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G P I F Tw i t t e r

2 0 2 2 E S G RE P O RT

GPIF Homepage

For All
Generations
Contact:
Planning and Communication Department,
Government Pension Investment Fund
Toranomon Hills Mori Tower 7th Floor, 1-23-1 Toranomon,
Minato-ku, Tokyo, Japan, 105-6377
TEL : +81-3-3502-2486 (direct dial)
FAX : +81-3-3503-7398
URL : https://www.gpif.go.jp/en/2022

ESG REPORT
Government Pension Investment Fund

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P.3
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For All
Generations
GPIF is committed to fulfilling our fiduciary duty to secure adequate
retirement funds for both current and future beneficiaries.
GPIF promotes ESG based on the concept of securing long term
“economic benefits” for the pension beneficiaries by reducing negativeenvironmental and social externalities in the capital market.

Introduction

GPIF in Numbers
ESG Investment at GPIFInterview with the President

11 GPIF’s ESG Initiatives
Chapter 1

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Fiscal 2022 Activity Highlights
ESG-Related Governance and Organizational Structure
ESG Initiatives within GPIF
Column 1: Gender Pay Gap within GPIF
GPIF’s External Public Communication
Support for TCFD and Climate-Related Financial Disclosures
ESG Index Adoption and ESG Index-Based Asset Management
Engagement with Index Providers and ESG Ratings Agencies
ESG in Equity and Fixed Income Mandate
Stewardship Activities and ESG Promotion
ESG in Alternative Asset Management
Collaboration with Overseas Public Pension Funds and Other Institutions
Implementation of a High-Level Study on the Integration of ESG and SDGs
in Investment
Column 2: Academic Research Related to GPIF’s Stewardship Activities
and ESG Investment
Measuring the Effects of Stewardship Activities and ESG Investment
Column 3: Investors Keeping Close Eye on Companies’ Human Rights Initiatives
Review of ESG Activities and Future Outlook

47 Measuring the Effects of ESG Activities
Chapter 2

P.49 ESG Index Performance
P.51 Portfolio ESG Rating, ESG Rating Ranking by Country, and Correlation
Between ESG Ratings
P.55 Gender Diversity in Japanese Companies

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57 Evaluation and Analysis of Climate Change Risks and Opportunities
Chapter 3

P.59 Disclosure and Analysis of Climate-Related Financial Information:
Composition and Key Points
P.61 Analysis of Portfolio Greenhouse Gas Emissions— Characteristics of GPIF’s Portfolio —P.63 Analysis of Portfolio Greenhouse Gas Emissions— Carbon Footprint and Carbon Intensity —P.67 Analysis of the Status of GHG Information Disclosure and Target Setting
P.69 Implied Temperature Rise Analysis
P.71 Analysis of Government Bond Portfolio Using Sovereign Bond Climate
Value-at-Risk
P.73 Analysis of Real Estate Portfolio Using Climate Value-at-Risk
P.75 Analysis of Avoided Emissions Based on the Bottom-up Approach
P.79 Measuring the Impact of Projects Funded Using ESG Bonds in GPIF’s Portfolio
P.83 Nature-Related Risks including Biodiversity and TNFD Trial Analysis
P.90 Editor’s Note

01

GPIF ESG REPORT 2022

GPIF ESG REPORT 202202

Government Pension Investment FundGPIF in Numbers
Number of Employees1

Policy Asset Mix
Equities 50%（±11%）
Domestic equities
24.49%
25%（±8%）

Bonds 50%（±11%）
Foreign bonds
24.39%
25%（±6%）

Domestic bonds
26.79%
25%（±7%）

Foreign equities
24.32%
25%（±7%）

Proportions of Passive and Active Investment

Specialist Personnel2
Active investment

Passive investment 82.82%

Asset size

16.12%¥200.1

trillion

ESG integration

Securities analysts

Other
1.06％

ESG Investment

Universal Owner

160

Employees

Lawyers¥200.1

trillionTax accountants

59
3
1

Real estate appraisers

MBA graduates, etc.

Ph.D. graduates, etc.

Number of GPIF-owned securities
Equities

Bonds

Investment
time horizon

5,678
18,254stocks

bonds

100

¥12.5

Assets undermanagement tracking
Approx.
ESG indexes

Investments ingreen bonds, etc.

¥1.9

Approx.

trilliontrillionLong-term Investment Performance
Cumulative
returns¥108.4External Ratings
Assessmentby PRI3

trillion(FY2001 - FY2022)

Rate of return

years

3
3
20
3

CPAs

35.9

%

(FY2001 - FY2022)★★★★

(as of March 31, 2023)

Responsible Asset Allocator
Initiative (RAAI) ranking4

Leaders

The 30 Most Responsible Asset Allocators

1 Employees: As of April 1, 2023 (excluding temporary staff)
2 Specialist personnel: As of April 1, 2023 (some personnel are counted in more than one category)
3 Assessment by PRI: Number of stars from Investment & Stewardship Policy assessment
4 Every two years, the American think tank New America analyzes sovereign wealth funds and pension funds on their responsible investing practices based on the Responsible Asset Allocator
Initiative (RAAI) index, developed in partnership with the Fletcher School at Tufts University.

03

GPIF ESG REPORT 2022

GPIF ESG REPORT 202204

Government Pension Investment FundESG Investment at GPIF

GPIF’s Positioning in the Investment Chain

While investors have traditionally used cash flows, profit margins and other quantitative financial data to evaluate companies,“ESG

A portion of the pension contributions made by individuals andcompanies, including consideration of ESG. This approach isinvestment” also takes non-financial ESG factors into consideration. ESG investment is expected to improve long-term risk-others (the actual asset owners) is entrusted to GPIF by the

aimed at creating a virtuous cycle where boosting corporate

adjusted returns by incorporating environmental, social, and corporate governance perspectives into investment decisions.

Minister of Health, Labour and Welfare as pension reserves. As

value over the long term leads to growth across the entire

the asset owner of these pension reserves, GPIF selects asset

economy and the long-term enhancement of investment returns.

managers to manage these assets and encourages them topursue constructive dialogue (engagement) with investee

Why Does GPIF Focus on ESG?

The Relationship Between ESG and the SDGs

GPIF can be described as a “universal owner”; that is, an

The SDGs (Sustainable Development Goals) are international

investor with a substantial level of assets under management

goals set forth by the United Nations in the “2030 Agenda forthat invests in securities spanning the entire world capital

Sustainable Development” adopted at the UN Summit inmarket. GPIF can also be characterized as a “cross-generational

September 2015. The SDGs evolved from the Millennium

investor”, managing assets from a perspective spanning multiple

Development Goals formulated by the UN in 2001 and are

generations. Sustainable corporate value creation by eachtargeted for achievement by 2030. They comprise 17 goals

investee company and the sustainable, stable growth of the

aimed at realizing a diverse, inclusive, and sustainable society.

entire capital market is critical for GPIF – a universal owner andAlthough the ESG issues considered in ESG investment and thosecross-generational investor – to achieve stable income over theof the goals and targets of the SDGs may have different objectives,long run.

they also have much in common, and addressing the former also

For example, if the share prices of some portfolio companies

commitment to the SDGs and ESG by companies would help topaying attention to their adverse impacts on the environment

improve their corporate value (ESG investment), while at the sameand society for the sake of short-term revenue growth, societytime, the realization of a sustainable economy and society (achieving

and the economy as a whole, including other companies, are

the SDGs) would lead to better return for all assets managed bynegatively affected by such activities. Consequently, the overall

GPIF over the long term.

other words, reducing negative externalities to maintain a

Entrustment ofPension Reserves

We have published a video explaining this content in simple
terms on GPIF’s YouTube page (only available in Japanese).

Pension contributions
Increase inpension reserves(GPIF)

Increased business opportunities(for discretionary investment)

Engagement

Investment returns

ESG investment
Return (profitability)

Investors

Companies

Asset managersof actively working to curb these kinds of negative externalities
lies at the core of GPIF’s ESG investment.

Pension special account

Asset owner

Entrustment of funds

Increased investment opportunities

sustainable capital market and society is vital for maintaining
profitability of the portfolio. This “universal ownership” approach

Actual asset owners(Individuals and others who are paying insurance premiums/ future generations)contributes to achieving the latter. We believe that an active

increase as a result of conducting business activities without

portfolio of the universal owner will be significantly impaired. In

Wages

SignedPRI
Principles for
Responsible
Investment

Endorsed
2016
ProposedUnitedNations

2015
Adopted

SDGs
Sustainable
Development
Goals

Minimize negative environmental and social
externalities and enhance the long-term return ofthe portfolio across all asset classes
ReturnProhibition on
in-house investment
in equities, etc.

(investment fiduciaries)

Investment(exercise of voting rights)

Engagement

Dividends andholding gains

Investee companies, etc.

Social issues
Negative impact
Positive impact
Multiple
ESG investment generations later

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GPIF ESG REPORT 2022

GPIF ESG REPORT 2022

06

Interview with the President

GPIF is committed tofulfilling our fiduciary duty to secure
pension reserves for future beneficiaries
by investing from a long-term perspective.

Government Pension Investment Fund

President

Q

Even as the trend towards ESG
promotion gains pace in Europe, there
seems to be an increasing movement
against ESG in the United States. Whatis your perspective on this situation?

MIYAZONO Masataka
Trump administration, however, there were many cases

investment. I believe that GPIF’s ESG investment will

designed to achieve a social or environmental effect as

where the federal and state governments did not see

have benefit from this improvement in disclosure.

well as investment returns. One might assume thateye-to-eye, and not all of the country is unified in its
attitude. In that sense, perhaps things have not changed
very much. Meanwhile, Japan is in a different situation
to both Europe and the United States. Until recently,

The ESG environment is certainly quite different inJapan was trailing behind Europe in its efforts to codify

Europe and the United States. European countries,

statutory disclosure requirements for sustainability

especially in the EU, are implementing increasingly

information, but it is now catching up.

stringent rules for ESG disclosure, targeting both07

investment that pursues both impact (social or

Beginning with annual securities reports andQ

There is an increasing attention in recent
years on impact investment aimed atsolving social issues. What are your views
on impact investment?

environmental effect) and investment returns is the ideal
form of investment for GPIF. However, GPIF’s sole
mission is to generate investment returns. We cannot
invest for the purpose of creating an impact. I thinkthat’s an important restriction from the perspective of

Our mission at GPIF is to contribute to the stability of thenational pension system by managing and investing themaintaining investment discipline, as well.
However, we believe the act of investing does affectcompanies and investors. They seem to have adopted asimilar disclosures for the fiscal year that ended on

pension reserves entrusted to us by the pension

investee companies’ corporate value through businessstrategy of taking a lead in the development ofMarch 31, 2023, Japanese companies are required tobeneficiaries, who are the people of Japan, and paying

activities of our investee companies generating a social andinternational rules with the aim of building sustainabledisclose their views and initiatives related toour investment returns into the national treasury. That isenvironmental impact which creates revenue and costs

societies while also boosting the competitive strength ofsustainability. Japan’s efforts may not be as eye-

our unique mission. We are prohibited by law fromeventually leading to impact on corporate value. I believe

industries in the region. By contrast, there are many

catching as those in Europe and the United States, but

managing pension reserves for any other purpose. This is

ESG investment, in particular, is an approach based on thisrecent reports from some political parties and states inthey have sparked little backlash or vacillation andreferred to as the “prohibition of consideration of issues

idea. It is for this reason that we have consistently

the United States that give the impression of anseem to be progressing steadily, step by step.

except for those that benefit the pension beneficiaries.”emphasized the measurement of impact in our previous

increasingly radical movement against ESG in the

Improving the quality and quantity of ESG information

The report from the Financial Services Agency

ESG Reports. In this ESG Report, we have gone evencontext of the country’s politics. Even under the previous

facilitates an improvement in the quality of ESG

working group defines impact investment as investment

further, attempting to measure impact of eligible projects

GPIF ESG REPORT 2022

GPIF ESG REPORT 202208

Interview with the President

financed by ESG bonds in GPIF portfolio and otheryear. This change is too profound to be characterized

investments. We also plan to measure impact as part of oursimply as a trend; rather, we assume it reflects the

Measurement of Effects of Stewardship Activities and ESG

increasing number of serious environmental and social

Investment Project, beginning this fiscal year. GPIF does

issues that must be taken into account. However, thesenot invest in impact, and yet we suppose ourselves as

issues affect assets under management to a varying

among the most impact-focused of all investors.

degree depending on the theme. Moreover, since GPIFQ

Recently, there is growing interest in ESG
disclosure related to human capital anddisclosure based on the Taskforce on
Nature-related Financial Disclosures(TNFD) framework.

I feel that we need to address an increasingly diverse
and extensive range of ESG factors with each passing

Q

In Japan, the Tokyo Stock Exchange has
gained public attention by requiring
companies with a price-to-book ratio(PBR) below 1.0 to disclose andimplement improvement measures.
How do you view this initiative?

mainly relies on external asset managers, there are

Approximately half of the listed companies in Japan

only some issues that we can address effectively.

have PBRs lower than 1.0, indicating that their shares

We would like to remain constantly alert to the

PBR of Japanese companies, a substantial challenge
facing the capital market. In this context, we would liketo ask our external asset managers to pursue even more
active engagement.

Q

How do you view the sustainabilityof GPIF itself?

are valued at less than liquidation value. Althoughvarious issues that are gaining attention among theeveryone is aware of this issue, I presume it has always

At GPIF, we have not recruited new graduates for years.

public and work to gather information on them.

been a difficult one to address and attempt to improve

In almost all cases, we recruit mid-career personnel

the situation, since it might be interpreted as a criticism

from a diverse range of different backgrounds. In thisof some of Japan’s foremost companies. In that sense, I

sense, GPIF is a highly diverse organization. At the same

would like to express my respect for the forthright action

time – and this seems to be a common concern acrosstaken by the Tokyo Stock Exchange.

the asset management industry – our proportion of

PBR is equal to the share price divided by net assets

female employees is still at 27.7%, an extremely low

per share. It is possible to raise PBR by shrinking thelevel. This is shameful for us, as an organization that

denominator through share repurchases or higher

recognizes the importance of gender diversity anddividends, but in general, it’s necessary to increase thediscloses related information to the public, including

numerator: the share price. A PBR of less than 1.0

pursuing passive investment strategies based on genderindicates that the company is not generating returns

diversity-related equity indexes.

above the cost of capital, or that investors doubt that it

In our ESG Report, we disclose gender pay gap

will be able to generate this level of returns in the future.

indicator for GPIF in the same way as for otherIn other words, in either case, there are doubts aboutcompanies. The figure is nothing to be proud of.

its sustainability. If the low PBR is a result of mispricing

However, we think that an accurate understanding of thein the stock market, then one way for the company topresent situation is the first step in finding a solution.

rectify the situation is to actively engage in disclosure

Creating workplace environments where everyone, notand dialogue with investors. However, if the low PBR is aonly women, can find fulfillment and work with a sense

result of low profitability, then it must swiftly act to reviseof purpose will not only boost business performance but

its business portfolio. There might be other cases where

also increase the sustainability of the organization. This,

the sustainability of the business is cast into doubt byin turn, will lead to greater sustainability of pension

the social and economic movement towards net zero.

reserves. This is not an issue that can be solved

We think that dialogue between companies andovernight, but we are working towards a solution.

investors will play a major role in addressing the low
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GPIF ESG REPORT 2022

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10

Chapter 1 GPIF’s ESG Initiatives

Chapter 1

GPIF’sESG Initiatives

P.13

Fiscal 2022 Activity Highlights

P.35

ESG in Alternative Asset Management

P.15

ESG-Related Governance and Organizational Structure

P.37

Collaboration with Overseas Public Pension Funds and Other Institutions

P.17

ESG Initiatives within GPIF

P.39

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Column 1：Gender Pay Gap within GPIF

Implementation of a High-Level Study on the Integration of ESG and
SDGs in Investment

pursue ESG-related activities, we have also adopted ESG-themed indexes, undertaken

P.20

GPIF’s External Public Communication

P.41

stewardship activities, engaged with index providers and ESG rating agencies, andP.21

Support for TCFD and Climate-Related Financial Disclosures

Column 2: Academic Research Related to GPIF’s Stewardship Activities
and ESG Investment

collaborated with overseas public pension funds and other institutions. In Chapter 1, we

P.23

ESG Index Adoption and ESG Index-Based Asset Management

P.44

Measuring the Effects of Stewardship Activities and ESG Investment

P.25

Engagement with Index Providers and ESG Ratings Agencies

P.45

Column 3: Investors Keeping Close Eye on Companies’ Human Rights Initiatives

P.46

Review of ESG Activities and Future Outlook

GPIF has been promoting ESG initiatives since we signed the Principles for Responsible
Investment (PRI) in 2015. In addition to building organizations and company structures topresent these activities together with new initiatives undertaken in fiscal 2022.
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GPIF ESG REPORT 2022

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ESG in Equity and Fixed Income Mandate

P.31

Stewardship Activities and ESG Promotion
GPIF ESG REPORT 2022

12

Chapter 1 GPIF’s ESG Initiatives

Fiscal 2022

Activity Highlights

In fiscal 2022, GPIF continued to promote ESG activities in new areas.

Adoption of Additional ESG-Themed Domestic Equity Index

Implementation of a High-Level Study on the Integration of ESG and SDGs in Investment

Chapter 1 GPIF’s ESG Initiatives | Activity Highlights

Here we present the highlights of our ESG activities during the year.

In fiscal 2022, GPIF undertook a High-Level Study on the
Integration of ESG and SDGs in Investment. This study was
implemented to provide an overview of academic research on
the topic, through a broad-based survey of the findings ofFrom the indexes submitted to the Index Posting System, GPIF

leading papers on investment performance in the sustainability

adopted the Morningstar Japan ex-REIT Gender Diversity Tilt

field, including ESG and the SDGs, in Japan and overseas.

Index, which is a gender diversity index for domestic equities,
and began passive investment tracking this index.

Please refer to pages 39 to 40 for details.
Please refer to pages 23 to 24 for details.

Engagement with Index Providers and ESG Ratings Agencies

Measuring the Impact of Projects Funded Using ESG Bonds in GPIF’s Portfolio

GPIF has been actively conducting dialogue with index

economic benefits for pension beneficiaries and cannot invest

providers and ESG ratings agencies since 2017 when wefor the purpose of creating an impact. However, we focus on

started to select ESG indexes for Japanese equities. As

impact because we believe that the business activities of our

GPIF’s investments are predominantly passive, index

investee companies generate a social and environmental

providers and ESG rating agencies play a pivotal role in theimpact which creates revenue and costs, consequently

success or failure of our fund management. By ongoing

affecting their corporate value. For our ESG Report for fiscal

dialogue with these providers, efforts are underway to2022, we have measured the impact of eligible projects

improve ESG rating coverage and rating methodologies.

Please refer to pages 25 to 28 for details.

Please refer to pages 79 to 82 for details.

Chapter 3
Evaluation and Analysis of Climate Change Risks and Opportunities

Engagement Through Our Asset Managers

financed by ESG Bonds in GPIF portfolio.

Chapter 2
Measuring the Effects of ESG Activities

GPIF is required to invest solely for the purpose of generating

TNFD Trial Analysis
At GPIF, we think it is vital to understand our investee companies’

GPIF promotes constructive dialogue between asset managers

dependence on the natural environment and their effect on thisand investee companies. Our asset managers for domestic

environment, and to comprehend the natural risks and opportuni-

equities engaged with 946 companies during the 2022

ties that they face. In fiscal 2022, we engaged in a trial analysis

calendar year. This equates to 40% of all of GPIF’s investee

concerning natural capital, including biodiversity, based on thecompanies, or 94% in terms of market capitalization.

Locate and Evaluate steps of the LEAP approach under the TNFD
Please refer to pages 31 to 34 for details.

13

GPIF ESG REPORT 2022

analysis framework.

Please refer to pages 83 to 89 for details.

GPIF ESG REPORT 2022

14

Chapter 1 GPIF’s ESG Initiatives

The Board of Governors discusses and oversees approaches to ESG investment at GPIF. The
Executive Office advances ESG initiatives through the ESG & Stewardship Department andother departments related to asset management, and reports to the Board of Governors.

Deliberations by the Board of Governors
The Board of Governors, established in October 2017,

meetings, and ESG-related issues were discussed at threemakes decisions concerning important matters such as theof those meetings. The Board of Governors discusses andformulation of the policy asset mix and medium-term plansoversees the promotion of ESG and approaches to ESG

by council decision-making system, and oversees theinvestment at GPIF. Details of the discussions by the Board

execution of operations by the Executive Office.

of Governors are posted on the GPIF website in the form of a

In fiscal 2022, the Board of Governors held 13

summary of the proceedings after a certain period of time.

GPIF adopted a new organizational structure on April 1,

Investment Department,. The Investment Committee, chaired

2023 for the purpose of promoting initiatives related to moreby the Chief Investment Officer (CIO), deliberates and makes

sophisticated investment. The ESG & Stewardshipdecisions on asset management-related issues, including

Department was newly established as an independent

ESG-related initiatives . Important matters are reported todepartment to boost the expertise of GPIF’s ESG and

the Board of Governors after deliberation in the Investment

stewardship activities, as well as to promote and deepen its

Committee. In addition to comprehensive, regular checks ofinitiatives. The Executive Office implements ESG initiatives

the portfolio management by the Investment Committee, thein coordination of departments relevant to asset

status of ESG investments is also monitored from a risk

management, including the ESG & Stewardshipmanagement perspective by the Portfolio Risk Management

Department, Investment Department, and Private Market

Committee, which meets monthly.

Chapter 1 GPIF’s ESG Initiatives | ESG-Related Governance and Organizational Structure

ESG-Related Governance andOrganizational Structure

ESG-related Executive Structure

Key departments responsible for ESG

ESG & Stewardship Department

Selecting ESG indexes, evaluating the
stewardship and other aspects of

Main
Responsibilities

Promotion of ESG investment, stewardship
responsibility, and analysis and evaluation of
voting, etc.

external asset managers, andsupporting ESG and stewardshiprelated initiatives across GPIF.

Meeting number

Meeting date

Agenda item

68th

May 2022

Reported matter

ESG Report (Outline)

72nd

September 2022

Reported matter

2021 ESG Report

79th

March 2023

Reported matter

Stewardship Activities Report 2022

Chapter 2
Measuring the Effects of ESG Activities

ESG-related items discussed and reported on at Board of Governor meetings

Investment Department
Main
Responsibilities

Formulating investment strategy, selecting andevaluating external asset managers for equity and
fixed income, conducting operations related tomore sophisticated investment, etc.

Private Market Investment Department
Selecting and evaluating external asset managers
for alternative assets, etc.

external asset manager evaluation process.

Integrating ESG into its selection andChapter 3
Evaluation and Analysis of Climate Change Risks and Opportunities

Main
Responsibilities

Assessing ESG integration as a part of theevaluation of external asset managers
for alternative assets.

Composition of the Board of Governors
https://www.gpif.go.jp/en/about/board.html

Status of the Board of Governors
https://www.gpif.go.jp/operation/board/

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GPIF ESG REPORT 2022

GPIF ESG REPORT 2022

16

Chapter 1 GPIF’s ESG Initiatives

ESG Initiatives within GPIF

5 times

GPIF is committed to promoting ESG investment and promotes
initiatives designed to bolster the organization’s ESG and
SDGs-conscious internal values. Here we present ESG initiatives
being undertaken within GPIF.

SDGs and Diversity-Related Initiatives and Internal ESG Study Sessions
GPIF’s Code of Conduct states, “We are committed to GPIF’s

At GPIF, we promote environmentally and socially conscious

saving initiatives aimed at achieving a decarbonized city, andinitiatives in the area of procurement. As part of ourhas been recognized with an S-rank certification under theenvironmentally conscious initiatives, we established a “BasicComprehensive Assessment System for Built Environment

Policy on Promoting Green Procurement” for fiscal 2022

Efficiency (CASBEE) system.

based on the Act on Promotion of Procurement of Eco-

Chapter 1 GPIF’s ESG Initiatives | ESG Initiatives within GPIF

Number of SDGs training
sessions and internal ESG study
sessions held

Environmental and Other Initiatives

We have also established a “Basic Policy on Promoting

Friendly Goods and Services by the State and Other Entities

Procurement from Facilities Employing Disabled Persons” for(Green Procurement Act). Pursuant to this policy, GPIF works

fiscal 2022 based on the Act on Promotion of Procurement

to ensure that the paper and stationery, office furniture, officeof Goods and Services from Disability Employment Facilities

equipment, appliances, and other office products in the officeby the State and Other Entities . We actively promote thehave a minimal impact on the environment. The building

procurement of goods and services from facilities that

where GPIF is located is promoting energy- and resource-

employ people with disabilities.

mission by promoting communication and teamwork andnurturing a diversity of talents and capabilities.” Building on this, in

Women in the Workplace at GPIF

January 2020, GPIF established the SDGs Promotion Group—acommittee reporting directly to the President in order to develop

The advancement of women in the workplace is a crucial part

initiatives designed to bolster the organization’s ESG-consciousof diversity promotion. Through disclosure based on The Actinternal values. The Group provides regular training sessions foron Promotion of Women’s Participation and Advancement in

Caregiver Leave, and Other Measures for the Welfare of

the Workplace, companies have an obligation to confirm theWorkers Caring for Children or Other Family Members,

status of women in their workplaces and analyze the issues

companies with over 1,000 employees are required toall of the staff in GPIF on the SDGs and invites external experts tocentered working style predicated on long working hours to morethey face. We calculated GPIF’s scores for the five metrics that

disclose the childcare leave uptake rate among their male2022, we had one SDGs training session and four internal ESG

flexible working styles based on individual lifestyles and value

companies are required to disclose under The Act on

employees, starting in April 2023. Although GPIF is notstudy sessions. Here, we would like to introduce one of our SDGs

perceptions. In this training session, GPIF employees learned thePromotion of Women’s Participation and Advancement in the

obligated to disclose this information, our calculation reveals

training session: Promoting Women’s Advancement and Diversity.

importance of establishing systems and reforming attitudes to

Workplace, shown under (1) to (5) below. These five metrics

that 100% of eligible male employees took childcare leave inChanges in the working-age population have made it imperative

enable them to choose their own optimal working style to perform

are also the quantitative evaluation metrics used in the MSCI

fiscal 2022. Creating work-friendly environments wherethat Japan shifts from a highly homogeneous, organization-

to their best.

Japan Empowering Women Index (WIN index). The result

everyone can find fulfillment and work with a sense ofshows that women only account for a little over 20% of GPIF’s

purpose could boost business performance as well as

employees. GPIF still appears to have room to improve in theincrease the sustainability of the organization. We will work to

areas of recruitment and promotion of female employees, anmake our workplace environments even more work-friendly.

July
2022

Title: Recent Trends in ESG Investing and GPIF’s Role
Lecturer: MIZUGUCHI Takeshi (President, Takasaki City University of Economics)

Title: The Structure of Annual Reports by Major Overseas Pension Funds – Trends in Corporate Governance andDecember
Their Influence on Annual Reports by Overseas Pension Funds
2022
Lecturer: FURUSAWA Tomoyuki (former Director-General of the Policy and Markets Bureau, Financial Services
Agency; currently a member of the PIOB)
December Title: ESG Investment at GPIF (Including introduction to ESG Report)
2022
Lecture: GPIF staff members
January2023

Title: Renewable Energy Policy Trends
Lecturer: USHIO Takafumi (Deputy Director, New and Renewable Energy Division, Agency for Natural Resources
and Energy, Ministry of Economy, Trade and Industry)

January2023

Title: Promoting Women’s Advancement and Diversity
Lecturers: UTSUMI Tomoe (Managing Executive Officer, Head of Operations and Chief Diversity Officer, The
Norinchukin Bank)AKAMATSU Takeshi (Head of Diversity Promotion, Diversity Group, Human Resources Division, The Norinchukin Bank)(Note) Lecturers’ titles were current at the time when the relevant session was held.

GPIF ESG REPORT 2022

Chapter 3
Evaluation and Analysis of Climate Change Risks and Opportunities

purpose of improving staff’s understanding on this topic. In fiscal

FY2022 SDGs training and internal ESG study sessions

17

Moreover, with the revision of the Act on Childcare Leave,

Chapter 2
Measuring the Effects of ESG Activities

lecture on ESG related recent trends and other issues , for the

Study session (July 2022)

issue common to the entire asset management industry.

Women in the Workplace at GPIF

(1) % Female New Hires(2) % Women in the Workforce(3) % Difference in Years Men and Women are Employed by the Company*(4) % Women in Senior Management(5) % Women on Board**[Reference] % Childcare Leave Uptake Rate Among Male Workers***

GPIF
20.8
27.7
-43.5
9.3
16.7
100.0

(Note 1) The data represents FY2022 results for (1) and childcare leave uptake rate among male workers, status as of April 1, 2023 for (2), (4) and (5), and the status as of March 31, 2023 for (3).
(Note 2) The data for (1) includes five staff members who transitioned from regular employees to specialist personnel and excludes staff employed under a continuing employment scheme, seconded staff, temporary staff,
and contract workers. The data for (2) includes regular employees, specialist personnel , staff employed under a continuing employment scheme, seconded staff, temporary staff, and contract workers, but does notinclude executive managing directors or part-time staff. The data for (3) includes only regular employees and excludes staff employed under a continuing employment scheme and seconded staff. The data for (4)includes regular employees, specialist investment staff, staff employed under a continuing employment scheme, and seconded staff.
(Note 3) (3) Difference in Years Men and Women are Employed by the Company* = (Average years women employed – Average years men employed) / Average years men employed.
(5) % Women on Board (Officers)** is the percentage of women on the Board of Governors. Governors are appointed by the Minister of Health, Labour and Welfare.
[Reference] Childcare Leave Uptake Rate Among Male Workers*** = (Number of male workers who took childcare leave or equivalent) / (Number of male workers whose spouse gave birth)(This ratio fluctuatessignificantly from year to year due to GPIF’s small workforce)

GPIF ESG REPORT 2022

18

Chapter 1 GPIF’s ESG Initiatives

GPIF’s External Public Communication

Gender Pay Gap within GPIF

Speech and Panel Discussions(FY2022)

With the revision of The Act on Promotion of Women’s Participationcompared the pay received by comparable male and female

and Advancement in the Workplace, companies normally employing

employees (see Figure 2).

301 or more full-time employees are required to disclose their gender

32 times

At GPIF, we proactively send information through media such as
YouTube and Twitter, as well as through conferences andlectures. We aim to provide accessible information to the broad
public, not just investment specialists.

