March 11, 2022

“Critical ESG issues” listed by GPIF’s asset managers
In its Stewardship Principles, GPIF stipulates that asset managers should consider ESG factors
and that they should proactively engage with investee companies on critical ESG issues. Accordingly,
the following issues were identified as material ESG issues among asset managers. While a varietyof ESG issues were identified, the table below represents the issues pointed out by all assetmanagers, whereas the table in the page 3 and 4 shows the issues pointed out by more than 50% ofasset managers.

＜Critical ESG issues listed by all domestic equity managers＞

Y 2021

PassiveActive

Climate Change, Misconduct, Disclosure,Board Structure & Self-evaluation, Minority

Supply Chain, Diversity, Corporate

Shareholder Rights, Disclosure

GovernanceY 2020

Climate Change, Misconduct, Disclosure,Board Structure & Self-evaluation, Minority

Supply Chain, Diversity

Shareholder Rights

Y 2019Climate Change, Misconduct, Disclosure

Board Structure & Self-evaluation, Minority

Y 2018

Climate Change, Misconduct, Supply Chain

Shareholder Rights
Board Structure & Self-evaluation＜Critical ESG issues listed by all foreign equity managers＞

Y 2021
Y 2020
Y 2019Y 2018Passive

ActiveClimate Change, Diversity, Disclosure,
Supply Chain
Climate Change, Diversity, Disclosure,
Supply Chain
Climate Change, Diversity, Others (social),
Disclosure
Climate Change, Diversity, Others (social),
Water Stress & Water Security

Climate Change
Climate Change
Climate Change
Climate Change＜Critical ESG issues listed by all domestic bond managers from the viewpoint of corporate bondinvestors＞
Y 2021

Disclosure

Y 2020Disclosure

＜Critical ESG issues listed by all foreign bond managers from the viewpoint of corporate bond investors＞
Not available
The underlined items in the above items are issues newly selected from all the managers this timecompared to the previous survey.
＜Domestic equities＞"Corporate Governance" was newly listed as a critical ESG issue by all passive managers this time,and specifically, those many items that are also mentioned in the Corporate Governance Code, suchas the role and effectiveness of the board of directors, succession plans and compensation structure,and explanation of voting results. In addition, all active managers chose "Disclosure" in this survey,
and all of passive and active managers, consider it to be a common and critical issue. Specifically, interms of disclosure, we found that asset managers consider not only the content of disclosure
including the preparation and enhancement of integrated reports, disclosure of GHG emissions,disclosure policies and communication with investors and disclosure in English, but also the way of
information is disclosed to be important. Except for "Disclosure," passive and active managers differ
in terms of the issues they consider critical, with active managers recognizing G (governance) issues
such as "Board structure & Self-evaluation" and "Minority Shareholder Rights" as more critical ESG
issues, and passive managers recognizing a wide range of long-term issues including E(environmental) and S (social) issues such as "Climate Change," "Diversity," "Supply Chain"), and"Misconduct," as more critical.
＜Foreign equities＞
The issues selected by all foreign equity managers, both passive and active, remained unchanged
from the previous survey. "Climate change," "Diversity," "Supply Chain," and "Disclosure" whichwere identified as critical ESG issues by all passive managers, were also identified by passive
domestic equity managers. In particular, "Supply Chain" has been recognized as a critical issue byboth domestic and foreign passive managers for the second consecutive year, on the back of the
COVID-19 pandemic.
＜Domestic bonds＞
GPIF also asked external asset managers entrusted with bond investment about critical ESG
issues considered from the viewpoint of corporate bond investors from Year of 2020. All domestic
bond managers identified "Disclosure" as a critical issue for the second consecutive year. As shown
above, all domestic equity managers also identified "Disclosure" as a critical issue, indicating thatregardless of the asset class, any managers consider it to be a critical issue for Japanese firms.

