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Sustainable Investment
Sustainable Investment
Sustainable Investment
KIC is committed to improving sustainability through ESG-integrated investments that take into account environmental, social and governance factors in the pursuit of long-term and stable returns.
In particular, along with our participation in the Korean government’s green and sustainability bond issuance, KIC actively invests the entrusted funds in environmentally friendly and socially beneficial green and social projects.
- We apply ESG considerations to both traditional and alternative assets, in direct and indirect investments alike. By identifying ESG factors that could affect the value of investees and taking appropriate action during the investment process, we aim to enhance long-term asset value and returns. Our efforts include the following:
First, we pursue sustainable investments, which consider ESG factors as a core investment theme. They include ESG equity strategy funds and green and social projects within alternative investments. KIC also invests in green, social and sustainability bonds and has ESG-themed quant sub-strategies that integrate ESG factors at the portfolio level.
Second, KIC conducts ESG reviews of all its traditional and alternative asset managers, as well as on direct investments and co-investments in alternative assets. Using ESG questionnaires and on-site inspections, we assess each firm’s ESG policies and whether those policies are embedded in the investment process. We also review ESG factors of individual projects from multiple angles and reflect the findings in our investment decisions.
Third, KIC actively addresses climate-related risks. We conduct detailed assessments of carbon emissions across equity and fixed-income investments at the portfolio level. We have also expanded this work to include climate scenario analyses and have disclosed our findings in our Sustainable Investment Report since 2022 based on Task Force on Climate-related Financial Disclosures (TCFD) standards.
Fourth, KIC limits investments in companies with low ESG scores by maintaining a watchlist. We also operate an ESG program that incorporates exclusionary strategies, avoiding investments in themes and industries identified as problematic from an ESG perspective.
Beyond policy development, KIC launched an ESG strategy fund in 2019. It tracks an ESG index that adjusts constituent weightings based on ESG scores, and it was the first global ESG strategy fund in Korea to adopt this methodology.
Since then, KIC has increased its allocations to ESG strategy funds and diversified these strategies into ESG Core and ESG Global. In response to the fastevolving ESG landscape, we are also developing new ESG strategies. From a long-term perspective, KIC will continue to monitor and evaluate ESG strategy fund performance while proactively seeking new opportunities to create future value and establishing advanced ESG investment strategies.
In 2019 and 2021, KIC received green and sustainable fixed-income issuance funds from the Korean government (Ministry of Economy and Finance), which we have been investing in green and social projects. Following investment execution, we disclose both environmental impacts—such as greenhouse gas emissions reductions and renewable energy generation—and social outcomes, including job creation and increased access to medical and educational services.
Through these initiatives, KIC seeks to strengthen investor confidence in Korea’s green and sustainable sovereign bonds, promote the growth of global ESG investing and contribute over the long term to achieving the United Nations Sustainable Development Goals.
Looking ahead, we will continue to strengthen our ESG analysis capabilities and apply sustainable investing practices across our process and portfolio. KIC is committed to delivering strong returns, generating positive environmental and social outcomes and building a sustainable investment model that serves as a global benchmark.탭 내용 2탭 내용 3
Green & Social Projects
In June 2019, the Korean government issued a five-year green and sustainability bond worth USD 500 million, followed by an additional EUR 700 million green bond in October 2021. The EUR Green Bond drew strong demand from European investors, as it was the first Asian sovereign green bond issued in EUR and Korea was able to price the notes at an all-time low premium of MS+13bps.
KIC is entrusted with the proceeds of the government’s Green and Sustainability Bond to invest in eligible green and social projects to enhance environmental and social values. KIC examines and discloses the environmental and social impact of each investment, including reductions in carbon dioxide and greenhouse gas emissions, renewable energy generation capacity, job creation and number of beneficiaries (i.e., patients in the event of a medical investment). The aim is to increase investors’ trust in the government-issued Green and Sustainability Bond, contribute to growing the global ESG market and achieve the UN Sustainable Development Goals (SDGs) in the long-term.
Sustainable Investment Report
KIC is entrusted with the proceeds from the Korean government’s 2021 Green Bond for investments in Green Projects. The allocation and environmental impact of each investment are disclosed in the Sustainable Investment Report.
Green & Sustainability Bond Framework
Stewardship Activity
Exercising voting rights is one of the most widely used stewardship activities for overseeing corporate management, governance, and sustainability, while enhancing long-term shareholder value. KIC exercises its voting rights in investee companies in accordance with the Santiago Principles, which emphasize the importance of sovereign wealth funds actively exercising shareholder rights, and the KIC Stewardship Principles, adopted in 2018, thereby fulfilling its fiduciary duty.
To strengthen its proxy voting capabilities for the directly managed portfolio and align with global best practices, KIC began working with a global proxy advisory firm in 2019. In 2023, KIC appointed a new advisory firm to better reflect the evolving shareholder rights landscape. Since 2023, KIC has directly exercised voting rights in major investee companies to enhance corporate value as a global investor.
And starting in 2024, KIC has expanded the scope of its direct voting in accordance with its shareholder rights roadmap. For indirect investments, voting is carried out by external asset managers. KIC monitors all voting activities and outcomes, with a continued focus on enhancing the long-term value of its investee companies.
Shareholder engagement refers to active communication between companies and investors aimed at enhancing corporate value. This includes direct dialogue with management, written inquiries and shareholder letters. Such engagement contributes to improved management practices and has a positive impact on corporate value over the medium to long term. Effective engagement has become a key component of value-enhancement strategies, particularly in Asian markets.
As Korea’s sovereign wealth fund and a global investment institution, KIC integrates the UN Sustainable Development Goals (SDGs) into its shareholder engagement efforts and monitors the progress of related initiatives. Through this approach, KIC contributes to enhancing the value of its investee companies.
Partnership
KIC has actively established sustainable investing partnerships with institutional investors in Korea and abroad. In 2019, KIC became the first Korean institutional investor to join the International Corporate Governance Network(ICGN). In 2020, we joined the One Planet Sovereign Wealth FundsOPSWF, an initiative to respond to climate change. We were the first Korean public institutional investor to pledge support for the Task Force on Climate-related Financial Disclosures(TCFD). And in 2022, we joined the UN Principles for Responsible Investment(PRI), the world’s largest responsible investment initiative to promote sustainable investment. In these and other ways, we expand our partnerships with global institutional investors through sustainable investment focused exchanges.
Since 2020, KIC has been publishing the Sustainable Investment Report for the first time among public investors in Korea. The sustainable investment report, which was published in October 2024, further strengthened the analysis of climate change, such as predicting the Emission Pathway and diversifying scenarios, and added examples of exercising voting rights on new ESG issues such as Generative AI. In addition, KIC's sustainable management status was included for the first time.??In addition, KIC holds the KIC ESG Day every year to strengthen the exchange of ESG investment information among domestic institutional investors and to promote responsible investment-based communication. In 2024, the 6th KIC ESG Day was held under the theme of "ESG Investment Strategies and Cases Using AI" by inviting foreign investment managers and private investment experts from the domestic public sector. This ESG Day was followed by heated lectures and discussions from participants on how AI can utilize non-financial factors represented by environmental, social and governance for investment. In the future, KIC will continue to expand partnerships with domestic institutional investors and actively share responsible investment policies and ways to contribute to returns.
