Japan’s GPIF ramps up ESG expectations for real estate managers, announces new sustainable fixed-income partnerships

Moves are possible last hurrah for outgoing CIO Mizuno

Japan’s $1.6trn Government Pension Investment Fund (GPIF) has ramped up its ESG expectations for real estate managers and extended its work promoting the issuance of green and sustainability bonds. 

The world's largest pension scheme became a member of the Global Real Estate Sustainability Benchmark (GRESB) last week, tweeting that it now “requests managers to actively use GRESB Assessment in their real estate investment and management process to enhance the disclosure of ESG information and constructive dialogue”. 

GRESB’s data covers some $4.5trn of infrastructure and real estate assets. It has more than 100 investor and lender members, including REST, Northern Trust, Lothian Pension Fund, UBS, AP3, Kempen and JP Morgan, who can use its analytical tools to improve ESG engagement with investment managers.

The development comes as GPIF expands its long-standing work on ESG in fixed income – originally pioneered through a partnership with the World Bank by announcing a new collaboration with one of the leading issuers of green and sustainability bonds globally, Kommuninvest, and Dutch bank BNG. Kommuninvest is a Swedish municipal lender, which has been raising use-of-proceeds bonds to help local public borrowers access cheaper capital for their sustainability projects, and BNG Bank also specialises in financing for publicly-owned organisations.

The collaborations will see BNG Bank and Kommuninvest issue green and sustainability bonds that GPIF asset managers will invest in “at their own discretion” – although outgoing CIO Hiromichi Mizuno has made clear on multiple occasions that GPIF “requires all asset managers to integrate ESG into their investment analysis and decision-making [and regards] purchase of Green, Social and Sustainability Bonds as one of the direct methods of ESG integration in fixed income investment”.

GPIF has similar partnerships in place with the Asian Development Bank, the European Investment Bank, the Inter-American Development Bank, the Council of Europe Development Bank, the Nordic Investment Bank,  the European Bank for Reconstruction and Development, the Islamic Development Bank, KfW and the African Development Bank.

Of the latest partnerships, Mizuno said: "We would like to leverage the success with multinational development banks in green, social and sustainability bonds partnerships in hopes to expand this to other platforms. GPIF wishes to contribute to make Green, Social and Sustainability bonds mainstream investment products in order to ensure the sustainable performance of the pension reserve fund for all the generations.”

The flurry of sustainability-related news from the mammoth fund comes one week after the revelation that Mizuno, who has become renowned for his focus on ESG and sustainable finance, will step down from his role at the end of this month.