Reimagining Capital Markets With Hiromichi Mizuno
Hiromichi Mizuno is a United Nations Special Envoy on Innovative Finance and Sustainable Investments. Previously, he has served as Chief Investment Officer of the Japan Government Pension Investment Fund–the largest asset owner in the world.
He is a Founding Member of the Climate Finance Leadership Initiative, and was also a member of the Global Investors for Sustainable Development Alliance convened by the Secretary-General.
As part of our upcoming film, The Purpose of Capitalism: Lessons from Japan, we spoke to Mizuno about his journey towards sustainable investing, and the value of flexibility, open-mindededness and growth.
This interview was edited for clarity and length.
TBT: When you were at business school in the US, what was the perception of business in Japan?
Hiromichi: In the 1980s, I think people in the US saw Japan as a sort of role model for business. But by the time I arrived at Kellogg for MBA education in 1993, things were different. In just over ten years, people’s views on business had completely changed. Japan had turned into another sort of role model: of long-term stagnation, or failure.
It made me think: we have to be flexible. We have to learn from one another. Because there’s no one size fits all solution that serves all of society for a long time.
“We have to be flexible. We have to learn from one another. Because there’s no one size fits all solution that serves all of society for a long time.”
TBT: After you finished business school, what were your next steps?
Hiromichi: I went back to the Japanese trust bank and I worked in Silicon Valley and New York. But I was always questioning myself, whether my job was really creating any value to society.
I was considering retiring from finance altogether when I was invited by a Japanese bank to run the world’s biggest pension fund, Japan Government Pension Investment Fund (GPIF), managing 1.5 to 6 trillion dollars.
I decided to take it because I believed that it would allow me to contribute to society. That brought me on a totally different journey, to pursuing sustainability and ESG in finance.
TBT: You became very well-known for your work at GPIF. Can you describe your journey there?
Hiromichi: The first thing I did when I arrived at GPIF [Government Pension Investment Fund] was redefine the role of a big public pension fund, so that it could serve the whole of society, across generations.
But nothing I learned during my MBA or my financial career gave me any clue how to do this. So I had to come up with a new solution.
Rather than trying to beat others, we tried to find a way to make the whole system better, and promote long-term sustainability in a capital market. This is the thinking behind the suspension of stock lending, because while it gives us very easy money, it doesn’t create long-term value or serve society.
Eventually, we came up with the concept of universal ownership. So, now, each time we make an investment decision, our team discusses whether it’s consistent with our long-term principles of universal ownership and cross-generational investment.
“Each time we make an investment decision, our team discusses whether it’s consistent with our long-term principles of universal ownership and cross-generational investment.”
TBT: Was there something about being raised in Japan that gave you ideas about how to establish this direction for you?
Hiromichi: I think the main difference between business in Japan and the Western world is in cultural background. I remember when I first heard about Environmental, Social and Corporate Governance (ESG) it made sense to me; it just fit in with what I had learnt about business. And I think a lot of Japanese people wouldn’t find this to be a new concept.
But when I started talking about this in America and Europe, I had to fight for it more, because the concept wasn’t in their business culture.
However, over the past five years, this has been changing. Nowadays people understand what we are talking about more, and are working hard to integrate it into their business practice.
But what is important for me is, rather than saying that the Japanese or the American businesses model is superior, we should think: we all have different cultures, we have different histories, but if we have an open-minded approach to that discussion, we will probably be able to learn from each other.
“Rather than saying that the Japanese or the American businesses model is superior, we should think: we all have different cultures, we have different histories, but if we have an open-minded approach to that discussion, we will probably be able to learn from each other.” – Hiromichi Mizuno
TBT: Do you think there is a problem with capitalism today?
Hiromichi: Capitalism is the best system we can think of, but we need to reimagine it. The current capital market mechanism is leaving a lot of people behind; the new definition of capitalism has to be more inclusive and more sustainable.
TBT: What were your first impressions of the Business Roundtable’s shift from shareholder to stakeholder value?
Hiromichi: The business round table statement came to me as a surprise. This year is the 50th anniversary of Milton Friedman’s famous New York Times essay, where he stated that maximizing shareholder value was the only purpose of a business. So I think it took a lot of guts for them to sign the statement, and I respect and appreciate their doing it. We just need to make sure that everybody actually practices it.
TBT: That’s interesting. Many people said it would just PR. But do you think conversations have the power to change things?
Hiromichi: Saying something in public means a lot, and it can be very impactful on the actions of others. Even if some people signed it with no beautiful motivation— because they felt like they had to or thought it was more politically correct to do so —eventually they will want to do it for themselves.
To be honest, I don’t mind whatever the way they approached it, we all seem to be heading in the same direction. There’s always going to be people who genuinely believe it, and those who don’t. We have to be inclusive.
“There’s always going to be people who genuinely believe it, and those who don’t. We have to be inclusive.”
TBT: Do you have any advice for young managers and business people?
Hiromichi: Be creative. Learn from each other—that’s the whole use of education. Don’t just stick to one idea for years and years, but be open-minded and flexible.
The Purpose of Capitalism: Lessons from Japan premieres on CNBC in October.
This interview took place as part of The Purpose of Capitalism: Insights from Japan . The documentary takes an inside look at some of the largest and oldest Japanese companies to find the answer. It premieres on CNBC in October.
To read more about the film and be the first to receive insights and updates, click here.