The National Pension Service (NPS) has begun preparations to expand conversations with corporations from domestic to overseas. The NPS has started selecting a consulting organization to help accumulate experience, which has been limited in discussions with overseas corporations. The NPS invests more than 35% of its total fund reserves in overseas stocks.
The NPS's fund management headquarters announced on the 20th of this month the selection of a service provider for shareholder activities related to dialogue with corporations regarding overseas stocks. The NPS noted that the background for pushing forward this project is that the proportion of international stocks in the fund has increased, and the need for dialogue with overseas corporations has grown as overseas environmental, social, and governance (ESG) issues continuously arise.
The NPS cited the humidifier disinfectant scandal as a representative example of overseas ESG issues. This scandal, which caused numerous respiratory illness victims in Korea, involved not only domestic conglomerates but also several multinational corporations such as the British company Reckitt Benckiser. As the NPS's investments in overseas stocks increase, it aims to raise its voice as a major shareholder.
Previously, the NPS's Fund Management Committee voted in September last year to adopt a plan for dialogue with corporations regarding overseas stocks. This measure provides a basis for the NPS to engage in dialogue with overseas corporations similarly to domestic corporations if industrial accidents occur at the domestic or overseas business sites of the overseas corporations in which the NPS holds shares, or if consumer safety incidents related to their products arise.
The market considers the NPS's recent selection of a consulting organization as the starting point for formal dialogue. However, since the NPS does not yet have enough experience to adeptly lead conversations with overseas corporations, it plans to focus on indirect dialogue through consulting firms until 2026, transitioning to direct dialogue later.
The NPS intends to build the necessary capabilities for direct dialogue by receiving services from the consulting organization, including the selection of dialogue topics and targeted corporations, meeting coordination, review of intermediate milestones, and on-site training programs to transfer dialogue know-how.
The NPS has been initiating conversations with domestic corporations since January 2019 regarding issues closely related to corporate value, such as dividend policy, climate change, and industrial safety, aiming to encourage voluntary improvements from investment targets. If the NPS determines that a corporation's activities infringe on shareholder rights or pose other problems, it sends a letter to the corporation pointing out the issues and urging improvements. Initially, it conducts private conversations, and if no improvements are made, it transitions to public dialogue.
The expansion of dialogue partners from domestic corporations to overseas corporations is not unrelated to the increasing proportion of overseas stocks in the NPS's total investment. As of the end of February this year, the NPS's fund reserves amounted to 1,227 trillion won. Of this, domestic stocks were valued at 152 trillion won, and overseas stocks at 434 trillion won. In terms of proportion, they account for 12.5% and 35.4%, respectively, signifying that the scale of investment in overseas stocks is about three times larger.
As of the end of 2023, the top investment items for the NPS show that Apple has the highest proportion within its asset portfolio at 4.11%. The valuation in Korean won is 13.1724 trillion won. Following that are Microsoft (3.48%·11.1496 trillion won), Amazon (1.71%·5.4887 trillion won), and NVIDIA (1.60%·5.1299 trillion won).