The National Pension Service conducts qualitative assessments of the revenue realization process when selecting domestic private equity management companies. Until now, it focused on existing performance-oriented quantitative assessments, but it plans to reflect the 'quality of revenue' in the future. This is a measure that responds to demands from the National Assembly to strengthen the application of Environmental, Social, and Governance (ESG) criteria to private management companies.
According to the Public Institution Management Information Disclosure System, Alio, on the 13th, the National Pension Service stated in its recently disclosed '2024 National Audit Request for Correction and Action Report' that it would review the specific implementation method and timing of applying ESG-related standards to alternative investment assets, considering the legal applicability and the specificity of the alternative investment asset class.
In this report, the National Pension Service said, 'We are considering measures to incorporate qualitative assessments when selecting domestic private equity management companies,' and added, 'We will revise the selection and management criteria for domestic private equity management companies to reflect evaluation criteria related to the quality of revenue in the future.' The National Pension Service also noted, 'We plan to clarify the preparation of selection committee minutes in the selection and management criteria for domestic private equity management companies to enhance transparency in the selection process.'
During last October's National Audit, Park Hee-soo, a member of the National Assembly from the Democratic Party, questioned Kim Tae-hyun, the chairman of the National Pension Service, asking whether it is appropriate for MBK, selected as the National Pension Service's management company, to attempt to interfere with the management rights of Korea Zinc, where the National Pension Service is a major investor. Park also asked, 'Does it align with ESG principles for the National Pension Service, which is responsible for the public's retirement, to select speculative private equity funds that threaten jobs at corporations and for workers as management companies?'
In response, Chairman Kim stated, 'It is undesirable for the National Pension Service to be used for hostile mergers and acquisitions (M&A) rather than improving corporate financial structures,' and added, 'We will devise measures to be more precise in selecting management companies after comprehensive reviews.'
Currently, the National Pension Service only has evaluation criteria related to the 'stewardship code and responsible investment' with positive points (2 points) when selecting asset managers for stocks and bonds. Since alternative investments often involve joint investors and fund formation, there was some ambiguity regarding whether they fall into the realm of responsible investment assessment, and there were constraints in establishing evaluation standards.
However, as MBK, which is included as a private equity management company for the National Pension Service, is closely associated with the recent Homeplus incident following last year's management rights dispute over Korea Zinc, there is an inevitable atmosphere for the revision of the selection standards for the National Pension Service's private equity management companies.
A National Pension Service official said, 'We have revealed plans to address the issues raised during last year's National Audit.'