World’s third-largest pension fund to limit coal-linked investing

South Korea’s state pension fund, the world’s third-largest, said on Friday it will stop funding new coal power projects at home and abroad, joining global efforts to reduce carbon emissions and pursue responsible investment strategies.

The National Pension Service (NPS)’s plan is to restrict investment in coal miners and businesses tied to coal power by adopting “negative screening”. The approach consists of excluding investments that fall short of environmental, social and governance (ESG) principles.

NPS’s 873 trillion ($783 billion) in assets under management trails in size only to its peers in Japan and Norway. It includes investments in several Korean companies with coal-linked investments, such as Posco, OCI, LG International, GS Holdings, Korea Electric Power Corp., Samsung C&T, Doosan Heavy Industries & Construction, and Kumho Petrochemical.

The pension plan did not elaborate on the timing or details of specific projects subject to financing exclusion, but said it planned to set up an action plan on where not to invest.

Some companies that have NPS as an investor have outlined their own efforts toward scrapping coal assets from their portfolios.

Samsung C&T Corp., the de-facto holding firm of Samsung Group, said last year it would ditch coal after completing two ongoing thermal-power plant projects by 2024. Posco and five other steelmakers plan to be carbon neutral by 2050.

Scrambling for funds

Pensions and banks across the globe are bowing to pressure from shareholders and lobby groups to avoid coal investments. 

Earlier this month, Australia’s Macquarie Group said it would stop financing coal projects by 2024. The move followed similar announcements by Australia and New Zealand Banking Group (ANZ Bank), Commonwealth Bank of Australia and Westpac, three of the nation’s top four banks.

The growing trend has left miners scrambling to source alternative funds for projects.

Yet, fossil fuel companies are worth $18 trillion in listed equity, making up a quarter of the total value of global equity markets, according to Carbon Tracker’s most recent estimate. They account for $8 trillion in corporate bonds, more than half the non-financial corporate bond market.

Unlisted debt — mostly owed to banks — could be four times greater, reaching almost $32 trillion, the London-based think tank suggests.