South Korea's National Pension Service maintains a domestic stock portfolio that closely mirrors KOSPI market capitalization rankings despite claiming 100% responsible investment practices, according to analysis by Kookmin Ilbo and climate think tank Solutions for Our Climate published on the date referenced in source. Samsung Electronics comprised 20% of the NPS domestic portfolio in 2022, 23.3% in 2023, and 16.7% in 2024, maintaining the top position across all three years while SK Hynix and LG Energy Solution held second and third positions respectively. The pension fund continues investing in companies receiving its lowest ESG grades, with only 5 out of 973 evaluated Korean firms receiving D ratings in 2024, and no prohibition exists on purchasing shares of these lowest-rated entities. The gap between NPS responsible investment declarations and actual portfolio management practices stems from lenient ESG enforcement mechanisms that allow D-rated companies to remain in the portfolio up to benchmark weightings.
NPS Portfolio Composition Mirrors KOSPI Rankings 2022-2024
National Pension Service domestic stock holdings tracked KOSPI market capitalization order across the three-year period analyzed. Samsung Electronics held the largest position at 20% in 2022, increased to 23.3% in 2023, then decreased to 16.7% in 2024. SK Hynix occupied second position with portfolio weight rising from 3.2% to 6.9% during the same timeframe. LG Energy Solution maintained third position with weighting shifting from 4.4% to 3.7%. Among the top 20 KOSPI companies by market capitalization during this period, no evidence emerged of NPS intentionally reducing exposure or excluding any company based on ESG considerations.
NPS designated 100% of domestic and foreign stocks as responsible investment targets. Domestic stock holdings totaled approximately 264 trillion won as of the end of the year referenced in source, with overseas holdings reaching 550 trillion won.
ESG Grading System Permits Investment in Lowest-Rated Firms
National Pension Service assigns ESG scores and grades to companies for portfolio manager reference during stock purchases. The grading system produces minimal low ratings—only 5 companies among 973 evaluated Korean firms received the lowest D grade in 2024, representing 0.5% of assessed entities. D-grade designation does not trigger investment prohibition. NPS restricts its portfolio managers from holding D-rated companies above benchmark weighting but does not require divestment. The system reduces rather than eliminates holdings of poorly-rated firms.
External Asset Managers Evaluated Solely on Returns
National Pension Service delegates management of approximately half its domestic stock portfolio to external asset management firms. These firms receive quarterly performance rankings based purely on returns. Managers consistently ranking in lower tiers face contract termination. The evaluation structure creates no incentive for external managers to prioritize ESG factors in investment decisions. NPS awards minor preference points to firms adopting stewardship codes during manager selection but conducts no monitoring of actual stewardship code implementation.
Norway and Netherlands Pension Funds Exclude Problem Companies
Norway's Government Pension Fund Global, the world's largest pension fund by assets under management, excludes from investment any company deriving 30% or more of revenue or operations from coal-related activities. ABP, the Dutch civil service pension fund ranking fifth globally, disposed of 15 billion euros worth of fossil fuel producer stocks in 2024, eliminating all such holdings.
Jang Yeon-ju, head of climate finance at Solutions for Our Climate, stated that major foreign pension funds demand change by excluding problem companies from investment universes while the world's fourth-largest pension fund merely assigns grades without enforcement. Jang noted that NPS responsible investment would require concrete exclusion strategies specific to each asset type to move beyond declaration.
FAQ
What percentage of National Pension Service domestic portfolio did Samsung Electronics stocks represent in 2024?
Samsung Electronics comprised 16.7% of the National Pension Service domestic stock portfolio in 2024, maintaining the top position for the third consecutive year after holding 20% in 2022 and 23.3% in 2023.
How many Korean companies received the lowest ESG grade from National Pension Service in 2024?
Five companies out of 973 evaluated Korean firms received D grade, the lowest ESG rating assigned by National Pension Service in 2024, representing 0.5% of assessed entities. D-grade designation does not prohibit NPS investment in these companies.
