Two of South Korea's largest government funds - the Korea Investment Corporation (KIC) and the National Pension Service (NPS) - have embarked on a series of ESG ownership actions as part of their $500 billion in overseas investments.

The measures include exercising shareholder voting rights in overseas investments, and mandatory non-financial performance disclosure reports from overseas companies. Currently the two funds have combined assets under management of $980.6 billion, with more than $500 billion in overseas positions.

Speaking at an international ESG conference in Seoul on Sept 2, Jin Seoung-ho, the chief executive officer of KIC, said the $195.7 billion sovereign wealth fund would start actively exercising voting rights and participate in shareholder engagement in its overseas investments.

Kim Yong-jin

After establishing its stewardship principles in 2018, KIC began exercising voting rights and participating in shareholder engagement through an external organisation. But, like most Korean institutional investors, KIC had remained passive in ownership when investing overseas.

“KIC will prepare to exercise our valuable shareholder rights no matter how small our stake in a target company. And we will cooperate with domestic pension funds as needed,” Jin said during the conference.

It will start doing so early next year, AsianInvestor understands.

Also speaking at the same conference, NPS Chairman and CEO Kim Yong-jin said the $785 billion pension fund would ask external fund managers or investee companies to include non-financial performance indicators in their financial or disclosure reports.

The mandatory request, which was planned to be implemented next year, will be in force by the end of this year, Kim said.

Such ESG reporting guidelines were set up in November last year, but it had been mandatory only for local stockbrokers.

STANDARD SETTING

Korean president Moon Jae-in announced the country’s net-zero commitment by 2050 in late October last year. As the largest public funds in Korea, NPS and KIC have been trying to set up standards to promote the country’s net-zero transition among financial institutions.

Jin Seoung-ho

Jin said KIC plans to establish a climate change model under various scenarios - including large-scale wildfires, droughts and floods worldwide - through the collection and evaluation of carbon footprint data from its investments and investee companies.

It eventually plans to apply this to its entire investment portfolio and hopes the model can serve as a guide for global institutional investors.

The California Public Employees' Retirement System (CALPERS) in the US and the Norges Bank Investment Management (NBIM) in Norway have similar climate change risk models.

To enhance global collaboration, KIC also plans to promote green partnerships that pursue ESG co-investments with global institutional investors.

Jin said partners would be able to share their ESG investment cases and impact analyses to help prevent greenwashing.

KIC will use proceeds from the Korean government's $500 million green bonds as well as its own assets for such co-investments.

On August 24, KIC established its first dedicated sustainable investment team with three ESG experts, under a new investment strategy and innovation division.

“The restructuring makes clear that ESG is a core task for our future,” Jin said.

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He said KIC would develop ESG strategies appropriate for each asset class, as well as aim to discover new strategies for renewable energy, energy conversion, smart mobility, clean tech and green buildings.