December 18, 2020

GPIF Selects Two ESG-Themed Foreign Equity Indexes
GPIF has selected two additional ESG-themed benchmarks based on information submitted
through its Index Posting System, which the fund uses to collect information on a variety of
new indexes. After closely evaluating the qualities of each general ESG- and diversity-themed
foreign equity index and conducting thorough due diligence on respective providers, GPIF
selected and began passive management based on the following two benchmarks:

Theme

Index Name

General ESG

MSCI ACWI ESG Universal Index1

Diversity

Morningstar Gender Diversity Index (“GenDi”)2(Primary evaluation criteria)
1) ESG ratings play a central role in the constituent selection/weighting process.
2) The index encourages ESG disclosure (i.e. ratings are based on public information)3) The ratings methodology is clearly disclosed and the index provider/ESG ratings agency
actively engages in dialogue with issuers.
4) The scope of issuers rated is sufficiently broad.
5) The governance and conflict of interest management structures of the ESG ratings agency
and index provider are adequate.

(Comment from MIYAZONO Masataka, President of GPIF)
By selecting a new general ESG index for foreign equities, GPIF has embarked on passive
equity investment that incorporates all elements of ESG (environmental, social andgovernance) in both our domestic and foreign portfolios. Furthermore, a significant body of
empirical research indicates that strong gender diversity has the potential to boost corporate
performance. We consider these two indexes to be firmly in line with our objective of improving

1
2

Official name: MSCI ACWI ex Japan ex China A ESG Universal with Special Taxes Index”.
Official name: “Morningstar Developed Markets (ex-Japan) Gender Diversity Index”

long-term returns through enhanced sustainability of individual issuers and the market as awhole.
We have allocated and begun passively investing a combined total of ¥1.3 trillion(approximately USD $12.5 billion) in assets against these two benchmarks, and will continue
our proactive ESG investment in order to protect and grow the pension reserve for several
generations of beneficiaries into the future.

Copyright © 2017 Government Pension Investment Fund All rights reserved.

New ESG Index Selection
Selection of General ESG and Gender Diversity-Themed
Foreign Equity Indexes
December 18, 2020
Government Pension Investment Fund, Japan

ESG Index Description and Evaluation Criteria

Copyright © 2020 Government Pension Investment Fund All rights reserved.

2

ESG Index Selection Overview
 For each general ESG- and diversity-themed index submitted to the Index Posting System, GPIF examined aspects
such as ESG rating processes and index construction methodologies, in addition to conducting thorough due diligenceon respective index providers.
 Similar to previous ESG indexes, GPIF focused mainly on the following points during the selection process:
1)

Whether ESG ratings play a central role in the index constituent selection/weighting process.

2)

Whether the index encourages ESG disclosure (i.e. ratings are based on public information)

3)

Whether the ratings methodology is clearly disclosed and the index provider/ESG ratings agency actively engages
in dialogue with issuers.

4)

Whether the scope of issuers rated is sufficiently broad.

5)

Whether the governance and conflict of interest management structures of the ESG ratings agency and index
provider are adequate.

 Based on the above criteria, GPIF selected the MSCI ACWI ESG Universal Index* calculated by MSCI as a new general
ESG-themed benchmark for foreign equities. This index is designed to curb ESG risk inherent in the portfolio while
limiting tracking error from the parent index.
 Similarly, GPIF selected the Morningstar Gender Diversity Index** (“GenDi”) developed by Morningstar as a newdiversity-themed index for foreign equities. This index weights constituents based on a multifaceted gender equality
evaluation that focuses on aspects such as policies for the proactive appointment of women and establishing anenvironment that promotes the success of women.
 GPIF has begun passive management based on these two indexes, allocating ¥1 trillion to the MSCI ACWI ESG
Universal Index and ¥300 billion to the Morningstar Gender Diversity Index. We expect our investment in these two
indexes to improve long-term returns by promoting the sustainable growth of individual investee companies and themarket as a whole.
* Official name: “MSCI ACWI ex Japan ex China A ESG Universal with Special Taxes Index”.
** Official name: “Morningstar Developed Markets (ex-Japan) Gender Diversity Index”
Copyright © 2020 Government Pension Investment Fund All rights reserved.

