Stewardship Activities Report
2020-2021
March 2021

年金積立金管理運用独立行政法人
Government Pension Investment FundFor increasing long-term investment returns, GPIF will
fulfill its stewardship responsibilities by promoting
various activities to encourage long-term perspectives
and the sustainable growth of investee companies andthe whole capital market.

1. Stewardship & ESG Activities of GPIF

1. Stewardship Activities for GPIF
GPIF is a universal owner with a very large fund size and a widely diversified portfolio, and a cross-generational investor
designed as a part of a 100-year sustainable pension scheme. Given such features, prevention of activities that impede
corporates’ long-term growth as well as sustainability of the overall capital market is essential for us to secure our long-term
investment returns. GPIF contributes towards the sustainable growth of the capital market through the following activities.
As GPIF invests in equities and exercises voting rights through its external asset managers, we promote constructive
dialogues (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 investment returns. GPIF shall fulfill our stewardship responsibilities bypromoting engagement and building a win-win environment in the investment chain.

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2. History of GPIF’s Stewardship Activities

2014-15
May 2014
Accepted Japan’s
Stewardship Code.
Established “Policy to Fulfill
Stewardship Responsibilities.”
March 2015
Established “Investment
Principles.”▶“Stewardship activities inequity investment.”

2016-17
July 2016
Established “Business andAsset Owners’ Forum” and“Global Asset Owners’ Forum.”▶Exchange of opinions on
stewardship, ESG, etc.
June 2017
Established “Stewardship
Principles” and “Proxy Voting
Principles.”▶Requested compliancefrom asset managers forequity investment.

September 2015
Signed “Principles for Responsible
Investment (PRI).
August 2017
▶Enhanced initiatives for ESG.
Endorsed the revised Japan’s
Stewardship Code.

October 2017
Partial revision to “Investment
Principles.”▶Stewardship activities
including ESG-oriented
initiatives wereexpanded to all assets.

2018-19
November 2019
Partial revision to “Policy to
Fulfill StewardshipResponsibilities.”▶Focused on prevention ofactivities that impede longterm corporate growth toachieve sustainablegrowth of the overall markets.
▶Contribute to sustainablegrowth of markets.

2020-21
February 2020
Partial revisions to “Stewardship
Principles” and “Proxy Voting
Principles.”▶Requested compliance frommanagers of all domestic andforeign assets.
April 2020
Partial revisions to “Investment
Principles”▶ Following the revisions to the Basic
Policy of Reserves, the revised
Principle describes investments
taking into consideration thesustainable growth of investee
companies and the capital market as awhole as well as ESG.
June 2020
Endorsed the second revision to Japan’s
Stewardship Code.
Partial revision to “Policy to Fulfill
Stewardship Responsibilities”▶ The scope of subject assets was
expanded to all domestic and foreign
assets.
▶ Consideration of ESG factors has
been further clarified.

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2. History of GPIF’s Stewardship Activities■ Status of participation in global initiatives

Signed in September 2015

Six principles advocated in 2006 by Mr. Annan, then
Secretary General of the United Nations, which demand
institutional investors to include ESG in the investment
process.

Joined in October 2018

A five-year initiative led by investors, established in
September 2017. Via dialogues with companies
that are significantly influential in formulating
possible solutions to global environmental issues, itfocuses on the improvement of climate changerelated governance, initiatives for the
reduction of greenhouse gas emissions, theenhancement of information disclosure, etc.
GPIF, as an asset owner, has also joined its
Asia Advisory Group, which provides thesteering committee with advice on thecharacteristics of the Asian region.

Joined the Asset Owner Advisory Committee,
SDGs Advisory Committee, Japan Network
Advisory Committee, etc. GPIF acquired A+,
the highest score, in the module “strategy
and governance” in the 2020 assessment.

Joined the 30% Club in the U.K., and theThirty Percent Coalition of the U.S. in
November 2016. Joined the 30% Club inJapan in December 2019.
Established to seek diversity in boards of directors,
with the aim of achieving 30% female directors.

Joined in August 2019

An industry association established by institutional investors, focusing on
improvement of corporate governance and encouragement of stewardship
activities with the aim of promoting efficient markets and sustainableeconomy.

Supported in December 2018

Established by the FSB (Financial Stability Board) at the requestof the G20 Finance Ministers and Central Bank Governors
Meeting. In June 2017, the TCFD published voluntary
recommendations to encourage information disclosure on thefinancial impact of climate-related risks and opportunities toenable appropriate investment decisions by 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 U.S.
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3. Revisions to Principles and Policies:
Investment Principles■ Partial Revisions to the Investment Principles
ￚ Partial revisions were made to the Investment Principles on April 1 2020. (See page 8)
ￚ The revisions were made following the amendment (amended on February 27, 2020, and effective on April 1, 2020) to the “Basic Policy for Safe andEfficient Management and Investment of Reserves from a Long-term Perspective” (hereinafter, “Basic Policy of Reserves”) and in line with the Fourth
Medium-term Plan.
ￚ The principal revisions to the Basic Policy of Reserves are outlined below. These revisions were reflected in the Investment Principles.
(1) The concept behind ESG investment* (see Reference below) is clarified in the Basic Policy.
(2) The Basic Policy of Reserves clarified that the yields on the entire assets under management will be evaluated using compound benchmarks, etc.
The following three points were revised in the Investment Principles.
⇒ Paragraph 4 of the Investment Principles newly included investments with
(1) Investments considering ESG factors
consideration of ESG factors.
(2) Evaluation of investment yields on the entire⇒ Paragraph 3 of the Investment Principles was partly revised in terms of theassets under management
relevant investments.
(3) Stewardship responsibilities⇒ The item of stewardship responsibilities was partially revised and transferred
to paragraph 5 of the Investment Principles.

ￚ As to stewardship responsibilities, the revisions newly mentioned growth of the whole capital market from the viewpoint to clarify that it isindispensable for GPIF as a universal owner and a cross-generational investor that the whole capital market grows sustainably over the long term.
*Reference: Excerpts of the relevant paragraph from the Basic Policy of Reserves
Based on the concept that the sustainability of investee companies and the whole capital market will be critical for the expansion of long-term investment
returns in the management of pension reserves, the reserve funds shall implement necessary initiatives by individually examining the promotion of
investments that consider ESG (environmental, social and governance) as non-financial factors in addition to financial factors, from the viewpoint of
securing long-term returns for the interest of beneficiaries.

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3. Revisions to Principles and Policies:
Investment Principles
Investment Principles

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

1. Our overarching goal is to contribute to the stability of the national pension system by securing the investment returns
that it requires with minimal risk and from a long-term perspective, to the sole benefit of pension recipients.
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 in enhancing longterm investment returns. In order to secure such returns for pension beneficiaries, therefore, we promote theincorporation of non-financial environmental, social, and governance (ESG) factors into the investment process inaddition to financial factors.
5. In order to enhance long-term investment returns and fulfill our stewardship responsibilities, we shall advance various
initiatives (including the consideration of ESG factors) that promote long-termism and the sustainable growth of investee
companies and the capital market as a whole.
https://www.gpif.go.jp/en/about/philosophy.html
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3. Revisions to Principles and Policies:
Responses to Stewardship CodeOn March 24, 2020, a second revision to Japan’s Stewardship Code was implemented. In this second revision,consideration of sustainability for asset management strategy (medium- to long-term sustainability including ESG
factors) was added to the definitions of stewardship responsibilities, and other assets in addition to Japanese listed
equity were also included in the scope of assets.
GPIF endorsed the second revision to Japan’s Stewardship Code and is determined to fulfill its responsibilities as an
asset owner which is required by the Code.
■ Endorsement to the second revision of the Code and partial revisions to the Policy to
Fulfill Stewardship Responsibilities
ￚ GPIF endorsed Japan’s Stewardship Code which had been re-revised on March 24, 2020 (“the second revision to the Code”), and made partial
revisions to “the Policy to Fulfill Stewardship Responsibilities” on June 29, 2020.
ￚ The principal changes to the Policy to Fulfill Stewardship Responsibilities are outlined below.
 The scope of assets was expanded from equity to all assets. In line with the Investment Principles and other principles, the scope of assets was
expanded from equity to all assets. We continue to require our external managers to comply with the Stewardship Principles and Proxy Voting
Principles. Should an asset manager decide not to comply with any of the principles in light of respective situations such as the characteristics
and investment styles of their assets under management, they are required to explain their rationale for non-compliance to GPIF.
 As to responses to each principle of the Code, consideration of ESG factors has been clarified. Consideration of ESG factors is explained in
Principles 1 and 7.
 It was added that our external asset managers are required to disclose their rationale of exercise of voting rights in accordance with importanceor if needed (Principle 5).
https://www.gpif.go.jp/en/investment/endorsement_to_the_second_revision_of_japan%27s_stewardship_code.pdf
https://www.gpif.go.jp/en/investment/policy_to_fulfill%20stewardship_2020.pdf
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4. Initiatives for the Sustainable Growth of the Whole CapitalMarket

