National Pension Service investments in WMD, coal, tobacco companies top $4.4bn

[Courtesy of NPS]

South Korea’s largest pension fund National Pension Service (NPS) has invested more than 6 trillion won ($4.42 billion) in companies that are excluded or monitored by overseas pension funds, including those related to weapons of mass destruction (WMD), coal, and tobacco.

According to data obtained by Representative Jung Choun-sook, who is a member of the National Assembly’s Health and Welfare Committee, on domestic stock holdings of companies excluded from investment by overseas pension funds obtained from the NPS, the fund invested 359.7 billion won in five WMD companies, 999.1 billion won in a coal-related company, and 893.9 billion won in a tobacco company at the end of 2022.

It also invested 2.46 trillion won in three environmentally polluting companies, 297.3 billion won in a company violating human rights, and 40 billion won in a company responsible for both pollution and human rights violations.

Additionally, as much as 1.12 trillion won was invested in three companies that are not excluded from investment but are classified as watchlisted due to serious corruption.

The total amount of investments in these companies was 6.17 trillion won, up slightly from 6.20 trillion won at the end of 2021.

Overseas pension funds, including Norway’s Norges Bank Investment Management (NBIM), Dutch pension fund PGGM Vermogensbeheer B.V., Swedish national pension fund AP4, and Canadian CPP Investment Board (CPPIB), are investing in companies with considerations for environmental, social, and governance (ESG) factors to manage risks and secure stable returns, according to Jung.

Many international pension funds do not invest in companies in the following areas: WMD, climate change, and health. NBIM and AP4 exclude or limit investments in all three sectors, while PGGM excludes or limits investments in WMD and health.

But NPS only considers excluding or restricting investments in climate change. After declaring its coal-free policy in 2021, it has been conducting a study to define the criteria for excluding the “coal mining and power generation industry” and preparing a phased action plan, but progress has been slow so far.

“We need to introduce an action plan for coal exclusion as soon as possible and promote plans to exclude not only coal but also WMD and tobacco from the portfolio,” Jung said. “Socially responsible investment should be expanded to include women’s empowerment and industrial accidents.”