3

Primary ESG Index Evaluation Criteria

InitialScreening

ESG Ratings
 Validity
 Transparency
 Understandability
 Data quality

Organizational Structure Global infrastructure/index
development capacity
 Infrastructure within Japan
 Dialogue with investors
 Dialogue with issuers/media

Final
Selection

Index Evaluation
 Index methodology (validity, transparency, understandability)
 Risk/return, etc. (sector/factor bias, turnover) Investment capacity
 Index license fees

Index
Company
Suitability
Screening(Due
Diligence)

 Organizational Structure (Corporate
Group Level) Approach to ESG
 Communication With Market
Participants Internal Controls/Conflict of Interest
Management

 Internal/External Data Quality Control
 Organizational Structure/Personnel (Index
Division) Index Governance (committees, consultation,etc.) Approach to Index Fees

Copyright © 2020 Government Pension Investment Fund All rights reserved.

4

New ESG Index Overview
MSCI ACWI ESG Universal Index*

Morningstar Gender Diversity Index (“GenDi”) **・One of MSCI’s flagship ESG indexes, the MSCIACWI ESG Universal Index adjusts the weight of
constituents based on each issuer’s current ESG
rating and rating trend to elevate the ESG metrics of
the index overall.

・The Morningstar Gender Diversity Index (“GenDi”)
determines investment weights primarily based on the
Equileap Gender Scorecard, which rates issuers’ efforts
in gender equality.

Index Concept/
Characteristics ・The MSCI ACWI ESG Universal Index wasdeveloped for large institutional investors seeking toenhance ESG integration while achieving the samelevel of investment opportunity and risk exposure as
the parent index.

Index
Construction
Constituent
Universe(Parent Index)
Number ofConstituents
GPIF Initial
Investment

・The Gender Scorecard rates companies across four
broad categories: 1) Gender Balance in Leadership &Workforce, 2) Equal Compensation & Work-Life
Balance, 3) Politics Promoting Gender Equality and 4)
Commitment, Transparency & Accountability

Tilted (weight-adjusted)

Tilted (weight-adjusted)

MSCI ACWI***(2,197 issuers)

Morningstar Developed Markets(ex JP) Large-Mid (1,873 issuers)

2,100

1,765

Approx. ¥1 trillion

Approx. ¥300 billion* Official name: “MSCI ACWI ex Japan ex China A ESG Universal with Special Taxes Index”.
** Official name: “Morningstar Developed Markets (ex-Japan) Gender Diversity Index”*** Official name “MSCI ACWI ex Japan ex China A with Special Taxes Index”

Copyright © 2020 Government Pension Investment Fund All rights reserved.

5

MSCI ACWI ESG Universal Index* Performance
Cumulative return

CY returns and cumulative returns（2014/12/31=100）

（%）
30

160

27.9 26.5
20.5 20.3

20150

11.1 10.6

4.9 5.6

10

7.1 6.8

0

140

-10

-1.9 -2.5-11.1 -11.1

-20

130

2015

2016

2017

2018

2019

120
MSCI ACWI ESG Universal Index*
110

100
90

Last 3

Last 5

years

years

MSCI ACWI***

Total risk

Tracking error

（%）
18

（%）
1.0

16.1

16.2

0.9
0.7

16

80
2014/1214
2015/122016/122017/122018/12MSCI ACWI ESG Universal Index*

2019/1213.5

2020/12MSCI ACWI***MSCI ACWI ***12

0.0
Last 3 years

Last 3 years

ESG Universal Index*

a Total return

11.07%

10.59%b Total risk

13.52%

13.65%

0.82

0.78

c return/risk（a/b）

c return/risk（a/b）

0.5

13.6

Last 5 years

Last 5 years

Last 3 years

ESG Universal Index*

MSCI ACWI ***a Total return

7.12%

6.84%

b Total risk

16.12%

16.21%

0.44

0.42

d Excess return

0.48%

-

d Excess return

0.28%

-

e Tracking error

0.71%

-

e Tracking error

0.88%

-

0.67

-

f Information ratio（d/e）

0.32

-

f Information ratio（d/e）

Last 5 years* Official name: “MSCI ACWI ex Japan ex China A ESG Universal with Special Taxes Index”*** Official name “MSCI ACWI ex Japan ex China A with Special Taxes Index”
Copyright © 2020 Government Pension Investment Fund All rights reserved.

