National Pension Service seeks 'Korean-style' ESG investing

National Pension Service (NPS) Chairman Kim Yong-jin delivers a speech during the 2021 ESG Plus Forum at Conrad Seoul on Yeouido, Friday. Courtesy of NPS

Shinhan, SK, Incheon Airport execs join hands for 'K-ESG'

By Park Jae-hyuk

The National Pension Service (NPS) will accelerate its efforts to make investments that take into account environmental, social and corporate governance (ESG) factors here, tailored to the Korean market.

During the 2021 ESG Plus Forum in Seoul, Friday, NPS Chairman Kim Yong-jin emphasized that the state pension fund must be the guide for Korean-style ESG investing by serving as a platform for innovation of what he called “K-ESG.”

“No matter if it wants to or not, ESG investing by the NPS is highly likely to become the standard for Korea's ESG investment,” he said at the event, which was held to celebrate the publication of his new book, “ESG's New Path with the NPS,” and to discuss the pension fund's role, participated in by chief executives from the financial and industrial sectors.

“Given that the NPS represents Korea in the global financial market, we should be the global rule-maker based on K-ESG, rather than remaining as an observer or a learner,” he added.

Kim will lead the K-ESG Initiative, an organization launched at the event to study establishing a Korean-style ESG model and ways for it to take root.

Through the organization, the NPS chairman will seek the principles, standards and methods to assess domestic companies' efforts for ESG, along with experts from asset management firms and various other “stakeholders.”

Aiming to create a sustainable ESG ecosystem, the K-ESG Initiative has three divisions ― responsible investments, management reform and public sector innovation.

Shinhan Asset Management CEO Lee Chang-goo and Incheon International Airport Corp. CEO Kim Kyung-wook will lead the divisions for responsible investments and public sector innovation, respectively. The organization is asking SK hynix CEO Lee Seok-hee to lead the management reform division.

National Pension Service (NPS) Chairman Kim Yong-jin, center, speaks during a panel discussion at the 2021 ESG Plus Forum at the Conrad Seoul on Yeouido, Friday. Courtesy of NPS

The NPS also disclosed details about its ESG strategies during the event.

As the world's third-largest state pension fund with 860 trillion won ($768.54 billion) in assets under management as of February, it seeks to make responsible investments with 50 percent of this by the end of next year.

The fund also plans to conduct ESG assessments more meticulously by increasing the number of evaluation items and indices. It decided to put more focus on the environmental and social factors.

Starting this year, the NPS will apply its integrated ESG strategies to foreign stocks and domestic and foreign bonds under its direct management so as to avoid additional investments in companies with low ESG ratings.

In addition, it will engage more in the management of foreign firms in which it has invested, after Mercer and MSCI, which signed contracts with it earlier this year, establish the necessary systems by November.