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| NPS Investment Management headquarters in Jeonju, North Jeolla Province / Courtesy of NPS |
The National Pension Service (NPS) is facing mounting criticism for its passive attitude toward the Korea Electric Power Corp. (KEPCO) which decided recently to continue its investments in the construction of coal-fired power plants in Indonesia.
Although BlackRock and several global institutional investors have called on KEPCO to stop building coal-fired power plants outside of Korea, warning it of possible divestments, the national pension fund, which holds an 8.2 percent stake in the state-run power company as its third-largest shareholder, remains reluctant to interfere in its management.
Critics described this as a "double standard," citing the fact that the NPS had decided to meddle with managements of large private enterprises this year, such as Samsung Electronics and SK hynix.
According to KEPCO, its board of directors decided on June 30 to spend 62 billion won ($51 million) on the construction of two coal-fired power plants on the Indonesian island of Java.
This decision was made despite BlackRock's letter sent in April to demand KEPCO disclose its interests more transparently in coal-fired power plants outside Korea. Back then, the world's largest asset manager said: "KEPCO should take note of the ways in which leading global investors such as BlackRock may react to KEPCO's current climate strategy and energy transition plans."
APG, the $548 billion Dutch pension fund, has already sold most of its 60 million euro stake, while the Church of England is considering divesting at the end of the year if KEPCO does not take action, according to the Financial Times.
In contrast, the NPS has yet to take any measures against KEPCO, despite its promise last year that it would pursue socially responsible investments and take account of environment, social and corporate governance when making investments.
"We need time for our decision makers to review our investments in KEPCO," an NPS official said.
But the delayed decision could lead to worsening profitability of the pension fund, which was set up to maximize its returns for Korean citizens through stable investments.
During the National Assembly audit last year, it was revealed that the NPS had lost up to 900 billion won between 2014 and 2018 over its investments in KEPCO and its subsidiaries.
"According to KEPCO's financial management plan, its operating loss is expected to surpass 1 trillion won until 2023," then-lawmaker Kim Seung-hee of the main opposition United Future Party said at that time. "The NPS loss from its investments in KEPCO is feared to grow further."
In response, the Ministry of Health and Welfare supervising the NPS said in November last year the pension fund would become an activist shareholder against any company, if it discovers any damage to corporate value or any infringement on shareholders' rights.
But the purpose of the NPS' investments in KEPCO is still "simple," not "standard" which would allow it to exercise its influence on listed companies.