At present, GPIF not only has relatively larger proportion of young

pay gap, starting in July 2022. Gender pay gap is one of thefemale employees, but also fewer number of female investment

evaluation metrics used by the Morningstar Japan ex-REIT Genderspecialist personnel employed on a fixed-term basis, who have a

Diversity Tilt Index, which GPIF has adopted as one of its gender

relatively high level of pay. This is the main reason for the gender pay

We are working to enhance our public relations concerning

TCFD Summit organized by the Ministry of Economy, Tradediversity indexes. Exploring the background to the gender pay gap not

gap at GPIF. Investment specialist personnel require a high level of

GPIF’s ESG initiatives to the broad public and the media, notand Industry and the Japan Investment Conference 2022

only reveals the different treatment given to men and women but also

expertise and, at present, are mostly mid-career hires with experience

just investment specialists. In addition to preparing andorganized by the CFA Society Japan. We also publishedexposes various organizational issues.

at private sector financial institutions and similar organizations. The

publishing our annual ESG Report, which presents GPIF’s

papers in academic journals and the like. We aim to further

small proportion of women in this talent pool is affecting the

ESG initiatives and their effects, we announce our selection

strengthen our public communication in fiscal 2023.

disclose this information. Nonetheless, we calculated the gender pay

recruitment of female staff. In order to increase GPIF’s organizationalof ESG indexes on our website, together with an outline of

gap for fiscal 2022, revealing that female employees earn 70.6% of

diversity as well as inclusion, we think it is vital that we boost thetheir male counterparts (see Figure 1).

attraction of our workplace by creating work-friendly environments

With employees less than 301, GPIF is not required by law toChapter 1 GPIF’s ESG Initiatives | GPIF’s External Public Communication

Column 1

where everyone, not only women, can find fulfillment and work with a

Consulting Inc., to adjust these numbers for the various reasons thatsense of purpose, as well as implementing measures such as humancause gender pay gap (such as age, education, and job category)

resources development for young female staff. Executive Managing

through statistical processing based on economic insight, andDirector (Planning and General Affairs) MORI Kotaro

Figure 1. Gender Pay Gap at GPIF

each index.
In addition, we post information targeting a broad
Chapter 2
Measuring the Effects of ESG Activities

We used GEM App, an application developed by UTokyo Economic

Communicating GPIF’s Initiatives to the Public

section of the public on Twitter and release the YouTube
video, such as “Understanding GPIF in 10 minutes,”series,
mainly for company employees responsible for ESG, IR andengagement with investors. These YouTube videos introduce
and explain GPIF’s ESG investment and stewardship

Gender pay gap (average)
Among all employees (%)

activities. In fiscal 2022, we joined 32 conferences and

GPIF
70.6

lectures (topics including unrelated to ESG), such as theExternal Conference (December 2022)

Chapter 3
Evaluation and Analysis of Climate Change Risks and Opportunities(Note 1) Data is based on the results for FY2022(Note 2) Total annual pay includes basic salary, overtime pay, bonuses, etc., and excludes travel allowances.
(Note 3) Calculated excluding executive managing directors, staff joining or leaving during the fiscal year, staff employed under a continuing employment scheme, seconded staff, staff seconded to GPIF, temporary
staff, contract workers, and staff on leave.

Figure 2. Causes of the Gender Pay Gap（％）

Unadjusted

0

Adjusted for age, number of years of
Adjusted for (b) + divisioncontinuous employment, and education (=b)
and occupation (=c)

-5

-3.1

-10

-9.8

-15

The difference of 19.6% is mainly
due to the relatively large number ofyoung female employees

-20
-25
-30
-35

Adjusted for (c)+ working hours-1.3

The difference of 6.7% is mainly due to thesmall number of investment specialist
personnel , who have relatively high level of
pay among female employees-29.4

The YouTube video series “Understanding GPIF in 10 minutes”
Understanding GPIF in 10 minutes
GPIF’s ESG Investment

GPIF’s ESG
Investment

GPIF’sStewardship
Activities

Climate change
Risks and
Opportunities(Note 1) The definition of each adjustment category is shown below.
No adjustment: Gender pay gap among all 138 employees surveyed
・Adjusted for age, number of years of continuous employment, and education (=b): Gender pay gap adjusted to compare male and female employees of the same age with the same number of years ofcontinuous employment and education
・Adjusted for (b) + division and occupation (=c): Gender pay gap adjusted to compare male and female employees in the same division with the same occupation, in addition to the adjustments in (b)・Adjusted for (c) + working hours: Gender pay gap adjusted to compare male and female employees working the same number of hours, in addition to the adjustments in (c)(Source) Prepared by GPIF using the GEM App developed by UTokyo Economic Consulting Inc.

19

GPIF ESG REPORT 2022

GPIF ESG REPORT 2022

20

Chapter 1 GPIF’s ESG Initiatives

Disclosure consistent
with TCFD recommendations

5th year

Climate change risks are difficult to eliminate completely merely
through diversification and are highly likely to manifest over thelong term. GPIF, as an asset owner, is taking the lead in addressingthese risks.

Governance

GPIF’s Investment Principles and Stewardship Principles clearly state that climate change and other ESG factors shall be taken
into account in fund management, and GPIF actively works to achieve this declaration (page 92).

■

The Board of Governors, which oversees the Executive Office, receives reports on ESG from the Executive Office as necessary(page 15).

■

GPIF’s Executive Office convenes Investment Committee meetings to make decisions on climate change and other ESG-related
initiatives. Organizational structure is in place to implement these initiatives (page 16).

Strategy

The Financial Stability Board (FSB) established the Task
Force on Climate-related Financial Disclosures (TCFD) in

Governanceopportunities. The recommendations published by the TCFD■

In relation to the environment (E) in particular, we use indexes for equity investment that focus on each company’s carbon
efficiency (page 23-24) and invest in ESG bonds including green bonds (page 30).

■

In addition to measuring the carbon footprint of GPIF’s portfolio (page 63-66), we measure the impact of eligible projects financed by
ESG Bonds in GPIF Portfolio and analyze the contribution of some of our stock holdings reducing GHG emissions (page 75-82).

companies and other organizations in (1) governance, (2)Chapter 2
Measuring the Effects of ESG Activities

Risk management

outline a series of information disclosure practices fororganization’s businesses, strategy, and financial planning where such information is material.

GPIF proactively integrates ESG across all asset classes. In equity investment, we incorporate external asset managers’ ESG
activities into their evaluations as well as conduct passive investment based on ESG indexes (page 29). In fixed income
investment, we propose investment opportunities in ESG bonds to our external asset managers (page 30). We also promote ESG
integration in our alternative investments (page 35-36).

Strategy

disclose information related to climate change risks andDisclose the actual and potential impacts of climate related risks and opportunities on the■

December 2015, and in June 2017, the TCFD released its
recommendations on how companies and others can better

Disclose the organization’s governance around climate-related risks and opportunities■

Climate-Related Financial Disclosure Consistent with TCFD Recommendations

Chapter 1 GPIF’s ESG Initiatives | Support for TCFD and Climate-Related Financial Disclosures

Support for TCFD and
Climate-Related Financial Disclosures

Metrics and targets

strategy, (3) risk management, and (4) metrics and targets,
Risk
management

in relation to climate change.
For investors, climate change risks occur
simultaneously across all companies and asset classes

GPIF is developing an organizational structure for monitoring the greenhouse gas (GHG) emissions (carbon footprint and carbon
intensity) of our entire portfolio as well as for each fund for which we outsource the management.

the TCFD framework include all ESG activities and are not■

The Portfolio Risk Management Committee meets monthly to report on risk management status of ESG indexes and otherinvestments.

manifest at least over the long term, and we believe that

confined to initiatives that is only relevant to climate■

As well as requiring asset managers to actively engage with companies on key ESG issues (pages 31-34), GPIF engages withindex providers to encourage improvement in the evaluation techniques used within the methodologies of the carbon efficientindexes and ESG indexes for domestic and foreign equities that GPIF adopts (pages 25-28).

GPIF, as an asset owner, should take the lead in addressingchange. This section presents an overview of whatthem. Accordingly, we declared support for the TCFD in

information GPIF discloses for the four TCFD disclosures,

December 2018 and began disclosing information inalong with the corresponding pages in this report.

accordance with the TCFD recommendations in the

GPIF will work to enhance the sustainability of the entire

following fiscal year’s ESG Report. This year’s 2022 ESG

market by further improving its disclosure on ESG in general,

Report is the 5th year of such disclosure.

including climate-related financial information.

It is difficult to separate climate change-focused

Metrics andtargets

climate change as one of the most important themes in ESG
activities in general. Therefore, our disclosures in line with

21

GPIF ESG REPORT 2022

Disclose the metrics and targets used to assess and manage relevant climate-related risks andopportunities where such information is material.

■

GPIF aims to control portfolio risks and secure opportunities for investment return by contributing to curbing greenhouse gas(GHG) emissions across the entire economy, through engagement with external asset managers and ESG investment (pages
23-24 and 31-34).

■

GPIF calculates Scope 1 to Scope 3 carbon footprint and compares these with each portfolio benchmark by asset class. We also
calculate each portfolio’s carbon intensity using weighted average carbon intensity (page 63-66).

investment from ESG activities as a whole, and GPIF regards

Chapter 3
Evaluation and Analysis of Climate Change Risks and Opportunities■

and cannot be completely eliminated throughdiversification. Moreover, these risks are highly likely to

Disclose how the organization identifies, assesses, and manages climate-related risks.

GPIF ESG REPORT 2022

22

Chapter 1 GPIF’s ESG Initiatives

Number of ESG indexes
adopted by GPIF

9

In order to improve the long-term risk/return profile of the portfolio by
reducing ESG risks, GPIF engages in passive investment based on ESG
indexes. In fiscal 2022, GPIF newly adopted the Morningstar Japan
ex-REIT Gender Diversity Tilt Index.

Adoption of a Gender Diversity Index for Domestic Equities
GPIF has used ESG indexes as passive benchmarks since

information on a continuous basis, and adopted thefiscal 2017.We believe that passive investment based on

Morningstar Japan ex-REIT Gender Diversity Tilt Index

indexes that focus on corporate sustainability will not(GenDi J).
The GenDi J Index determines investment weights

the long run, but also enhance the Japanese equity

based on the Equileap Gender Equality Scorecard, in themarket through secondary effects such as thesame way as the Morningstar Developed Markets ex-Japan

improvement of ESG ratings.

Gender Diversity Index, which GPIF adopted for foreign

In fiscal 2022, GPIF screened those gender diversity

Concept andcharacteristics
of index

includes gender pay gap as an evaluation metric, which

Index Posting System, the framework for collecting index

many companies are required to disclose from fiscal 2022.

<Characteristics of the GenDi J Index>(1) The weighting of constituent stocks is adjusted based on the Equileap assessment of companies’ commitment togender diversity.

Index construction

Best-in-Class

Best-in-Class

Best-in-ClassFTSE Japan All Cap Index(1,423 stocks)

FTSE Japan All Cap Index(1,423 stocks)

MSCI Japan IMI(1,083 stocks)

Number of index
constituents

255

530

249

Assets undermanagement (Billion yen)

1,030.5

1,001.6

2,056.2

Domestic equities: ESG thematic indexes (women’s advancement / climate change)

Concept andcharacteristics
of index

based passive investment since fiscal 2017, when we

size of passive investments tracking ESG indexes has reachedadopted our first three domestic equity ESG indexes. We have

¥12.5 trillion. Please refer to “ESG Index Performance” onsince adopted several new indexes, allocating andpages 49-50 for information on the performance of each

withdrawing assets accordingly. GPIF adopted the GenDi J

index. By investing in these indexes, GPIF aims to enhanceIndex in fiscal 2022. This is the ninth ESG index (including

long-term investment returns through the sustainable growth

domestic and foreign equities) that we invest in as of Marchof our investees and of the market as a whole.

Morningstar Japan ex-REIT Gender Diversity Tilt Index(“GenDi J”)

・MSCI calculates the gender diversity scoresbased on information disclosed under the Act
on Promotion of Women’s Participation andAdvancement in the Workplace and selects
companies with higher gender diversity
scores from each sector.
・The first index designed to cover a broad
range of factors related to gender diversity.

・Domestic equities index that determines
investment weighting based on assessmentof companies’ commitment to genderequality, using the Equileap Gender Equality
Scorecard.
・Ratings are conducted in four categories:(1) gender balance in leadership andworkforce; (2) equal compensation and worklife balance; (3) policies promoting genderequality; and (4) commitment, transparency,
and accountability.

S&P/JPX
Carbon Efficient Index

・Constructed by S&P Dow Jones Indicesbased on carbon data provided by Trucost,a pioneer in environmental assessment.
・This index is designed to overweightcompanies that have lower carbon footprints(annual greenhouse gas emissions divided
by annual revenues) and that actively
disclose their carbon emission information.

Index construction

Best-in-Class

TiltedTiltedMSCI Japan IMI Top 700(699 stocks)

Morningstar Japan ex-REIT(928 stocks)

TOPIX(2,160 stocks)

Number of index
constituents

374

928

1,832

Assets undermanagement (Billion yen)

649.2

520.6

1,643.4

Foreign equities: Comprehensive ESG indexes and ESG thematic indexes (women’s advancement / climate change)
MSCI ACWI ESG Universal Index(ex Japan and ex China A-shares)

GPIF’s Expanding of ESG Investment
31, 2023, as shown in the table on the right. The total asset

MSCI Japan Empowering Women Index(“WIN”)

Constituent universe(parent index)(3) Industry sectors are neutrally weighted, achieving low tracking error and a low portfolio turnover rate.

At GPIF, we have progressively expanded our ESG index-

・The MSCI Japan ESG Select Leaders Index isa comprehensive ESG index that integrates
various ESG risks into today’s portfolio. The
index is based on MSCI ESG Research used
globally by more than 1,000 clients.
・The index is comprised of stocks withrelatively high ESG scores in each industry.

Concept andcharacteristics
of index・One of MSCI’s flagship ESG indexes, thiscomprehensive index adjusts the weight of
constituents based on each issuer’s current
ESG rating and ESG trends to elevate theESG metrics of the index overall.
・The index was developed for large investors
seeking to enhance ESG integration whileachieving the same level of investment
opportunity and risk exposure as the parent
index.

Morningstar Developed Markets Ex-Japan Gender
Diversity Index (“GenDi”)

Chapter 3
Evaluation and Analysis of Climate Change Risks and Opportunities(2) 928 companies are eligible for the index, covering a broad spectrum of domestic equities.

・Assessments are performed based on FTSE
Russell’s ESG rating. For the companies withhigh carbon intensity (greenhouse gas
emissions/sales), management attitude
toward climate-change risks/opportunities isalso assessed.
・The index selects stocks with relatively high
ESG ratings within each industry, and adjusts
industry weights to neutral.

MSCI Japan ESG Select Leaders Index

Constituent universe(parent index)

equities in fiscal 2020. The Equileap assessment also

indexes for domestic equities that were posted on the・This index uses the ESG assessment scheme
used in the FTSE4Good Japan Index Series,
which has one of the longest track records
globally for ESG Russell indexes.
・It is a comprehensive ESG index that selects
stocks with high absolute ESG scores andadjusts industry weights to neutral at theindustry level.

FTSE Blossom
Japan Sector
Relative Index

Chapter 2
Measuring the Effects of ESG Activities

only improve the risk/return profile of the portfolio over

FTSE Blossom
Japan Index

Chapter 1 GPIF’s ESG Initiatives | ESG Index Adoption and ESG Index-Based Asset Management

ESG Index Adoption and
ESG Index-Based Asset Management

Domestic equities: Comprehensive ESG indexes

S&P Global LargeMidCap
Carbon Efficient Index

・Foreign equities index that determines
investment weighting based on assessmentof companies’ commitment to genderequality, using the Equileap Gender Equality
Scorecard.
・Ratings are conducted in four categories:(1) gender balance in leadership andworkforce; (2) equal compensation and worklife balance; (3) policies promoting genderequality; and (4) commitment, transparency,
and accountability.

・Constructed by S&P Dow Jones Indicesbased on carbon data provided by Trucost,a pioneer in environmental assessment.
・This index is designed to overweightcompanies that have lower carbon footprints(annual greenhouse gas emissions divided byannual revenues) and that actively disclose
their carbon emission information.

Index construction

TiltedTiltedTiltedConstituent universe(parent index)

MSCI ACWI ex Japan ex China A ESG
Universal with Special Taxes Index(2,148 stocks)

Morningstar® Developed Markets
Ex-Japan Large-Mid(1,965 stocks)

S&P Global Ex-Japan LargeMidCap(3,174 stocks)

Number of index
constituents

2,087

1,938

2,136

Assets undermanagement (Billion yen)

1,655.0

488.4

3,477.0(Note) Data is current as of March 31, 2023 (Source) Prepared by GPIF based on data from FactSet and individual index providers.

23

GPIF ESG REPORT 2022

GPIF ESG REPORT 2022

24

Chapter 1 GPIF’s ESG Initiatives

GPIF has been actively conducting dialogue with index providers and ESG ratings agencies
since selecting ESG indexes for Japanese equities in 2017. In fiscal 2022, we focused our
engagement on improving index methodologies through consultation1.

Improving ESG Ratings and Index Methodologies Through Consultation

The WIN index, which GPIF adopted in July 2017, is composed

Chapter 1 GPIF’s ESG Initiatives | Engagement with Index Providers and ESG Ratings Agencies

Engagement with Index Providers
and ESG Ratings Agencies

Improving Index Methodology – Revising the WIN Index
Quality score.

of companies selected for their high gender diversity scores.

We have conducted passive investment linked to the WIN

These scores are calculated from the three perspectives ofindex for approximately six years. In view of the relatively highAttraction (the ability to attract women), Retention (anrisk (large variation in performance) of this index compared toenvironment where women can continue to work), andother ESG indexes, as well as its poor performance recently, we

Promotion (the promotion of women), based on information

set out to discover the cause of these issues and measures fordisclosed under the Act on Promotion of Women’s Participation

improvement. As a result of our analysis, it became clear thatand Advancement in the Workplace. The weighting of constituent

while the gender diversity score (which evaluates the company’s

stocks reflects their gender diversity scores, in addition toefforts for women’s advancement) made a positive contribution

quality scores which measure financial quality (ROE, debt toto share price performance, the deterioration in performance

As GPIF’s investments are predominantly passive, index

In fiscal 2022, we mainly held dialogue on the themes

equity, and earnings variability). Weights are calculated using thewas mainly due to weighting adjustments based on the quality

providers and ESG rating agencies play a pivotal role in thepresented in Figure 1. In this section, we will present GPIF’s

formula: Market capitalization weight × Gender diversity score ×

score (see Figure 2 and Figure 3).

success or failure of our fund management. GPIF conducts

concerns that was discussed with index providers and ESG

dialogue with index providers and ESG rating agencies torating agencies, regarding changes to the methodology used

improve the sustainability of the market and enhance ourfor the MSCI Japan Empowering Women Index (WIN index)

long-term investment performance.

and the S&P Carbon Efficient Index series adopted by GPIF.

Figure 2. Excess Return Compared to the Parent Index (MSCI Japan IMI Top 700) (March 31, 2017 – February 28, 2023)
8.0%
6.0%
4.0%
2.0%
0.0%

<Changes made by MSCI>
Timing when the
consultation was announced

Major Updates

The parent index was changed from MSCI Japan IMI Top 700 to MSCI Japan IMI. This expansionof the investment universe was made possible by the expansion of MSCI’s ESG rating coverage.
Change in ESG ratings: Gender Diversity Score used in MSCI Japan Empowering Women Index (WIN)

November 2022

The percentile value calculation of Gender Diversity Score base year was changed to apply its
recent evaluation from Q1 2023.

Removed the weighting adjustment based on quality factor scores from the formula used to
calculate the weighting of constituent stocks.

<Changes made by S&P Dow Jones Indices>
Timing when the
consultation was announced

January 2023

Major Changes

Figure 3. Gender Diversity Score Spread Return
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
-0.5%
-1.0%
-1.5%
-2.0%
-2.5%

Mar. 2020

6.0%
4.0%
2.0%
0.0%
-2.0%
Monthly (left-hand axis)
Cumulative (right-hand axis)
Sep. 2020

Mar. 2021

Sep. 2021

Mar. 2022

Sep. 2022

-4.0%
-6.0%

Mar. 2023(Source) Prepared by GPIF based on data from MSCI,etc.

Change in index methodology: S&P Carbon Efficient Index series

At GPIF, we believe that the sustainable growth of investeeof the quality score weighting adjustment, and it was decided

Added the disclosure status to the TCFD framework as a weighting criterion for constituent
stocks, in addition to the disclosure of greenhouse gas emissions.

companies and the capital market as a whole are crucial in

to remove this adjustment.

1 Consultation is held by the index providers and ESG rating agencies to gather opinions from users of the index or ESG rating to decide on changes to index construction and ESG
rating methodology.

GPIF ESG REPORT 2022

Mar. 2017 Sep. 2017 Mar. 2018 Sep. 2018 Mar. 2019 Sep. 2019 Mar. 2020 Sep. 2020 Mar. 2021 Sep. 2021 Mar. 2022 Sep. 2022
(Source) Prepared by GPIF based on data from MSCI,etc.

(Note) We split the constituents of the MSCI Japan IMI TOP 700 index into high and low groups based on their gender diversity scores, and calculated mean returns for eachgroup. The graph above represents the cumulative spread between the high-scoring group and the low-scoring group(Source) Prepared by GPIF based on data from MSCI and S&P Dow Jones Indices.

25

-8.0%

Chapter 3
Evaluation and Analysis of Climate Change Risks and Opportunities

Change in index methodology: MSCI Japan Empowering Women Index (WIN)
February 2023

WIN index (excluding quality score)-6.0%

Change in index methodology: MSCI Japan ESG Select Leaders Index
March 2022

WIN index-4.0%

Chapter 2
Measuring the Effects of ESG Activities

Figure 1. Topics Discussed with Index Providers and ESG Rating Agencies-2.0%

enhancing long-term investment returns. As an organization

We believe that ESG investment is the most effectivethat promotes ESG investment, we do not welcome variations

when continued over a long period. However, this does notin the performance of ESG indexes due to factors outside themean that an investment, once made, should then be

scope of ESG. Based upon this concern, we communicatedneglected for years. We will continue to make improvementswith MSCI, which provides the WIN index. As a result, ato our ESG investments, as necessary, while monitoring

consultation was held in February 2023 regarding the removalchanges in factors such as performance and disclosure rules.
GPIF ESG REPORT 2022

26

Chapter 1 GPIF’s ESG Initiatives

Compliance with the Code of Conduct for ESG Evaluation and Data Providers

Japan’s Corporate Governance Code, as revised in 2021,

that many companies are not yet able to provide full

ESG rating agencies play an increasingly prominent role ingrounds and expert professional judgement, while keeping

requires that “companies listed on the Prime Market should

disclosure consistent with the TCFD recommendations.

the investment chain. Ever since 2017, when GPIF adopted

abreast of society-wide trends associated with ESG. ThisESG indexes for its domestic equity investments, GPIF has

code applies a “comply or explain” approach. Even if acollect and analyze the necessary data on the impact of

The S&P Carbon Efficient Index series adopted by GPIF is

climate change-related risks and earning opportunities on

constructed to give a higher investment weight to companies

advocated the need to ensure the transparency of thecompany publicly announces its support for the code, it istheir business activities and profits, and enhance the qualitythat disclose their greenhouse gas (GHG) emissions. As noted

methods used by these organizations and to improve their

not obligated to implement all of the principles andand quantity of disclosure based on the TCFD

above, in view of the rising standards required by the market,

communication with companies.

guidelines therein. An explanation of its reasons for non-recommendations, which are an internationally well-

S&P Dow Jones Indices (S&P) started seeking feedback from

Recently, the growth of ESG investment has fueled

established disclosure framework, or an equivalentmarket participants concerning its plan to add information

expectations of an even greater contribution by ESG rating

understanding by investors and companies. At GPIF, weframework.” An increasing number of companies, especiallydisclosure in line with TCFD recommendations as additional

agencies. The Financial Services Agency published themonitor our contracted ESG rating agencies for theirlarge companies, provide ESG disclosures as non-financial

adjustment to the weighting in its index methodologies,

Code of Conduct for ESG Evaluation and Data Providers insupport and compliance with the code. We hope to refer todisclosures in their integrated reports, sustainability reports,

which are currently adjusted based on whether the company

December 2022 to ensure that these organizations provide

this information in our future engagement activities.

or equivalent documents. However, according the TCFD’s

discloses GHG emissions. As a market participant, GPIF also

appropriate evaluations and data based on rational

2022 Status Report, in which it analyzes whether or not

engaged in dialogue with S&P on multiple occasions. As a

1,434 companies around the world are actually disclosing

result of consultation, S&P included disclosure consistentclimate change-related information in line with the TCFD

with the TCFD recommendations in its methodology fromrecommendations, only 4% of companies disclosed in line

June 2023, in addition to the disclosure of GHG emissions

with all 11 recommended disclosures by the TCFD. It is clear(see Figure 4).

Carbon Emissions / Net Sales
Ranking Within Industry
1st decile(Top 10%)
2nd decile(Top 20%)

4th–7th decile
8th decile(Bottom 30%)
9th decile(Bottom 20%)10th decile(Bottom 10%)Investment weightadjustment
40%
35%
30%
30%
25%
20%
20%
15%
10%
10%
5%
0%
0%
-5%
-10%
-10%
-15%
-20%
-20%
-25%
-30%

(Note) In the case of high and low impact sectors, the investment weight adjustment is equal to the amount shown in the table above multiplied by 3.0 and 0.5, respectively.
(Source) Prepared by GPIF based on material and other information provided by S&P Dow Jones Indices.

27

GPIF ESG REPORT 2022

Figure 5. Support and Compliance Status of GPIF’s Main Contracted ESG Rating Agencies
ESG Rating Agencies
FTSE
Sustainalytics*
MSCI
S&P Global Sustainable1

Websitehttps://www.ftserussell.com/ja/governance/regulation
https://www.sustainalytics.com/governance-documents
https://www.msci.com/legal/disclosures/esg-disclosures
https://www.spglobal.com/esg/jfsa-statements(Note) Sustainalytics* is a member of the Morningstar Group

More Sophisticated Dialogue with ESG Ratings Agencies and Companies
As in previous years, GPIF conducted meetings with ESG

improvements if they do not understand their present rating.

rating agencies during fiscal 2022 to discuss the inquiries

We request Morningstar that when they receive an inquiry

and opinions they received from the companies that theyfrom a company concerning the company’s own rating, theyrate. More and more companies are consulting with ESG

should provide it with a report indicating the company’s

rating agencies over the course of the rating process, andcurrent rating.

Chapter 3
Evaluation and Analysis of Climate Change Risks and Opportunities

3rd decile(Top 30%)

Carbon Emissions Disclosure Status
Disclosure Consistent with
Disclosure
TCFD Recommendations
Consistent
Disclosed
Not consistentNot disclosed－
Consistent
Disclosed
Not consistentNot disclosed－
Consistent
Disclosed
Not consistentNot disclosed－
Consistent
Disclosed
Not consistentNot disclosed－
Consistent
Disclosed
Not consistentNot disclosed－
Consistent
Disclosed
Not consistentNot disclosed－
Consistent
Disclosed
Not consistentNot disclosed－

implementation would also facilitate a broader

Chapter 2
Measuring the Effects of ESG Activities

Figure 4. Weight Adjustment Table Used to Determine Investment Weights in the S&P Carbon Efficient Index Series (In the Case of Mid Impact Sectors)

Chapter 1 GPIF’s ESG Initiatives | Engagement with Index Providers and ESG Ratings Agencies

Improving Index Methodology – Revising the S&P Carbon Efficient Index Series

according to MSCI, Japan is counted as one of the areas
with a high rate of companies that consult with them out of
the world’s major economies.
We also requested Morningstar to engage actively in
dialogue with companies for its Morningstar Japan ex-REIT
Gender Diversity Tilt Index, which GPIF newly adopted infiscal 2022. Even if companies are working to address
women’s advancement with the aim of increasing theirinvestment weight in the index, it would be extremely
difficult for them to make efficient and pertinent

GPIF ESG REPORT 2022

28

Chapter 1 GPIF’s ESG Initiatives

When GPIF evaluates our equity and fixed income managers, we examine their ESG initiatives
on their management. We have also formed partnerships with several multilateral developmentbanks and governmental financial institutions to expand investment opportunities in green andother ESG bonds.

ESG Integration in Asset Manager Evaluations

Four years have passed since GPIF first formed its

trillion1 as of March 31, 2023 (Figure 1). Green bonds

partnership with the World Bank Group in 2019. GPIF’s

account for 61.5% of the total, followed by sustainability

portfolio of ESG bonds has grown in diversity over thesebonds (23.0%), social bonds (14.2%) and transition bonds

four years.

(1.2%) (Figure 2).

GPIF’s external asset managers make their own

In Chapter 3 “Measuring the Impact of Projects Funded

investment decisions to invest in ESG bonds throughUsing ESG Bonds in GPIF’s Portfolio ,” we measure theinvestment platforms and other channels on GPIF’s behalf.

environmental and social impact generated by the projects

The size of those investments has grown to around ¥1.9

funded by these bonds (see pages 79-82).

Figure 1. GPIF's Investment in ESG Bonds

Figure 2. Breakdown of GPIF’s ESG Bond Portfolio (By Type)(trillions of yen)

Most of GPIF’s portfolio assets are managed by external asset

investment analysis and investment decisions,” based on thedefinition provided by PRI. In fiscal 2019, we establishedand ESG & Stewardship Department work together to selectevaluation criteria for ESG integration based on this definitionand evaluate asset managers. Asset managers are evaluatedand began comprehensive assessment for asset managers

on their investment policies, investment processes,

according to these new criteria. In addition to evaluatingorganizational structure and human resources. ESG

external asset managers currently working with GPIF, the new

integration is a key part of the investment process review.

ESG integration criteria are also used when selecting new

As a PRI signatory, in 2018 we defined ESG integration as

external asset managers.

1.2%

1.9
1.6

FY2022(As of March 31, 2023)

14.2%

1.1

■Green

23.0%

61.5%

■Sustainability■Social■Transition

0.4

2020/32021/32022/32023/3“the explicit and systematic inclusion of ESG factors into

(Source) GPIF

ESG Integration in Fixed Income Investments

International Organizations with Investment Platforms in Green Bonds, etc.

GPIF is committed to promoting ESG investment, noton ESG integration in fixed income investment through efforts

only in equities but also in fixed income and other assets, insuch as publishing a joint research paper in 2018. Following

order to reduce negative environmental and social

up on this research, in 2019, the International Bank forexternalities and enhance the long-term return of theReconstruction and Development (IBRD) and the International

portfolio across all asset classes.

(Source) GPIF

Chapter 3
Evaluation and Analysis of Climate Change Risks and Opportunities

GPIF and the World Bank Group have been working together

Chapter 2
Measuring the Effects of ESG Activities

managers in Japan and overseas. The Investment Department

2.0
1.8
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0

Chapter 1 GPIF’s ESG Initiatives | ESG in Equity and Fixed Income Mandate

ESG in Equity and
Fixed Income Mandate

Breakdown of Green, Social, Sustainability and Other ESG Bonds in GPIF’s Portfolio

Finance Corporation (IFC) – both members of the World Bank
Group– drew up a new proposal to provide GPIF’s external
asset managers with an opportunity to invest in green, socialand sustainability bonds.
GPIF provides its external asset managers with
opportunities to both integrate ESG into their fixed income
investments and gain excess return by building platforms inwhich they can invest in green, social and sustainability bonds
issued by multilateral development banks and governmental
financial institutions. As of March 31, 2023, we have built

1 Track record in investment in bonds, calculated by GPIF, in compliance with International Capital Market Association (ICMA) principles, etc.

investment platforms with 16 institutions.
29

GPIF ESG REPORT 2022

GPIF ESG REPORT 2022

30

Chapter 1 GPIF’s ESG Initiatives

Stewardship Activities and ESG Promotion

overlaps and portfolio weights for investee companies withlarger market capitalization.