It is indispensable for GPIF as a cross-generational investor and a universal owner that the whole capital
market grows in a sustainable manner. Prohibited from conducting in-house management of equity investmentby the relevant law, GPIF invests and exercises voting rights through external asset managers. Therefore, GPIF
promotes dialogues between its external asset managers and investee companies. GPIF believes that
disclosure is important for both parties to conduct efficient dialogues. Particularly, disclosure of ESG
information is likely to increase in importance as disclosure of non-financial information becomes more
important going forward. GPIF agreed to the purpose for the establishment of JPX ESG Knowledge Hub, andparticipated as a supporter.
■ Participation in JPX ESG Knowledge Hub
ￚ ESG Knowledge Hub was established in November 2020 by JPX based on perspectives for encouraging ESG disclosures by listed companies
with the intention of providing one-stop access to contents and information that explain ESG investments, and to make ESG Knowledge Hub acommunity that connects listed companies, investors and related institutions in the future.
ￚ The purposes of ESG Knowledge Hub match the significance of GPIF’s stewardship activities 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 level of the Japanese stock market.
ￚ Agreeing with the purpose of the establishment, GPIF participated from the beginning as a “supporter,” a qualification for participation as aninvestor and related organization. (At the time of establishment, the 28 supporters that participated were domestic and overseas investors andrelated organizations including governmental ministries and agencies.)
ￚ GPIF, as an asset owner, will endeavor to promote constructive dialogues (engagement) taking into consideration ESG factors through its
activities as a supporter.
Supporting ESG
disclosures bylisted companies(Overview of GPIF)
https://www.jpx.co.jp/corporate/sustainability/esgknowledgehub/esg-investor/10.html(Practical Seminars for ESG Disclosure)https://www.jpx.co.jp/corporate/sustainability/esgknowledgehub/practical-disclosure-seminar/2020-104.html

Copyright © 2021 Government Pension Investment Fund All rights reserved.

105. Promotion of ESG Activities
Based on the concept that the sustainable growth of investee companies and the whole capital market will be
required for the improvement of investment returns, GPIF promotes ESG activities. On the assumption that
ESG activities will reduce risks, GPIF believes that the longer the investment horizon is, the greater the riskadjusted return will improve.

■ Checking support for the PRI and TCFD Recommendations
ￚ In the Stewardship Principles, GPIF has stipulated “ESG integration into the investment process” and requires its external asset
managers to sign the PRI. In the revision in February 2020, GPIF also required its external asset managers to proactively participate
in various initiatives concerning ESG.
ￚ GPIF conducted a questionnaire survey and interviews with its external asset managers entrusted with equity and fixed-income
investments concerning the status of their participation in initiatives such as PRI and TCFD recommendations. The status of support
for the PRI and participation in TCFD recommendations, to which an increasing number of Japanese companies have expressed
their support as an example of initiatives, and the status of their disclosure are outlined below.
ￚ All external asset managers entrusted with equity, fixed-income and alternative asset investments are signatories of the PRI.
ￚ More than 90% of external asset managers expressed their support for TCFD. Almost one-quarter of them expressed their support in2020 and thereafter, which shows that support has been further increasing during the past one year. Even in the case of asset
managers who have not expressed their support, a large part of them supported TCFD in their groups as a whole, or are currently
considering their stance.
ￚ Meanwhile, external asset managers which have already implemented disclosure in accordance with the TCFD recommendations
account for 76% of those who expressed their support, which demonstrates the mixed status of disclosure. Various forms of
disclosure included issuance of independent publications such as TCFD Report or Climate Report, and other asset managers madedisclosure as part of sustainability report and the like. There are also asset managers who posted descriptions on their websites andin the reporting according to the PRI. Thus, we found that many asset managers are positive to better disclosure in any way by trying
various methods.
ￚ There are many cases in which TCFD disclosure is the theme of engagement with investee companies. Therefore, knowledge andexperience of disclosure by the relevant asset managers are likely to serve as reference and encouragement to corporate disclosure
while sharing the present status.
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5. Promotion of ESG Activities■ Critical ESG issues listed by asset managers
ￚ In the Stewardship Principles, GPIF states “ESG integration into the investment process.” Accordingly, GPIF continued from the previous
year to conduct a questionnaire survey and interviews concerning “Critical ESG issues” selected by each external asset manager.
ￚ Please refer to pages 33 and 34 for “Critical ESG Issues” chosen by asset managers entrusted with equity investment.
ￚ Based on the results, GPIF ascertains why they highlighted such issues and how they engage with investee companies regarding these
topics.
ￚ This time, GPIF also ascertained the “Critical ESG issues” considered by each asset manager entrusted with fixed-income investment (seepage 35). Questions on fixed-income investment were asked on the assumption of corporate bonds. As for government and public bonds,
GPIF received separate answers based on the open-ended method if asset managers established critical ESG issues.
ￚ In order to promote constructive dialogue between investee companies and investors, GPIF also asked investee companies their principle
ESG themes in the “6th Questionnaire Survey on Stewardship Activities by Institutional Investors” conducted in January 2021.

■ ESG integration
ￚ As mentioned on the above, GPIF is committed to “ESG integration into the investment process” in the Stewardship Principles. In the
Stewardship Activities Report 2019, GPIF stated “ESG integration across different investment styles” under the section of “Expectations andChallenges for External 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 ininvestment analysis and investment decisions.”<Assessment of ESG Integration>− From the comprehensive assessment (equity and fixed-income investments) conducted in 2019, GPIF included the assessment of ESG
Integration as part of “Investment process.” ESG Policy, collection and analysis of importance of ESG information, changes in impact on thecorporate sector, application to investment decisions, etc. are assessed in the management process.
ￚ ESG-related engagement and exercise of voting rights are assessed as part of the “Stewardship Activities” as have been conducted to date.
Copyright © 2021 Government Pension Investment Fund All rights reserved.

126. Reinforcement of Engagement with Relevant Organizations■ Engagement with external asset managers
ￚ Regarding communication with external asset managers, GPIF has shifted from a one-way annual monitoring model toan “engagement” model, focusing on two-way communication and exchanging views on stewardship responsibilities, as
stated in the “Summary Report of GPIF’s Stewardship Activities in 2016.” Accordingly, GPIF has called meetings andconducted surveys on particular themes or as required, in the form of stewardship meetings, etc., in addition to holding
an annual assessment meeting.
ￚ In 2020, amid the Covid-19 pandemic, our discussion meetings have been basically shifted from face-to-face meetingsto Web conferences since April 2020. By using the Web conference system, we held dialogues with external asset
managers including those based outside Japan more often than ever. Particularly from April to June, we exchanged
opinions on the core themes including the stewardship activities we should pursue based on long-term perspectives
toward the future after the COVID-19 pandemic, dialogues with companies under crisis, and exercise of voting rights.
ￚ GPIF also began continuous dialogues with the management teams of external asset managers over the limits ofmandate. It was extremely useful for us, in promoting mutual understanding, to exchange opinions with the
management teams of external asset managers and relevant sections on the themes ranging from how asset
management companies should be in terms of not only asset management business and stewardship activities, future
perspectives but also new ideas. Therefore, we will continue this dialogue in the future.
ￚ GPIF also held briefings for external asset managers in addition to individual meetings when we established new
policies and implement significant changes. We focus on two-way communication by exchanging opinions and providing
feedback in order to fully explain the background and concepts of these policies and changes, through Q&A sessions
and follow-up questionnaires. With the change in GPIF’s management system in 2020, GPIF implemented engagement
individually concerning its way of thinking and requirements for external asset managers. In addition, GPIF held
briefings for external asset managers as follows.

<Briefing for external asset managers>
・ Briefing for external asset managers (November 2020)
GPIF explained and exchanged opinions concerning changes in business management systems, changes in guidelines,
Stewardship Principles, Proxy Voting Principles, and schedules for future assessment of stewardship activities ofexternal asset managers engaged with fixed-income investment.
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6. Reinforcement of Engagement with Relevant Organizations■ Engagement with external asset managers (continued)<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. The following
are asset managers for domestic equities who have already disclosed them publicly. It should be noted, however, that the frequency and details of thedisclosure vary depending on each asset manager, and GPIF will continue to conduct engagement for the improvement of disclosure.

[Asset managers that have publicly disclosed the details of proxy voting records (GPIF’s external asset managers for domestic equities)] Asset Management One
http://www.am-one.co.jp/company/voting/ Eastspring Investments(Eastspring Investments (Singapore) Limited)https://www.eastspring.co.jp/about-us/our-policy/voting-rights
 Invesco Asset Management (Japan)
http://www.invesco.co.jp/footer/proxy.html
 Capital International (Capital International, Inc.)https://www.capitalgroup.com/advisor/jp/ja/proxy-voting.html
 Goldman Sachs Asset Management(Goldman Sachs Asset Management, L.P., etc.)
https://www.gsam.com/content/gsam/jpn/ja/gsitm/aboutgsam/stewardship-code.html
 JPMorgan Asset Management (Japan)
https://www.jpmorganasset.co.jp/wps/portal/Policy/Guideline
 Schroders Investment Management (Japan)
http://www.schroders.com/ja-jp/jp/asset-management/aboutschroders/proxy-voting/ Nikko Asset Management
http://www.nikkoam.com/about/vote/results Nomura Asset Management
http://www.nomura-am.co.jp/corporate/service/responsibility_investment/vote.html

