Korean institutional investors ahead of Asian peers in climate disclosure

gettyimagesbank

Korea's institutional investors are steadily advancing in climate governance, slightly outperforming the average Asian investor in climate disclosures and internal policies, the Asia Investor Group on Climate Change (AIGCC) said Tuesday.

In its analysis of 18 influential Korean institutional investors managing a combined 2.87 trillion won ($2.07 billion) in assets under management, AIGCC noted that a growing proportion of Korean investors integrate climate considerations into their portfolios, and align with international disclosure standards.

Notably, 78 percent of Korean investors recognized the financial materiality of climate change, compared to 75 percent of Asian investors overall. This recognition has led 67 percent of Korean investors to integrate climate considerations into their investment policies, compared to 66 percent across Asia.

Additionally, 44 percent of Korean investors have disclosed the results of physical risk assessments of their portfolios, and half of the investors posted disclosures that align with international standards. By contrast, 43 percent and 39 percent of average Asian investors have done so, respectively.

"It is encouraging to see more Korean investors recognize the financial materiality of climate risks," AIGCC CEO Rebecca Mikula-Wright said. "We now need to mobilize this into action. While 44 percent of Korean investors have disclosed results of portfolio physical risk assessments, responses to build resilience to mounting climate risks are nascent."

Given Asia's high exposure to climate impacts, AIGCC emphasized the need for more decisive action among Korean investors to address rising risks.

For instance, only 22 percent of Korean investors have set near-term climate goals, such as 2030 emissions reduction targets. Most are falling short in demonstrating sufficient climate stewardship and active ownership as well. They do not yet publicly disclose support or actions relating to climate policy advocacy and related engagements.

Korean investors also lag behind in developing climate transition plans, such as forward-looking strategies to decarbonize portfolios and invest in climate solutions. Only a quarter have such plans in place, compared to 35 percent of their Asian counterparts.

"The overall vision and journey for investors to achieve net-zero is clear, but we now need to get more granular with the implementation of concrete and actionable plans," said Won Chong-hyun, chair of council of fiduciary at the National Pension Fund's management committee. "It will be an ongoing conversation between investors, policymakers, businesses and organizations like AIGCC."

AIGCC works to raise awareness and drive action among Asian investors regarding the risks and opportunities associated with climate change. Its members span 11 markets and manage more than 36 trillion won in combined assets under management.