The world’s largest pension fund, Japan’s Government Pension Investment Fund, is getting pushback from a recent decision to throw in its lot with the green, responsible investing crowd.
But the fund’s manager insists they aren’t backing down.
Hiro Mizuno, the GPIF’s chief investment officer, explained in an interview why the manager of $1.6 trillion is coming out strongly against short selling, saying protecting the planet doesn’t jive with a short-term mindset.
“I never met a short seller who has a long-term perspective,” Mizuno told the Financial Times. Environmental, social and governance standards adopted by many socially conscious investors “are inconsistent with supporting short selling,” he said.
The move to go green, and stop lending global equity stocks to short sellers, coincides with a shift in Japanese policy ahead of the 2020 Olympics in Tokyo while at the same time operating in line with Mizuno’s own goals of building a more sustainable financial system, the FT said.
The move announced earlier this month was met with applause from the general public but garnered criticism both within the GPIF and the larger investor community. The GPIF historically has invested most of its assets in Japanese government bonds.
“This is a decision between making cash immediately or being better stewards for our constituency,” Mizuno said in the interview. “Being good stewards, we create an environment in which corporate executives can focus on long-term value creation rather than paying attention to how to make their short-term quarterly performance targets.”
So-called “passive” investment managers — those who link their strategies to an index, for example — may be some of the biggest critics of the ESG approach, given that many use lending fees to justify lower customer fees, Mizuno said. But the GPIF is also changing how it deals with these types of portfolio managers, he said.
“Some of the managers now say that they can integrate ESG into the passive portfolio, and have been asking passive managers to come up with a new business model to respond to our new demands in the area of stewardship,” he said.
- In contrast to Japan’s approach, Norway’s $1 trillion sovereign wealth fund, the world’s largest, got permission from the legislature to dump shares in coal and energy companies, the FT reported earlier this year.
- Tesla CEO Elon Musk praised the GPIF’s move and said in a tweet that short selling should be illegal.