 Nomura Asset Management (Dimensional Fund Advisors LP)
https://us.dimensional.com/about-us/investment-stewardship FIL Investments (Japan)
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
http://www.smtam.jp/company/policy/voting/result/
Mitsubishi UFJ Trust and Banking
https://www.tr.mufg.jp/houjin/jutaku/about_stewardship.html
 Russell Investments Japan(Russell Investments Implementation Services, LLC.)
https://russellinvestments.com/jp/legal/proxy Resona Asset Management
https://www.resona-am.co.jp/investors/giketuken.html
Note: Names in parentheses indicate subcontractors.
URLs are based on information as of March 1, 2021.
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6. Reinforcement of Engagement with Relevant Organizations■ Assessment of “Stewardship Activities” by asset managers for equity investment
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 is passively managed, and GPIF invests in a wide rage of listed companies. For the improvement of returns
for GPIF, the sustainability of the entire market is crucial. Therefore, GPIF believes that it is critical for passive managers to implement
engagement activities, which would encourage investee companies to increase their corporate value and the sustainable growth of the entire
market from the long-term perspectives.
ￚ In Japan’s Stewardship Code revised in May 2017, the importance of dialogue in passive investment is clarified. Furthermore, the possibility ofcollaborative engagement is also referred to as a means of dialogue.
ￚ Furthermore, in the second revision of the Stewardship Code published in March 2020, “consideration of sustainability consistent withinvestment management strategies (medium- to long-term sustainability including ESG factors)” was added to the definitions of the StewardshipResponsibilities. Thus, the importance of ESG has been increasing more and more to fulfill stewardship responsibilities.
ￚ The second revision clarifies the expectations for Stewardship activities with consideration of ESG factors, particularly its significance in passive
investment. GPIF highly evaluates asset managers who fulfill stewardship responsibilities more effectively if the preconditions are similar.
ￚ With respect to Stewardship activities, passive managers are assessed in terms of their contribution to the sustainable growth of the market,
whereas active managers are assessed in terms of their contribution to increasing shareholder value of the investee companies in the long run.

Equity active

WeightEquity passive

Investment policy, investment process,organization, human resources, etc.

70%

90%

Stewardship
responsibilities

30%

10%

Viewpoints of assessment ofstewardship activities
Base for the assessment

Contribution to the sustainable growth of theContribution to increasing shareholder value ofmarketthe investee companies in the long term(Common to both passive and active)
Stewardship Code, GPIF’s Stewardship Principles and Proxy Voting Principles
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6. Reinforcement of Engagement with Relevant Organizations■ Assessment of “Stewardship Activities” by asset managers for equity investment(continued)
ￚ Since the introduction of the Stewardship Code in 2014, the stewardship activities of asset managers have been formalistically wellorganized. Following the second revision of the Stewardship Code, GPIF changed the assessment system of initiatives for
stewardship responsibilities to an assessment system for more substantial activities, and a new assessment system has been
adopted since a comprehensive assessment system began in 2020.
ￚ Specifically, we focused on the following points, and exchanged opinions on how they are working on stewardship activities. We also
referred to information obtained from external providers.
 Frameworks (organizations, management of conflicts of interest)
 Endorsement status of Japan’s Stewardship Code and the Principles for Responsible Investment (PRI) Stewardship activities (policy, current actions, implementation of engagement)
 ESG activities including responses to their critical ESG issues selected by GPIF’s asset managers
 Exercise of voting rights (topics, cases where judgments are divided at each external asset manager, process of judgments on
exercising shareholder proposals, etc.)
 Responses to the GPIF’s Stewardship Principles and Proxy Voting Principles in disclosing the details of proxy voting records, etc.
ￚ In cases we acknowledge concerns about governance of external asset managers, such as conflicts of interest, through reports andinterviews, GPIF communicates its concerns and engages in various opportunities, aiming to alleviate such concerns.

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6. Reinforcement of Engagement with Relevant Organizations■ Assessment of “Stewardship Activities” for Other Assets<Fixed income investment>ￚ The scope of assets under the Stewardship Responsibilities was expanded to all assets in accordance with the revised UK
Stewardship Code which took effect in January 2020 (“The UK Stewardship Code 2020”). Furthermore, it was explicitly stated in thesecond revision of Japan’s Stewardship Code revised in March 2020 (hereinafter, “Revised Code”) that other assets also became
applicable although the assets subject to assessment had been assumed to be Japanese listed equities. Accordingly, it seems thatthe stewardship activities of fixed-income investors will make further progress.
ￚ On the back of this trend, more and more Japanese and foreign asset managers engaged with fixed-asset investment have
expanded their scope of stewardship activities including ESG integration and ESG engagement. Some foreign asset managers
engaged with fixed-income investment have begun to invite supervisors responsible for stewardship and ESG from outside of theirorganizations.
ￚ After Japan’s Stewardship Code was revised for the second time, GPIF asked its external asset managers engaged with fixedincome investment about signing the Revised Code, and found that those who signed it accounted for over 70%. It was also
ascertained that over 60% of those that haven’t signed the Revised Code had already signed the UK Stewardship Code 2020, andthat the signatories to either Japan’s or UK Stewardship Code accounted for just under 90% of asset managers engaged with fixedincome investment. The signatories to the Revision Code who answered that the scope of assets subject to the Code covered
fixed-income accounted for almost 50%.
ￚ As of today, GPIF does not assess stewardship activities for fixed-income investment, while in 2020, a questionnaire survey on the
stewardship activities for fixed-income investment was conducted to asset managers engaged with fixed-income investment. Thus,
GPIF ascertained the current initiatives for the whole stewardship activities including the implementation status of engagement aswell as future plans and challenges.

Copyright © 2021 Government Pension Investment Fund All rights reserved.

176. Reinforcement of Engagement with Relevant Organizations■ Assessment of “Stewardship Activities” for Other Assets (continued)<Alternative assets>
ￚ Alternative assets (infrastructure, real estate, private equity) are an asset class in which asset managers may have an impact
directly on the ESG activities of investee companies. As a result, investors focusing on ESG when selecting investment managers
are increasing mainly outside Japan. GPIF has placed an emphasis on stewardship responsibilities and the initiatives for ESG as
critical points of evaluation since it started call for application of investment managers in April 2017.
ￚ After selecting investment managers, GPIF requests them to submit “ESG Report” on a regular basis, based on which GPIF
assesses in the comprehensive assessment their initiatives for stewardship responsibilities including the factors mentioned below.
As the fund of funds type investment has been currently adopted in alternative investment, GPIF exchanges opinions concerning
how the gatekeepers and managers of fund of funds implement stewardship activities.
 Frameworks (organizations, management of conflicts of interest, etc.)
 Endorsement status of the Principles for Responsible Investment (PRI) Stewardship activities including ESG (policy, current actions, implementation of engagement, and response to ESG issues
according to the characteristics of the assets)ￚ In March 2020, GPIF, as a real estate investor member, joined “GRESB*,” an initiative providing a benchmark for ESG(Environment, Society and Governance) in real estate and infrastructure investments. In assessing external asset managers, GPIF
also ascertains the status of their use of GRESB.
ￚ While all investment managers are signatories to the PRI at the level of gatekeepers or fund of funds managers, not all managers
at the level of investee funds are necessarily so.
ￚ Both gatekeepers and fund of funds managers confirm their ESG activities when they select investee companies. After selecting,they conduct engagement with investee companies, including encouragement of the establishment of ESG policies.
* Outline of GRESBGRESB is an initiative established in 2009 mainly by European pension funds and provides ESG benchmarks for real estate andinfrastructure investments. GRESB assesses the initiatives and achievements of ESG investments by real estate companies and realestate funds on an annual basis. In the annual assessment for 2020, more than 1,200 real estate companies and funds participated,
and the amount of the subject real assets including infrastructure reached approximately 5.3 trillion dollars. More than 120 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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6. Reinforcement of Engagement with Relevant Organizations
Approximately
80% of GPIF’s assets are passively managed. Although indices function as critical
GPIFは、投資先及び市場全体の持続的成長が、運用資産の長期的な投資収益の拡大に必要であると
factors
directly linked to performance, GPIF and other participants of the investment chain haveの考え方を踏まえ、ESGを考慮した取り組みを進めています。それにより期待されるリスク低減効果につ
failed to allocate sufficient resources to select indices. Based on the awareness of such problem,
いては、投資期間が長期であればあるほど、リスク調整後のリターンを改善する効果が期待されます。
GPIF not only implements engagement with index providers concerning their index governancesystems but also promotes initiatives such as the conclusion of direct agreements to fund indices.
■ Engagement with index providers
ￚ In passive investment, the important factor of success is the selection of benchmarks, rather than the degree of investment skill.
However, asset owners including GPIF have not exerted more efforts for selecting benchmarks than understanding theimportance of benchmarks. In the investment chain, it is asset owners who have the most significant impacts on the investment
performance and evaluations by selecting benchmarks and improving quality. On the back of the awareness of the abovementioned problem, GPIF partially introduced the “Index Posting System” in fiscal 2019 with the aim of effectively gathering
information on various indices in order to enhance our overall fund management.
ￚ GPIF has implemented due diligence and engagement, since we acknowledged the significance of assessment of index
providers’ organization structure as well as governance system, while working in selecting benchmarks such as ESG index.
Specifically, GPIF strictly examines the relationships between stakeholders (shareholders and major customers) and rating
agencies/index providers, their decision-making processes (whether they have independent committees, what they discussed),
and whether they engage in any businesses that are likely to fall under conflicts of interest, such as consulting services forcompanies. GPIF believes index providers should be responsible for establishing solid governance systems and implementing
decision-making from the investor-oriented point of view, according to their increasing presence year after year.
ￚ Furthermore, GPIF, as an asset owner, has proactively participated and provided opinions in the consultation meetings held byindex providers and ESG rating agencies when they consider changes in the index methodologies and ESG assessment
methodologies. GPIF encourages external asset managers to similarly implement and express opinions.
ￚ GPIF has been considering reviewing its style of contract with index providers while enhancing our commitment to indices. We
believe that the alignment with not only index providers but also passive managers would be reinforced if the index license fee is
directly borne by GPIF.

