Thailand’s Government Pension Fund (GPF) has joined the small but growing band of Asian asset owners to adopt global environmental, social and governance (ESG) standards as established under the United Nations' Principles of Responsible Investment (PRI).
Although no official statement has been made yet, AsianInvestor spoke to GPF's deputy secretary general for the fund management division, Yingyong Nilasena, who confirmed that the Thai pension fund had become an official signatory on December 29.
He added that the fund's management team is in discussions with its entire investment team and in-house ESG experts as to the exact internal framework needed to adopt the PRI principles, which are supported by a UN-partner body of the same name.
By signing up to the PRI, institutions uphold that their primary duty is to act in the best long-term interests of their beneficiaries and that ESG issues can affect the performance of their investment portfolios.
As a consequence, they commit to incorporate ESG issues into their investment processes and ownership practices. They also agree to seek appropriate disclosure on ESG issues by investee companies and to report on the effectiveness of their ESG work.
GPF, with $21 billion under management and one million members, has already revamped its investment committee and management process in recent years. As previously reported, it is looking to ensure its sustainability by further developing its asset allocation amid increasingly yield-starved markets.
Other Asian asset owners to have signed the PRI in 2018 include Malaysian public services pension fund KWAP and the Victoria University Foundation in New Zealand. PRI’s Asia director James Robertson, based in Hong Kong, told AsianInvestor he expects two other major Asian asset owners, in addition to GPF, to confirm their signing in the next few weeks.
Even so, Asia remains some way behind other regions.
Out of 2,205 current PRI signatories, only 318 are Asian and out of that total just 65 are asset owners. The rest are predominantly investment management firms.
The vast majority of PRI signatories are from Europe and the US, PRI data shows. The data also reveals how poorly countries outside the well-developed markets of Japan, Australia and New Zealand are represented. The only other Asian asset owners signed up are two Indonesian funds, Persero and Kehati, the National Pension Service in Korea, plus KWAP and Khazanah Nasional Berhad in Malaysia.
But momentum is building, said Robertson, and Asia is currently the biggest growth area for new signups. For example, signatory numbers in China have doubled in the past year. Then again, it's still mainly the larger fund management firms, with China AMC, E Fund, Harvest, China Life AM, CSOP and Penghua among those who signed up in 2018.
Insurance companies are expected to be a significant area of growth for PRI in Asia, Roberston said.
Much of the work being done currently within the PRI framework concerns action to minimise the effects of climate change.
“Whilst investors alone, can’t solve the climate issues the world faces they do have a role to play," the PRI’s London-based chief executive Fiona Reynolds told AsianInvestor. “Investors need to look at their asset allocation and portfolio construction and understand their exposure to climate risk across asset classes.”
To address these climate issues, asset owners at the leading edge, such as the New Zealand Super Fund are looking to decarbonise their portfolios and allocate investments to low carbon opportunities and new technologies. At the same time, they are engaging with the companies they invest in about transitioning to a low carbon economy.