[Photo by Lee Seung-hwan]
Korea Financial Investment Association (KOFIA) has proposed a measure to give tax benefits to eligible investors who invest in funds that offer environmental, social and governance (ESG) factors to promote sustainable investment and then help businesses achieve better ESG performance in the long term, according to its chairman Na Jae-chul.
KOFIA is a non-profit, self-regulatory organization overseeing the country’s financial investment industry and it is making efforts to foster the growth of ESG investment, one of the hottest investment trends in the world.
The financial investment industry should play a role as the “ESG economy platform” that connects the various needs of market participants and stakeholders, from investors to companies and community members, said Na during a recent interview with Maeil Business Newspaper.
Successful ESG investment requires active involvement by private capitals, and this is even more important than policy finacing and bank loans, Na explained.
ESG investing is a way of sustainable investment which is made in consideration of impacts on the environment, society, and economy. ESG investing is expanding rapidly across the world, with assets invested under the theme amounting to $40.5 trillion last year. Analysts project worldwide ESG-themed investment is projected to reach $130 trillion by 2030.
KOFIA will support the financial investment industry to act as a platform for ESG ecosystem’s growth in the country, said Na. The organization aims to have the financial investment industry to lead ESG’s growth in the capital market, thus creating a “virtuous cycle,” where best ESG companies can have their values better recognized and investors can also gain benefits, stressed Na.
Na proposed providing big incentives for ESG investment to support its growth. Investment companies would be able to expand ESG-themed products with their tools to reduce risks, such as easing in prudential regulations. For example, easing in net capital ratio requirement for investing in carbon credits would increase such sustainable investment, said Na.
He also proposed providing incentives on ESG investment with focus on long-term investment such as retirement pension. ESG and retirement make a very good combination, said Na as he recommended giving tax benefits on ESG-themed funds as an example.
ESG-themed funds already have shown records of delivering fair profits.
Midas Responsible Investment Securities Investment Trust has recorded return rate of 24.88 percent for a year and 77.65 percent for three years, both far exceeding benchmark yields. Truston Asset Management’s ESG Level Up Fund launched early this year also has yielded over 17 percent to date.
Na also called on local financial investment industry and capital market to actively respond to global warming and carbon emissions issues, which have become the major discussion topic in the global community. Domestic carbon market is too volatile compared to the stock market and depends heavily on over-the-counter trading, observed Na. Improvements should be made to allow institutional investors participate in the carbon credits market on top of creating an environment for investment brokers to offer ESG-themed funds to retail investors, he added.
By Moon Ji-woong and Cho Jeehyun
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