April 14, 2023

Adoption of ESG Index and Portfolio Adjustment
GPIF has evaluated ESG indices for Japanese equities based on the information submitted
through the Index Posting System, which GPIF uses to collect information on a variety of indices. As
a result of the evaluation, GPIF has adopted the following index and has begun passive
management based on this index from March 2023.
TypeIndex Name

Thematic

Morningstar Japan ex-REIT Gender Diversity Tilt Index (“GenDi J”)<Characteristics of the index>➢Based on the evaluations by Equileap of the initiatives concerning corporate gender
diversity, the weighting of constituents is adjusted.

➢The number of constituents of the index is 9301, covering a wide range of domestic listedcompanies.

➢With industry weights neutralized, the index has a low tracking error and low turnover ratio.

Comment from MIYAZONO Masataka, President of GPIF
Based on our belief that the sustainable growth of investee companies and the whole market is
crucial for the stable investment returns from assets under management, GPIF takes gender
diversity, as one of the ESG factors, into consideration in its passive investment in domestic andforeign equities.
We have newly adopted the Morningstar GenDi J index, and has begun passive investment bywithdrawing a portion (equivalent to 500 billion yen) of assets from the passive investment managed
under the existing ESG indices and redistributing it to the new index. This adjustment of ESG
portfolio is conducted as part of our risk management of the entire portfolio2.
ESG investments are implemented from a long-term perspective. Therefore, it is undesirable thatthe investment performance significantly fluctuates due to factors other than ESG as a result of abias toward certain sectors or other factors. GPIF will continue to promote ESG investment from theperspective of securing the necessary reserves for the future beneficiaries.

1As of February 28, 2023.
2For details, please refer to “Initiatives for Improving ESG Passive Equity Investment.”Morningstar Japan ex-REIT Gender
Diversity Tilt IndexesOverview of New Gender Index for Japanese Equities
Morningstar Japan ex-REIT Gender Diversity Tilt Index(“GenDi J”)

Index Name・A tilted gender index that emphasize companies that have strong gender diversity policies embedded intheir corporate culture and those that ensure equal opportunities to employees, irrespective of theirgenderIndex
Concepts/Chara ・Equileap’s Gender Equality Scores determine each stock’s Index weightcteristics
・Neutralizing the industry weighting relative to the parent index will control tracking error and reduce
the possibility of significant underperformance relative to the parent index. It also suppresses turnoverand reduces transaction costs.
Index
Construction
Constituent
Universe(Parentindex)
Number ofIndex
ConstituentsGPIFInitialInvestment

Tilt
Morningstar Japan ex-REIT Index[930 stocks*]
930
Approx. ¥500billion(Note 1) Data as of February 28, 2023
Copyright © 2023 Government Pension Investment Fund All rights reserved.

2

Characteristics of GenDi J
Morningstar Japan ex-REIT Gender Diversity Tilt Index
ESG Rating

Equileap, Gender equality score

Parent Index

Morningstar Japan ex-REIT Index

Issuer Size

Large, Mid, and Small Cap

Screening (controversy,etc.)

Companies with Alarm Bell（ track record of legal action taken for sexual
harassment and gender discrimination）

Number of Index
Constituents

930Constituent Selection /Weight Calculation
MethodCreate quintile portfolios based on gender equality score
Multiply the constituent weight by the tilt factor for each group (1.5, 1.25, 1.0, 0.75,0.5)

Restrictions

Individual security weights capped at 5%

Rebalance

Quarterly Rebalance(weight adjustment)
Annual Reconstitution(membership reset by the score)(Note) Data as of February 28, 2023
Copyright © 2023 Government Pension Investment Fund All rights reserved.

3

Constituent Selection and Index Construction
Starting universe

Constituent selection

Portfolio construction• Tilt factor is based on
the Equileap GenderEquality Score todetermine
component weights
Morningstar Japan
ex-REIT Index• Companies that are partof Equileap’s Alarm Bell List
are ineligible• Assign sector neutral
weight with respect
to the benchmark• Individual security
weights capped at
5%(Note) Equileap monitors incidents involving sexual harassment and gender discrimination. If an identified incident signals structural orsystemic problems according to Equileap's methodology, the company receives an alarm bell and becomes ineligible for the index. Thealarm bell securities will continue to be part of the controversy list for the next 12 months from the date it was flagged by Equileap.

Copyright © 2023 Government Pension Investment Fund All rights reserved.

4Equileap Gender Scores Overview• Screening process considers the four
categories of the Equileap Gender Equality
ScorecardTM

Gender balance inleadership &workforce

Equal
compensation &work-life balance• Companies are awarded an overall scorebased on commitment to equality in theworkplace• Companies are divided into five equally
sized groups by count based on their Gender
Equality Score

Policies promoting
gender equalityCommitment,
transparency &accountability• Float-adjusted market cap is used alongsidetilt factor to arrive at the final weight• Sector weights are held constant withrespect to the parent Index at eachreconstitution
Copyright © 2023 Government Pension Investment Fund All rights reserved.

