Thai asset owners are pushing for ESG-integrated portfolios to be adopted across the board by the country’s investing institutions.
Speaking at this week’s Sustainable Investment Conference in Bangkok, Dr Seree Nonthasoot, a board member of the Government Pension Fund of Thailand (GPF), said the fund was well on the way to having its entire portfolio covered by ESG investment processes.
Nonthasoot, who is also governor of the Stock Exchange of Thailand (SET) added that 32 major institutional investors in Thailand, with over 11 trillion baht (US$1.8 trillion) in assets under management, have signed the ESG collaborative engagement guidelines initiated by GPF in August this year.
GPF will complete its ESG scoring tool by the end of this year, which will be used to evaluate investment opportunities in Thai equities and fixed income assets.
“By the first quarter of 2020, GPF targets to use an ESG lens for all of our investments in the Thai market across equity classes including real estate, private equity and infrastructure,” said Vitai Ratanakorn, secretary-general of GPF. “This means we will not invest in a company if we have material concerns on its ESG track record.”
In December last year, GPF joined the small but growing band of Asian asset owners in adopting global ESG standards as established under the Principles for Responsible Investment (PRI).
Other Asian signatories in the last year include Malaysia’s Employees Provident Fund and the Hong Kong-based insurer AIA.
GPF has strengthened its investment committee and management process in recent years, building a dedicated ESG team in the process. Its analysts have been visiting Thai companies to engage with them on governance, said Ratanakorn.
The Thai pension fund, with $21 billion under management, began studying how ESG factors can impact its portfolio four years ago. It integrated ESG into its investment process for corporate bonds in 2018. The team of eight analysts came up with an ESG scoring system and in 2019 the fund has extended this into its equity investments.“Once the team can import the ESG analysis into their models for equity valuation, they can make the whole process more systematic, assigning different discount rates for the various ESG scores and evaluations,” said Yingyong Nilasena, GPF’s deputy secretary general of fund management.
Now GPF is set to apply this to the total portfolio, which will mean external fund managers can expect more detailed questioning on their investment processes. “We are going to find out more about how they are integrating ESG into their own processes,” Nilasena said.
“External fund managers can expect more detailed questioning on their investment processes”
GPF’s ESG-focused portfolio recorded a ten-month return of 4.6%, surpassing the GPF main equity fund by 50 basis points.
PRI’s chief executive Fiona Reynolds said she is pleased to see the GPF taking the lead in Southeast Asia. “The region is already making measurable progress,” Reynolds said. “In Thailand, the SET has carried out a series of sustainability-related workshops as part of its sustainable development forum. In addition, it has organised free-of-charge training sessions with listed companies on, among other things, the specifics of sustainability reporting, sustainability indexing, evaluation and data management, corporate social initiatives, sustainable development risks and materiality.”
Delegates at the Sustainable Investment Conference were in agreement that ESG will continue to perform as well or better than non-ESG-integrated portfolios, with 120 of the 140 attendees forming the consensus and 51% saying they will increase their sustainable investments in the next 12 months.