While the bulk of ESG investment in Japan is carried out by the Government Pension Investment Fund (GPIF), a public pension fund, corporate pension funds are awakening to the practice. Even so, ESG/sustainability investment is far from being in the mainstream, as it is in Europe.
AL-IN, IJ’s sister publication and a magazine for Japanese institutional investors, conducted the first ESG/sustainability survey of private asset owners in Japan last summer. The online survey generated responses from 104 corporate pension funds, 98% of which are defined benefit pensions.

ESG investment among corporate pension funds is gaining momentum, but it is still limited.  Over half of Japan’s corporate pensions engage in or plan to engage in ESG investment, but the majority of funds have not accepted the Japan's Stewardship Code, as shown in a previous IJ article (https://investmentjapan.jp/esg/1236/).  In the latest survey, less than quarter have signed or plan to sign the Code.


The 60 funds who engage in or plan to engage in ESG investment do so predominantly in equities, although they report considering other assets in the future, including bonds and private assets.  Private assets such as infrastructure and real estate are popular, probably because they require a long-term investment and consideration of the environment.

Most are investing in ESG without being guided by clear policies.  Just 10% (6) have fixed ESG investment policies, 12% (7) are “planning to set up policies”, 57% (34) report “no policy set up / no plans to set up policies” and 22% (13) responded they “don’t know yet”.

However, the 33 corporate pensions who have engaged in ESG investment seem quite happy with the investment.  When asked “Are you satisfied with your ESG investment?”, 9% (3) said “satisfied”, 79% (26) said “pretty much satisfied” and 12% (4) said “slightly unsatisfied”.  When questioned about future ESG planning, 30% (10) said they “will increase” and 70% (23) said they “will keep it at the same level”, while none said they planned to decrease investment.  

Among ESG holdouts, their reasons for “none / no plans for ESG investment” and “no plans to sign the Stewardship Code” are as follows:

(multiple answers among 44* funds)

(multiple answers among 80** funds)

The Covid-19 pandemic of 2020 has required corporate pension funds to adjust their operations to remote working and other necessities.  As a result, ESG investment and accepting the Stewardship Code have been placed on the back burner.  Signing the Code requires a long-term commitment to the future, and the future for most is far from certain.  Although corporate pension funds are quite positive toward ESG investment, increasing their ESG investment will be difficult absent well thought out investment policies that reflect their particular corporate beliefs and practices.  The survey shows Japanese asset owners have a lot of work to do to grow their ESG/Sustainability investment.