Value creation process and Materiality Management

Value creation process

SuMi TRUST Group has defined our Purpose as “Trust for a flourishing future” and placed the “balanced creation of both social value and economic value” at the core of our management philosophy. To achieve this, we have established a business process aimed at achieving both social and economic value creation, along with an executive-level management framework. This is what we refer to as “Value Creation Process.”

Business processes

By leveraging our trust functions, we create and accelerate a virtuous cycle of funds, assets, and capital, delivering economic value to a wide range of stakeholders—from individuals to global corporations (creation of economic value). Through these activities, we aim to generate positive impacts and mitigate negative ones on the planet, society, and the economy, thereby contributing to the achievement of the SDGs (creation of social value).

Management framework for business processes at the executive level

We have established two key frameworks to manage our business processes at the executive level: Materiality management and the Risk Appetite Framework.

(i) Materiality management: Based on the concept of dynamic materiality, —where changes in social conditions and values can impact corporate value—we regularly review our material issues and incorporate them into our management strategies and plans.
(ii) Risk Appetite Framework: We regularly monitor and verify whether risk-taking is being conducted within appropriate boundaries, as defined in our Risk Appetite Statement.

Through these frameworks, we aim to optimize our business processes and achieve a balance between the creation of social and economic value.

Approach to Materiality

We define material issues (materiality) as “events that have a material impact on the process of enhancing sustainable value-creation capabilities through the accumulation of financial and non-financial capital.”

Based on this definition, they are determined by the Board of Directors and managed from both perspectives: opportunities that promote capital circulation and risks that hinder it.

We adopt the concept of dynamic materiality, which recognizes that changes in social conditions and values can affect corporate value. Accordingly, we conduct annual reviews to identify emerging issues in response to shifts in the economic and social landscape, and report them to the Board. These reviews also take into account group-wide risk awareness and stakeholder expectations.

We first identified our materiality in FY2015, and revised it in FY2019 and FY2022. In the 2022 revision, we used Common Metrics* as a starting point to extract materiality themes. These themes were then organized into categories reflecting the society and values we aim to realize, based on our corporate purpose and strategic priorities. This process led to the identification of our current materiality.

In the FY2024 regular review, we anticipated heightened uncertainty in the political and economic landscape, including potential policy shifts associated with the U.S. presidential election and rising geopolitical risks.

While remaining attentive to both internal and external environmental changes, we confirmed that no revisions were necessary to our current materiality.

*Common metrics in “Toward Common Metrics and Consistent Reporting of Sustainable Value Creation”

Identification of materiality based on Common Metrics

Identifying Materiality from Common Metrics

	Materiality	Overview
Impact Materiality Items in which our corporate activities have impacts (both positive and negative impacts) on the economy, society, or the environment. Items that are in a phase where we can take concrete steps toward achieving both social value and economic value.	The age of 100-year life	Providing products and services that support a prosperous life by preparing for changes in social systems such as pensions and social security in a super-aging society, and social issues such as extending healthy life expectancy. Create conditions in which clients can use beneficial and affordable financial products and services that meet their requirements.
	ESG/Sustainable management	Responding to climate change, biodiversity, resource recycling and the circular economy, air, water and soil pollution, respect for human rights, and providing support and means for environmental, social and governance-friendly management for the companies to whom we extend investments and loans and our suppliers.
	Regional ecosystems and global investment chain (Networking)	Build mutually complementary relationships among agents in the region and establish relationships with economic agents outside the region to promote multifaceted collaboration and co-creation. Provide investment opportunities by strengthening the investment chain through collaboration with advanced overseas players.
	Trust × Digital Transformation	Driving force and function which promote a virtuous circulation of funds, assets and capital. Realization of virtuous circulation through the power of trust, including asset management and asset administration with appropriate management and thorough administration, and the power of DX, which creates new businesses through structural transformation of existing business processes and cross-business integration.
Governance and Management Framework Materiality Non-financial items where environmental or social issues do not immediately affect our corporate value enhancement process, but are likely to affect our finance over the long term, so they are highly defensive.	Corporate governance	Establish a management framework that achieve balanced creation of both social value and economic value.
	Fiduciary spirit	Fulfill the trustee’s responsibilities and act faithfully on behalf of clients (beneficiaries) with the due care of a prudent manager. Realize our clients’ best interests.
	Human capital	Recruit and promote human resources with diverse values, and build a group of them. Create a situation where employees can be of healthy mind and body, sympathize with our Purpose, build healthy relationships that respect diversity, and pursue wellness in their own work by utilizing their own values and strengths.
	Risk management and resilience	Accurately assess risks and take necessary countermeasures to secure earnings and support sustained growth by ensuring sound management, and taking risks based on management strategy.
	Compliance and conduct risk	Comply with laws and regulations, market rules, internal rules and regulations, as well as social norms in general. Ensure that the conduct of directors, executive officers, and employees, which violates professional ethics or fails to live up to the expectations and trust of stakeholders, does not result in adverse effect.
	Security	Prevent cyber-attacks against core infrastructure providers and address incidents when they occur.Continuously review and improve the system risk management system. Acquire and use client information in accordance with rules and regulations, and manage it strictly.
Financial Materiality Items where environmental or social issues affect our finance.	Financial strength expected by stakeholders	Sound finance, sustained growth. Securing stable earnings.

Incorporation of Stakeholder Perspectives

At our company, the Corporate Planning Department and the Sustainability Management Department engage in dialogue with relevant divisions, acting as “simulated investors” based on feedback from ESG rating agencies and discussions with actual investors. This initiative, referred to as “Internal Engagement,” serves as a stakeholder-oriented check-and-balance mechanism, distinct from the oversight function of the Board of Directors based on a management perspective.

In FY2024, internal engagement was conducted across 10 themes with 10 departments, focusing on topics such as human capital and financial inclusion. Each department recognized the issues as operational and disclosure-related challenges, leading to improvements in business practices and enhanced transparency. The identified issues and corresponding action plans were reported to the Sustainability Committee, the Executive Committee, and the Board of Directors.

Internal Engagement Relationship Diagram