Key Sustainability Issues

In light of social trends, the expectations as well as demands of stakeholders, and their importance to Aozora’s corporate management, Aozora defines Materiality as a key challenge area in terms of both opportunities and risks, and Core Foundations as items that underpin Materiality-based business operations.

With regard to Materiality, Aozora has set three priorities: “Contribution to the future of economy and society” from the perspective of generating social and economic value through its focus businesses, “Response to environmental issues,” as a global issue that requires a response on a global scale, and “Enhancement of the value of human capital,” as an essential element for Aozora’s sustainability.

We have adopted four factors as Core Foundations: Integrity, Respect for human rights, Risk management, and Governance. Aozora will continue to flexibly review Key Sustainability Issues in response to changes in the business environment while building a PDCA cycle that is integrated with our management strategy, and will steadily promote Group-wide efforts to resolve issues.

Identifying Process

STEP1　Identification of Environmental and Social Issues

Issues were listed in light of the overlap between various sustainability-related guidelines and management strategies and businesses

STEP2　Analysis and Organization of Significant Themes

Issues were assessed along the two axes of “importance to stakeholders” and “importance to Aozora” and items determined to be particularly important were chosen as Materiality candidates

STEP3　Dialogue with Stakeholders

Confirmed whether there were any discrepancies in issues to be considered and recognized through interviews with internal and external stakeholders

STEP4　Discussions and Decisions at Management Meetings

Resolved by the Board of Directions following discussion and finalization of the proposed Materiality and Core Foundations by the Sustainability Committee and Management Committee

Aozora conducts regular reviews, taking into consideration changes in the business environment as well as stakeholders’ perspectives.

Key Sustainability Issues

Key Sustainability Issues

Key Sustainability Issues

Materiality

Background (Opportunity and Risk)
Opportunity Growing and expanding opportunities to provide solutions in response to increased diversification and complexity in corporate management issues Risk Deterioration in business results due to insufficient or delayed responses to changes in the social structure
Main Initiatives
Support for structural transformation through equity investments with a primary focus on engagement, M&A advisory, LBO finance, transition support, and real estate business Support for start-ups through the provision of venture debt as well as solutions offered by GMO Aozora Net Bank Support for companies’ business recovery and restart through recovery funds provided by Aozora Loan Services
Main KPIs
Aozora’s Sustainability Targets Number of venture-related investments GMO Aozora Net Bank: Number of account openings by small businesses and start-ups Number of business recovery fund-based transactions Number of equity investments with a primary focus on engagement Number of business and asset succession consulting contracts Number of non-financial service customers

Background (Opportunity and Risk)
Opportunity Growing needs for financing and solutions to respond to climate change and conserve natural capital Risk Deterioration in business results mainly due to the occurrence of natural disasters and tightening of regulations, and decline in stakeholder confidence
Main Initiatives
Support for companies by promoting sustainable finance and consulting on decarbonization Reduction of GHG emissions as a business entity, and phased measurement and reduction of GHG emissions in the investment and loan portfolios Improvement of a risk management framework, including enhanced climate change scenario analysis, and the strengthening of risk tolerance
Main KPIs
Aozora’s Sustainability Targets Sustainable financing amount Environmental financing amount GHG emissions as a business entity GHG emissions in investment and loan portfolio Balance of project financing for coal-fired power plants

Background (Opportunity and Risk)
Opportunity Enhanced corporate competitiveness resulting from the securing of human resources that support the provision of highly professional and distinctive financial services Risk Personnel departures due to a workplace environment that does not respond to the diversification of values and changes in our social structure
Main Initiatives
Developing, hiring, and deploying human resources in line with business strategies, and redeployment of human resources to focus areas Support for career development, creation of a more comfortable workplace, and high job satisfaction Creation of work environment where personnel with a diverse range of backgrounds/values can play an active role, and improvement of diversity, equity & inclusion
Main KPIs
Aozora’s Sustainability Targets Percentage of female managers / deputy managers Percentage of eligible male employees taking childcare leave Percentage of non-Japanese managers Percentage of mid-career managers

Core Foundations

Background (Opportunity and Risk)
Risk Risk of legal violations or being subject to administrative actions due to neglect of compliance, and damage to reputation and loss of public trust due to acts against social norms
Main Initiatives
Compliance with the Code of Ethics and Conduct Ensuring strict compliance with, and higher levels of, the Customer-oriented Business Management Implementation of compliance programs
Main KPIs
Number of compliance cases found Number of cases opened by the Aozora Hotline whistle-blower program

Background (Opportunity and Risk)
Risk Risk of legal violations or being subject to administrative actions due to involvement in or neglect of human rights abuses, and damage to reputation and loss of public trust
Main Initiatives
Establishment and implementation of a human rights due diligence framework based on international norms Raising of awareness of human rights and elimination of harassment in the workplace
Main KPIs
Number of human rights e-learning participants

Background (Opportunity and Risk)
Risk Damage to business continuity mainly due to deterioration in financial strength caused by inappropriate risk taking
Main Initiatives
Strengthening of risk governance based on the risk appetite framework
Main KPIs
CET1 ratio

Background (Opportunity and Risk)
Risk Damage to creditworthiness triggered by improper corporate governance, and material impact on the sustainability of corporate management due to delayed responses to system failures and other factors
Main Initiatives
Establishment of a more transparent corporate governance structure Strengthening of cybersecurity and crisis management structures Strengthening and improving the effectiveness of internal audits
Main KPIs
Percentage of independent outside directors Number of targeted email training sessions conducted