Institutional investors are increasingly shifting their strategies to incorporate environmental factors into their portfolios. Beyond their important commitment to addressing climate change directly, data continue to mount on the performance impact of environmental risks at the company level. To exemplify this trend, on Sept. 24, 2018, Japan’s Government Pension Investment Fund (GPIF), the world’s largest pension fund, selected new environmental benchmarks launched by S&P Dow Jones Indices (S&P DJI) to achieve its green objectives.
1. How did S&P DJI become GPIF’s carbon efficient index provider?
Kana: In November 2017, GPIF released a request for proposal for global environment investment strategies. After many collaborative discussions with S&P DJI, Trucost ESG Analysis, Japan Exchange Group, and GPIF, S&P DJI was able to create an index series that serves to promote not only environmental disclosures in Japan but also in companies around the world. We also developed new carbon efficient indices, and GPIF selected the S&P/JPX Carbon Efficient Index for the Japanese equity portion and the S&P Global Ex-Japan LargeMidCap Carbon Efficient Index for the non-Japanese equity portion to serve as benchmarks for ESG business strategies. These strategies were created in collaboration with Trucost ESG Analysis, which is an environmental research company that is part of S&P Global and has expanded their coverage to cover all of TOPIX.
2.Why did GPIF and S&P DJI undertake this project in the first place?
Ryan: S&P DJI was able to align our index methodology with GPIF’s mission of achieving long-term returns while reducing environmental risk. As signatories of the Principles for Responsible Investment, GPIF and S&P DJI are committed to promoting responsible investment. As the leading index provider, S&P DJI’s partnership with Trucost puts it in the best position to be able to provide the E portion of environmental, social, and governance (ESG) criteria in the index methodologies.
