Stewardship Activities Report2023-2024

March 2024
GPIF
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GPIF
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GPIFX

年金積立金管理運用独立行政法人
Government Pension Investment FundTopics for FY2023
Global Asset Owners’ Forum was held 👉👉(See page 23 for details.)
After suspension of the Forum due to the COVID-19 pandemic, the Global Asset Owners’ Forum was re-held for the first time in four and ahalf years following. Global Asset Owners’ Forum members had a meeting with the Japan Business Federation (Keidanren) and its
corporate members during the “Japan Weeks,” in which the annual general meeting of PRI was held in Tokyo. At the meeting, we
exchanged views on corporate governance, sustainability issues such as climate change, and the exercise of voting rights. Apart from themeeting with Keidanren, a discussion was held among the asset owners concerning expectations for information disclosure, and theopinions of the members were summarized and published.

Measurement of the effects of stewardship activities and environmental, social, and governance(ESG) investment 👉👉(See page 44 for details.)
We implemented measurement of the effects of stewardship activities and ESG investment in collaboration with an external organization. In
March 2023, GPIF announced an open call for the quantitative analysis consulting, and selected UTokyo Economic Consulting Inc. and EYStrategy and Consulting Co., Ltd. Since FY2023, the measurement of the effects of stewardship activities was jointly conducted with UTokyo
Economic Consulting Inc. in terms of “1. (1) Verification of the effects of engagement,” and with EY Strategy and Consulting Co., Ltd., in termsof “2. (1) Study of ESG factors which contribute to the improvement of corporate value and investment returns,” respectively. The results will
be announced upon finalizing the analyses.
1. Measurement of the effects of stewardship activities(1) Verification of the effects of engagement (Research into the causation between the engagement and ESG ratings/ improvement ofcorporate value)(2) Verification of the exercise of voting rights by external asset managers (Changes in the difference between how voting rights have been
exercised for companies with which there is a potential conflict of interest and other investee companies*)
2. Measurement of the effects of ESG investment(1) Research on ESG factors that contribute to the improvement of corporate value and investment return (Research into the causation
between the ESG factors and the improvement of corporate value/investment returns)(2) Verification of the effects of passive equity investment based on ESG indices (Analysis of the impact of ESG investment on corporate
behavior*)*The specific analyses are subject to change depending on further discussions.
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Posting videos on social media platforms X (Twitter) and YouTube
Since FY2023, GPIF has posted a series titled “GPIF’s ESG and Stewardship Activities” on X (Twitter) on a weekly basis. We have also
continued posting YouTube videos on YouTube since FY2022, in which GPIF’s stewardship activities and ESG investment are introduced.
and You Tube videos are mainly aimed at those at companies which are engaged in ESG-related work or IR/engagement activities withinvestors as well as those at asset management companies.

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Status of Engagement by GPIF’s External Asset Managers (January to December 2023)
Number of companies thatheld dialogues

Not holding
dialogues:
6%

Holding
dialogues:
924 companies;40%
Not holding
daialogues:
1,388 companies;
60%

100%

TOPIX 10092%

TOPIX Mid400

52%

TOPIX 1000
Other

14%
0

20

40

Active:16%
Passive:
84%

Holding
daialogues:
94%

Ratio of dialogues implemented by company scale

TOPIX Small &Number of dialogues held
(passive and active ratios)

Ratio of companies that held dialogues(on a market capitalization basis)

60

80

100 %

Ratio of topics of ESG dialogues by industry
FOODS
ENERGY RESOURCESCONSTRUCTION & MATERIALSRAW MATERIALS & CHEMICALSPHARMACEUTICAL
AUTOMOBILES & TRANSPORTATION EQUIPMENTSTEEL & NONFERROUS METALSMACHINERY
ELECTRIC APPLIANCES & PRECISION INSTRUMENTS
IT & SERVICES, OTHERSELECTRIC POWER & GAS
TRANSPORTATION & LOGISTICSCOMMERCIAL & WHOLESALE TRADE
RETAIL TRADEBANKS
FINANCIALS (EX BANKS)REAL ESTATE

Note 1: The ratio of the number of companies with which dialogues were held was calculated with the number of domestic companies for which shares are held andmarket capitalization as of March 31, 2023, as a denominator. Regarding passive and active ratios, in a case in which both passive and active are entrusted, they arecounted by the mandate which is more entrusted by GPIF. (The company scales represent those as of March 31, 2023.) J-REIT is excluded. Industries are based on the
TOPIX-17 series.
Note 2: GPIF does not highly evaluate asset managers based solely on the number of engagements, in order to avoid an increase in perfunctory dialogues.

0
E

S

20

40

G (explanations on agenda)

60

80

100 %

G (Other than that on the left)

👉👉 See pages 28 to 30 for details.
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Characteristics of Four Engagement-enhanced Passive Managers and their Progress
Considering that GPIF invests in a wide range of listed companies by passive investment which accounts for approximately 90% of GPIF’s
equity investment, the long-term growth of the overall market is essential for the improvement of investment return. For passive investment,
we believe that efforts for engagement activities are critical to encourage investee companies to achieve a long-term increase in corporate
value and, to promote sustainable growth of entire markets in particular. Therefore, with the aims of achieving sustainable growth of the overallmarket through stewardship activities, as well as diversifying and enhancing the approach methods of stewardship activities, GPIF selectedengagement-enhanced passive investment since 2018. Following four funds have been selected so far.
See pages 32 to 39 for details, including the individual progress.

Characteristics of engagement
Asset Management One
Started in 2018.
FIL Investments
Started in 2018.
Sumitomo Mitsui Trust
Asset Management
Started in 2021.
Resona Asset Management
Started in 2021.

Engagement on 18 ESG issues is conducted by ESG analysts and the person in charge of voting rights
who have over 20 years’ experience, in collaboration with fund managers and analysts from the asset
management division. The engagement activity makes tangible investee companies’ challenges,
contributing to the improvement of their corporate value.
Aims for efficient enhancement of β by urging companies with a strong impact on indices to make reforms,
utilizing knowledge of analysts of active investments. The agenda of engagement is identified from theperspectives of creating corporate value, and the improvement of profitability and growth potential ispursued by enhancing companies’ competitiveness.
Adopts multi-engagement model in which the upper management (chairperson or president) actively
participates in engagement. The effects of engagement are maximized for the increase of corporate value
by combining a top-down approach based on ESG materiality and a bottom-up approach from the business
operation levels, along with policy engagement.
Engagement based on the analyses of integrated reports using AI. Aims to improve the corporate value ofinvestee companies by encouraging disclosure in integrated reports and setting qualitative improvement asinterim targets and triggers. At present, the scope has been expanded to the Securities Report and TCFDbased analysis.

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Chapter 1

Stewardship Activities of GPIF

1.

Introduction ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

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2.

History of GPIF’s Stewardship Activities ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

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3.

Stewardship Activities for GPIF ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

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4.

Status of Participation in Various Initiatives ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

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5.

Engagement with External Asset Managers ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

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6.

Assessment of “Stewardship Activities” by Asset Managers ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

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7.

Engagement with Index Providers・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

19

8.

Initiatives for Promoting Dialogue between Asset Managers and Investee Companies・・・・・・・・・・・・・・・・・・・・・・・・・

20

9.

Enhancing Collaboration with Relevant Organizations・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

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Chapter 2

Initiatives and Challenges of External Asset Managers

1.

GPIF’s View on the Current Status of External Asset Managers・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

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2.

Status of Engagement by Domestic External Asset Managers Entrusted with Japanese Equities (January 2023 to
December 2023) ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

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3.

Passive Investment Models Focusing on Stewardship Activities “Engagement-enhanced Passive”・・・・・・・・・・・・・

31

4.

Critical ESG Issues ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

40

Expectations & Challenges for External Asset Managers and GPIF’s Action Plans Going Forward

42

Chapter 3

Status of Exercise of Shareholders’ Voting Rights (April 2023 to June 2023)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

45

Reference: GPIF’s Principles
Investment Principles ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

48

Stewardship Principles ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

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Proxy Voting Principles ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

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Chapter 1. Stewardship Activities of GPIF

1. Introduction
GPIF signed Japan’s Stewardship Code (hereinafter, “the Japan Code”) in May 2014.
In the Japan Code, “stewardship responsibilities” refers to the responsibilities of institutional investors to enhance medium- to long-term
investment returns for their clients and beneficiaries (including the ultimate beneficiaries; the same shall apply hereafter) by improving andbuilding the investee companies’ corporate value and sustainable growth through constructive engagement, or purposeful dialogue(engagement), based on in-depth knowledge of the investee companies and their business environment, with consideration of sustainability(medium- to long-term sustainability including ESG factors) that is consistent with their investment management strategies.
In accordance with the Policy to Fulfill Stewardship Responsibilities which GPIF formulated for the signing, GPIF will endeavor to achieve
its mission to contribute to the stability of pension system management by focusing on the expansion of long-term investment returns forpension beneficiaries through various activities to fulfill the stewardship responsibilities.
The Japan Code consists of the following eight principles.
The Principles of the Code
So as to promote sustainable growth of the investee company and enhance the medium- and long-term investment return of clients and beneficiaries,
1. Institutional investors should have a clear policy on how they fulfill their stewardship responsibilities, and publicly disclose it.
2. Institutional investors should have a clear policy on how they manage conflicts of interest in fulfilling their stewardship responsibilities and publicly disclose it.
3. Institutional investors should monitor investee companies so that they can appropriately fulfill their stewardship responsibilities with an orientation towards the sustainable growth ofthe companies.
4. Institutional investors should seek to arrive at an understanding in common with investee companies and work to solve problems through constructive engagement with investee
companies.
5. Institutional investors should have a clear policy on voting and disclosure of voting activity. The policy on voting should not be comprised only of a mechanical checklist; it should bedesigned to contribute to the sustainable growth of investee companies.
6. Institutional investors in principle should report periodically on how they fulfill their stewardship responsibilities, including their voting responsibilities, to their clients andbeneficiaries.
7. To contribute positively to the sustainable growth of investee companies, institutional investors should develop skills and resources needed to appropriately engage with thecompanies and to make proper judgments in fulfilling their stewardship activities based on in-depth knowledge of the investee companies and their business environment andconsideration of sustainability consistent with their investment management strategies.
8. Service providers for institutional investors should endeavor to contribute to the enhancement of the functions of the entire investment chain by appropriately providing services for
institutional investors to fulfill their stewardship responsibilities.

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2. History of GPIF’s Stewardship Activities

2014–16
May 2014
Accepted Japan’s Stewardship
Code
Established Policy to Fulfill
Stewardship Responsibilities
March 2015
Established investment
principles.
▶ Stewardship activities inequity investment.
September 2015
Signed Principles for
Responsible Investment (PRI)▶Enhanced initiatives for ESG

2017–19
June 2017
Stewardship Principles
Proxy Voting Principles▶Requested compliance from asset
managers forequity investment
August 2017
Endorsed the revised Japan’s
Stewardship Code2023

2020–22
February 2020
Stewardship Principles
Partial revisions to Proxy Voting
Principles▶Requested compliance frommanagers of all domestic andforeign assets.

