The Government Pension Fund (GPF) plans to allocate 1 billion baht to invest in 33 stocks listed on the SET THSI index, a benchmark for stocks that meet criteria for environmental, social and governance (ESG) factors.
The 33 targeted stocks must also meet the GPF's internal investment criteria comprising mission, business operations, transparency and good governance, said secretary-general Vitai Ratanakorn. The state pension fund plans to start investing in them this month.
"This is good timing, given the market correction, and the downside risk is quite limited when compared with this year's trough of 1,584 points," Mr Vitai said.
The SET index yesterday fell below 1,600 points in the first session before bargain-hunting kicked in and helped the bourse rebound to close nearly 21 points higher at 1,644.33 in brisk trade worth 76.1 billion baht.
The benchmark gauge is down about 150 points in the last month and 270 points from the start of the year.
Mr Vitai said 1 billion baht is tiny when compared with the GPF's net assets under management worth 891.23 billion baht at the end of September.
"Investment size is a not a concern for an ESG-focused portfolio worth 1 billion baht, but such a portfolio coupled with other institutional investors' ESG portfolios would prompt companies to be more aware of ESG factors to put their stocks on institutional investors' radar," Mr Vitai said.
Investment in ESG stocks not only generates sustainable returns, he said, but also reduces financial and reputation risk and encourages society to move towards sustainable growth.
At present there are 45 constituents of the SET THSI index, including PTT Plc, PTT Exploration and Production Plc (PTTEP), PTT Global Chemical Plc (PTTGC), Advanced Info Service Plc (ADVANC), Siam Cement Plc (SCC), Bangkok Bank (BBL), Indorama Ventures Plc (IVL), Siam Commercial Bank (SCB) and Kasikornbank (KBANK).
"We're a member of the country's capital markets," Mr Vitai said. "Apart from taking care of our members, we should show responsibility for our capital markets."
He said foreign research indicates that investment in ESG stocks can generate steady returns in the medium to long term for investors and carries lower operational risk.
Commenting on the stock market's slump, Mr Vitai said external factors such as trade tensions between the US and China, further anticipated US rate hikes and the fragility of emerging-market economies are pressuring shares.
Thailand's economic fundamentals remain solid, he said.
"I think the Thai stock market won't enter a bear market and the domestic economy won't enter into a recession," Mr Vitai said. "The market is just in a correction."
To avoid wild swings, GPF members can shift investment to a money market plan, he said.