Japan’s $1.7 trillion Government Pension Investment Fund issued new guidelines backing sustainability-related investments as crucial to long-term returns.
The fund, one of the world’s largest pension funds, sees managing environmental and social issues as fundamental to its strategy, GPIF said March 31 in a new policy document — rejecting the shift by other asset managers to downgrade or remove green commitments.
“Capital markets are not free from sustainability-related risks, such as environmental and social issues,” the fund said in the document. “GPIF regards the reduction of sustainability-related risks and the creation of impact related to sustainability as an essential factor in achieving long-term performance of the entire portfolio.”
Asset managers globally are being forced to reexamine their approach to environmental, social and governance concerns, particularly in the U.S. where BlackRock and others have faced lawsuits and bans from Republican lawmakers enraged by what they call “woke” policies. Advocates of ESG warn that such attacks focus too closely on short-term profits while ignoring longer-term risks.
Some Europe-based institutional investors are now reviewing mandates with U.S. asset managers on concerns those firms are downplaying climate change.
GPIF held about ¥17.8 trillion ($119 billion) of assets tracking ESG indexes at the end of March 2024 — equivalent at the time to about 14% of equity investments — and had ¥1.6 trillion of green or related bonds, according to a previous filing.
The fund plans to maintain its current portfolio, which allocates a quarter of funds to four assets — domestic stocks and bonds, foreign equities and debt — for the next five years.
