Press Releases

“National Pension Service Must Disclose the Extent of ESG Integration in Investment Decisions”

Korea Sustainability Investing Forum (KoSIF) Calls for Mandatory Responsible Investment Disclosures under the National Pension Act

SEOUL, June 30, 2026 — As the National Pension Service (NPS) continues to expand its responsible investment activities and legislative discussions remain focused on making ESG consideration mandatory, the Korea Sustainability Investing Forum (KoSIF) has called for stronger disclosure requirements to improve the substance and accountability of responsible investment.

The NPS currently discloses the asset classes covered by its responsible investment policies and the amount of assets under management in each category. However, its existing disclosure framework does not provide sufficient information on the extent to which environmental, social and governance (ESG) factors are incorporated into investment decisions through its ESG integration strategy, which combines financial and ESG considerations.

KoSIF warns that this lack of transparency makes it difficult to objectively assess the quality and effectiveness of the NPS’s responsible investment practices, potentially exposing the fund to allegations of ESG washing.

Following a comprehensive review of proposed amendments to the National Pension Act across successive National Assemblies, KoSIF published a policy brief recommending that future legislative reforms move beyond mandatory ESG consideration and the expansion of eligible asset classes to include mandatory disclosure of the extent of ESG integration in investment decisions.

According to the analysis, a total of 18 bills addressing ESG investment were introduced between the 18th National Assembly, when legislative efforts to introduce responsible investment into the National Pension Fund first began, and the current 22nd National Assembly. Of these, 14 sought to make ESG consideration mandatory in pension fund management, while 11 proposed expanding the asset classes subject to responsible investment. The findings demonstrate that legislative efforts have predominantly focused on requiring ESG consideration and broadening its application.

In 2015, the National Pension Act was amended to allow ESG factors to be considered at the fund’s discretion, while requiring disclosure of certain responsible investment information. This included the criteria used to consider ESG factors, the scope and size of relevant asset classes, information on individual holdings, and the selection criteria, status and performance evaluation standards for external asset managers.

However, major socioeconomic controversies—including the merger of Samsung C&T and Cheil Industries, the humidifier disinfectant scandal, and the more recent Homeplus–MBK controversy—have highlighted the limitations of a discretionary approach to ESG consideration. KoSIF identifies these developments as key drivers behind continued legislative efforts to make ESG consideration mandatory and expand the scope of responsible investment under the National Pension Act.

Combined with growing internal recognition of the importance of responsible investment, these external pressures have contributed to the gradual expansion of both the scale and asset-class coverage of the NPS’s responsible investment activities.

As of the end of 2025, assets classified under the NPS’s responsible investment framework totaled KRW 958.1 trillion, representing approximately 65.1% of the fund’s total assets of KRW 1,458 trillion. Initially limited to domestic equities, responsible investment has since expanded to domestic and overseas equities and fixed income, while alternative investments—including real estate, infrastructure and private equity—remain outside its current scope.

Against this backdrop, KoSIF argues that legislative reform should place greater emphasis on mandatory disclosure of the extent to which ESG factors are considered in actual investment decisions, alongside existing efforts to make ESG consideration mandatory. Such disclosure requirements should apply not only to internally managed assets but also to assets managed by external investment managers.

Three lawmakers—Lee Mok-hee of the 19th National Assembly, Noh Woong-rae of the 20th, and Nam In-soon of the 22nd—have previously introduced bills reflecting this approach.

KoSIF further recommends that enhanced disclosure of the extent of ESG consideration should serve as a foundation for future discussions on establishing minimum thresholds for classifying investments as responsible investment.

Under existing practices, investments may be classified as responsible investment regardless of whether ESG factors play a relatively limited or substantial role in investment decisions. For example, an investment strategy giving ESG considerations a weight of 10% could potentially carry the same responsible investment label as one assigning them a weight of 80%.

KoSIF therefore argues that clearer standards are needed to determine the extent to which ESG factors must be incorporated into investment decisions for an investment strategy to qualify as responsible investment. Establishing such thresholds could also help prevent ESG washing and strengthen the credibility of responsible investment claims.

Although these frameworks regulate investment products rather than public pension fund management, regulatory developments in the United States and the European Union offer relevant points of reference.

In the United States, the Securities and Exchange Commission’s (SEC) Names Rule requires investment funds whose names suggest a particular investment focus—including certain ESG-related or thematic strategies, such as artificial intelligence—to adopt a policy of investing at least 80% of their assets in accordance with the investment focus indicated by their names.

Similarly, the European Securities and Markets Authority (ESMA) has introduced guidelines requiring funds using ESG- or sustainability-related terms in their names to allocate at least 80% of their investments toward meeting the environmental or social characteristics or sustainable investment objectives associated with those terms, subject to additional requirements.

KoSIF suggests that these international approaches provide useful reference points for developing clearer criteria and more robust disclosure requirements for responsible investment by the NPS, while recognizing the differences between investment product regulation and public pension fund management.

Hanjin Yu, Policy Team Lead at the Korea Sustainability Investing Forum (KoSIF), emphasized:

“It is no longer sufficient for the National Pension Service simply to state that it practices responsible investment. To earn the trust of the Korean public, to whom the pension assets ultimately belong, the NPS must be able to objectively explain and demonstrate how ESG factors are incorporated into actual investment decisions and the extent to which they influence those decisions.”