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?
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