Japan’s Government Pension Investment Fund reveals 3°C portfolio emissions

World’s largest pension fund works with Trucost to respond to TCFD

The portfolio emissions of Japan’s Government Pension Investment Fund (GPIF) are consistent with more than 3°C of global warming, a level far surpassing the 2°C target set out in the Paris agreement, according to analysis for the fund by Trucost.

The world’s largest pension fund published the finding in its new 2018 ESG Activities Report (Japanese), having commissioned Trucost – now part of S&P – to take an in-depth look at climate risk across its portfolio in response to the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

The analysis found that GPIF’s foreign corporate bond, foreign equity and domestic equity portfolios were all consistent with over 3°C, with only domestic corporate bonds, of the asset classes that were assessed, in line with a 2°C world.

The report says it will be necessary to continuously reduce emissions going forward, but that this “will be difficult with the current emissions reduction targets” of the companies it owns.But the influential fund rules out divestment as a response to the analysis, explaining: “Within GPIF, when it comes to ESG issues such as climate change, we believe it is more important to make efforts to encourage companies to make improvements, rather than use divestment and lose our position as shareholder.”

A more comprehensive report from Trucost on GPIF’s portfolio climate risk and GHG analysis is forthcoming.

It’s not the first time GPIF has worked with Trucost on climate-related projects. In September 2018, GPIF selected two low carbon indices based on Trucost data as part of a multi-billion dollar shift of assets into ESG products.

The report comes as Hiromichi Mizuno, GPIF’s Executive Managing Director and CIO, speaks at a CalPERS investment committee meeting today, putting ESG at the forefront of his presentation.