6

Morningstar Gender Diversity Index** Performance
Cumulative return

CY returns and cumulative returns（2014/12/31=100）
160

（%）
40

28.2 28.0

30

18.8 18.7

20

150
140

11.2 10.9

5.4 5.4

10

7.5 7.3

0
-10

130

-1.0 -0.9-9.7 -10.2

-20
2015

2016

2017

2018

2019

120
Morningstar Gender Diversity Index
110

100
90

2017/12Morningstar Gender Diversity Index**

2018/122019/122020/12MSCI KOKUSAI

（%）
0.5

16.4

16.5

0.3

0.4

Last 3 years

Last 5 years

0.3
14.0
0.1

12

-0.1
Last 3 years

Last 3 years

Diversity Index**

MSCI Kokusai

Last 5 years

a Total return11.19%

10.92%b Total risk

13.94%

14.01%

0.80

0.78

c return/risk（a/b）

c return/risk（a/b）

years

（%）
18

14
2016/12years
MSCI KOKUSAI

Tracking error

13.9
2015/12

Last 5

Total risk

1680
2014/12

Last 3

Last 5 years

Diversity Index**

MSCI Kokusaia Total return

7.49%

7.35%

b Total risk

16.41%

16.49%

0.46

0.45

d Excess return

0.27%

-

d Excess return

0.14%

-

e Tracking error

0.34%

-

e Tracking error

0.35%

-

0.80

-

f Information ratio（d/e）

0.40

-

f Information ratio（d/e）* All values are calculated based on gross returns.
** Official name: “Morningstar Developed Markets (ex-Japan) Gender Diversity Index”
Copyright © 2020 Government Pension Investment Fund All rights reserved.

7

(Reference) Overview of Companies Providing New Indexes
MSCI

⚫
⚫

⚫

⚫

⚫

Morningstar⚫ Morningstar, Inc. is a leading provider of independent
investment research listed on the NASDAQ StockMSCI is a NYSE-listed U.S. financial solution provider, andExchange (MORN), A PRI Signatory.
a PRI signatory company.
⚫ The Company offers an extensive line of products andWith 36 offices in 25 countries and 3,396 employees
services for both individual investors and institutional
worldwide, MSCI Global Stock Index benchmarked AUM isinvestors through offices in 27 countries over the world.
USD 11 trillion (approx. JPY1,100 trillion)⚫ Morningstar Indexes translates Morningstar’s intellectual
MSCI index is the most used among all listed ETFs
capital based on its equity research covering 1,000+ stocks
worldwide, and the largest share in the field of ESG
and other various research into investable index solutions
indices
across all major asset classes with over $307 billion in
AUM benchmarked. (as of November 2020)
MSCI ESG research provides Research, ESG Ratings,
and Analyses on the environmental, social, and⚫ In 2020, Morningstar finalized the acquisition of
governance of more than 6,000 companies worldwide,
Sustainalytics, a globally recognized leader inwhich are used by institutional investors and management
environmental, social and governance (ESG) ratings andfirms to integrate ESG elements into the investment
research, which offers data on 40,000 companies
process
worldwide and ratings on 20,000 companies and on 172
countries (as of June 2020)
MSCI ESG Research has more than 200 dedicated ESG
analysts and is the world's largest ESG research firm used
⚫ All global solutions and products of Morningstar Inc.
by institutional investors and more than 1,400 companies
including index solutions are provided in Japan throughworldwide
Ibbotson Associates Japan Inc., a wholly owned affiliate ofMorningstar Inc.
Copyright © 2020 Government Pension Investment Fund All rights reserved.

