The South Korean state pension fund, like many other such funds, is moving into responsible investment. With a twist.

From the FT overnight:

The National Pension Service of Korea has started to assess whether investments in as many as 75 companies — which totalled Won1.23tn ($1.1bn) at the end of 2018, and include Mitsubishi Heavy Industries, Panasonic, Toshiba and Toyota Motor — should be dropped if it can be proved the companies were linked to Japan’s war efforts.

“We are in the process of adopting a new guideline of responsible investment and we are reviewing whether Japanese ‘war crime companies’ should be excluded from our investment list,” Kim Sung-joo, NPS chair, told the Financial Times in Seoul.

The move comes after escalating trade tensions between the two countries, a story which has been somewhat overshadowed by the US-related trade tensions Twitter cacophony.

It also reflects how easily the language of “responsible” or “sustainable” investment — a trend which is sweeping the global investing universe — can be drawn into political disputes.

We’ve previously highlighted the inbuilt flexibility of the language of sustainable finance, which pushes for investments to have beneficial consequences for society, as well as making money for their owners.

The movement is part of an anticipation of governmental constraints on owning certain assets — bonds of coal miners, for example. That’s an area that will soon become more overtly geopolitical when the varied impact of energy reform across different countries becomes more apparent.

The South Korean case shows that responsible investment doesn’t only need to relate to the future; it can just as easily relate to the past. The pressure exerted on a group of assets is in this case relatively low. If the EU or US (perhaps under a different dispensation) adopted a comparable approach for anything — boycotting the assets of certain companies via its pension funds or insurance companies — the effect would be immense.

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Financial assets today play a greater-than-ever role in the provision of all kinds of services, so you’d expect them to play an increasing role in political pressure. Which is why what’s happening in South Korea has so many parallels elsewhere.

Related links:
Green finance: a bet on looming legislation — FT Alphaville

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