Shinhan Asset to shy away from domestic equities with low ESG scores

Seoul-based Shinhan Asset Management said Thursday it plans to implement an equity investing framework associated with the environmental, social and governance factors for its domestic large-cap equity funds.

Starting in May, 16 publicly pooled domestic equity funds managed by the fifth-largest asset management firm in South Korea must have at least 70 percent exposure to stocks that received the integrated ESG ratings of “BB” or above.

The same strategy has so far been exercised by one equity fund, dedicated to socially responsible investing.

These selected large-cap funds are part of its 30 active domestic equity funds that are sold through public fund distribution channels.

Shinhan Asset, overseeing over 61 trillion-won ($55 billion) assets as of March, said in a statement that ESG is no longer a strategic option but a prerequisite for investment decision in order to address climate risks.

“The market sentiment toward companies ignorant to climate risks will gradually turn sour, and this will incur higher capital cost of such companies,” said Ko Young-hoon, head of equity research at Shinhan Asset. “Companies without an emissions goal and without a green business portfolio are subject to lower valuation, and we are to take this into account in our investment decisions.”

Shinhan Asset said the latest news is in line with its actions for sustainable future. It has implemented an internal ESG scoring system with external partners since 2005. Also in September, Shinhan Asset announced the launch of an internal ESG committee and supported the Task Force on Climate-related Financial Disclosures.

By Son Ji-hyoung (consnow@heraldcorp.com)