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World’s Largest Pension Fund Selects Three ESG Indices for $9 Billion Investments

Japan’s  Government Pension Investment Fund looks to set a global example.

Japan’s Government Pension Investment Fund (GPIF), the world’s largest pension fund, announced Monday that it will shift 3% of its passive domestic equity investments (roughly $8.8 billion) into environmental, social, and governance (ESG) indices.

The first of the $1.2 trillion fund’s picks include MSCI’s “Empowering Women” WIN index, in favor of its gender equality agenda. The index focuses on companies that “encourage more women to enter or return to the workforce,” ranking companies according to the gender balance of staff from their new hires to their executive board.

“Recent research has suggested that greater participation of women in the workforce may have benefits for the Japanese economy,” said Diana Tidd, MSCI head of index, in a statement. “As a result, the Japanese government has set out explicit goals to encourage women’s participation and promotion in the business world.”

The GPIF’s other two chosen indices are MSCI’s Environmental, Social, and Governance Select Leaders and the FTSE Blossom Japan index, which track the performance of Japanese companies based on their general social responsibilities.

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“GPIF expects that the selected ESG indices incentivize Japanese companies to improve their ESG evaluations and enhance enterprise values in the long term,” said GPIF president Nhihiro Takahashi in a news release.

In addition to fellow Japanese investors, Takahashi also requested that all funds globally follow GPIF’s lead.

“If overseas investors focusing ESG with long-term horizons follow, the investment returns of Japanese equities are likely to improve. GPIF, as a universal owner (a large-scale investor holding a well-diversified portfolio), and its pension beneficiaries are considered to reap most benefit by the optimization of investment value chain.”

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