8

Future Index Information Collection and ESG Investment

Copyright © 2020 Government Pension Investment Fund All rights reserved.

9

Future Index Information Collection and ESG Investment(Passive Management Benchmarks)
GPIF will continue to actively collect information on ESG and other indexes through the Index Posting
System. In the immediate future, we are particularly interested in submissions with the following
themes:①Market cap-weighted indexes designed to reduce the market impact of index rebalances(indexes with extremely small tracking error against the TOPIX index for domestic equities
and the MSCI ACWI ex Japan index for foreign equities).

②

Tilted general ESG indexes comprising a large number of constituents for domestic equities.

Please note that GPIF may select indexes not submitted to the Index Posting System and/or indexes
with themes other than those noted above.
(ESG Integration in Active Management)
GPIF asks all of our current active fund managers to integrate ESG into their investment processes
according to their individual management styles, and we continue to accept submissions to ourManager Entry System for ESG active managers who aim to secure long-term excess returns by
incorporating ESG elements into their issuer selection and investment judgment methods.

Copyright © 2020 Government Pension Investment Fund All rights reserved.

10

(Reference 1)
MSCI ACWI ESG Universal Index Overview

Copyright © 2020 Government Pension Investment Fund All rights reserved.

11

MSCI ACWI ESG Universal** Index
MSCI ACWI ESG Universal
Universe/Numberof Constituents*

2,100 issuers selected from all MSCI ACWI*** constituents (2,197 issuers), excluding companies without ESG ratings and companies withsevere ESG controversies, etc.

RegionDeveloped countries, emerging markets

Issuer Size

Large-mid cap

Index Style

TiltedESG Trend Score
Upgrade Unchanged
1.25
AAA

・Constituents weighted by combined ESG scores, comprised of an
ESG Rating Score and an ESG Trend Score.
ESG Rating Score：AAA・AA＝2; A・BBB・BB＝1; B・CCC＝0.5

Weight Calculation
MethodESG Trend Score: Upgrade＝1.25; Neutral＝１; Downgrade＝0.75
Combined ESG Score: ESG Rating Score X ESG Trend Score(upper limit of 2 and lower limit of 0.5)

AA
ESG

A

Rating

BBB

Score

BB
B
C

2

2
⇒2.0

Downgrade

1

0.75

2

1.5

0.75

1

1.25

1

0.5

0.625

0.5

0.375
⇒0.5

・Constituent weight = Market cap weight X combined ESG score

Caps/Restrictions

Industry: None
Country: None
Individual issuer cap: 5%

Rebalance

Quarterly*As of November 30, 2020** Official name: “MSCI ACWI ex Japan ex China A ESG Universal with Special Taxes Index”*** Official name “MSCI ACWI ex Japan ex China A with Special Taxes Index”
Copyright © 2020 Government Pension Investment Fund All rights reserved.

12

MSCI ESG Ratings Overview•

MSCI ESG ratings are based on an analysis and evaluation of public issuer information.

•

Key issues for E (environmental), S (social), and G (governance) are identified for eachindustry and analyzed for each issuer.

•

Companies are given a final ESG score that places them on a spectrum from “leaders”(AAA/AA) to “laggards” (B/CCC).

Copyright © 2020 Government Pension Investment Fund All rights reserved.

13

Key Issues Identified By Industry•

MSCI calculates an “environmental pillar score,” “social pillar score” and “governance pillar
score” based on an evaluation of key issues identified by industry.

•

Each issue noted in the governance pillar are considered key issues for all industries.
MSCI ESG Score
ENVIRONMENT PILLAR

