Using data from Korea’s National Pension Service, this study shows how ownership and voting engagement drive improvements in portfolio firms’ ESG characteristics without harming financial returns.
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Abstract
We examine a unique dataset of portfolio holdings and voting records from Korea’s National Pension Service (NPS), one of the largest pension funds in the world, to assess whether and how it incorporates environmental, social, and governance (ESG) considerations. We find that firms with higher NPS ownership exhibit greater improvements in ESG scores, with stronger effects when NPS votes against management at shareholder meetings. These improvements first manifest in governance, followed by the social and environmental dimensions. Overall, our results suggest that NPS’s actions catalyze meaningful improvements in the ESG characteristics of portfolio firms.