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New ESG Index Chosen By World's Largest Pension Fund

Posted on July 3, 2017 at 12:15 PM

The Government Pension Investment Fund (GPIF) of Japan, the world's largest pension fund with over $1.3 trillion in assets. has selected a new index provided by FTSE Russell, the global index provider, as a core ESG benchmark.

The new FTSE Blossom Japan Index is constructed using FTSE Russell’s ESG Ratings data model, which draws on existing international ESG standards, including the UN Sustainable Development Goals. Its inclusion thresholds are aligned with the globally established FTSE4Good Index Series.

The index can be used to assist in the integration of ESG considerations into a diversified strategy. It does not deviate significantly from the index characteristics of its traditional market capitalization weighted benchmark, said FTSE Russell.

"To minimise industry bias, the index has been designed using an industry-neutral weighting approach to match the industry weights in the underlying FTSE Japan Index" it said.

FTSE Russell says it is responding to "a growing trend among asset owners to integrate ESG considerations into passive investments."

“We are delighted to be working with GPIF to promote strong stewardship practices and market standards. FTSE Russell’s ESG capabilities are increasingly being used by asset owners and pension funds around the world" said Mark Makepeace, Chief Executive, FTSE Russell.

Japan and its institutions are actively engaging with companies on their ESG practices, he added, saying the FTSE Blossom Japan Index "provides a powerful basis to increase corporate ESG transparency and performance."

The London Stock Exchange Group launched the FTSE Russell brand in May 2015 and has since actively supported the growing global green and sustainable financing movement.

Categories: Investors, ESG, Governance