With a portfolio of USD 1.6 trillion, Japan’s Government Investment Pension Fund (GPIF) is a heavyweight in the world of institutional capital. So when its Chief Investment Officer pushes the fund’s authorized asset managers to "get tougher on sustainability," it sends a strong signal to the market.
In order to deliver its mandate of safeguarding Japan’s social security system against the threats posed by an ageing and shrinking population, the GPIF has ordered its asset managers to go beyond "delivering alpha" and manage the negative externalities from companies within its investment portfolio.
Legal and General, the fund’s second-biggest asset manager after BlackRock, committed to adopting more "active" asset management strategies earlier this year. Active stewardship for them involves putting pressure on corporate managers to actively disclose climate and other ESG risks. Legal and General outlines a series of mechanisms available to put pressure on executives to take sustainability and ESG seriously, from collaboration to targeted voting on boards to ultimately divestment. This is not just rhetoric: In June 2019 Legal and General excluded ExxonMobil from their Future World’s Funds deeming it as failing to address the risks posed by climate change.
Amidst this backdrop of sustainability informed asset management, the GIPF’s statements and the election of Legal and General alongside BlackRock will send further signals of change to the institutional investment community.