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

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.”

Tags: ESG, GPIF, Japan, MSCI, Pensions

In a rather blunt report summarizing the negotiations leading up to the deal in which BHS owner Sir Philip Green agreed to fund his defunct company’s pension plan with £363 million ($473 million), the UK’s The Pensions Regulator (TPR) portrays Green as having tried to shirk his responsibilities to his workers.

Under the terms of the settlement, which were agreed upon earlier this year, Green is providing funding for a new independent pension plan, which gives members the option of the same starting pension as they were originally promised by BHS, and higher benefits than they would get from the Pension Protection Fund (PPF).

“The agreement we have reached with Sir Philip Green represents a strong outcome for the members of the BHS pension schemes,” said TPR chief executive Lesley Titcomb said at the time.

But in an analysis of the agreement, TPR revealed that Green made several attempts to settle the dispute that were rejected for being insufficient. It also concluded that the main reason behind the sale of BHS “was to postpone BHS’ insolvency to prevent a liability to the schemes falling due while it was part of the Taveta group of companies ultimately owned by the Green family,” said TPP. It added that “the effect of the sale was materially detrimental to the schemes.”

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TPR’s assessment appears to contradict Green’s public apology to BHS pensioners “for this last year of uncertainty, which was clearly never the intention when the business was sold in March 2015.”

The report also disputes what Green said at a parliamentary hearing last year in which MPs grilled him on BHS’ pension problems. Green told the MPs that “somebody was asleep at the wheel,” but that it wasn’t him, because he was not involved in he pension negotiations. However, in its report, TPR said Green was “personally involved with the schemes, including investment issues, the 2012 valuation and recovery plan negotiations, and the appointment of new trustees and advisers.” TPR also referred to him as a key decision maker.

“The report highlights the lessons we have learned from this case about how we can regulate more effectively,” said Nicola Parish, executive director of frontline regulation. “We are already acting more quickly to intervene where we consider schemes to be underfunded, or where there are indications that employers may be avoiding their responsibilities.”

Tags: BHS, Pension, Phillip Green