South Korea will expand the range of assets subject to the National Pension Service's responsible investment principles to include alternative assets. The government plans to apply the principles as early as next year, factoring them into processes such as the selection of external asset managers.
The Ministry of Health and Welfare said on the 20th that an amendment to the National Pension Act reflecting these changes passed a plenary session of the National Assembly. The amendment establishes an explicit legal basis for applying responsible investment principles to alternative investments.
The National Pension Service (NPS) currently applies its responsible investment principles only to traditional assets — stocks and bonds. For stocks and bonds managed directly by its fund management arm, the NPS uses an ESG integration strategy that incorporates environmental, social and governance factors into financial analysis. For stocks and bonds managed externally, it considers responsible investment criteria when selecting managers and monitors whether they continue to apply responsible investment in their operations.
The amendment also adds, as items to be included in the National Pension Fund's management guidelines, the criteria and methods for considering each of the environmental (E), social (S) and governance (G) factors.
The revised law will take effect six months after promulgation, following review and approval by the State Council. The government plans to revise the National Pension Fund's management guidelines and review ways to consider ESG factors when selecting and monitoring external managers for alternative investments, implementing the measures after discussion by the Fund Management Committee.
Jeong Eun-kyeong, Minister of Health and Welfare, said the amendment is significant in that it allows responsible investment principles to be applied across all of the National Pension Service's asset classes. "We will work to raise fund returns in a long-term and stable manner across all asset classes, so that a secure retirement income can be guaranteed," she said.
