National Pension Service's 'Coal Phase-Out Declaration' for Carbon Emission Reduction

[Asia Economy Reporter Park So-yeon] The National Pension Service (NPS) has agreed on the need to reduce carbon emissions amid the climate change crisis and decided not to invest in projects for the construction of new coal power plants domestically and internationally going forward.

On the 28th, the NPS Fund Management Committee (Fund Committee) held its 6th meeting at The Plaza Hotel in Jung-gu, Seoul, and deliberated and resolved on the 'Introduction Plan for Investment Restriction Strategy of the National Pension Fund,' among other matters.

During the meeting, the Fund Committee declared a 'coal phase-out' management policy and decided to introduce 'negative screening' that restricts investments in the coal mining and power generation industries in the future.

Negative screening refers to a policy that restricts industries or groups of companies negatively evaluated from an ESG (Environmental, Social, and Governance) perspective from the list of investable stocks or investment portfolios.

The Fund Committee decided to start with the coal phase-out declaration and not to invest in projects for the construction of new coal power plants domestically and internationally going forward. They plan to prepare an investment restriction strategy by establishing a phased implementation plan.

To this end, related research services will be conducted in the second half of this year.

In this process, the Fund Committee stated that it plans to institutionalize the implementation plan by reflecting the opinions of various stakeholders, including academia and businesses.

Additionally, the Fund Committee will add investment restriction clauses to the 'National Pension Fund Management Guidelines' and announce the direction of the coal phase-out management policy to maintain consistency in fund management direction and increase predictability.

In the declaration released at the meeting, the Fund Committee stated, "In preparation for climate change and strengthening international environmental regulations, the National Pension Fund, one of the world's top three pension funds, declares a coal phase-out management policy and aims to proactively establish fund management strategies from a risk management perspective."

They also mentioned, "As a long-term investor responsible for the stable retirement income of the people, we will strive to realize a sustainable society," and "We will actively participate in creating a low-carbon industrial ecosystem and play a leading role in the transition to a carbon-neutral society."

At the meeting, the fund management plan for the next five years and the mid-term asset allocation plan were also approved.

The mid-term asset allocation plan is a five-year fund management strategy established annually to enhance the fund's profitability and stability. Considering projections of real economic growth rates and inflation rates, the Fund Committee set the target return rate for the next five years at 5.1%.

The target allocation to achieve this is approximately 50% stocks, 35% bonds, and 15% alternative investments by the end of 2026.

The Fund Committee said, "We comprehensively considered the need for active fund management during the 'fund accumulation period' and the impact on the market," adding, "The asset allocation to achieve the target return will be adjusted gradually and step-by-step until 2026."

The meeting also addressed the fund management plan for the next year to be submitted to the Ministry of Economy and Finance.

According to the '2022 Fund Management Plan,' next year's fund income is expected to total 131 trillion won, including 53 trillion won from pension insurance premiums, and expenditures are expected to total 32 trillion won, including 31 trillion won for pension benefit payments. Approximately 99 trillion won, excluding expenditures, will be operated as surplus funds.

Considering this, next year's National Pension Fund assets are expected to increase to 419 trillion won in stocks, 404 trillion won in bonds, and 128 trillion won in alternative investments, respectively.

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