选择的ESG指标.pdf
July 3, 2017 GPIF Selected ESG Indices GPIF selected three ESG indices for Japanese equities and commenced passive investment tracking those indices. Investment heeding ESG factors is expected to enhance risk-adjusted return over the longer term. In choosing the ESG indices, GPIF emphasized that 1 “positive screening“ that determines constituent companies based on their ESG uation should be adopted, 2 the uation should be based on public ination and its and results should be disclosed and 3 ESG uators and index providers should be properly governed and their conflict of interests should be properly managed. GPIF selected two “broad“ indices covering all of the environmental, social and governance factors, and one “thematic“ index focusing on the gender diversity among social factors. Type Name of index Broad index FTSE Blossom Japan Index Broad index MSCI Japan ESG Select Leaders Index Thematic/social S MSCI Japan Empowering Women Index nickname WIN * Thematic index for environmental factor is still examined. GPIF expects that the selected ESG indices incentivize Japanese companies to improve their ESG uations and enhance enterprise values in the long term. If overseas investors focusing ESG with long- term horizon follow, the investment returns of Japanese equities are likely to improve. GPIF, as a universal owner a large scale investor holding well diversified portfolio, and its pension beneficiaries are considered to reap most benefit by the optimization of investment value chain. GPIF’s passive investment tracking the selected ESG indices initially accounts for 3 of Japanese equity portfolio about 1 trillion yen. GPIF aims to expand ESG investment by adopting other indices or active investment. GPIF commits to actively engage in the ESG investment and the promotion of the ESG concepts. Results of ESG Index Selection July 3th, 2017(GOVERNMENT PENSION INVESTMENT FUND ) Summary of ESG index selection and the list of selected indices 1(GOVERNMENT PENSION INVESTMENT FUND ) ESG index selection Summary 2. Adopt positive screening based on public ination and aim for boosting equity markets in Japan. 4. uate investment and manage risk appropriately. 5. Commence investment from 3 of Japanese equity portfolio 1 trillion yen and aim for increasing it in the future. 3. Select multiple indices for them to be collectively balanced and not to be biased to a specific theme. ○ Adopt positive screening based on ESG uation and provide opportunities for a wide range of companies to be included in the indices and avoid categorically excluding companies providing specific goods and services in order to boost overall equity markets in Japan. ○ Monitor the selected indices by uating investment and managing risk properly, and review them as needed if the risk return profile does not improve in the medium to long term. ○ Commence investment from 3 of Japanese equity portfolio funded in part by restructuring current holdings. Aim for increasing it including other products in the future. ○ Select multiple indices such as indices uating comprehensive ESG factors or a index focusing on gender diversity for them not to be biased to a specific theme and work on a wide range of themes. 2 1. Expect portfolio’s risk-adjusted return to be improved over the long run. ○ Aim for maximizing the long-term return of the portfolio by minimizing the negative externality of environmental and social problems.(GOVERNMENT PENSION INVESTMENT FUND ) List of selected ESG indices E Environment S Social G Governance Broad indices Thematic indices N/A MSCI Japan Empowering Women Index WIN Under examination MSCI Japan ESG Select Leaders Index FTSE Blossom Japan Index 3(GOVERNMENT PENSION INVESTMENT FUND ) Objective of ESG index selection, expected effect and the selection process 4(GOVERNMENT PENSION INVESTMENT FUND ) GPIF as a universal owner and a super-long-term investor -- universal ownership -- 5 ■ GPIFs shareholding as of the end of March 2016 * In the case of passive investing based on the full replication using TOPIX as its benchmark, any of its shareholdings essentially continues to be held as long as it remains listed on the Tokyo Stock Exchange TSE First Section. Number of major indices constituents and that of GPIFs shareholdings UNEP Finance Initiative “Universal Ownership“ 2011 “Leading institutional investors are, in effect, universal owners shareholders that broadly encompass the entire capital markets since over the long run they invest in well diversified portfolio that represents the worlds capital market. Their portfolios are inevitably exposed to ever-growing costs incurred due to environmental damage caused by corporate activities. To minimize such costs as a whole and reduce externality, institutional investors are able to influence ways of engaging in business activities. Long-term economic stability and beneficiary benefit are now faced with a crisis. Institutional investors can, and must, work together to take action to lower financial risks resulting from environmental effects.