Stagnant Public Fund Market... Seeking Breakthrough with ESG

156 New Operating Funds Launched
25% Increase Compared to Last Year

Flood of Products Linked to ESG Keywords

[Asia Economy Reporter Minji Lee] Asset management companies are increasing the launch of new funds in the new year. They appear to be swiftly responding to investors' heightened demand for ESG (Environmental, Social, and Governance) after COVID-19, seeking changes in the stagnant public fund market.

According to financial information provider FnGuide on the 18th, a total of 156 new funds were established from the beginning of the year (January 1 to February 17). Considering that 125 funds were established during the same period last year, this represents an increase of about 25%. The most issued funds were ELF (Equity-Linked Fund), which indirectly invests in equity-linked securities (ELS) through funds. A total of 131 funds were launched, accounting for over 80% of all new funds this year, continuing from last year.

Last year, due to the impact of the US-China trade war, the domestic stock market remained in a box range, and the main features were the launch of EMP (ETF portfolio composition) funds related to asset allocation and small and medium-sized materials, parts, and equipment (Sobejang) funds relying on the semiconductor industry recovery. The most distinct difference this year compared to last year is the aggressive launch of funds with ESG as a keyword from the beginning of the year. ESG, which emerged as a key topic in the financial market after the COVID-19 pandemic, is the area asset managers are focusing on the most this year.

So far, a total of nine ESG-related funds have been newly launched. Last month, Samsung Asset Management opened the door to ESG funds by introducing the ‘Samsung Energy Transition Securities Investment Trust.’ This fund primarily invests in overseas funds related to energy and environmental changes. It focuses on the prospect that US President Joe Biden’s green energy policies and the new climate regime will expand renewable energy facility investments in major countries.

Truston Asset Management went beyond the previous method of calculating based on environmental, social, and governance evaluation indices and launched the ‘Truston ESG Level-Up Securities Investment Trust,’ which combines active shareholder engagement with ESG. The strategy is to invest in companies whose corporate value can increase through ESG but to strengthen shareholder rights through active shareholder activities if ESG improvement efforts are insufficient. In addition, KB Asset Management, Mirae Asset Global Investments, and others are also actively increasing ESG products by launching related funds.

Recently, a large number of ETFs tracking the Carbon Efficiency Green New Deal Index jointly developed by S&P and the Korea Exchange have been launched. They selected 260 KOSPI stocks and 223 KOSDAQ stocks to invest in companies with high carbon efficiency scores. So far, ‘Hanwha ARIRANG Carbon Efficiency Green New Deal Securities Listed Index Investment Trust,’ ‘Samsung KODEX Carbon Efficiency Green New Deal Securities Listed Index Investment Trust,’ ‘Mirae Asset TIGER Carbon Efficiency Green New Deal Securities Listed Index Investment Trust,’ and ‘HANARO Carbon Efficiency Green New Deal’ have been released to the market.

The market expects asset management companies to continue launching various products related to ESG and incorporate ESG into investments. Song Jaekyung, head of the Research Center at Heungkuk Securities, explained, "ESG investment has begun to establish itself as a global investment trend over the past decade, and its importance is increasing more as an indirect regulation through financial capital rather than direct regulation. Creating excellent fund performance through ESG in the global asset management market has become a core goal."

Earlier, Larry Fink, chairman of BlackRock, the world's largest asset manager, emphasized in his annual letter earlier this year that CEOs and investors should continue to consider ESG as a key investment decision factor this year as well, aiming for net-zero carbon emissions by 2050 in their investment approach. Song added, "The asset size with ESG mandatory provisions is expected to expand from $23 trillion at the end of 2015 to $60 trillion next year."

This content was produced with the assistance of AI translation services.