Copyright © 2021 Government Pension Investment Fund All rights reserved.

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7. Initiatives for Promoting Dialogues between Asset Managers
and Investee Companies■ Survey of companies listed on the 1st Section of the Tokyo Stock Exchange
ￚ GPIF conducted our 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 situations of “constructive dialogue” (engagement). Since thethird survey in 2018, we expanded the subjects to companies listed on the TSE’s first section, in order to gain direct feedback
from a wide range of companies. In January 2021, we conducted the sixth survey.
ￚ In the fifth survey in January 2020, 662 companies responded (accounting for 30.6%). The survey questions were as follows:(1) Evaluation concerning stewardship activities of GPIF’s asset managers; (2) Actual status concerning “constructive dialogue”(engagement); (3) Changes in the past one year; (4) IR and ESG activities of investee companies; and (5) GPIF’s initiatives.
The results of the survey are available here: https://www.gpif.go.jp/en/investment/summary_report_of_the_5th_survey.pdf■ Business and Asset Owners’ Forumￚ The forum was established based on a proposal to establish a “platform for continuous and constructive dialogue between GPIF,
an asset owner, and companies,” which we received from several companies including OMRON Corporation, Eisai Co., Ltd., andNissan Motor Co., Ltd. The first forum was held in September 2016.
ￚ Participated by 10 companies including three lead organizer companies and five asset owners.
[Participating companies]<Lead organizers> Eisai Co., Ltd., OMRON Corporation, Nissan Motor Corporation<Other companies> Asahi Group Holdings, Ltd., JFE Holdings, Inc., Shiseido Co., Ltd., TOTO Ltd., Nippon Telegraph andTelephone Corporation, Hitachi, Ltd., Mitsubishi Chemical Holdings Corporation[Asset Owners]
Federation of National Public Service Personnel Mutual Aid Associations, Pension Fund Association for Local Government
Officials, National Federation of Mutual Aid Association for Municipal Personnel, Promotion and Mutual Aid Corporation forPrivate Schools of Japan, Government Pension Investment Fund (GPIF).
ￚ We decided to not hold the meeting in 2020 due to the COVID-19 pandemic, and are considering to resume it in 2021.
ￚ An outline of the discussions is available here: https://www.gpif.go.jp/en/investment/business-asset-owner-forum.html. We provide feedback to
our external asset managers and overseas asset owners.
Copyright © 2021 Government Pension Investment Fund All rights reserved.

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7. Initiatives for Promoting Dialogues between Asset Managers
and Investee Companies■ “Excellent Integrated Reports” and “Most-improved Integrated Reports” selected by
GPIF’s external asset managers entrusted with domestic equity investment

ￚ GPIF considers integrated reports to be important tools of constructive dialogue for improving corporate value, and believes they are
instrumental for interactive engagement between external asset managers and investee companies.
ￚ Therefore, since 2016 GPIF has requested external asset managers for domestic equities to nominate companies that have createdexcellent integrated reports, with the aim of encouraging companies to start creating or enhancing integrated reports and encouraging
investors to utilize them. For the fifth year, GPIF requested asset managers to nominate up to 10 “excellent integrated reports” and 10“most-improved integrated reports” in December 2020. GPIF compiled the results and announced them in February 2021.
ￚ We received positive feedback from companies, such as “the management began to pay more attention to the integrated reports,” “moreactive collaboration among relevant staff and departments has been found,” “Raised awareness of the integrated reports within thecompany,” “We observed PR effects through the company website and social media,” “It helps us to prepare our next integrated reports,” toname a few.
ￚ Backed by the heightened awareness from the business 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 external asset managers for domestic equities named a total of
77 companies for their “excellent integrated reports.” The following
companies were nominated by four or more respondents as publishersof “excellent integrated reports.”


ITOCHU Corporation

○ Most-improved Integrated Reports

GPIF’s external asset managers for domestic equities named a total of 94
companies for their “most-improved integrated reports.” The following four
companies were nominated by four or more respondents as publishers of the“most-improved integrated reports.”

Nominated by SIX asset managers

Nippon Paint Holdings Co., Ltd.

Hitachi, Ltd.

Five asset managers



Daito Trust Construction Co., Ltd.

Four asset managers



Tokio Marine Holdings, Inc.

Five asset managers

Ajinomoto Co., Inc.

Four asset managers

Kirin Holdings Company, Limited

Four asset managers



Mizuho Financial Group, Inc.

Four asset managers

Fuji Oil Holdings Inc.

Four asset managers



Mitsui Chemicals, Inc.

Four asset managers



Mitsubishi Chemical Holdings Corporation

Four asset managers



Kao Corporation

Four asset managers



OMRON Corporation

Four asset managers

Ricoh Company, Ltd.

Four asset managers



MARUI GROUP CO., LTD.

Four asset managers

Nominated by SIX asset managers* Please visit following website for the details including principal commentsof the asset managers
https://www.gpif.go.jp/en/investment/excellent.most-improved-Integrated-reports_2020.pdf
Copyright © 2021 Government Pension Investment Fund All rights reserved.

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8. Enhancing Collaboration with Stakeholders and Relevant
Organizations■ Enhancing collaboration with stakeholders and relevant organizations<Collaboration with stakeholders>
Discussion Meeting: “Development of ESG investment and promotion of constructive dialogues between investee companies andinvestors” (November 2020 issue, Monthly magazine “Keidanren” published by Keidanren)<Collaboration with Global Asset Owners>
Global Asset Owners’ Forum

Established as a forum for continuous exchange of opinions to further fulfill our stewardship responsibilities with the aim of utilizing
mutual knowledge with foreign public pension funds, etc. The first conference was held in Tokyo in November 2016. GPIF,
CalPERS and CalSTRS served as co-organizers.
ￚ Members except for co-organizers include the following (as of March 2021):[USA] Florida State Board of Administration, The Regents of University of California, The World Bank; [Canada] bcIMC, OTPP;[Europe] NBIM, APG, PGGM, AP2, ERAFP, USS; [Singapore] GIC; [Australia] HESTAￚ We decided to not hold the conference in 2020 due to the COVID-19 pandemic, and are considering to resume it in 2021.
<Participation in meetings organized by ministries>[Ministry of Foreign Affairs] The Round Table for Promoting Implementation of the Sustainable Development Goals (SDGs)– Mr. Miyazono, President, participated as a member.
<Presentations at various seminars and international conferences (since last reported)>
June 2020: ASEAN Webinar Series - ASEAN Green Bond Investors August 2020: PRI Japan Network Webinar – COVID-19 Pandemic and ESG investment October 2020: “TCFD Summit 2020” hosted by the Ministry of Economy, Trade and Industry
November 2020: Green & Social Bond Conference
November 2020: GO ESG ASEAN Corporate Sustainability Virtual Summit 2020
December 2020: IR Conference 2020
February 2021: “ESG Investment Seminar for Pension Funds” hosted by the Ministry of the Environment
Copyright © 2021 Government Pension Investment Fund All rights reserved.

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(Reference) PRI and SDGs
Increase ininvestment
opportunities

Addressing social issues will lead to thecreation of business opportunities andinvestment opportunities.

ESG Investments

GPIF
Promotion of ESG

Companies

Investment
managementcompanies

Signed in September 2015

Increase inbusiness
opportunities

Investment returns

Consent

Creating Shared Value (CSV)

Sustainable Society

Principle 1: We will incorporate ESG issues into investment
analysis and decision-making processes.
Principle 2: We will be active owners and incorporate ESG issues
into our ownership policies and practices.
Principle 3: We will seek appropriate disclosure on ESG issues by
the entities in which we invest. (Principles 4 through 6
are omitted.)
GPIF’s initiative:
Participate in various PRI committees such as
the Asset Owner Advisory Committee.

GPIF’s initiative:
Mr. Miyazono, President, participated in the Round Table for Promoting
Implementation of the SDGs hosted by the Japanese government.

(Source: Created by GPIF based on information from the United Nations, etc.)
Copyright © 2021 Government Pension Investment Fund All rights reserved.