5

Details of Gender Equality Score
Category A
Gender Balance inLeadership & Workforce(40%)

Category B
Equal Compensation &Work-Life Balance (30%)

Category C
Policies promoting Gender
Equality (20%)

Category D
Commitment,
Transparency &Accountability (10%)

Board of Directors

Gender balance of the company’s board of directors and non-executive board (or supervisory board)

Executives

Gender balance of the company’s executives and executive boardSenior Management

Gender balance of the company’s senior management

Workforce

Gender balance of the company’s workforce

Promotion & Career Development
Opportunities

Gender balance of the company’s senior management compared to the gender balance of the company’s workforce, signalling career progression
opportunities

Living Wage

Commitment to pay a living wage to all employees

Gender Pay Gap

Transparency on gender pay data, strategy to close any gender pay gap and detailed performance in achieving thisParental Leave

Paid leave programs (at least 2/3 paid) for child care to both primary or secondary carers globally or at least in the country of incorporation

Flexible Work Options

Option to employees to control and / or vary the start and end times of the work day, and / or vary the location from which employees work

Training & Career Development

Commitment to ensure equal access to training and career development irrespective of gender

Recruitment Strategy

Commitment to ensure non-discrimination against any type of demographic group and equal opportunities to ensure gender parity

Freedom from Violence, Abuse &Sexual Harassment

Prohibits all forms of violence in the workplace, including verbal, physical and sexual harassment

Safety at Work

Commitment to the safety of employees in the workplace, in travel to and from the workplace and on company related business, as well as safety ofvendors in the workplace

Human Rights

Commitment to ensure the protection of human rights, including employees’ rights to participate in legal, civic and political affairs

Social Supply Chain

Commitment to reduce social risks in its supply chain such as forbid business related activities that condone, support, or otherwise participate intrafficking, force and child labor or sexual exploitation

Supplier Diversity

Commitment to ensure diversity in the supply chain, including support for women owned businesses in the supply chain

Employee Protection

Systems and policies for the reporting of internal ethical compliance complaints without retaliation or retribution, such as access to confidential thirdparty ethics hotlines or systems for confidential written complaints

Commitment to Women’sEmpowerment

Signatory to the UN Women’s Empowerment PrinciplesAudit

Undertaken and awarded an independent gender audit certificate by an Equileap recognized body

Copyright © 2023 Government Pension Investment Fund All rights reserved.

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Tilting Process(Top Group has higher scores)• All eligible constituents are sorted in descending order of their Equileap genderequality score• Securities are divided into five equally sized groups by count based on their
Gender Equality Score• Float-adjusted market cap is used alongside tilt factor to arrive at the final weight• Sector weights are held constant with respect to the parent Index at eachreconstitution

Copyright © 2023 Government Pension Investment Fund All rights reserved.

7

Overview of Morningstar Inc. and Equileap
Morningstar Inc.
⚫

⚫

⚫

Morningstar, Inc. is a leading provider of independent
investment insights, listed on the NASDAQ Stock
Exchange (MORN), A PRI Signatory.

The Company offers an extensive line of products andservices for both individual investors and institutional
investors through subsidiaries in 32 countries.
Morningstar Indexes translates Morningstar’s
intellectual capital based on its equity research andother various research into investable index solutions
across all major asset classes with over $496 billion in
AUM of December 31, 2022.

⚫

In 2020, Morningstar finalized the acquisition ofSustainalytics, a globally recognized leader inenvironmental, social and governance (ESG) ratings
and research.

⚫

All global solutions and products of Morningstar Inc.
including index solutions are provided in Japan throughIbbotson Associates Japan Inc., an affiliate ofMorningstar Inc.

Equileap⚫

Equileap is a leading provider of data and insights ongender equality in the corporate sector.

⚫

Equileap was founded in 2016 in Amsterdam. Theirmission was to take a leap towards gender equality in theworkplace.

⚫

Equileap’s proprietary Gender Equality Scorecard™ isthe methodology used globally to holistically assess acompany’s gender equality performance.

⚫

Equileap is assessing companies globally on 19 criteria
including gender balance, the gender pay gap, paid
parental leave and anti-sexual harassment policies.

Copyright © 2023 Government Pension Investment Fund All rights reserved.

8GenDi J Performance Backtest
Cumulative Returns (As of Dec. 2017 = 100)

Year and Cumulative Returns (%)

13050403020100-10-20125120115
110
105

15.97 15.87

FY2019FY2018

90

15.6
15.4
15.2
15.0
14.8
14.6

85

GenDi J

Last 3 years

2022/122022/06

2021/122021/06

2020/122020/06

2019/122019/06

2018/122018/06

2017/1280

GenDi J

15.47

FY2020

0.8
15.21

15.21

FY2021

Last 3 years Last 5 years

0.75

0.8
14.99

0.7

0.65

0.7

0.6
Last 3 years

TOPIX

0.06 0.06 0.03 0.03

Tracking error (%)

Total risk (%)

95

2.51 1.99-4.42 -5.04 -9.78 -9.50
FY2017

100TOPIX

GenDi J

43.01 42.13

Last 5 years

Last 5 years

TOPIX

Last 5 years

Last 3 years

GenDi JTOPIXa Total Return

5.83%

5.70%

a Total Return

3.49%

3.23%

b Total risk

15.47%

15.21%b Total risk

15.21%

14.99%

c Return/Risk(a/b)

0.38

0.37

c Return/Risk(a/b)

0.23

0.22

d Excess Returns

0.13%

d Excess Returns

0.26%

e Traking error

0.75%

e Traking error

0.65%

f Information Ratio(d/e)

0.17

f Information Ratio(d/e)

0.46(Note) Data is based on data up to the end of December 2022.

Copyright © 2023 Government Pension Investment Fund All rights reserved.

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