The National Pension Service (NPS) has constantly increased its involvement in coal-related businesses despite a government policy emphasizing socially responsible investment, according to a report submitted to the National Assembly.
NPS had an estimated 5.51 trillion won ($4.81 billion) invested in coal-related stocks at the end of 2019, up from 4.32 trillion won at the end of 2015, a reported 4.50 trillion won at the end of 2016, 4.94 trillion won at the end of 2017, and 5.56 trillion won at the end of 2018.
The amount of domestic stock investment by the pension fund has steadily decreased from 3.14 trillion won at the end of 2015 to 2.29 trillion won at the end of 2019, while investments in overseas stock rose from 1.18 trillion won to 3.22 trillion won in the same period. This resulted in an overall increase in the total amount of stock investment.
NPS reported an investment of 1.62 trillion won in coal-related domestic stocks at the end of 2019, including stakes in Korea Electric Power Corporation (KEPCO), GS, Kumho Petrochemical, OCI and LG International. The fund invested 975.4 billion won in KEPCO, more than half of the total domestic investment.
It also had 2.86 trillion won invested in overseas coal-related stocks like NextEra Energy, Exelon Corporation and Dominion Energy in the U.S., Enel SpA in Italy and Iberdrola SA in Spain. Many of these companies are shifting to renewable energy.
Coal power is known to be one of the main sources of fine dust and greenhouse gas emissions. Global financial investment companies are reducing their involvement in the industry as part of climate change commitments.
The South Korean government reemphasized the importance of green energy on July 14 by unveiling the “Korean New Deal” policy as a response to the economic crises caused by Covid-19. The policy pledges an investment of 160 trillion won in the Digital New Deal and Green New Deal. Under the Green New Deal, the government hopes to make a green transition in infrastructure and supplies of low-carbon energy, while it will bring innovation through Green Industry.
In line with the government policy, NPS mandated four companies to look for socially responsible investments in the domestic stock market in September. They will source stocks that meet an environmental, social and governance (ESG) criteria.
“ESG factors, which are used to measure the sustainability of the company, are becoming more important than ever since Covid-19,” NPS chief investment officer Ahn Hyo-joon said. “We will make efforts to find sustainable companies by utilizing external managers’ ESG operating and research strategies and thoroughly carry out risk management, along with flexible market responses to enhance the long-term return of the fund.” (Reported by Hyewon Chang)