23

2. Stewardship Activities by GPIF’s
External Asset Managers, andIssues to be Addressed1. GPIF’s View on Current Status of External Asset Managers<Stewardship Activities on Equity Investment> The overall quality has been improved as observed in both the activities and speed of actions of each asset manager. In addition totheir company-wide commitments, in the case where an asset manager belongs to a financial group, the group as a whole has
further committed itself to stewardship and ESG, which implies that such commitment has become a focal point of business.
 More and more external asset manager, both passive and active investment, have developed new policies on engagement and ESG,
for which asset managers now implement organizational initiatives. Reviews on the policies are also implemented periodically, while
taking actions corresponding to changes in the business environment.
 In stewardship reports, some asset managers established and disclosed plans for stewardship activities from medium- to long-term
perspectives, including specific priority actions and other activities planned for several years ahead. Meanwhile, other external asset
managers send letters to investee companies, as a tool to communicate their views and a chance to start dialogues with the
management. It is critical to continue to monitor how they implement these plans in the engagement platforms.
 Despite these initiatives which are put into practice, there are still some asset managers which do not fully understand the GPIF’s
Stewardship Principles and the Proxy Voting Principles.
 In the past a few years, some passive and active managers have established and enhanced a designated department in charge of
stewardship activities. Full-fledged efforts toward stewardship activities and more organized efforts throughout the year can beobserved.
 As mentioned above, while active managers also implement engagement activities, their definitions of engagement and their actions
vary depending on their organizational structures and investment styles. Some managers have a designated department in charge of
their stewardship activities including engagement, while others do not. Particularly, as for the former case, cooperation between
investments and stewardship activities are properly established. For the latter case, the focus should be placed on the commitmentof the fund manager, and who takes leadership initiatives and how they are taken in order to make them more organized activities.
 All asset managers for domestic and foreign equities answered that they have taken measures for ESG issues. With respect tomanagers for domestic equities, some have taken further measures for “E (environment)” and “S (social)” issues, compared to thepast. Some active managers for domestic equities have also taken further measures for “E (environment)” and “S (social)” issues, inaddition to proactive engagement concerning “G (governance)” issues. Some other asset managers implement dialogues concerning
ESG in their engagement with small- and medium-sized companies.
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1. GPIF’s View on Current Status of External Asset Managers<Stewardship Activities on Equity Investment (continued)> We believe that integrated reports and corporate governance reports are primary tools for interactive communication in implementing
engagement and measures for ESG issues. While we are fully aware that asset managers have been moving forward on their use of
those tools, we expect that analysts and fund managers, in addition to specialists in stewardship and ESG, will also further deploy
these reports.
 Some managers including Japanese asset managers are promoting reform measures of not only investee companies but also theentire investment chain, by way of submission of public comments to overseas regulatory authorities and proactive engagement withstock exchanges and index providers.
 Japanese asset managers participated in joint initiatives such as CA100+ more proactively than foreign asset managers. As a whole,more and more asset managers joined global initiatives, using them as platforms to gain expertise and conduct joint engagements.
 It is observed that more and more asset managers, both passive and active investment, have participated in joint initiatives eventhough they had focused on engagement solely by themselves. GPIF will ascertain the newly joined asset managers how they will
actually use the engagement going forward.
 Some asset managers not only participated in joint initiatives but also worked together from the establishment phase. The Net Zero
Asset Managers initiative inaugurated in December 2020 comprises GPIF’s five asset managers (one Japanese and four foreign
asset managers) as founding members.

<Exercise of Voting Rights>
 Depending on the cases, we positively assess asset managers when they exercised their voting rights in a way that it is notnecessarily pursuant to voting policies but in line with their activities or actual situations as a result in engagement. As we consider
voting along with engagement, we expect them to take measures that would contribute to enhancing long-term corporate value.
 In the announcement of the results of exercising individual voting rights by asset managers for domestic equities, there were obvious
differences in timing, frequency and items of disclosure. We also found some asset managers’ disclosure inappropriate for dialogues
with companies towards next year’s general meeting of shareholders. Many asset managers, however, made quarterly disclosures sothat the announced results would be of use in the dialogue after the general meeting of shareholders.
 In the case where external asset managers for domestic equities oppose an investee company’s proposal, all of them disclose thereasons for such decision. While responses to shareholder proposals vary, the reasons for exercising voting rights for approval
and/or opposition are disclosed. Some asset managers implement their own ideas by flagging investee companies such as business
partners in the Group in which conflicts of interest are likely to take place, and provide more detailed explanations than usual. Other
asset managers disclose the reference on their stewardship and exercise of voting rights. Some foreign asset managers of equity
investments voluntarily disclose the result of exercise of voting rights.
Copyright © 2021 Government Pension Investment Fund All rights reserved.

26

1. GPIF’s View on Current Status of External Asset Managers<Exercise of Voting Rights (continued)> When required their investees an increase in independent external directors, some asset managers for domestic equities allowed
almost one-year grace period from the announcement of change in voting policy before taking effect, in order to let them know thechange and implement engagement. Similarly, when some asset managers for foreign equities began including Diversity in theirvoting policy, each of them elaborated their own methods of engagement and exercising voting rights, for example by setting a grace
period until the implementation.
 Both asset managers for domestic and foreign equities use proxy advisory firms. The majority of them use these firms in order tocollect information, outsource administrative services concerning exercising 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 deployed
the recommendations of advisory firms for the exercise of voting rights of the investees other than those required management ofconflict of interest. GPIF uses the results of recommendations provided by ISS and Glass Lewis for analysis after the General
Meeting of Shareholders.
 Regarding voting instruction errors and administrative errors made by custodians, we have requested asset managers andcustodians to take appropriate measures, considering the importance of exercising voting rights. We requested asset managers to
conduct explanations and engagement.

<Initiatives under the COVID-19 Pandemic>
 Some asset managers informed solely or collaboratively their investee companies of their ways of thinking on stewardship activities
and messages at an early stage. Also, other asset managers sent messages to clients concerning their business continuity, etc.
Even under the current restricted environment, they strive to implement dialogues with investee companies using Web conference
systems and video conference systems without suspending stewardship activities including engagement thanks to the intensive
efforts by both companies and investors.
 As to the exercise of voting rights, some asset managers decided to handle the criteria in a flexible manner considering the status ofindividual companies while other asset managers changed the criteria across the board. GPIF believes that individual consideration
should be given to each investee company according to the status of stewardship activities.
 GPIF will continue to ascertain the responses taken by asset managers going forward.

Copyright © 2021 Government Pension Investment Fund All rights reserved.

27

2. External Asset Managers’ Governance Structures andManagement of Conflicts of Interest with their Parent
Companies, etc.
[Issues carried over from the previous year]While third-party committees are established in all Japanese asset managers for equity investment, there are some cases in which the status of holding
committee meetings are hardly visible from outside, and where the targets subject to the management of conflicts of interest are extremely limited. The
involvement in voting also varies largely depending on external asset managers. Given changes in some organizations, it may be necessary to verify thefacts and conduct a review in order to make it more effective in the future.



Since there has been progress in the management of conflicts of interest and the development of voting guidelines, we believe that it is important to makerevisions according to the actual situation and utilize them appropriately for practical purposes.



Responses to shareholder proposals to their own company or the group companies including their parent company.

 In recent years, at Japanese asset managers for equities, organizational segregation aimed at preventing conflicts of interest
between the investment division and other divisions has been promoted, including by way of company split and integration of theinvestment division. In a case where the split division was organized as a separate company, various initiatives are quickly put into
practice under the leadership of the top of the organization. Some asset managers appointed a leader of the organization fromoutside of the company. All Japanese asset managers for equities have already organized proper governance structures, including
the election of outside directors and the establishment of a third-party committee comprised mainly of outside directors. The focus
has now shifted to their effectiveness and improvement, if necessary.
 The compensation schemes for executives and employees of external asset managers ultimately reflect their position within theGroup, the relationship with a parent company, and their corporate culture, which suggests the importance of the compensation
scheme and the incentive system.
 While we found some asset managers having challenges in identifying investees to be managed in terms of conflicts of interest, in
responding to misconduct when it occurred in the parent company and the group companies, and in responses including exercise
of voting rights, a certain level of improvement has been observed in the responses to exercise of voting rights to parent company
and the group companies.
 Meanwhile, it was revealed that some foreign asset managers have no organizational segregation or no visible scheme to prevent
conflicts of interest, indicating that the predominance of external foreign asset managers has no solid basis as expected.


It is confirmed that management of conflicts of interest in voting and voting guidelines are formalistically well organized.

 However, given an increase in the number of shareholder proposals to both Japanese and foreign asset managers, their parent
company and the group companies, we found there were some cases in which the current rules for decision processes ofshareholder proposals were unable to function to the fullest. While some asset managers have already changed their decision
processes, GPIF will demand that other asset managers make improvements as one of the future challenges.
Copyright © 2021 Government Pension Investment Fund All rights reserved.

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3. Engagement by Passive Managers and Proper Exercise of
Voting Rights[Issues carried over from the previous year]Establishment of passive investment models focused on stewardship activities, and verification of the effectiveness of the appointed funds.



New proposals for business models of passive investment focused on stewardship activities.



Exercise of voting rights and its disclosure in accordance with the purpose of the GPIF’s Proxy Voting Principles.

Implementation of engagement in an effective manner of the passive investment in foreign equities.



As for passive investment models focusing on stewardship activities, we adopted two funds in FY2018 (See pages 30 to 32 fordetails). We continue to look forward to positive proposals.

All passive managers for equities have established a designated department in charge of engagement with investee companies
from the perspective of enhancing long-term corporate value, and are developing and reinforcing necessary systems. In somecases, departments in charge of stewardship activities and ESG collaborate with sector analysts and fund managers inengagement.

Some passive managers for domestic equities have been conducting dialogues in accordance with the engagement enhancement
plan and policies. They addressed on a wide range of themes in engagement by utilizing external and/or proprietary data on ESG
and creating ESG rating by their own criteria.



In passive equity investment, almost all asset managers made proposals for ESG integration.

Even in the case of using a proxy advisory firm for an engagement purpose, we require such asset managers to establish asystem to make a final decision by itself considering the status of engagement and the content of the agenda.



Meanwhile, when asset managers use proxy advisory firm for the purpose of managing conflicts of interests, we seek
improvements in their usage if they need reconsideration of their utilization to achieve the intended goals.

In the passive investment of foreign equities, some asset managers conduct engagement efficiently and effectively by using
frameworks of collaborative engagement such as PRI and Climate Action 100+ in addition to their internal resources. Other
managers also proactively participate in collaborative engagement by serving in the role of lead manager, etc.