2023
Verification of theeffects of engagement

April 2020
Partial revisions to investment
principles▶Following the revisions to the Basic
October 2017
Policy of Reserves, the revised
Partial revisions to investment principles
Principle describes investments▶Stewardship activities, including
taking into consideration the
ESG-oriented initiatives, were expanded
sustainable growth of investee
to all assets.
companies and the capital market asa whole as well as ESG.
November 2019
Partial revision to Policy to Fulfill
June 2020
Stewardship
Endorsed the second revision to
Responsibilities.
Japan’s Stewardship Code.
▶Contribute to sustainable growth ofmarkets
Partial revision to Policy to Fulfill
StewardshipResponsibilities.
▶Expanded scope to target all
domestic and foreign assets▶Clarified consideration of ESG
factors

Assessment of stewardship activities for equity investment
Assessment of stewardship activities for alternative asset investment
Assessment of stewardship activities for
fixed income investment
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3. Stewardship Activities for GPIF

GPIF is a universal owner with a very large fund size and a widely diversified portfolio, as well as a cross-generational investor designed asa part of a 100-year sustainable pension scheme. Given such features, prevention of activities that impede corporates’ long-term growth aswell as sustainability of the overall capital market is essential for us. Therefore, GPIF contributes towards the sustainable growth of theoverall capital market through the following activities.
As GPIF invests in equities and exercises voting rights through its external asset managers, except for some assets, we promote
constructive dialogue (engagement) between asset managers and investee companies, taking into consideration ESG factors that
contributes to sustainable growth.
Improvement of long-term corporate value will lead to growth of the overall economy, which will eventually enhance our long-term
investment returns. GPIF shall fulfill its stewardship responsibilities by promoting engagement and building a win-win environment in theinvestment chain.

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4. Status of Participation in Various Initiatives
GPIF has participated in a variety of initiatives since it signed the Principles for Responsible Investment (PRI) in September 2015. By
participating in these initiatives, GPIF has accumulated knowledge on stewardship and ESG, which is utilized for evaluation of the stewardship
activities of its external asset managers.
Furthermore, GPIF has participated in domestic organizations which promote disclosure. Prohibited from in-house investing of equity by
the relevant regulation, GPIF invests and exercises voting rights through its external asset managers. Therefore, GPIF promotes dialogue
between its external asset managers and investee companies. GPIF believes that disclosure is important for both parties to conduct efficientdialogue. Particularly, disclosure of ESG information is likely to gain in importance as non-financial information disclosure becomes moresignificant going forward.

PRI (Principles for Responsible Investment)
Signed in September 2015

Six principles advocated in 2006 by Mr. Annan, then-Secretary General of the United Nations. PRI
demands institutional investors to include ESG in the investment process.
GPIF participated in Global Policy Reference Group, Japan Network Advisory Committee, etc.
In 2023, GPIF also participated in “PRI in Person,” attending
the asset owners’ meetings, etc.
Results of the most recent assessments are as follows:
Policy Governance and Strategy
Indirect - Listed equity – Passive
Indirect - Listed equity - Active
Indirect - Fixed income - Passive
Indirect - Fixed income - Active
Indirect - Infrastructure
Confidence building measures

★★★★
★★★★
★★★★
★★★★
★★★★
★★★★
★★★★

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30% Club and Thirty Percent Coalition
Joined the 30% Club in the UK, and the Thirty Percent Coalition of the UnitedStates in November 2016.
Joined the 30% Club in Japan in December 2019.
Both organizations were established to seek gender diversity in boards of directors, with the aim ofachieving 30% female directors.
GPIF attended the annual general meeting of the Thirty Percent Coalition held in November 2023.

Climate Action 100+
Joined in October 2018

This investor-led initiative was established in September 2017. Via constructive dialogue with companies
that are significantly influential in formulating possible solutions to global environmental issues, it focuseson the improvement of climate change-related governance, initiatives for the reduction of greenhouse gas
emissions, the enhancement of information disclosure, and more.
As an asset owner, GPIF has also joined the Asia Advisory Group, which provides the Climate Action 100+steering committee with advice on the characteristics of the Asian region. Also, GPIF attended a meeting of
Climate Action 100+ member investors that was held in September 2023.

TCFD (Task Force Climate-related Financial Disclosures)Supported in December 2018

TCFD was established by the Financial Stability Board (FSB) at the request of the G20 Finance Ministers
and Central Bank Governors Meeting. In June 2017, the TCFD published voluntary recommendations toencourage information disclosure on the financial impact of climate-related risks and opportunities toenable appropriate investment decisions by investors.
Concurrent with the release of its 2023 status report on October 12, 2023, the TCFD has fulfilled its remitand disbanded. The FSB has asked the IFRS Foundation to take over the monitoring of the progress ofcompanies’ climate-related disclosures.
GPIF has made its disclosure in line with the TCFD recommendation since 2019, publishing a TCFDbased disclosure in the “2022 ESG Report” in August 2023.

CII (Council of Institutional Investors)
Joined in August 2019

Established by a U.S. public pension fund with the aim of promoting shareholders’ rights and corporate
governance and collaborating in the United States.

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ICGN (International Corporate Governance Network)
Joined in August 2019

This industry association was established by institutional investors and others. It focuses on the
improvement of corporate governance and encouragement of stewardship activities with the aim ofpromoting efficient markets and a sustainable economy.
In 2023, GPIF attended the ICGN Member Meeting held in May, and took the podium at the ICGN-NBIM
Company & Investor Engagement Meeting jointly held by ICGN and Keidanren in October.

Domestic organizations promoting disclosure
JPX ESG Knowledge HubParticipated as a supporter in November 2020.

The ESG Knowledge Hub was established in November 2020 by JPX from the viewpoint of promoting
disclosure of ESG information by listed companies for the purpose of enabling one-stop access to content
and information which will help understand ESG investments, and making the ESG Knowledge Hub acommunity that connects listed companies, investors, and related organizations.
The purposes of the ESG Knowledge Hub are consistent with the intent of GPIF’s stewardship activities, thatis, to encourage engagement between its external asset managers and investee companies, taking into
consideration ESG factors that contribute to sustainable growth. GPIF believes that the progress of ESG
disclosure by listed Japanese companies will enhance the Japanese equity market.
GPIF agreed with the purpose of its establishment, participating as a supporter from the beginning, with aqualification for participation as an investor and related organization. (As of now, there are approximately 60
supporters, consisting of domestic and overseas investors as well as relevant organizations including
ministries and other government agencies.)

ESG Disclosure Study Group
Participated as an observer in February 2023.

The major challenge for many Japanese companies and institutional investors is how they should face thetrend of ESG disclosure that has been dramatically changing globally. The ESG Disclosure Study Groupwas established in June 2020 with the aim of providing listed companies and investors with opportunities forfree and open discussions while enriching ideas on the ideal disclosure of non-financial information tocontribute to the long-term improvement of corporate value, while paying close attention to global trends.
Its main activities include: 1) searching for an effective and efficient framework of ESG information
disclosure, 2) accumulating implementation examples (verified) related to ESG information disclosure, 3)
promoting mutual understanding among stakeholders for better decision-making, and 4) publishing white
papers on study results.
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5. Engagement with External Asset Managers

ￚ GPIF communicates with external asset managers through an engagement model that emphasizes two-way communication while
expressing our way of thinking toward stewardship responsibilities. Regarding meetings with external asset managers, GPIF has alsoestablished a system to hold meetings and conduct questionnaire surveys as necessary, such as stewardship meetings according to adhoc topics and necessary issues, in addition to the general evaluation meeting held on an annual basis.
ￚ In 2023, GPIF conducted dialogues (including evaluation meetings) mainly with asset managers entrusted with North American equity
investments selected in FY2022 and other asset managers for foreign equities. Furthermore, GPIF had more opportunities for in-person
dialogues throughout the year, such as in-person dialogues with asset managers who visited Japan to attend “PRI in Person Tokyo” in
October 2023. In addition, GPIF also attended in-person or on-line conferences and seminars hosted by asset managers and held
dialogues with asset managers abroad, resulting in increase of the opportunities for exchange of views. We will continue to increase
opportunities for dialogues, mainly with newly selected asset managers.
ￚ We hold individual meetings and briefing for asset managers when GPIF establishes new policies or makes significant policy changes, inorder to provide sufficient information such as the background, concepts, and GPIF’s awareness of issues. We focus on conducting twoway communication via exchange of views and feedback through Q&A sessions and the follow-ups.

ￚ In 2023, following the selection of new external asset managers engaging in active domestic equity investment, GPIF implemented
individual engagement for asset managers—including newly selected ones—concerning GPIF’s views and what is expected from external
asset managers, in addition to holding briefing session for asset managers.

<Briefing for external asset managers>
・Briefing for external asset managers February 2024)
Reviewing activities in FY2023, GPIF answered questions by asset managers, explained future responses and GPIF’s stewardship
activities and others, and exchanged views with them.

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<Status of PRI and TCFD approval by external asset managers>

ￚ In the Stewardship Principles, GPIF has stipulated “ESG integration into the investment process” and requires our external asset
managers to sign the PRI. In the February 2020 revision, GPIF required its external asset managers to proactively participate in various
initiatives.

ￚ GPIF has conducted a questionnaire survey and interviews with its external asset managers entrusted with equity and fixed income,asking the status of their participation in initiatives such as PRI and TCFD. The status of support for the PRI as well as the status of theirdisclosure are outlined below. Participation in TCFD is an example of initiatives, to which an increasing number of Japanese companies
have expressed their support.
● All external asset managers entrusted with equity and fixed-income investments, including those newly appointed, are signatories of
the PRI (as of December 2023).
● Slightly less than 90% of external asset managers have expressed their support for TCFD, including those who have supported TCFD
as their corporate group.
● Of the asset managers who agree with TCFD, little less than 90% have implemented the disclosure. Some asset managers are now
considering disclosure for the next fiscal year. The status of disclosure continued to vary depending on asset managers. Some issued
independent publications such as a TCFD Report or Climate Report, and others posted their disclosure as a part of their sustainability
report or similar publication. Also, some asset managers posted an announcement on their websites, or regarded the PRI reporting as
their disclosure. Many asset managers are positive toward better disclosure in various ways.
ￚ In many cases, TCFD disclosure is an engagement topic with investee companies. The knowledge and experience regarding disclosureof asset managers is likely to serve as a reference and encouragement to corporate disclosure while sharing the current status withinvestee companies.

<Critical ESG issues listed by asset managers>

ￚ In the Stewardship Principles, GPIF has stipulated “ESG integration into the investment process.” Based on this, GPIF conducts aquestionnaire survey and interviews every year concerning critical ESG issues selected by each external asset manager entrusted withequity and fixed-income investment.

