South Korea’s US$205 billion sovereign wealth fund, the Korea Investment Corporation (KIC), is set to take up membership of the UN PRI (Principles for Responsible Investment), joining the world's largest responsible investment consultative body on ESG investment.
Last week, KIC met with UN PRI’s CEO David Atkin on the fund’s planned membership of the body, which includes 711 asset owners, 3,946 investment managers, and 522 service providers. Together, these signatories – which also currently include Korea’s National Pension Service (NPS) – oversee combined assets under management amounting to about US$121 trillion.
UNPRI produces an annual qualitative assessment (“A” to “D”) of their signatory members, who may choose to make it public or not – in fact, only a few asset owners, such as NZ Super, do so. Only around a third of state owned investors, including 13 SWFs and 51 PPFs, are signatory members of the UN Principles for Responsible Investing (PRI); and 22 other institutions align with the Sustainable Development Goals (SDGs).
Jin Seung-ho, president of KIC, said, "After enacting the principle of responsible investment, KIC has been actively expanding ESG-based investment partnerships with global institutional investors. We expect it to improve.”
PRI CEO David Atkin said, "We appreciate KIC's commitment to becoming a member of PRI. This is a welcome step in demonstrating KIC's leadership in responsible investment, and we look forward to further cooperation in strengthening PRI initiatives and responsible investment activities.”
In this year’s Global SWF Governance, Sustainability and Resilience Report, KIC was in 10th place with a GSR score of 84%, putting it on a par with Abu Dhabi’s Mubadala. Its score is supported by its various initiatives in support of its ESG objectives.
KIC sought to affirm its climate credentials by joining the One Planet Sovereign Wealth Funds (OPSWF) in October 2021. OPSWF was formed in 2017 in accordance with the 2015 Paris Climate Accords. Funds that endorse the OPSWF Framework pledge to integrate climate change risks and invest in the transition to a Paris-aligned low emissions economy. However, the lack of standardization of greenhouse gas auditing and reviews of progress towards targets makes judging OPSWF's real world impact difficult to measure.
The KIC is also Korea's first institutional investor to publicly advocate the Task Force on Climate-related Financial Disclosures (TCFD), which was formed in 2015. The TCFD framework involves a set of voluntary, consistent disclosure recommendations and is regarded by investors and governmental bodies as the benchmark disclosure guidance.
KIC introduced the ESG investment plan after enacting the stewardship principle in 2018. In April 2019, KIC launched a dedicated global ESG fund, the first of its kind in Korea, which follows an ESG index that is linked to equity benchmarks and readjusted according to ESG factors. KIC has used this fund to expand its exposure to companies with a proven ability to manage ESG risk. In August last year, a responsible investment team dedicated to ESG was established, and this year a 'climate change response model' was formulated and implemented to identify carbon risks of its investment assets.
KIC has also been entrusted with the proceeds of the Korean government’s green and sustainable bonds to invest in green & social projects. It has published updates on environmental impact indices, including carbon dioxide and greenhouse gas emission reductions and renewable energy generation, in addition to social impact indices including medical and educational outreach.