100

each theme in ESG-related engagement for each market
Dialogue coverage(market capitalization basis)

94 %capitalization category. The most common ESG theme infor domestic equities engaged in dialogue with 946 companies
during 2022. This equates to 94% of all of GPIF’s investee
companies on a market capitalization basis.

categories is G (Governance). However, whereas E

8055

dialogues with companies in all market capitalization

40(Environmental) and S (Social) themes account for slightly

managers, including engagements with investee companies

Figure 1. Dialogue Coverage of GPIF’s Portfolio(Inside: Based on the number of companies; Outside:
Based on market capitalization)

63

70

20

18

17

13

20

companies, the proportion of dialogues focused on

GPIF entrusts its equities investments to external asset

58

60

less than half of all dialogue themes among the top 200

Status of Engagement Through Our Asset Managers for Domestic Equities

Chapter 1 GPIF’s ESG Initiatives | Stewardship Activities and ESG Promotion

In Figure 3, we present a graph of the proportions of
GPIF promotes constructive dialogue between its external asset
managers and investee companies. Our external asset managers

Figure 3. Proportion of Each Theme in ESG Engagement
for Each Market Capitalization Category (%)

26

governance tends to be greater among smaller companies.

0This suggests that the emphasis given to each theme by25

Top 200
companies

17

Companies ranked Companies ranked
201-500
501-1,000■E (Environmental) ■S (Social)asset managers depends on the company scale.

20

Top 1,001companies■G (Governance)(Note) G (Governance) includes the explanations on agenda of general meetings.

and exercising its voting rights. For this reason, GPIF monitors
the stewardship activities of its external asset managers and6%

Survey of Listed Companies

requires them to engage in constructive dialogue with
946 companies;
40%

investee companies. Here, we will introduce the status of
dialogue by our external asset managers for domestic equities
during 2022 calendar year.

■Holding dialogue■Not holding dialogue

domestic equities engaged with 946 companies from

1,401 companies;
60%

January to December, 2022. This equates to 40% of all of
GPIF’s investee companies, or 94% in terms of total
market capitalization.

themes were for Climate Change, Diversity, and Humanget their feedback on the stewardship activities of our

Rights and Community. This suggests an increased

external asset managers and to monitor the nature andawareness among companies of the supplementary

progress of their engagement. We also use the survey toprinciples added in the revision of the Corporate Governancegather their opinions on the ESG indexes we invest in andCode. Figure 5 shows a summary of the major ESG themes

understand companies’ ESG disclosure initiatives. In ourfor each of the 17 TOPIX sector categories. The highest-

eighth survey, conducted in fiscal 2022, we surveyedranked themes are generally common between most94%

companies in the TOPIX and received responses from 735

sectors, but some sector traits are also visible, such as the(Note) Proportional coverage has been calculated based on the number of investee companies (domestic
equity) as of March 31, 2022.

companies, representing 72% of total market capitalization.

high ranking of Health & Safety in the Foods sector, where it

The results of the fiscal 2022 survey indicate little

14.1

14

Figure 2 presents a graphic analysis from the perspective

change in the ranking of the major themes of companies’

As noted above, many companies now perceive climate

of dialogue frequency. For each market capitalization, theESG activities (Figure 4). Compared to the results of the lastchange as the main ESG theme, and progress is being madenumber of asset managers conducting dialogue per

survey, the largest jumps in the rates of recognition as major

in climate change-related corporate disclosure. In Figure 6,

company, and the number of dialogues per company are12

demonstrated. In terms of companies that held dialogue,

Figure 4. Responses to the Question, “What are the major themes of the ESG activities of your company?” (Multiple responses allowed, up to five)companies in each market capitalization category held

100

10

dialogue with an average of at least two asset managers

80

totaling at least three dialogues per year. Larger

60

8
6

6.9

6.0

4
2

companies held dialogue more frequently. The top 200

4.2

3.7
2.5

3.1
2.2

0

Top 200
Companies ranked Companies ranked
Top 1,001companies
201-500
501-1,000
companies■Average number of asset managers holding dialogue per company per year
■Average number of dialogues per company per year
(Note) Calculated using only companies that held dialogue in each market capitalization category31

is ranked second.

GPIF ESG REPORT 2022

Chapter 3
Evaluation and Analysis of Climate Change Risks and Opportunities

Figure 2. Average Number of Asset Managers Holding
Dialogue and Number of Dialogues per Company per Yearfor Each Market Capitalization Category(Number of asset managers; Number of dialogues)

Chapter 2
Measuring the Effects of ESG Activities

As shown in Figure 1, our external asset managers for

GPIF conducts an annual survey of companies in order tocompanies by market capitalization held dialogue with anaverage of approximately six asset managers totaling at
approximately 14 dialogues per year (an average of 2.3
dialogues with each asset manager per year). This result islikely to be affected by the tendency towards greater

82.3
68.0
57.0
44.6
40

39.7
27.3

20
0

Climate Change

Corporate GovernanceDiversity

Human Rights & Community■FY2018■FY2020■FY2021■FY2019

Health & Safety

Risk Management■FY2022(Note) Only the top 6 of 25 themes are shown. Presented from left to right in order of proportion of survey responses for FY2022

GPIF ESG REPORT 2022

32

Chapter 1 GPIF’s ESG Initiatives

the number of companies making disclosures in line with theahead, we expect to see further progress in dialogue with

TCFD recommendations has increased substantially, from 249

investors and enhancement of disclosure.

institutional investors regarding TCFD disclosure. Looking

Figure 5. Top Five ESG Themes in Each of the 17 TOPIX Sector Categories
17 TOPIX Sector
Categoriesn

GPIF’s Stewardship Principles require external asset

domestic equities managers have come to recognize

managers to engage proactively on critical ESG issues. On“Climate Change” as a critical issue. In addition to thethat basis, every year, GPIF surveys our asset managers on“Capital Efficiency” mentioned above, active asset managers

what ESG issues they consider to be critical.

continue to cite G (Governance) issues including “Board

This time, “Human Rights & Community” newly emerged as

Top Five ESG Themes

34 1_Climate Change

2_Health & Safety

3_CG

3_Human Rights & Community 5_Supply Chain

Energy Resources

4

1_Climate Change

2_CG

3_Diversity

3_Health & Safety

3_Human Rights & Community 3_Disclosure

Construction & Materials

65 1_Climate Change

2_CG

3_Diversity

4_Health & Safety

Raw Materials & Chemicals

83 1_Climate Change

2_CG

3_Diversity

Pharmaceutical

16 1_CG

1_Diversity

Automobiles &Transportation Equipment

26 1_Climate Change

Steel & Nonferrous Metals

Rights (cross-shareholdings, etc.)” as critical ESG issues.

In Europe, some countries have made it mandatory to

Meanwhile, passive managers continue to perceive a broad

5_Human Rights & Community

conduct human rights due diligence. In some cases, therange of long-term E (Environmental) and S (Social) issues

4_Health & Safety

5_Human Rights & Community

consequences extend beyond reputation risk to include ansuch as “Diversity,” “Supply Chain,” and “Misconduct” as

3_Climate Change

4_Health & Safety

4_Product Liability

increasing risk of more direct economic impact. It is clear

critical ESG issues.

2_CG

3_Diversity

4_Supply Chain

4_Human Rights & Communitythat human rights have also become a key issue for

19 1_Climate Change

2_CG

2_Human Rights & Community 4_Health & Safety

5_Diversity

Japanese companies that trade internationally.

Machinery

54 1_Climate Change

2_CG

3_Human Rights & Community 4_Diversity

5_Product Liability

There is also a growing awareness of human rights

Electric Appliances &Precision Instruments

85 1_Climate Change

2_CG

3_Diversity

4_Supply Chain

5_Health & Safety

among investors, with the December 2022 launch of the PRI(Governance),” in addition to “Human Rights &IT & Services, Others

119 1_CG

2_Diversity

3_Climate Change

4_Human Rights & Community 5_Risk Management

Advance, a collaborative engagement initiative on the theme

Community.” The launch of the Task Force on Nature-

Electric Power & Gas

13 1_Climate Change

2_CG

3_Diversity

4_Human Rights & Community 5_Disclosureof human rights and other S (Social) issues. Also for the first

related Financial Disclosures (TNFD), an initiative

Transportation & Logistics

39 1_Climate Change

2_Diversity

3_CG

4_Human Rights & Community 5_Health & Safety

5_Product Liability

time, all active managers for domestic equities haveconcerning natural capital and biodiversity, established inCommercial & WholesaleTrade

56 1_CG

2_Climate Change

3_Diversity

4_Health & Safety

5_Supply Chain

5_Human Rights & Community

perceived “Climate Change” and “Capital Efficiency” asJune 2021, has likely played a part in the increased focus

Retail Trade

41 1_Climate Change

2_Human Rights & Community 3_CG

4_Diversity

5_Health & Safety

critical issues. In other words, both passive and active

on “Biodiversity” and “Deforestation.”Banks

31 1_Climate Change

2_Diversity

3_CG

4_Human Rights & Community 5_Disclosure

Financials (Ex Banks)

30 1_Diversity

1_Climate Change

3_CG

4_Risk Management

5_Health & Safety

Real Estate

20 1_Climate Change

2_CG

3_Diversity

4_Health & Safety

4_Human Rights & Community■■…E (Environmental)■■…S (Social)

2_CG

3_Diversity■■…G (Governance)■■…Multiple ESG themes

5_Others

4_Human Rights & Community 5_Health & Safety

600

500

49

400

Domestic Equities – Passive Domestic Equities – Active Foreign Equities – Passive Foreign Equities – Active100

Climate Change

100

Climate Change

100

Climate Change

86

Disclosure

100

Disclosure

100

Disclosure

100

Disclosure

71

Climate Change

93

Climate Change
Human Rights &Community

88

100
100

100

Diversity

100

CG

71

CG

86

Supply Chain

71

Board Structure
Self-evaluation

71

Supply Chain

71

Pollution & Resources

65

71

CG

65

71

Diversity

65

100

0

GPIF ESG REPORT 2022

139
FY2020■(1) YesFY2021■(2) Have a plan to disclose

FY202276

Misconduct

100

Minority Shareholder Rights(cross-shareholdings, etc.)
Board Structure
Self-evaluation

100

Biodiversity

100

CG

100

Capital Efficiency

100

100

Human Rights &Community
Diversity

Human Rights &Community

100

Misconduct

86

Health & Safety

100

100

Diversity

86

Deforestation

100

Board Structure
Self-evaluation
Human Rights &Community
Misconduct

64

Waste Management

59

Biodiversity

83

Supply Chain

71

Others (Governance)

100

Labor Standards

64

Disclosure

59

Capital Efficiency

83

Others (Governance)

71

CG

75

64

Anti-corruption

59

71

Board Structure
Self-evaluation

75

Diversity
Environmental
Opportunities

57

Deforestation

53
53

Board Structure
Self-evaluation
Minority Shareholder Rights(cross-shareholdings, etc.)

83
83

CG
Labor Standards

71

Labor Standards

75

Human Rights &Community

Water Stress
Water Security

71

Capital Efficiency

75

Others53

75

Board Structure
Self-evaluation

53

69
249

Foreign Bonds

Climate Change

462
200

Domestic Bonds

Supply Chain

126

300

& Safety,” “Biodiversity,” “Deforestation,” and “Others■■…E (Environmental)■■…S (Social)■■…G (Governance)■■…Multiple ESG themes

Water Stress,
Water Security
Others75

Health & Safety53

Supply Chain

75

Product Liability

53

Risk Management
Minority
Shareholder Rights
Environmental
Opportunities
Others (Environmental)

75

Labor Standards

53

Chapter 3
Evaluation and Analysis of Climate Change Risks and Opportunities

Figure 6. Number of Company Responses to the Question “Do You Disclosure Information in Line with the
TCFD Recommendations?” Among Companies That Endorse the Recommendations

an expanding range of critical ESG issues including “Health

Figure 7: Critical ESG Issues Recognized by External Asset Managers (%)

Disclosure(Note) Numerical prefixes represent the rank of each theme. CG is an abbreviation of corporate governance.

For foreign equities, all passive managers emphasize

Chapter 2
Measuring the Effects of ESG Activities

735 1_Climate Change

Total

33

Structure and Self-evaluation” and “Minority Shareholders

a critical ESG issue among all passive managers for equities.

Foods

Chapter 1 GPIF’s ESG Initiatives | Stewardship Activities and ESG Promotion

to 462. Moreover, 72% of these companies held dialogue with

Critical ESG Issues Cited by GPIF’s External Managers

75
75
75

(Note) The percentage represents the ratio of the number of managers that selected the relevant issues to the number of active/passive managers. Only the issues cited as “critical ESG issues” by more than 70% of equity
asset managers and more than 50% of fixed income asset managers are listed. For domestic equities, if an asset manager is entrusted to both active and passive mandates, it is counted as the one with larger amountof mandate entrusted by GPIF. The figures for “Foreign Equities – Active” include the responses of external asset managers newly added in fiscal 2022. CG is an abbreviation of corporate governance.
(Source) Survey of GPIF’s external equity and fixed income asset managers as of December 2022

GPIF ESG REPORT 2022

34

Chapter 1 GPIF’s ESG Initiatives

ESG in Alternative Asset Management

Trends in GRESB Participation Rate (All GPIF real estate / Japan)
（%）

100
80

Equivalent to117,000
households

59%

52%

43%

40

GPIF has been developing initiatives to properly integrate ESG in
its alternative asset manager selection and post-selection
monitoring process.

20
0

49%

21%

10%
2019

82%

2020
2022
2021
All GPIF Real EstateJapan

Chapter 1 GPIF’s ESG Initiatives | ESG in Alternative Asset Management

60

Avoided Emissions

72%

GRESB is an investor-led organization thatprovides a standardized benchmark andvalidated data of the ESG performance ofReal Assets including Real Estate andInfrastructure. GPIF joined GRESB in fiscal
2019 as an investor member in the real estate sector. In
fiscal 2022, GPIF became the first investor member in
the infrastructure sector in Japan.

Analysis of Real Estate Portfolio Using Climate Value-at-Risk
ESG in Alternative Assets
The holding period for alternative assets (infrastructure, real

particularly prominent among overseas asset managers.

In our climate-related financial disclosures for this fiscal year, we haveextreme cold, there was a large proportion of “negligible risk reduction,”used climate Value-at-Risk (CVaR) to measure the effect of climate

while for (3) fluvial flooding, (4) extreme heat, (5) tropical cyclones, andchange (physical risks and transition risks) on real estate asset values in(6) wildfire, the effect on asset value was “negligible risk” or “noGPIF’s Japanese domestic real estate portfolio, part of the alternative

identifiable risk” in most cases. However, there were some properties

asset portfolio. In our analysis of physical risks, we evaluated risks

for which the risk of (1) coastal flooding fell under “severe risk,”

across six categories of natural disasters: (1) coastal flooding, (2)“significant risk,” or “moderate risk.”

Although we use the collective phrase “alternative asset

many cases, the asset manager itself is involved in the

management”, ESG factors and its impacts vary, depending

corporate management and business operations of theon the individual characteristics of the asset and/or business

investee. As a result, more asset managers are focusing onin question. Approaches to ESG integration also differ

integrating ESG into their investment processes not only for

depending on individual investment strategies. With an

identifying the risks that may arise during the holding period

understanding of these differences, GPIF as an asset owner

but also for finding opportunities for sustainable asset value

monitors asset managers’ ESG evaluation and monitors thegrowth and improvement of corporate value. This trend is

status of their investment.

(1) ESG Evaluation in Selecting Asset Managers

that can be applied across all alternative assets. As such,

Since GPIF began selecting alternative asset managers thateach asset manager creates its own unique ESG rating criteria

adopt a multi-manager strategy in April 2017, we have added

and scoring methodology based on the characteristics of thean evaluation of prospective asset managers’ ESG initiatives

asset and the fund manager’s investment strategy. GPIF

to the assessment. Assessments are conducted from many

monitors asset managers for any changes in their ESG-related

We conducted an analysis of the avoided emissions fromdifferent aspects, including through due diligenceorganizational structure, whether or not the diversified funds

the domestic renewable energy facilities in GPIF’s

questionnaires, interviews with ESG staff, and evaluations byin which they invest are managed by PRI signatories, and theinfrastructure portfolio.

third-party consultants. Among other things, we look at thestatus of their ESG initiatives. As well as requiring individual

The total power generated by the renewable energy

manager’s company-wide ESG policies, ESG integration in theasset managers to provide a report detailing the status of theirfacilities in Japan that GPIF invests in through infrastructure

investment process, their oversight company structure, and

ESG-related investment capabilities and initiatives, we engage

amounted to approximately 461GWh in 2022, an increase

how they report to investors after an investment is made.

in dialogue with them to understand the status of the ESG-

from the previous year. We increased our total investment in(2) Post-Investment Monitoring

related aspects of their portfolios.

and (6) wildfire.
In terms of property value, the results of the analysis of physicalseveral climate change scenarios (NGFS). This analysis revealed that ahigher reduction target in the scenario tended to result in higher

few cases where the risk was classified as “severe risk” or “significant

transition risks.

risk.” In terms of the risks of each category of natural disaster, for (2)*Please refer to pages 73–74 for details of this analysis.

Analysis of Avoided Emissions from Domestic Renewable Energy Projects

infrastructure funds, which progressively invested in solar

Total Power Generated and Avoided Emissions through
GPIF’s Portfolio of Domestic Renewable Energy Projects(GWh)(× 10,000t)

500

25

400

20

300

15

200

10

100

5

power facilities. In addition, some solar power facilities

Real Estate Portfolio Initiatives / GRESB (Global Real Estate Sustainability Benchmark)In 2022, 82% of the funds in GPIF real estate portfolio by valueand Australia (APAC), participation rates have remained stableparticipated in GRESB Real Estate Assessment (weighted

at 90% or more ever since measurement began in fiscal 2019.

average asset value as of the end of December each year). This

Fiscal 2022 saw an increase in the number of participating

was an increase of 10%, or 6 funds, from the previous year. In

funds in North America and Japan, boosting the participation

regions where GRESB was introduced early on, such as Europe

rate across GPIF’s entire real estate portfolio.

GPIF ESG REPORT 2022

impact caused by the transition to a low-carbon economy, based onrisks show that in most cases the risk was “negligible risk,” with only abenefitted from good weather conditions, leading to an

35

In our analysis of transition risks, we evaluated the potential cost

Chapter 3
Evaluation and Analysis of Climate Change Risks and Opportunities

There is still no standardized rating criteria for ESG factors

extreme cold, (3) fluvial flooding, (4) extreme heat, (5) tropical cyclones,

Chapter 2
Measuring the Effects of ESG Activities

estate, and private equity) is generally quite long, and inincrease in the power generated. The theoretical amount of
avoided emissions from the switch to renewable energyfueled power generation in 2022 increased to approximately
210,000t. This figure is calculated based on the power

0

0
2019

2020

Total power generated (left-hand axis)

2021

2022

Avoided Emissions (right-hand axis)(Note) Total power generated and Avoided Emissions are calculated based on GPIF’s
holding percentage of end investees.

generated, using the Japan Photovoltaic Energy Association(JPEA) guidelines and other information such as the GHG

equivalent to the annual GHG emissions from electricity

emission factors published by power companies. This is

usage of approximately 117,000 households.
GPIF ESG REPORT 2022

36

Chapter 1 GPIF’s ESG Initiatives

February
2023

Chapter 1 GPIF’s ESG Initiatives | Collaboration with Overseas Public Pension Funds and Other Institutions

Collaboration with Overseas Public
Pension Funds and Other Institutions

Joined the ESG Disclosure Study Group

GPIF joined the ESG Disclosure Study Group (EDSG) as an observer in February 2023.

GPIF collaborates with a wide range of domestic and global institutions. From fiscal 2022,

This study group provides a forum for free and vigorous discussion between listed companies, investors,

GPIF participates as an observer in the ESG Disclosure Study Group.

and others regarding approaches to the disclosure of non-financial information to contribute to enhancing
corporate value over the long term. We believe that our participation will be useful in GPIF’s efforts toNovember
2016

Joined the Thirty Percent
Coalition and the 30% Club

April
2018

Both the Thirty Percent Coalition in the U.S. and the 30% Club in the U. K.

In 2018, GPIF and the World Bank Group published a joint

are initiatives that seek greater diversity in listed company boards by

research paper entitled “Incorporating Environmental, Social andincreasing the proportion of female board members to 30%. GPIF has

Governance Factors into Fixed Income Investment.” Following up

participated in the Thirty Percent Coalition in the U.S. and the Investor

on this research, in April 2019, the World Bank Group drew up aGroup of the 30% Club in the U. K. as an observer since November 2016.

new proposal to provide GPIF’s external asset managers with an

Since December 2019, we have also participated in the 30% Club Japan

opportunity to invest in green bonds.

Investor Group.

Signed the Principles for
Responsible Investment (PRI)

October
2018

2017

Declared Support for the TCFD

November2020

Joined JPX ESG Knowledge Hub

GPIF declared our support for the recommendations of the

The ESG Knowledge Hub, established by the Japan Exchange Group

Task Force on Climate-related Financial Disclosures(JPX), is a platform that aims to encourage listed companies to disclose(TCFD) in December 2018. We commenced information

ESG information by providing one-stop access to content anddisclosure in accordance with the TCFD recommendations

information that will assist in understanding ESG investment. GPIF

in August 2019 with our ESG Report 2018 and have done

joined the ESG Knowledge Hub as a supporter when it was firstso every year since.

established in November 2020.

2018

2019

2020

2023

Joined Climate Action 100+
August2019

August2019

GPIF has been stepping up its ESG initiatives since we

Climate Action 100+ is an investor-led climate change initiative launched insigned the PRI in September 2015. Each signatory

September 2017. Members of this initiative hold constructive dialogues withorganization reports its ESG initiatives to the PRI andcompanies that have a significant impact on the resolution of climate change issues.

International Corporate Governance Network (ICGN) is an international

The Council of Institutional Investors (CII) is a network ofreceives a full assessment of its progress. In the mostParticipants discuss improving climate change-related governance, making efforts to

network of institutional investors and other organizations. It promotes

institutional investors established by U.S. public pension funds,

recent assessment, as of March 31, 2023, GPIF

reduce greenhouse gas emissions, and enhancing information disclosure. GPIF has

better corporate governance and stewardship activities with the aim ofwith the aim of advocating and collaborating in the areas ofachieved a four-star rating in the PRI Investment andparticipated in Climate Action 100+ as a supporter since October 2018, and also

advancing efficient markets and sustainable economies. GPIF joined

shareholder rights and corporate governance in the U.S. GPIF

Stewardship Policy.

participates as an asset owner in the Asia Advisory Group (AAG), which advises the

ICGN in August 2019.

joined CII in August 2019.

Joined ICGN

Chapter 3
Evaluation and Analysis of Climate Change Risks and Opportunities

September
2015

2016

December
2018

Chapter 2
Measuring the Effects of ESG Activities

2015

promote stewardship activities.

Published a Joint Research Paper
with the World Bank Group

Joined CII

Steering Committee on circumstances and conditions in the Asia region.

37

GPIF ESG REPORT 2022

GPIF ESG REPORT 2022

38

Chapter 1 GPIF’s ESG Initiatives

73％

F: Engagement
6%

B: Excess return31%

E: ESG bond investment
11%
D: Corporate value 15%

C: Risk control 6%(Source) Report on the High-Level Study on the Integration of ESG and SDGs in Investment

measures of investment performance. Return was the mostinvestment performance. A positive relationship was also

common perspective from which ESG and investment

indicated in 62% of papers published in financial economics

Sustainability-related fields such as ESG and the SDGs are

overview of academic research on the topic, including trends

performance were assessed, with 84 papers using thisand investment theory journals, such as the Journal ofconnected with a diverse range of research fields: not onlyin analysis methodologies. This was done through a broad-measure. Where return was used, a positive relationship

Financial Economics.

conventional fields such as economics, finance, andbased survey of leading papers on investment performance

between ESG and investment performance was observed infinancial engineering but also eclectic areas such as

in the sustainability field, including ESG and the SDGs, in

55% of cases. By contrast, a positive relationship was

effects of GPIF’s ESG investments and stewardship activities

environmental economics, climate science, and urban

Japan and overseas.

observed in 81% of cases where market measures wereusing statistical methods such as causal inference (theused (Figure 3). From another perspective, we examined

Effect Measurement Project). Through the high-level study

engineering. Active efforts are also being made to leverage

For the study, we selected 300 academic papers published

From fiscal 2023, we will commence a review of thefrom 1991 to 2023 using the selection methods shown in 1 topolarity tendencies by classifying papers by their journal ofdescribed above, we were able to gain useful insights forhas been difficult to quantify so far. In fiscal 2022, given this4 below, based on a consideration of the balance between

publication (financial economics and investment theory,

our Effect Measurement Project, including examples ofsituation, GPIF embarked on a High-Level Study on thefairness and comprehensiveness. These 300 papers were

accounting and business management, corporate ethics,

research using causal analysis for engagement impact, as

Integration of ESG and SDGs in Investment.

classified into six themes (A to F) and checked their analysis

and other). Among papers published in journals that discusswell as prior research considering spillover effect1 andmethodology and other characteristics (Figure 1).

ESG from the perspective of corporate ethics, such as themarket risk control effect. We will refer to these results in

Journal of Business Ethics, a relatively large proportion,

GPIF’s Effect Measurement Project.

Selection Methods

73%, found a positive relationship between ESG and

1. Number of citations received (cited over 100 times)

Figure 2. Proportion of Polarity (Positive or Negative
Impact) for Each Theme Category

2. Qualitative judgement
3. Coverage of the latest topics

field of journal in which the paper was published.

A: Review papers andmeta-research

56

B: Excess return60

study, 73% indicated a positive relationship between ESG

As a result, we found clear differences in polarity,

C: Risk control

and investment performance. In particular, approximately

especially for the factors “ESG data source used in the

D: Corporate value

90% of papers indicated a positive effect in the categories

analysis” and “Investment performance measurement used

“C: Risk control” and “F: Engagement” (Figure 2).

in the analysis,” while there was little effect from “Field of

Overall, a large majority of papers presented positive

the journal of publication.” Here, of the six factors

results, but there was a chance that differences in analysis

considered, we will explain the difference in polarity due tomethods and publishing journals may have given rise to“Investment performance measurement used in the

different tendencies, so we also surveyed the relationshipanalysis” and “Field of the journal of publication .”between their polarity (positive or negative) and six factors:

The academic papers we considered used return,affiliation of the author(s), period analyzed, analysis universe,market measures (such as Tobin’s Q and cost of capital),data source, investment performance measurement, andand accounting measures (such as ROE and ROA) as

GPIF ESG REPORT 2022

4 4 N=31

37
18

11

88
76

E: ESG bondinvestment

18

68

21

F: Engagement

20

40

60

Return11

N=94

Market measures

12

N=17

Accounting measures

4 2 N=46

Return × market andaccounting measures

9 3 N=34

Accounting measures ×
market measures

6 N=18Others94
0Figure 3. Proportion of Polarity for Each Type of
Performance Measurement80

100 （％）■Positive (A) ■(A)+(B) Mixed ■Negative (B) ■Neutral(Note) Polarity (positive/negative) types and definitions:
Positive (Negative): Papers indicating a positive (negative) relationship between
ESG and investment performance
Positive + Negative: Papers indicating both positive and negative results
Neutral: Papers not indicating any statistically significant results

13

N=84

12

8

N=52

10

10 N=1015

4 4 N=26

10

22

55
81

20

60
77

38

62

20

40

N=8

6 11 6 N=1878
0Chapter 3
Evaluation and Analysis of Climate Change Risks and Opportunities

4. Coverage of topics unique in JapanOf the 300 academic papers considered in this high-level

Chapter 2
Measuring the Effects of ESG Activities

data science to quantify non-financial information, which

This high-level study was implemented to provide an

39

A: Review papers and meta-research10%

Z: Others20%

In fiscal 2022, GPIF undertook a High-Level Study on the Integration of ESG and
SDGs in Investment. Of the 300 academic papers considered in the study, 73%
indicated a positive relationship between ESG and investment performance.

Chapter 1 GPIF’s ESG Initiatives | Implementation of a High-Level Study on the Integration of ESG and SDGs in Investment

Implementation of a High-Level Study on the
Integration of ESG and SDGs in Investment

Figure 1. Composition of Academic Papers Surveyed by Theme Category

60

80

100

（％）

■Positive (A) ■(A)+(B) Mixed ■Negative (B) ■Neutral(Note) Measure definitions:Market measures: Market price-based measures such as Tobin’s Q and PBR, as
well as cost of capital, risk-based measures, etc.
Accounting measures: Capital efficiency and profitability measures such as ROE
and ROA, as well as net sales growth rate, cash flow, etc.
(Source) Figures 2 and 3: Report on the High-Level Study on the Integration of ESG and
SDGs in Investment

1 This refers to the phenomenon and effect where, for example, the advance adoption of a CSR policy by one company leads to the adoption of similar CSR policies by a number of other similar companies.

GPIF ESG REPORT 2022

40

Chapter 1 GPIF’s ESG Initiatives

Chapter 1 GPIF’s ESG Initiatives | Column 2: Academic Research Related to GPIF’s Stewardship Activities and ESG Investment

Column 2

Academic Research Related to GPIF’s
Stewardship Activities and ESG Investment
At GPIF, we collect information on the latest empirical academic studies in the fields of ESG investment and stewardship

TOPIX 500 into five groups based on their ESG scores,

engagement was effective for companies with relatively

activities as part of our efforts to review our activities from diverse perspectives. The extent of such empirical research isfrom lowest to highest. The results indicate that, for FTSE

low G scores. Governance-themed engagement withlimited, however, as companies do not normally disclose the specific details of engagement with institutional investors.

scores, engagement was effective for companies withcompanies that had relatively low G scores was estimatedMoreover, it is impossible to know from outside whether changes in corporate behavior after such engagement are due to therelatively low E scores. Environmentally-themed

to boost the G scores of the treated group by 0.15pt

effectiveness of the engagement or whether they are voluntary changes of their own accord. However, as data in this field

engagement with companies that had relatively low E

compared to the control group.

accumulate over the years, in an increasing number of cases, researchers are able to obtain and analyze information fromscores was estimated to boost the E scores of the treatedinstitutional investors on their engagement activities. In this column, we will introduce three examples of empirical research into

group by 0.50pt compared to the control group.

results between the FTSE and MSCI ESG scores is due tothe effects of ESG investment and stewardship activities related to GPIF.

Meanwhile, for MSCI scores, the results indicate thatdifferences in their ESG scoring methodologies.

