Japan’s giant Chikyoren government officials fund tenders active ESG equities mandate

Request for proposal from Pension Fund Association for Local Government Officials

The JPY18.9trn (€141bn) Pension Fund Association for Local Government Officials (PAL), the second largest public pension fund in Japan, has tendered an active Japanese equities mandate seeking long-term returns via environmental, social and governance (ESG) factors.

The fund, known as Chikyoren, hasn’t stated the mandate size but says in its request for proposal (Japanese) that the manager must be managing a minimum JPY100bn globally. The deadline for responses is July 24.

The benchmark is the main TOPIX index and a quantitative approach is being sought.

Chikyoren was founded in 1984 and is the pension fund for government officials in Japan. It has a strong governance focus, having had corporate governance principles and voting rights guidelines in place since 2004; it signed up to Japan’s Stewardship Code
in 2014.

It conducts dialogue with its investment managers about how they engage with companies and exercise voting rights. In the year to March 2014 it voted against 21.9% of total AGM proposals in its home market, according to its 2014 Stewardship Report.It voted against 36.1% of directors, mostly over lack of independence/disclosure or where the candidate is “considered to be responsible for poor business performance or antisocial acts”. It voted against 19.8% of proposals related to director pay.

It comes amid Prime Minister Shinzo Abe’s push to improve corporate governance, known as ‘Abenomics’ that has seen the nation’s massive $1.1trn Government Pension Investment Fund (GPIF) radically shift away from government bonds towards equities.

Now Chikyoren and other public funds are following suit as the pension system is being consolidated.

Though Chikyoren and its peers will align their investment strategies, the government has said they will remain organisationally independent.

Last year GPIF awarded contracts to three firms to undertake research into ESG and stewardship. Reuters reported last week how Abe’s reforms had attracted foreign investors but hit the yen.

Link to Chikyoren’s English language home page.