As more and more people are interested in environmental, social and governance (ESG) investment with the inauguration of the Moon Jae-in government and introduction of the stewardship code by the National Pension Service (NPS), new fund products that invest in foreign ESG companies will be launched for the first time.
According to investment banking industry sources on October 12, Mirae Asset Global Investments plans to release a “Global Good Innovator” fund at the end of this month. This is the product that invests in ESG companies which are included in the Morgan Stanley Capital International (MSCI) All Country World Index (ACWI) and has business innovation.
With the launch of the Moon Jae-in government which has pledged to activate the stewardship code and to improve the operation of the pension funds considering ESG, an increasing number of securities firms is more interested in ESG. ESG, an abbreviation of environment, social and governance, refers to sustainability management that makes businesses to achieve a sustainable growth in the long term. A company’s financial performance represents its current value. By contrast, its non-financial performance, like ESG, shows the future value so it based on the concept that investors can gain higher returns in the medium and long term.
Considering such a social atmosphere, Hi Asset Management and Samsung Asset Management set up “Hi Social Responsibility Investment” and “Samsung Good Responsibility Investment 1” in May and August, respectively, while Hanwha Asset Management listed “Arirang ESG Leading Company” exchange-traded fund (ETF). According to market data provider FnGuide, the raising amount of these products are 19.3 billion won (US$17.05 million), 27.5 billion won (US$24.29 million) and 12 billion won (US$10.6 million), respectively, as of the 10th, enjoying popularity.
Unlike existing ESG funds in the market, the Global Good Innovator will invest in foreign ESG firms. Although the interest in corporate social responsibility investment is growing, there are not many South Korean companies to invest so Mirae Asset Global Investments has decided to target foreign companies. In addition, it has taken into account a growing demand of foreign equity funds rather than domestic equity funds.
The fund also considers not only ESG but also business innovation. This is because it is hard to raise the earnings rate when forming a portfolio only based on ESG indexes. An official from Mirae Asset Global Investments said, “There are not many domestic business universe to invest based on ESG indexes and advanced countries are still well ahead of South Korea. We think that the stock price of ESG companies will be advantageous in the long term but it can miss investors’ investment period. So, we are investing in innovative companies that fits the current trend, including the fourth Industrial Revolution.