The issues pointed out as “critical ESG issues” by more than 50% of external asset managers* ofeach asset under management are listed below.
2

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＜Passive managers of domestic equities＞＜Active managers of domestic equities＞

Climate Change100%

Board Structure & Self-evaluation

100%

Corporate Governance

100%

Minority Shareholder Rights

100%

Disclosure

100%

Disclosure

100%

Supply Chain100%

Supply Chain

88%

Diversity

100%

Climate Change

88%

Misconduct

100%

Capital Efficiency

88%

Board Structure & Self-evaluation

83%

Diversity

75%

Minority Shareholder Rights

83%

Misconduct

75%

Capital Efficiency

83%

Human Rights & Community

75%

Human Rights & Community

83%

Waste Management

75%

Biodiversity

83%

Corporate Governance

63%

Waste Management

67%

Environmental Opportunities

63%

Environmental Opportunities

67%

Others-Governance

63%

Others-Social

67%Pollution & Resources

63%

Health & Safety

67%

Labor Standards

63%

Water Stress & Water Security

67%

Product Liability

67%

Deforestation

67%

Anti-Corruption

67%＜Passive managers of foreign equities＞＜Active managers of foreign equities＞

Climate Change

100%

Climate Change

100%

Supply Chain100%

Supply Chain

86%

Disclosure

100%

Disclosure

86%

Diversity

100%

Corporate Governance86%

Corporate Governance75%

Others-Social

86%

Others-Social

75%

Health & Safety86%

Health & Safety

75%

Board Structure & Self-evaluation

86%

Board Structure & Self-evaluation

75%

Human Rights & Community

86%

Water Stress & Water Security

75%

Social Opportunities

71%

Others-Governance75%

Diversity

57%

Others-Environment

75%

Water Stress & Water Security

57%

Deforestation

75%

Environmental Opportunities

57%

Risk Management

75%

Capital Efficiency

57%

Biodiversity

75%

Minority Shareholder Rights

57%

Labor Standards

57%

3

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＜Domestic bonds＞＜Foreign bonds＞

Disclosure

100%

Climate Change

95%

Climate Change

93%

Corporate Governance70%

Corporate Governance79%

Health & Safety

70%

Board Structure & Self-evaluation

64%

Supply Chain

65%

Supply Chain

57%

Pollution & Resources

65%

Diversity

57%

Human Rights & Community

65%

Environmental Opportunities

57%

Labor Standards

65%

Misconduct57%

Anti-Corruption

60%…

E（Environmental）…

S（Social）…

G（Governance）…

A multiple themes of ESG

Issues pointed out by all managers are shown in red.
(*) Percentage indicates the ratio of the number of managers that selected the issue. The percentage shown above
represents the ratio of the number of managers which selected the relevant issue to the number of active/passive
asset managers. If an asset manager for Japanese equities is entrusted to both active and passive mandates, it iscounted as the one with larger amount of mandate entrusted by GPIF.

The common change among domestic and foreign passive equity managers in this survey was anincrease in the number of managers that view "Biodiversity" as a critical ESG issue. This change
may be due in part to the launch of the Taskforce on Nature-related Financial Disclosures (TNFD) inJune 2021 to establish a framework for the appropriate assessment and disclosure of risks andopportunities related to natural capital and biodiversity. In addition, the percentage of "HumanRights & Local Communities" has increased for both passive and active domestic equity managers,
and along with "Supply Chain" specifically addressing human rights issues in the supply chain, suchas responding to the Modern Slavery Act and EU human rights due diligence. It can be seen thatvarious issues are intertwined with each other.

The survey to bond managers was second time. More than 50% of domestic bond managers have
newly identified “Supply Chain,” “Diversity,” “Environment Opportunities,” and “Misconduct” ascritical issues, and the range of topics has broadened. The issues selected by more than 50% of theforeign bond managers did not change significantly from last year, but the ratios for all of themincreased, indicating that more institutions are beginning to focus on them as issues.

4Copyright © 2022 Government Pension Investment Fund All rights reserved.