
  • *Source: Data released by the Japan Investment Advisers Association
  • Balance of Wrap accounts at Daiwa Securities: ¥2,574.1 billion (As of March 31, 2021)
  • *Source: Data released by the Japan Investment Advisers Association
  • Daiwa Social Contribution Wrap - Daiwa Fund Wrap with a donation service
    Amount donated in FY2020: ¥3.58 million
  • *Total donated amount from customers and from Daiwa Securities
  • *Donated to United Nations World Food Programme, Medecins Sans Frontieres Japan, WWF Japan, Japan Committee for UNICEF, Japan Platform

Daiwa Asset Management Offers Investment Trusts with ESG and SDG Targets

Daiwa Asset Management offers investment opportunities by creating and managing investment trusts with ESG and SDG targets based as a part of its stewardship activities. Daiwa Asset Management has an extensive lineup of funds that are compatible with the 17 SDGs including ETFs linked to ESG indices and investment funds with sustainability themes.

Initiatives Using REITs and Other Structures to Solve Social Issues

Daiwa Real Estate Asset Management uses investment corporations and fund structures to provide funds through capital markets to real estate, including offices, rental housing, healthcare facilities, hotels, and logistics facilities, as well as infrastructure assets such as renewable energy power plants. By doing so, the company will contribute to putting in place and developing high-quality properties and social infrastructure with minimal environment impact.

Issuance of Green Bonds

Daiwa Office Investment Corporation (DOI), a REIT that specializes in office properties and is managed by Daiwa Real Estate Asset Management, established a green finance framework to provide ESG investment opportunities to investors. The company received a Green 1 (F) rating, the highest rating, from Japan Credit Rating Agency, Ltd. (JCR). In September 2020, DOI issued its first green bonds (five-year term: \1.5 billion; 10-year term: \2.4 billion).

Investment in Healthcare Facilities

Daiwa Real Estate Asset Management managed Nippon Healthcare Investment Corporation, which was Japan's first REIT focusing on healthcare facilities. On April 1, 2020, that REIT was merged with Japan Rental Housing Investments Inc., a REIT focusing on housing that was also managed by Daiwa Real Estate Asset Management, and Daiwa Securities Living Investment Corporation (“DLI”), the J-REIT with the largest amount of healthcare facility assets under management in Japan, was established. DLI invests in prime healthcare facilities that are likely to see stronger demand from society over the medium to long term as the population continues to age. Through such investment, it will contribute to the “Achievement of Good Health and Longevity,” a social issue in Japan identified in the SDGs Implementation Guiding Principles formulated by the government’s SDGs Promotion Headquarters.
DLI has also established a social finance framework to provide ESG investment opportunities to investors through social financing and received a Social 1 (F) rating, the highest rating, from Japan Credit Rating Agency, Ltd. (JCR).

Total amount of investment in healthcare facilities

  • Approximately \95.5 billion (as of May 31, 2021)

Supporting Healthcare Workers

As a part of its measures to address the COVID-19 pandemic, Daiwa Real Estate Asset Management donated a total of 5 million yen in collaboration with Daiwa Securities Group for allocation to accommodation fees under the “Room Support Plan for Medical Professionals,” a program conducted at hotels by JHAT Co., Ltd. JHAT is a hotel operating company owned by Daiwa Hotel Private Investment Corporation (DHP), a private REIT managed by Daiwa Real Estate Asset Management.
Looking ahead to the post-COVID era, Daiwa Real Estate Asset Management put into practice activity based working (ABW), which enables diverse work styles by employees regardless of location. One aspect of this was supporting hotel operators facing difficulties during the COVID-19 pandemic by encouraging telecommuting by employees to telecommute from hotels owned by DHP and subsidizing the entire amount of associated costs.

Investment in Renewable Energy

With regard to infrastructure assets, Daiwa Real Estate Asset Management has been managing photovoltaic power stations since FY2014, and was entrusted in FY2017 with the management of a biomass power generation plant invested in by Daiwa Energy & Infrastructure. It has been continuously expanding the balance of its assets under management while striving to accumulate knowledge of investment and management in the renewable energy field.

Management results of renewable energy power plants

  • Number of deals: 21
    (Hokkaido, Tohoku, Hokuriku, Kanto, Chubu, Chugoku, and Shikoku regions)
  • Output: Approximately 180 MW (excluding output from assets on land with leasehold interest)
  • Annual energy output (June 2020 to May 2021): 253,187 MWh
    (calculated based on an assumed CO2 reduction of 120,264 t-CO2 and an emission factor of 0.000475 t-CO2/kWh)
  • •Balance of assets under management: Approximately ¥75.4 billion

Group-wide Research on Financial Innovations

Daiwa Securities Group launched the Financial Innovation Committee in FY2016 as a platform for Group-wide research activities, and frontline employees at Daiwa Securities Group Inc., Daiwa Securities, Daiwa Institute of Research, Daiwa Asset Management, and other companies are proceeding with research activities on artificial intelligence (AI) and other state-of-the-art technologies.
Specifically, they have achieved results in research on the provision of a stock information service using a stock price prediction model, a real-time stock volume prediction model, shareholder rewards program Robo-Advisor, an AI-based business matching service, an AI-based company analysis tool, and other matters.