ￚ The interview results were published in March 2024 as Critical ESG Issues Listed by GPIF’s Asset Managers on the following site:
https://www.gpif.go.jp/en/investment/20240419_esg_issues_en.pdf
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ￚ Please refer to page 40 for the Critical ESG Issues Listed by GPIF’s Asset Managers entrusted with equity and fixed-income
investment. Questions on fixed-income investment were asked on the assumption of corporate bonds. For government and publicbonds, GPIF received open answers if asset managers established critical ESG issues. The transition of critical ESG issues listed byasset managers for domestic equities for the past three years are also displayed on page 41.
ￚ In this survey, some asset managers were observed to have significantly changed their critical ESG issues. Based on the results, GPIF
ascertains why they highlighted such issues, to what policy their changes were attributable, and how they will engage with investee
companies regarding them.
ￚ In order to promote smooth dialogue between investee companies and investors, GPIF also asked investee companies their principle
ESG topics in the Ninth Survey of Listed Companies Regarding Institutional Investors’ Stewardship Activities conducted in January
2024.

<ESG integration>

ￚ GPIF is committed to “ESG integration into the investment process” in the Stewardship Principles. In the Stewardship Activities Report
2022, GPIF set forth its ESG integration across different investment styles under the section of “Expectations and Challenges forExternal Asset Managers.”
ￚ As a signatory to PRI, GPIF defines ESG integration in accordance with PRI’s definition as follows.

“ESG should be expressly and systematically incorporated in investment analysis andinvestment decisions.”ￚ In the Assessment of ESG Integration, GPIF has begun to include the assessment of ESG Integration as part of the Investment Processsince the comprehensive assessment (for equity and fixed-income) conducted in 2019. Matters such as ESG policy, ESG data
gathering and importance analysis, changes in impact on the corporates/sectors, and application to investment decision are assessedin the management process.

ￚ ESG-related engagement and exercise of voting rights are assessed as part of the “Stewardship Activities.”

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<Request for disclosure of the details of proxy voting records>

In the Proxy Voting Principles, GPIF asks its external asset managers to publicly disclose proxy voting records for each investee company.
All external asset managers entrusted with domestic equity investment disclosed their proxy voting records.
It should be noted, however, that the frequency and details of the disclosure vary depending on each asset manager, and GPIF willcontinue to conduct engagement for the improvement of disclosure.
Reference: Asset managers that have publicly disclosed the details of proxy voting records (GPIF’s external asset managers fordomestic equities [Source: FY 2022 Annual Report])
Asset managers entrusted with domestic equity investment

Disclosure websites for proxy voting records

Asset Management One

http://www.am-one.co.jp/company/voting/

Invesco Asset Management (Japan)

https://www.invesco.com/jp/ja/policies/proxy.html

Capital International (Capital International, Inc.)https://www.capitalgroup.com/advisor/jp/ja/proxy-voting.html

Schroders Investment Management (Japan)

https://www.schroders.com/ja-jp/jp/asset-management/about-schroders/proxy-voting/Nomura Asset Management

https://www.nomura-am.co.jp/special/esg/responsibility_investment/vote.html

FIL Investments

https://www.fidelity.co.jp/about-fidelity/policies/investment/voting

BlackRock Japan

https://www.blackrock.com/jp/individual/ja/about-us/important-information/voting

Sumitomo Mitsui DS Asset Management

https://www.smd-am.co.jp/corporate/responsible_investment/voting/report/

Sumitomo Mitsui Trust Asset Management

https://www.smtam.jp/company/policy/voting/result/

Mitsubishi UFJ Trust and Banking

https://www.tr.mufg.jp/houjin/jutaku/about_stewardship.html

Lazard Japan Asset Management

https://www.lazardassetmanagement.com/jp/ja_jp/references/sustainable-investing

Russell Investments Japan(Russell Investments Implementation Services, LLC)
Resona Asset Management

https://russellinvestments.com/jp/legal/proxyhttps://www.resona-am.co.jp/investors/giketuken.html

Note: Names in parentheses indicate subcontractors. URLs are based on information current as of March 7, 2024.
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6. Assessment of “Stewardship Activities” by Asset Managers<Assessment of stewardship activities by equity managers>

ￚ A comprehensive assessment of asset managers is conducted through qualitative assessment while taking into consideration quantitative
achievements.
ￚ Approximately 90% of GPIF’s equity investment is passively managed, and GPIF invests in a wide range of listed companies. For the
improvement of returns for GPIF, the sustainability of the entire market is crucial. Therefore, we believe that it is critical for passive
managers to implement engagement activities, which can encourage investee companies to increase their corporate value and thesustainable growth of the entire market from the long-term perspective.
ￚ In the May 2017 revision to Japan’s Stewardship Code, the importance of dialogue in passive investment is clarified, and the possibilityof collaborative engagement is also referred to as a means of dialogue. Furthermore, in the second revision of the Stewardship Codepublished in March 2020, “consideration of sustainability consistent with investment management strategies (medium- to long-termsustainability including ESG factors)” was added to the definition of stewardship responsibilities. Thus, ESG to fulfill stewardship
responsibilities has been growing increasingly important.

ￚ The second revision clarifies the expectations for Stewardship activities with consideration of ESG factors, particularly its significance inpassive investment. GPIF highly evaluates asset managers who fulfill stewardship responsibilities more effectively.
ￚ With respect to the initiatives for stewardship responsibilities, passive investments are assessed in terms of their contribution to the longterm improvement of corporate value of investee companies and the sustainable growth of the entire market, whereas active investments
are assessed in terms of their contribution to increasing shareholder value of the investee companies in the long run.
ￚ Since the introduction of the Stewardship Code in 2014, the stewardship activities of asset managers have been formally well organized.
Following the second revision of the Stewardship Code, GPIF changed the assessment system of initiatives for stewardship
responsibilities from the 2020 comprehensive assessment to a system in which more substantial activities are highly evaluated.
ￚ Specifically, in this assessment, we exchange opinions on how asset managers are working on stewardship activities, while confirming
the following points. Information obtained from external providers is also referred.
 Framework (organizations, management of conflicts of interest)
 Endorsement status of Japan’s Stewardship Code and the Principles for Responsible Investment (PRI)
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 Stewardship activities (policy, status, implementation of engagement)
 ESG activities including responses to critical ESG issues listed by asset managers
 Exercise of voting rights (topics, cases where judgments are divided among asset managers, process of judgments on
exercising shareholder proposals, and others)
 Responses to GPIF’s Stewardship Principles and Proxy Voting Principles, including disclosing the details of proxy voting
records
ￚ In cases where we acknowledge concerns about the governance of external asset managers—such as conflicts of interest—throughreports and interviews, we communicate our concerns and engage in various opportunities, aiming to alleviate such concerns.

<Assessment of stewardship activities by fixed-income managers>

ￚ The scope of assets under stewardship responsibilities was expanded to all assets in accordance with the revised UK Stewardship Codethat took effect in January 2020 (“The UK Stewardship Code 2020”). While assets subject to assessment were assumed to be Japaneselisted equities, it was explicitly stated in the Japan Code which was again revised in March 2020 that other assets are also applicable.
Accordingly, the stewardship activities of fixed-income investors have also made further progress.
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ￚ In response to the second revision to the Japan Code, GPIF expanded the scope of assets subject to the Policy to Fulfill StewardshipResponsibilities from equity to all assets, including fixed income in June 2020, and has been considering assessment methods for fixedincome asset managers. As part of such initiatives, GPIF conducted a questionnaire survey on stewardship activities by external asset
managers for fixed income in 2020. In the survey, GPIF ascertained the current measures on overall stewardship activities by external
asset managers, including the status of implementation of engagement activities, as well as their future plans and challenges.
ￚ Based on the above, stewardship activities by external asset managers for fixed income have been assessed since FY2022 in terms of
their contribution to encouraging the sustainable growth of investee companies and reducing credit risks.
ￚ At this stage, it is hard to say that evaluation methods for individual engagement concerning asset managers for fixed income have been
established. Therefore, their stewardship activities will be evaluated in the item of “organization and human resources,” by assessing thestatus of establishment of organizations and human resources for stewardship activities, including policies and systems such as
stewardship policies and the management of conflicts of interest. The same policy will apply in FY2024.
ￚ Specifically, GPIF assesses the status of organizations and human resources regarding the implementation of stewardship activities byexternal asset managers, while confirming the following points.
Framework (organizations, management of conflicts of interest)
Endorsement status of Japan’s Stewardship Code and the Principles for Responsible Investment (PRI)
Policy for Stewardship Activities
Response to GPIF’s Stewardship Principles (applicable items), etc.

<Assessment of stewardship activities by alternative managers>

ￚ Alternative assets (infrastructure, real estate, private equity) represent an asset class in which asset managers may have an impact
directly on ESG activities of investee companies. As a result, mainly global investors focusing on ESG have been increasing whenselecting investment managers. At GPIF, stewardship responsibilities and the initiatives for ESG have been critical items for evaluation
since starting the call for investment managers to apply in April 2017. Since 2023, GPIF has invested in limited partnerships, and thecritical assessment items for selection include their stewardship responsibilities and ESG activities.
ￚ After selecting investment managers, GPIF asks them to submit an ESG Report on a regular basis, based on which GPIF evaluates theirinitiatives for stewardship responsibilities in the comprehensive assessment. As the fund of funds type investment has been currently
adopted, we exchange opinions concerning how the gatekeepers and fund of funds managers implement stewardship activities.
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 Framework (organizations, management of conflicts of interest, etc.)
 Endorsement status of the Principles for Responsible Investment (PRI) Stewardship activities including ESG (policy, status, implementation of engagement, and response to ESG issues
according to the characteristics of the assets)ￚ In March 2020, as a real estate investor member, GPIF joined GRESB,* an initiative providing a benchmark for environmental, social, andgovernance (ESG) in real estate and infrastructure investments. In August 2022, GPIF joined GRESB as Japan’s first infrastructure
investor member. In the assessment of external asset managers, GPIF also confirms the status of their use of data provided by GRESB.
ￚ When choosing an investment destination, both gatekeepers and fund of funds managers confirm ESG activities of investee. Afterappointment, they conduct engagement with investees, including encouragement of the establishment of ESG policies.

*Outline of GRESB:GRESB is an initiative established in 2009 mainly by European pension funds and provides ESG benchmarks for real estateand infrastructure investments. GRESB assesses the initiatives and achievements with ESG investments by real estatecompanies, real estate funds, infrastructure business operators and infrastructure funds on an annual basis. According to themost recent annual assessment, more than 2,000 real estate companies and real estate funds, and more than 800
infrastructure business operators and infrastructure funds participated, and the amount of the subject real assets reachedapproximately 8.8 trillion U.S. dollars. More than 150 institutional investors use the assessment results to select investee
companies to conduct monitoring and engagement as investor members.

GRESB® and the related logo are trademarks owned by GRESB BV and are used with permission.

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7. Engagement with Index Providers

ￚ In passive investment, an important factor of success is benchmark selection, rather than the investment skill. However, asset owners,
including GPIF, have not exerted much effort in selecting ideal benchmarks. With that in mind, GPIF partially introduced the Index
Posting System in FY2019 with the aim of effectively gathering information on various indices in order to enhance its overall fundmanagement.

