Korea’s national pension fund triples ESG investment in 2022

South Korea’s National Pension Service (NPS), the country’s largest institutional investor, has tripled sustainable investment that considers environmental, social, and corporate governance (ESG) factors over the past one year.

The NPS is expected to undertake a big paradigm shift in investment as nearly half of all asset groups it invests in are in the responsible investment category.

According to the 2022 report disclosed recently by the NPS, the amount of investment assets under the responsible investment category has nearly tripled to 384 trillion won ($288.3 billion) at the end of 2022 from 130 trillion won in 2021.

The NPS says that it invested about 43 percent of its entire investment assets worth 899 trillion won as of the end of last year with considerations for responsible investment.

Such dedication comes from the belief that portfolio diversification will improve long-term returns.

“We have established an overseas equity research team to promote active overseas equity strategies through direct management,” said Seo Won-joo, chief investment officer at the NPS. “We have reinforced our expertise in risk management by separating the risk management office into securities and alternative departments.”

While the U.S. California Public Employees’ Retirement System (CalPERS) and the Netherlands All Pension Group (APG) use ESG investing for alternative assets, the NPS has yet to begin the effort.

The NPS announced earlier in its roadmap for promoting responsible investment that it will consider introducing responsible investment for alternative investment assets, but details have not been released yet.

Still, the NPS made a start last year by signing a memorandum of understanding for investing in funds managed by private equity firm Blackstone Inc. that focus on sustainable resources, including renewable energy, climate change solutions, and energy transition.