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Powerful Japanese union, RENGO, issues formal guidelines to pension funds and managers to adopt ESG

Union-linked pension plans account for almost half of the schemes in Japan’s corporate pensions sector.

RENGO, the powerful Japanese trades union confederation whose members influence a significant part of the country’s institutional retirement savings, has issued one of the most far-reaching ‘guidelines’ by any union in the world outlining how domestic pension plans should incorporate ESG factors into their investment decisions. RENGO-linked pension plans account for almost half of the schemes in Japan’s corporate pensions sector, which as a whole manages more than JPY50 trillion (€450bn). The influence of RENGO in Japanese pensions could make the new guidelines a game-changer in the take up of ESG by retirement funds in the country. Last year, RI reported that Rengo was working towards formalising the position paper on ESG.
The recommendations laid out in a document titled: Responsible Investment of Workers’ Capital, say they are a “course for industrial federations of trade unions and company-based trade unions to practice responsible investment of pension funds and other workers’ capital”.Significantly, RENGO is requesting that the Japanese Government Pension Investment Fund (GPIF) – the world’s largest pool of pension assets at JPY120trn (€1.1trn, $1.4trn) – should develop a responsible investment policy. It follows a similar recommendation earlier this month by the Organisation for Economic Cooperation and Development (OECD), which said adopting an RI policy would help GPIF keep pace with its peers and diversify its investments, which are heavily skewed towards Japanese debt. RENGO also says that investment managers running Japanese pension funds with trades unions links should incorporate non-financial factors into investments based on client instructions. Importantly, RENGO says pension funds should consider the RI strategies of fund managers before hiring them. This includes how they report on RI issues, the number of staff engaged in responsible investment and whether the manager has signed the UN Principles of Responsible Investment.
See downloadable documents – left hand column