Revision of National Pension Fund Management Principles... Specifies Environmental Management, Social Responsibility, and Governance

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[Asia Economy Reporter Ji-hwan Park] The National Pension Service has revised its fund management principles for the first time in 13 years.

According to the National Pension Service on the 17th, the Fund Management Headquarters changed the National Pension Fund Management Guidelines on December 27 last year to add the principle of 'sustainability' to the existing five fund management principles: profitability, stability, public interest, liquidity, and operational independence. This is the first time in 13 years since the five principles were established in the 2006 fund management guidelines that the National Pension Service has added a new principle.

The new principle focuses on responsible investment that faithfully manages by considering factors such as Environment (E), Social (S), and Governance (G) to enhance the sustainability of investment assets. It aims to kick-start responsible investment management that actively engages in fiduciary duties such as director dismissal against investee companies whose corporate value has plummeted due to embezzlement and breach of trust.

Through the 'National Pension Shareholder Rights Exercise Guidelines' finalized at the end of December last year, the National Pension Service decided to exercise shareholder rights by resolution of the Fund Management Committee if the ESG evaluation rating falls by two or more grades to C grade or below in the field of social responsible investment (ESG), or if unexpected corporate value damage or shareholder rights infringement concerns arise related to responsible investment.

However, the business community has expressed concerns about the National Pension Service's decision, citing that the existing ESG evaluation system is neither objective nor fair.

Companies argue that many elements of ESG evaluation are difficult to quantify, making it inevitable for evaluator subjectivity to be reflected, thus lowering reliability.

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