ￚ GPIF has implemented due diligence and engagement, as it has gradually acknowledged the significance of the assessment of index
providers’ organizational structure as well as governance system when selecting benchmarks, such as an ESG index. Specifically, GPIF
strictly examines the relationships between stakeholders (shareholders and major customers) and ESG rating agencies/index providers,
their decision-making processes (whether they have independent committees, what they discussed), and whether they engage in any
forms of business that are likely to fall under conflicts of interest, such as consulting services for companies. GPIF believes that index
providers should be responsible for establishing solid governance systems and implementing investor-oriented decision-making, since
their presence is gradually increasing.
ￚ Since April 2022, the Technical Committee for ESG Evaluation and Data Providers, which was established under the FSA, has
discussed the current status concerning ESG rating and data, the challenges of the relevant parties to provide and use ESG rating anddata appropriately, future prospects, and a wide scope of other items. At the 15th Expert Panel on Sustainable Finance held in
December 2022, the Code of Conduct for ESG Evaluation and Data Providers was reported and then published. The FSA urged ESG
rating agencies and data providers to accept the Code of Conduct, and called on them to announce on their own websites and informthe FSA that they accepted it if they decided to do so. In July 2023, the FSA published the first list of the ESG evaluation and data
providers that notified the FSA of their intention to endorse the Code of Conduct for ESG Evaluation and Data Providers. As of
December 2023, the number of such organizations that declared their endorsement was 21.
ￚ Furthermore, GPIF, as an asset owner, has proactively participated and provided opinions in the consultation meetings held by index
providers and ESG rating agencies when they consider changing index methodologies and ESG assessment methodologies. GPIF
encourages external asset managers to give similar attention.
ￚ GPIF has been reviewing its contract style with index providers while enhancing its commitment to indexes. We believe that thealignment with not only index providers but also passive managers would be strengthened if the index license fee is directly borne by
GPIF.
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8. Initiatives for Promoting Dialogue between Asset Managers and Investee Companies<Survey of TOPIX component companies>

ￚ GPIF conducted its first survey of JPX-Nikkei Index 400 companies in January 2016 with the aim of assessing the stewardship activities
of external asset managers and understanding the actual status of purposeful dialogue (engagement). Since the third survey in 2018, we
expanded the subjects to companies listed on the TSE’s first section in order to obtain direct feedback from a wide range of companies.
Due to changes in the TSE’s market segments, the subjects were changed to the constituents of TOPIX from the eighth survey conductedin January 2023.

ￚ The survey examined 1) evaluations concerning the stewardship activities of GPIF’s asset managers, 2) the actual status of purposeful
dialogue (engagement), 3) changes in the past year, 4) IR and ESG activities of investee companies, and 5) GPIF’s initiatives.
ￚ In the eighth survey conducted in January 2023, 735 companies responded, which accounted for 34.0% of the subject 2,162 constituentsof TOPIX.
ￚ During the past year, we have observed great progress in the number of companies endorsing the TCFD recommendations and theirprogress with disclosure., I It was also confirmed that dialogues between those companies and institutional investors has advanced
significantly.
ￚ We can see the progress of the disclosure and its utilization that is indispensable for promoting the understanding between investors andcompanies as well as for conducting efficient dialogues. As a result, we can assure the expanding of the “engagement” for the
improvement of corporate value that is the common purpose of companies and investors, in a variety of aspects.
 Expansion of the scope of persons who handle engagement: Non-executive directors and outside statutory auditors (NEDs)
 Expansion of engagement methodology: Collaborative engagement
 Expansion of engagement themes: TCFD-based disclosureￚ The result of the survey is available here: https://www.gpif.go.jp/en/investment/report_of_the_8th_survey.html

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<Excellent Integrated Reports and Most-improved Integrated Reports selected by GPIF’s asset
managers entrusted with domestic equity investment>

ￚ GPIF considers integrated reports to be important tools for constructive dialogue that improves corporate value, and believes they are
instrumental for interactive engagement between external asset managers and investee companies.
ￚ Therefore, since 2016, GPIF has asked external asset managers for domestic equities to nominate companies that have publishedexcellent integrated reports, with the aim of encouraging companies to start publishing or enhancing integrated reports, as well as
encouraging investors to utilize them. For the eighth year, GPIF requested asset managers to nominate up to 10 excellent integrated
reports and 10 most-improved integrated reports in December 2023. GPIF compiled the results and announced them in February 21,2024.
ￚ This time, we also asked external asset managers to respond to questions about their approach to selection, their perspectives and key
points in their evaluation, regarding which we had received many inquiries from companies in the past. We also asked if, as a result ofsustainability disclosure in securities reports having become more substantial, asset managers require any changes in the content of
disclosure, as well as inquiring about the expectations and significance of integrated reports. (For details, see the following:https://www.gpif.go.jp/en/investment/excellent.most-improved-integrated-reports_2024_03.pdf)
ￚ We received positive feedback from companies, such as “The management began to pay more attention to integrated reports,” “We foundmore active collaboration among the involved staff members and departments,” “There is increased awareness of integrated reports within
the company,” and “This will help us to prepare our next integrated report.” There were many cases in which companies announced on
their website that they were selected for excellent or most improved integrated reports. Backed by the heightened awareness from thebusiness side, we will continue this initiative as a tool to make dialogues between investee companies and asset managers more useful.

○Excellent Integrated Reports
GPIF’s asset managers for domestic equities named a total of 70 companies for their excellent integrated reports. The following
companies were nominated by four or more respondents as publishers of excellent integrated reports.
◇ ITOCHU Corporation◇ Asahi Group Holdings, Ltd.
◇ Hitachi, Ltd.

6 asset managers
5 asset managers
5 asset managers○Most-improved Integrated Reports◇ Sojitz Corporation

4 asset managers◇ Mitsubishi UFJ Financial Group, Inc. 4 asset managers

GPIF’s asset managers entrusted with domestic equity investment named a total of 100 companies for the most-improved integrated
reports. There were no reports that were nominated by four or more respondents as publishers of the most-improved integrated reports.
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<Excellent TCFD Disclosure selected by GPIF’s asset managers entrusted with equity investment>ￚ The Corporate Governance Code was revised in June 2021 and stipulates that companies listed on the Prime Market “should collect andanalyze the necessary data on the impact of climate change-related risks and earning opportunities on their business activities and profits,
and enhance the quality and quantity of disclosure based on the TCFD recommendations, which are an internationally well-establisheddisclosure framework, or an equivalent framework.”
ￚ Examples of companies that have provided TCFD disclosure ahead of others can be useful for other companies that intend to implement
TCFD disclosure in the future. TCFD is a framework of disclosure shared worldwide, and we believe that referring to examples ofcompanies outside Japan will be also useful. Therefore, continuing on from last year, we asked our external asset managers entrustedwith domestic and foreign equities to select companies that provided excellent TCFD disclosure.
ￚ GPIF asked external asset managers entrusted with equity investment to nominate up to five companies that provided excellent TCFD
disclosure, and also to each nominate up to three companies that provided excellent disclosure of the four disclosure items (governance,
strategy, risk management, and metrics and targets). GPIF compiled the results and announced them in March 2024.

ￚ TCFD is a topic of discussion for international disclosure standards, and its significance is expected to further increase going forward.
Since TCFD disclosure will likely become indispensable for global companies in the future, GPIF will continue to announce excellent
TCFD disclosure.

○ Excellent TCFD Disclosure (Japanese companies)

GPIF’s asset managers entrusted with domestic equities named a total of 29 companies for excellent TCFD disclosure. The following
companies were highly evaluated by four or more respondents as publishers of excellent TCFD disclosure.

◇ Hitachi, Ltd.: 8 asset managers◇ Mitsubishi UFJ Financial Group, Inc.: 5 asset managers◇ Mitsui O.S.K. Lines, Ltd.: 4 asset managers◇ Kirin Holdings Company, Limited: 6 asset managers◇ ITOCHU Corporation: 4 asset managers
https://www.gpif.go.jp/en/investment/202405_excellent_TCFD_disclosure_en.pdf

Note: Please visit the website for details, including the comments of the asset managers.

○ Excellent TCFD Disclosure (Overseas companies)

GPIF’s asset managers entrusted with foreign equities named a total of 75 companies for excellent TCFD disclosure. The following
companies were highly evaluated by four or more respondents as publishers of excellent TCFD disclosure.

◇ Microsoft Corporation: 6 asset managers.

◇ Enel Spa: 5 asset managers

Note: Please visit the website for details, including the comments of the asset managers.

https://www.gpif.go.jp/en/investment/202403_excellent_TCFD_disclosure_en.pdf

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9. Enhancing Collaboration with Relevant Organizations<Collaboration with Global Asset Owners: Global Asset Owners’ Forum>ￚ This forum was established by GPIF with co-organizers CalPERS and CalSTRS for continuous exchange of opinions to further fulfill ourstewardship responsibilities with the aim of utilizing mutual knowledge with foreign public pension funds and others. The first conference
was held in Tokyo in November 2016.
ￚ Members (except for co-organizers) include the Florida State Board of Administration and the Regents of University of California of theUnited States; bcIMC and OTPP of Canada; NBIM, APG, PGGM, AP2, ERAFP, and USS of Europe; GIC of Singapore; HESTA of Australia;
and the World Bank.
ￚ After suspension of the Forum due to the COVID-19 pandemic, the Global Asset Owners’ Forum was re-held in 2023 for the first time infour and a half years. Global Asset Owners’ Forum members had a meeting with the Keidanren and its corporate members during the“Japan Weeks,” in which the annual general meeting of PRI was held in Tokyo. At the meeting, we exchanged views on corporate
governance, sustainability issues such as climate change, and the exercise of voting rights.
ￚ Separately from the above-mentioned meeting with Keidanren, the asset owners also exchanged views on disclosures and other issues.
The members of the Forum discussed various topics including expectations for Japanese companies such as timely disclosures and timely
English translations, support for the ISSB standard, and support for the TSE’s request on cost of capital, etc., and these opinions weresummarized and published on January 11, 2024.
(https://www.gpif.go.jp/en/investment/summary_6th_Global_Asset_Owners_Forum_en.pdf)<Cooperation with Keidanren>
September 2023: Attended the Meeting with GPIF
October 2023: Co-hosted the Meeting with the Global Asset Owners’ Forum Members<Presentations at various seminars and international conferences (since last reported)>
June 2023: Global Corporate Governance Colloquium 2023
October 2023: Japan Weeks－GGX × TCFD Summit 2023, ICGN Company & Investor Engagement Forum
October 2023: ICMA & JSDA Annual Sustainable Bond Conference
December 2023: JICPA Conference 2023－Toward the Creation of Sustainable Corporate Value
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Chapter 2. Initiatives and Challenges ofExternal Asset Managers

1. GPIF’s View on the Current Status of External Asset Managers<Organization, systems, policies, etc., in stewardship activities>

The overall quality has been improved in both the activities and the speed at which they are conducted by each asset manager. Most
external asset managers, both for passive and active investment, have developed policies for engagement and ESG. Their corporate
principles, philosophy and process are applied into each policy and initiative, and developed into ongoing efforts as a corporate body,which are reviewed on a regular basis. For domestic equities, asset managers’ stewardship activities have evolved as seen in the
responses to listed companies to “the Action to Implement Management That Is Conscious of Cost of Capital and Stock Price,” which
was issued by the TSE.



