July 3, 2017 / 5:37 AM / 2 months ago

Japan's GPIF says allocated 1 trillion yen to ethical investments

TOKYO, July 3 (Reuters) - Japan's Government Pension Investment Fund (GPIF), the world's largest pension fund, said on Monday it has allocated 1 trillion yen ($8.9 billion) of funds to socially responsible investments.

That represents about 3 percent of its Japanese stocks portfolio and, in the medium term, the fund could increase its investment in companies that have good ESG (Environmental, Social, and Governance) practices, the fund said.

Market players said the allocation change by the mammoth fund with total assets of 144 trillion yen ($1.3 trillion) may explain the strong performance of some Japanese stocks, such as Ajinomoto during the last quarter.

The GPIF's move could prompt other, smaller Japanese corporate and public pension funds to start ESG investments, which have grown popular in the West, particularly in Europe, but have not gained much traction in Asia including Japan.

The GPIF said its methodology is based on positive screening, in which investors choose companies which they think have good practice.

Pension funds of Norway and Sweden, for example, have adopted negative screening, in which they divest from companies they consider harmful, such as coal mining companies.

$1 = 112.24 yen Reporting by Hideyuki Sano, Additional reporting by Aaron Sheldrick; Editing by Jacqueline Wong

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