Government Pension Investment Fund, Tokyo, has allocated and begun passively investing a total of ¥1.3 trillion ($12.5 billion) against two ESG-themed benchmarks run by MSCI and Morningstar.
The world's biggest pension fund said in a document published on its website Friday that it had added the MSCI ACWI ex-Japan ex-China A ESG Universal with Special Taxes index and the Morningstar Developed Markets (ex-Japan) Gender Diversity index to its roster following a due diligence process.
The ¥167.5 trillion pension fund benchmarked ¥1 trillion benchmarked to the MSCI index and the remaining ¥300 billion to the Morningstar index. Executives expect the investments benchmark to these two indexes "to improve long-term returns by promoting the sustainable growth of individual investee companies and the market as a whole," the document said.
"By selecting a new general ESG index for foreign equities, GPIF has embarked on passive equity investment that incorporates all elements of ESG in both our domestic and foreign portfolios," said Masataka Miyazono, president, in a news release. "Furthermore, a significant body of empirical research indicates that strong gender diversity has the potential to boost corporate performance. We consider these two indexes to be firmly in line with our objective of improving long-term returns through enhanced sustainability of individual issuers and the market as a whole."
The pension fund is prohibited from investing in equities directly by law so these assets are outsourced to external managers, a spokeswoman for GPIF said. She declined to name the managers but said a list of all allocations is disclosed in the fund's annual report.