Insights

Repeated Serious Industrial Accidents —
Korea’s Largest Institutional Investor Is Finally Taking Action

ㅣTaehan Kim, COO of KoSIFㅣ

Accidents happen.

Even after the Serious Accidents Punishment Act took effect in 2022—despite fierce opposition from business groups claiming that it would make it impossible to operate a company—accidents have continued to occur.

Industrial accidents have also continued under the Lee Jae-myung administration, which made workplace safety a key campaign pledge. Since August 2025, when the Minister of Employment and Labor said he would “stake his position” on reducing workplace fatalities, industrial accidents have continued across both private companies and public enterprises.

Accidents happen. No matter how hard we try to prevent them, accidents will still occur. But an accident that happens despite every reasonable effort to prevent it cannot be treated in the same way as one caused by a failure to take adequate preventive measures. It remains questionable whether our society and companies are truly doing everything they can to prevent such accidents.

     Capital Markets and Industrial Accidents

At a Cabinet meeting on July 29, 2025, the Financial Services Commission proposed using the capital market as one of the measures to eliminate workplace fatalities. The President responded that the approach was “expected to be effective.” The logic was that companies would make greater efforts to prevent industrial accidents if they faced economic penalties, including restrictions on investment and lending.

On October 1, the Financial Services Commission announced follow-up measures titled “Improving ESG Evaluation and Disclosure to Strengthen Financial Risk Management Related to Serious Accidents.”

The measures aim to strengthen the disclosure of serious accidents through both timely disclosures by the Korea Exchange and periodic disclosures such as annual business reports. This would provide financial institutions with relevant information when making investment and lending decisions. The Commission also plans to increase the weight given to serious accidents in ESG assessments used by financial institutions.

Because ESG ratings remain a private-sector activity, however, the government plans to revise the Guidelines for ESG Rating Agencies, a voluntary code followed by domestic ESG rating providers, to encourage them to incorporate serious industrial accidents more fully into their assessments.

This is a reasonable approach. Companies respond to economic incentives. If the total cost incurred after an accident exceeds the cost of preventing it, companies will naturally choose prevention.

The Financial Services Commission’s policy is intended to increase the cost of capital for companies involved in serious accidents, in addition to the direct and indirect costs already imposed through existing laws and regulations. The greater the gap between the cost of prevention and the cost of an accident, the stronger the incentive to focus on prevention.

     Stronger Consideration of Serious Accidents in National Pension Service Investments

In November, the National Pension Service, the largest institutional investor in Korea’s capital market, also took action.

The National Pension Service is the world’s third-largest pension fund, managing approximately KRW 1,300 trillion in assets. It is a dominant force in Korea’s capital market, holding stakes of at least 5 percent in more than 250 domestic companies.

At a meeting of the Fund Management Committee in November 2025, the National Pension Service approved measures to strengthen stewardship activities related to workplace safety. It announced plans to improve its ESG evaluation framework so that serious industrial accidents would be more fully reflected in investment decisions.

Under the current system, companies receive a deduction only when they are designated as workplaces with a high incidence of industrial accidents. The revised framework would expand the criteria to include companies with two or more workplace fatalities in a year, companies involved in serious industrial accidents, and companies that conceal or fail to report workplace accidents. The size of the deductions would also be increased.

     A Society Where the Obvious Is Not Obvious

Human life is more valuable than anything else. Yet our society has failed to uphold this self-evident principle. We have not created penalties strong enough to ensure that companies make every possible effort to prevent serious accidents.

That is not the only issue.

The recent announcements by the Financial Services Commission and the National Pension Service also raise another question: Have our financial institutions made sufficient efforts to protect the money entrusted to them by clients and pension beneficiaries?

The Minister of Health and Welfare stated that the government would “continue to monitor and improve the implementation process so that the National Pension Service’s stewardship activities on workplace safety, including serious accidents, contribute to enhancing corporate value and fund returns.”

If workplace safety affects fund returns, why has the National Pension Service only now announced this basic measure?

In fact, the National Pension Service adopted the Principles on Stewardship Responsibilities of the National Pension Fund, its Stewardship Code, in 2018. In 2023, it added climate change and workplace safety to the list of key issues used to select companies for active shareholder engagement, alongside corporate governance issues.

However, according to materials submitted by the National Pension Service to the office of National Assembly member Nam In-soon, the fund conducted workplace safety-related stewardship activities with only four companies in 2024 and another four in the first half of 2025.

It has also not disclosed the criteria it uses to designate companies for priority monitoring on workplace safety.

     Are the National Pension Service’s Measures Sufficient?

Are the National Pension Service’s latest measures sufficient to prevent serious accidents while also improving fund returns?

The announcement focuses primarily on penalties for companies after accidents occur. Stronger penalties can certainly have a preventive effect. Our experience, however, shows that penalties alone are not enough.

Companies are assumed to exist indefinitely. The individuals who manage them do not. Moreover, executives often respond to their own short-term interests rather than the company’s long-term interests.

From an individual executive’s perspective, whether an accident occurs during their tenure is a matter of probability, while spending on prevention is a certain and immediate cost. This is why some choose to avoid short-term expenses rather than pursue uncertain long-term benefits.

As long as Korea continues to exist, the National Pension Service must also continue to exist. Yet the newly announced evaluation criteria contain no forward-looking indicators assessing whether a company has established responsible safety governance and management systems, or whether it is making adequate long-term investments in workplace safety.

It is also questionable that the measures rely primarily on the indirect mechanism of ESG evaluation rather than direct shareholder action.

In a capitalist economy, the government cannot control the future management direction of private companies through regulation alone. The National Pension Service, however, is a shareholder that holds stakes in more than 1,000 domestic companies using the public’s money. It has both the authority and the responsibility to act.

Even before a formal disclosure framework is established, the National Pension Service should request workplace safety information from companies and actively demand improvements where their practices are inadequate.

Since adding workplace safety as a priority issue in 2023, the fund has conducted only low-level stewardship activities—in the form of private dialogue—with a total of eight companies over nearly two years. This demonstrates how passive it has been on workplace safety.

It is not too late.

The National Pension Service must now act decisively to fulfill its most basic responsibilities: protecting the lives of the Korean people and safeguarding their retirement assets.