Our company has four in-house factories and five group factories as domestic manufacturing bases, but we also conduct OEM production by outsourcing manufacturing to suppliers in Japan and overseas in order to produce what our customers want. When making packages, we are required to faithfully reproduce the structural design and general design that our customers want. However, if we focus on this, we may need manufacturing facilities, so we sometimes have to make a decision. For this reason, we have built a network with suppliers in Japan and overseas to create an environment where we can plan, propose, and manufacture products that meet our customers' needs. One example is cloth bags. Eco-friendly bags became a hot topic as stores began charging for plastic bags, we did not have facilities for manufacturing cloth bags. In response to our customers' requests, we used OEM production to provide them.

Aihara:

I saw that The Pack Corporation's CSR Report includes annual environmental targets, and that the company is working to reduce the environmental impact of its overall production activities, including the procurement of raw materials, manufacturing processes, and waste generation. I also sensed that the company is actively working to protect the natural environment, such as forest conservation activities, as an additional part of its business activities. Could you tell us why you started focusing on environmental initiatives?

Aihara:

How to minimize the damage caused by unavoidable natural disasters, etc., and the business of Japan Earthquake and the SDGs are inextricably linked. Next, could you give us an overview of JASSO?

Mr. Nishio:

JASSO was established in April 2004 through the consolidation of the Japan Scholarship Foundation, which provided scholarship loans and four international student-related organizations. The purpose of JASSO's establishment was to contribute to the development of creative people with an abundance of humanity who will lead society in the future, through the lending and payment of educational funds and other support for students' studies in order to contribute to equal educational opportunities.

Aihara:

Please tell us about the characteristics and framework of JASSO social bonds, the purpose of issuing them as social bonds, and the history of JASSO social bonds.

Mr. Nishio:

First, there are three characteristics of JASSO social bonds. The first is that there are only a limited number of cases of education-related social bonds in the domestic bond market. Second, as a rare two-year bond in the domestic bond market, JASSO social bonds are regularly issued four times a year in June, September, November, and February. Third, JASSO has obtained a second opinion on social bonds from Moody's ESG Solutions, an overseas ESG evaluation agency, and has obtained a second opinion for each bond issue number. In addition, JASSO has been rated AA+ by R&I (Rating and Investment Information Center) and AAA by JCR (Japan Credit Rating Agency). As the rating is the same as that of Japanese government bonds, JASSO believes that JASSO social bonds can be invested in with confidence.

Next, the JASSO social bond framework is based on the Social Bond Principles set forth by the International Capital Market Association (ICMA). The entire amount of funds invested by investors is used only for loans during the student period, making it easy for the public to understand JASSO's contribution to Goal 4 of the SDGs.

The first purpose of JASSO's issuance of social bonds is to raise the funds necessary to continue our operations, so it is important to expand the pool of investors and achieve stable funding from a medium- to long-term perspective. The second purpose is to make more people understand JASSO's efforts and contributions to social issues.

About four years ago, when JASSO started issuing social bonds, SDG bonds were still in their infancy, but we wanted this market to develop and expand in the future. By providing social bonds ourselves, we wanted to contribute as much as possible to the spread and development of SDG bonds in the domestic bond market. In addition, since JASSO was established as an independent administrative agency in 2004, JASSO has issued bonds up to the No. 67 issue in June.

Mr. Nishio:

As JASSO social bonds, JASSO has been issuing bonds since No. 52 in 2018, No. 52 and the maturities are two years, \30 billion per issue, and four regular issues per year. As for the issuance yields, JASSO social bonds have had a yield of 0% for the past several years, partly because the yields for JGBs have been negative due to the Bank of Japan's monetary policy. Despite this situation, we continue to receive investment announcements, and recently we have received interest from private sector companies. The Pack Corporation also made an investment declaration this past January.

Aihara:

I would like to ask Mr. Fujii. Could you tell us about the background behind your decision to invest in JASSO social bonds?

Aihara:

Do you have any other initiatives with respect to social issues?

Mr. Fujii:

We recognize that we are still in the middle of deciding our path with respect to social issues. We are currently in the process of formulating a sustainable management policy. Regarding ESG initiatives, in addition to what I mentioned earlier, we have started investing in a fund that invests in renewable energy businesses. We recognize that this will lead to solving environmental and social issues. In the future, we would like to continue investing in things related to our company's management philosophy and core businesses.

Aihara:

From our vantagepoint, we have seen a lot of moves by companies to expand their investments in ESG. The number of investment announcements by companies is increasing in terms of investment announcements for SDGs bonds as mentioned earlier by JASSO. We expect that the number of companies that make ESG investments will increase in the future, so what advice would you give to corporations that are considering such an investment?

