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.

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