“ excerpt from “Responsible Investment“ by Takeshi Mizuguchi Passive-active composition of equity investment Source Annual Report for Fiscal Year 2015 Number of stocks Number of stocks TOPIX GPIFs Japanese shareholdings MSCI ACWI excl. Japan GPIFs Foreign shareholdings Active 18.48 Passive 81.52 Active 15.85 Passive 84.15(GOVERNMENT PENSION INVESTMENT FUND ) Objective of soliciting proposals for ESG indices 6 For GPIF as a universal owner a large scale investor holding well diversified portfolio, it is rational to seek to maximize its portfolios investment return over the long term by minimizing negative externalities e.g. environmental and social issues. Considering the risk-reduction effects that are expected to be realized by integrating the environment, social and governance “ESG” factors into the investment process, the longer the investment horizon is, the greater the effects improving risk-adjusted investment returns will be. GPIF called for applications for the indices ESG indices, by which risk-reduction effects and acquisition of excess returns can be expected from a medium- and long-term perspective through the effects of ESG integration, with the aim of exploring the feasibility of passive investment in Japanese equities that integrate ESG factors. Universal owner Super-long-term investor Boost of Japanese Equity Market ESG index ESG integration Promoting ESG ination disclosure Investment and engagement Improving ESG uation Minimizing negative externality Mitigating short-termism Company GPIF External asset manager Investment and engagement(GOVERNMENT PENSION INVESTMENT FUND ) Expected effect by expanding ESG investment 7 Expanding ESG investment brings many benefits not only to GPIF. The increase in fund for ESG investment encourages companies to improve their ESG uations and enhanced ESG activities lead to the increase in enterprise values in the long term. Further, if the improvement of the ESG uation of Japanese companies leads to the inflow of foreign funds placing emphasis on ESG uation, the perance of Japanese equities is expected to improve. GPIF, as a universal owner, and the insured of the public pension are considered to reap most benefit with investment value chain optimized. based on the number of stocks Note 1 Analysis based on the ranking of ESG uation average of the top 10 countries regions in terms of the constituents of each index Note 2 Constituents and ESG uation are as of June 2017 Source Prepared by GPIF from MSCI and FTSE ESG uation by FTSE FTSE Global constituents Low ← ESG uation pt → High South Korea Hong Kong Japan U.S. Canada Australia Switzer- land Germany UK France ESG uation by MSCI MSCIACWI constituents Low ← ESG uation pt → High China India Japan Taiwan U.S. Japan Canada Australia UK France Expansion of ESG investment Investment opportunity at low cost Building sustainable society Improving the soundness of pension finance Increasing incentives to enhance the response to ESG by companies Improvement of ESG investment and the perance of Japanese equities Improvement of the ESG uation of Japanese companies(GOVERNMENT PENSION INVESTMENT FUND ) Process of ESG index selection 8 During the solicitation period from the end of July to the end of September 2016, 27 indices were proposed by 14 companies, including asset managers and index developers at home and abroad. To examine the proposed indices both qualitatively and quantitatively, several dozen rounds of interviews have been conducted, field research has been implemented, and the Investment Advisory Committee has been convened seven times. ESG integrated, 17, 63 E only, 4, 15 S only, 2, 7 G only, 1, 4 Other, 3, 11 Note Legends shown are in the order of categories, number of proposals, and percentage. Classified by the GPIF First screening - Outline - Perance analysis Second screening - Company and organizational system - Concept of the index - Index establishment process - ESG uation Report to and Discussion at the Investment Advisory Committee Additional screening and field research - Governance - Conflicts of interest management - Fee structure Selection of index - Allocation policy(GOVERNMENT PENSION INVESTMENT FUND ) Points of ESG index selection 9 1. Positive screening 2. Encouragement of disclosure and improvement of ESG uation 3. Governance and conflicts of interest(GOVERNMENT PENSION INVESTMENT FUND ) Overall market Overall portfolio ESG broad index Thematic index B Thematic index A uation point 1 Positive screening 10 Not a few indices incorporate different factors such as low volatility or