The study’s authors pointed out that the divergence in

Empirical Research on the Improvement in ESG Performance Due to Engagement by Passive Investment Managers

published by a research group including Professor Marco

ESG scores.
Their findings are presented in Figure 1. The FTSE ESG

Becht of Université libre de Bruxelles, Professor Kazunoriscore (overall score) of the treatment group, where there

Suzuki of Waseda University, and others (Becht, Franks,

was some form of engagement, was estimated to be

Miyajima, and Suzuki [2023]1) using information on

0.21pt higher than that of the control group. The effect ofengagement activities provided by Asset Management One

engagement on E (Environmental) themes was estimatedCo., Ltd., one of GPIF’s engagement-enhanced passive

to raise the E score of the treated group by 0.29pt

investment managers.

compared to the control group. The effect of engagementon comprehensive ESG themes was estimated to raise theinvestors’ engagement with companies had a subsequent

ESG score of the treated group by 0.16pt compared to theeffect on the companies’ ESG scores. The researchers

control group. Meanwhile, for the MSCI scores, there wasapplied regression analysis using the difference-in-no significant difference between the ESG score (overall

differences method , comparing two groups of companiesscore) of the treated group and the control group in thefrom within the TOPIX 500: companies with which Assetabsence of any form of engagement; however,Management One had engaged during the period fromengagement on G (Governance) themes was estimated to2018 to 2022 (the treated group) and other companies

raise the G score by 0.10pt (Figure 1).

that have not been engaged (the control group). They

Figure 2 shows the effects of engagement on eachtested the influence (treatment effect) of engagement on

ESG score in more detail by splitting the companies in the

1 (Source) Becht, Franks, Miyajima, Suzuki, “Does Paying Passive Managers to Engage Improve ESG Performance?” (2023 working paper: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4506415)
2 Difference-in-differences method: a method used to estimate the effect of treatment as the difference between the average change (difference) in the treated group and the average change (difference) in the control group

41

GPIF ESG REPORT 2022

FTSE
MSCI

Score

ESG Score (Overall)

Details of Engagement
DifferenceStandard error
DifferenceStandard error

All Engagement
0.21***(0.049)0.02(0.028)E ScoreE
0.29***(0.064)-0.08(0.064)

S ScoreS
0.09(0.074)-0.00(0.064)

G ScoreG
0.01(0.043)0.10***(0.035)ESG Score (Overall)

ESG (Comprehensive)
0.16***(0.046)0.03(0.026)

Figure 2. Results of Analysis: Does Engagement Affect ESG Scores? (By ESG Score Percentile)
FTSE

E Score1
S Score2
G Score3

Percentile
DifferenceStandard error
DifferenceStandard error
DifferenceStandard error

10th
0.50***(0.136)0.20(0.151)
0.10(0.120)25th
0.50**(0.196)0.20(0.224)0.10(0.166)Median0.30(0.230)0.10(0.259)-0.20(0.203)

MSCI

75th
0.20
(0.202)0.10(0.221)
0.10(0.160)90th-0.10(0.137)-0.20(0.148)-0.20*(0.115)10th-0.00(0.070)0.10(0.124)0.15**(0.063)25th-0.15(0.106)0.15(0.119)0.05(0.092)

Median-0.05(0.122)0.05(0.138)0.10(0.108)75th-0.05(0.106)-0.00(0.119)-0.00(0.094)90th-0.15(0.178)-0.05(0.165)0.10(0.063)

Chapter 3
Evaluation and Analysis of Climate Change Risks and Opportunities

The research group analyzed whether institutional

2

Figure 1. Results of Analysis: Does Engagement Affect ESG Scores?

Chapter 2
Measuring the Effects of ESG Activities

First, we will present some of the research findings(Notes) 1 Engagement on E themes; 2 Engagement on S themes; 3 Engagement on G themes

Figures 1 and 2:(Note1) ESG score percentiles have been classified into five groups from lowest to highest (“extremely low,” “low,” “medium,” “high,” and “extremely high”)(Note2) FTSE’s scores are for the period from June 2016 to December 2021. MSCI’s scores are for the period from December 2016 to June 2020 (due to a major change in the method
used to calculate MSCI’s scores in November 2020)(Note3) *** p<0.01, ** p<0.05, *p<0.1(Source) Becht, Franks, Miyajima, and Suzuki, “Does Paying Passive Managers to Engage Improve ESG Performance?” (2023 working paper)

GPIF ESG REPORT 2022

42

Chapter 1 GPIF’s ESG Initiatives

Chapter 1 GPIF’s ESG Initiatives | Measuring the Effects of Stewardship Activities and ESG Investment

Measuring the Effects of Stewardship
Activities and ESG Investment
Empirical Research on the Selection and Effect of Engagement by Institutional Investors
Next, we will introduce a study using engagement data(for companies in Japan) from four companies: Amundi,on the results of the previous research.
The study found that institutional investors tended to

Tokio Marine Asset Management, and Fukoku Capital

pursue E and S engagement with companies for which

Management, as well as FIL Investments (Japan)

monitoring was highly necessary, companies with

Limited, one of GPIF’s engagement-enhanced passive

outstanding capital efficiency, and companies withinvestment managers.

outstanding disclosure of governance structure as well as

This study (Hayashi, Kimura, and Inoue [2023] ) was
3

Number of Themes
to be Analyzed

4 themes

GPIF will conduct a project using statistical methods such as causal
inference to examine the effects of its stewardship activities and ESG
investments. We will implement this project in collaboration with external
consultants and researchers from academia and elsewhere across eachof four themes.

environmental and social information. This tendency was
found to be stronger among active investment funds.

Inoue of the Tokyo Institute of Technology (the Inoue lab) andRegarding the effect of engagement, the study found that E

used data on engagement with Japanese companies during

engagement encouraged companies to establish CO2

the period from 2017 to 2020, provided by the four

emission reduction targets and consequently reduce theircompanies listed above. The researchers applied difference-

CO2 emissions, while S and G engagement raised

in-differences analysis and other methods to examine whatcompanies’ proportion of female in management position.

kind of companies were chosen as engagement targets by

The study also examined the effect of engagement on

institutional investors and what changes were brought about

About Measuring the Effects of Stewardship Activities and ESG Investment Project
It takes a long time for stewardship activities and ESG

From fiscal 2023 to fiscal 2024, after the elapse of aninvestment to produce tangible results such as improving theappropriate period for data accumulation since the start ofsustainability of financial markets and boosting risk-adjusted

our stewardship and ESG investment initiatives, we will

returns. Therefore, to appropriately implement the PDCA cycle

collaborate with external consultants and researchers from

(Plan→Do→Check→Act) for stewardship activities and ESG

academia and elsewhere to implement a review of thecorporate value. The results suggest that Tobin’s Q improved

investment, it is crucial to examine issues such as whether

effects of these initiatives using statistical methods such as

by this engagement. The Inoue lab had previously conducted

as a result of G engagement, and that there is a difference

GPIF’s activities are connected with companies’ behavioral

causal inference, across each of the four themes shown

empirical research into engagement4 in 2021, which wein effect depending on the engagement theme.

changes and higher ESG ratings, including causal effectbelow (Figure 1).

between the two, as a first step, without waiting for eventual

introduced in our 2020 ESG Report. This new study is built
Empirical Research on the Effects of Adopting the Women’s Advancement Thematic Index
show a larger increase in the proportion of women employed

adoption of the MSCI Japan Empowering Women Index (WINin the treated group than the control group during the periodindex), including its effect in promoting the employment ofafter GPIF adopted the WIN index, especially in positions at

women by companies. In this study, a group of researchers

the senior management level and above. Moreover, thefrom the University of Alberta and elsewhere (Mehrotra,

study revealed a decrease in overtime work and an increase

Roth, Tsujimoto, and Wiwattanakantang [2023]5) used thein the childcare leave uptake rate among male employees atdifference-in-differences method to analyze data from 2013

companies in the treated group. There was also an increase

to 2020, including MSCI gender diversity scores and data on

in holdings of these stocks by institutional investors. The

employment from the Toyo Keizai CSR Surveys conducted bystudy’s authors explained that the adoption of the WIN index

Toyo Keizai Inc. The researchers divided the data into two

provided companies with an incentive for inclusion in thegroups: companies close to the standards for inclusion inindex and encouraged them to change their behavior.

the WIN index (the treated group) and companies far from
inclusion in the WIN index (the control group). Their results

Through the appropriate implementation of the PDCA

outcomes such as more sustainable financial markets andcycle, we will continue to improve and revise ourhigher boosting of risk-adjusted returns.

stewardship and ESG investment initiatives.

Figure 1. Overview of the Effect Measurement Project
Project Themes

Measuring the effects ofstewardship activities

Measuring the effectsof ESG investment

Details (Examples)

Verification of the effects
of engagement

Research into causal effect on ESG ratings andimprovement of corporate value, caused by engagement

Verification of the exercise of voting
rights by investment managers

Trend analysis in voting behavior differences forcompanies with which they have a potential conflict ofinterest and other investee companies

Verification of the effects of passive
equity investment based on ESG indexes

Analysis of the effects of ESG investment on corporate behavior

Research into ESG factors that
contribute to improving corporate
value and investment returns

Research into the causal effect between ESG factors andcorporate value/ investment returns

Chapter 3
Evaluation and Analysis of Climate Change Risks and Opportunities

Lastly, we will present a study analyzing the effects of GPIF’s

Chapter 2
Measuring the Effects of ESG Activities

conducted by a research group led by Professor Kotaro(Note) Project themes and the timing of implementation may be subject to change

3 (Source) Hayashi, Kimura, and Inoue, “The Selection and Effect of ES Engagement by Institutional Investors” (paper presented at the 2023 Conference of the Nippon Finance Association)
4 (Source) Hidaka, Ikeda, and Inoue, “Motivations and Effects of Engagement by Institutional Investors” (2021 REITI discussion paper)
5 (Source) Mehrotra, Roth, Tsujimoto, and Wiwattanakantang, “Empowering Women by Index Membership : Evidence from a Unique Experiment from Japan” (2023 working paper)

43

GPIF ESG REPORT 2022

GPIF ESG REPORT 2022

44

Chapter 1 GPIF’s ESG Initiatives

Review of ESG Activities and Future Outlook
Chapter 1 GPIF’s ESG Initiatives | Review of ESG Activities and Future Outlook

Column 3

GPIF’s Investment Principles state that “sustainable growth of investee companies and the capital market as a

Investors Keeping Close Eye on Companies’ Human Rights Initiatives

whole are vital in enhancing long-term investment returns.” Sustainable growth of our investments and themarket as a whole could never be achieved by GPIF alone. GPIF will pursue ESG investment from the perspectiveof securing long-term investment returns with the cooperation of all concerned parties.

Companies may have the risks of, perhaps unintentionally,

Advance initiative are selected based on factors such as

violating human rights through their business activities.

their human rights benchmark scores, evaluated by the

Therefore the international community requires them to act

World Benchmarking Alliance (WBA)4 on the basis of

In fiscal 2022, GPIF secured a positive annual return on its

merely aimed at enhancing the long-term returns from thein accordance with regulations such as the OECD

corporate disclosures. As of June 2023, 40 companies had

investments of pension reserves. However, substantial

funds we invest in (gaining excess returns). For example, for

Guidelines for Multinational Enterprises and the Tripartite

been selected from the resource mining and renewable

market fluctuations persisted throughout the fiscal year,

our ESG index-based passive equity investments, we ask

Declaration of Principles Concerning Multinationalenergy sectors. The WBA has also conducted evaluations formaking it an extremely difficult investment environment to

the disclosure of evaluation methodologies to the index

Enterprises and Social Policy.1 In Japan, the National

the food and agricultural products sector, the ICT

navigate. Under these conditions, ESG indexes for foreign

providers in order to promote an awareness of potential

Action Plan on Business and Human Rights was formulated

manufacturing sector, and the automotive manufacturing

in 2020. This was followed in 2022 by the Guidelines on

sector in November 2022. It may be possible that we would

equities adopted by GPIF all outperformed the policy

inclusion in the ESG index among companies not currently

Respect for Human Rights in Responsible Supply Chains.

be able to see companies added from these sectors to ourbenchmarks, but ESG indexes for the domestic equities allpart of the index. In our Effect Measurement Project,

These guidelines present the significance of respect forengagement targets in the future.

underperformed. This was partly due to a recoil after the

beginning this fiscal year, we plan to analyze the flow-on

extremely favorable results recorded in the previous fiscal

effects of GPIF’s adoption of ESG indexes.

human rights in terms of controlling corporate
management risks and enhancing corporate value.

A comparison of the human rights benchmark scores(average) of 22 Japanese companies in these threesectors with their foreign counterparts, evaluated inyear, and investment success should not be measured interms of single-year performance. However, it is alsoinference to analyze a range of issues based on the

launched in December 2022, is gaining attention in theNovember 2022, reveals that the Japanese companies lag

important to revise our approach if there are any problems.

engagement records submitted to us by our external asset

context of recent developments related to human rights.

behind in almost all measurement themes (Figure 1). ThereIn fiscal 2022, we repeatedly engaged in dialogue with index

managers. These include what kind of changes in corporate

Advance is an initiative by institutional investors forare no established international standards for theproviders regarding issues such as changes to index

behavior investment managers actually bring about throughcollaborative engagement on human rights issues anddisclosure of human rights information. In this context, we

methodology and the adoption of a new gender diversity

their engagement activities and which asset managers

other social (S) themes. As of June 2023, the number ofthink that the WBA’s human rights benchmark scoreindex (the GenDi J index) for domestic equities.

pursue engagement most effectively. We hope to work withinstitutions participating in the initiative has grown to 255,

framework provides a useful reference point forwith combined AUM of US $37 trillion.

understanding the factors emphasized by institutionalverification work to further refine our ESG investments andeffective approaches to engagement based on these results.

investors around the world.

stewardship activities. As stated in our Investment Principles,

Recently, the national government and local authorities are

GPIF’s ESG investments and stewardship activities are notpursuing Evidence Based Policy Making (EBPM). At GPIF, we

2

The target companies for engagement under the

In fiscal 2023, we will step up our review and

Perfect Score
A: Governance and Policies
A1: Policy commitments
A2: Board level accountability
B: Embedding Respect and Human Rights Due Diligence
B1: Embedding respect for human rights in culture and management systems
B2: Human rights due diligence
C: Remedies and Grievance Mechanisms
D: Performance: Company Human Rights Practices
E: Performance: Responses to Serious Allegations
Total score

10
5
5
25
10
15
20
25
20
100

Japanese
Companies
2.03
1.72
0.31
5.07
2.40
2.67
2.61
2.02
2.29
14.02

Foreigncompanies
2.12
1.61
0.51
5.36
2.39
2.97
4.40
3.25
2.91
18.04

will also strive to engage in ESG investment and stewardship
Difference

activities based on reasonable grounds.

-0.09
0.11
-0.20
-0.29
0.01
-0.30
-1.79
-1.22
-0.63
-4.02

We believe that ESG risks such as climate change arerisks that GPIF must consider as a cross-generational
investor with investments diversified across a wide spectrumof assets. Our motivation is neither political nor moral, nor
are we chasing a passing trend. These are simply risks thatmust be considered in order for investors to achieve long-(Source) Prepared by GPIF based on data from 2022 Corporate Human Rights Benchmark.
1 Guidelines on Respect for Human Rights in Responsible Supply Chains (2022)
2 Linked from the Advance website; as of June 22, 2023
3 Advance selects engagement targets based on its sector and company selection methodology.
4 An initiative established in 2018 by the United Nations Foundation, Aviva, and the Index Initiative. It provides various benchmarks for the evaluation of companies’ achievement of the SDGs.

GPIF ESG REPORT 2022

our external asset managers to examine efficient andChapter 3
Evaluation and Analysis of Climate Change Risks and Opportunities

Figure 1. Comparison of the (Average) Human Rights Benchmark Scores of Japanese and Foreign Companies

45

We also plan to use statistical methods such as causal
Chapter 2
Measuring the Effects of ESG Activities

The PRI Advance, a collaborative engagement initiative3

term investment returns. GPIF will pursue ESG investment
Executive Managing Director and Chief Investment Officer (CIO)

from the perspective of securing long-term investment

UEDA Eiji

returns with the cooperation of all concerned parties.

GPIF ESG REPORT 2022

46

Chapter 2 Measuring the Effects of ESG Activities

Chapter 2

Measuring theEffects of ESG
Activities

At GPIF, we measure whether our ESG activities are producing the expected results of

P.49

ESG Index Performance

improving the sustainability of financial markets and boosting risk-adjusted returns and hope

P.51

Portfolio ESG Rating, ESG Rating Ranking by Country, and Correlation Between ESG Ratings

P.55

Gender Diversity in Japanese Companies

that this will lead to the verification of the long-term impact of our initiatives. We therefore
implement continuing, multi-faceted reviews, not only of our short-term investment
performance but also of the factors responsible for the performance of ESG indexes, as well as
various aspects of ESG ratings.

47

GPIF ESG REPORT 2022

GPIF ESG REPORT 2022

48

Chapter 2 Measuring the Effects of ESG Activities

The launch ofeach fundThe launch of each fund to March 2023 (annualized)
Return Rates
ESG Index

Sharpe Ratio of ESG
Passive Fund forDomestic Equities

0.39

The total performance of passive funds tracking ESG indexes for domestic
equities selected by GPIF had been outperforming market averages since
the launch of the individual funds until fiscal March 2023.
The risk-adjusted return (Sharpe Ratio) of these funds has also
outperformed the market average. We will continue to review performance

Parent Index(Reference) April 2022 to March 2023
Return Rates

TOPIX

ESG Index

0.98%

4.96%

-0.43%-0.85%(2) MSCI ESG Select Leaders

2017/6

6.73%

0.32%

0.65%

2.80%

-2.40%-3.02%(3) MSCI WIN

2017/6

5.29%-1.10%-0.79%

0.05%-4.99%-5.77%(4) S&P/JPX Carbon

2018/94.95%-0.13%-0.13%

4.89%-0.93%-0.93%(5) FTSE BlossomSR

2021/11

3.34%

0.94%

0.64%

5.73%

0.34%

-0.08%(6) Morningstar GenDiJ

2023/3

―

―

―

3.39%

0.02%

0.06%

Parent Index

MSCI ACWI
ex Japan

ESG Index

2018/911.84%

0.22%

0.14%

2.65%

1.11%

0.77%

(8) MSCI ESG Universal

2020/1115.85%

0.27%

0.25%

2.23%

0.45%

0.35%

(9) Morningstar GenDi

2020/1216.42%

0.16%

1.55%

2.95%

0.87%

1.07%

(Note 1) Index returns include dividends. For indexes with investment period less than 1 year, the actual return is shown.
(Note 2) The parent indexes for (1) to (9) (constituent universe) are as follows:(1) (5) FTSE Japan All Cap Index ((5) was FTSE Japan until December 2020)(2) MSCI JAPAN IMI (MSCI JAPAN IMI TOP700 until May 2022)(3) MSCI Japan IMI TOP700(4) TOPIX(6) Morningstar Japan ex REIT
(7) S&P Global Ex-Japan LargeMidCap(8) MSCI ACWI ex Japan ex China A ESG Universal with Special Taxes Index(9) Morningstar® Developed Markets Ex-Japan Large-Mid(Source) Prepared by GPIF based on data from FactSet.

situation changed completely after March 2022, which2023). In fiscal 2022, the return from ESG indexes, forbrought GPIF to revise the WIN index, which was

Figure 2. Excess Return Trend of ESG Passive Fund for Domestic Equity

domestic equities in particular, underperformed the TOPIX.

underperforming the most within adopted ESG indexes.

8%

ACWI (excluding Japan) for foreign equities).

Also, in Figure 2, we have calculated Sharpe ratio (riskadjusted return) of ESG passive fund and TOPIX since the6%4%

tracking ESG indexes for domestic equities selected by GPIF

of ESG fund was 0.39, which is 0.02 higher than the Sharpe-2%(ESG passive fund) over the past six years, from June 2017

Ratio of the TOPIX (0.37).

-4%

Ratio and ESG Ratings. Each ESG index has a higher ESG

into two parts, ‘Benchmark Effect’ and ‘Fund Effect’. When

rating than that of the TOPIX as a whole, and their Sharpe

evaluating ESG passive funds performance, we would first

Ratios have tended to exceed the TOPIX over the six-year

need to calculate composite returns, considering the launch

period from April 2017 to March 2023. In other words, it isof individual ESG passive funds vary. For composite returns

confirmed that these indexes achieve both a reduction in

calculation, we have used time weighted average daily

ESG risk and better Sharp Ratios .

0.55

definition for ‘Benchmark Effect’ is the difference in return of

ratings on risk-adjusted returns requires further examination

0.50

ESG indexes and TOPIX, while ‘Fund Effect’ is theover the long term. GPIF will continue to examine the various

difference in return of ESG passive funds and ESG indexes.

aspects of the performance of ESG indexes from a long-

GPIF ESG REPORT 2022

-0.6%

-2%

-0.9%

-0.9%
-4%
2018/3

2019/32020/3

Benchmark Effect2021/32022/32023/3

Excess Return Rate (compared to TOPIX)

2017/3

2018/3Fund Effect2019/32020/3

Benchmark Effect2021/32022/32023/3

Excess Return Rate (compared to ESG Parent Index)

0.65

limited period. We believe that the impact of portfolio ESG* Figure 1 shows the investment performance of individual ESG indexes** Figure 2 shows the actual performance considering investment timings etc.

0.3%

0%

Sharpe Ratio

time weighted average return, and accumulate them. The

investment results.

2%

Figure 3. Relationship Between ESG Ratings and Sharpe Ratio for ESG indexes for Domestic Equity and TOPIX

0.60

rate compared to TOPIX is approximately 1.6%. With regards

4%(Note 1) ESG passive fund composite return is calculated by using time weighted average daily return and total amount of net assets.
(Note 2) The definitions for ‘Benchmark Effect’ and ‘Fund Effect’ on the left are the difference in return of ESG indexes and TOPIX and difference in return of ESG passive funds and ESG indexes, respectively.
(Note 3) The definitions for ‘Benchmark Effect’ and ‘Fund Effect’ on the right are the difference in return of ESG indexes and parent indexes and difference in return of ESG passive funds and ESG indexes, respectively.
(Source) Prepared by GPIF based on data from FactSet.

These results only cover investment outcomes over aterm perspective, without being swayed by short-term

1.6%

Fund Effectreturn and total amount of net assets to compute cumulative

As shown in Figure 2, ESG passive funds excess return

2.6%

Chapter 3
Evaluation and Analysis of Climate Change Risks and Opportunities

March 2023. Here, we have broken down the excess return

Sharpe Ratio
ESG Fund：0.39
TOPIX：0.37

2017/3Compared to ESG Parent Index

6%0%launch of ESG index based passive fund. The Sharpe Ratio

Figure 3 shows the relationship between the Sharpe

8%Compared to TOPIX

2%

Figure 2** shows the excess return of passive funds(when we started ESG index based passive investment) to

MSCI ACWI
ex Japan(7) S&P Global Carbon

and during the previous year (from April 2022 to March

allocation etc., and remained unchanged after that.

Parent Index

Chapter 2 Measuring the Effects of ESG Activities | ESG Index Performance

ESG Index

trend from March 2018 until March 2022. However, thegenerally outperformed both their parent indexes and

TOPIX

0.65%

indexes since the launch of each fund until March 2023,’Fund Effect’ had fell to minus at March 2020 due to fundParent Index

7.06%

to ‘Benchmark Effect,’ excess return rate had an upward

However, since the launch of each indexes , these indexes

Excess Return

2017/6

Figure 1* shows the performance of GPIF’s selected ESG

market averages (TOPIX for Japanese equities and MSCI

49

Excess Return(1) FTSE Blossomof ESG indexes from long-term perspectives.

ESG Index Performance Attribution Analysis

Chapter 1
GPIF’s ESG Initiatives

ESG Index Performance

Figure 1. Returns of Nine ESG Indexes Selected by GPIF

0.45
5.00

(5) FTSE BlossomSR(4) FTSE Blossom(1) MSCI ESG Select Leaders(3) Morningstar GenDi J(7) TOPIX (6) S&P/JPX Carbon(2) MSCI WIN

5.50(ESG Ratings)

6.00(Note 1) ESG ratings are based on data as of the end of March 2023. Sharpe Ratios are from April 2017 to March 2023 (annualized).
(Note 2) ESG ratings are the average of FTSE and MSCI (Please refer to pages 52 for the calculation of portfolio ESG rating).
(Source) Prepared by GPIF based on data from FTSE and MSCI.
FTSE Russell. Reproduced by permission of MSCI ESG Research LLC ©2023.

GPIF ESG REPORT 2022

50

Chapter 2 Measuring the Effects of ESG Activities

0.53

At GPIF, we aim to assess the impact of ESG investment from a variety ofperspectives. To this end, we have measured and provided stationary observations of the ESG ratings of our equity portfolio, the average ESG ratings andlevel of improvement by country, and the correlation between the ESG ratingsof different providers every year since our activities report for fiscal 2017.

ESG

S

E

G

ESG

GPIF (Domestic Equities)
2017/3

2.43

0.86

0.77

0.80

3.03

0.88

0.95

1.20

2018/3

2.61

0.92

0.83

0.86

3.16

0.93

1.00

1.23

2019/3

2.63

0.96

0.81

0.86

3.35

1.01

1.06

1.28

2020/3

2.95

1.02

0.95

0.99

3.38

1.00

1.09

1.28

2021/3

2.96

1.02

0.98

0.97

3.34

0.99

1.07

1.28

2022/3

3.11

0.96

1.09

1.06

3.26

0.91

1.11

1.24

2023/3

3.29

1.09

1.11

1.09

3.42

1.06

1.12

1.25

1.11

1.25

2023/3

3.27

1.08

1.10

1.09

3.40

companies are among the biggest improvers over the past

GPIF’s equity portfolios as of the end of fiscal year (Marchsix years based on the ratings provided by both FTSE and31), from 2017 to 2023, as well as the ESG rating for

MSCI. Figures 7 and 8 (P.54) compare the distributions of

Past Six Years

+0.86

+0.23

+0.34

+0.29

market representative indexes as of March 31, 2023. In the

ESG ratings for Japanese companies as of March 31, 2017

Past One Year

+0.18

+0.13

+0.02

+0.03

FTSE evaluation for the most recent year, the ESG rating for

and March 31, 2023. The distributions of ESG ratings fromdomestic equities and foreign equities both increased. This

both FTSE and MSCI have shifted to the right, indicating a

is partially attributable to a rise in E scores. Meanwhile, thegeneral improvement in the ratings of Japanese companies.

MSCI ESG rating has continued to improve for both domestic

As ESG ratings deal with a diverse variety of non-scores in the most recent year. We compared the ESG

established standard rating methodologies as yet. For thisratings for GPIF’s equity portfolios to ratings for the whole

reason, there is considerable variation among ESG ratings

market (TOPIX and MSCI ACWI (excluding Japan)) as of

by rating agencies, which is shown in Figures 9 and 10

March 31, 2023 . The result shows that GPIF’s equity(P.54). The scatter diagram in Figure 9 shows the ESG

portfolios are outperforming the ESG scores for the TOPIX
and MSCI ACWI (excluding Japan), albeit marginally.

+0.03

Excess Score

+0.01

+0.01

1.05

+0.01

Change in Score

+0.01

+0.01

+0.01

+0.00

+0.39

+0.17

+0.17

+0.05

+0.16

+0.14

+0.01

+0.01

Change in Score(Note 1) Among the stocks held by GPIF, we analyzed those with ESG ratings by FTSE.
(Note 2) ESG scores are calculated as the average ESG scores of companies weighted by their market capitalization in GPIF’s portfolio (excluding stocks for which an ESG rating
was not available).
(Source) Prepared by GPIF based on data from FTSE. FTSERussell.

Figure 2. MSCI ESG Ratings
ESG

E

S

G

Industry
Adjustment

GPIF (Domestic Equities)

ESG

E

S

G

Industry
Adjustment

GPIF (Foreign Equities)

5.29

1.56

2.19

1.02

0.52

5.31

1.40

1.91

1.44

0.56

2018/3

5.44

1.56

2.25

1.09

0.55

5.56

1.34

2.02

1.62

0.58

scores of the two rating agencies for the same target

2019/3

5.51

1.39

2.31

1.16

0.65

5.69

1.21

2.06

1.68

0.74

companies as of March 31, 2023, with the ESG scores by

2020/3

5.79

1.36

2.38

1.34

0.71

6.01

1.21

2.18

1.79

0.84

FTSE on the vertical axis and those by MSCI on the2021/3

5.92

1.21

2.11

1.58

1.02

6.04

1.13

2.08

1.80

1.03

country from March 31, 2017 to 2023. These werehorizontal axis. Some degree of positive correlation is2022/3

6.37

1.22

2.18

1.79

1.18

6.47

1.17

2.19

1.87

1.24

calculated based on the ESG ratings of companies from nine

evident for both Japanese and foreign companies. Figure 10

2023/3

6.93

1.26

2.19

2.11

1.37

6.80

1.21

2.16

2.13

1.29

representative countries included in the major indexes

shows the changes in correlation between each ESG scoreprovided by FTSE and MSCI.

in chronological order as of March 31 every year from 20172023/3

2.15

2.13

1.27

The rankings for both FTSE and MSCI are topped by

to 2023. Although the correlation coefficients are lower for

Excess Score

countries from European and North American countries such

Japanese companies than for foreign companies, the results

as France, the United Kingdom, and Canada. Figures 5 andindicate that the correlation between individual scores,

Past Six Years

+1.64

-0.30

-0.00

+1.09

+0.86

6 (P.53) show the rate of improvement in each country over

especially for the ESG score, is gradually increasing for both

Past One Year

+0.56

+0.04

+0.01

+0.32

+0.20

the last six years and the most recent year. JapaneseJapanese and foreign companies.

GPIF ESG REPORT 2022

TOPIX
6.87

Chapter 3
Evaluation and Analysis of Climate Change Risks and Opportunities

2017/3Figures 3 and 4 (P.53) show the ESG rating rankings by

51

MSCI ACWI ex Japan

Figures 1 and 2 show the trend in each ESG rating for

financial information, unlike financial analysis, there are noG

GPIF (Foreign Equities)

TOPIX

and foreign equities since 2017, partly due to higher G

SE

Chapter 2 Measuring the Effects of ESG Activities | Portfolio ESG Rating, ESG Rating Ranking by Country, and Correlation Between ESG Ratings

Correlation coefficientof ESG ratings(Japanese companies)

Chapter 1
GPIF’s ESG Initiatives

Portfolio ESG Rating, ESG Rating Ranking by
Country, and Correlation Between ESG Ratings

Figure 1. FTSE ESG Ratings

MSCI ACWI ex Japan
1.25

+0.06

2.18
+0.01

2.10
+0.01

1.34
+0.01

6.76
+0.03

Change in Score

1.21

+0.03

-0.00

+0.01

+0.00

+0.02

+1.48

-0.19

+0.25

+0.69

+0.74

+0.32

+0.04

-0.03

+0.26

+0.05

Change in Score(Note 1) Among the stocks held by GPIF, we analyzed those with ESG ratings by MSCI.
(Note 2) ESG scores are calculated as the average ESG scores of companies weighted by their market capitalization in GPIF’s portfolio (excluding stocks for which an ESG rating
was not available).
(Note 3) Industry adjustment: Difference between the final rating and the weighted average of each company’s rating for environmental (E), social (S) and governance (G), arising
due to the normalization of ratings by industry.
(Source) Prepared by GPIF based on data from MSCI. Reproduced by permission of MSCI ESG Research LLC ©2023.

