TOKYO -- Japan's Government Pension Investment Fund is investing in environmentally, socially and governance-oriented companies in line with three new specially designed indexes, raising hopes that other institutional money managers here will follow suit.
The country's biggest public pension fund, which reported 144 trillion yen ($1.26 trillion) in managed assets as of the end of December, had bought about 1 trillion yen in ESG stocks as of the end of June.
The three indexes were launched Monday. The MSCI Japan Empowering Women Index covers companies with high percentages of female managers and new hires, among other factors. Financials make up the biggest sector, with a weighting of about 26%. Top holdings include Astellas Pharma and wireless carrier NTT Docomo.
The other two indexes have a more general ESG focus. The FTSE Blossom Japan Index counts Toyota Motor, railroad operator JR East and retail group Seven & i Holdings among its components, while the MSCI Japan ESG Select Leaders Index includes megabank Sumitomo Mitsui Financial Group, factory automation device maker Keyence and Shin-Etsu Chemical.
Many stocks covered by the trio rose Monday as investors tried to get ahead of the pension fund. JR East advanced 1.7%, as did chemicals group Asahi Kasei, which touched a year-to-date high on an intraday basis. Air conditioner maker Daikin Industries gained as well.
The GPIF holds about 30 trillion yen in Japanese equities, much of it invested in line with the Topix index of first-section shares on the Tokyo Stock Exchange. The ESG indexes initially account for about 3% of its Japan-stock portfolio, with plans to raise the share to about 10%, or 3 trillion yen. The fund is looking to start investing in ESG stocks abroad as well.
The GPIF had long been seen as the opposite of an activist investor, choosing not to make its shareholder voice heard. But it changed tack after adopting Japan's stewardship code for institutional investors in 2014.
European and U.S. funds have led the way in ESG investment, but most rate companies by deducting points for such activities as making alcoholic beverages or cigarettes. The GPIF is a rare example of a major investor taking an additive approach to picking ESG stocks.