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ESG included as Japan’s giant government pension fund plots in-house data analysis move

Government Pension Investment Fund looks to bolster index data analysis

Japan’s Government Pension Investment Fund (GPIF) is looking to bolster its in-house index data analysis capabilities, as it searches for three new ESG indices through a restructured selection process.

In a request for proposal (Japanese) set to close next week, the pension fund is inviting proposals for an IT system dedicated to internal index analysis and a service provider to be contracted for the job until 2025.

It will ultimately analyse the indexes submitted to GPIF’s “Index Posting System” (IPS), which will see it ask index providers to register and fill in details regarding their indices online.

A pilot run of the IPS kicks off this month requesting index ideas for foreign ESG equities, foreign diversity equities, and domestic and foreign green bonds – indices towards which the mammoth pension fund hasn’t confirmed how much it’s planning to shift. Both new and existing index ideas will be accepted.

GPIF spokesperson Naori Honda said: “The IPS aim is to collect information of indices with more flexibility and get information more promptly.”

Honda said the fund was hoping to receive index proposals from newcomers in the index industry as well as incumbents.

The IPS will be expanded to cover all indices following the implementation of the new IT system, which GPIF hopes to have in place by 2020.

Honda said: “80% of our investment is passive, so choosing appropriate indices is really important.

“It doesn’t matter whether it’s ESG related or not, indexes as a whole are very important for us.”In 2017, GPIF started a huge shift of assets towards five ESG indices.

Now, assets under management in each of the indexes stands at JPY642.8bn (5.4bn) for the FTSE Blossom Japan Index, JPY804.bn for the MSCI Japan ESG Select Leaders Index, JPY474.6bn for the MSCI Japan Empowering Women Index (WIN), JPY387.8bn for the S&P/JPX Carbon Efficient Index and JPY1,205.2bn for the S&P Global Ex-Japan LargeMidCap Carbon Efficient Index.

The current RFP builds on an earlier, more broad request for information (RFI) that said GPIF was considering the centralised management and analysis of market data, financial information and non-financial information like ESG data.

It said it was looking to achieve automatic receipt/efficient importation of the data, and to introduce statistical analysis functions such as back-testing.

In 2016, GPIF introduced an “asset manager registration system” designed to speed up and facilitate manager selection.

In other news this week, GPIF has launched an “initiative to promote green bonds” alongside the Nordic Investment Bank, a partnership that will see the bank issue bonds that GPIF asset managers can then buy at their own discretion.

GPIF has similar partnerships in place with the European Investment Bank, the Asian Development Bank, and the World Bank Group (the International Bank for Reconstruction and Development and the International Finance Corporation).