課題

Copyright © 2021 Government Pension Investment Fund All rights reserved.

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3. Engagement by Passive Managers and Proper Exercise of
Voting Rights
 Overview and Points for Selection of Passive Investment Models Focused on
Stewardship Activities<Purpose of Selection>(1) Reinforcing management of diversified benchmark indices(2) Improving the overall market through stewardship activities. Diversifying and enhancing how to approachstewardship activities.
<Evaluation Method>
Reviewing their investment process and stewardship policies, as well as the entire business model includingorganizational systems and fee levels in order to implement such process and policies.
<Results of selection>
We received applications from new and existing asset managers. As a result of our examination, we selected
two asset managers: Asset Management One and FIL Investments (Japan) in 2018.
Key Points for selection<Setting of appropriate KPI> Medium- to long-term goals for engagement activities
 Annual plan for the achievement (Milestone)<Engagement system and method>課題 Organizations and persons in charge of stewardship

activities Methods of engagement

Evaluation method after selection
For evaluation going forward, thestatus of achievement of the KPI as
indicated on the left and the milestones
for the following fiscal year will be
evaluated.
GPIF will renew the contract based on
this result.

Copyright © 2021 Government Pension Investment Fund All rights reserved.

30

3. Engagement by Passive Managers and Proper Exercise of
Voting Rights

 Characteristics of the two funds adopted as stewardship-focused passive investment
models<Asset Management One>






Establish 19 ESG themes, and clarify the direction of engagement by showing the Challenges (locating problems), Goals(building models to be realized) and Action (company’s activities). Implement engagement based on each theme at target
companies. In 2020, digital transformation was added as an ESG issue, making a total of 20 ESG themes for the current
implementation of engagement.
Establish 8-level milestones, and periodically report GPIF the progress of engagement from the establishment of themes totheir solutions.
Steadily advancing the steps of specific actions from establishing and sharing themes to starting themes, formulating plans andimplementing measures.
Most of the engagement agenda of which the challenges were solved in 2019 were governance-related issues whereas justmore than half of the engagement agenda of which the challenges were solved in 2020 were ESG issues such as CSR/ESG
management and CSR procurement. Thus, the kinds of issues which were solved have been increasing.
20 ESG Issues

On Engagement Milestones (8 steps)

E1：Climate Change

E

S

ESG

At the end of FY2020

E3: Water Resource Management
E4: Biodiversity
E4: Biodiversity
E5: Waste & Pollution
E5: Waste & Pollution
E6: Resource & Energy Management
E6: Resource & Energy Management
S0：Diversity
S0：Diversity
S1：HumanRights
S1：HumanRightsS2：Labor
Practices/Health&&Safety
SafetyS2：Labor
Practices/Health
S3：Product
Liability
SafetyS3：Product
Liability&&
SafetyS4：LocalCommunity
S4：LocalCommunity

G

Engagement Progress

At the beginning of FY2020

E1：Climate
ChangeE2：Deforestation
E2：Deforestation
E3: Water Resource Management

G0：Board
Governance
G0：Board
Governance&&Accountability
Accountability
G1：Capital
Efficiency
G1：Capital
Efficiency
G2：Takeover
DefenseMeasures
G2：Takeover
DefenseMeasures
G3：Risk Management
G3：Risk Management
ESG1：CSR/ ESG Management
ESG1：CSR/ ESG Management
ESG2：Corporate Misconduct
ESG2：Corporate Misconduct
ESG3：Regional Revitalization
ESG3：Regional Revitalization
ESG4：CSR Supply Chain Management
ESG4：CSR Supply Chain Management
ESG5：Digital Transformation (DX)
ESG5: Digital Transformation (DX)

Initiatives taken:
5 The Company has taken initial steps to improve/tackle the issues
Plans formulated:
6 The company has established a concrete plan for solving the issues
Plans implemented:
7 The company has implemented the plan set out for solutions
8

Completing engagement:
Effective actions positive outcome assessed/confirmed by ESG analyst

Newly added factor

Source: “20 ESG Issues,” “Eight-steps Milestone,” and “Progress of Engagement” are excerpts from the Engagement
Report of Asset Management One.

Copyright © 2021 Government Pension Investment Fund All rights reserved.

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3. Engagement by Passive Managers and Proper Exercise of
Voting Rights

 Characteristics of the two funds adopted as passive investment models focusing on
stewardship activities<FIL Investments (Japan)>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 is expected to improve by 50% or more, to implement engagement with large caps which are likely
to have significant impacts on market capitalization.



The status of progress is managed using three indicators of input, output and outcome, and is periodically reported to GPIF.

Progress was observed in 90% (70% in the previous year) of the subject companies, which established new challenges, etc. At
present, the progress is advancing from “Input” to “Output,” and in the past one year, in particular, many issues were observed tohave made progress to “Output.”

Most of the engagement agenda of which the challenges were solved in the past one year were governance-related issues while
there were also some cases of progress in strategic business challenges. Virtuous cycles are also becoming visible as observed insome cases in which continuous engagement is mutually appealed to both sides.
Four Steps of Engagement

Engagement Counterpart

課題

Source: “Four Steps of Engagement” and “Engagement Counterpart” are from Fidelity’s Report on Investment Trusts.
Copyright © 2021 Government Pension Investment Fund All rights reserved.

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4. Critical ESG Issues[Issues carried over from the previous year]Critical ESG issues are recognized by asset managers, and the status of implementation of engagement should be surveyed.

Disclosure by investors on critical ESG issues.

 In the Stewardship Principles, GPIF stipulates that asset managers should consider ESG factors and that they should proactively engage with investee companies
on critical ESG issues. Accordingly, the following issues were identified as material ESG issues among asset managers for equities. (The table below represents theissues pointed out by all asset managers (the underlined issues represent those pointed out for the third year straight) whereas the table in the following pageshows the issues pointed out by more than 50% of asset managers.)
 With regard to passive managers that hold investees’ stocks as long as they are included in indices, we have found that all asset managers for domestic and foreign
equities recognized that “Climate Change” was a material ESG issue, and that they considered long-term issues such as E (environmental) and S (social) including
diversity and supply chain as extremely critical ESG issues. Some passive managers adopted a top-down approach while others conducted reconstruction ofmateriality to establish ESG issues.
 Among active managers whose primary holding periods are approximately several months to a few years, the material ESG issues for domestic equity managers
were different from those for foreign equity managers. While all foreign equity managers considered “climate change” as critical, all domestic equity managers
considered “board structure & self-evaluation” and “minority shareholder rights” as critical, which indicates that domestic equity managers continued to recognize G(governance) as the more critical ESG issue.
 A significant change observed from the previous year was “Supply chain,” of which the percentage of both domestic and foreign passive equity managers rose, andit indicates that all passive asset managers consider the issue as critical. This demonstrates that supply chain is recognized as a critical issue on the back of the
COVID-19 pandemic.

Foreignequities

Domestic
equities

Passive<Critical ESG issues in passive/active investments as listed by all asset managers>
Active2020

Climate Change, Misconduct, Disclosure, Supply Chain,
Diversity

Board Structure & Self-evaluation, Minority Shareholder Rights

2019

Climate Change, Misconduct, Disclosure

Board Structure & Self-evaluation, Minority Shareholder Rights

2018

Climate Change, Misconduct, Supply Chain

Board Structure & Self-evaluation

2020

Climate Change, Diversity, Disclosure, Supply Chain

Climate Change

2019

Climate Change, Diversity, Others (social), Disclosure

Climate Change

2018

Climate Change, Diversity, Others (social), Water Stress &Water Security

Climate Change
Copyright © 2021 Government Pension Investment Fund All rights reserved.

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4. Critical ESG Issues“Critical ESG Issues” as pointed out by more than 50% of passive/active asset managers(*) are listed below. If an asset manager
for Japanese equities is entrusted to both active and passive mandates, it is counted as the one with larger amount of mandate
entrusted by GPIF.
(*) The percentage shown below represents the ratio of the number of managers which selected the relevant issue to the number ofactive/passive asset managers.
<Passive managers of domestic equities><Active managers of domestic equities><Passive managers of foreign equities><Active managers of foreign equities>

Climate Change

100%

Board Structure & Self-evaluation

100%

Climate Change

100%

Climate Change

100%

Misconduct

100%

Minority Shareholder Rights

100%

Disclosure

100%

Others (social)

86%

Disclosure

100%

Capital Efficiency

89%

Supply Chain

100%

Health and safety86%

Supply Chain

100%

Misconduct

89%

Diversity100%

Human Rights & Community

86%

Diversity

100%

Disclosure

89%

Corporate Governance75%

Corporate Governance86%

Board Structure & Self-evaluation

83%

Supply Chain

89%

Others (social)

75%

Disclosure

86%

Minority Shareholder Rights

83%

Diversity

78%

Health and safety

75%

Diversity

71%

Capital Efficiency

83%

Environment Opportunities

78%

Board Structure & Self-evaluation

75%

Social Opportunities

71%

Corporate Governance83%

Climate Change

67%

Other (Governance)

75%

Labor Standards

71%

Environment Opportunities

67%

Corporate Governance

67%

Water Stress & Water Security

75%

Board Structure & Self-evaluation

71%

Health and safety

67%

Health and safety

67%

Risk management75%

Minority Shareholder Rights

71%

Human Rights & Community

67%

Human Rights & Community

67%

Deforestation75%

Supply Chain

71%

Others (social)

67%

Pollution & Resources

67%

Environment Opportunities

71%

Water Stress & Water Security

67%

Product Liability

67%

Product Liability

57%

Biodiversity

67%

Waste Management

67%

Other (Governance)

57%

Anti-corruption

67%

Labor Standards

67%

Capital Efficiency

57%

Deforestation

67%

Others (social)

56%

Anti-corruption

57%… E (Environmental)

Other (Governance)

56%

Others (ESG)57%… S (Social)

Other (Environment)

56%

Water Stress & Water Security

57%

Social Opportunities

56%

Pollution & Resources

57%… G (Governance)… A multiple themes of ESG

Issues pointed out by all managers are shown in red.
Percentage indicates the ratio of managers that selected the issue.
Copyright © 2021 Government Pension Investment Fund All rights reserved.

