SRI funds start to attract assets in Korea

Nov 16, 2010

Backed by the National Pension Service, socially responsible investment products in Korea now boast more than $3 billion in assets, and inflows are expected to continue.

It may be a drop in the ocean of Korean mutual funds, but socially responsible investment (SRI) products are starting to gather assets.

The total amount invested in Korean-domiciled SRI funds has risen to $3.3 billion, according to the Korea Sustainability Investment Forum (Kosif). The National Pension Service is a major supporter, accounting for $1.1 billion of these invested assets.

Although the sector has enjoyed rapid growth, it remains tiny, accounting for just 1% of the retail funds market. But Kosif executive director Karl Yang says the asset-management industry continues to add exposure.

Kosif was founded in 2007 as a non-profit organisation, with members including Hermes, Kookmin Bank, Samsung Life Insurance and NH-CA Asset Management, a joint venture between National Agricultural Cooperative Federation and Amundi. A number of specialised consultancies are also involved.

“We believe there will be much stronger initiatives by the Korean government towards SRI and green growth industries starting in 2011,” says Nicolas Sauvage, CEO at NH-CA.

The firm now runs four SRI funds, one of which dates back to 2006, when the first of such products emerged.

SRI as an investment theme took off shortly afterwards, notably when Samsung Investments and Belgium-based KBC together launched an offshore-domiciled SRI fund, a global water strategy.

Sauvage says work needs to be done in expanding research capabilities into environment, social and governance issues, as well as in educating investors about the competitive edge that SRI products can offer.

But he expects local institutional investors to issue more SRI mandates, and the government and big companies are pursuing more ‘green growth’ business activities. “This should increase interest from equity investors, including retail,” Sauvage predicts.

Kosif, meanwhile, plans to provide more data to both local and foreign SRI investors with more information about ‘sustainable’ companies in Korea.

Yang says a priority is to help Korean institutions such as NPS expand their socially responsible investments, notably in the area of carbon and solutions to climate change.