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Governance viewed as critical catalyst for ESG management

The moderator and panelists hold a discussion during the first session of the 2021 Korea Times Global ESG Forum at the KCCI building in Seoul, Thursday. From left are KB Financial Group Chairman Yoon Jong-kyoo, Institute for Global Economics Chairman Jun Kwang-woo and National Pension Service Chairman Kim Yong-jin. The screen shows foreign participants at the session. Clockwise from top left are Carlyle Global Head of Impact Megan Starr, MSCI APAC ESG Client Coverage Head Chitra Hepburn and BNP Paribas Asset Management APAC CEO Steven Billiet. Korea Times photo by Shim Hyun-chul
The moderator and panelists hold a discussion during the first session of the 2021 Korea Times Global ESG Forum at the KCCI building in Seoul, Thursday. From left are KB Financial Group Chairman Yoon Jong-kyoo, Institute for Global Economics Chairman Jun Kwang-woo and National Pension Service Chairman Kim Yong-jin. The screen shows foreign participants at the session. Clockwise from top left are Carlyle Global Head of Impact Megan Starr, MSCI APAC ESG Client Coverage Head Chitra Hepburn and BNP Paribas Asset Management APAC CEO Steven Billiet. Korea Times photo by Shim Hyun-chul

Capital market leaders unveil key strategies for sustainable finance

By Park Jae-hyuk

Global capital market leaders with expertise in investments based on environmental, social and corporate governance (ESG) principles unveiled key strategies for sustainable finance during the COVID-19 pandemic.

Moderated by Institute for Global Economics Chairman Jun Kwang-woo, who described a well-working governance factor as a "critical catalyst" for ESG management to move forward, top experts from around the world shared their insights and strategies of their institutions during the 2021 Korea Times Global ESG Forum at the KCCI building in Seoul, Thursday.

KB Financial Group Chairman Yoon Jong-kyoo started the discussion with a brief speech, mentioning net-zero, green finance and diversity as the three key ESG agendas for the financial industry in the post-pandemic era.

As the head of the nation's leading banking group in terms of sustainability and profitability, he emphasized the necessity of reasonable standards for disclosures and ratings regarding the ESG factors, so that those satisfying the standards enjoy benefits, while those who fail to do so get penalized.

In response to questions from some market insiders on the governance structure of domestic financial holding companies, Yoon showed KB's efforts to improve its governance structure, such as excluding the chairman from the procedure of recommending non-executive directors.

"Our governance structure is okay systematically," he said. "We hope people admit the fact that governance structures can differ from company to company, depending on each of their cultures and characteristics."

National Pension Service (NPS) Chairman Kim Yong-jin introduced the world's third-largest state pension fund's ESG investment strategies, emphasizing that such strategies are essential for the entire Korean economy, given that the pension fund is investing in almost all companies representing Korea and that their performances are highly related to the fund's medium- to long-term returns.

"Last month, we decided to adopt negative screening for climate change," he said, stressing that companies that fail to embrace environmentally-friendly policies will get sidelined among the pension fund's targets for investments. "Starting this year, we need to step forward to practically boost socially responsible investments."

The NPS chairman vowed to make more investments in socially responsible assets, integrate ESG factors with its financial analysis and demand private firms consigned to manage its assets submit reports on responsible investments.

Kim shared the KB chairman's view that better standards are needed for ESG investments and management.

"We need to elaborate our overall schemes for ESG investing to set the standard for Korea," he said. "Sharing the experience, capability and data we have, we want to serve as a foothold to bring K-ESG innovation to this country."

National Pension Service Chairman Kim Yong-jin speaks during the first session of the 2021 Korea Times Global ESG Forum at the KCCI building in Seoul, Thursday. Korea Times photo by Shim Hyun-chul
National Pension Service Chairman Kim Yong-jin speaks during the first session of the 2021 Korea Times Global ESG Forum at the KCCI building in Seoul, Thursday. Korea Times photo by Shim Hyun-chul

Foreign experts impressed with Korea's efforts

The efforts made by KB and the NPS for sustainable finance received favorable reviews from foreign panelists from institutions that are regarded as exemplary in terms of ESG strategies.

Expressing her keen interest in KB's robust approaches and describing the NPS's strategies as "commendable," Carlyle Global Head of Impact Megan Starr, who joined the panel discussion virtually from Costa Rica, emphasized social factors as well as environmental ones.

Starr picked diversity as one of the most important ESG topics, along with climate change and energy transition.

She cited Kewsong Lee, the global private equity firm's Korean American CEO, as an example of diversity, adding that the firm is also making efforts to enhance diversity in the boards of its portfolio companies.

According to the head of the firm's dedicated ESG team, Carlyle recently secured the largest ESG-linked private equity credit facility in the U.S. for $4.1 billion and is the first to focus exclusively on advancing board diversity.

MSCI APAC ESG Client Coverage Head Chitra Hepburn, who said she was encouraged by KB's decarbonizing efforts and the NPS's adoption of stewardship codes, noted what the most critical of ESG policies is governance, although she did not rule out the importance of efforts to fight against climate change and social inequality amid the COVID-19 pandemic.

"Governance continues to be a focus in any event," she said during her virtual participation from Singapore.

Hepburn, who drives the growth of the index provider's ESG Research in the Asia-Pacific market, also agreed with the need for a global standard, explaining that mandatory ESG disclosures can help.

BNP Paribas Asset Management APAC CEO Steven Billiet, who attended the panel discussion from Hong Kong, welcomed the collaboration among media and all market participants ― public, financial and private sectors ― to take steps to enhance sustainability.

Highlighting the importance of the societal factors that have failed to draw enough attention so far, Billiet said his company has focused on companies making investments to improve fairness, inclusiveness and equality.

The Asia-Pacific head of the French asset management firm also hoped more companies will follow his firm by paying attention to the "3Es," which stand for energy transition, the environment and equality.

Institute for Global Economics Chairman Jun Kwang-woo, center, KB Financial Group Chairman Yoon Jong-kyoo, left, and National Pension Service Chairman Kim Yong-jin greet each other after the first session of the 2021 Korea Times Global ESG Forum at the KCCI building in Seoul, Thursday. Korea Times photo by Shim Hyun-chul
Institute for Global Economics Chairman Jun Kwang-woo, center, KB Financial Group Chairman Yoon Jong-kyoo, left, and National Pension Service Chairman Kim Yong-jin greet each other after the first session of the 2021 Korea Times Global ESG Forum at the KCCI building in Seoul, Thursday. Korea Times photo by Shim Hyun-chul
Park Jae-hyuk pjh@koreatimes.co.kr


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