GPIF ESG REPORT 2022

52

Chapter 2 Measuring the Effects of ESG Activities

Figure 7. FTSE ESG Rating Distribution for Japanese Companies

FTSE(Number of Companies)

March 2017

March 2018

March 2019

March 2020

March 2021

March 2022

March 2023

Latest Value
3.76

March 2017
March 2023

120

Chapter 1
GPIF’s ESG Initiatives

Figure 3. FTSE ESG Rating Ranking by Country

Figure 8. MSCI ESG Rating Distribution for Japanese Companies
March 2017
March 2023

(Number of Companies)
70
60

100

3.68
3.31

Chapter 2 Measuring the Effects of ESG Activities | Portfolio ESG Rating, ESG Rating Ranking by Country, and Correlation Between ESG Ratings

50

80

40
60

3.06

30

2.93

40

2.88

20

20

10

2.79
0

2.38
1.73

0-0.4 0.5-0.9 1-1.4 1.5-1.9 2-2.4 2.5-2.9 3-3.4 3.5-3.9 4-4.4← Low (ESG Ratings) High →

0

4.5-5

0-0.9 1-1.9 2-2.9 3-3.9 4-4.9 5-5.9 6-6.9 7-7.9 8-8.9 9-10
← Low (ESG Ratings) High →(Note) Among the companies included in FTSE’s “FTSE All World Index” and MSCI’s “MSCI All Country World Index,” the analysis presented in Figures 3 to 8 focuses oncompanies for which an ESG rating is available.
(Source) Prepared by GPIF based on data from FTSE and MSCI. FTSE Russell. Reproduced by permission of MSCI ESG Research LLC ©2023.

Figure 4. MSCI ESG Rating Ranking by Country
Figure 9. FTSE and MSCI ESG Score Correlation Chart (as of March 31, 2023)

MSCI
March 2017

March 2018

March 2019

March 2020

March 2021

March 2022

March 2023

Latest Value

3

3

7.59

2

2

6.94

1

1

6.89

0

0

6.42

-1

-1

-2

-2

4.65
4.52
2.94

0.8

2.0

1.86 1.82

0.58

0.57

0.57

0.53
0.38

1

2

3

0.8

0.68

0.66
0.51

0.50

0.2
0.2
-0.1
Hong Japan Canada China
Kong

India

South
Korea

US

UK

FranceUS

Canada Japan

UK

Hong
Kong

(Note) This figure shows the change over the six years from the end of March 2017 to the end of March 2023 and over the most recent year.
(Note) ESG rating of constituents by country on Figure 3 to 6 is calculated as the arithmetic average.

GPIF ESG REPORT 2022

South
Korea

India France China

-3

-2

-1

0

1

2

3

MSCI Scores

Figure 10. Trends in Correlation Coefficient of ESG Score Data from FTSE and MSCI
＜Japanese Companies＞＜Foreign Companies＞
E

S

G

ESG

0.37

E

S

G

Correlation Coefficient
0.47

0.11

0.04

2017/3

0.48

0.37

0.20

0.26

2018/3

0.44

0.47

0.06

0.10

2018/3

0.49

0.34

0.23

0.31

2019/3

0.43

0.43

0.05

0.15

2019/3

0.53

0.33

0.24

0.32

2020/3

0.41

0.45

0.02

0.11

2020/3

0.58

0.38

0.24

0.28

2021/3

0.46

0.48

0.09

0.14

2021/3

0.57

0.38

0.25

0.34

2022/3

0.51

0.49

0.12

0.14

2022/3

0.59

0.44

0.27

0.37

2023/3

0.53

0.45

0.07

0.15

2023/3

0.63

0.35

0.26

0.42

Change in Correlation Coefficient

0.0

-3

(Note) Normalized (mean 0, variance 1) and plotted ESG rating data from FTSE and MSCI.
(Source) Prepared by GPIF based on data from FTSE and MSCI. FTSE Russell. Reproduced by permission of MSCI ESG Research LLC ©2023.

2017/30.5

53

0Correlation Coefficient
1.36

1.1
0.40

0.4

-1

ESG
1.40

1.4
0.60

-2

MSCI Scores

1.77

1.7

0.79

0.6

Past Six Years
Past One Year

(Rate of Improvement)-3

Chapter 3
Evaluation and Analysis of Climate Change Risks and Opportunities

Past Six Years
Past One Year

(Rate of Improvement)
0.99
1.0

Figure 6. Rate of Improvement in MSCI ESG Ratings by Country-3＜Foreign Companies＞

FTSE Scores

8.00

5.09

Figure 5. Rate of Improvement in FTSE ESG Ratings by Country＜Japanese Companies＞

FTSE Scores

Change in Correlation Coefficient

Past One Year

+0.02

-0.04

-0.05

+0.02

Past One Year

+0.04

-0.10

-0.01

+0.05

Past Six Years

+0.16

-0.02

-0.05

+0.11

Past Six Years

+0.15

-0.03

+0.07

+0.17

(Note) Including stocks for which an ESG rating is available for FTSE and MSCI.
(Source) Prepared by GPIF based on data from FTSE and MSCI. FTSE Russell. Reproduced by permission of MSCI ESG Research LLC ©2023.

GPIF ESG REPORT 2022

54

Chapter 2 Measuring the Effects of ESG Activities

Continuing from last year, we examined the deviation scores for

Gender diversity is a central element of the S (Social) category in
ESG. This is a major issue for Japanese companies, but at the sametime, it is an area with tremendous potential for improvement. In thissection, we provide an overview of the current status of Japanesecompanies through a comparison with foreign companies.

14.3 ％

Japanese companies (excluding small-caps) for each of the 19

While Japanese companies rank highly globally in terms ofcriteria included in Equileap’s scoring methodology (the “Score”)“parental leave” and “flexible work style options,” they still lag

used in the GenDi and GenDi J indexes to verify which areas

significantly behind the global standard in terms of the gender

had particular room for improvement (Figure 2).

balance of boards of directors, executives , senior management,

The Score is used to evaluate the companies in question

Area

Gender Diversity in Japanese Companies
gender diversity has the potential to boost the economic

B. EQUAL COMPENSATION & WORK
LIFE BALANCE

Deviation Score

Change from previous year

1 Board of Directors

Criterion

35.8

5.3

2 Executives*

33.6

6.5

3 Senior Management**

31.6

2.0

4 Workforce

42.6

4.1

5 Promotion & Career Development Opportunities

35.6

2.6

6 Living Wage

48.2

0.6

7 Gender Pay Gap

42.9

-1.0

8 Parental Leave

61.0

-2.9

62.1

0.6

(WIN) in 2017 and the Morningstar Developed Markets

performance of individual countries. Based on this

9 Flexible Work Options

Ex-Japan Gender Diversity Index (GenDi) for foreign equities

understanding, by investing in companies with greater

10 Training and Career Development

51.0

0.3

11 Recruitment Strategy

20.7

-8.7

12 Freedom from Violence, Abuse and Sexual Harassment

47.2

-2.3

13 Safety at Work

45.2

2.6

14 Human Rights

53.1

-2.4

15 Social Supply Chain***

47.2

4.1

16 Supplier Diversity

46.6

16.2

17 Employee Protection****

36.0

-4.2

18 Commitment to Women’s Empowerment

49.6

-0.5

19 Audit

46.7

0.6

in 2020 as passive equity benchmarks. In 2022, GPIF went

gender diversity, GPIF aims to increase long-term investment

on to adopt the Morningstar Japan ex-REIT Gender Diversity

returns caused by the sustainable growth of our investees

Tilt Index (the GenDi J index). In December 2019, GPIF

and the market as a whole.

joined the 30% Club Japan Investor Group, a group that

C. POLICIES PROMOTING GENDER
EQUALITY

Similar to last year, we reviewed data of the quantitative

aims to increase the ratio of female executives in Japanese

factors used in the WIN index to gauge progress in gendercompanies. A large body of evidence shows that companies

diversity at Japanese companies as shown below.

with greater gender diversity are able to access a wider pool

The percentage of women for each factor (median) is

of talent, which may potentially enhance corporate value.

steadily improving overall, although (4) % Women in Senior

From a macro-economic perspective as well, higher

Management remains at a low level (Figure 1).

D. COMMITMENT, TRANSPARENCY &ACCOUNTABILITY(Note 1) Deviation scores have been calculated based on the average score for each criterion among companies evaluated from 49 countries. Deviation scores of 40 or lower are shown in red.
(Note 2) The definition of each criterion marked with * is shown below.
2 Executives*: Gender balance among the company’s executives and executive board
3 Senior Management**: Gender balance of the company’s senior management
15 Social Supply Chain***: Commitment to reduce social risks in the company’s supply chain, such as forbidding business-related activities that condone, support, or otherwise participate in trafficking, force
and child labor or sexual exploitation
17 Employee Protection****: Systems and policies for the reporting of internal ethical compliance complaints without retaliation or retribution, such as access to confidential third-party ethics hotlines orsystems for confidential written complaints(Source) Prepared by GPIF based on data from Equileap.

Efforts to Boost the Proportions of Female Managers and Executives in Japan

2017

2018

2019

2020

2021

2022

2023

(1) % Female New Hires

25.0%

27.9%

28.0%

28.9%

28.1%

27.0%

26.9%

The results of the quantitative evaluation metrics used in theexecutives by 2030.

(2) % Women in the Workforce

17.0%

18.6%

18.8%

20.2%

21.2%

22.0%

22.0%

WIN index and Equileap’s gender equality scores indicate that

It is not only the Japanese government that is concerned(3) % Difference in years men and women are
employed by the company-16.6%-16.5%-16.5%-17.5%-18.2%-17.9%-18.0%

the proportions of female managers and executives atabout this issue: investors in Japan and elsewhere are also

Japanese companies are far below international levels.

adopting a firmer stance. United States voting advisory(4) % Women in Senior Management

3.5%

4.5%

4.6%

5.1%

5.5%

6.0%

6.0%

(5) % Women on Board*

10.0%

10.0%

10.0%

11.1%

12.5%

12.5%

14.3%

At present, both governments and private companies arecompanies such as ISS and Glass Lewis have announced aRate of Disclosure for (1) to (5)

73.6%

72.7%

77.3%

75.4%

74.0%

76.8%

76.1%

working to improve this situation. The Intensive Policy forpolicy of recommending shareholders of Japanese companies

40%

42%

52%

61%

72%

83%

91%

Women’s Empowerment and Gender Equality 2023 (Basic

reject, in principle, any proposal for the election of directors

Policies Related to Women 2023) announced by thethat does not include women candidates, at general meetings

Japanese government in June 2023 included the goals forof shareholders held from February 2023 onward. There isPrime Market-listed companies of appointing at least one

also a movement among institutional investors in Japan andfemale executive by around 2025 and at least 30% female

abroad to consider voting against such proposals.

Reference: % Companies with Female Directors(Note) Includes companies evaluated in the WIN index (500 major companies up to 2019, and 700 major companies from 2020).
*% Women on Board is calculated excluding the value of 0%.
(Source) Prepared by GPIF based on data from MSCI. Reproduced by permission of MSCI ESG Research LLC@2023.

GPIF ESG REPORT 2022

Chapter 3
Evaluation and Analysis of Climate Change Risks and Opportunities

Figure 1. Actual Values for WIN Index Quantitative Factors (Median)55

and equivalent positions.

Figure 2. Individual Criteria of Average Gender Scorecard and Deviation Scores of Japanese Companies for Each Criterion

A. GENDER BALANCE IN LEADERSHIP& WORKFORCEGPIF adopted the MSCI Japan Empowering Women Index

from 0 to 100 points in each of four categories.

Chapter 2 Measuring the Effects of ESG Activities | Gender Diversity in Japanese Companies

Proportion of
women on the board(Japanese companies)

Chapter 1
GPIF’s ESG Initiatives

Gender Diversity
in Japanese Companies

Advancement of Women into Executive Positions Remains a Challenge

GPIF ESG REPORT 2022

56

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities

Chapter 3

Evaluation andAnalysis of Climate
Change Risks andOpportunities

Ever since GPIF declared its support for the recommendations of the Task Force on Climaterelated Financial Disclosures (TCFD) in 2018, we have engaged in annual evaluations andanalysis of climate change risks and opportunities. As part of these efforts, we examine a
range of different indicators and engage in new methods of analysis. This time, we analyzed
factors such as contribution to greenhouse gas reductions and the measurement of impact

P.59

Disclosure and Analysis of Climate-Related Financial Information:
Composition and Key Points

P.69

Implied Temperature Rise Analysis

P.71

Analysis of Government Bond Portfolio Using Sovereign Bond Climate Value-at-Risk

P.61

Analysis of Portfolio Greenhouse Gas Emissions— Characteristics of GPIF’s Portfolio —P.73

Analysis of Real Estate Portfolio Using Climate Value-at-Risk

P.75

Analysis of Avoided Emissions Based on the Bottom-up Approach

P.63

Analysis of Portfolio Greenhouse Gas Emissions— Carbon Footprint and Carbon Intensity —P.79

Measuring the Impact of Projects Funded Using ESG Bonds in GPIF’s Portfolio

P.67

Analysis of the Status of GHG Information Disclosure and Target Setting

P.83

Nature-Related Risks including Biodiversity and TNFD Trial Analysis

from projects funded by the ESG bonds that GPIF invests in. The scope of this analysis is not
limited to climate change-related factors but also includes trial analysis concerning naturalrisks and biodiversity, which are progressively becoming topics of debate in recent years.
57

GPIF ESG REPORT 2022

GPIF ESG REPORT 2022

58

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities

improvements to our previous reports. Here, we present threeuse of proceeds. For example, under Green Bond Principles

key points.

(GBP)1 established by the International Capital Market
bond instrument where the proceeds or an equivalent amountcompany’s own products and services have contributed towill be exclusively applied to finance or re-finance, in part or ininvests in. Moreover, for the first time, we implemented a trial analysis concerning nature-related risks in line with

reducing the GHG emissions of others. Companies that possess

full, new and/or existing eligible Green Projects (...) and which

the recommendations of the Taskforce on Nature-related Financial Disclosures (TNFD).

products and services associated with high “avoided emissions”

are aligned with the four core components of the GBP.” (These

have a significant competitive advantage in the context of thefour core components are 1. Use of Proceeds, 2. Process for

global movement to reduce GHGs, and this may also be a key

Project Evaluation and Selection, 3. Management of Proceeds,

Composition of Chapter 3 and TNFD Trial Analysis

element that affects investment performance for investors as

and 4. Reporting.) Regarding reporting, the GBP state that thewell. At GPIF, we first analyzed the contribution to GHG reduction“annual report should include a list of the projects to which

For this year’s report, we appointed the Intercontinental

Global. The TNFD, as a framework following TCFD, was— “avoided emissions” — in our ESG Report 2020. In

Green Bond proceeds have been allocated, as well as a brief

Exchange Group (ICE) and MSCI to provide analysis support

envisaged at the 2019 World Economic Forum in Davos and is“Analysis of Inter-Industry Transfer of Transition Risks anddescription of the projects, the amounts allocated, and theirfor our climate-related financial disclosures in line with TCFD

now an international organization established to build a

Opportunities” in our ESG Report 2020, we calculated the

expected impact.” At GPIF, we collect and analyze information

recommendations, conducting a multifaceted analysis thatframework for organizational risk management and disclosure

contribution to GHG reduction from each industrial technology

on expected impact, and the status of information disclosure

drew on the characteristics of each of these companies. In our

related to nature. GPIF has not declared its endorsement offield and evaluated net opportunities of GHG reduction, equal tofrom the projects to be funded from the proceeds of ESG bonds

analysis of the carbon footprint and carbon intensity of our

the TNFD, but we believe that nature-related risks, just likethe difference between this contribution and the required GHG

based on these reports prepared by the bond issuers (impact

entire portfolio, GPIF conducts evaluations based on the

climate-related risks, can potentially affect assets under

reductions in each industry. This analysis by industry took areports). Given the recent criticism of greenwashing andgreenhouse gas (GHG) emissions data provided by S&P Global

management through their impact on the corporate value ofsemi-macro approach based on each technology field. This

SDGs-washing, it is becoming increasingly important for(formerly Trucost), which we have been using for some time.

investee companies. However, it is also true that, unlike

time, in our “Analysis of Contribution to GHG Reduction Basedinvestors to understand the use of ESG bond proceeds andMoreover, for the first time, we implemented a trial

individual companies, pension funds that manage portfolios

on the Bottom-up Approach (pages 75 to 78),” we have carried

information disclosure.

analysis concerning the nature-related risks of GPIF’s portfolio

have a limited range of options for managing these risks, andout a bottom-up analysis based on the avoided emissions from

Lastly, we present the improvements made in “Analysis ofin line with the recommendations of the Taskforce on Nature-

we have positioned our analysis in this report as a trial

the technologies used by individual companies, such as sales

Portfolio’s Implied Temperature Rise” (pages 69 to 70). Recently,

related Financial Disclosures (TNFD), in cooperation with S&P

analysis mainly aimed at deepening understanding.

and production plans for zero emissions vehicles and powera steady increase can be seen in number of companies not only

generation plans using renewable energy sources. Unlike last

disclose their GHG emissions but also publish emissions

time, we narrowed down the subjects to the automotive

reduction targets. At the same time, however, there is growing

industry and the power generation industry, two industries

doubt over the credibility of the GHG emissions reduction

where the reduction of GHGs is considered to have a substantial

targets published by companies. In our “Analysis of Implied

analyzed contribution to GHG reductions, and measured the impact of projects funded by the ESG bonds that GPIF

Figure 1. Major Analysis of Climate Change-Related Risks and Opportunities Conducted for This Report
Asset Class

Analysis Performed by /Data Provided by

Equities / corporate bonds

S&P Global

effect on corporate value and other measures. For electric

Temperature Rise,” we evaluated the credibility of the GHG

Equities

S&P Global/MSCI

vehicles, we considered factors such as the GHG emissions

emissions reduction targets published by companies using four

Implied Temperature Rise Analysis

Equities / corporate bonds

MSCI

associated with generating the electricity used to run theperspectives: (1) short-term targets set for each emissions

Climate Value-at-Risk (CVaR) analysis

Government bonds / real estate

MSCI

vehicle, for which a deeper analysis can be achieved .

scope, (2) third-party verification by the Science Based Targets

Contents of Analysis
Carbon footprint / Carbon intensity analysis
Analysis of the Status of GHG Information Disclosure and Target Setting

Equities
Analysis of Contribution to GHG Reduction Based on the Bottom-up Approach (Zero emissions vehicles and power generation business)

Meanwhile, for the first time we conducted an analysis

initiative (SBTi), (3)the issuer’s track record for achieving past

ICE

concerning ESG bonds, in “Measuring the Impact of Projects

targets, and (4)progress towards current targets. By calculating

Measuring the Impact of Projects Funded Using ESG Bonds in GPIF’s Portfolio

ESG bonds

ICE

Funded Using ESG Bonds in GPIF’s Portfolio” (pages 79 to 82).

the implied temperature rise based on this evaluation, we aim to

Biodiversity and Other Nature-Related Risks and TNFD Trial Analysis

Equities

S&P Global

ESG bonds entail different issuer responsibilities from regularimprove the accuracy of the calculation.

(Source) Prepared by GPIF based on various materials

GPIF ESG REPORT 2022

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities | Disclosure and Analysis of Climate-Related Financial Information: Composition and Key Points

evaluation of “avoided emissions,” indicating how much a

Chapter 2
Measuring the Effectsof ESG Activities

bonds in terms of managing and disclosing information on the

Association (ICMA), green bonds are defined as “any type of

Implied Temperature Rise,” we evaluated the credibility of the GHG reduction targets set forth by companies,

59

In the FY2022 ESG Report, we introduce new analyses andRecently, there is a trend towards the quantitative

As part of our climate-related financial disclosures compliant with the TCFD recommendations, in the “Analysis ofChapter 1
GPIF’s ESG Initiatives

Disclosure and Analysis of Climate-Related
Financial Information: Composition and Key Points

Key Points of the Analysis

1 ICMA’s 2021 Green Bond Principles Voluntary Process Guidelines for Issuing Green Bonds
https://www.icmagroup.org/assets/documents/Sustainable-finance/2022-updates/Green-Bond-Principles-June-2022-060623.pdf

GPIF ESG REPORT 2022

60

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities

sector includes electric power companies, and the materials

from the consumption and use of sold products and services

sector includes chemicals and iron and steel manufacturers,(Scope 3 downstream) in addition to direct emissions by thethese three sectors tend to emit higher GHG emissions thancompany itself (Scope 1), indirect emissions related toother sectors.

Industry sectors withhigh GHG emissions per unit of net sales(Domestic equities)
EnergyUtilities
Materials

procured products and services other than purchased electricity

emissions in mind when understanding the results of the

In Chapter 3, we measure the greenhouse gas emissions from the assets(Scope 3 upstream) (Figure 5). For domestic equities, emissions

analysis presented in the following sections. Around 90% of

in GPIF’s portfolio and conduct an analysis of the portfolio’s physicalare high in the energy, utilities, and materials sectors. The same

stock investments and 70% of bond investments by GPIF are

tendency can be observed in other asset classes as well. Sincepassive investments, which means our investment is largely

the energy sector includes oil and coal companies, the utilities

identical to the sector ratios of each benchmark.

Figure 2. Breakdown of GPIF Equities Portfolio by
Sector 4 Based on Total Market Value

Figure 3. Breakdown of GPIF Corporate Bond Portfolio by
Sector Based on Total Market Value

（%）
30

（%）
50

risks. As a preliminary step, this section presents the characteristics of
GPIF’s portfolio and our measurements of greenhouse gas emissions per
million yen of sales for each industry sector.

In Chapter 3, we analyze the measurement of greenhouse gas

foreign equities for 24.32%. The majority of bond holdings, bothemission volumes (“GHG emissions”) and transition risks1, as

domestic and foreign, consist of government bonds andwell as analyzing the physical risks relating to the assets ingovernment-related bonds (Figure 1).

2

domestic bonds accounted for 26.79% of the total portfolio,

but among domestic corporate bonds, the proportion invested inforeign bonds for 24.39%, domestic equities for 24.49%, andthe sectors such as utilities and industrials is higher than that

Figure 1. Breakdown by Category in GPIF Bond Portfolio
90

87.9

Domestic Bonds
Foreign Bonds
As of March 31, 2023

90.4

80

bonds, the proportion invested in the high-emitting energy
sector is higher than that of domestic corporate bonds, butthere is also a high proportion invested in the low-emitting

70
60
50
30

information technology.

20

6.6

10

Government Bonds,
Government-Related Bonds

4.8

Corporate Bonds(Note) “Others” includes securitized products.
(Source) GPIF

5.6

4.8

Others(Source) GPIF

Figure 4. Greenhouse Gas Emissions per Million Yen of Sales (CO2 Equivalent Tons)

Domestic Equities
Foreign Equities
Domestic
Corporate Bonds
Foreign
Corporate Bonds

EnergyUtilities

30.03
44.03

19.80
25.56

19.01
27.10

Consumer Consumer
Discretionary Staples
17.79
10.02
5.00
27.47
7.18
5.55

28.66

16.52

26.11

10.94

12.15

4.39

3.05

3.87

1.34

3.36

1.22

39.49

25.59

20.14

17.54

12.40

8.99

6.05

2.50

1.05

4.84

0.88

Materials Industrials

GPIF ESG REPORT 2022

Real
Information Communications Financials Healthcare
Estate Technology Services
3.71
3.06
1.65
1.54
1.13
8.33
5.83
1.19
2.95
0.97

(Note) The calculation scope of greenhouse gas emissions includes Scopes 1, 2, and 3. The year-to-year percentage changes in GHG emissions of plus or minus 1% have been excluded from calculations as outliers.
Data is as of March 31, 2023 (GHG emissions data is calculated from available data as of March 31, 2023).
(Note) Carbon footprint is apportioned based on the percentage of the stocks/bonds holdings of the issuing companies. The apportion is calculated using the size of the holding in stocks/bonds in the issuing
companies at the time of analysis as the numerator and the enterprise value including cash (EVIC) as the denominator.
(Source) Prepared by GPIF based on data from S&P. S&P Global Sustainable1, S&P Trucost Limited ©Trucost 2023

Figure 5. Greenhouse Gas Emissions by Scope
Scope 3 Upstream

Scope 1

Scope 2

Direct emissions associatedwith the company’s activities

Indirect emissions associatedwith the use ofelectricity and steam(e.g., emissions associated with
fuel combustion, product manufacturing)Raw materials Employee commuting Transportation
and business travel

Scope 3 Downstream

Use ofsold products

End-of-life
treatment

Processing

The next figure (Figure 4) looks at characteristics of GHG
emissions by asset class and industry sector. The data shown
here is for GHG emissions per million yen of sales. The

1 Transition risks are risks that arise from policy, technological innovation, demand change, etc. that accompany the transition to a low-carbon economy.
2 Physical risks are risks from direct damage to an asset, supply chain disruption, etc., caused by climate change.
3 Alternative assets account for around 1.38% of the pension reserve fund (up to 5% of the policy asset mix), and are generally allocated to the four main portfolio asset types according to their characteristics.

61(Note) Only corporate bonds are analyzed. Bonds by unlisted companies are classified according to thesector of their parent company or equivalent.

sectors of communications services, healthcare, and40

0

for foreign corporate bonds. Moreover, among foreign corporate

Energylargest proportion for both domestic and foreign bond portfolios,

Information
Technology

half equities by overall market value. As of March 31, 2023,

Healthcare

bonds and foreign bonds (Figure 3). Financials account for theConsumer Staples

The GPIF portfolio is composed of roughly half bonds andMaterials

sector in GPIF’s corporate bond portfolio between domestic

Real Estateinterpreting these results.

Communications
Services

There is also a difference in the composition by industry

Consumer
Discretionary

understand the characteristics of our portfolio prior to

Industrials

financials, and healthcare sectors.

(Source) GPIF

Utilities

sector weighting of each asset class, it is important toFinancials

has a high proportion in the low-emitting information technology,

Energyresults are heavily influenced by the investment amount andUtilities

consumer discretionary sectors, while the foreign equities portfolio

Real Estate

assets (GPIF’s domestic real estate portfolio). Because analysis

Materials

proportion invested in the relatively high-emitting industrials and3Consumer Staples

this report, we also attempted an analysis of some alternative0

Communications
Services

portfolios (Figure 2). The domestic equities portfolio has a higher

0

Healthcare

bonds, foreign bonds, domestic equities, and foreign equities. In

10

Financials

a difference in the composition of the domestic and foreign equity

20
10

Information
Technology

mainly looks at four asset classes in GPIF’s portfolio: domestic

40

30

Industrials

When examining GPIF’s equities portfolios by sector, there is

Domestic Bonds
Foreign Bonds
As of March 31, 2023

20

Consumer
Discretionary

GPIF’s portfolio, using data as of March 31, 2023. The analysis

Domestic Equities
Foreign Equities
As of March 31, 2023

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities | Analysis of Portfolio Greenhouse Gas Emissions — Characteristics of GPIF’s Portfolio —Characteristics of GPIF’s Portfolio

（%）
100

It is necessary to bear this sector characteristic in GHG

Chapter 2
Measuring the Effectsof ESG Activities

purchased electricity (Scope 2), and indirect emissions from

Chapter 1
GPIF’s ESG Initiatives

Analysis of Portfolio Greenhouse Gas Emissions— Characteristics of GPIF’s Portfolio —calculation scope of GHG emissions includes indirect emissions

Leased assets

Waste generated
in operations

Upstream activities

Transportation anddistribution

Reporting company

Investments

Downstream activities(Note) The above figure indicates the major sectors included in each scope.
(Source) Created by GPIF based on the Greenhouse Gas Protocol, etc.
4 Based on the 11 sectors of the Global Industry Classification Standard (GICS).

GPIF ESG REPORT 2022

62

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities

Figure 2 shows the calculation of Scope 1–3 emissions1 foremissions (Scope 1+2) from FY2021 to FY2022 by asset

the equity and corporate bond portfolios as of the end ofclass. For example, for domestic equities, GHG emissions rose

FY2022. Looking at the total GHG emissions by asset class,slightly by approximately 20,000t (+0.07%) YoY. We havedomestic equities were found to have the highest level ofanalyzed the causes for this rise in terms of “investee

emissions, followed by foreign equities, domestic corporate

emissions,” which represents the change due to GHG

the companies held in GPIF’s portfolio, as part of our climate-relatedbonds, and foreign corporate bonds. This reflects the relativeemissions by investee companies, “portfolio weighting,” which

This analysis measures the greenhouse gas emissions (carbon footprint) offinancial disclosures in line with the TCFD recommendations. The changes

size and sector of holdings of each asset class within GPIF’s

represents the change due to the proportional weights ofin greenhouse gas emissions in each asset class are significantly affected

portfolio as shown in Figures 1 to 4 on the previous page. The

stocks and bonds in the portfolio, and “other,” which+by the changes in stocks/bonds held and amounts held in GPIF’s portfolio.

breakdown of GHG emissions in each asset class shows that

represents other causes. For domestic asset classes, whereas

Scope 3 accounts for the major proportion of total emissions

investee emissions decreased, an increase was caused byfor all assets.

portfolio weighting. In other words, changes in the stocks held

0.07%

Greenhouse Gas Emissions by Sector Significantly Affected by Scope 3
Figure 1 shows GHG emissions1 for the equity and corporatecompanies in these sectors, as analysis results changebond portfolios at the end of FY2022 by sector and by scope.

significantly depending on whether or not Scope 3 is included in

As in Figure 4 on the previous page, this includes Scope 1,

the calculation. In the analyses below, the top and bottom 1% of

Scope 2, and Scope 3 GHG emissions. For both the equity andequities and bonds in terms of year-to-year percentage change

corporate bond portfolios, total emissions were high in thein GHG emissions have been excluded from our calculations as

industrials, consumer discretionary, materials, and energy

outliers. Further, many companies do not disclose their Scope 3

sectors. Scope 3 Downstream emissions account for anemissions, leading to a dependence on estimates from models .

extremely high proportion of total emissions in these sectors.

For this reason, scope 3 emissions are excluded from

Caution is required for portfolios with a higher weight ofcalculations of emission trends (Figures 3 and 6).

