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Environment

Japan's $1.5tn pension fund to go all in on green bonds

Move forms part of ESG embrace by country's top public investor

Japan's enormous Government Pension Investment Fund could set off a domestic stampede into green bonds.

TOKYO -- Japan's Government Pension Investment Fund will begin allocating substantial amounts of money to bonds with an environmental purpose as early as the fiscal year beginning next April, Nikkei has learned.

The move by the GPIF -- Japan's largest public investor by assets, managing 159 trillion yen ($1.5 trillion) -- springs from the fund's new focus on environment, social and governance investing.

Starting next month, it will solicit green-bond indexes from private-sector index companies. The GPIF's move could influence other institutional investors in Japan, deepening the market for these bonds.

Green bonds raise money for climate and environmental projects. The issuers are private companies as well as international organizations and governments.

According to the Climate Bonds Initiative, an international not-for-profit organization that works to fight climate change, the global issuance of green bonds amounted to $167.6 billion in fiscal 2018. Without a linked index, Japan issued $5 billion worth of these bonds.

The GPIF, which already owns a small amount of green bonds, is now ready to create a framework for such investing.

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