In stewardship reports, some asset managers established and disclosed their stewardship activities plans from medium- to long-term
perspectives, including specific priorities and other prospective activities for several years ahead, while others demonstrated their bestpractices for governance from the perspective of investors.

In the past few years, some passive and also active managers have established and enhanced a dedicated department in charge of
stewardship activities, thereby full-fledged and full-year stewardship activities and organizational efforts have been further established.
On the other hand, from the perspectives of cooperation with the investment section and sharing and use of expertise at the investment
division, there are some cases of restructuring sections responsible for stewardship and ESG activities within the investment division.



As mentioned above, while active managers implement engagement, their definitions of engagement and their actions vary dependingon their organizational structures and investment styles. Some managers have a dedicated department in charge of stewardship
activities, including engagement, while others do not. Particularly, in the former case, the collaboration between investment andstewardship activities has advanced. For the latter case, it is important to consider the fund manager’s commitment and how it isresonated to the compensation system, as well as who takes the leadership in designing more organized activities, who and how to leadthe coordination with external parties in collaborative initiatives.



It has been observed that asset managers introducing in-house platforms and systems which unitarily manage global engagement havefocused on the improvement of effectiveness of engagement, using a PDCA cycle through the management of milestones in which theprogress of dialogues and companies’ responses on the way to the achievement of goal are divided into several steps, after setting
goals for each engagement.

Some asset managers have established a clear escalation strategy in order to enhance the effectiveness of engagement.

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

While various initiatives have been implemented, GPIF’s Stewardship Principles and Proxy Voting Principles seem to have highly
recognized to an extent among asset managers for equities. Going forward, we will conduct dialogues with newly selected asset
managers for equity and fixed income as well.

<Stewardship Activities in Equity Investment: Engagement>Some external asset managers send letters to investee companies as a tool to communicate their views or an opportunity to start
dialogues with the management. Continuous monitoring is necessary to see how they develop engagement by using letters as thestarting point.

All asset managers for domestic and foreign equities answered that they have taken measures for ESG issues. Some managers
implement dialogues concerning ESG in their engagement with small- and medium-sized companies.

In establishing topics of engagement with an individual company, many external asset managers implement a cooperation system inwhich a person (or a division) in charge of stewardship (or ESG/sustainability) identifies issues in line with the ESG and sustainability
topics and then, a person in charge of investment (or a division) identifies issues directly related to corporate value on a bottom-up
basis. Also, in implementing engagement, various ideas have been devised to appoint a leader and a person in charge of engagement,
depending on the topics.



We believe that integrated reports and corporate governance reports are both primary tools for two-way communication in measures for
ESG issues as well as engagement. While we recognize that asset managers have been moving forward with their use of those tools,
we expect analysts and fund managers, in addition to specialists in stewardship and ESG, to make further use of these reports. Goingforward, further expansion of non-financial disclosure will be expected, including sustainability disclosure for Securities Reports and theintroduction of IFRS Sustainability Disclosure Standards (also known as ISSB Standards) as a global standard, in addition to integrated
reports. It will be important to consider how such disclosure can be effectively utilized in asset management and engagement.

Japanese asset managers participate in collaborative engagement such as CA100+ more proactively than foreign asset managers. As
a whole, more and more asset managers join global initiatives, utilizing them as platforms to gain expertise and conduct joint
engagement.



While a growing number of asset managers, both in passive and active investment, have participated in collaborative initiatives
according to necessity and topic, the status of use and the degrees of involvement vary among asset managers. In FY2023, newinitiatives were established, as seen in the full-fledged start of Nature Action 100—which is related to natural capital—and theannouncement of the establishment of PRI’s Spring. On the other hand, there were some cases in which the form of involvement in joint
engagement was changed. We will ask asset managers to confirm how they will actually get involved in the initiatives and their thinking
toward joint engagement.
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Some managers including Japanese asset managers have been promoting reform measures of the entire investment chain throughpolicy engagement, by submitting public comments to regulatory authorities and standard-setting bodies such as government agencies
and ISSB, as well as proactively engaging with stock exchanges and index providers.

<Stewardship Activities in Equity Investment: Exercise of Voting Rights>


We positively assess asset managers, depending on the case, when they exercise their voting rights in a way that is not necessarily
pursuant to voting policies but in line with their activities or actual situations as a result of engagement. Abstention from voting is also
observed as a means of expressing their will. As we consider voting along with engagement, we expect them to take measures that willcontribute to enhancing long-term corporate value. Some asset managers send strong messages in voting policies and utilize them forengagement, while others have introduced cross-shareholding systems, TSR, and PBR standards.

In the results of exercising individual voting rights by asset managers for domestic equities, while there were differences in timing,
frequency, and items of disclosure, many asset managers made quarterly disclosures so that the announced results would be of help inthe dialogue after the general meeting of shareholders. Some cases seemed to be inappropriate for dialogues with companies in next
year’s general meeting of shareholders. Meanwhile some active foreign asset managers provided direct feedback on voting results fromthe person in charge to their investee companies and sent documents to inform the results and reasons for opposing an investee
company’s proposal. On the other hand, the disclosure of voting guidelines and voting results by Japanese asset managers tends to be
more thorough. Some asset managers for foreign equity published their approval or disapproval of the voting decision in advance aspart of their engagement escalation strategy.



In a case where they oppose an investee company’s proposal, all of asset managers for domestic equities disclose the reasons for suchdecision. While responses to shareholder proposals vary, they disclose either the reasons for approval or disapproval, or reasons forboth are disclosed. Some asset managers implement their own ideas by flagging investee companies such as business partners in theGroup in which conflicts of interest are likely to take place, or by providing more detailed explanations than usual. Other asset managers
disclose the reference on their stewardship and exercise of voting rights. Some external asset managers for foreign equities voluntarily
disclose the results of the exercise of voting rights.

When some asset managers for domestic equities ask their investees to increase independent external directors as well as diversity,
they allow a grace period of nearly a year from the announcement of the change in voting policy before taking effect, during which they
inform their investee companies of the change and implement engagement.

Both asset managers for domestic and foreign equities use proxy advisory firms. The majority of them use these firms to collectinformation; outsource administrative services concerning the exercise of voting rights; and manage conflicts of interest in exercising
voting rights for their own company, parent company, and the Group companies. Only a small number of cases used the26

Copyright © 2024 Government Pension Investment Fund All rights reserved.

recommendations of advisory firms for the exercise of voting rights of the investees other than those requiring management of conflictsof interest. Even when using proxy advisory firms, for those subject to engagement activities, GPIF requires asset managers to makethe final decisions by themselves, taking into account the status of engagement and the contents of proposals. GPIF uses the result of
the recommendations provided by ISS and Glass Lewis for analysis after the General Meeting of Shareholders.


Regarding voting instruction errors, administrative errors made by custodians, and unexercised votes, we have asked asset managers
and custodians to take appropriate measures, considering the importance of exercising voting rights.

<External Asset Managers’ Governance Structures and Management of Conflicts of Interest with
Their Parent Companies>

The external asset managers’ governance and management of conflicts of interest are formally well-organized in general. Goingforward, continuous consideration, reviews and improvement as well as transparency should be improved to increase effectiveness.

In the past few years, at Japanese asset managers for equities, organizational segregation aimed at preventing conflicts of interest
between the asset management divisions and other divisions has been promoted, including by way of company split or integration of
the asset management divisions. In a case where the divisions are split and organized as a separate company, various initiatives arequickly put into practice under the leadership of the upper management. At all Japanese asset managers, the formalistic aspect is wellorganized with the appointment of outside directors and the establishment of a third-party committee consisting mainly of outside
directors. Some asset managers have appointed senior executives and officers from outside of the company.

Meanwhile, we observe that some foreign asset managers have no organizational segregation or no tangible scheme secured fromoutside to prevent conflicts of interest, which indicates that their superiority has no solid basis as expected. Some asset managers,
however, seek to enhance management on the assumption that conflicts of interest would occur in a wide range of entities, including all
discretionary investment customers and their parent companies.



The compensation schemes for executives and employees of asset managers ultimately reflect their position within the Group, therelationship with a parent company, and their corporate culture. It suggests the importance of the compensation scheme and the
incentive system.

While it is confirmed that management of conflicts of interest in voting and voting guidelines are formally well organized, the definition of
the companies subject to management of conflict of interest varies depending on the asset manager. Recently, given an increase in thenumber of shareholder proposals to both Japanese and foreign asset managers, their parent company, and group companies, there aresome cases in which the current rules for decision processes for shareholder proposals are unable to function to the fullest. While someasset managers have already changed their decision processes, GPIF will continue to ask other asset managers to improve this area
as a future task.
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2. Status of Engagement by Domestic External Asset Managers Entrusted with Japanese Equities(January 2023 to December 2023)
Number of companies that held
dialogues

Holding
dialogues:
924 companies;40%
Not holding
dialogues:
1,388 companies;
60%

Ratio of companies that held
dialogues (on a market capitalization basis)
Not holding
dialogues
6%

Holding
dialogues
94%

Number of dialogues held
(Passive/active ratio)

Active:16%

Passive:
84%

Note: The ratio of the number of companies with which dialogues were held was calculated with the number of domestic companies forwhich shares are held and market capitalization as of March 31, 2023, as a denominator.
The total number of companies with which engagement was conducted by GPIF’s external asset managers for domestic equities fromJanuary 2023 to December 2023 was 924.
In terms of the number of companies, engagement was conducted with 40% of the companies whose shares are held. In terms of market
capitalization, engagement was conducted with 94% of the companies. Each ratio remained the same as in the previous year. Furthermore,engagement by asset managers for passive investment accounted for 84%. When an asset manager is entrusted with both active andpassive investments, the passive/active ratio is counted as the one with larger amount of mandate entrusted by GPIF.

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7,000Trend of number of dialogues andcomapnies

6,500
6,000

1,000

4,000

900

3,500

800

5,500
5,000

700

4,500
600

4,000
3,500

500

3,000
2,500
2,000

2017

2018

2019

2020

2021

2022

2023

Trend number of dialogues withexecutive levels

200
180
160

3,000

140

2,500

120
100

2,000

80

1,500

60

1,000

400

500

300

0

40
20
2017

2018

2019

2020

2021

2022

2023

0

President

Number of dialogues held
Number of companies (right axis)

Executives except for President(including executive officers)
Of whom, outside directors (right axis)

The chart on the left represents the trend in the number of dialogues held from January to December every year in the past seven years.
While a temporary drop in the number of dialogues was recorded in 2020, in which the COVID-19 pandemic first broke out, the number ofengagements increased compared with the past years. The chart on the right represents the status of engagement conducted withexecutives. The number of dialogues held with outside directors in particular increased significantly during the past year.
GPIF does not highly evaluate asset managers on the number of engagements only, in order to avoid an increase in perfunctory interviews.
This chart is subject to fluctuations due to changes in asset managers.
29
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Ratio of dialogues held bycompany scale

Ratio of ESG dialogue topics by industry

100%

TOPIX 10092%

TOPIX Mid400

TOPIX Small and
TOPIX 1000

52%

Other 14%

0

20

40

60

80

100

FOODS
ENERGY RESOURCESCONSTRUCTION & MATERIALSRAW MATERIALS & CHEMICALSPHARMACEUTICAL
AUTOMOBILES & TRANSPORTATION EQUIPMENTSTEEL & NONFERROUS METALSMACHINERY
ELECTRIC APPLIANCES & PRECISION INSTRUMENTS
IT & SERVICES, OTHERSELECTRIC POWER & GAS
TRANSPORTATION & LOGISTICSCOMMERCIAL & WHOLESALE TRADE
RETAIL TRADEBANKS
FINANCIALS (EX BANKS)REAL ESTATE

%

0

E

S

G (explanations on agenda of AGM/EGM)

50

100

G (Other than that on the left)%

Note: The company scales represent those as of March 31, 2023. J-REIT is excluded. Industries are based on the TOPIX-17 series.

