World’s biggest pension fund reviewing Russian holdings

Meanwhile fellow sovereign wealth fund finds “risk-based divestments” pay off

Japan’s Government Pension Investment Fund (GPIF) is reviewing its Russia-linked assets “from a risk management perspective”, RI can reveal. 

Managing more than $1.7trn, GPIF is the largest pension fund in the world. 

Russia’s invasion of Ukraine last week has sparked international outcry, government sanctions, and a growing wave of investor divestments. 

A spokesperson told RI that as of March 2021, GPIF had around 50bn JPY (393m) of fixed-income and around 170bn JPY (1.3bn) of equities in Russia-linked assets. 

“While GPIF is not allowed by law to make investment decisions based on political reasons, we continue to monitor the situation and will strive to act in the best interest of pension beneficiaries. From the perspective of risk management, we are now reviewing our Russia-linked assets,” a spokesperson told RI. 

“We continue to be committed to managing pension reserves solely for the benefit of pension recipients.” 

Earlier this year the fund put out a tender for a provider to conduct a portfolio analysis “regarding the impact of climate change.” 

Whilst GPIF is looking at Russia from a risk perspective, yesterday the manager of Norway’s sovereign wealth fund showed the hit it took on its Russian assets. 

During a press conference, Norges Bank Investment Management (NBIM) CEO Nicolai Tangen explained: “At the beginning of the year, we had shares at a value of roughly NOK27.4bn (€28.bn), now of course what’s been going on since in the stock market has meant the values are significantly lower. We estimate that they are roughly at NOK2.5bn [as of March 2nd].” 

On Sunday the Norwegian government announced the fund would offload its stake in Russia. 

NBIM also published its 2021 Responsible Investment Report yesterday.  

Amongst the highlights, it noted that the number of “risk-based divestments” in 2021 – which totaled 52 companies – was the second highest they have had since they started doing this type of divestment in 2012.  

Interestingly, the biggest group – at 29 divestments – this year were those based on human rights issues surrounding exposure to high-risk sectors and markets, and indications of insufficient risk management, related to human rights, labour rights or health, safety and environment. 

In all, 366 companies have been ditched. 

During the press conference, Carine Smith Ihenacho, Chief Governance and Compliance Officer, flagged: “It has made money too.” 

In her presentation she said that risk-based divestment had increased the cumulative return on their equity by almost a half percentage point since they began; in particular, the climate divestments have had the most impact on the increased return.