GPIF Publishes the 2021 ESG Report

September 30, 2022

Government Pension Investment Fund, Japan (GPIF) has published the ESG Report 2021 as a way of reporting on GPIF's Environmental, Social and Governance-related initiatives and the effects thereof to all pension beneficiaries. This report marks GPIF's fifth ESG Report. In addition to a review of GPIF's ESG initiatives for FY2021 and ESG-based evaluation of the fund's portfolio, this year's report includes an enhanced analysis based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Specifically, we (1) include analysis on public- and private-sector support for achieving a net-zero economy; (2) conduct an analysis of climate change-related risks and opportunities in our portfolio based on the scenarios adopted by major central banks; and (3) provide an analysis of reductions in CO2 emissions at the domestic renewable energy facilities in GPIF infrastructure portfolio.

GPIF will continue to assess whether our ESG activities are having the intended effect of improving the sustainability of financial markets and risk-adjusted returns, and hope this leads to a verification of the long-term effects thereof.

ESG Report 2021 Key Contents
Chapter 1: GPIF's ESG Initiatives
ESG Index Adoption and ESG Index-Based Asset Management
ESG in External Equity and Fixed Income Management
Stewardship Activities and ESG Promotion
Engagement with Index Providers and ESG Ratings Agencies
ESG in Alternative Asset Management
Investor Attention to "Human Capital" and Its Disclosure
Review of ESG Activities and Future Outlook

Chapter 2: Measuring the Impacts of ESG Activities
ESG Index Performance
Portfolio ESG Rating
ESG Rating Ranking by Country
Correlation of ESG Ratings
Gender Diversity in Japanese Companies
Relationship between ESG Disclosure and ESG Rating

Chapter 3: Evaluation and Analysis of Climate Change Risks and Opportunities
Disclosure and Analysis of Climate-Related Financial Information: Composition and Key Points
Analysis of Portfolio Greenhouse Gas Emissions
Public- and Private-Sector Support for Achieving a Net-Zero Economy
Corporate Initiatives in Anticipation of Transition to a Carbon-free Society and Their Evaluation
Analysis of Risks and Opportunities Using Climate Value-at-Risk
Analysis of Government Bond Portfolio Using Sovereign Bond Climate Value-at-Risk
Evaluation of Alignment with SDGs

〈Comment by MIYAZONO Masataka, President of GPIF〉
GPIF believes that considering ESG in our investments is key to making the Pension Reserve Fund more sustainable. As such, we became a signatory to the Principles for Responsible Investment (PRI) in 2015, and have been engaged in a broad array of ESG-related initiatives ever since. This year's report builds on previous years by, for example, using the enhanced model of Climate Value-at-Risk for the sophistication of our analysis. We also included a multifaceted analysis of decarbonization policy trends and corporate initiatives in transition to a net zero society. As governments and companies strive to transition their way to net zero, it is becoming increasingly important for investors, including GPIF, to gain a proper understanding of the climate change risks and opportunities of the investee companies and to reflect them in investment decisions. We hope that these initiatives provide motivation for other asset owners and asset managers in their own disclosures.