SOCIAL PILLAR

GOVERNANCE PILLAR

ClimateChangeNatural Capital

Pollution &
Waste

Env.
Opportunities

Human Capital

Product
Liability

Stakeholder
Opposition

SocialOpportunities

Corporate
GovernanceCorporate
Behavior

CarbonEmissions

Water Stress

Toxic Emissions& WasteClean Tech

Labor
Management

Product Safety& Quality

Controversial
Sourcing

Access to
Communication

Board

Business Ethics

Product Carbon
Footprint

Biodiversity &Land Use

Packaging
Material &Waste

Green Building

Health & Safety

Financial
SystemInstability

Community
Relations

Access to
Finance

Pay

Tax
Transparency

Financing
Environmental
ImpactRaw Material
Sourcing

Electronic
Waste

Renewable
EnergyHuman Capital
Development

Consumer
Financial
Protection

Access to
Health Care

OwnershipSupply Chain
Labor
Standards

Privacy & Data
Security

Opportunities
in Nutrition &HealthAccounting

Climate Change
Vulnerability

Responsible
Investment

Universal key issues applicable to all industries

Insuring
Health &Demographic
Risk

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14

MSCI ESG Ratings Framework•

Environmental pillar scores, social pillar scores, and governance pillar scores arecalculated based on each issuer’s ESG risk exposure score and management score.

•

Overall ESG scores ranging from AAA to CCC are designated by calculating theweighted average score across all pillars and applying an industry adjustment.
ESG Letter Rating (AAA-CCC)
Final Industry Adjusted Score (0-10)
Weighted Average Key Issue Score: (0-10)

Key Issue Score

Key Issue Score

Governance Pillar Score

Social Pillar Score

Environmental Pillar Score

Key Issue Score

Key Issue Score

Corporate
Governance
Ownership & Control

Exposure
Scores

Mgmt
ScoresExposure
Scores

Mgmt
ScoresExposure
Scores

Mgmt
ScoresExposure
Scores

Mgmt
ScoresCorporate Behavior

Business Ethics

Board
Pay
Accounting

Tax Transparency

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15

Parent Index ESG Indicator Comparison
MSCI ACWI*MSCI ACWI ESG Universal**

ESG Score

6.0

6.7

ESG Leaders (AAA-AA) (%)

27.0

42.2

ESG Laggards (B-CCC) (%)

7.4

3.3

Environmental （E） Pillar Score

5.8

6.1

Social （S） Pillar Score

4.8

5.1

Governance （G） Pillar Score

4.6

4.8

Independence of Board of Directors (weighted average, %)

78.3

79.7

Ratio of Female Directors (weighted average, %)

29.4

30.6

Greenhouse Gas Emissions (tCO2e per $1mil. Invested)

104

88

Weighted Average Carbon Intensity (tCO2e per $1mil. In Revenue)

161

153

Companies With Fossil Fuel Holding (%)

4.8

3.8

Thermal Coal Producing Mining Companies (%)

0.8

0.3

Unconventional Oil and Gas Producers (%)

2.2

1.7

Revenue from Green Technology (Weighted Average, %)

4.6

5.3

Green Profit/Brown Profit Exposure

2.7

3.1

Low Carbon Economy Transition Management Score (Proportion in Top 25%, %)

69.5

74.3

ESG Score

Governance-Related

Environment-Related

Green Technology Exposure*As of November 30, 2020** Official name: “MSCI ACWI ex Japan ex China A ESG Universal with Special Taxes Index”*** Official name “MSCI ACWI ex Japan ex China A with Special Taxes Index”

Copyright © 2020 Government Pension Investment Fund All rights reserved.

16

(Reference 2)
Morningstar Gender Diversity Index Overview

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17

Morningstar Gender Diversity Index** (“GenDi”)
Morningstar Gender Diversity Index**
Universe/Number ofConstituents*

1,765 issuers selected from all Morningstar Developed Markets ex-Japan Large-Mid Cap Index constituents (1,873 issuers),
excluding companies with gender discrimination and/or sexual harassment controversies

RegionDeveloped countries

Issuer Size

Large-mid cap

Index Style

Tilted・All eligible constituents are sorted in the descending order of their Equileap Gender Equality (GE) score. Securities within eachregion are then divided into 5 groups with an equal number of issuers.
・Assign tilt factors of 1.5x, 1.25x, 1.0x, 0.75x, 0.5x respectively to each security grouping with the best to the worst Equileap
GE scores.

