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Japan's GPIF partners Saudi-based multilateral bank to promote Islamic green bonds

December 10, 2019

Japan’s Government Pension Investment Fund (GPIF) has partnered with the Islamic Development Bank to promote green sukuk or Islamic bonds, in a move that allows the fund to invest in the latter’s inaugural Islamic green debt.

The Saudi Arabia-based multilateral institution sold 1 billion euros (US$1.1 billion) of green sukuk on December 4. The five-year bonds have a profit rate of 0.037%.

GPIF did not disclose how much it invested in the offering and a spokesperson for the fund declined to provide any details.

This is the fund’s fourth green bond partnership. The first, in April, was with the World Bank Group, followed by similar tie-ups with the Asian Development Bank and the European Investment Bank.

As of July, the fund had invested over $1 billion in green bonds issued by the three multilateral organisations, the spokesperson tells Asia Asset Management.

Green bond issuance in Asia Pacific reached a record $21.9 billion in the first half of 2019, almost 30% higher than in the first six months of 2018, according to data provider Refinitiv.

The Islamic Development Bank’s green sukuk “provide investment opportunities for GPIF’s asset managers to contribute to make a sustainable society”, the pension fund says in a statement on December 6, adding that its asset managers are required to integrate environmental, social and governance (ESG) criteria into their investment processes.

“We regard the purchase of green and sustainable sukuk as one of the direct methods of ESG integration,” Hiro Mizuno, executive managing director and chief investment officer of GPIF, says in the statement.

Zamir Iqbal, vice president and chief financial officer of Islamic Development Bank, adds that the partnership with the Japanese fund “reaffirms our commitment to provide opportunities for socially responsible investments and ESG investors like GPIF to deliver sustainable development to our member countries through green and responsible finance”.

GPIF, the world’s largest pension fund, had 161.7 trillion yen ($1.48 trillion) of total assets as of September 2019.