South Korea’s National Pension Service (NPS), the world’s third-largest pension fund, is poised to consider expanding its responsible investment system — which currently applies only to stock and bond investments — to include alternative investments.
The NPS will consider introducing a policy that favors private equity firms with responsible investment policies when the pension fund selects asset managers for its alternative investments, according to its filing in Korea’s public sector management information disclosure system on Thursday.
“Regarding the application of responsible investment strategies to alternative investment asset classes, NPS will consider the applicability of the law and the specificity of alternative investment asset classes, reviewing the specific method and timing of introduction,” the NPS said.
The pension scheme seeks to bolster responsible investment policies internally by providing incentives to asset managers with such policies when hiring and monitoring managers for alternative investments, which include real estate, infrastructure and private equity.
QUALITY OF RETURN
Responsible investment, also known as ethical or sustainable investing, is an approach that considers environmental, social, and governance (ESG) factors alongside financial performance when making investment decisions.
The NPS's move comes after lawmakers urged it to reinforce responsible investment policies for alternative investments last year.
The state-run pension service, Korea’s largest institutional investor, is mulling measures to reflect the quality of returns, such as a qualitative evaluation of the profit realization process, rather than focusing on the existing, performance-oriented quantitative evaluation to select managers for domestic private equity investments.
Homeplus supermarket in Seoul (File photo by Yonhap) NOT RELATED TO HOMEPLUS
“We are considering incentives for investment firms with responsible investment policies to select external asset managers after the National Assembly requested. It is not linked to the Homeplus fiasco," an NPS official said.
