Global Institutional Investors Intensify ESG Shareholder Activism Targeting Korean Companies

[Asia Economy Reporter Suyeon Woo] As global institutional investors increase shareholder activism in Asian companies including those in Korea, there are calls for Korean companies to take proactive measures. In particular, with the Biden administration in the United States expected to expand shareholder activism on ESG issues by global institutional investors, the importance of responding to ESG issues is anticipated to grow.

On the 7th, the Federation of Korean Industries (FKI) released a report titled "Trends in Shareholder Rights Exercise by Global Asset Management Firms," analyzing shareholder activities of global asset managers such as BlackRock, Vanguard, and SSGA. The report revealed that the number of shareholder rights exercises by BlackRock, the world's largest asset manager, targeting Asian companies (excluding Japan) surged by 92%, from 238 cases in 2019 to 458 cases in 2020. This figure is significantly higher compared to the 48.4% increase in shareholder rights exercises targeting companies across all regions during the same period.

Source=Federation of Korean Industries

Among them, BlackRock was the most active in shareholder activism toward Korean companies, including exercising shareholder rights and voting on shareholder proposals. BlackRock's participation in shareholder proposal voting for Korean companies more than doubled, increasing from 12 companies in 2019 to 27 companies last year.

Examples of BlackRock’s participation in shareholder rights exercises involving Korean companies include opposing Elliott’s 2018 proposal to improve Hyundai Motor’s corporate governance, sending a letter in 2020 regarding Korea Electric Power Corporation’s investment in a coal power plant in Vietnam, and demanding improvements related to the gas leak incident at LG Chem’s plant in India.

Meanwhile, all three global asset managers have recently increased shareholder activism related to ESG (Environmental, Social, and Governance) issues, and this active engagement trend is expected to continue. BlackRock’s participation in ESG-related shareholder proposal voting increased by 14%, from 953 cases in 2019 to 1,087 cases in 2020. During the same period, the number of cases in the Asia region rose from 200 to 264, a 32% increase, showing a higher growth rate than the average.

Vanguard also showed a 14% increase in ESG shareholder proposal voting participation in the Asia region, higher than other regions, while SSGA’s shareholder activities related to climate change increased by more than 150%. Kim Bong-man, head of international cooperation at FKI, stated, "Global asset managers are intensifying their shareholder activism on ESG issues in the Asia region comparatively more," adding, "Following the recent climate summit, the U.S. global carbon neutrality drive will become even stronger."

He continued, "With former BlackRock personnel occupying key positions, an aggressive ESG drive by the Biden administration and BlackRock is expected," and added, "It is now more important than ever for our companies to closely monitor trends and proactively manage ESG issues."

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