Dr. Srikanya Yathip joined the Government Pension Fund of
Thailand (GPF) in 2010 and was appointed Secretary General in 2020. She is at
the forefront of responsible investing in Thailand. She introduced her vision
that GPF should become the leader in environmental, social and governance (ESG)
investing and initiatives in Thailand in 2019. Her successes include
integrating PRI’s ESG integration framework and OECD’s responsible business
conduct into GPF’s investment process. She has also headed development of ESG
valuation framework, formula and methodology – the project that got technical
assistance from the World Bank.
Moving GPF ahead towards the United Nations’ sustainable
development goals (SDG), she has initiated the revision of strategic asset allocation
of GPF to include both an investment paradigm shift and SDG compliance. Her
current project, through cooperation with UN Financial Initiatives, is
developing the Human Rights heatmap and common Human Rights integration
framework for the Thai capital market.
In this interview with Iain Bell, head of Middle East content
for Markets Group, Dr. Srikanya details how
taking inspiration from the UNs SDGs and NGO frameworks has focused the
investment function on responsible investments.
Markets Group: You’ve made ESG integration a
priority since joining GPF as Secretary General. Could you explain how you have
implemented your objectives?
Dr. Srikanya Yathip: With the assets under management of
approximately USD 28 billion (as of September 2022) and
over 1.1 million pension members, the Government Pension Fund (GPF) is fully
aware of its importance as a universal owner and of its role in supporting
sustainable global values within the context of environmental, social, and
governance (ESG). It is our belief that ESG goes hand in hand with our
fiduciary duty. When our investees get better in terms of ESG, their financial
performance will likely improve too. As such, we have formulated a responsible
investment policy – a “master policy” that guides how ESG
factors would be integrated into each asset class as well as each step of the
investment process from research to investment decision-making.
MG: GPF is extremely influential in the
development of Thailand’s economy and its capital markets. How do you translate
this influence into action when it comes to your ESG framework and your Thai
holdings?
SY:
To drive capital markets toward sustainability, we have created sustainable
investment impact through investment in ESG bonds, including both government
and corporate bonds. The GPF holding (as of September 2022) was approximately USD
one billion, of which three-quarters [SO1] was in the Thai government’s sustainability
bonds. ESG bonds also go through the same scoring system that vanilla bonds do,
such that we do not need to sacrifice financial returns in the quest for
sustainability.
We have recently committed to scaling up our
engagement efforts to 100% coverage of investee companies. This is what we can
contribute as an active asset owner – to make a real improvement to the country.
MG: The debate between
divestment vs. engagement continues to rage on. What’s your take on it?
SY: As an
active owner, the GPF believes that effective engagement can benefit companies,
investors, and society at large. Positive engagement is therefore preferred to
divestment, especially from a long-term perspective. Divestment leaves us no
influence over the investees and no room to voice our
ambitions to drive sustainable goals.
MG: How do you then engage with your managers
and the companies which you hold? What specific engagement strategies have you
found to work?
SY:
The GPF does mainly positive engagement both with the external fund managers
and investees to share information and thoughts on how to make improvements in
terms of ESG. Our last round of thematic engagement focused on human rights and
the transition toward net zero.
On the other hand, we also have an escalating
strategy in place when negative issues or breaches of the SEC regulations
arise. In 2019, the GPF joined hands with 32 institutional investors to
reinforce good corporate governance. The investors all agreed to shun
investments in companies whose names are present in the ‘negative list.’
MG: How do you strike a balance between your
domestic and your international ESG framework?
SY:
In 2018, we publicly announced our commitment to ESG investing and our
intention to be the leader in ESG investing and initiatives in Thailand. We applied
three main ESG international standard frameworks to our investment process i.e.,
PRI (Principles for Responsible Investment), ESG integration; OECD, Responsible
Business framework; The United Nations Guiding Principles (UNGPs) on Business
and Human Rights framework. This type of action is consistent with our ambition
to be a Thai pension fund with global standards.
MG: GPF has been active in working with
international partners to progress social development issues. Could you explain
more about this and how it has been effective?
SY:
We have been working with UNEP FI (United Nations Environment-Finance
Initiative), OECD and PRI on ESG integration. We also have ambitions to invest
in compliance with SDG11 (Sustainable cities and communities), SDG12
(Responsible consumption and production) and SDG13 (Climate action). We could
make a significant contribution toward these three SDGs by our investment in
infrastructure. Moreover, companies in our portfolio can contribute directly or
indirectly to these goals. This is the reason why we emphasize the importance
of positive engagement.
We follow world standards in key issues like
human rights and climate change, and we network broadly with standard setters, policymakers,
and regulators. More collaboration among investors is also key to success
because investors themselves need to act and cooperate with each other.
MG: With so many NGOs publishing their own
frameworks, which do you take inspiration from, and how do you ensure the
investment function is on board with the changes?
SY:
Our investment team agrees with the GPF’s role as a universal owner where we have
a wider responsibility to support sustainable investing commonly. Therefore, our
investment function will also support the change, and, we believe, to deliver
both sustainable and financial values.
MG: Many asset owners align their investments
with a number of the UN’s SDGs in order to focus their efforts. Does this ring
true with GPF and if so, which are most achievable in the context of Thailand’s
capital markets?
SY:
The GPF has already set SDGs 11, 12, 13 as our main goals. This is because GPFs
has holdings in asset classes that can contribute directly to the progress of
these goals, for instance, our investments in infrastructure and environmental
projects via ESG bonds. These SDGs also have a common theme of the
Bio-Circular-Green (BCG) economy which is relatable to many companies in our equity
portfolio. We can help move the BCG agenda, one of Thailand’s strategic
directions, forward by positive engagement with our investees.
MG: What measurable successes have you seen in
your ESG policy and perhaps, what are you most proud of?
SY:
a) ESG scoring system which is core to our ESG
integration
The GPF codeveloped the fund’s ESG scoring system with the World Bank.
The scoring system and valuation model are fully integrated into the selection
of corporate holdings, both equity and fixed income.
b)
Institutional
investors’ Negative List Guidelines
As mentioned earlier, the GPF
joined hands with 32 institutional investors to reinforce good corporate
governance. All of these Thai
institutional investors signed the MOU to act similarly against companies which
are negative-listed.
c)
Our announcement of ESG goals and targets
The soon-to-be-released Sustainability Report
shall express our commitment towards such goals, helps track the progress, and
communicate that along with other ESG initiatives at the GPF to the public.
d) ESG Attribution
report to set ESG targets, measure progress
both qualitatively and quantitatively, and help us close gaps accordingly.
Interview by Iain Bell