Japan's GPIF Equity Managers Rate Microsoft, Enel Tops for Climate Risk Disclosure

Software giant Microsoft Corp. and Italian utilities company Enel SPA were lauded for providing the best climate risk disclosure by foreign equity asset managers working for Japan’s $1.5 trillion Government Pension Investment Fund.

The pension giant conducted a survey of its 28 external foreign equity asset managers, asking them to nominate portfolio companies they say have “excellent TCFD disclosure,” referring to guidelines of the Task Force on Climate-Related Financial Disclosures. It was the second straight year Microsoft received the most nominations.

The GPIF survey asked the managers to nominate as many as five companies they felt provided “excellent TCFD disclosure” and up to three companies that have “excellent disclosure” regarding governance, strategy, risk management, and metrics and targets. The survey’s results were compiled into two lists, one with 75 companies chosen for having excellent TCFD disclosure and the other with 110 companies named for having excellent disclosure.

Only 10 companies were nominated by more than one asset manager, with Microsoft and Enel the only ones selected by more than two managers, with six and five nominations, respectively. The other eight companies with multiple nominations were Anheuser-Busch InBev, Cemex, Citigroup, Ford Motor, Johnson & Johnson, Procter & Gamble, Salesforce and Schneider Electric.

“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 company was also praised for having “comprehensive climate transition risk processes, with strong oversight, target setting and transparency,” and for having a TCFD report that “comprehensively addresses all of the TCFD recommendations,” as well as “a particularly ambitious target to be carbon negative by 2030.”

Microsoft was also commended for publishing a stand-alone climate report and for being one of the only “mega cap” technology companies to do so. “The report clearly outlines climate scenarios and multiple examples of climate risks and opportunities,” according to the summary. Microsoft’s report explains how those risks are managed and shows the commitments and targets it uses to manage climate-related risks and opportunities.

“The company is one of the most advanced in the market in terms of the scope, ambition and transparency of its climate metrics and targets,” the GPIF report stated.

Italy-based Enel, a manufacturer and distributor of electricity and gas, was noted in the GPIF report for being the first company to fully align its disclosures with the Climate Action 100+ Net Zero Company Benchmark, which aims to measure a company’s progress implementing net zero transition plans and meeting the targets of the Paris Agreement.

“They have clear scenario analysis, highlighting the potential transition and physical climate risks and opportunities for different aspects of their business, including highlighting the different time horizons these will occur,” according to the GPIF report, which added that Enel also provides detailed disclosure of its net zero strategy.

“In our view, the company is one of the most advanced high climate impact companies in the portfolio in terms of the scope, ambition and transparency of its climate metrics and targets and governance,” the report stated.