skip

GPIF Publishes the "Analysis of Climate
Change-Related Risks and Opportunities
in the GPIF Portfolio"

October 2, 2020

In the FY2019 ESG Report released in August 2020, GPIF expanded on the information we disclosed last year in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) to include a comprehensive assessment of climate change-related risks and opportunities across all major asset classes in the fund's portfolio.

We commissioned this year's climate change risk and opportunity analysis to three different evaluators: the Zurich-based MSCI Climate Risk Center (formerly Carbon Delta, acquired by MSCI in 2019); Paris-based Beyond Ratings, a subsidiary of FTSE Russell, and London-based Trucost, a subsidiary of S&P Global. By drawing on the particular strengths of each of these world-leading climate change data and analytics firms, GPIF was able to compile a climate change analysis that utilizes the most cutting-edge climate change assessment techniques.

We were unable to fully describe the depth and scope of these analyses within our FY2019 ESG Report due to space limitations, and therefore chose to include these details within this "Analysis of Climate Change-Related Risks and Opportunities in the GPIF Portfolio" as a supplementary guide to the report.

〈Main Contents〉

Carbon footprint/carbon intensity measurement and attribution analysis
Corporate disclosure of greenhouse gas emissions
Scenario analysis of climate change risks and opportunities using Climate Value-at-Risk (CVaR)
Impact of technological opportunities on corporate value
Sovereign bond climate change analysis
Warming potential of GPIF portfolio

〈Comment from MIYAZONO Masataka, President of GPIF〉

While the analyses in this report focus mainly on GPIF's portfolio, the fact that the majority of our assets are invested passively across a broad range of equities and fixed income instruments across the world means that this climate change risk and opportunity analysis can effectively be considered an assessment of the climate change exposure of the global capital market as a whole. We therefore believe that it can serve as a valuable reference to other investors all around the world.

For corporate issuers as well, we believe the report can provide valuable insight into not only the different climate change-related challenges and risks that exist in different countries and at different firms around the globe, but also the potential value and business opportunities inherent in the technologies that are needed to solve these problems.

One important finding of the report is that equity prices are estimated to actually be higher under a 1.5˚C scenario than under a 2˚C or 3˚C scenario due to the value generated by greater technological opportunities. This should provide some encouragement to investors and issuers who tend to focus on the costs associated with climate change risk.

Accurately assessing how the climate will change and what the inherent risks and opportunities will be several decades into the future is realistically an incredibly difficult task, and readers should bear this in mind when evaluating the results of each analysis. We hope, however, that the report serves as an importance resource for investors and issuers as they think about their own exposure to climate risks and opportunities.

Analysis of Climate Change-Related Risks and Opportunities in the GPIF Portfolio [PDF:11.6MB]