Weight Calculation
Method・Tilted Weight = Final Tilt Factor x Free-Float Market Cap Weight・The Tilted Weights for the securities are normalized, so that the sum of the weights at each reconstitution is 100%・Securities on the Alarm Bell controversy list will be removed during the quarterly reviews and will continue to be excluded forthe next 12 months. These securities will be reintroduced at the next reconstitution given that they are no longer part of thecurrent Alarm Bell controversy list at a weight of (Final Tilt Factor x Free-Float Market Cap Weight x 0.5).

Caps/Restrictions

Industry: None
Country: Region weight is set to region weight of parent index
Individual issuer cap: 5%

Rebalance

Security capping/Alarm Bell rebalance: Quarterly
Tilt factor rebalance based on Gender Scorecard: Yearly (December)*As of November 30, 2020** Official name: “Morningstar Developed Markets (ex-Japan) Gender Diversity Index”***Equileap assigns an Alarm Bell to a company when a company has had: 1) A legal judgement or an official ruling regarding gender discrimination or sexual harassment against thecompany or an employee, or 2) Two or more legal cases, or one class action, that have been settled against a company or an employee regarding gender discrimination or sexual
harassment, or 3) Two or more legal judgements or official rulings regarding gender discriminatory practices in a company’s marketing and advertising.
Copyright © 2020 Government Pension Investment Fund All rights reserved.

18

(Reference) Equileap Gender Diversity Scorecard
Headquartered in Amsterdam, Equileap is a leading provider of data and insights on gender equality in the corporate sector. Equileap researches and ranks over 3,500 publiccompanies around the world using a unique and comprehensive Gender Equality Scorecard with 19 criteria, including the gender balance of the workforce, senior management andboard of directors, as well as the pay gap, parental leave, and sexual harassment.
EQUILEAP CRITERIA and DEFINITION

A GENDER
BALANCE IN
LEADERSHIP& WORKFORCE（40％）

B EQUALCOMPENSATION& WORK LIFE
BALANCE（30％）

C POLICIESPROMOTINGGENDEREQUALITY（20％）

D COMMITMENT,
TRANSPARENCY&ACCOUNTABILITY（10％）

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

2 Executives＞Gender balance of the company’s executives and executive board

3 Senior Management＞Gender balance of the company’s senior management

4 Workforce＞Gender balance of the company’s workforce

5 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

6 Living Wage

＞Commitment to pay a living wage to all employees, even in those countries that do not legally require a minimum wage

7 Gender Pay Gap＞Transparency on the gender pay gap at company level and on multiple pay bands, commitment to close the pay gap

8 Parental 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

9 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

10 Training and Career
Development＞Commitment to ensure equal access to training and career development irrespective of gender

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

12 Freedom from Violence,
Abuse and
Sexual Harassment＞Prohibits all forms of violence in the workplace, including verbal, physical and sexual harassment

13 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 of vendors in the workplace

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

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

16 Supplier Diversity＞Commitment to ensure diversity in the supply chain, including support for women owned businesses in the supply chain

17 Employee Protection＞Systems and policies for the reporting of internal ethical compliance complaints without retaliation or retribution, such as access toconfidential third-party ethics hotlines or systems for confidential written complaints

18 Commitment to Women’s
Empowerment＞Signatory to the UN Women’s Empowerment Principles

19 Audit＞Undertaken and awarded an independent gender audit certificate by an Equileap recognized body
Copyright © 2020 Government Pension Investment Fund All rights reserved.

19

Gender Diversity Index Selection Background•A significant body of empirical research suggests that companies with a high degree of gender diversity(i.e. companies that actively appoint female staff) have access to a deeper pool of human resources,
which may potentially result in superior performance.

•

Furthermore, from a macroeconomic perspective, leading research indicates that an improvement ingender diversity (i.e. an increase in the female labor force participation rate) can promote economic
growth in a given country.

