Impact investing yet to take off in Korea

Despite commitment to the impending Stewardship Code, Korean institutional investors are still working out how to incorporate ESG into their portfolios, the CIO of POBA tells PEI.

More than 30 institutional investors, such as sovereign wealth fund Korea Investment Corporation, STIC Investments, Samsung Asset Management and Mirae Asset Global Investments, are adopting or plan to adopt Korea’s new Stewardship code in the fourth quarter of this year. The code, which was unveiled by Korea’s Financial Services Commission in December last year, aims to encourage more responsible investments by institutional investors through transparent corporate management.

Yet, despite these positive intentions institutional investors in Korea are still scratching their heads as to incorporate environmental, social and governance best-practices into their portfolios.

Jang Dong Hun, chief investment officer, Public Officials Benefit Association

“Impact investment is a new concept in Korea and it will take some time to establish our own direction,” Jang Dong Hun, chief investment officer of Public Officials Benefit Association (POBA) told Private Equity International.

Jang adds that for Korea’s institutional investors, time is needed to understand impact investments, especially in figuring out how the investment fits in the portfolio as well as its level of expected return and risk

POBA, which manages 10.3 trillion won ($9.1 billion; €8.1 billion) of assets, is not yet active in impact investing but has committed capital to clean energy investment projects such as solar energy and natural gas power plants in the US.

Jang notes the difficulty in pinning down a specific timeline to when impact investing can take off in Korea, however the introduction of the Stewardship Code should serve as a catalyst for more socially responsible investments.

Sung-Soo Eun, chairman and chief executive of KIC, said in September that the investor is in the process of selecting a manager specialising in environmental, social and governance-focused investing to manage an initial allocation of $300 million. Meanwhile other investors including the National Pension Services have create a task force to review adoption of the Stewardship Code.

While in the Korean private fund management community, former deputy prime minister and finance minister Lee Hun Jai said in May that he is launching a private impact investing firm called Impact Finance Korea. Lee aims to raise KRW 200 billion, to support small businesses and low-income entrepreneurs whose businesses generate a social or environmental impact.