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GPF launches environmentally and socially focused portfolio

Oct 25. 2018
The GPF plans to invest in 33 listed companies.
The GPF plans to invest in 33 listed companies.
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By WICHIT CHAITRONG 
THE NATION 

5,305 Viewed

GOVERNMENT PENSION Fund (GPF), Thailand’s largest institutional investor, has launched an environment, social and governance (ESG)-focused portfolio to invest in Thailand-listed companies amid a worldwide equity sell-off.

The GPF yesterday set up an investment portfolio worth Bt1 billion. It will invest in 33 listed companies found in the “Thailand Sustainability Investment” list (THSI). All are large firms in the SET 100. 

“It is the first ESG fund in Thailand,” said Vitai Ratanakorn, secretary-general of the GPF. “The GPF wants to be a leader in investment in companies that have responsibility towards the environment, society and corporate governance.” 

The investment aims to reduce financial and reputation risks and increase investment returns, he said. 

The initial investment of Bt 1 billion is not much, but the GPF will expand its investment portfolio next year, he pledged. 

He also called on other institutional investors to follow for the sake of sustainable investment. The fund has collaborated with the Stock Exchange of Thailand (SET) which formulates the Thailand sustainability investment list.

The SET launched the THSI in 2015 by selecting companies voluntarily registering in the programme, taking into account environmental, social and governance factors. 

Currently, there are 79 listed firms in the ESG list, and their combined market capitalisation is worth Bt10.59 trillion, representing 59.80 per cent of total market capitalisation. Those firms pay dividends of 3.91 per cent on average, compared with the market’s average annual dividend payment of 3.62 per cent, according to information available on the SET website. 

Vitai said GPF also gave priority to opposing corruption under Thailand’s Private Sector Collective Action Coalition Against Corruption (CAC). 

According to CAC adviser Phisanu Phromchanya most local asset management companies last year launched their own corporate governance (CG) funds, using CAC certification as one criteria in creating a stock basket. The latest move by the GPF clearly reiterates how Thailand’s investment community has emphasised clean business practices in alignment with the global trend.

“Anti-corruption is, in fact, one crucial element of the ESG principles. It basically is governance in action,” said Phisanu. 

Vitai said GPF would also collaborate with the World Bank and the Organisation for Economic Cooperation and Development (OECD). 

The fund and the World Bank will co-host a seminar on “ESG Investing: Return-Enhancing or Sacrificing? How to make It work?” It also plans to work with the OECD on ESG-integrated due diligence guidelines for GPF investment, he said.

Vitai said that the GPF prefers large companies, due to the importance of market liquidity, and hence all 33 companies are in the SET 100 group. They include PTT, Kasikornbank, Thai Union Group, Bangchak Corporation and Siam Cement Group. 

He saw the current market sell-off as an opportunity to pick new shares for the portfolio. External factors such as the trade war, US rate hikes and the weakness of some emerging market countries have caused the market to crumble worldwide. 

“The Thai stock market has largely been hit hard by external factors, dropping about 150 points in just one month, or about 250-270 points since the beginning of the year, while economic fundamentals remain sound,” he said. 

As of the end of September, the GPF has net assets worth Bt891.2 billion, with Bt405.1 billion of this in the investment portfolio. 

GPF’s equity investment represented about 7 per cent of total investment portfolios, while investment in the Thai equity market was worth about Bt30 billion. It has large reserves of cash in hand, according to Vitai. 

“The return of investment in equity over the past 10 years has increased, while the equity market has had large swings this year. When GPF members do not want to be exposed to the equity market, we advise them to invest in the short-term bond market, which offers less return but is steady, he suggested. GPF currently has about 1 million civil servants, military and police as members. 

Meanwhile, Deputy Prime Minister Somkid Jatusripitak said that the current market sell-off was caused by a drop in oil prices, which impacted the share prices of energy companies. He said the World Bank, International Monetary Fund and other institutions remained positive about the outlook for the Thai economy. Thai assets are considered by investors to be a safe haven among emerging market economies, he assured. 

To offset the expected slower export growth next year due to a global economic slowdown, Somkid said he had asked the Fiscal Policy Office to push for faster investment in infrastructure projects. 

The SET Index yesterday rebounded to close at 1,644.33, up 1.29 per cent. Meanwhile, AFP reported that most markets in Asia suffered as Tokyo was scythed 3.7 per cent, Sydney sank 2.8 per cent, Seoul shed 1.6 per cent and Hong Kong lost 1 per cent. 

 

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