34

4. Critical ESG Issues
 GPIF also asked external asset managers entrusted with fixed-income investment about critical ESG issues considered fromthe viewpoint of fixed-income investors. The results are listed below.
The issues pointed out as “critical ESG issues” by more than 50% of external asset managers* of each asset under management
are listed below.
(*) The percentage shown below represents the ratio of the number of managers which selected the relevant issue to the number ofactive/passive asset managers.

Domestic bonds
Disclosure
Climate Change

100%
89%

Corporate Governance

67%

Board Structure & Selfevaluation
Health and safety

56%
56%

Foreign bonds
Climate Change
Health and safety
Board Structure & Selfevaluation
Human Rights &Community
Corporate GovernanceSupply Chain
Diversity
Pollution & Resources
Disclosure
Product Liability
Waste Management
Labor Standards

95%
67%
57%
57%
52%
52%
52%
52%
52%
52%
52%
52%

… E (Environmental)… S (Social)… G (Governance)… A multiple themes of ESG
Issues pointed out by all managers are shown in red.
Percentage indicates the ratio of managers that
selected the issue.

Copyright © 2021 Government Pension Investment Fund All rights reserved.

35

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
 Enhance the governance. Formulate and review
effective measures to prevent conflicts of interest
 Collaborate between investment and stewardship
activities
 Propose and establish models for passive
investment focusing on stewardship activities Practice ESG integration across different investment
styles Reflect ESG issues on the voting principles
 Initiate stewardship activities in fixed income
investments
 Implement stewardship activities in line withmessages to investee companies (consistency ofspeech and action)
 Improve the quality of disclosure Disclosure of voting principles and the results ofexercise of voting rights
 Disclosure in line with TCFD Recommendation
 Disclosure of critical ESG issues (materiality)

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
 Checking the governance systems of external asset
managers
 Conducting dialogues with each position from top
management to persons in charge, according to themes Recognizing challenges relating to engagement subject
companies. Sharing their evaluation among the investment
team and stewardship team
 Increase the adoption of passive investment models
focusing on stewardship activities
 Take further consideration on the evaluation method of
ESG integration
 Examine evaluation criteria and methods of stewardship
responsibilities in fixed income investment
 Conduct joint researches with external organizations on
the measurement of achievement and effects ofengagement including ESG

Copyright © 2021 Government Pension Investment Fund All rights reserved.

37

Status of Exercise of Shareholders’ Voting Rights(from April 2020 to June 2020)

Status of Exercise of Shareholder Voting Rights in FY2020(April to June 2020)
1. Domestic Equities(1) Exercise of voting rights by external asset managers
All external asset managers (31 funds) exercised their voting rights.
(2) Exercise of voting rights by type of proposal

Total number of voting
rights exercised

Management
proposals

Total

Approved

OpposedShareholder
proposals

Total

Approved

Opposed

Proposals pertaining to capital
policyProposals pertaining to
Director remuneration, etc.

Proposals pertaining to company organization
Proposals(Total number of proposals)

Appointment
Appointment Of which,Appointment Of which,ofDirector
appointmentof
Statutoryof Directors appointmentof Outside Accounting remuneration
Auditorsof Outside
Auditors
Statutory
Directors
Auditors

Director
bonuses(excluding items pertaining to changes tothe articles of incorporation)

Director
retirement
bonuses

Granting ofstock
options

Acquisitionoftreasurystock

Dividends

Proposals
pertaining tochanges toMergers,transfer of the articles
ofbusiness,company incorporation
split,
etc.

Poison Pill
(Rights Plan)
Other
proposals

Warning
type

Total

Trust type

143,100

49,517

20,116

13,394

390

4,448

1,314

919

557

11,740

43

256

4,873

656

0

179

188,591

142,240

49,12720,08913,376

390

4,431

1,314

919

557

11,686

0

256

3,299

656

0

138

185,975(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%)(100.0%)(0.0%)(100.0%)(100.0%)124,208

42,82817,463

10,846

389

4,192

1,125

183

463

11,515

0

256

3,226

27

0

107

163,154(87.3%)(87.2%)(86.9%)(81.1%)(99.7%)(94.6%)(85.6%)(19.9%)(83.1%)(98.5%)(0.0%)(100.0%)(97.8%)(4.1%)(0.0%)(77.5%)(87.7%)

18,032

6,299

2,626

2,530

1

239

189

736

94

171

0

0

73

629

0

31

22,821(12.7%)(12.8%)(13.1%)(18.9%)(0.3%)(5.4%)(14.4%)(80.1%)(16.9%)(1.5%)(0.0%)(0.0%)(2.2%)(95.9%)(0.0%)(22.5%)(12.3%)

860

390

27

18

0

17

0

0

0

54

43

0

1,574

0

0

41

2,616

(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%)

139

66

0

0

0

0

0

0

0

7

10

0

143

0

0

20

319

(16.2%)(16.9%)(0.0%)(0.0%)(0.0%)(0.0%)(0.0%)(0.0%)(0.0%)(13.0%)(23.3%)(0.0%)(9.1%)(0.0%)(0.0%)(48.8%)(12.2%)

721

324

27

18

0

17

0

0

0

47

33

0

1,431

0

0

21

2,297

(83.8%)(83.1%)(100.0%)(100.0%)(0.0%)(100.0%)(0.0%)(0.0%)(0.0%)(87.0%)(76.7%)(0.0%)(90.9%)(0.0%)(0.0%)(51.2%)(87.8%)

Notes:* Figures in parentheses represent percentages for each proposal. The total percentage may not add up to 100 due to rounding.
* There were no cases of non-exercise. The 37 cases of abstention are included in “Opposed.”* Resolutions of J-REIT general meetings of investors are included above.
Copyright © 2021 Government Pension Investment Fund All rights reserved.

39

Status of Exercise of Shareholder Voting Rights in FY2020(April to June 2020)
2. Foreign Equities(1) Exercise of voting rights by external asset managers
All external asset managers (17 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
Proposals pertaining to company
organization
Proposals

Total number of voting
rights exercised

Management
proposals

Total

Approved

OpposedShareholder
proposals

Total

Approved

Opposed

Appointment
of Directors(Total number of proposals)

Proposals pertaining to Director remuneration, etc.
Proposals pert

Appointment Appointment
Directorof Statutory of Accounting
remuneration
Auditors
Auditors

Director
retirement
bonuses

Director
bonuses

Granting ofstock options

Proposals pertaining to capital policy(excluding items pertaining to changes to thearticles of incorporation)

Dividends

Acquisition oftreasury stock

Mergers,transfer ofbusiness,company split,
etc.

Proposals
pertaining toWarning-typechanges topoison pill
the articles ofincorporation

Other proposals
Approval of
financialstatements
and statutory
reports

Other
proposals

Total

62,245

2,730

7,584

13,749

147

84

2,797

5,175

3,180

6,170

6,168

155

7,696

22,562

140,442

61,420

2,429

7,539

13,526

146

83

2,768

5,168

3,180

6,147

5,702

153

7,696

19,901

135,858(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%)53,144

2,097

7,078

11,577

126

41

2,076

5,083

3,043

4,643

5,057

131

7,602

16,426

118,124(86.5%)(86.3%)(93.9%)(85.6%)(86.3%)(49.4%)(75.0%)(98.4%)(95.7%)(75.5%)(88.7%)(85.6%)(98.8%)(82.5%)(86.9%)

8,276

332

461

1,949

20

42

692

85

137

1,504

645

22

94

3,475

17,734(13.5%)(13.7%)(6.1%)(14.4%)(13.7%)(50.6%)(25.0%)(1.6%)(4.3%)(24.5%)(11.3%)(14.4%)(1.2%)(17.5%)(13.1%)

825

301

45

223

1

1

29

7

0

23

466

2

0

2,661

4,584

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

530

219

37

72

1

0

10

7

0

16

91

2

0

1,023

2,008

(64.2%)(72.8%)(82.2%)(32.3%)(100.0%)(0.0%)(34.5%)(100.0%)(0.0%)(69.6%)(19.5%)(100.0%)(0.0%)(38.4%)(43.8%)

295

82

8

151

0

1

19

0

0

7

375

0

0

1,638

2,576

(35.8%)(27.2%)(17.8%)(67.7%)(0.0%)(100.0%)(65.5%)(0.0%)(0.0%)(30.4%)(80.5%)(0.0%)(0.0%)(61.6%)(56.2%)

Notes:* Figures in parentheses represent percentages for each proposal. The total percentage may not add up to 100 due to rounding* “Opposed” figures include 981 abstentions.

Copyright © 2021 Government Pension Investment Fund All rights reserved.