60%

Materials

Materials

49%

Consumer Discretionary

Energy83%

Energy81%
76%

Consumer Staples

27%

Industrials

Information Technology

59%

Financials

Utilities

41%

Consumer Staples

Financials

81%
10%

Communications Services

44%■Scope 3 Upstream

Real Estate

70%■Scope 3 Downstream

0■Scope 2

5,000

10,00015,000investee emissions were the main cause of the increase in

the trend has levelled-off for domestic equities, foreign equities,

emissions for foreign asset classes. (Please refer to Figure 8

and foreign bonds, and has begun rising for domestic bonds.

on page 66 for the carbon footprint and an analysis of the

Figure 4 shows the main causes of the change in GHG

80%

29.5

Figure 3. Carbon Footprint Trends(× 10 million tCO2e)30.4■Scope 3 Downstream

140■Scope 3 Upstream

120
100

■Scope 1

80

10

60

5
0

(FY2016 = 100)160

15.5 ■Scope 2

15.1

1.7
GPIF
Portfolio

TOPIX

Domestic Equities

GPIF
Portfolio

MSCI ACWI Domestic
ex Japan Corporate
Bonds

Foreign Equities

40

0.7

20
2016

Foreign
Corporate
Bonds

Bonds

2017

2018

2019

2020

2021

Domestic Equities

TOPIX

2022
(Fiscal year)
Foreign Equities

MSCI ACWI
ex JapanDomestic
Corporate Bonds

Foreign
Corporate Bonds(Note) Figure 2: Available data as of March 31, 2023.
(Note) Figure 3. Carbon footprint is calculated based on Scope 1+2(Source) Figures 2 & 3: Prepared by GPIF based on data from S&P. S&P Global Sustainable1, S&P Trucost Limited ©Trucost2023

90%

Figure 4. Analysis of Main Causes of Change in Carbon Footprint (By Asset Class)

16%

Real Estate

61%

Communications Services

38%

Information Technology

44%■Scope 3 Upstream

Healthcare

5%■Scope 3 Downstream

20,000main causes by sector for each asset class.)

Figure 2. Carbon Footprint by Scope

15

16%

Utilities

75%

Healthcarefrom fiscal 2016 saw a general decline in all asset classes, but

25(× 10,000 tCO2e)

Consumer Discretionary■Scope 1

responsible for the rise in GHG emissions. On the other hand,20(× 10,000 tCO2e)
86%

using 100 for fiscal 2016 emissions as a base. The five years

30

Corporate Bonds Portfolio

Industrials

and the amount of the holdings in the portfolio were mainly

35

Figure 1. Greenhouse Gas Emissions by Scope
Equities Portfolio

Figure 3 shows the trend in GHG emissions (Scope 1+2),

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities | Analysis of Portfolio Greenhouse Gas Emissions — Carbon Footprint and Carbon Intensity —(Domestic equities)
YoY

Chapter 2
Measuring the Effectsof ESG Activities

Portfolio carbon footprint

Chapter 1
GPIF’s ESG Initiatives

Analysis of Portfolio Greenhouse Gas Emissions— Carbon Footprint and Carbon Intensity —Carbon Footprint (GHG Emissions) Analysis

0■Scope 1■Scope 2

200

400

600

800

(Note) Available data as of March 31, 2023.
(Note) Numbers on graph are the percentage of Scope 3 Downstream emissions to total emissions.
(Source) Prepared by GPIF based on data from S&P. S&P Global Sustainable1, S&P Trucost Limited ©Trucost 2023

Equities
Corporate Bonds(× 10,000 tCO2e)

Domestic asset classes

Foreign asset classes

Emissions Change in emissions due toFY2022
Investee
Portfolio
emissions weighting

Emissions Change in emissions due toFY2022
Investee
Portfolio
emissions weighting

Other

Other

3,248

+2

-282

+317

-33

1,965

+91

+80

+3

+7

605

+205

-23

+221

+7

110

+4

+9

-2

-3

(Source) Prepared by GPIF based on data from S&P. S&P Global Sustainable1, S&P Trucost Limited ©Trucost2023

1 Carbon footprint is apportioned based on the percentage of the stocks/bonds holdings of the issuing companies. The apportion is calculated using the size of the holding in stocks/
bonds in the issuing companies at the time of analysis as the numerator and the enterprise value including cash (EVIC) as the denominator.

63

GPIF ESG REPORT 2022

GPIF ESG REPORT 2022

64

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities

Figure 5 measures Scope 1–3 carbon intensity for the equity

significantly for domestic corporate bonds.

and corporate bond portfolios at the end of FY2022. For thisFigure 7 shows the main causes of the change in WACI

disclosure of which is recommended by the TCFD, was used as

analyzed the causes of this change in terms of “investee carbon

the basis for the calculation of carbon intensity. WACI isintensity,” which represents the change due to the carbon

calculated by multiplying each company’s GHG emissions per

intensity (GHG emissions divided by net sales) of investee

million yen of sales by the company’s weighting in the portfolio,

companies, “portfolio weighting,” which represents the changethen taking the sum of those products to obtain the weighted

due to the proportional weights of stocks and bonds in the

average of carbon intensity. By asset class, WACI was highest in

portfolio, and “other,” which represents other causes. For all

the domestic corporate bond portfolio, with domestic equities

asset classes, whereas investee carbon intensity decreased, an

having the lowest WACI. Scope 3 accounts for the majority ofincrease was caused by portfolio weighting. In other words,

WACI for all asset classes.

changes in the stocks held and the amount of the holdings in

Figure 6 shows the trend of WACI (Scope 1+2), using 100

the portfolio were mainly responsible for the rise in WACI.

for fiscal 2016 as a base. The five years from fiscal 2016 saw a(Please refer to Figure 9 on page 66 for WACI and an analysis

general decline in all asset classes, but recently, WACI has risenof the main causes by sector for each asset class.)

Figure 5. Weighted Average Carbon Intensity (WACI) by Scope

Figure 6. Trends in Weighted Average Carbon Intensity (WACI)18
16(WACI, tCO2e)■Scope 1 ■Scope 2 ■Scope 3 Upstream ■Scope 3 Downstream

14
12
10

10.4

10.4

11.2

11.7

12.8

120
11.1

80

6

60

4

40

2
GPIF
Portfolio

TOPIX

Domestic Equities

GPIF
Portfolio

MSCI
ACWI
ex JapanDomestic
Corporate
Bonds

Foreign Equities

20
2016

Foreign
Corporate
Bonds

Bonds

2017

2018

2019

2020

2021

Domestic Equities

TOPIX

2022
(Fiscal year)
Foreign Equities

MSCI ACWI
ex JapanDomestic
Corporate Bonds

Foreign
Corporate Bonds(Note) Figure 5: Available data as of March 31, 2023.
(Note) Figure 6. WACI is calculated based on Scope 1+2.
(Source) Figures 5 & 6: Prepared by GPIF based on data from S&P. S&P Global Sustainable1, S&P Trucost Limited ©Trucost2023

Figure 7. Analysis of Main Causes of Change in Carbon Intensity (By Asset Class)
Domestic asset classes

Foreign asset classes

Change in WACI due to
WACI
FY2022(WACI, tCO2e)

Change in WACI due toInvesteecarbonintensity

Portfolio
weighting

Other

WACI
FY2022

Investeecarbonintensity

Portfolio
weighting

Other

Equities

1.02

+0.02

-0.03

+0.04

+0.01

1.46

-0.19

-0.23

+0.06

-0.03

Corporate Bonds

3.94

+1.67

-0.00

+1.68

-0.01

1.87

+0.06

-0.25

+0.30

+0.00

(Source) Prepared by GPIF based on data from S&P. S&P Global Sustainable1, S&P Trucost Limited ©Trucost2023

+0
-0
+0
+1
+0
-0
+5
-0
-0
+0
+2

Figure 9. Analysis of Main Causes of Change in WACI (By Sector)
Change in WACI due toInvestee
Portfolio
carbonweightingintensity
Domestic Equities
Communications Services
20
-0
-1
+0
Consumer Discretionary
65
-1
-2
+1
Consumer Staples
49
+3
-3
+6
Energy
32
-14
-13
-2
Financials
7
-2
-1
-1
Healthcare
27
+2
+0
+2
Industrials
229
-3
-11
+10
Information Technology
56
-10
-4
-6
Materials
424
+44
+11
+25
Real Estate
12
-2
-2
-1
Utilities
102
+5
-0
+5
Domestic Bonds
Communications Services
18
-5
-2
-3
Consumer Discretionary
29
+1
+6
-3
Consumer Staples
18
+2
-1
+2
Energy
60
-25
-11
-12
Financials
32
-6
-6
-1
Healthcare
7
-2
+0
-2
Industrials
215
-16
+57
-59
Information Technology
15
-0
+0
-0
Materials
291
+65
+21
+44
Real Estate
23
-3
-2
-1
Utilities
3,232 +1,656-65 +1,711
WACI
FY2022100

80(FY2016 = 100)

140

+0
+1
-0
+1
+0
-0
-25
-0
-12
+0
+3

Emissions Change in emissions due toFY2022
Investee Portfolio
emissions weighting
Foreign Equities
19
+0
+1
-1
49
-0
-2
+0
74
-6
-4
-1
388
+66
+23
+42
30
+4
+3
+1
23
+0
+1
-1
134
+8
+11
-3
62
+8
+6
+1
689
+2
+8
-8
9
-1
-1
-0
489
+9
+34
-27
Foreign Bonds
1
-0
+0
-0
4
+0
+0
-0
3
+0
+0
+0
19
-3
+3
-4
1
+0
+0
+0
2
-0
+0
-0
8
-1
+1
-2
1
-0
-0
-0
24
-2
+3
-4
1
-0
-0
-0
47
+10
+1
+9

Other
+0
+2
-1
+2
+0
-0
+0
+0
+2
-0
+2
-0
-0
-0
-2
-0
-0
-0
+0
-1
+0
+0

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities | Analysis of Portfolio Greenhouse Gas Emissions — Carbon Footprint and Carbon Intensity —(Scope 1+2) from FY2021 to FY2022 by asset class. We haveOther

(× 10,000 tCO2e)

Chapter 2
Measuring the Effectsof ESG Activities

analysis, weighted average carbon intensity (WACI), theEmissions Change in emissions due toFY2022
Investee Portfolio
emissions weighting
Domestic Equities
Communications Services
38
-0
+0
-0
Consumer Discretionary
229
-8
-9
+0
Consumer Staples
160
-11
-6
-4
Energy
136
-28
-14
-14
Financials
9
-1
-1
-0
Healthcare
41
-0
-1
+0
Industrials
606
-193
-191
+23
Information Technology
115
-15
-4
-11
Materials
1,659
+268
-60
+340
Real Estate
15
-3
-2
-1
Utilities
239
-7
+7
-16
Domestic Bonds
Communications Services
2
-1
-0
-1
Consumer Discretionary
7
-1
-0
-1
Consumer Staples
4
-0
-0
-0
Energy15-7-1-7Financials
2
-0
-0
+0
Healthcare
1
-0
+0
-0
Industrials
24
-20
-14
-11
Information Technology
2
+0
+0
+0
Materials
78
+12
+1
+11
Real Estate
2
+0
-0
+0
Utilities
469
+221
-9
+229

Chapter 1
GPIF’s ESG Initiatives

Figure 8. Analysis of Main Causes of Change in Carbon Footprint (By Sector)

Carbon Intensity Analysis(WACI, kgCO2e)

Other

-0
-0
-0
+1
+0
-0
-1
+0
+8
+1
+0
+0
-2
+0
-1
+1
-0
-13
-0
-1
+0
+10

Change in WACI due toInvestee
Portfolio
carbonweightingintensity
Foreign Equities
18
-4
-2
-2
61
-9
-11
+2
42
-3
-7
+5
219
-45
-76
+55
30
-2
-4
+0
24
-7
-5
-2
118
-17
-16
+0
66
-9
-8
-2
363
-78
-69
-5
20
-5
-4
-2
496
-16
-26
+15
Foreign Bonds
22
-3
+1
-4
104
+28
+7
+18
25
+1
-3
+4
302
-123
-105
-17
26
-2
-5
+2
21
-8
-3
-6
114
-27
-14
-17
9
-1
-1
-1
227
-59
-43
-11
44
-25
-12
-16
973
+275
-70
+347
WACI
FY2022

Other

+0
-0
-0
-24
+1
+1
-1
+1
-4
+1
-6
+0
+3
+0
-0
+1
+1
+4
-0
-5
+3
-1

(Source) Figures 8 & 9: Prepared by GPIF based on data from S&P. S&P Global Sustainable1, S&P Trucost Limited ©Trucost2023

65

GPIF ESG REPORT 2022

GPIF ESG REPORT 2022

66

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities

emissions. Meanwhile, panel (2) shows that companies tend to

examine the GHG emissions reduction targets set among

set targets for Scope 1+2,regardless of the proportion of Scope

Japanese companies1 and foreign companies (in developed

1+2 emissions . Panel (3) shows that, as a result, sectors such ascountries).2 In compiling data for Figure 2, we examined the“Utilities,” which have a large proportion of Scope 1+2 emissions,degree to which each company had (1) measured its GHG

tend to have a high coverage rate, while sectors such as

greenhouse gas emissions by individual companies in GPIF’s portfolio. Whileemissions by scope, then (2) assessed targets set for GHG“Financials,” which have a large proportion of Scope 3 emissions,(Domestic equities)

companies’ disclosure is improving, we found that, from the perspective ofemissions by scope. We calculated the emissions targets

tend to have a low coverage rate. Some areas of Scope 3

78

setting GHG emissions reduction targets, companies in many sectors havecoverage rate (3) based on (1) and (2).

emissions are difficult for companies to reduce directly throughWe examined the status of information disclosure and target-setting on%

not yet been able to establish targets in line with actual emissions.

Panel (1) in Figure 2 shows different tendencies amongindustry sectors. Whereas, for both Japanese and foreigncompanies not setting Scope 3 targets. However, in some sectors,

companies, a large proportion of emissions for “Utilities” arethe reduction of Scope 3 emissions may significantly affect

Scope 1+2, “Financials” have a larger proportion of Scope 3

companies’ future competitive strength.

Figure 1 shows the trend in corporate disclosure on GHG

across all asset classes. However, the disclosure rate for

Figure 2. Status of GHG Emissions Reduction Targets (Japanese and Foreign Companies)

emissions in GPIF’s equity and corporate bond portfolios

domestic asset classes still lags behind the level for

Japanese Companies

since FY2018 and the status of disclosures as of March 31,

foreign asset classes. The most recent disclosure rate for2023 by scope. For Scope 3 emissions, the Scope 3

Scope 3 Downstream is still around 50% across all asset

Upstream GHG emissions data provided by S&P Global forclasses, but is rising for all asset classes except for foreign

all categories (except for air freight, rail transportation, andcorporate bonds. Unlike in the case of Scope 1 and Scope

trucking) are estimates based on models, and we have2, the Scope 3 Downstream disclosure rate for domestic

therefore only included Scope 3 Downstream. We haveequities is at roughly the same level as for foreign equities.

weighted the rate of disclosure based on the amount of

A breakdown of the status of disclosures (Figure 1 (4))

each asset held in our portfolio.

shows a large proportion of Scope 1 disclosures in

The trend since FY2018, presented in Figure 1 (1) to(3), shows that the disclosure rate (including partial

(%)
90

85

84

80

81

75

78

65
60

2018

2019

2020

2021

(3) Scope 3 Downstream

(%)
60

2022
(Fiscal year)

55

52
50

45

85

81

80

79
79
Domestic Equities
Foreign Equities
Domestic Corporate Bonds
Foreign Corporate Bonds

70
65
60

2018

2019

2020

2021

2022
(Fiscal year)

Scope 3

Scope 2

Scope 1

Scope 3

Scope 2

Domestic Equities

Scope 1

2022
(Fiscal year)

Scope 32021

21

Industrials n=183

11

Consumer Staples

n=70

10

Information Technology

n=74

9

Healthcare

n=36

9

Consumer Discretionary n=104

8Communications Services

n=19

7

Energyn=8

7Financials

n=52

2

MSCI Japan IMI n=712

16

30

70

27

36

64

19

21

79

1 0

29

26

74

14

27

28

72

0 0

19

18

82

74

44

18

19

81

11

74

5 0

21

14

86

79

63

38

19

81

58

81

13

8

92

31

76

20

24

88

3

68

36

78

10

70

64

27

68

64

27

81

45

76
53
80

47
82
14
40
52
20

46

0 0 12

32

42

40

60

80

100 0
（％）

5 0

32
22

0 0
24
22
20

40

60

80

100 0
（％）

76
20

40

60

80

100
（％）

Utilities n=126

40

Materials n=248

26Real Estate n=248

18

Industrials n=499

14

Consumer Staples n=171

10

Information Technology n=200

9Healthcare n=149

8Consumer Discretionary n=285

8Communications Services n=101

10Energy n=159

17

Financials n=268

6

MSCI Kokusai IMI n=2454

16(2) Percentage of Companies with Targets by Scope(3) GHG Emissions Targets Coverage Rate

37

51

49

22

29

38

62

66

21

31

33

67

34

62

4 3

31

35

65

13

51

45

37

63

22

61

33

31

69

30

66

24

26

74

42

58

53

34

31

69

10

60

40

36

32

68

16

67

76

21

32

68

45

49

54

42

35

65

31

62

33

34

28
40
75
53
77
70
62
51
80

52
20

40

60

80

32

56

34

67

7

100 0
（％）

52

41
53
6 3

12
23
32
20

40

60

80

■Scope 1+2■Scope 1+2+3 Upstream■Scope 1+2+3 Upstream+Downstream■Scope 1+2+3 Category undefined

100 0
（％）

66
20

40

60

80

100
（％）

■Covered by targets■Not covered by targets(Source) Reproduced by permission of MSCI ESG Research LLC ©2023
Scope 2

2020

0%

Scope 1

201920%
Scope 3

2018

n=63

54

■Scope 1+2■Scope 3 Upstream■Scope 3 Downstream

60%

Scope 2

25

Real Estate

080%

Scope 1

Domestic Equities
Foreign Equities
Domestic Corporate Bonds
Foreign Corporate Bonds

30
20

89

40%

40
35

26

100%
56

50

(2) Scope 2(4) Breakdown of the Status of Disclosure as of March 31, 2023
57

n=84

(3) GHG Emissions Targets Coverage Rate

1679(1) Sector Average of GHG Emissions by Scope75

Domestic Equities
Foreign Equities
Domestic Corporate Bonds
Foreign Corporate Bonds

70

Materials(2) Percentage of Companies with Targets by Scope30

22

Foreign Companies

disclosure on direct emissions.

89

48

0

Figure 1. Trend in Disclosure Rates ((1), (2) and (3)) and Status of Disclosure as of March 31, 2023 ((4)) Weighted by Portfolio Holdings(1) Scope 1

n=19

domestic asset classes, indicating progress in thedisclosure) has been rising for both Scope 1 and Scope 2(%)
90(1) Sector Average of GHG Emissions by Scope
Utilities

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities | Analysis of the Status of GHG Information Disclosure and Target Setting

Percentage of Disclosure by Scope

their own efforts, and we conjecture that this results in many

Chapter 2
Measuring the Effectsof ESG Activities

In this section, we use target-level data provided by MSCI to

Scope 1 Disclosure by companies

Chapter 1
GPIF’s ESG Initiatives

Analysis of the Status of GHG Information
Disclosure and Target Setting

Status of GHG Emissions Reduction Targets

Foreign Equities
Domestic Corporate Bonds Foreign Corporate Bonds■Disclosed ■Partially Disclosed ■Estimated

1 Includes only companies in the MSCI Japan IMI that have set GHG emissions reduction targets
2 Includes only companies in the MSCI Kokusai IMI that have set GHG emissions reduction targets(Note) Disclosure includes partial disclosure, except in panel (4).
(Source) Prepared by GPIF based on data from S&P. S&P Global Sustainable1, S&P Trucost Limited ©Trucost2023

67

GPIF ESG REPORT 2022

GPIF ESG REPORT 2022

68

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities

Based on projected GHG emissions from the companies in GPIF’s portfolio

ResultTemperature Range

Domestic Equities (1,268)

Foreign Equities (3,201)

Domestic Bonds (327)Foreign Bonds (1,481)

Aligned with 1.5°C target

1.5°C or below

15.0%

20.2%

13.1%

21.3%

Aligned with 2°C target

Over 1.5°C and up to 2°C

28.8%

27.8%

23.5%

25.4%

Misaligned with 2°C target

Over 2°C and up to 3.2°C

39.9%

31.5%

39.1%

32.1%

Over 3.2°C and up to 9.9°C

14.1%

17.6%

22.6%

17.8%

10°C or above

2.2%

2.8%

1.5%

3.4%

until 2050, we have evaluated their possible impact on global warming in

2.5℃
Foreignasset classes: 2.6℃

Domestic
asset classes:

terms of the rise in temperature. By asset class, we found an implied
temperature rise of 2.5°C for domestic asset classes and 2.6°C for foreign
asset classes, indicating an overall rise exceeding 2°C.

(Note 1) Only companies for which ITR evaluations exist have been included.
(Note 2) The numbers of companies for which ITR evaluations exist have been shown in parentheses.
(Source) GPIF, Reproduced by permission of MSCI ESG Research LLC ©2023. All rights reserved.

Implied Temperature Rise Analysis of GPIF’s Portfolio
to what extent emissions overshoot or undershoot budget,using MSCI’s Implied Temperature Rise (ITR). ITR evaluates(3) is multiplied by the global-level carbon budget required

the extent of potential to cause global warming from a target

for the world to achieve the 1.5°C target. Then, bycompany’s projected greenhouse gas (GHG) emissions,multiplying the Transient Climate Response to Cumulative

shown as an increase in temperature.

Emissions (TCRE) factor3 based on scientific findings, theNet Zero 2050 scenario provided by NGFS1 is used toestimated corporate GHG emissions are converted into ameasurement of temperature increase (Figure 1).

calculate the carbon budget2 available to individual

The results of the analysis showed that the impliedcompanies based on elements such as the company’s

temperature rise across GPIF’s portfolio was 2.5°C forpresent revenue, carbon intensity, and the emissions

domestic equities, 2.5°C for domestic bonds, 2.6°C for

reduction pathways for each emitting sector indicated in theforeign equities, and 2.6°C for foreign bonds (Figure 1). In

NGFS scenario. (2) The company’s future GHG emissions are

all asset classes, the forecast temperature rise exceeds 2°C,

projected from its current GHG emissions and a target

with a slightly lower rise for domestic asset classes. This iscredibility assessment of its declared GHG emissions

thought to be due mainly to the lower proportion of

reduction targets (described below), and the difference fromJapanese companies for which ITR is 10°C or above,(1) is calculated on an emissions basis. After dividing thatcompared to foreign companies (Figure 2).

Target Credibility Assessment of GHG Emissions Reduction Targets
We have already examined the status of companies’ GHG

Evaluating the credibility of GHG emissions reduction targets set

emissions reduction target setting on page 68. Here, we present

by companies from these perspectives, we found that 88.6% of

an assessment of the credibility of the emissions reduction

Japanese companies that had set targets of 1.5°C or below hadtargets reflected in the analysis of implied temperature riseemissions aligned with a 1.5°C target. This was slightly higher

provided by MSCI.

than the 84.5% proportion of foreign companies. The proportion

We evaluate the credibility of GHG emissions reductionof foreign companies pursuing a 1.5°C target was 23.4%5 —targets using four perspectives: (1) short-term targets set forhigher than the 17.1% of Japanese companies pursuing thateach emissions scope, (2) third-party verification by the Sciencelevel. This suggests that many foreign companies set more

Based Targets initiative (SBTi), (3) the issuer’s track record for

ambitious targets, while the credibility of these targets is slightly

achieving past targets, and (4) progress towards current targets .
4Credibility assessed
Aligned with 1.5°C target(1.5°C or below)(3) Carbon budget overshoot(undershoot if below line for (1))

1
0.5
0

Foreign Equities
Foreign Bonds(1) Carbon budget in line with
the Net Zero 2050 scenario
2020

2025

2030

2035

2040

2045

2050

(Source) GPIF, Reproduced by permission of MSCI ESG Research LLC ©2023. All rights reserved.

69

GPIF ESG REPORT 2022

Strongly misaligned with
2°C target (over 3.2°C)

Aligned with 1.5°C target, if statedtarget is taken at face value* (220)

88.6%

9.1%

2.3%

0.0%

Aligned with 2°C target, if statedtarget is taken at face value* (374)

0.0%

93.0%

6.4%

0.5%

Foreign Companies

1.5

Aligned with 2°C target Misaligned with 2°C target(over 1.5°C and up to 2°C) (over 2°C and up to 3.2°C)

Japanese Companies

2

Credibility not assessed

Domestic Equities
Domestic Bonds(2) Annual forecast GHG emissions

inferior to those set by Japanese companies (Figure 3).

Figure 3. Credibility Assessment of GHG Emissions Reduction Targets (Japanese and Foreign Companies)

difference by the allocated carbon budget to determine (3)Figure 1. Temperature Rise Potential in GPIF Portfolio

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities | Implied Temperature Rise Analysis

In this section, we will examine the results of our analysis

We calculate implied temperature rise as follows. (1) The

Strongly misalignedwith 2°C target

Chapter 2
Measuring the Effectsof ESG Activities

Implied temperature rise of GPIF’s portfolio

Chapter 1
GPIF’s ESG Initiatives

Implied Temperature Rise Analysis

Figure 2. Company Distribution of ITR Evaluation Across Four Asset Classes

Aligned with 1.5°C target, if statedtarget is taken at face value* (863)

84.5%

12.2%

3.2%

0.1%

Aligned with 2°C target, if statedtarget is taken at face value* (978)

0.0%

91.9%

7.7%

0.4%

(Note 1) *Future emissions were projected, taking the company’s decarbonization target at face value, to measure the degree of overshoot or undershoot from the company’s
allocated carbon budget, and this was used to evaluate the company’s ITR.
(Note 2) The analysis included GHG emissions reduction targets set by companies in GPIF’s portfolio as of March 31, 2023, among issuers included in the analysis for MSCI’s
Target Summary Model . The number of companies analyzed for each item have been shown in parentheses.
(Source) GPIF, Reproduced by permission of MSCI ESG Research LLC ©2023. All rights reserved.
1 The Network of Central Banks and Supervisors for Greening the Financial System (NGFS) is an international network of the central banks and financial supervisory authorities of major countries.
2 Carbon budget is the upper limit of how much GHG emissions would be possible until the temperature increase reaches a certain value due to global warming.
3 This factor indicates the contribution to temperature rise of the release of 1Gt of GHG emissions.
4 For details, please refer to “Modeling target-based emissions projections using a Target Summary Model” in the “2023 Analysis of Climate Change Related Risks in the GPIF's Portfolios,” a report on MSCI’s analysis for the
preparation of this report.
5 The calculation method is as follows. Foreign companies: 863/3,693 = 23.4%; Japanese companies: 220/1,284 = 17.1%.

GPIF ESG REPORT 2022

70

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities-6.6%~-1.0%

CVaR by country for the government bond portfolio as ofin the short term in some countries). In other words, if the

March 31, 2023. This analysis shows that the Divergent Net

size of the yield curve shock is the same, it is possible to say

Zero scenario resulted in the greatest negative CVaR for thethat the longer the duration of a government bond, the larger

seven major countries (Figure 2). This scenario assumes

the negative CVaR impact will be. From this perspective, wethat, while the world will achieve net zero emissions byconducted a comparison of yield curve shocks under the Net

If we consider the fiscal burden and other impacts from the response to2050, the carbon price and other costs will rise due to theZero 2050 scenario (Figure 3). A roughly similar size of yield

climate change risks, these risks have the potential to affect GPIF’s

introduction of different policies in each industry and fossil

curve shock is estimated for France, Germany, and Italy, but

fuels will be phased out earlier than in other scenarios,a larger negative CVaR is calculated for France and Germany

resulting in rising interest rates due to inflationary pressuresthan for Italy. This is thought to be due to the relatively longer(larger yield curve shocks). It is thought that the results ofduration of French and German government bonds in GPIF’s

the analysis have been impacted by this rise in interest

portfolio, compared to Italian government bonds.

government bond portfolio through interest rate rises. Our analysis indicatesthat the overall value of Japanese government bonds in the portfolio may
fall by between 6.6% and 1.0% due to climate change risks.

rates. CVaR by country is affected by (1) the size of yield

Next, we estimated the impact of yield curve shock on

curve shocks and (2) the duration (the average time taken to

government bond prices using a simplified method, assum-

This section uses Sovereign Bond CVaR to analyze climate

climate change. Next, we adopted five of NGFS’s six climate

recoup bond investments)3 of bonds in GPIF’s portfolio.

ing zero-coupon bonds (Figure 4). Because the estimatedchange risk to government bonds. For Sovereign Bond CVaR, wescenarios, namely “Net Zero 2050,” “Below 2°C,” “Divergent Net

However, it should be noted that the price risk is generated

yield curve shock for Canada is the largest out of the sevenanalyze the impact of climate change on the price of government

Zero,” “Delayed Transition,” and “Nationally Determinedby two factors, namely the duration of the government bondmajor countries, Canadian government bonds suffer thebonds based on interest rate forecasts under the various climate

Contributions (NDCs)” as the scenarios to be compared with theand the size of the yield shock at maturity (for example, inlargest proportional fall in price across all maturities.

change scenarios provided by the Network of Central Banks andbase scenario. We then produced (2) 30-year yield curves forSupervisors for Greening the Financial System (NGFS), an

each scenario for the countries being analyzed.

1

2

Figure 2. CVaR of Government Bonds in GPIF Portfolio by Scenario (%)

After that, comparing (1) and (2), we estimated (3) yield curveinternational network of the central banks and financial

shock, which indicates how much the interest rate forecasts

supervisory authorities of major countries.

would change. Next, using (3), we calculated (4) the price of the

The specific analysis process is shown in Figure 1. Firstly, we
produced (1) a 30-year yield curve to serve as the baselinetarget countries’ government bonds. Finally, a comparison of (4)scenario for the countries being analyzed, using the interest ratewith the current prices of the same bonds indicates to what

forecasts for the scenario that does not factor in the impact ofextent returns will increase or decrease (Figure 1).

3.50％
3.00％

Net Zero 2050
Interest Rate Forecast
Long-term Interest Rate

Conversion

1.50％

2.00％
1.50％

Short-term Interest Rate

1.00％

1.00％

0

5

10

15

20

Tenor/Year

25

30

0.00％

0

Base Scenario Interest Rate Forecast
3.50％

2.50％

10

15

20

Tenor/Year

25

2.50％

1.00％

(1) Base Scenario Yield Curve

0.80％

1.50％

0.60％

1.00％

0.40％

0.50％

0.20％

0.00％

0.00％

Long-term Interest Rate

5

15

20

25

30

Conversion

-6.6
-5.1
-6.4
-7.6
-5.1
-4.6
-7.7

-1.0
-0.5
-0.8
-1.2
-0.4
-0.3
-0.9

-0.6

-5

0

5

10

15

20

25

30

Tenor/Year

Short-term Interest Rate

0.50％
0

5

10

15

20

Tenor/Year

25

0.50％
30

0.00％

0.2

-15

0.0

-20

Japan

FranceU.S.
1 YearU.K.

Germany Italy

10 Years

Canada Average

25 Years(Note) The average is a simple average of 53 countries, including the above seven countries.
(Source) GPIF, Reproduced by permission of MSCI ESG Research LLC ©2023.