•

By overweighting companies with superior gender diversity – that is, companies that have ademonstrated track record of actively appointing and encouraging the success of female staff – we aim to
improve long-term returns by promoting the sustainable growth of investee companies and the market asa wholeCircumstance 1: Gender diversity can improve sustainable growth at investee companies
Companies with strong gender diversity have the potential to outperform those without.
Circumstance 2: Gender diversity can be a driver for enhancing market sustainability
Improving gender diversity (e.g. encouraging female employment) can potentially boost economic
growth⇒Aim to improve long-term returns through enhanced sustainable growth ofinvestee companies and the market as a whole

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20

Circumstance 1: Gender diversity can improvesustainable growth at investee companies
The following factors may result in companies with strong gender diversity
potentially outperforming those without
1) Access to human capitalCompanies with high gender diversity have access to a deeper pool of human capital, which isa particularly important issue for companies in developed markets with aging populations.
2) Avoidance of groupthink
Highly homogeneous organizations that lack diversity are at risk of being less able to makeappropriate decisions due to the occurrence of groupthink.
3) Flexibility to adjust to changing customer needs
Studies indicate that women account for around 72% of all household expenditures. As
customer tastes and preferences evolve, service providers also need to be internally diverse ingender.
4) Innovation
Organizations with greater diversity are more likely to be exposed to new ideas and therefore
have the potential for greater innovation. Highly homogeneous organizations may have aharder time coming up with creative ideas.

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21

(Reference) Empirical Research on Gender Diversity and Performance
Stock prices of companies with women on the board outperform
Credit Suisse Research Institute (2016) The CS Gender 3000: The Reward for Change• The stock prices of companies that have women on the board outperform those that
don’t by 3.5%

Companies with women on the board have more effective organizations and higher
revenue
McKinsey & Company (2017) Women Matter: Time to accelerate• According to a 2007 study of 100 companies with around 60,000 employees, companies
that had at least three women on the board performed better across a number oforganizational metrics than those with none.
• A study of 300 companies around the world showed that those with the most women on
the board had around 47% higher ROE and 55% higher EBIT margins than those with
none.

Companies with higher diversity are more innovative
Boston Consulting Group• An analysis of the relationship between diversity and corporate performance at 1,700
companies across 8 different countries showed that greater diversity lead to moreinnovation, resulting in 19% higher revenue and 9% greater EBIT margins on average.
• The same study found a statistically significant relationship between diversity andinnovation, with a 2.5% improvement in executive gender diversity leading to a 1%
increase in revenue attributable to innovation.
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22

Circumstance 2: Gender diversity as a driver for enhancing
market sustainability
Improving gender diversity (e.g. encouraging female employment)
can potentially boost economic growth
McKinsey & Company (2017) Women Matter: Time to accelerate• While women comprise 50% of the overall population, they make up only 39% of theworkforce and account for only 37% of global GDP.
• Filling in the gender gap could potentially push up global GDP by 11% (approx. $12
trillion) by 2025.
STATE STREET GLOBAL ADVISORS (2019) Gender Equality: Better for Growth, Debt,
Income Equality and Sustainability• Based on an analysis of 103 countries, those with high levels of gender inequality havelower per-capital GDP.

McKinsey(2017)
STATE STREET GLOBAL ADVISORS(2019)
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(Reference) MSCI WIN Index Selected for Domestic Equities Since 2017MSCI Japan Empowering Women Index (WIN)Universe

MSCI Japan Investable Market Index (IMI) Top 700 Index (694 constituents)

RegionJapan

Issuer Size

Large-cap

Controversy Screening

Companies with serious labor rights or human rights controversies, or any companies involved in very
severe controversies are excluded

Index Style

Positive screening

Number of Constituents

297

Weight Calculation
Method・A multi-faceted Gender Diversity Score is calculated for each company based on female employment
data disclosed in compliance with the Act on Promotion of Women’s Participation and Advancement in
the Workplace. Companies with Gender Diversity Scores in the top half of each parent index GICS
sector group (excluding J-REITs) are selected as index constituents.
・Constituent weighting: Market Capitalization x Composite Score
Composite score: Industry-Adjusted Gender Diversity Score x Industry-Adjusted MSCI Quality Score

Rebalance

Rebalance: Semi-annual
Index review: Quarterly*As of Nov. 30, 2020

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