Left chart: Ratio of implementation of engagement by GPIF’s external asset managers for domestic equities from January 2023 to
December 2023, by company scale. Engagement was implemented with 466 companies (93%) on a TOPIX 500 basis.
Right chart: In all industries, many dialogues were conducted on the topic of governance, in general. Governance (apart from theexplanations on agenda of AGM/EGM) included a wide range of topics, such as cross-shareholding, capital efficiency and financial strategy.
Meanwhile, it is also noticeable that the topics of ESG dialogue varied, depending on industries. It is observed that the topics of dialogues
are set based on the materiality of each type of business. In the case of pharmaceuticals, the ratio of the S (social) area is higher than othertypes of business, and in energy resources and electric power & gas, many dialogues were set on the topic concerning the E(environmental) area.
30
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3. Passive Investment Models Focusing on Stewardship Activities: Engagement-enhanced Passive(1) Overview and points for selection of passive investment models focusing on stewardship activitiesￚ Considering that GPIF invests in a wide range of listed companies by way of passive investment which accounts for approximately 90%
of GPIF’s equity investment, the long-term growth of the overall market is essential for the improvement of investment return. For passive
investment, we believe that efforts for engagement activities are critical to encourage investee companies to achieve a long-term increasein corporate value and, in particular, to promote sustainable growth of entire markets.

ￚ Therefore, with the aims of achieving sustainable growth of the overall market through stewardship activities, as well as diversifying andenhancing the approach methods of stewardship activities, GPIF started to adopt passive investment models focusing on stewardship
activities in 2018.
ￚ In selecting the model, we review the investment process, stewardship policies, and the business model, which integrates organizational
systems and fee levels for execution of these process and policies.
ￚ In 2018, we adopted two managers as engagement-enhanced passive managers: Asset Management One and FIL Investments (Japan).
In FY2021, following new applications from several asset managers, we newly adopted Sumitomo Mitsui Trust Asset Management Co.,
Ltd., and Resona Asset Management Co., Ltd.
Key points for selection

Evaluation method after adoption<Setting of appropriate KPIs>

For evaluation going forward, the status of Medium- to long-term goals for engagement activities

achievement of the KPI as indicated on the Annual plan for the achievement (Milestone)<Engagement system and method> Organizations and persons in charge of stewardship activities Methods of engagement

left and the milestone for the following
fiscal year will be evaluated.
GPIF will renew the contract based on thisresult.

31
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(2) Progress at asset managers: (i) Asset Management One<Companies subject to engagement activities and management of milestones>
 The investee companies’ issues with ESG were identified for the increase in sustainable corporate value and sustainable market
growth, as the common issues in the market. Establish 18 ESG issues, and clarify the direction of engagement by showing theIssues (locating problems), Goals (outcomes to be realized) and Action (company’s initiatives). Implement engagement based oneach issue at target companies.
 In the approaches to ESG, there are mainly two perspectives of “Return” and “Risk.” The “Risk Perspective” is fundamental, andmore emphasis on the “Return Perspective”. The improvement of corporate value is sought by enhancing the initiatives for ESG
issues.
 Establish 8-level milestones, and periodically report to GPIF on the progress ofengagement from the establishment of issues to their solutions.
18 ESG Issues

8 Milestones

32
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<Progress>

 The number of issues subject to the management of milestones up to the third quarter of FY2023 was 448. The largest number
Biodiversity
among the ESG issues was in “Governance and Disclosure.” The topics of dialogues include the board of directors, corporate
governance, sustainability management and capital efficiency. The percentage of “People (Society)” increased year on year, due toAir, water and soil pollution
increases
in issues of diversity, equity and inclusion.
Sustainable food system
Diversity and inclusion

 UpBusinessto andthe
third quarter of FY2023, 68% of the engagement projects were observed to be on schedule or ahead of schedule in their
human rights
progress. By milestone, “1. Identifying ESG issues” decreased significantly, whereas “8. Completing engagement”, increased.
Board Governance Up to the third quarter of FY2023, 72 projects were completed in climate change, sustainability management, digital transformation,and more.
Risk Management

Climate Change

Composition of ESG issues for engagement(including additions during the period)0

OurCommunity
8%100

2.Raisingconcerns/suggestions
3.Issues recognized byGovernance & Disclosure
62%

2.Raisingconcerns/suggestions
3.Issues recognized by

22

4.Issues recognized bycompany representative
4.Issues recognized by

41

Senior Management

0

300

100

Senior Management

27
47

50

5.Initiatives taken

44

6.Plans formulated

49

6.Plans formulated

50

199

8.Completing
engagement

0190

7.Plans implemented
8.Completing
engagement300

05.Initiatives taken

7.Plans implemented

200

18

1.Identifying ESG issues

0company representative

People(Society）
15%

200

87

1.Identifying ESG issues

Planet（Environment）
15%

Milestones at the end of December 2023

Milestones at the beginning of April 2023

72

33
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(2) Progress at asset managers: (ii) FIL Investments (Japan)

Companies subject to engagement activities and management of milestonesWith the expertise of analysts of active investment, efficiently increase β by encouraging large-cap companies to reform theirmindset. In order to improve corporate value, identify the agenda of engagement and engage with companies, by which profitability
and growth capability will be improved caused by strong competitiveness.

 Specifically, narrow the subject companies for engagement by such conditions as 1) market capitalization of one trillion yen or more,and 2) corporate value that is expected to improve by 50% or more, to implement engagement with large caps which are likely tohave significant impacts on market capitalization.
 The progress is managed using three indicators of input, output and outcome*, and is periodically reported to GPIF.
 FIL Investments (Japan) also verified the effects of engagement through an external organization from an academic standpoint.

Four Steps of Engagement

Engagement Counterpart

Source: Four Steps of Engagement and Engagement Counterpart from Fidelity’s Report on Investment Trusts.

34

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<Progress>
 FIL Investments (Japan) established three indicators of input, output and outcome* in order to manage the progress of theengagement activities in engagement-enhanced passive investment, granting points to each indicator according to the degrees ofprogress. While agenda and timeline vary depending on the subject company, the input indicator, which share the issues, advanced
to almost 70% of the plan for all subject companies. Approximately 50% of those companies have nearly completed the input phase,
which means that senior management of corporates and FIL Investments (Japan) shared the awareness of issues, entering a phaseof waiting for companies’ action.
 In the initiatives for the improvement of sustainability prospects, there are companies that can confirm the achievements at a
relatively early stage in contrast to those that take time in changing business. Particularly in the latter case, effective engagement issought by taking measures in close cooperation by the entire investment division.
 Some investee companies entered a phase of working toward theenhancement of profitability by autonomously reviewing business portfolios,
significant improvement of PBR, and growth, making them no longer subject
to active engagement activities. These companies are being replaced withother companies with problems and higher priorities, in order to improve theoverall performance of the index by expanding the scope of those subject toengagement activities. Particular to the current fiscal year, it was pointed outthat there is a growing number of new inputs through proactive dialogues
with companies which were newly targeted for engagement. The
accumulative progress is shown in the chart on the right.
*Input: Sharing of awareness of issues based on evidence toward theimprovement of corporate value, and requests for consideration
concerning measures proposed by investors to solve such
issues.
Output: Corporate activities, achievements
Outcome: Stock price performance, its components such as financial
performance and the perception by the stock market (valuation,
sell-side rating, etc.), and corporate activities strongly related to
them.

180%
160%
140%
120%
100%
80%
60%
40%
20%
0%

Mar-19Mar-20
Input

Mar-21
OutputMar-22Mar-23

Feb-24

OutcomeEach input, output and outcome represent the total rate of progress against
the planned value of the entire mandate. (The maximum rate is 300%.)

35
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(2) Progress at asset managers: (iii) Sumitomo Mitsui Trust Asset Management<Companies subject to engagement activities and management of milestones>

 In addition to engagement with investee companies, activities through various initiatives are carried out and engagement is
implemented targeting a wide range of stakeholders, including market participants, in order to increase the probability of achieving
such targets, thereby promoting solutions to companies’ issues and increasing corporate value.
 Engagement is promoted through the commitment from the top management (the Chairperson and President) by themselves, suchas messaging actively by speaking at overseas conferences and elsewhere. Issues which are set for the “ESG 12 topics” wereselected based on ESG materiality are classified from the viewpoint of risks and opportunities. Targets (medium-term goals) for each
investee company are set by backcasting from the goals (long-term goals) for a specific ESG topic, and engagement is implemented
with the aim of achieving the targets.
 By setting milestones in six stages, the progress in engagement activities from issue setting to the resolution of issues is reported to
GPIF periodically.
1. Selecting Target Companies and Setting Goals and Targets according to ESG Topic
Corporate ESG
IssuesTarget (Middle
term )

Established in accordance with corporate
ESG management level

Goal (Longterm )

Backcasting

2. Stage management and monitoring
The progress of engagement activ ities is managed in f our stages by ESG topic and will be monitored until the implementation
f measuresoand resolution of issues.
(i) Issue setting

・Identif y ing important ESG issues in inv estee companies and setting specif ic topics (issues)
・Setting targets (interim targets) bybackcastingf rom topic goals(ii) Issue presentation

・Issues are presented during interv iews with companies and engagement is held continuously f or sharing issues.

(iii) Issue sharing (withperson in charge of thecompany)

・While sharing issues with the person in charge of the company , engagement is escalated to the management f or implementing
measures and resolv ing issues.

(iv) Issue sharing (withmanagement group)・Issues are shared with the management and best practices are introduced.
・Internal examination is promoted f or implementing measures and resolv ing issues.

(v) Implementation of
measures・Corporate policy statements (corporate actions) are conf irmed.
・Progress is monitored(vi) Issue resolution

・Target achiev ements are conf irmed and shared with the company .
・If the progress is insuf f icient, consideration is giv en when exercising v oting rights.

