A proposed amendment to the National Pension Act that would have made consideration of environmental, social and governance (ESG) factors mandatory in the investment principles of the National Pension Service (NPS) fund has failed to clear the Health and Welfare Committee due to opposition from the People Power Party. The opposition party argued strongly that the purpose of the pension fund lies in generating stable returns, while concerns over the sustainability of the fund’s finances have been raised despite parametric reforms.
According to the second bill review subcommittee of the Health and Welfare Committee held at the National Assembly on Thursday, the amendment to the National Pension Act containing mandatory ESG consideration for the pension fund was scrapped. “Due to opposition from People Power Party lawmakers, it was decided to maintain the existing current law,” a committee official said.
The amendment proposed by Rep. Nam In-soon of the Democratic Party centered on changing the discretionary provision of “may consider ESG” in Article 102 of the National Pension Act to a mandatory provision of “shall consider ESG.”
However, People Power Party lawmakers argued that changing it to a mandatory provision could undermine the pension fund’s principle of pursuing long-term and stable return growth. Rep. Kim Mi-ae of the People Power Party, the opposition secretary of the Welfare Committee, stressed, “Mandating ESG for this pension, which is the public’s retirement asset and whose sustainability is so important, would be taking the public’s money too lightly.” She added, “No matter how good the intent, the pension fund’s principle of profitability must be thoroughly upheld.” In the end, the staunch opposition from People Power Party lawmakers led to the scrapping of the mandatory ESG consideration clause.
However, a plan to expand the scope of ESG-considered investments, currently applied only to securities investments, to include alternative investments passed the bill subcommittee. Alternative investments refer to real estate, venture investments and private equity fund contributions. “An enormous amount of pension fund money has flowed into alternative investments, but ESG aspects have not been considered at all,” Rep. Lee Soo-jin of the Democratic Party said. “The passage of the bill will eliminate this blind spot.”