South Korea’s National Pension Service, one of the world’s largest pension funds with more than $700 billion under management, is tightening oversight of its investments by extending active stewardship beyond publicly traded stocks to alternative assets such as real estate, infrastructure and private equity.
The move, outlined in the fund’s newly submitted 2026 business plan, marks a significant escalation in how the NPS monitors risk and governance across its sprawling portfolio, as policymakers seek to safeguard long-term returns for Korean citizens who rely on the pension system for retirement income.
The Ministry of Health and Welfare said Jan. 28 that the NPS will strengthen enforcement of its stewardship code beginning this year. The code requires institutional investors managing public funds to actively engage portfolio companies on governance and sustainable value creation, rather than acting as passive shareholders. The NPS first adopted the framework in 2018.
Until now, stewardship efforts have focused largely on listed equities. The latest initiative aims to close what officials describe as oversight “blind spots” by applying an integrated environmental, social and governance framework across alternative investments, which account for a growing share of the fund’s assets.
ESG standards evaluate not only financial performance but also environmental impact, labor practices and corporate governance. NPS officials say the broader approach is intended to ensure capital is deployed in ways that support long-term stability and accountability—key considerations for a public fund responsible for the retirement savings of tens of millions of Koreans.
To formalize the shift, the National Pension Fund Management Committee is expected to revise investment guidelines to extend fiduciary responsibility requirements to alternative assets, placing them under the same governance expectations as public equities.
The plan also calls for tighter supervision of external asset managers. While the NPS makes some direct investments, it entrusts substantial capital to private fund managers. Going forward, the pension fund will more closely scrutinize how those managers exercise voting rights on its behalf and whether their decisions align with NPS stewardship principles.
Managers found to be in violation of the guidelines could face penalties, including lower performance ratings, according to officials familiar with the matter.
The pension fund will also intensify monitoring of risks that could erode corporate value, pressing investee companies to improve disclosure and governance transparency. Officials stressed that the initiative is designed to protect long-term returns for beneficiaries, not to interfere in day-to-day corporate management.
Since adopting the stewardship code, the NPS has engaged companies on issues ranging from dividend policy and executive pay to legal compliance, climate risks and workplace safety. Internal data show that the number of companies subject to such engagement rose from 60 in 2019 to a cumulative 624 by 2024, involving more than 1,200 non-public meetings.
An NPS official said stable, long-term investment performance is directly linked to the financial security of future retirees, adding that extending stewardship to alternative assets reflects a growing responsibility to manage public funds in a transparent and disciplined manner.
The expansion is expected to reinforce the NPS’s role not only as a dominant institutional investor, but also as a central force shaping corporate governance standards in South Korea’s capital markets—at a time when the sustainability of the national pension system has become a pressing concern for the country’s aging population.
