The World’s Largest Pension Fund Has Cooled on ESG. Should You?
Thematic indices make investors feel good. But is simple virtue enough to fatten retirement accounts and support an aging population?
The path of good intentions?
Photographer: Bloomberg/BloombergIf a pioneer investor in ESG is getting cold feet, should you? In July 2017, Japan’s $1.6 trillion Government Pension Investment Fund — the world’s largest — blazed a trail by putting 1 trillion yen ($9.1 billion) into three indices that track Japanese stocks that put emphasis on environmental, social and corporate governance issues. GPIF then plowed 1.2 trillion yen into two carbon-efficient indices in 2018, and another 1.3 trillion yen into two ESG foreign equity indices last December.
But top officials of the pension fund have been talking up fiduciary duty lately. GPIF “can’t sacrifice returns for the sake of buying environmental names or ESG names,” a senior director at the fund’s investment strategy department told Bloomberg News in April.