3. Improving corporate sustainability and corporate value for investee companies

36

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<Progress>
 In FY2023, in the E (environmental) area, the establishment of topics increased in “Natural capital and resource protection” inpreparation for TNFD-based disclosure. Companies depending on natural capital were urged to take measures to increasesustainable corporate value. In the G (governance) area, dialogues on the measures to improve companies’ PBR driven by reforms
to the Tokyo Stock Exchange in addition to reducing cross-holding shares and promoting diversity management were strengthened.
Dialogues were conducted with not only companies but also relevant organizations, including competent authorities.
 Many companies advanced to Step 4 (Sharing the awareness of issues with the management team) in all ESG topics. Regarding
issues in S (social) and G (governance), there is an increase in companies that advanced to Step 5 (Implementation of measures)and Step 6 (Issue resolution). Companies’ changes have been observed in the S area, in which human rights policies were
formulated and human rights due diligence advanced, and in the G area, in which mainly cross-shareholding was reduced andboards of directors were diversified.
Composition by top-down type engagement topic

Progress for FY2023 (July 2023 to March 2024)
Average status of progress

E

Period beginning July 2023

Step 3.3

80%

E

Period ending March 2024 (preliminary*)

Step 4.1

Progress in engagement

70%

60%

60%

50%

50%

40%

40%

30%

30%

20%

20%

10%

10%
0%
step1

step2

step3

step4

step5

Period beginning July 2023

S

step6
March 31, 2024

Period beginning July 2023

Step 2.9

Step 4.1

Progress in engagement

step1

step2

step3

step4

step5

Period beginning July 2023

step6
March 31, 2024

Period ending March 2024 (preliminary*)

Step 4.2

Progress in engagement

70%
60%
50%

Step 1: Issue setting
Step 2: Issue presentation
Step 3: Issue sharing (with person in charge of the company)
Step 4: Issue sharing (with management group)
Step 5: Implementation of measures
Step 6: Issue resolution

40%

July 2023

2024 (preliminary*)

Average status of progress

G

July 2022

Step 3.4

80%

70%

0%

G

S

Average status of progress
Period ending March

Period beginning July 2023

30%

Governance Reforms

Stable and Fair Governance
SystemPromotion of Corporate
Activities

Supply Chain Management

20%

Health and Safety

Human CapitalSocial Business Opportunities

Human Rights

10%Social Business
Opportunities

Prevention of Environmental
Destruction / Pollution Control

Natural Capital and Resource
Protection

Climate Change Issues

0%

step1

step2

step3

step4

step5

Period beginning July 2023

step6
March 31, 2024

*The figures for March 2024 are preliminary.

37

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(2) Progress at asset managers: (iv) Resona Asset Management<Companies subject to engagement activities and management of milestones>
 Engagement starts with an analysis of the current status of the integrated report. In the analysis of integrated reports using in-house
AI technology, the focus points of integrated reports are set as evaluation items and scored in order to identify issues.
 Engagement managers provide feedback on AI evaluation scores and dialogue on the value creation story of the target company,
and work to improve the corporate value by encouraging the disclosure of non-financial information (integrated reports) while setting
qualitative improvement as interim targets and triggers.
 Milestones in improving corporate value are set for each target company, and the progress of engagement activities from issue
setting to issue solving and changes to the above-mentioned AI assessment score over time are regularly reported to GPIF.

38
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<Progress>
 Since FY2022, the scope of AI analysis has been expanded to include the Securities Report in addition to the Integrated Report, andthereby TCFD-based disclosure and human resources strategies have been quantified and scored. Since March 2023, companies
have been selected whose corporate value might be significantly affected by the climate change issue and other companies fromamong the types of business which are highly important in terms of TCFD-based disclosure, and have also begun engagement
related to TCFD.
 When engaging with a company, a document containing comments of the engagement manager attached to the quantified score wasprovided for an exchange of opinions.
 Regarding the integrated reports of companies targeted for engagement, the improvement (in quality) of the content has advanced
as a whole (meaning that the average value of the subject companies’ AI scores has risen), as shown in the charts below.
Integrated Report AI Score of the Company Subject to Engagement(Human resources strategy)

Integrated Report AI Score of the Company Subject to Engagement (Overall)Companies issuing an Integrated Report (Overall)Company targeted for engagement
2023

Cost of Capital, ROE and ROIC
Non-financial KPIs and Acceptability
Financial Performance

KPI

Overall

60.00

MVV and purpose

57.50

Purpose

55.00
52.50
50.00
47.50

Sustainability Committee

45.00
42.50

Diversity

40.00

Director Compensation

2022

Cost of Capital, ROE and ROIC
Non-financial KPIs and Acceptability
VisionFinancial Performance

MissionValuesBusiness Model (strategy)

Analysis of Business Environment

Sustainability of Directors

Skill Matrix
Governance Framework
Governance
Building medium- and long-term plans

Identification and evaluation of key risks and opportunities

Identification of social and management issues
Determining Materiality
Corporate strategy and capital allocation
Consideration of human resources strategy

2023

2021

KPI

Overall

60.00

MVV and purpose

57.50

Purpose

55.00
52.50
50.00
47.50

Sustainability Committee

45.00
42.50

Diversity

40.00

Director Compensation

2022

2021

VisionMissionValuesBusiness Model (strategy)

Analysis of Business Environment

Sustainability of Directors

Skill Matrix
Governance Framework
Governance
Building medium- and long-term plans

Identification and evaluation of key risks and opportunities

Identification of social and management issues
Determining Materiality
Corporate strategy and capital allocation
Consideration of human resources strategy* The calculation of AI score is outlined in the paper “Method of calculating the disclosure score of climate change risks in the Securities Report” presented at the 2021 (the 56th) wintersession of the Japanese Association of Financial Econometrics and Engineering (JAFEE).
Notes 1. The average value of AI scores of integrated reports of companies subject to engagement were calculated for the subject accounting periods of FY2021 (April 2020 to March 2021), FY2022 (April 2021 to March 2022)
and FY2023 (April 2022 to March 2023.
2. To facilitate the time series comparison of AI scores, the deviation values of AI scores for the period from 2021 to 2023 were calculated based on the AI score in 2022 (the average value of all integrated reports is 50).
3. The AI scores of integrated reports calculated by Resona Asset Management based on the text information of corporate websites and EDINET. The AI scores of integrated reports as of January 2024 taken from 2021 to2023 are averaged by item and graphed.

39

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4. Critical ESG Issues

ESG Issues

Domestic
EquityPassive

Domestic
EquityActiveForeign
EquityPassive

Foreign
EquityActiveDomestic
Fixedincome

ForeignFixedincome

The percentage shown in the chart
represents the ratio of the number ofmanagers which selected each ESG issue asa critical ESG issue, with the number ofasset managers entrusted with eachmandate as a denominator. The number ofasset managers subject to the survey was asfollows:

Climate Change

100%

100%

100%

92%

93%

78%

Deforestation

83%

29%

75%

33%

36%

33%

Water Stress, Water Security

83%

43%

75%

42%

43%

44%

Biodiversity

100%

71%

50%

54%

71%

33%

Pollution & Resources

50%

43%

50%

29%

29%

56%

Waste Management

67%

71%

50%

25%

36%

56%

Environmental Opportunities

67%

71%

50%

4%

50%

22%

Others (Environmental)

33%

29%

25%

17%

14%

33%

Domestic equities: 13
Foreign equities: 28
Domestic fixed-income: 14
Foreign fixed-income: 9

Human Rights & Community

100%

71%

75%

54%

86%

67%

Product Liability

67%

43%

25%

38%

43%

33%

Health & Safety

67%

57%

75%

33%

43%

44%

Labor Standards

67%

71%

50%

50%

57%

33%

・When an asset manager is entrusted withboth active and passive investments, thepassive/active ratio is counted as the one
with larger amount of mandate entrusted by
GPIF.

Controversial Sourcing

33%

14%

25%

8%

7%

11%

Social Opportunities

50%

43%

50%

13%

21%

33%

Others (Social)

67%

43%

75%

46%

50%

33%

Board Structure, Self-evaluation

83%

100%

75%

54%

71%

33%

Risk Management

50%

57%

50%

21%

36%

33%

Capital Efficiency

83%

100%

50%

17%

29%

22%

Minority Shareholder Rights

83%

100%

50%

21%

29%

22%

Corporate Governance

83%

86%

75%

54%

79%

56%

Anti-corruption

67%

29%

25%

13%

21%

44%

Tax Transparency

33%

29%

50%

13%

14%

22%

Others (Governance)

50%

71%

75%

13%

21%

44%

Supply Chain

100%

71%

75%

33%

64%

56%

Diversity

100%

86%

100%

46%

79%

44%

Disclosure

100%

100%

100%

58%

93%

44%

Misconduct

100%

86%

50%

8%

57%

11%

Other

50%

14%

25%

33%

36%

44%

・GPIF also confirmed critical ESG issues
considered from the viewpoint of corporatebond investors.

E (Environmental)

S (Social)

G (Governance)

A multiple themes of ESG

40
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4. Critical ESG Issues (Trends in domestic equities for the past three years)

41
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Chapter 3. Expectations & Challenges forExternal Asset Managers and
GPIF’s Action Plans Going Forward

Expectations and Challenges for External Asset Managers
Integrate GPIF’s Stewardship Principles and Proxy Voting Principles in their operations at all levels
throughout their organizations
 Integration of investment and stewardship/ESG
 Collaborate between the investment section and the stewardship activities section
 Establish and enhance passive investment models focusing on stewardship activities Practice ESG integration tailored to different investment styles
 Strengthening of engagement, including exercise of voting rights
 Implement engagement activities concerning new ESG issues that contribute to the enhancement ofcorporate value, taking into account environmental changes
 Engagement to achieve management that is conscious of cost of capital and stock price Promote engagement strategy in accordance with the scale and stages of investee companies
 Integrate ESG issues and engagement on proxy voting principles
 Stewardship responsibilities in fixed-income investment
 Messages and disclosure for investee companies Implement stewardship activities in line with messages to investee companies (behavior consistent withwords)
 Improve the quality of disclosure Disclosure of voting principles and the result of exercise of voting rights
 Disclosure in line with TCFD Recommendation
 Disclosure of initiatives for critical ESG issues (materiality), and the policy and concepts of thecompany
42
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GPIF’s Action Plans Going Forward
 “Enhance engagement” with external asset managers, focusing on two-way communication
 Assessing the compliance status of GPIF’s Stewardship Principles and Proxy Voting Principles
 Confirming the governance systems of external asset managers
 Conducting dialogues with each internal position, from the top management to persons in charge,
according to the topic
 Conducting dialogues with the third-party and other committees as required Confirming new ESG issues that contribute to enhancing corporate value
 Confirming the status of engagement to achieve management that is conscious of cost of capital and stockprice Cooperation between the investment team and stewardship team
 Recognizing challenges related to companies targeted for engagement and sharing their evaluations
among the investment team and stewardship team
 Establish and enhance passive investment models focusing on stewardship activities
 Further examine the evaluation method of ESG integration
 Examine evaluation methods of stewardship activities in fixed-income investment
 Dialogues with issuers with the aim of understanding the actual status of engagement
 Measurement of achievement and effects of engagement, including ESG, in collaboration with externalorganizations (see next page)
43
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GPIF’s Action Plans Going Forward: Measurement of Effects of Stewardship Activities and ESG Investment
・GPIF believes that, regarding stewardship activities and ESG investment, the longer the investment horizon is, the higher the
improvement of returns after risk adjustments can be expected.
・Meanwhile, given that data has been accumulated in the corresponding period of time that has passed since the beginning of each
initiative, we will quantitatively measure effects as follows from FY2023 to FY2024 in collaboration with a consulting service provider
that has expertise in statistical analysis, for the purpose of appropriately implementing Plan-Do-Check-Act (PDCA) cycles.
・As to 1. (1) Verification of the effects of engagement and 2. (1) Study of ESG factors which contribute to the improvement of corporate
value and investment returns, both of which started in FY2023, the results will be announced upon completion of the analyses.
■ Outline of the measurement of effects

1.
Measurementof the effects
ofstewardship
activities
2.
Measurementof the effectsof ESG
investment

Quantitative analysis
consulting service provider

Project theme

Specific content (example)(1) Verification of the effects ofengagement

Research into the causation concerning theeffects on the engagement and ESG ratings/
improvement of corporate value

UTokyo Economic Consulting Inc.

