Japan’s Government Pension Investment Fund (GPIF) said on Friday it will step up expectations for external asset managers to strengthen stewardship activities, including deeper corporate engagement, as part of efforts to enhance long-term investment returns.
Stewardship — including environmental, social and governance (ESG) considerations — would be pursued from the perspective of improving long-term returns, said the world’s largest pension fund, with about US$1.8 trillion in assets under management, in its 2025/2026 stewardship activities report, which outlined its approach for the five-year period through March 2030.
Noting that effective engagement by asset managers could raise corporate value and support sustainable economic growth, the fund highlighted three priority areas: promoting corporate management that is conscious of capital costs and share prices, improving sustainability-related disclosure, and strengthening effective corporate governance.
Japan introduced its Stewardship Code in 2014 as part of broader economic reforms aimed at encouraging institutional investors to engage more actively with companies and improve long-term value. As one of the largest asset owners globally, GPIF has played a central role in driving that shift by requiring its external managers to adopt stewardship principles and incorporate ESG factors into investment decisions.
On capital efficiency, GPIF said interviews with domestic equity managers showed that engagement between investors and companies has become more advanced among leading firms, with discussions increasingly reaching top decision-makers such as chief financial officers, chief executives and boards of directors.
Asset managers are designing more targeted questions and analyses to encourage companies to take proactive steps, including providing peer comparisons and ensuring discussions are shared internally at senior levels.
The fund said companies more likely to respond to engagement typically have financial flexibility and leadership that recognises the need for change, with senior management often directly involved in dialogue.
By contrast, firms facing difficult industry conditions, weak performance or gaps in understanding between management and investors tend to show limited progress, even when targets or policies are set.
Organisational silos and underdeveloped board oversight were also cited as obstacles.
On sustainability disclosure, GPIF said it has consolidated its previous surveys on “excellent integrated reporting” into a single framework focused on “excellent sustainability disclosure” for asset managers.
Regarding corporate governance, the fund said it had engaged with domestic asset managers amid ongoing discussions on revising Japan’s corporate governance code. Many managers emphasised the importance of strengthening board secretariat functions and enhancing the oversight role of independent directors.
GPIF, which became a signatory to the UN-backed Principles for Responsible Investment in 2015, said integrating ESG factors into investment processes is essential to managing long-term risks and opportunities, while also supporting the sustainability of capital markets.
Looking ahead to fiscal 2026, GPIF said it would expand disclosure and public communication of its stewardship policies, while introducing evaluations of asset managers based on its expectations.
The assessment will focus on how well managers integrate investment and stewardship, the quality of their engagement with companies, and how effectively they communicate with both investee firms and the market, the fund said.
Globally, similar trends have been gaining traction among large pension funds and asset owners, with ESG integration and active ownership becoming a core part of fiduciary duty. The United Nations backed Principles for Responsible Investment (PRI), launched in 2006, now has more than 4,900 signatories managing over US$120 trillion in assets, reflecting the scale at which institutional investors are embedding ESG considerations into investment and stewardship practices.
Regulators and industry groups across markets including the UK, Australia and Thailand have also introduced stewardship or investment governance codes requiring pension funds to monitor investee companies and engage more actively on issues such as governance, sustainability and long-term value creation.
In Europe, large pension funds have gone further by tying mandates to stewardship performance, with some reallocating billions of dollars away from asset managers seen as lagging on ESG engagement, showing growing pressure on managers to demonstrate active ownership.
