Japan's Government Pension Investment Fund and ESG Investment: Policy Pathways to Carbon Neutrality

Abstract

With climate change and carbon neutrality becoming focal issues, GPIF, as the world's largest pension fund, plays an important role in promoting sustainable finance in Japan. Although there are still obstacles to achieving Japan's carbon neutrality goal, the Government Pension Investment Fund (GPIF) has proposed solutions in sustainable finance. Its exploration and practice of ESG investment is achieved mainly through participation in engagement-enhanced passive investment, inclusion of ESG indices as passive benchmarks, improvement of ESG rating standards, and increased investment in ESG bonds. As a result, GPIF has not only achieved investment returns higher than the benchmark through ESG investment, but also saw an annual improvement in the portfolio greenhouse gas emission. Drawing on GPIF's experience, this study provides a practical reference for the national social security fund of the People’s Republic of China.