The Government Pension Investment Fund (GPIF), one of the largest managers of retirement savings in the world, has dumped the ESG index it had been using for its passive investments in previous years.

In March, the fund said it has decided to change its benchmark from the MSCI Japan ESG Select Leaders Index to MSCI Nihonkabu ESG Select Leaders Index.

This change means:

• the new benchmark excludes REIT
• there are 516 shares in the new benchmark compared to 239 shares in the old benchmark
• the index will include the top 50% in ranking of each sector in terms of the number of shares compared with the top-ranked stocks in each sector covering 50% of market capitalisation of the parent index in the previous benchmark.

Having used the MSCI Japan ESG Select Leaders since 2017, it said that annual reviews have been done to make sure their assets are being properly benchmarked.

Following several discussions with MSCI, it chose MSCI Nihonkabu ESG Select Leaders Index “as a measure of improvement”.

“GPIF conducts passive investments based on ESG indexes from the viewpoint that the sustainable growth of our investee companies and the markets as a whole is critical for the expansion of long-term investment returns of the assets under management,” it said on its website.

“GPIF believes that it is not desirable that the investment performance significantly fluctuates due to factors other than ESG. The revision that we have announced [in March] is also based on this perspective,” said Mizayono Masataka, president of GPIF, in a statement.

Masataka said GPIF will continue to promote ESG investments to secure the necessary reserves for its future beneficiaries.

The fund is one of the top performing sovereign funds in the world with impressive returns of 22.67% in the year to March. Its total assets under management stood at $2.3 trillion (US$1.5 trillion).

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