The Government Pension Fund (GPF) plans to join forces with several large institutional investors to ban hoarding of shares of listed companies whose executives break the law or are involved in irregular trading behaviour.
The move is aimed at upgrading capital market standards by pushing environmental, social and governance (ESG) compliance with investment practices.
The GPF wooed seven mutual fund companies and 3-4 insurance firms to participate in the Negative List Guideline scheme, secretary-general Vitai Ratanakorn said.
Under the scheme, participating institutional investors will declare their intention to the public that they will suspend additional investment for 3-6 months for shares of companies' whose executives break the Securities and Exchange Act or other laws. Whether institutional investors will divest such shares depends on investors' own decisions.
After the suspension period, they will evaluate those companies again and they are allowed to resume accumulating these stocks if the cause is eliminated, he said.
A memorandum of understanding to make a commitment to comply with the Negative List Guideline is expected on Oct 1 and will take effect from next year.
The Negative List Guideline is not retroactive.
"Everyone has tried to comply with ESG, but concrete practice is necessary. These guidelines will help increase institutional investors' freedom to make investment decisions, reduce the power of institutional investors controlled by commercial banks, and provide support to companies with good governance," said Mr Vitai.
"Implementation should be done seriously. Wrongdoers must be punished and announced to the public. Moreover, the investment ban will not be considered to be controlling the market because it is a practical guideline."
He said the GPF cut its asset allocation ratio in global stocks but maintained investment in Thai shares at 7% as the Thai stock market has already bottomed out and has growth potential.
As of May 3, the GPF, a manager of retirement savings for more than 1 million state officials, allocated 21% in equity, 66% in debt instruments and the remaining 13% in other assets.
Mr Vitai is confident the GPF's return will hit its target of 5-6% this year from investment yields of around 3%.