Japan GPIF Foreign Equity Managers Rate Top TCFD Disclosure Firms

Microsoft and Australian mining company BHP Group were cited as the companies that provide the best climate-related disclosure among foreign equity asset managers working for Japan’s $1.43 trillion Government Pension Investment Fund.

The pension giant asked its 25 external asset managers overseeing foreign equity investments to nominate companies they deem to provide “excellent” reports to comply with the Financial Stability Board’s Task Force on Climate-Related Financial Disclosures. The asset managers were asked to nominate up to five companies for “excellent TCFD disclosure” and up to three companies each as “excellent disclosure of governance, strategy, risk management, and metrics and targets.” The result of the survey was compiled into two lists, comprised of 60 companies.

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Only 10 of the companies were nominated by more than one asset manager, with Microsoft and BHP receiving the most nominations at four each. Citigroup and JPMorgan Chase received three nominations each, while CVS Health, oil and gas company ENI, petroleum refiner Equinor, Nestle, Taiwan Semiconductor Manufacturing and Valero Energy received two nominations each.

“Microsoft provides extensive disclosure across all four TCFD core elements,” the GPIF specified in a report about the survey. “Detailed information is provided, outlining not just where accountability lies, but also the distinct role that different board-level committees and management level business functions play in providing oversight on climate-related risks and opportunities.”

The asset managers said that, overall, Microsoft shows comprehensive climate transition risk processes, with strong oversight, target setting and transparency. They also reported the company has a structured and separate TCFD report and provides clear descriptions of the board and management oversights, in addition to identifying transition and physical climate-related risks that can potentially impact the company.

Meanwhile, BHP “takes a risk-based approach to adapting to the physical impacts of climate change,” the report stated. “They work with third parties globally to obtain regional analyses of climate science to inform resilience planning at an asset level and improve their understanding of the potential climate vulnerabilities of their assets, operations and communities in which they operate.”

According to the report, BHP considers the impact of climate change in strategic planning while using a broad range of scenarios to determine how divergent policy, technology, market and societal outcomes could affect their portfolio of assets, including unlikely extreme shock events.

Citigroup, which the GPIF said has been reporting disclosures in line with TCFD recommendations since 2018, has a “comprehensive” stand-alone TCFD report that is approximately 75 pages long. The asset managers said Citigroup includes methodology for all of its estimations and calculations and discloses updated figures. The report also noted that the bank is on the steering committee for the Partnership for Carbon Accounting Financials, which is an initiative to develop an accounting methodology for banks and asset managers to disclose Scope 3 emissions.

JP Morgan Asset Management has its own TCFD report separate from its parent company’s report and provides guidance as to how it will be handling emissions-intensive sectors, according to the report. Asset managers said JPM’s December 2022 climate report provided “comprehensive qualitative and quantitative detail” for four main topics: governance, strategy, risk management and metrics and targets.

“They have done well at articulating both the risk and opportunities associated with climate change,” the report stated, adding that JP Morgan “detailed their framework to assess clients transition plans, which not many banking peers have published publicly yet.”