(4) Climate Value-at-Risk (%): Government Bonds
0

5

10

15

20

Tenor/Year

25

30

-4

-3

-2

-1

0

France
-0.3

-5.5

-25

U.S.

U.K. Germany Italy
-0.3

-0.8

-0.9

-4.7

-4.9

-0.3

-4.9

-8.1

-10

1.00％

1.00％

Nationally Determined
Contributions
-1.4
-0.9
-1.2
-1.4
-1.0
-0.9
-1.6

Figure 4. Country-to-country Comparison of Rate of Decline inGovernment Bond Prices (1-Year, 10-Year, and 25-Year Maturity)（%） Japan
0

0.4
Portfolio

Yield curve shock is used to
calculate impact on market prices.

1.50％

-1.5
-1.1
-1.9
-2.1
-1.1
-1.0
-2.1

0.6

Tenor/Year

2.00％

1.50％

10

-3.9
-3.3
-4.1
-5.0
-3.3
-2.9
-5.0

Japan
FranceU.S.
U.K.
Germany
Italy
Canada0.8

Estimation

2.00％

0

Delayed Transition

1.0

30

2.50％

2.00％

0.00％

1.20％

3.00％

4.00％

3.00％

5

Divergent Net Zero

（%）
1.2

(3) Yield Curve Shock

3.00％

0.50％

0.50％
0.00％

Process of Yield Curve Shock Estimation

2.00％

2.50％

Below 2°C

Figure 3. Country-to-country Comparison of Yield Curve Shock(1-Year, 10-Year, and 25-Year Maturity)(2) Net Zero 2050 Yield Curve
3.00％
2.50％

Net Zero 2050

(Source) GPIF, Reproduced by permission of MSCI ESG Research LLC ©2023.

Figure 1. Conceptual Diagram of Calculation of Sovereign Bond CVaR
4.00％

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities | Analysis of Government Bond Portfolio Using Sovereign Bond Climate Value-at-Risk

Analysis of Government Bond Portfolio Using Sovereign Bond Climate Value-at-Risk

Chapter 2
Measuring the Effectsof ESG Activities

Impact of climate change risks on Japanese
government bonds in GPIF’s portfolio

the Net Zero 2050 scenario, the yield curve shock is greater

Chapter 1
GPIF’s ESG Initiatives

Analysis of Government Bond Portfolio Using
Sovereign Bond Climate Value-at-Risk

In this section, we will examine the results of an analysis of

-13.6

-13.7

-15.1

Canada Average
-0.4

-0.9

-4.9

-6.0
-10.2

-13.4

-13.7

-13.7

-15.1

-21.8

1 Year10 Years

25 Years(Note) The average is a simple average of 53 countries, including the above seven countries.
(Source) GPIF, Reproduced by permission of MSCI ESG Research LLC ©2023.

3 Durations used in this analysis are approximations. The CVaR of government bonds is calculated using the full revaluation approach.

(Note) While the chronic impact of changes in climate patterns has been factored into physical risks in each scenario to a certain extent, acute impacts, such as disasters caused byextreme weather events, have not been taken into account.
(Source) GPIF, Reproduced by permission of MSCI ESG Research LLC ©2023.
1 Climate Value-at-Risk (CVaR) is an analytical method of measuring how climate policy changes and disasters caused by climate change impact corporate value.
2 We have used the Phase III climate scenarios published by the NGFS in September 2022. Please refer to NGFS Scenarios for Central Banks and Supervisors (September 2022) for thelevels of physical and transition risks anticipated under each scenario.

71

GPIF ESG REPORT 2022

GPIF ESG REPORT 2022

72

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities-1.4%~-2.7%

evaluate the impact on asset values of potential costs broughtof physical risks (the impact on asset values) under scenario

about by the transition to a low-carbon economy, for each(1), Net Zero 2050, is -1.4%, while the impact underclimate scenario (Figure 1). For details of the analysis process,scenario (4), Nationally Determined Contributions (NDCs),

please refer to the climate-related risks for the real estate

which assumes a greater rise in temperatures, is -2.7%

portfolio in the “2023 Analysis of Climate Change-Related Risks(Figure 3). These results indicate that physical risks may

In this report, we used CVaR to analyze the physical and transitionin the GPIF’s Portfolios,” a report on MSCI’s analysis for the

potentially lower the asset values of domestic real estate inrisks of domestic real estate, included in alternative assets. Our real

preparation of this ESG Report.

GPIF’s portfolio by between 1.4% and 2.7%.

estate CVaR results indicate that physical risks may potentially lower
the asset values of domestic real estate in GPIF’s portfolio by between 1.4% and 2.7%.

Risk Analysis of the Real Estate Portfolio Using CVaR

The results of the analysis of the distribution of our

The results of an analysis of transition risks for eachdomestic real estate portfolio by physical risk indicate that,

NGFS scenario reveal values of -3.3% under (1) Net Zerofor aggregated physical risk, the impact on asset value is2050, -0.8% under (2) Below 2°C, -2.7% under (3) Delayed“negligible risk ” for a majority of properties. However,Transition, and -0.6% under (4) Nationally Determined

there are some properties where the risk is “severe risk,”

Contributions (NDCs). A comparison of (1) and (4) shows“significant risk ,” or “moderate risk ” (Figure 2). Turning tothat transition risks tend to be higher in scenarios with moreclimate change (physical risks and transition risks) on real

specific natural disaster risks, the results show that, for (3)aggressive reduction targets. It should be noted that,

equities and bonds, GPIF’s portfolio contains alternative

estate asset values in GPIF’s Japanese domestic real estatefluvial flooding, (4) extreme heat, (5) tropical cyclones, andwhereas the costs of transition risks are estimated for theassets, such as infrastructure, private equity, and real estate.

portfolio, included in the alternative assets .

(6) wildfire, the impact on asset values is “negligible risk ,”period up to 2050, the costs of physical risks are estimatedIn this report, we used CVaR to measure the effect ofor “no identifiable risk” for most properties. There are a

up to 2100, and the two cannot be compared directly.

Physical and Transition Risks from the CVaR Perspective

large number of properties for which (2) extreme cold is

In this way, we were able to use CVaR to estimate physical“negligible risk reduction.” This is due to our assessment

risks due to natural disasters and transition risks. However, we

CVaR is used to analyze physical risks by identifying the asset

but this time we have added (6) wildfire as a new category.

that this risk will be mitigated as the frequency of extreme

have been unable to reflect the status of natural disastertypes and locations of real estate holdings, estimating the impact

Aggregated physical risk is calculated by summing each of thesecold weather events declines due to rising temperatures.

countermeasures at each real estate property in our currentof future climate change using climate data related to natural

physical risks. The magnitude of the impact of physical risks from

Next, Figure 3 shows the magnitude of the impact ofanalysis model for physical risks. Moreover, our analysis has notdisasters, and evaluating the magnitude of the impact on realnatural disasters is classified using a seven-tier scale: “severe

physical risks on asset values (the percentage decline intaken into account the likelihood that some of the costs ofestate asset values under each climate scenario (the NGFS

risk,” “significant risk” “moderate risk,” “negligible risk,” “noasset values) for each of four NGFS scenarios ((1) Net

transition risks will be passed on to property lessors. We think

scenarios were used in this analysis) (Figure 1). We evaluate

identifiable risk,” “negligible risk reduction” and “risk reduction.”

Zero 2050, (2) Below 2°C, (3) Delayed Transition, andthat further improvements are necessary in these areas.

physical risks across six categories of natural disasters for ourOur evaluation of the magnitude of the impact generally focuses on

CVaR analysis: (1) coastal flooding, (2) extreme cold, (3) fluvial

information on the property location and topography, although

Figure 2. Distribution of Domestic Real
Estate Portfolio by Physical Risk

Figure 3. Physical Risks (Percentage Decline in Asset Values)of Domestic Real Estate Portfolio by Scenario

flooding, (4) extreme heat, (5) tropical cyclones, and (6) wildfire. We

some consideration is given to local physical risk countermeasures.

also presented a real estate CVaR analysis in the ESG Report 2020,

We carry out a separate evaluation for each climate scenario.

Figure 1. Illustration of the CVaR Analysis of Physical Risks and Transition Risks

Assets0.0%

Physical Risk
Aggregated(1) Coastal Flooding-1.0%(2) Extreme Cold

Physical Risks

Location

HazardCosts

ClimateValue-atRisk

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities | Analysis of Real Estate Portfolio Using Climate Value-at-Risk

In addition to so-called traditional asset classes such as

Chapter 2
Measuring the Effectsof ESG Activities

Impact of physical risks on real estate values(real estate CVaR)(4) Nationally Determined Contributions (NDCs)). The impact

Chapter 1
GPIF’s ESG Initiatives

Analysis of Real Estate Portfolio
Using Climate Value-at-Risk

In our analysis of transition risks, we used a model to(3) Fluvial Flooding-1.4%(4) Extreme Heat

-2.0%

-2.0%

(5) Tropical Cyclones-2.3%(6) WildfireTransition Risks

Assets0%

Energy/emissions

Reductionrequirements

Costs

ClimateValue-atRisk

Severe risk

20%

Significant risk

No identifiable risk

40%

60%

80%

Moderate risk

Negligible risk

Negligible risk reduction

Risk reduction

100%(Note) Calculated for asset values based on the Net Zero 2050 scenario (average).
(Source) GPIF, Reproduced by permission of MSCI ESG Research LLC ©2023.

-3.0%(1) Net Zero 2050

(2) Below 2°C-2.7%(4) Nationally
Determined
Contributions(3) Delayed
Transition(1) Coastal Flooding(2) Extreme Cold

(3) Fluvial Flooding(5) Tropical Cyclones(6) Wildfire

Aggregated physical risk

(4) Extreme Heat

(Source) GPIF, Reproduced by permission of MSCI ESG Research LLC ©2023.

(Source) Reproduced by permission of MSCI ESG Research LLC ©2023.

73

GPIF ESG REPORT 2022

GPIF ESG REPORT 2022

74

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities

Equivalent to thecarbon absorbed in
one year by a forest

1.2 times
the area of JapanFirst, we will examine the Avoided Emissions attributable tocalculate emissions over the lifecycle of ICEV.

zero emissions vehicles. For this analysis, we classify the

manufactured in the same region (baseline emissions). The

lifecycle of the vehicle into five phases from manufacturing

difference between baseline emissions and the emissions

through usage to disposal and calculate the Avoided

from zero emissions vehicles, multiplied by the total

We analyzed the zero emissions vehicles produced by the world’s major

Emissions in each phase (Figure 1). This time, however, we

number of zero emissions vehicles, gives the Avoided

automotive manufacturers for Avoided Emissions which arise from the

did not analyze phase 3. Distribution and phase 5.

Emissions for that region.

use of products and services that contribute to reducing GHG emissions.
We estimate that the total Avoided Emissions are equivalent to theamount of carbon absorbed in one year by a forest with an area of 45
million ha (1.2 times the area of Japan).

What are Avoided Emissions?
reductions that occur outside of a product’s life cycle orprogressive reduction of GHG emissions, there is a trend

value chain, but as a result of the use of that product.” It is

towards GHG reduction, not only for individual companies

thought that, in the future, Avoided Emissions will have a

but throughout the value chain. At the same time, there is asignificant impact on companies’ competitive strength andtrend towards quantifying the contribution made by products

influence the corporate value of investee companies.

and services that help to reduce GHG emissions, and to

In this analysis, we used the analytical methodology

seize the opportunity presented by their positive impact ofdeveloped by the Intercontinental Exchange Group (ICE) toemission reduction across society. This contribution to

calculate Avoided Emissions, delving deeper into companies

emissions reduction is referred to as “Avoided Emissions.”in GPIF’s portfolio across two industries (automotive andAvoided Emissions are defined by the WRI2 , a body thatpower generation) using a bottom-up approach.

When estimating future Avoided Emissions, theof data and the absence of an established methodology. Ourestimated future number of vehicles sold (in 2030) by eachanalysis considered the 16 main automobile companies

company is aggregated by sales region using data andincluded in GPIF’s portfolio in terms of market capitalization

estimates disclosed by each company. Figure 2 shows theand other factors (four companies each from Japan, Europe,

Avoided Emissions (tCO2e) by region based on the current

the United States, and China). We calculated Avoided

and future number of vehicles sold. It should be noted that

Emissions using a bottom-up approach based mainly on

this data is aggregated based on the headquarters of eachdata disclosed by these companies. The 16 companies

company analyzed. Therefore, for example, Avoided

selected account for approximately 90% of the total

Emissions arising when a Japanese automotive

investment amount for the automotive sector in GPIF’s

manufacturer sells vehicles in Europe are counted as

equities portfolio.

Avoided Emissions for Japan.

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities |Analysis of Avoided Emissions Based on the Bottom-up ApproachWith companies aiming for decarbonization through the

Recycling/Disposal due to several reasons including a lack

Chapter 2
Measuring the Effectsof ESG Activities

Avoided Emissions(zero emissions vehicles1)

Chapter 1
GPIF’s ESG Initiatives

Analysis of Avoided Emissions Based on
the Bottom-up Approach

Avoided Emissions from Zero Emission Vehicles

The results of the analysis4 shown in Figure 2 (page 77)
Figure 1. Illustration of the Scope of Avoided Emissions from Zero Emissions Vehicles

indicate that, while Avoided Emissions from Japanese
automotive manufacturers are extremely small at present,

2. Manufacturing

total Avoided Emissions from Japanese companies will exceed
1. Battery Mining
and Refining

3. Distribution

those of their Chinese counterparts and reach closer to thoseof European automotive manufacturers by 2030. This is due

researches climate change and other issues, as “emission

to Japanese automotive manufacturers’ plans to substantially
increase the production of zero emissions vehicles by 2030.

The Avoided Emissions Approach

5. Recycling/
Disposal

Figure 3 (page 77) shows the Avoided Emissions per vehicle,

To estimate Avoided Emissions, it is necessary to identify

GHG emissions avoided through the use of zero emissions

which industries have products and services that contribute tovehicles replacing ICEV . We calculated Avoided Emissions as

reducing GHG emissions. Although there are no doubt many

the difference between the estimated emissions throughout

For the analysis, we calculate emissions over theEurope and the United States, it is anticipated that this will riseproducts and services that contribute to reducing emissions,the lifecycle of zero emissions vehicles, from production

lifecycle of zero emissions vehicles for specific models

to a similar level by 2030. We estimate that the current levelbut for this analysis, we focused on two products and services

through use to disposal, and the emissions throughout the(sizes) and sales regions. We calculate the total emissionsof total Avoided Emissions from the 16 automotive

where the methodology is easily understandable andlifecycle of ICEV, which we used as a baseline.

(Source) Reproduced by permission of ICE.

rather than in total. While the Avoided Emissions from each ofJapan’s zero emissions vehicles are still low compared toattributable to zero emissions vehicles by multiplying the

manufacturers we considered is equivalent to the amount ofcompanies disclose the information necessary to calculate

For details of the analysis process, please refer to

GHG emissions of individual vehicles by the total number

carbon absorbed in one year by a forest with an area of 45

Avoided Emissions: “zero emissions vehicles ” vs. “Internal“Approach and Methodology” in the “Avoided Emissionsof zero emissions vehicles sold in the region. Next, wemillion ha (1.2 times the area of Japan).

Combustion Engine Vehicles(ICEV) ,” and “renewable energy”~Analysis of GPIF Portfolio~,” a report on ICE’s analysis forvs. “energy mix including fossil fuels and renewable energy at

the preparation of this ESG Report. The analysis in the ICE

the time of evaluation.” In the case of zero emissions vehicles,

report includes the mined minerals sector as well as zero

Avoided Emissions are equal to the result of quantifying theemissions vehicles and power generation.

3

1 Zero emissions vehicles are battery electric vehicles (BEV) that emit no exhaust gasses such as CO2 during operation, and do not include hybrid electric vehicles (HEV) etc.
2 World Resources Institute3 Hybrid electric vehicles (HEV) were included ICEV etc. for this analysis.

75

4. Zero Emissions
Vehicles Transportation

GPIF ESG REPORT 2022

4 Avoided Emissions are calculated without considering the relative weight of each holding in GPIF’s portfolio.

GPIF ESG REPORT 2022

76

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities

Emissions from each company engaged in the power

Emissions due to nuclear power especially high in 2050. The

generation business, aggregated by region. In Figure 5, weabsolute amount of Avoided Emissions is highest in Europe, buthave summed the total Avoided Emissions (tCO2e) relating to

it is necessary to consider differences in economic scale andrenewable energy power generation today, in 2030, and in

population when making comparisons between countries and2050. Renewable energy includes wind, solar, geothermal,

regions. Figure 6 presents the total Avoided Emissions perbiomass, and hydro power generation. Meanwhile, althoughkilowatt hour of renewable energy (tCO2e/kWh) for each region.

nuclear power generation contributes to reducing emissions,Because Japan currently uses more fossil fuels for powerwith extremely low emissions during the operating phase,

generation (that is, the baseline value is higher) than Europe or

we have aggregated it separately due to various concerns of

the United States, Japan’s Avoided Emissions per kilowatt hour

issues such as nuclear waste. Moreover, none of thefrom the introduction of renewable energy are also higher thanChinese companies analyzed are engaged in a business

in Europe or the United States. The intensity of Avoided30

related to nuclear power generation, nor have they madeEmissions is expected to gradually decline as renewable energy

25

any disclosures concerning future business plans involving

occupies an increasingly large proportion of the baseline value.

20

nuclear power generation. We have therefore removed

Currently, the estimated total Avoided Emissions from the 12

15

nuclear power generation from the analysis for China.

power generation companies considered are equivalent to the10

As shown in Figure 5, overall, Avoided Emissions arecarbon absorbed in one year by a forest with an area of 150

20,00015,00010,000

5,000

0

Japan

EuropeU.S.

■Avoided Emissions (Current)）

China■Avoided Emissions (2030)(Note) Current: Estimates for 2022
(Source) Reproduced by permission of ICE.

Figure 3. Comparison of Avoided Emissions per Zero Emissions Vehicle by Region (Based on Headquarters Location)(tCO2e)550expected to increase towards 2050. In the case of Japan,
Japan

EuropeU.S.

■Avoided Emissions (Current)

China■Avoided Emissions (2030)(Note) Current: Estimates for 2022
(Source) Reproduced by permission of ICE.

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities |Analysis of Avoided Emissions Based on the Bottom-up Approach

Avoided Emissions are trending higher until 2050, with Avoided

Chapter 2
Measuring the Effectsof ESG Activities

Figure 5 shows the results of the analysis of Avoided(× 10,000 tCO2e)

Chapter 1
GPIF’s ESG Initiatives

Figure 2. Comparison of Avoided Emissions from Zero Emissions Vehicles by Region (Based on Headquarters Location)

million ha (4.0 times the area of Japan).

Figure 5. Regional Comparison of Avoided Emissions from the Power Generation Business(× 10,000 tCO2e)
20,00015,000

Avoided Emissions from the Power Generation Business in the Utilities Sector
Next, we engaged in an analysis of the power generation

amount for the utilities sector in GPIF’s equities portfolio.

business in the utilities sector. We considered 12 companies

For this analysis, we classify the emissions into fivein four regions (three companies each from Japan, Europe,phases from manufacturing through to disposal (Figure 4).

the United States, and China). The 12 companies selected

Within this scope, we calculate the emissions across theaccount for approximately 30% of the total investment

entire lifecycle of renewable energy power generation for

Figure 4. Illustration of the Scope of Avoided Emissions
from Utilities
1. Fuel Extraction /Equipment Manufacturing

Baseline emissions are calculated based on the NGFS
Current Policies scenario, which assumes that each

2. Transportation

country’s energy mix is only affected by policies already

3. Plant Construction

5. End of Life Management

each company and compare these with baseline emissions.

4. Plant Operations

implemented today. We calculate Avoided Emissions as the

10,0005,000

0Current

2030
Japan

2050

Current

2030
Europe2050■Renewable energy

Current

2030
U.S.

2050

Current

2030
China

2050

■Nuclear power(Note) Current: Estimates for 2022
(Source) Reproduced by permission of ICE.

Figure 6. Avoided Emissions per Kilowatt Hour from the Power Generation Business (tCO2e/kWh)(tCO2e)
700
600
500
400

difference between the emissions estimated under each300

company’s electric power plan for decarbonization and200

baseline emissions.

100
0(Source) Reproduced by permission of ICE.

Japan
■Avoided Emissions Intensity (Current)

EuropeU.S.

■Avoided Emissions Intensity (2030)■Avoided Emissions Intensity (2050)

China(Note 1) Avoided Emissions per kilowatt hour = Avoided Emissions intensity(Note 2) Current: Estimates for 2022
(Source) Reproduced by permission of ICE.
5 Some of the state-owned parent companies of the power generation companies considered in this analysis are engaged in the nuclear power generation business, which was excluded
from this analysis.

77

GPIF ESG REPORT 2022

GPIF ESG REPORT 2022

78

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities

8.29million
tCO2eclassified these bonds based on three criteria: “Type of

ESG bonds held in GPIF’s portfolio. We begin by considering theimpact funded,” “Type of issuer (international development

impact results from investing US $1,000 in each ESG bond . As

bank, private sector company, etc.),” and “Region where

described above, in approximately half of these bonds, there isissuer is located.” We then allocated the average impact

at least one post-issuance disclosure regarding impact results

results of ESG bonds in each class to any bonds in thatprivate sector companies. This year, we collected information on theagainst the stated goals of bond issuance in the impact reports

class for which no disclosure had been made (Figure 2).

environmental and social impact and effects generated by the projects

or equivalent . Although the numbers are disclosed, it isHowever, we excluded from our data any class containing

funded using the proceeds of ESG bonds, mainly from the disclosures ofnecessary to make certain assumptions4 concerning theless than 10 bonds with disclosures. Moreover, this time, we

the issuers of ESG bonds in GPIF’s portfolio.

disclosed data due to the differing scopes of impact results

narrowed down l our analysis to green bonds due to the(disclosure for a single bond or multiple bonds) and the fact that

number of samples required. Of the 633 bonds for which no

impact results span several different fields, resulting in a lack ofdisclosure of impact results had been made, there were 269

clarity concerning the amounts of investment contributing toissues for which we were able to apply the average impact

each area of impact.

results using the method described above. This method

GPIF invests in ESG bonds issued by international organizations andStatus of Disclosure by Issuers
The Green Bond Principles (GBP), the Social Bond Principles

There are, however, very few examples of the actual

We undertook a more detailed analysis of bonds for(SBP) , and the Sustainability Bond Guidelines (SBG)

aggregation and analysis of impact-related disclosure andpublished by the International Capital Market Association

impact results from ESG bonds. In this report, with the(ICMA), as well as standards such as the EU Green Bond

cooperation of ICE, we have analyzed the ESG bonds held byStandard (GBS) provide global guidelines to promote

GPIF in terms of (1) the status of disclosure by issuers and (2)Type of Impact fundedtransparency and disclosure for the issuance of bonds that

impact results. Figure 1 shows the status of disclosure for(1) Energy efficiency

contribute to achieving social and/or environmental goals,

1,324 ESG bonds held by GPIF as of March 31, 2023. Of(2) Renewable energy

thus supporting the integrity of the ESG bond market.

these 1,324 bonds, 691 bonds — approximately half —Specifically, guidelines such as the Green Bond Principles

enabled us to measure approximately 72.5% of bonds inwhich no disclosure of impact results has been made. We

2terms of the number of bonds (Figure 1).

Figure 2. Criteria Used to Distinguish Similar Bonds for Estimation PurposesType of Issuer

×(1) Corporate(2) Financial

Region×(1) EU(2) U.K.

(3) Sovereign(3) North America

disclosed in post issuance reports at least one impact result of(4) Supranational(4) Japan

encourage issuers to engage in accurate and transparent

the project(s) funded from the proceeds of bond issuance. Of(5) Agency (SSA)(5) APAC (excluding Japan)*disclosure to investors and other stakeholders. Even after

the remaining 633 bonds, approximately half had only recently

the bonds are issued, they require that issuers provide

been issued3 (within the last 18 months), thus we canannual disclosure of the environmental and social impact

categorize these as bonds where we would expect disclosureand effects (impact results) of the project(s) in areas such as

in the future. Meanwhile, there were a certain number of

avoided emissions, as well as the amount of bond proceeds

bonds for which no disclosure had been made regarding

Impact of ESG Bonds in GPIF’s Portfolio

already allocated to the designated project(s). This

impact results, despite being issued based on guidelines such

An examination of the goals of projects funded using thefollowed by “Annual renewable energy generation.” It can bedisclosure is required until all the proceeds from the bonds

as the Green Bond Principles and the lapse of a sufficient

proceeds of ESG bonds held as of March 31, 2023 (1,324

said that one of the reasons why the most common impact

have been allocated.

period of time (at least 18 months) since issuance.

bonds) reveals that these can be summarized in terms of

metrics being environmental related is due to the fact thatseven impact metrics (Figure 3, page 81). “Annual GHG

61.5% of the ESG bonds held by GPIF are green bonds.

(Number of Bonds)

Can be estimated 269(6) Asia*(7) Global (other)

Figure 1. Disclosure of Impact Results and Details Thereof
At least one disclosure regarding
impact results against stated goals
691

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities | Measuring the Impact of Projects Funded Using ESG Bonds in GPIF’s Portfolio

Here, we present the approach used to measure the impact ofChapter 2
Measuring the Effectsof ESG Activities

Contribution of ESG bond-funded projects to
reducing GHG emissions over the latest year1

Chapter 1
GPIF’s ESG Initiatives

Measuring the Impact of Projects Funded
Using ESG Bonds in GPIF’s Portfolio

Approach to Measuring the Impact of ESG Bonds(Note) *Countries such as India and Iran are included in “Asia,” while countries such as Australia and South Korea are included in “APAC (excluding Japan).”(Source) Reproduced by permission of ICE.

emissions reduced/avoided” is the most common goal,

Cannot be estimated 364

No disclosure regarding impact results 633
At least 18 months since issuance
Consistent with Green Bond
Principles (ICMA), etc.
165

Less than 18 months
since issuance
339
0%

10%

20%

30%

40%

50%

60%

70%

Not consistent with any Others
standards or guidelines 21
108
80%

90%

100%

(Note) “Others” includes bonds consistent with the Climate Bonds Taxonomy, the EU Green Bond Standard, the LMA Green Loan Principles , or equivalent standards.
(Source) Prepared by GPIF based on data from ICE.

1 Compiled from the latest impact report or equivalent issuer disclosure. Of the 691 bonds for which information was disclosed, 2022 results were used for 41.7%, 2021 results were used
for 45.3%, and results disclosed through reports and other information published up to 2020 were used for the remainder.

79

GPIF ESG REPORT 2022

2 This is equal to the 1,456 bond issues that meet the criteria for ESG bonds established by ICE’s Impact Bond Classification Service, minus 132 bonds that are sustainability-linked bonds.
It is not the same as the number of bonds that are consistent with ICMA’s principles, etc. shown on pages 29 to 30.
3 The principles and guidelines published by the ICMA and the EU Green Bond Standard require annual disclosure. In this report, we have conservatively categorized the period fromissuance to disclosure into “less than 18 months” and “18 months and over.”4 For details, please refer to “4. Impact Bond Data” in “Impact Bond Indicator ~Analysis of GPIF Portfolio~.”

GPIF ESG REPORT 2022

80

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities

impact metrics, weighted by the value of GPIF’s investment.

assumptions. For example, it is estimated that the equivalentHere, we present separate figures for the impact resultsof ¥100 billion would be needed for the avoided emissions

generated in the latest year and the projected (cumulative)

over the past year (results + estimates) of 8,291,327 tCO2e

impact results if the bond is held to maturity.6 These impact

when using carbon credits7 (Figure 5).

6436Annual Renewable Energy Generation

30

Annual Energy Savings27
9
6

Number of People Benefited6

scale of the impact shown on the previous page, we have

86% of all completely unemployed persons in Tokyo inattempted to convert this impact into more familiar units and

FY2022 (226,000 persons) to return to work.
Recently, investors are becoming increasingly strict intheir attitude to “sham” ESG investing, as evident in the

Avoided (8,291,327 tCO2e) is equivalent to the amount of

spread of terms such as greenwashing and SDGs-washing.

carbon sequestered by a forest 18 times the size of Tokyo,

Going forward, ESG bond issuers will be required toindicating just how large the contribution is in terms ofappropriately disclose information including impact results,

reducing GHG emissions. In terms of social impact, theand it is possible that investors may also be required to

195,227 cases of Jobs Created and/or Retained translate todisclose information based on this.

Figure 6. Scale of Impact

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities | Measuring the Impact of Projects Funded Using ESG Bonds in GPIF’s Portfolio

Jobs Created and/or Retained

the creation of enough employment to enable approximately

For example, the quantity of GHG Emissions Reduced/

Annual GHG Emissions Reduced/Avoided

Number of Students Reached

To enable readers to gain a more direct understanding of the

figures (Figure 6).

Figure 3. Impact Metrics of ESG Bonds Target Projects

Capacity of Renewable Energy Plants Constructed or Rehabilitated

Scale of Impact

Chapter 2
Measuring the Effectsof ESG Activities

results can be converted to monetary values under certain

5

Chapter 1
GPIF’s ESG Initiatives

Figure 4 shows the impact results against seven stated

33

Others

0

10

20

30

40

50

60

70
（%）

(Note) The dark green bars represent environment-related goals and the yellow bars represent social -related goals.
(Source) Reproduced by permission of ICE.

Figure 4. Impact of Projects Funded Using ESG Bonds in GPIF’s Portfolio (Latest/ Cumulative)
Impact Metric
Annual GHG Emissions Reduced/Avoided
Annual Renewable Energy Generation
Annual Energy Savings
Capacity of Renewable Energy Plants Constructed or Rehabilitated
Number of Students Reached
Jobs Created and/or Retained
Number of People Benefited

Unit
tCO2e
MWh
MWh
MWh
Students
Jobs
PeopleLatest Year
Results
Results + Estimates
5,238,192
8,291,327
4,209,676
6,746,261
870,179
964,066
38,989,228
53,198,394
1,581,079
1,581,079
195,227
195,227
17,481,390
17,481,390

Cumulative
Results
29,287,757
15,330,172
3,418,613
335,220,952
8,567,689
904,525
76,944,833(Note) Because estimates only include green bonds, there is no difference between “Results” and “Results + Estimates” for the latest year in “Number of Students Reached ,”“Jobs Created and/or Retained,” and “Number of People Benefited.”(Source) Prepared by GPIF based on data from ICE.

Figure 5. Formula for Calculating Monetary Value for ‘Annual GHG Emissions Reduced/Avoided’

The total Annual GHG Emissions Reduced/Avoided (8,291,327 tCO2e) is equivalent to the amount ofcarbon sequestered by a forest 18 times the size of Tokyo per year.*

The total Annual Energy Saved (964,066MWh) is equivalent to the (annual) energy consumption** ofapproximately 230,000 Japanese households.

The total Renewable Energy Generated (6,746,261MWh) is equivalent to the (annual) energy
consumption** of approximately 1,600,000 Japanese households.

The total Capacity of Renewable Energy Plants Constructed or Rehabilitated (53,198,394MWh) is
equivalent to the (annual) energy consumption** of approximately 12,700,000 Japanese households.