40

Status of Exercise of Shareholder Voting Rights in FY2020(April to June 2020)
Comparison of the number of exercises of voting rights by fiscal year (Period from April to June)* Comparison of the number of opposition to management proposals, etc., and the number of approvals of shareholder
proposals by fiscal year

FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020

Domestic
equityOpposition to the
management proposals orabstention from voting
Approval of shareholder
proposals

ForeignequityOpposition to the
management proposals orabstention from voting
Approval of shareholder
proposals

132

1,872

2,594

5,377

12,917

16,84016,907

14,00915,472

17,67422,07418,044

16,191

12,911

14,266

13,40812,491

15,061

22,25022,821

0.5%

2.2%

2.8%

3.6%

8.1%

12.1%

10.3%

10.2%

8.7%

11.6%

13.3%

11.6%

11.5%

9.5%

8.4%

7.9%

8.5%

10.3%

11.1%

12.3%

15

38

48

89

57

41

76

37

42

47

34

58

34

56

55

65

167

129

215

319

2.2%

3.7%

5.8%

8.0%

6.9%

6.3%

7.0%

3.5%

3.1%

2.6%

1.9%

2.7%

2.3%

2.9%

2.8%

4.7%

7.8%

8.8%

12.0%

12.2%

412

2,336

1,513

2,453

3,571

4,299

5,770

6,427

8,849

7,293

6,087

5,422

7,161

7,269

10,778

11,162

13,076

17,061

17,51017,734

5.8%

9.9%

4.6%

5.0%

5.7%

5.4%

6.2%

6.5%

8.1%

6.9%

5.3%

4.9%

6.0%

6.7%

7.5%

7.7%

8.7%

10.3%

12.4%

13.1%

123

381

999

907

1,074

1,724

1,669

1,745

2,821

2,085

1,486

1,655

1,503

1,483

2,650

2,630

3,295

2,849

2,504

2,008

25.8%

15.2%

28.0%

14.4%

24.7%

31.7%

29.5%

29.7%

44.2%

38.9%

32.9%

35.2%

32.0%

40.3%

47.4%

43.0%

50.5%

53.3%

52.7%

43.8%

Copyright © 2021 Government Pension Investment Fund All rights reserved.

41

[Reference]

Stewardship Principles
Stewardship Principles

Established on June 1, 2017
Revised on February 6, 2020

Government Pension Investment Fund (GPIF) requires its external asset managers (“asset managers”) tocomply with the following principles. If an asset manager decides not to comply with any of the principles
due to the characteristics of the assets in which it invests and/or its investment style, it is required to explain
the rationale for its non-compliance to GPIF.
In order to fulfill its own stewardship responsibilities, GPIF continuously monitors the stewardship activities of
its asset managers, including their exercise of any voting rights, and proactively conducts dialogue(engagement) with them.

(1) Corporate Governance Structure of Asset Managers○Asset managers should adopt Japan’s Stewardship Code.
○ Asset managers should have a strong corporate governance structure. In particular, asset managers
should develop a supervisory system through such measures as appointing outside directors with a highdegree of independence in order to enhance their independence and transparency.
○ Asset managers should commit sufficient internal resources to fulfill their stewardship responsibilities
effectively.
○ Asset managers should explain how their remuneration and incentive systems for their executives andemployees are aligned with the interests of GPIF.

(2) Management of Conflicts of Interest by Asset Managers○ Asset managers should appropriately manage conflicts of interest (if the asset manager belongs to a
corporate group, not only within asset manager but also within the group) in order to put the beneficiaries’interests first. Asset managers should classify types of conflicts of interest into those related tofinancial/capital relationships and those related to business relationships. Asset managers should also
develop and publicly disclose a policy for the management of conflicts of interest.
○ Asset managers should manage conflicts of interest through measures such as establishing a third-party
committee with a high degree of independence and disclosing information on such. When selecting
committee members, asset managers should consider the candidates’ independence, experience and skill
sets, among other factors.
○ When exercising voting rights for companies with which they have a potential conflict of interest, such as
their own company, their parent company or other group companies, asset managers should develop anddisclose a process that removes arbitrariness and is in line with best practice in corporate governance andconflict of interest management, such as letting their third-party committee make voting decisions or
examine the validity of their own decisions, or following the recommendations of a proxy voting advisor.

(3) Policy for Stewardship Activities, including Engagement○ Asset managers should integrate stewardship and investment.
○ Asset managers should proactively engage with index providers to promote the interests ofbeneficiaries. Such engagements should include participating in index providers’ consultations
regarding the constituent stocks of indices, as these have a material impact on GPIF’s investment
performance.
○ Asset managers should engage with various stakeholders including regulators, stock exchanges,
investee companies and index vendors, so as to improve the sustainability of the markets in which
they and GPIF invest.
○ Asset managers should take non-financial information into consideration when engaging withinvestee companies. Non-financial information should include (but not be limited to) the information
contained within companies’ corporate governance reports and integrated reporting.
○ If a company should decide not to comply with any of the principles established by relevant
corporate governance codes of individual countries or equivalents but to explain their reasons for noncompliance, asset managers should engage with the company to understand their thought process andaddress the quality and detail of these explanations as necessary.
○ GPIF expects asset managers of passive equity investment mandates to develop and effectively
implement a corporate engagement strategy to promote the sustainable growth of the market.
○ When using an engagement agency or third-party engagement service provider, asset managers
should conduct proper due diligence prior to their selection and undertake continuous monitoring after
selection.

(4) ESG Integration into the Investment Process○ GPIF believes that it is vital to integrate environmental, social and governance (ESG) factors into
the investment process to increase corporate value and promote the sustainable growth of investee
companies and the capital market as a whole, thereby contributing to long-term investment returns.
Asset managers should consider the materiality of ESG issues in relevant sectors and thecircumstances of individual investees and deal with those factors accordingly.
○ Asset managers should determine which ESG issues they deem to be critical, specify goals that theywould like to achieve as a long-term investor, and proactively engage with investee companies
on these issues.
○ Asset managers should become signatories of the Principles for Responsible Investment (PRI),
and participate in other industry ESG initiatives.

(5) Exercise of Voting Rights○ Asset managers should exercise the voting rights relating to GPIF’s investments exclusively in the bestinterests of GPIF and its beneficiaries.
○ In order to promote long-term corporate value at investee companies, asset managers should exercise
voting rights in accordance with the GPIF Proxy Voting Principles as attached.
○ When using a proxy voting advisor, asset managers should conduct proper due diligence prior to theirselection. After selection, asset managers should continuously monitor service quality and engage with theproxy voting advisor as necessary (excluding cases where the objective is managing conflicts of interest in
relation voting on their own shares (see section 2 above)).

○Asset managers should develop and publicly disclose a stewardship policy, which should include
their approach to engagement.
○ Asset managers should ensure that their stewardship policy and activities contribute to long-termrisk-adjusted returns rather than short-term outcomes. In addition, to support more effective
stewardship activities, asset managers should consider formulating engagement objectives and plans.

Copyright © 2021 Government Pension Investment Fund All rights reserved.

42

[Reference]

Proxy Voting Principles
Proxy Voting Principles
Established on June 1, 2017
Revised on February 6, 2020

〇In accordance with the GPIF’s Stewardship Principles, GPIF’s external asset managers (“asset
managers”) should exercise any and all voting rights in a manner consistent with their ongoing corporate
engagements and other stewardship activities.
○ Asset managers should develop a proxy voting policy and guidelines that will contribute to the
maximization of shareholders’ long-term interests. Asset managers should publicly disclose their proxyvoting policy and guidelines in order to make the basis for their voting decisions clear.
○ Asset managers should have sufficient communication with investee companies to inform their voting
decisions and to ensure that all voting rights are exercised with thoughtful consideration.
○ Asset managers should give careful consideration to environmental, social and governance (ESG) issues
when exercising voting rights, with the objective of enhancing investee companies’ corporate value over the
medium- to long-term.
○Asset managers should apply careful due diligence when exercising voting rights on proposals that could
undermine minority shareholders’ interests as well as those that could protect minority shareholders’interests.
○Asset managers should generally exercise voting rights in support of the Corporate Governance Codes
established by the individual countries in which their investee companies are domiciled. When there is nosuch code or equivalent, asset managers should appropriately exercise voting rights in support of theinternationally recognised standards that they require investee companies to follow.
○If asset managers use a proxy voting advisory service to exercise voting rights, they should notmechanically follow the advisor’s recommendations (excluding cases in which the objective is to manage
their own conflicts of interest). In all cases, it will remain the sole responsibility of asset managers to exercise
voting rights in the best interests of GPIF and its beneficiaries.
○ Asset managers should publicly disclose their entire voting record on an individual company andindividual agenda item basis.
○ Asset managers should disclose the rationale for their voting decisions based on necessity and/or
importance as appropriate.
○ Asset managers should explain the rationale for their voting decision in detail to investee companies
upon request.
○ Asset managers should periodically review their voting records and conduct self-assessments.
○ Based on their self-assessments, asset managers should update their policies for the following year asnecessary.

https://www.gpif.go.jp/en/investment/pdf/stewardship_principles_and_proxy_voting_principles.pdf
Copyright © 2021 Government Pension Investment Fund All rights reserved.

43

GPIF Homepage
https://www.gpif.go.jp/
GPIF YouTube channel
https://www.youtube.com/channel/UCWpjyPh1kw0VyfIPpcVMIXwGPIF twitter
https://twitter.com/gpiftweets