Japan’s government fund, world’s largest, awards three ESG research contracts

The world’s largest pension fund, the JPY127trn (€948bn) Japanese Government Pension Investment Fund (GPIF), has awarded contracts to three firms to undertake research into ESG and stewardship.

The awards have gone to QUICK, MSCI ESG Research and Ernst & Young and come as the fund is looking to boost its holdings in domestic equities as part of the wider ‘Abenomics’ reform programme of Prime Minister Shinzo Abe.

The ‘third arrow’ of Abenomics has seen the creation of the Principles for Responsible Institutional Investors, a stewardship code based on the UK model (which the GPIF signed earlier this year) as well as its own version of the Kay Review – the Ito Review – and a planned corporate governance code.

QUICK, the financial information provider that’s part of the Nikkei group, has been selected to research how GPIF should undertake stewardship responsibilities and ESG investment. London’s FTSE Group has been sub-contracted to help QUICK deliver the project.

MSCI, the index and environmental, social and governance (ESG) information provider, has also been awarded a mandate from GPIF around stewardship and ESG.Speaking to Responsible Investor, Howard Sherman, Head of Corporate Governance Business Development at MSCI, said it would be providing the fund with a background on various stewardship and governance codes worldwide as well as providing examples of how other asset owners have used stewardship and ESG to improve returns. It would also lead a review of how ESG factors can be integrated into the investment process.

He said MSCI had been asked to provide its research and recommendations by the end of the first quarter next year, and it was still working out a definite timeline with the GPIF.

Sherman said: “It’s not just winning a contract with a large client. It is a visible part of Japan’s effort to stimulate growth as part of the third step of Abenomics. It is a clear example of structural reform and indicates that the Japanese government and GPIF are looking at stewardship engagement and ESG as growth drivers.” He added it sent a “visible signal” to the global market on the role ESG can play.

Advisory firm Oxford Economics has also been awarded a contract from GPIF to look at business accounting rules.