South Korea’s National Pension Service, the world’s third-largest retirement fund, will need to sell holdings in some overseas coal producers and potentially the nation’s state-run utility under stricter climate policies.
The NPS will stop investing in companies that get more than 50% of their three-year average revenue from coal-fired power generation or production of the fuel, the welfare ministry said Dec. 19. The restrictions will come into force from next year for overseas companies and from 2030 for domestic firms.
South Korea has vowed to zero out emissions by mid-century, but the government’s slow transition to clean sources has helped reduce pressure on the NPS to follow global pension managers in exiting fossil fuels after it initially made a commitment in 2021 to ditch coal. While Norway’s $1.7 trillion fund, which has been one of the global pioneers, said in 2016 that it had started removing companies based on their use of coal from its portfolio, Japan’s $1.6 trillion fund has also been accused of treading water on sustainable investing.
“The NPS has chosen the most lenient option, and even that took them more than three years to finalize,” Lee Jong-O, a director at the Korea Sustainability Investing Forum, a non-profit advocacy and research organization, said by phone. “This is extremely disappointing as the policy significantly lags behind its global peers, showing little commitment to reducing coal exposure in its portfolio.”
The Korean fund declined to give further details on possible divestments. Under the new policy, shares in about 28 overseas companies will need to be sold from next year, while state-run utility Korea Electric Power and its five units, will be subject to divestment from 2030, Lee said. The fund held shares in producers including Coal India and Whitehaven Coal at the end of 2023, according to its website.
For domestic businesses, the fund may continue to invest if they have energy transition plans in place and provide evidence of progress, according to the statement.
In total, the NPS manages assets worth about 1,146 trillion won ($791 billion). It allocates almost 5% of its 399 trillion won global equity portfolio to the energy sector.