Mr. Fujii:

There are many ESG-related investment targets in the world, so I think it is better to clarify in advance the company's policy and philosophy about what kind of investments it wants to make. When we receive information from securities companies and other financial institutions, I think it would be better to clarify the purpose and philosophy with respect to investment and communicate them in advance so that they can introduce better investment options.

Aihara:

Next, I would like to ask JASSO. Please tell us your thoughts on the SDGs from the perspective of a bond issuer, your opinion on ESG investment, and what you think about ESG investment by companies.

Mr. Nishio:

I believe that ESG investment and the issuance of social bonds are a means to achieve the SDGs, so the most important thing is that they genuinely want to contribute to solving social issues and improving the environment, or that they sympathize with the business. From this point of view, for example, the purchase of JASSO social bonds is not simply a bond investment, but also contributes to the SDGs, or as part of efforts to address issues that are difficult to contribute to on their own.

As interest in the SDGs increases in society as a whole, I believe that JASSO social bonds have been able to contribute to the achievement of Goal 4, "Quality Education for All." When I hear from students today, I feel that their awareness of the SDGs is very high. In this context, I believe that companies’ efforts to address the SDGs will lead to those companies becoming more attractive, including from the viewpoint of recruiting personnel.

Aihara:

I imagine that The Pack Corporation participates in IR meetings with investors as an issuer. Do you tell investors that you, as an investor, have established an amount of money for ESG investment?

Mr. Fujii:

We hold IR meetings on an ongoing basis, and we tell investors that we have established such an ESG investment framework.

Mr. Nishio:

For JASSO, it is very meaningful to deepen our relationship with investors through meetings like this one. Through today's meeting, I have become even more confident that we need to showcase JASSO's efforts. I hope this will serve as a reference in the future, but from the perspective of investors, could you give us some advice on how to promote JASSO's social bonds?

Mr. Fujii:

Given that ESG bonds are on the rise, investors also need to study the market thoroughly. Investors often get information from financial institutions, so it is important to collect information after clarifying the purpose of investment.

Aihara:

The Pack Corporation is listed on the Prime Market of the Tokyo Stock Exchange. Do you have to consider ESG because you are listed on the Prime Market, or have you become more aware of ESG due to the recent developments with disclosure, or are your ESG efforts simply the result of the build-up of past efforts?

Mr. Ouchi:

Packaging materials are originally intended to wrap things, and customers want the things that are wrapped, and thus packaging material inevitably ends up being thrown away. For this reason, the idea of "If it's going to be discarded anyway, let's make something good for the environment," has long been rooted in our company. As a manufacturer of packaging materials, we will continue to do our best to consider what we can do for society and the environment.

Aihara:

ESG is very much an extension of the business we have been engaged in for a long time, and now I understand that the terms ESG and SDGs apply to what we have historically been doing.

Mr. Fujii:

Recently, there has been a lot of talk about "purpose-based management" and a company’s "raison d'etre," but we have not defined it from that perspective. At the Pack Corporation, we are in the process of discussing purpose and other issues as we formulate our sustainable management policy. If we were to be asked, "What kind of company are you?" one example of our answer would be that we enrich society and make people smile through our packaging.

As for our listing on the Prime Market that you mentioned earlier, we made a decision based on internal discussions. As an analogy, choosing to list on the Prime Market means going down a thorny path. This is because there are costs in terms of having a sustainable management policy, TCFD-related work, and disclosure in English. However, we felt that as long as we meet the criteria for listing on the Prime Market, we should be a company that satisfies those requirements. Before listing on the Prime Market, we had been working on ESG and the SDGs, but we are working on how to systematize those activities.

Mr. Shimomura:

From the perspective of environmental considerations, the packaging materials we make, such as paper bags and boxes, are all disposed of, so I think it is possible to argue that we should get rid of them. However, we want to continue to value packaging that wraps things up and makes them look elegant, and we think that packaging is a wonderful culture. So, we are making company-wide efforts to make this culture sustainable.

Aihara:

Thank you. It was a very productive meeting. It has not been commonplace for issuers and investors to meet face to face to discuss the specifics of bonds. Also, ESG bonds have a relatively short history, and I recognize that ESG bonds are positioned as a very new product. However, about 30% of bonds currently issued are already ESG bonds. An increasing number of bonds in the market are not simply aimed at raising funds, but also for solving social issues and improving the environment. From an investor's perspective, ESG bonds not only provide a return on investment funds based on the scheduled maturity, but social bonds help solve social issues and green bonds help improve the environment.

I mentioned earlier that about 30% of bonds issued are ESG bonds, and this ratio is on an upward trend. As the market itself is expanding, Nomura, as a securities firm, will continue to play the role of connecting issuers and investors, and we will also further expand our efforts to achieve the SDGs.