Fighting climate change is key factor in global investment principles

McKinsey & Company Korea Senior Partner Richard Lee, left, moderates a panel discussion during the 2021 Korea Times Global ESG Forum held in the KCCI building in Seoul, Friday. Second from left are BlackRock Korea Country Head Choi Man-yeon, Swiss Re Korea Branch Head Jonas von Oldenskiold and National Pension Service Global Responsible Investment & Governance Division Head Yi Dong-sub. BNP Paribas Asset Management Global Client Group Head Steven Billiet's face is seen on the screen as he joined the event online. Korea Times photo by Shim Hyun-chul

By Kim Jae-heun

Global investors with expertise in environmental, social and corporate governance (ESG) principles proposed their investment principles for the post-COVID-19 era, as the role of ESG has greatly expanded as a key facilitator to promote sustainable growth. They further gave advice on how to better cope with ESG-led changes and what changes companies should pursue for each principle of ESG.

Moderated by McKinsey & Company Korea Senior Partner Richard Lee, the four representatives from the National Pension Service (NPS), BNP Paribas Asset Management, BlackRock Korea and Swiss Re Korea Branch shared their insights into and strategies for ESG investment principles during the 2021 Korea Times Global ESG Forum at the KCCI building in Seoul, Friday.

Lee opened the discussion by introducing the participants, whose organizations he said represent over $10 trillion that is being managed around the world.

"BlackRock alone has $9.5 trillion, and the NPS also has close to $1 trillion. As they say, follow the money. Money flow really helps understand how the world will move," Lee said.

BlackRock Korea Country Head Choi Man-yeon speaks during the panel discussion of the 2021 Korea Times Global ESG Forum held at the KCCI building in Seoul, Oct. 29. Korea Times photo by Shim Hyun-chul

BlackRock Korea Country Head Choi Man-yeon started with a brief speech on his company's sustainable investments spanning a range of strategies combining traditional investment approaches with ESG insights to deliver both financial and purpose-driven outcomes.

"We believe that sustainable investing is not a temporary theme but is going mainstream. We believe that integrating material sustainability-related insights into our investment processes will improve long-term risk-adjusted returns," Choi said.

It is BlackRock's investment conviction that climate risk is investment risk. Climate change has become a defining factor in companies' long-term prospects. BlackRock seek to provide clients with a clear picture of how sustainability-related issues affect risk and long-term financial performance.

At the time of BlackRock CEO Larry Fink's 2020 letter to CEOs, the fiduciary announced commitments that included additional efforts towards cutting out investments in some coal-related businesses from some of its portfolios and increasing the number of sustainability-focused funds that it offers.

Korea Times forum proposes global investors' ESG principles

2021-10-29 17:00 | Economy

Swiss Re Korea Branch Head Jonas von Oldenskiold shared his company's perspective on the environmental challenges.

Mitigating climate risk and advancing the energy transition is one of the three ambitious areas in which Swiss Re has significant knowledge and capacities.

"There has been a drag on economic growth, GDP of 1.6 percent over the last 50 years on average, as a result of natural catastrophes and other climate change-related perils," Oldenskiold said. "Our job is to take risk and we are getting exposed to climate change. If we look back in 2020, we had $190 billion of economic losses that was created by climate change-related perils. Roughly, only $90 million of those were insured, so there is still a big gap."

McKinsey Korea Senior Partner Richard Lee speaks during a panel discussion of the 2021 Korea Times Global ESG Forum held at the KCCI building in Seoul, Oct. 29. Korea Times photo by Shim Hyun-chul

Swiss Re also integrates ESG criteria across its investment portfolio. Its approach is based on three strategic cornerstones: enhancement, inclusion and exclusion. Swiss Re aim to generate higher risk-adjusted returns over the long term.

BNP Paribas is deeply rooted in the Global Sustainability Strategy that it launched in March 2019. There, the banking group defines six pillars of sustainable investment, which are governed by robust policies and implemented across its portfolios.

First, a systematic integration of ESG considerations into investment decisions. Second, active stewardship. Third, responsible business conduct policy. Fourth, a forward-looking focus on the "3Es" of energy transition, environmental sustainability and equality. Fifth, BNP Paribas's Sustainable range of funds. Sixth, corporate social responsibility (CSR).

"As a result of all our efforts in the Sustainability space, 83 percent of our public open-ended fund range is currently classified under the new EU Sustainable Finance Disclosure Regulation Article 8 and 9 funds, representing $214 billion of our assets under management as of September 2021," said Steven Billiet, head of BNP Paribas Asset Management's Global Client Group.

Yi Dong-sub, head of the NPS's Global Responsible Investment & Governance Division, also emphasized the importance of sustainability by defining it as "harmony between short-term and long-term growth."

The NPS considers not only traditional financial factors but also non-financial factors such as ESG. After an investment is made, it continues to monitor its investing entities, exercise proxy voting and talk to the companies to enhance the long-term profitability of the funds.

Last May, the NPS declared its investments coal-free, with the introduction of a strategy to limit investment in coal mining and coal power generation industries.

"The backdrop of this is the strengthening of domestic and foreign regulations such as carbon border adjustment mechanisms and investment focus on eco-friendly companies. Such changes may affect the sustainability of investment assets, especially electric power, chemicals, steel and transportation," Yi said.