Japan’s Government Pension Investment Fund (GPIF), the world’s largest pension fund with about US$1.5 trillion in assets under management, has adopted a new index rolled out by investment research provider Morningstar to provide exposure to developed-market companies with strong gender diversity policy and practices.
Morningstar Developed Markets ex-Japan Gender Diversity Index is powered by the data and scoring methodology of Equileap, a provider of data and research on gender equality for investors.
In tracking the index, GPIF seeks long-term better risk-adjusted returns by incorporating not only financial factors but also environmental, social, and governance (ESG) factors in its investment decisions, according to a statement.
Investor demand for ESG has sharply increased over the last decade, with global assets in sustainable funds hitting a record high of US$1.2 trillion as of September 2020, Morningstar research shows.
The announcement coincides with the publication of a white paper highlighting gender disparity in the corporate sphere. The Morningstar and Equileap report, “Investing Inclusively: Building Shareholder Value Through Gender Diversity”, highlights that companies that foster gender diversity and create inclusive cultures are tapping into the potential of the full population and are positioned to benefit from the effects of cognitive diversity.
These companies are not only advancing the cause of human rights but also have the potential to maximize shareholder value. However, many barriers still exist on the road to gender equality, according to the report.
Australia, UK cited
The Morningstar Developed Markets Gender Diversity Index allocates above-market weight to both Australia and the United Kingdom. Equileap attributes Australia’s high scores to legislation in place since 2012 requiring companies to publish comprehensive public reports on their gender equality performance on a yearly basis and cites Australia as an example of how enforced transparency can motivate improved performance over time.
The UK is recognized for having one of the world’s highest levels of female workforce participation, along with France, Hong Kong, Switzerland, and the United States.
Japan, on the other hand, stands out as having low female representation across a variety of companies. With an average of 7% women on corporate boards, 2% at the executive level, 4% in senior management, and 25% in the workforce, Japanese companies fall far below all 23 countries researched by Equileap.
The index maintains above-market weight to the utilities sector, which scores high for gender equality. Financial services, a sector that has long struggled with female underrepresentation, is underrepresented in the index.
“During a tumultuous year consumed by a global health and economic crisis in which research shows working women pay a disproportional toll, transparent practices and policies that advance gender representation should be top of mind for companies,” comments Morningstar Indexes president Ron Bundy.
Diana Van Maasdijk, chief executive officer of Equileap, says: “Given the state of the world today, it is more important than ever for companies to advance social justice issues, including gender equality. The fact that the largest pension fund in the world is investing with a gender-lens is a clear message for companies to step up their game. It is also an inspiration for all investors who care about increasing share price, as well as a more inclusive and robust economy.”