NPS to ramp up shareholder engagement with overseas companies

South Korea’s National Pension Service (NPS) plans to deepen shareholder engagement with its foreign portfolio companies, signaling a more assertive stance on active ownership as its overseas equity holdings grow.

According to the National Pension Service Investment Management, the investment arm of NPS, on Friday, the world’s third-largest pension fund will appoint an external organization to launch shareholder engagement activities with overseas companies.   

It plans to open bidding soon to choose a stewardship service provider by July, enabling the selected firm to begin active shareholder engagement abroad on NPS’ behalf within this year.

The move comes as NPS' holdings of international equities have recently increased as part of its portfolio diversification strategy.

“The need for constructive engagement with foreign companies has increased due to rising overseas equity holdings and growing ESG-related risk,” NPS said in a statement.  

As of end-February, Korea’s state-run pension fund has 1,227.49 trillion won ($896.1 billion) in assets under management (AUM).

International equities now account for 35.4% of NPS’ assets, or 434.68 trillion won, compared to 12.5% for domestic stocks.

The allocation to offshore equities is expected to grow further as recent reforms of Korea’s pension system have extended the fund’s projected lifespan by about a decade, allowing for increased risk exposure.

NPS will release its mid-term asset allocation plan for the 2026-2030 period later this month.

The selected provider will engage in private dialogue with overseas companies and report outcomes to the NPS. It will also identify target companies and key engagement themes, and provide related training for NPS officials.

By 2027, the NPS aims to internalize its overseas stewardship activities by building its own guidelines based on the external provider’s reports.

NPS, also Korea’s largest institutional investor, initiated its active ownership approach in 2019 for domestic companies, exercising voting rights and conducting confidential and public discussions with companies under the stewardship code framework.

These efforts have focused on managing environmental, social and governance (ESG) risks and improving corporate value.

Global proxy advisory firms such as Institutional Shareholder Services and Glass Lewis offer stewardship solutions beyond proxy voting services.

Write to Gyeong-Jin Min at min@hankyung.com

Sookyung Seo edited this article.