Moreover, in FY2017, the Group launched the “Daiwa Securities Group & the University of Tokyo Future Finance Forum” in order to develop its research activities further and expand the basis of the activities. As its advanced form, since FY2018 we have been conducting joint research with a University of Tokyo study group led by Professor Kiyoshi Izumi through a social cooperation program entitled “Next Generation Investment Technology” and have developed a theme issue search system based on associative retrieval.
Going forward, Daiwa Securities Group will continue to promote innovations in the financial industry through its ongoing research activities.

Response to FinTech and artificial intelligence (AI)

Since starting Daiwa Online Trade, Japan's first Internet-based securities brokerage service, in 1996, Daiwa Securities has provided various products and services successively over a period of more than 20 years. Due to the widespread use of portable information devices and the development of information communications technology, the importance of Internet channels has increased even more in recent years, with the number of accounts held under contract for Daiwa Online Trade topping 3.4 million as of the end of March 2021. Of Daiwa Securities' total stock transactions, approximately 80% are carried out via the online trading service, underscoring the fact that Daiwa Online Trade has become an indispensable channel for Daiwa Securities.

Since May 2017, we have been providing information through Daiwa Online Trade regarding domestic issues selected using an AI-based stock price prediction model developed by Daiwa Institute of Research, Daiwa Securities Group’s think tank. We select issues whose prices are likely to go up gradually after the announcement of financial results, using a method of machine learning, which is an AI-related technology. In 2019, we distributed information four times in total when major financial results were announced.
Furthermore, in February 2019, we introduced a login function using a biometric authentication system to Kabu Walk, a smartphone application with a domestic stocks trading function provided on iPhones and Android devices. We believe that by actively using such new technologies, including AI and FinTech—an amalgamation of finance and information technology—we will stimulate interest in securities investment among individuals, especially younger generations, who have not previously been familiar with securities investment, and thereby support a shift from savings to asset building. In that way, we can contribute to Japan’s sound economic development.

As the use of various AI-based services is currently spreading and the development of FinTech is accelerating, new financial services leveraging these technologies are becoming easily available. We will keep track of such trends and endeavor to continue enhancing convenience and providing quality services as a channel chosen by next-generation affluent customers and young customers with particular focus on inbound marketing.

Daiwa Online Trade

  • Number of contract accounts: 3,446,000 accounts
    (As of the end of March 2021)

Contribution to Stimulation of Local Economies though AI-based Support for Enhancement of Financial Services

Due to its technological progress and higher academic rating, artificial intelligence (AI) has been increasingly used for business applications. Daiwa Institute of Research Business Innovation, which is entrusted by many financial institutions with system development, is advancing initiatives for research and application of AI.
As part of AI-based support for enhancement of financial services, the company developed a common data definition that enables AI to learn the financial activities and state of mind of retail customers with remarkable accuracy by combining a wealth of experience in developing financial systems and unique data science expertise. It built a financial product recommendation AI system based on this data definition, which has been provided since 2019 to some regional financial institutions. The system is expected to allow those financial institutions to predict the financial needs of their customers more accurately with AI.
Daiwa Securities Group will contribute to the social and economic development of communities through initiatives that actively use state-of-the-art technologies.

Efforts to Enhance Asset Management Using AI in Collaboration with Academia

In recent years, increasing attention is being paid to the knowledge derived from behavioral economic, which focuses on irrational human psychology. It is difficult to explain economic bubble and crashes using conventional economic mechanisms, and consequently, algorithms are being sought in asset management practice to create highly reproducible operations based on emotional human behavior while accepting the limitations of exiting theory.
The research lab of Professor Tomoya Suzuki of the Ibaraki University Graduate School of Science and Engineering and Daiwa Asset Management investigated abnormal situations in financial markets using artificial intelligence (AI) and developed a model to transform the process of abnormal situations returning to normal situations into profit opportunities. Recent research has made it clear that at times, financial market participants engage in irrational behavior that can be difficult to explain. It is believed that market trading prices become distorted because of such irrational behavior. This model uses AI to assess whether there are distortions and the degree of those distortions with the objective of making the restoration of normal conditions into profit opportunities. Operation of a private fund for qualified institutional investors using the model started in February 2021.
Daiwa Asset Management has welcomed Professor Suzuki, who has been conducting research on using machine learning that employs collective intelligence in financial fields, as a senior research fellow since October 2017. Joint research by the Ibaraki University and the company began the following year. Going forward, the company will work to enhance its operations and create new value in customer services through collaboration with academia through a variety of initiatives.