National pension, enhance profitability through voting rights delegation... endow ESG operating companies with new responsibilities

The Ministry of Health and Welfare is moving forward with a plan to delegate voting rights for domestic stocks held by the National Pension to private asset management firms. The goal is to more effectively exercise the pension fund’s voting rights, primarily entrusting responsibility to responsible investment management companies.

As of the end of last year, the National Pension held domestic stocks worth 263.7 trillion won, with about half managed by several private asset management firms. These responsible investment firms focus on ESG (Environmental, Social Responsibility, Corporate Governance) factors and aim for long-term corporate value maximization. Currently, 8 out of 27 management companies adopt this approach.

The Ministry plans to change the delegation method from “full investment delegation” to a “separate fund” approach, and to pilot allowing entrusted management companies to exercise voting rights in their own name. This can be seen as a measure to strengthen the trustee’s responsibility activities aimed at improving fund returns. A Ministry official stated that capable operators will be selected to advance this initiative, with the ultimate goal of increasing fund returns.

Additionally, the meeting decided to strengthen the management system for the trustee responsibilities of the National Pension entrusted management companies. They plan to establish standards that entrusted management companies must follow and evaluate their performance, reflecting the results in fund allocation or recovery to enhance execution.

This trend is likely to further boost the profitability of the National Pension Fund while ultimately promoting stable retirement funding operations. The market is watching whether this decision can contribute to the development of a quality capital market and has high expectations for how related policies will unfold in the future.