The total impact of People Benefited(17,481,390 persons) is equivalent to approximately 1.2 times
the population of Tokyo.***Annual GHG Emissions Reduced/Avoided × Price of carbon credits under the EU Emissions Trading System (EU-ETS)
8,291,327 tCO2e × €87.5* (=¥13,783.26**) / tCO2e(Notes) *The price of carbon credits is as of June 30, 2023. **The EUR/JPY exchange rate is as of June 23, 2023.
(Source) Reproduced by permission of ICE.

The total impact of Students Reached (1,581,079 persons) is equivalent to approximately 9% of thetotal number of students in Japan.****The total Impact of Jobs Created and/or Retained (195,227 Jobs) is equivalent to approximately 86%
of the total unemployment rate in Tokyo in FY2022.

5 For the methodology used to aggregate impact results, please refer to “6. Methodologies” in “Impact Bond Indicator ~Analysis of GPIF Portfolio~.”
6 Maturity is taken to be the number of years to maturity for bonds maturing prior to 2044. For bonds maturing in 2044 or later (including perpetual bonds), maturity has been
capped at 2043, and the impact has been forecast based on a 20-year holding period.
7 Please refer to “9. Conclusions” in “Impact Bond Indicator ~Analysis of GPIF Portfolio~” for other conversions of impact results into monetary values.

81

GPIF ESG REPORT 2022

(Note 1) A latest year (results + estimates) is used for impact results.
(Note 2) *The area of Tokyo is equivalent to approximately 0.0058 times the area of Japan.
**The (annual) energy consumption per Japanese household is based on the Results of Survey on the Actual Conditions of Carbon Dioxide Emissions from Residential Sector in
FY2021 (Preliminary Figures) published by the Ministry of Environment.
***The population of Tokyo as of April 1, 2023.
****The number of students in Japan represents the number of students attending educational institutions under the jurisdiction of the Ministry of Education, Culture, Sports, Scienceand Technology from kindergarten to university graduate school as of May 1, 2021.
*****The number of unemployed persons in Tokyo in FY2022.
(Source) Reproduced by permission of ICE.

GPIF ESG REPORT 2022

82

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities

The composition of the TNFD framework features “Corethese two concepts is vital for the evaluation of anConcepts and Definitions,” the “Risk & Opportunity

organization’s (3) risks and (4) opportunities.

65%

We analyzed nature-related risks including biodiversity in GPIF’s

stage.4 The TNFD also recommends the consideration of thescope of assessment before commencing the LEAP
approach, as well as engagement with stakeholders. The
approach is designed as an iterative process (Figure 2).

organizations, are attracting interest from companies,

Parties (COP15) of the UN Convention on Biological Diversity

investors, and others. The TNFD has included disclosure(CBD) held in Montreal, Canada, in 2022, the participants

guidance that is in line with the TCFD recommendations,agreed to protect 30% of the world’s land, marine andand aims for close coordination with the TCFD. GPIF has notcoastal areas, and inland waters by 2030. In view of thisdeclared its endorsement of the TNFD, but we are closely

trend, there is an increasing consciousness of the need forwatching the approaches, guidelines, and associatedcompanies to consider the impact of nature-related risks

analysis methods recommended by the TNFD.
Under these circumstances, S&P Global is working withextensive investments in domestic and foreign companies, isthe United Nations Environment Programme – World

aware of the importance of deepening understanding ofConservation Monitoring Centre (UNEP-WCMC) to support

nature-related risks in the same way as for the climate-

disclosure and analysis in line with the TNFD framework by

related risks with which it is already engaged.

combining information including geographically and spatially

However, nature-related risks entail a diverse range oflinked biodiversity, nature risk data and detailed information

natural capital, including biodiversity, and factors such as

on business activities. In this section, we present an outline

Sc

ena

ri o G ui d a n

At GPIF, as a first attempt, we examined our portfolio’s

cecurrent degree of connection with the ecosystem and theextent to which it depends on, and affects, nature and(Source) Prepared by GPIF with reference to the TNFD Nature-related Risk and Opportunity
Management and Disclosure Framework Beta v0.4 overview ©TNFD 2022-2023.

biodiversity. In terms of the LEAP approach, the task ofascertaining where our investees’ assets and businessOf these components, here, we will present an overview

activities are and what ecosystems they have connectionsof “Core Concepts and Definitions” and the “Risk &with corresponds to the guiding questions for “Locate.”

Opportunity Assessment Approach (LEAP).” First of all, Core

Likewise, the guiding questions for “Evaluate” apply in terms

Concepts and Definitions include an explanation of fourof ascertaining our investees’ degree of dependence andconcepts: (1) nature-related dependencies, (2) nature-related

impact on nature in their region. In this analysis, we

impacts, (3) risks, and (4) opportunities. Of these, (1) nature-

therefore quantified the “dependencies” and “impacts”

related dependencies are defined as “aspects of ecosystemdescribed above based on the two stages of “Locate” andservices that an organisation or other actor relies on to“Evaluate” in the LEAP approach. In the following pages, wefunction,” while (2) nature-related impacts are “changes in thefurther examine the characteristics of these dependencies

state of nature, which may result in changes to the capacity ofand impacts before disclosing the results of our analysis ofnature to provide social and economic functions.” Assessing

GPIF’s equities portfolio by ecosystem service and sector.

3

the different natural environments in the locations whereof the TNFD framework and, utilizing the analytical support

each company conducts its business activities often make itof S&P Global, we disclose the results of a trial analysis ofdifficult to accurately ascertain the associated risks and

GPIF’s equities portfolio based on the methods

opportunities. At present, the activities of the Taskforce onrecommended by the TNFD. This analysis is based on the

L1

Business footprint

Nature-related Financial Disclosure (TNFD), which is working

information published up to the TNFD beta framework Beta

L2

Nature interface

towards the development and provision of a framework for

v0.4, as of the time of writing.

L3

Prioritization

L4

Sector identification

Figure 2. Overview of the LEAP Approach
Locate your interface with nature

Evaluate your dependencies and impacts

Assess your risks and opportunities

Prepare to respond to nature-related risks
and opportunities and reportof environmental assets A1 Risk and opportunity identification P1
E1 Identificationand ecosystem services
of dependencies and A2 Existing risks mitigation and risk and P2
E2 Identification impacts
opportunity management
Additionalrisk mitigation and risk and P3
E3
Dependency analysis
A3
opportunity management
Risk and opportunity materiality
E4
Impact analysis
A4
P4
assessment: Items referred to in our trial analysis
1 Calculated by dividing the number of companies with a dependency score of 0.6 or greater by the total number of investee companies for domestic equities and foreign equities.
S&P Global classifies a dependency score of 0.6 or above as a high dependence on nature, with reference to the materiality evaluation framework in the ENCORE (Exploring
Natural Capital Opportunities, Risks, and Exposure) knowledge base (Natural Capital Finance Alliance 2022), under which a score of 0.6 or above indicates high or very highdependence. For details, please refer to pages 11 and 18 of “Nature & Biodiversity Risk Portfolio Assessment,” a report on S&P Global’s analysis for the preparation of this report.
2 Cited as a global risk for the next decade in the World Economic Forum Global Risks Perception Survey (WEF, 2023).

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities | Nature-Related Risks including Biodiversity and TNFD Trial Analysis

Core Concepts
and Definitions

global issues for companies.2 At the 15th Conference of

GPIF ESG REPORT 2022

report.” Several guiding questions are indicated at each

Risk & Opportunity
Assessment Approach(LEAP)Nature-Related Risks including Biodiversity

83

respond to nature-related risks and opportunities andMetrics & Targ
ets
ta,
a
D
Recommended
Disclosures

are on nature but also their impact on nature.

nature-related risk management and disclosure by

your interface with nature; Evaluate your dependencies andimpacts; Assess your risks and opportunities; and Prepare to

al GuidanceditionAd

time, we not only considered how dependent our investee companies

when making financial and business decisions. GPIF, with its

The LEAP approach is composed of four stages: “Locate

Figure 1. Main Components of the TNFD Framework

portfolio, with reference to the TNFD framework. In our analysis thisNature-related risks including biodiversity are recognized as

We will now present an overview of the LEAP approach.

Chapter 2
Measuring the Effectsof ESG Activities

Assessment Approach (LEAP),” and “Recommended
Disclosures” (Figure 1).

Proportion of companies that arehighly dependent on nature1

Chapter 1
GPIF’s ESG Initiatives

Nature-Related Risks including
Biodiversity and TNFD Trial Analysis

Overview of the TNFD Framework

Strategy and resource allocation
Performance management
ReportingPresentation
Review and repeat(Source) Prepared by GPIF with reference to the TNFD Nature-related Risk and Opportunity Management and Disclosure Framework Beta v0.4 overview ©TNFD 2022-2023.
3 From the TNFD Nature-Related Risk and Opportunity Management and Disclosure Framework Beta v0.2 Annex 1.
4 These include guiding questions recommended at each stage, for example, L2 “Which biomes and ecosystems do these activities interface with?” and E3 “What is the size andscale of our dependencies on nature in each priority location?”

GPIF ESG REPORT 2022

84

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities

Figure 4 shows the dependency score results for eachindicate relatively high dependency scores for “Mass“Bio-remediation” refers to the degrading or detoxification ofstabilisation and erosion control,” “Flood and storm

contaminants by micro-organisms, plants, etc., “Filtration”

protection,” “Bio-remediation,” “Filtration,” and “Mediation ofrefers to the filtration of contaminants by various plants andsensory impacts” for both domestic and foreign equities.

animals, and “Mediation of sensory impacts” refers to the“Mass stabilisation and erosion control” refers to the control ofcontrol of noise and light pollution by vegetation.

organization or other actor on ecosystem services as

relevance of the ecosystem services at the business location.

“dependencies.” Dependencies are said to include

The (2) resilience score evaluates the level of disturbance anecosystems' ability to regulate hazards, provide a suitableecosystem can undergo while continuing to maintain its flow

habitat for pollinators, and sequester carbon. We consider thatof ecosystem services. For example, if the relevant ecosysteman understanding of nature-related dependencies and theirservices are important to a business’ production processes

extent is useful from the perspective of evaluating risks to athen the degree of reliance will be high, but if the resilience ofcompany’s business activities from changes in the state of

the ecosystem — its ability to continuously provide ecosystem(Score)0.6

biodiversity and the natural environment. Under the LEAP

services — is high, then this dependency risk is considered to

0.5

approach, it is recommended that analysts first “Locate” andbe reduced. A dependency score of 0 indicates no0.4“Evaluate” dependencies and impacts before proceeding todependency risk, while a score of 1 indicates very high“Assess” risks and opportunities.

dependency risk. For details of the calculation method and

17
18
19
20
21

Pollination
Soil quality
Ventilation
Water flow maintenance
Water quality

GPIF ESG REPORT 2022

(Source) GPIF, S&P Global Sustainable1 (2023). Data as of 31st March 2023.

Next, in Figure 5, we present the distribution of

Natural Capital Opportunities, Risks, and Exposure), underwhich a score of 0.6 or above indicates high or very highthe dependency scores, from 0 to 1, into five levels, anddependence. Approximately 65% of the companies in GPIF’s

Employment of domestic and commercial animals such as oxen, horses, etc.
Fibres and other materials from plants, etc., directly used or processed
Deoxyribonucleic acid (DNA) and all biota including plants, etc.
Water stored underground in aquifers and originating from rainfall, natural freshwater resources, etc.
Freshwater resources from collected precipitation and water flow from natural sources

aggregated the number of companies at each level as aequities portfolios have scores in this range (Figure 5).

proportion of the total number of investee companies in our

Scores closer to 1 indicate greater nature-related

domestic and foreign equities portfolios. The results indicate

dependencies. Therefore, these results show that many

that, for both domestic and foreign equities, the largest

companies, both domestic and foreign, are highly dependent

A natural process whereby living organisms such as micro-organisms, plants, etc. degrade, reduce,
and/or detoxify contaminants
Buffering and attenuation of mass flows allows the transport and storage of sediment by rivers, seas, etc.
Global and regional climate regulation provided through soils, oceans, vegetation, etc.
Dilution of gases, fluids, etc. produced by human activity through water and atmosphere
Important roles in the regulation of diseases for animals, plants, and humans
Filtering, sequestering, etc. of pollutants by animals, plants, etc.
Flood and storm buffering, attenuating, and similar effects of vegetation
Maintain habitats that make a significantly high contribution to the reproduction of individuals from aparticular species
Mass stabilisation and protection from erosion in terrestrial, coastal, and other ecosystems provided
by vegetation cover
Vegetation limiting the impact of noise and light pollution on human health and the environment
Pest control and invasive alien species management provided through the manufacture of natural
biocides, predators, etc.
Pollination services provided mainly by animals, water and wind
Weathering processes and decomposition and fixing processes that contribute to soil quality
Ventilation, vital for good indoor air quality, provided by natural or planted vegetation
The system that enables circulation of water through the Earth’s atmosphere, land, and oceans
Favourable living conditions etc . for biota that contribute to the water quality of freshwaters and salt waters

number of companies had scores in the range from 0.6 toon nature and biodiversity. Perhaps we might perceive from

0.8. S&P Global classifies a dependency score of 0.6 or above

this that our daily business activities around the world, andas a high dependence on nature, with reference to thebeyond them, our very lives, are only made possible thanks tomateriality evaluation framework in the ENCORE (Exploring

the many benefits we receive from nature and biodiversity.

(Source) Summarized by GPIF from S&P Global Sustainable1; S&P Global Market Intelligence. Natural Capital Finance Alliance (Global Canopy, UNEP FI, and UNEP-WCMC) (2022)
ENCORE: Exploring Natural Capital Opportunities, Risks and Exposure. [On-line], Cambridge, UK: the Natural Capital Finance Alliance. Available at: https://encore.naturalcapital.
finance. DOI: https://doi.org/10.34892/dz3x-y059.

85

Maintain nursery habitats

Pest control

Foreign Equities

Buffering andattenuation of mass flows

16

Pollination

Mediation of sensory impacts

Animal-based energy

15

Disease control

Mass stabilisation and erosion control

Pest control

14

Soil quality

Maintain nursery habitats

Fibres andother materials

13

Ventilation

Buffering and attenuation of mass flows
Climate regulation
Dilution by atmosphere and ecosystems
Disease control
Filtration
Flood and storm protection

Genetic materials

7
8
9
10
11
12

Dilution by atmosphereand ecosystems

Bio-remediation

Water quality

6

Domestic Equities

dependency scores in GPIF’s equities portfolios. We have split

Figure 3. The 21 Ecosystem Services
Provisioning services
1
Animal-based energy
2
Fibres and other materials
3
Genetic materials
4
Ground water
5
Surface water
Regulatory & maintenance services

Surface water3). The (1) reliance score is calculated from the degree of

Ground wateror business activity on 21 different ecosystem services (Figure

Water flow maintenanceresilience score — to evaluate the dependency of each asset

Climate regulation

preparation of this report.

Mediation of
sensory impacts

are composed of two scores — a (1) reliance score and a (2)Filtration

Assessment,” a report on S&P Global’s analysis for the0

Bio-remediation

dependency of GPIF’s equities portfolio. Dependency scores

0.1
Flood and storm protection

to pages 17 and 18 of “Nature & Biodiversity Risk Portfolio

0.2

Mass stabilisation anderosion control

S&P Global to analyze the degree of nature-related

0.3

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities | Nature-Related Risks including Biodiversity and TNFD Trial Analysis

other information concerning dependency scores, please refer

Figure 4. Nature-Related Dependency Scores of GPIF’s Equities Portfolios by Ecosystem Service

Chapter 2
Measuring the Effectsof ESG Activities

protection” refers to the attenuating effect of vegetation,materiality of reliance on ecosystem services and theThis time, we used the dependency scores provided bytopographical erosion by vegetation, “Flood and storm

ecosystem service in GPIF’s equities portfolios. The results

As described above, TNFD refers to the reliance of an

Chapter 1
GPIF’s ESG Initiatives

Nature-Related Dependencies in GPIF’s Portfolio

Figure 5. Distribution of Dependency Scores in GPIF’s Equities Portfolios
All
Equities

6%

4%

17%

64%

9%
1%

Foreign
Equities 3% 3%

16%

67%

11%
0%

Domestic
Equities
0%

10%

4%

20%
20%
■0-0.259%
40%■0.2-0.4 ■0.4-0.6■0.6-0.8

60%■0.8-1

5%
80%

1%

100%

■Others(Note) “Others” contains stocks for which no score was available at the time of the analysis, etc.
(Source) GPIF, S&P Global Sustainable1 (2023). Data as of 31st March 2023

GPIF ESG REPORT 2022

86

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities

Figure 6. Nature-Related Impact of Domestic Equities and Foreign Equities(Hectares or hectares equivalent)

region is important in terms of the continued provision ofstate of nature, which may result in changes to the capacity

ecosystem services. The largest score is used to calculate

160,000of nature to provide social and economic functions. Thesethe “ecosystem footprint.” A score closer to 1 indicates

140,000

changes may be positive or negative, and their impact may

greater materiality. For details of the calculation method and120,000

be direct, indirect or cumulative. In this context, it isother information concerning the ecosystem footprint, please

100,000

important to begin by understanding the characteristics ofrefer to pages 7, 8, 15, and 16 of “Nature & Biodiversity

80,000the area of the company’s business activities in terms of

Risk Portfolio Assessment,” a report on S&P Global’snature and ecosystems. Here, we attempt a trial analysis ofanalysis for the preparation of this report.
estimated to be equivalent to 21,836ha (approximately

in their areas of business activities.

218km2), or just under 10% of the land use footprint. We

The ecosystem footprint measures the direct impact ofAdjustment for condition
Ecosystem SignificanceSpecies Significance Ecosystem Contribution
Domestic Equities
0.02
0.13
Foreign Equities
0.03
0.22
Asset Class

95,16988,728Adjustment for significance41,57840,00012,53020,0009,306

0Land Use Footprint

Ecosystem Integrity Footprint

Ecosystem Footprint

expect to see an expansion of the scope of this methodology
Domestic Equities

and a refinement of the evaluation method in the future.5

the equivalent area. It is calculated as follows, as shown

However, even in our analysis at present, it is possible thatgraphically in Figure 6. First, we measure the “land use

the areas of corporate activities for both domestic andfootprint” in hectares. This is the total area of land aforeign equities may contain important regions in terms ofcompany uses, apportioned based on the percentage

natural and biodiversity integrity.

Foreign Equities(Note) The scores for the ecosystem integrity and ecosystem significance are evaluated on a scale between 0 and 1, based on the weighted average for each asset.
(Source) S&P Global Sustainable1 (2023). Data as of 31st March 2023.

Figure 7. Nature-Related Impact of Domestic Equities by Sector（％）(Hectares or hectares equivalent)
70,00016

In GPIF’s equities portfolios, the land use footprint,

60,00014

footprint” by adjusting the “land use footprint” using scores

ecosystem integrity footprint, and ecosystem footprint of

50,00012

based on the state of the natural environment anddomestic equities all exceed those of foreign equities. Next,

ecosystems on that land. Three scores are used for thiswe examined the land use footprint and other aspects of the

20,000equities portfolios for each sector. The results show that, for

10,0002

00

investment. Next, we calculate the “ecosystem integrity

adjustment: “Structure,” which indicates the degree offootprint to the land use footprint was relatively high in thecloser to 1 indicates that greater degradation has occurred

utilities sector for domestic equities and the real estatecompared to the pristine state.

sector for foreign equities. These results show that, despite

Healthcare

used to calculate the “ecosystem integrity footprint.” A score

Ecosystem Footprint

Communications
Services

financials sectors (Figure 8). The ratio of the ecosystem

Ecosystem Integrity Footprint

Real Estateeach evaluated on a scale of 0 to 1, and the largest score isLand Use Footprint

Information
Technology

relatively large in the utilities, real estate, materials, andFinancials

change in the natural environment. These three scores are

Consumer
Staplessectors (Figure 7). For foreign equities, all the values were

Energy“Function,” which mainly indicates the degree of qualitative

4

Materials

industrials, consumer discretionary, utilities, and materials

6

Utilities

which indicates the degree of change in biodiversity, and

830,000Consumer
Discretionary

domestic equities, the values were relatively large in the10

40,000Industrials

physical change in the natural environment, “Composition,”

Ratio of Ecosystem Footprint to Land Use Footprint (Right Axis)(Source) GPIF, S&P Global Sustainable1 (2023). Data as of 31st March 2023.

Figure 8. Nature-Related Impact of Foreign Equities by Sector（％）(Hectares or hectares equivalent)

4

5,000

2

0

0

on the impact on endangered species in specific areas and“ecosystem contribution,” which evaluates whether the
5 For example, at present, the ecosystems considered do not include freshwater ecosystems or marine ecosystems, and no assessment is made of the capacity of individual
ecosystems to provide different ecosystem services. There has been an explanation regarding this situation and future developments. For details, please refer to page 19 of“Nature & Biodiversity Risk Portfolio Assessment,” a report on S&P Global’s analysis for the preparation of this report.

Land Use Footprint

Ecosystem Integrity Footprint

Ecosystem Footprint

Healthcare

evaluated on a scale of 0 to 1: “species materiality,” based

Communications
Services

6

10,000Information
Technology

based on materiality. There are two scores used here,

Consumer
Staples8

15,000Consumer
Discretionary

10

20,000Industrials

display quite different tendencies.

tempering the “ecosystem integrity footprint” using scores

Energy12

25,000Financials

some common sectors between the two asset groups, they

Materials

14

30,000Real Estate

16

35,000Utilities

40,000Lastly, we calculate the “ecosystem footprint” byChapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities | Nature-Related Risks including Biodiversity and TNFD Trial Analysis

corporate activity on nature and biodiversity, converted into

Domestic Equities
Foreign Equities

142,92160,000The ecosystem footprint of the equities held by GPIF is

which it is necessary to consider their nature-related impact

Ecosystem Integrity
Structure
Composition
Function
0.64
0.31
0.18
0.44
0.20
0.10

Asset Class

Chapter 2
Measuring the Effectsof ESG Activities

Nature-related impacts are defined as changes in thecompanies’ ecosystem footprint to ascertain the degree toChapter 1
GPIF’s ESG Initiatives

Nature-Related Impacts of GPIF’s Portfolio

Ratio of Ecosystem Footprint to Land Use Footprint (Right Axis)(Source) GPIF, S&P Global Sustainable1 (2023). Data as of 31st March 2023.

87

GPIF ESG REPORT 2022

GPIF ESG REPORT 2022

88

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities

Key Biodiversity Areas and Protected Areas

Issues Identified by This Year’s Report and Initiatives for Next Fiscal Year

Protected Areas from the perspective of sustaining andestimation of the degree to which the activity areas ofprotecting biodiversity. A Key Biodiversity Area is an area

companies in GPIF’s equities portfolios overlap with Key

that contributes “significantly to the global persistence ofBiodiversity Areas or Protected Areas (Figures 9 and 10). We

biodiversity in terrestrial, inland water and marine

estimate that the overlap with Key Biodiversity Areas is

From this sixth issuance of ESG Report, we have decided not

significant questions concerning how investors managing

environments.”6 A Protected Area is a “clearly defined

approximately 12,500ha and the overlap with Protected

to compile the “Analysis of Climate Change-Related Risks

portfolios should measure and monitor these risks.

geographical space, recognised, dedicated and managed,

Areas is approximately 21,200ha. For both types of areas,

and Opportunities in the GPIF Portfolio” a supplementarythrough legal or other effective means, to achieve thethe overlaps were relatively large with the utilities andguide to the ESG Report (the “Supplementary Guide”). With

funded using the proceeds of the ESG bonds in GPIF

long-term conservation of nature with associated ecosystem

industrials sectors.

regards to the detailed analysis previously presented in theportfolio, we implemented relatively sound and reliable

Supplementary Guide, we have incorporated it into the bodymethods of analysis, collecting information on the status ofof this report, as detailed as possible, and, also haveprojects funded using ESG bonds and their environmental

disclosed the final reports of the companies to which we

impact primarily from impact reports published by the bondcommissioned the TCFD related analysis simultaneously

issuers, and estimating in cases where information was notwith the publication of this report. In the past years, we had

disclosed. We hope to further deepen our analysis with

Figure 9. Business Locations that Overlap with Key Biodiversity Areas

published the Supplementary Guide approximately one

regard to issues such as the monetary value of impact, as(Hectares)
14,000month after publishing the ESG Report, so that readers may

well as the relationship of ESG bond disclosures and impact

12,000have found it difficult to seek information such as the details

with the greenium.1 Our analysis in this report revealed that,

10,000of the analyses presented in the ESG Report or our analyticaleven among ESG bonds that are consistent with the ICMA

methodology. We suppose this change in approach should

Green Bond Principles and similar standards, there is a

4,000

help the situation. We will continue to endeavor to provide

substantial number for which no disclosure has been made2,000

clear, accessible and user-friendly disclosures.

regarding impact. We hope to focus on this as one theme of

In this way, we are becoming able to gain a quantitative

areas may be required to shoulder additional costs orunderstanding of the possibility that corporate activities

explanations, in some cases, from the perspective of

involve areas that are important to ecosystems.

sustaining and protecting biodiversity.

8,000
6,000

Healthcare

Communications
Services

Consumer Staples

Information
Technology

Consumer
Discretionary

Financials

EnergyReal Estate

Materials

Industrials

Utilities

Total

0

We have three main purposes in preparing the ESG
Report: (1) to report our ESG-related initiatives to pension

Meanwhile, when measuring the impact of projects

engagement by our external asset managers.
Regarding purpose (3), to implement the PDCA cycle, we

beneficiaries and our other stakeholders, (2) to provide awill proceed to undertake “Measuring the Effects ofreference regarding ESG-related initiatives for our asset

Stewardship Activities and ESG Investment Project” in earnest

managers and investee companies, and (3) to implement thethrough FY2024. Under this project, we intend to do more

Figure 10. Business Locations that Overlap with Protected Areas

PDCA cycle. While purpose (1) is similar to the aim ofthan simply verify the effectiveness of stewardship activities(Hectares)
25,000disclosures by corporations and asset managers, purposesand ESG investment in general. We will analyze whether the(2) and (3) may be unique to GPIF.

stewardship activities and ESG investment carried out by GPIF

Domestic Equities

Foreign Equities(Source) GPIF, S&P Global Sustainable1 (2023). Data as of 31st March 2023.

20,000We have consistently striven at the frontiers of purpose

15,00010,0005,000
Consumer Staples

Healthcare(Source) GPIF, S&P Global Sustainable1 (2023). Data as of 31st March 2023.

Communications
Services

Foreign Equities

Real Estate

Information
Technology

Domestic Equities

Consumer
Discretionary

Financials

EnergyMaterials

Industrials

Utilities

Total

0

Chapter 3 Evaluation and Analysis of Climate Change Risks and Opportunities | Editor's Note

For this analysis, we present the results of our

Chapter 2
Measuring the Effectsof ESG Activities

Some areas are designated Key Biodiversity Areas orservices and cultural values.”7 Companies located in these

Chapter 1
GPIF’s ESG Initiatives

Editor’s Noteso far have actually produced the intended effects. Our(2), aiming to provide a reference regarding ESG-related

stewardship activities and ESG investment so far have been

initiatives for our asset managers and investee companies,

aimed at improving the sustainability of markets, in particular,

perhaps at the risk of overreaching ourselves. For this year’s

and we will focus on measuring the effects from thisESG Report, we engaged in a trial analysis of the risks

perspective. We hope to report on the progress of this project

associated with biodiversity and natural capital in anticipationin next year’s ESG Report.

of the TNFD’s final recommendations, which are scheduled forrelease in September 2023. These risks entail a high degreeof regionality and individuality, and we feel that there remain

SHIOMURA Kenji
Editor-in-Chief of ESG Report(Managing Director of ESG & Stewardship Department)

6 International Union for Conservation of Nature (IUCN) “A Global Standard for the Identification of Key Biodiversity Areas.”
7 IUCN “Dudley, N. (2008) Guidelines for Applying Protected Area Management Categories.”
1 A portmanteau of “green” and “premium,” the “greenium” refers to the phenomenon in which green bonds are valued more highly (with lower yields) than other bonds issued with the same terms.

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GPIF ESG REPORT 2022

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GPIF’s Disclaimer
This report is intended to provide information regarding GPIF’s ESG-related initiatives and ESG-related evaluation and analysis. The content of the report is
up-to-date at the time of writing, and GPIF provides no guarantee of its accuracy and completeness. It may be amended or changed at any time without
prior notice. GPIF and third parties reserve all rights concerning the content of the report. Please consult with the Planning and Communication
Department (TEL: +81-3-3502-2486) before reproducing or copying (not including quotations) this ESG Report for commercial purposes.

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Our overarching goal is to contribute to the stability of the national pension system by
securing the investment returns that it requires with minimal risk and from a long-term
perspective, to the sole benefit of pension recipients.

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Our primary investment strategy is diversification by asset class, region, and timeframe.
While market prices may fluctuate in the short term, GPIF will take full advantage of ourlong-term investment horizon to achieve investment returns in a more stable and efficientmanner, while simultaneously ensuring sufficient liquidity to pay pension benefits.

its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication.
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The information provided by ICE and included in this report is for informational purposes only and does not constitute any representation or warranty; it isbased on data provided by third parties, compiled from public sources, or is estimated. All forecasts or values included in the report are estimates and are3

and investment manager level. We utilize both passive and active management in orderto achieve benchmark returns (i.e., average market returns) and seek untapped profitable
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provided as is. Nothing in the information provided herein constitutes investment, legal, or any advice, or that a strategy is suitable for any particular
circumstances. ICE expressly disclaim any and all express or implied warranties or any liability in relation to this report, does not guarantee that it is accurate orcomplete, and shall have no liability for any errors or omissions in connection with any data or information in this report, or any liability for any direct, indirect,
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We believe that sustainable growth of investee companies and the capital market as a whole

https://www.theice.com/terms-of-use.

MSCI
Although GPIF’s information providers, including without limitation, MSCI ESG Research LLC and its affiliates (the “ESG Parties”), obtain information from4

sources they consider reliable, none of the ESG Parties warrants or guarantees the originality, accuracy and/or completeness, of any data herein and expressly

are vital in enhancing long-term investment returns. In order to secure such returns forpension beneficiaries, therefore, we promote the incorporation of non-financial
environmental, social, and governance (ESG) factors into the investment process in addition
to financial factors.

disclaim all express or implied warranties, including those of merchantability and fitness for a particular purpose. None of the Information is intended toconstitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such, norshould it be taken as an indication or guarantee of any future performance, analysis, forecast or prediction. None of the ESG Parties shall have any liability forany errors or omissions in connection with any data or Information herein, or any liability for any direct, indirect, special, punitive, consequential or any otherdamages (including lost profits) even if notified of the possibility of such damages.

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GPIF ESG REPORT 2022

5

In order to enhance long-term investment returns and fulfill our stewardship
responsibilities, we shall advance various initiatives (including the consideration of
ESG factors) that promote long-termism and the sustainable growth of investee
companies and the capital market as a whole.