quality in the ulation process in addition to the ESG factors and some of them may be more influenced by these factors even though they identify themselves as ESG indices. Indices were uated in the context of the purport of solicitation“indices by which risk-reduction effects and acquisition of excess returns can be expected from a medium to long term,“ by putting emphasis on the fact that the index mainly focuses on ESG uation. As a result of positive screening based on ESG uation and from a view point of boosting overall equity markets in Japan, appreciated indices provide opportunities for a wide range of companies to be included and avoid categorically excluding companies providing specific goods and services. From the same perspective, the balanced combination of broad indices and thematic one was also considered. Return TOPIX incl. dividned * As for risks and returns, the annual average for the 36 months from the end of June, 2016 is being calculated. * The red dots show the ESG indices that clearly consider factors including low volatility and quality upon the selection. Blue dots show others. Risk (GOVERNMENT PENSION INVESTMENT FUND ) uation point 2 Encouragement of disclosure and improvement of uation In order to improve the accuracy of ESG uation, the “promotion of the disclosure of ESG ination by companies“ and the “improvement of ESG uation “ are essential, and reactions to these issues are uated in selecting the indices. Both FTSE and MSCI are actively engaged in the detailed disclosure of ESG uation s and results, providing the results of uation to companies, having dialogues with investors using the ESG indices, and are planning to analyze the results to improve ESG uation. “MSCI Japan Empowering Women Index WIN” was highly appreciated because it incentivizes constituent companies to disclose the ination companies with less disclosure are assigned low score. 11 [Current situation of ESG uation] Unlike financial analysis, ESG uation does not have a long history, and the standard of uation is yet to be established. Diclosure of ination necessary for uation is also not sufficient. The correlation of ESG uations by FTSE and MSCI is very low. Note 1 Universe for the analysis are 430 Japanese companies commonly surveyed FTSE and MSCI as of July 2016 Note 2 The plot of the diagram shows the ranking of ESG uation of each company from 1st to 430th High uation ← FTSE → Low uation High uation ← MSCI → Low uation 0 50 100 150 200 250 300 350 400 450 0 50 100 150 200 250 300 350 400 450 High uation ← MSCI → Low uation High uation ← FTSE → Low uation(GOVERNMENT PENSION INVESTMENT FUND ) uation point 3 Governance and conflicts of interest 12 In the case of the traditional capitalization weighted equity indices, constituent companies are determined “automatically“ based on the market capitalization and liquidity. On the other hand, in the case of the selected ESG indices, there is larger room for “human“ involvement such as analysts implementing ESG uation and analysts devising the ology to establish the index. That is, when guaranteeing the continuity, transparency and neutrality of ESG uation, governance and management to prevent conflicts of interest are critical. From such perspective, field research was implemented at multiple bases. FTSE MSCI Governance/ management to prevent conflicts of interest Parent company London Stock Exchange Group becomes listed in UK there are no strategic investors who threaten the neutrality of ESG uation among large shareholders. Changes in the general framework of the ESG uation scheme and index ology are decided at the committee comprised of only external experts. Have no involvement in services with which the interests may conflict, such as consulting service Listing of U.S. NYSE there are no strategic investors who threaten the neutrality of ESG uation among large shareholders. Decision of ESG uation, ESG uation, and the management/change of index ology are implemented only by in-house staff members under a strict firewall from the perspective of ination management and the ruling out of insider dealing. The results are disclosed together with reasons, allowing for external validaion. Have no involvement in services with which the interests may conflict, such as consulting service ESG uation philosophy In the course of transition to a sustainable economy and low-carbon economy, we support all participants in the capital market, including issuer companies, investors and brokers. In order to support the inclusion of sustainability in capital allocation, data are improved and engagement is promoted. Allow the market participants to actively incorporate sustainability upon ulating investment strategy, and involvement with improving the corporate value of invested companies engagement and stewardship.