GPIF: Climate risk impacts all asset classes | New


Developing a social bond market is extremely important, although of all environmental, social and governance (ESG) issues the risk associated with climate change is the biggest challenge for investors, according to Masataka Miyazono, chairman of the Fund. Government of Japan Pension Investment (GPIF). .

“The risk occurs simultaneously in all asset classes, although the magnitude of the impact may vary,” Miyazono said at a conference on green and social bonds, co-hosted by International Capital Markets Association (ICMA) and the Japan Securities Dealers Association, in Tokyo today.

He said, “No matter how diversified you are, you can’t completely eliminate risk. These risks are considered highly likely to materialize in the long term. “

GPIF, in its first published analysis of the impact of climate change on its portfolio, found that if the world could limit global warming greenhouse gas emissions to 2 ° C, the value, especially of companies Japanese, would increase.

Miyazono said working towards this goal is generally seen as costly for businesses.

But he suggested that the benefits of achieving the goal would lead to new opportunities in areas such as environmental technologies. The value created by the use of these technologies would exceed the cost of reducing greenhouse gas emissions.

This trend was particularly evident in domestic (Japanese) stocks, he said. “According to our analysis, there are many opportunities for Japanese companies to generate commercial profits. “

Miyazono added: “We intend to further deepen our analysis and knowledge related to climate change on bonds. “

He told the audience that as of 2017, GPIF has extended the scope of its ESG investment from equities to all assets, including bonds. Since last year, it has extended its bond investments to green, social and sustainable bonds.

Specifically, he said, GPIF had partnered with multilateral banks and government institutions around the world, creating platforms to encourage the creation of sustainable bonds.

“At the end of June 2020, we have partnerships with 10 multilateral banks and government financial institutions,” he said. “Our investment in green, social and sustainable bonds reached 441 billion yen (3.7 billion euros) at the end of March 2020.

Miyazono said that from a risk control perspective, the impact of environmental and social issues and governance on the capital market is negative in the long run.

“We believe it is extremely important to avoid the risk of asset depreciation and to seek sustainable investment returns,” he said.

The development of a social bond market was extremely important, he said, for the sustainability of capital markets and, therefore, the long-term returns of investments through pension reserves.

The conference audience learned that there has been an exponential increase in the issuance of social bonds since COVID-19 to mitigate the social impact of the pandemic. The amount of social bonds reached $ 100 billion this year, compared to just $ 17 billion last year.

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