GPIF Publishes the "FY2021 Analysis of Climate Change-Related Risks and Opportunities in the GPIF Portfolio"

October 19, 2022

Government Pension Investment Fund, Japan (GPIF) announced its support for the Task Force on Climate-related Financial Disclosures (TCFD) in 2018, and has disclosed information based on the recommendations of the TCFD every year since. Following on from last year, GPIF has again conducted a TCFD-based analysis of our portfolio and is reporting the results to pension beneficiaries through a supplementary guide to our ESG report entitled "FY2021 Analysis of Climate Change-Related Risks and Opportunities in the GPIF Portfolio."

In this report, we put emphasis on conducting analysis of equities, corporate bonds and government bonds, based on the same assumptions. The climate-related risks and opportunities was analyzed based on the scenarios published in June 2021 by the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), a network of major central banks and financial authorities around the world. In addition, we analyzed public- and private-sector support for achieving a net-zero economy and status of companies' setting of greenhouse gas emission reduction targets.

〈Key Contents〉

Introduction: Challenges to Address and Key Points of This Report
Chaper1: Analysis of Portfolio GHG Emissions
Chaper2: Public- and Private- Sector Support for Achieving a Net-Zero Economy
Chaper3: Analysis of Climate Value-at-Risks
Chaper4: Other Analysis

For this year's report, in addition to MSCI, we newly appointed FTSE Russell and BloombergNEF, to provide assistance in our analysis.

〈Comment from MIYAZONO Masataka, President of GPIF〉

Climate change risk affects all asset classes and securities simultaneously, cannot be eliminated through diversification, and has a very high likelihood of becoming more severe in the long term. With this in mind, this year GPIF once again examined climate change risks and opportunities inherent in our portfolio.

For GPIF, which invests not only in domestic listed companies but also in a wide range of major foreign companies, it is important to understand the issues and risks that countries and companies around the world are facing in relation to climate change.

The analysis shows that countries constituting 99% of the world's GDP are steering toward carbon neutrality and investment in decarbonization technologies are expected to expand in the future. It has also been shown that under the severe climate change policy, Japanese companies' low-carbon technology can gain recognition, which will have a positive effect on their corporate value. Accurately assessing how the climate will change and what the inherent risks and opportunities will be several decades into the future in a practical sense is an incredibly difficult task, and the analysis results need to be interpreted as occurring within a spectrum. We hope, however, that the report serves as an importance resource for investors and issuers alike as they think about their own exposure to climate risks and opportunities.