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Pension Funds

GPIF selects two S&P environmental indexes for its global equity portfolio

Government Pension Investment Fund, Tokyo, chose two S&P environmental indexes for global equities.

The ¥156.4 trillion ($1.4 trillion) fund selected the S&P/JPX Carbon Efficient index and the S&P Global Ex-Japan LargeMidCap Carbon Efficient index, said a news release on the pension fund's website. The fund has ¥1.2 trillion invested in domestic and overseas passive strategies tracking these global environmental stock indexes.

Both indexes overweight firms with high carbon efficiency within the same industry, and/or disclose the amount of carbon emissions relative to those companies. Both also adjust the over- and underweight positions of companies in accordance with the damage their relevant industry is doing to the environment.

Further, the S&P/JPX Carbon Efficient index covers all companies listed in the first section of the Tokyo Stock Exchange, excluding some illiquid stocks, and GPIF said this means the coverage is broader than other environmental, social and governance indexes.

A search was launched in November.

"GPIF hopes that the selected global environmental stock indices will provide an opportunity for companies to work on carbon efficiency and disclosure," said Norihiro Takahashi, president of GPIF, in the news release. "These indices are not constructed by the divestment of companies that have more damage on the environment, (but they) nevertheless lead to accomplish lowering climate-change risks by significantly reducing carbon emissions of the portfolio. Moreover, the indices can include small listed companies that were not covered by other ESG indices, which goes along with GPIF's idea to improve the sustainability of the overall market."