(2) Verification of the exercise of
voting rights by external asset
managers

Change in the difference of exercise of voting
rights in the stakeholder companies from othercompanies*

UTokyo Economic Consulting Inc.

(1) Study of ESG factors which
contribute to the improvementof corporate value andinvestment returns(2) Verification of the effects ofpassive investment of equities
based on ESG indices

Research into the causation between the
ESG factors and the improvement ofcorporate value/ investment returns

EY Strategy and Consulting Co., Ltd.

Analysis of the impact of ESG investment on
corporate behavior*

UTokyo Economic Consulting Inc.

*The specific analyses are subject to change depending on further discussions.
44
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Status of Exercise of
Shareholders’ Voting Rights(April 2023 to June 2023)

1. Domestic Equities(1) Exercise of voting rights by external asset managers: All external asset managers (26 funds) exercised their voting rights.
(2) Exercise of voting rights by type of proposal(Total number of proposals)
Proposals pertaining to company organization

Proposals
Appointment
of Directors

Total number ofvoting rights exercised

TotalManagement
proposals

Approved

Opposed

Total

Shareholder
proposals

Approved

OpposedOf which
Appointmentof Outside
Directors

Appointmentof Statutory
Auditors

Proposals pertaining to capital policy(excluding items pertaining to changes to the
Articles of Incorporation)

Proposals pertaining to Director remuneration, etc.

Of which
Appointmentof Outside
Statutory
Auditors

Appointmentof Accounting
Auditors

Director
Compensation

Director
retirement
bonuses

Director
bonuses

Granting ofstock options

Dividends

Acquisition oftreasury stock

Mergers,transfer ofbusiness,company split,
etc.

Proposals
pertaining tochanges to the
Articles ofIncorporation

Poison pill
(Rights plan)
Other
Proposals
Warning
type

Total

Trust type

126,000

52,226

14,005

9,352

347

3,682

711

321

290

9,733

223

241

5,025

495

0

123

161,196

125,316

51,776

13,981

9,329

347

3,572

711

321

290

9,506

6

241

2,542

495

0

102

157,430(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(0.0%)(100.0%)(100.0%)110,038

45,644

12,388

7,815

347

3,410

624

40

241

9,300

6

237

2,479

23

0

98

139,231(87.8%)(88.2%)(88.6%)(83.8%)(100.0%)(95.5%)(87.8%)(12.5%)(83.1%)(97.8%)(100.0%)(98.3%)(97.5%)(4.6%)(0.0%)(96.1%)(88.4%)

15,278

6,132

1,593

1,514

0

162

87

281

49

206

0

4

63

472

0

4

18,199(12.2%)(11.8%)(11.4%)(16.2%)(0.0%)(4.5%)(12.2%)(87.5%)(16.9%)(2.2%)(0.0%)(1.7%)(2.5%)(95.4%)(0.0%)(3.9%)(11.6%)

684

450

24

23

0

110

0

0

0

227

217

0

2,483

0

0

21

3,766

(100.0%)(100.0%)(100.0%)(100.0%)(0.0%)(100.0%)(0.0%)(0.0%)(0.0%)(100.0%)(100.0%)(0.0%)(100.0%)(0.0%)(0.0%)(100.0%)(100.0%)

75

55

7

6

0

13

0

0

0

46

48

0

219

0

0

9

417

(11.0%)(12.2%)(29.2%)(26.1%)(0.0%)(11.8%)(0.0%)(0.0%)(0.0%)(20.3%)(22.1%)(0.0%)(8.8%)(0.0%)(0.0%)(42.9%)(11.1%)

609

395

17

17

0

97

0

0

0

181

169

0

2,264

0

0

12

3,349

(89.0%)(87.8%)(70.8%)(73.9%)(0.0%)(88.2%)(0.0%)(0.0%)(0.0%)(79.7%)(77.9%)(0.0%)(91.2%)(0.0%)(0.0%)(57.1%)(88.9%)

Note: Figures in parentheses represent percentages for each proposal. The total percentage may not add up to 100 due to rounding.
Note: There were no cases of non-exercise. There was one abstention.
Note: The resolutions of J-REIT general meetings of investors are included above.

45
Copyright © 2024 Government Pension Investment Fund All rights reserved.

2. Foreign Equities(1) Exercise of voting rights by external asset managers: All external asset managers (54 funds) exercised their voting rights.
(In some cases, voting rights were not exercised in the subject countries for institutional reasons, etc.)(2) Exercise of voting rights by type of proposal(Total number of proposals)
Proposals pertaining to company organization

Proposals
Appointment
of Directors

Total number ofvoting rights exercised

TotalManagement
proposals

Approved

Opposed

Total

Shareholder
proposals

Approved

Opposed121,218

Appointmentof Statutory
Auditors

4,113

Proposals pertaining to capital policy(excluding items pertaining to changes to the
Articles of Incorporation)

Proposals pertaining to Director remuneration, etc.

Appointmentof Accounting
Auditors

13,103

Director
Compensation

30,162

Director
retirement
bonuses

Director
bonuses

205

Granting ofstock
options

144

Dividends

5,193

7,847

Other proposals

Acquisition oftreasurystock

Mergers,transfer ofbusiness,company split,
etc.

5,074

7,562

Proposals
pertaining
to changes to the
Articles ofIncorporation

6,374

Warning type
Poisonpill

198

Approval of
financialstatements
and statutory
reports

10,859Total
Other
proposals

48,218260,270

120,298

3,642

13,05529,942

197

29

5,120

7,847

5,074

7,560

5,764

194

10,78339,671

249,176(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)103,7623,259

11,261

23,579

167

12

2,975

7,827

4,823

5,901

5,162

157

10,472

33,343

212,700(86.3%)(89.5%)(86.3%)(78.7%)(84.8%)(41.4%)(58.1%)(99.7%)(95.1%)(78.1%)(89.6%)(80.9%)(97.1%)(84.0%)(85.4%)

16,536

383

1,794

6,363

30

17

2,145

20

251

1,659

602

37

311

6,328

36,476(13.7%)(10.5%)(13.7%)(21.3%)(15.2%)(58.6%)(41.9%)(0.3%)(4.9%)(21.9%)(10.4%)(19.1%)(2.9%)(16.0%)(14.6%)

920

471

48

220

8

115

73

0

0

2

610

4

76

8,547

11,094(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(0.0%)(0.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)(100.0%)

634

378

41

52

4

0

0

0

0

2

133

1

12

2,964

4,221

(68.9%)(80.3%)(85.4%)(23.6%)(50.0%)(0.0%)(0.0%)(0.0%)(0.0%)(100.0%)(21.8%)(25.0%)(15.8%)(34.7%)(38.0%)

286

93

7

168

4

115

73

0

0

0

477

3

64

5,583

6,873

(31.1%)(19.7%)(14.6%)(76.4%)(50.0%)(100.0%)(100.0%)(0.0%)(0.0%)(0.0%)(78.2%)(75.0%)(84.2%)(65.3%)(62.0%)

Note: Figures in parentheses represent percentages for each proposal. The total percentage may not add up to 100 due to rounding.
Note: The figures for “Opposed” include 1,945 abstentions.

46
Copyright © 2024 Government Pension Investment Fund All rights reserved.

3. Comparison of the number of exercises of voting rights by fiscal year (Period from April to June)

Note: Comparison of the number of opposition votes to management proposals, etc., and the number of approvals of shareholder proposals
by fiscal year

FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023
Opposition to the
management
proposals orabstention from
Domestic
votingequityForeignequityApproval ofshareholder
proposals
Opposition to the
management
proposals orabstention fromvotingApproval ofshareholder
proposals

17,67422,07418,044

16,191

12,911

14,266

13,40812,491

15,061

22,25022,821

17,022

16,42918,199

11.6%

13.3%

11.6%

11.5%

9.5%

8.4%

7.9%

8.5%

10.3%

11.1%

12.3%

10.4%

10.1%

11.6%

47

34

58

34

56

55

65

167

129

215

319

154

262

417

2.6%

1.9%

2.7%

2.3%

2.9%

2.8%

4.7%

7.8%

8.8%

12.0%

12.2%

8.9%

10.0%

11.1%

7,293

6,087

5,422

7,161

7,269

10,778

11,162

13,076

17,061

17,51017,73428,38536,04236,476

6.9%

5.3%

4.9%

6.0%

6.7%

7.5%

7.7%

8.7%

10.3%

12.4%

13.1%

15.9%

17.2%

14.6%

2,085

1,486

1,655

1,503

1,483

2,650

2,630

3,295

2,849

2,504

2,008

2,772

3,526

4,221

38.9%

32.9%

35.2%

32.0%

40.3%

47.4%

43.0%

50.5%

53.3%

52.7%

43.8%

53.9%

52.2%

38.0%

47
Copyright © 2024 Government Pension Investment Fund All rights reserved.

Reference: GPIF’s Principles

Investment Principles

March 26, 2015
Revised: October 2, 2017
Last revised: April 1, 2020

[1] Our overarching goal is to contribute to the stability of the national pension system by securing theinvestment returns that it requires with minimal risk and from a long-term perspective, to the sole benefitof pension recipients.

[2] 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 our long-term investment horizon
to achieve investment returns in a more stable and efficient manner, while simultaneously ensuring
sufficient liquidity to pay pension benefits.
[3] We formulate our overall policy asset mix and manage risks at the portfolio, asset class, and investment
manager level. We utilize both passive and active management in order to achieve benchmark returns(i.e., average market returns) and seek untapped profitable investment opportunities.
[4] We believe that sustainable growth of investee companies and the capital market as a whole are vital inenhancing long-term investment returns. In order to secure such returns for pension beneficiaries,
therefore, we promote the incorporation of non-financial environmental, social, and governance (ESG)
factors into the investment process in addition to financial factors.
[5] In order to enhance long-term investment returns and fulfill our stewardship responsibilities, we shalladvance various initiatives (including the consideration of ESG factors) that promote long-termism andthe sustainable growth of investee companies and the capital market as a whole.
48
Copyright © 2024 Government Pension Investment Fund All rights reserved.

49
Copyright © 2024 Government Pension Investment Fund All rights reserved.

50
Copyright © 2024 Government Pension Investment Fund All rights reserved.