By Joori Roh

SEOUL (Reuters) – South Korea’s central bank said on Tuesday it would raise its focus on environmental, social and governance (ESG) issues in managing its foreign currency assets and prepare guidelines to be applied to these assets going forward.

According to the Bank of Korea, “upgrading” the bank’s asset management strategy will allow it to respond to the growing demand for responsible investment. The current stage of the bank’s ESG product investments will be replaced by applying ESG elements all assets.

As of June 30, the BOK had invested $7.12B in ESG-related bonds and stocks, and around $5.90B in bonds. This compares with $5.45 trillion invested in 2020.

According to the statement, the central bank plans to continue increasing its investments in ESG related stocks and bonds.

The bank plans to apply negative screening – a policy that excludes investment in companies or sectors that does not meet specific ESG criteria – by utilising the MSCI ESG screened indexes https://www.msci.com/esg-screened-indexes, while the BOK may also review establishing its own negative screening system within two to three years.

According to the central bank, the increase in ESG investments will result in a higher rate of return for its foreign currency assets.