Ryu Young-jae, CEO of Sustainvest, "National Pension Service Should Lead KOSPI Uptrend..."

Ryu Young-jae, CEO of Sustainvest

[Asia Economy Reporter Sohyeon Park] Ryu Young-jae, CEO of Sustainvest, a proxy advisory firm, recently stated in an interview with Asia Economy, "The National Pension Service (NPS) must recognize itself as a Universal Owner?a mega long-term investor?and lead the KOSPI to an upward trajectory." The NPS is currently discussing changes to the domestic stock target ratio maintenance rule (rebalancing) to reduce selling pressure on domestic stocks in the Korean stock market.

CEO Ryu said, "It is not desirable for fund management to be influenced by political circles or public opinion," but added, "However, mechanically selling stocks based on a fixed ratio is only a temporary fix." He further emphasized, "More fundamentally, the NPS itself must lead the national economy and stock market to continuously rise as a Universal Owner."

He explained, "A large investor is not good just because it picks one stock and makes short-term profits; the KOSPI must continuously rise so that the fund ultimately grows," adding, "From the perspective of increasing Gross Domestic Product (GDP) and playing a role in growth momentum, the strategic asset allocation structure needs to be redesigned."

The NPS has been reducing its domestic stock investment target ratio from 21.2% last year to 16.8% this year, and plans to lower it to 15% next year. This is to minimize the shock to the domestic stock market when selling domestic stocks to pay pensions, as pension expenditures are expected to exceed premium income in the future.

CEO Ryu noted, "If we consider only risk, domestic and foreign stocks are similar," and mentioned, "In a pension depletion scenario, selling foreign stocks or investment assets to bring funds back domestically could cause problems such as won appreciation and disrupt the foreign exchange market."

He stressed, "The NPS should increase allocations to future growth sectors such as alternative investments and venture investments, and also allocate resources to ESG (Environmental, Social, and Governance) investments," emphasizing, "The pension must act as a kindling and primer to help the national economy rise overall."

He also pointed out that the NPS’s exercise of shareholder rights remains limited to voting rights. CEO Ryu advised, "It currently stops at expressing 'opposition' through voting rights, but more importantly, there should be many private dialogues with companies."

The NPS should broaden its perspective on exercising shareholder rights by continuously monitoring investee companies and proactively engaging in ongoing dialogue to prevent situations that damage corporate value. Through dialogue, it should lead changes in corporate behavior and develop expertise to propose solutions to problems.

CEO Ryu said, "If it were a small fund in Yeouido, it could just sell and exit when problems arise, but the NPS is not a trader," adding, "As a Universal Owner holding about 10% stakes in major domestic companies, the investment approach should focus on risk mitigation through dialogue."

Ryu Young-jae joined Meritz Securities in 1988 and worked in securities firms for over ten years. In the early 2000s, while studying in Europe, he witnessed the spread of ESG management and founded Sustainvest in 2006. Recognized as a leading ESG expert in Korea through 15 years of ESG investment research, CEO Ryu also shared advice for the successful rooting of ESG investment domestically.

He said, "As ecosystems are destroyed and zoonotic diseases spread, environmental concerns are growing. The Biden administration’s key positions are dominated by former BlackRock executives?the world’s top asset manager emphasizing ESG investment?indicating a global superpower shift toward ESG."

CEO Ryu stated, "Financial statements created 100 years ago cannot evaluate future companies," and explained, "In the traditional era where capital and factories created added value, the growth potential of human capital companies equipped with innovative ideas, data, and democratic communication culture has increased." He added, "When attracting investors or conducting an IPO, an 'ESG evaluation framework' is necessary to explain companies with such intangible assets."

He noted, "In the West, ESG investment has become widespread after decades of effort, and Korea is rapidly catching up," emphasizing, "All institutions and companies are suddenly advocating ESG investment, but it is necessary for each institution to work together to prevent 'ESG washing,' which is ESG in name only."

He also offered advice to young investors who entered the stock market during the COVID-19 crash. CEO Ryu said, "I have invested for 34 years, but the capital market shows no mercy." He added, "The 'Donghak Ants' entered at KOSPI 1400 and now it is 3000, so they have not experienced a market crash. The 2030 generation seems to view the market too optimistically, so I plan to create opportunities to share investment methodologies to enable them to invest rather than speculate."

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