KFCC to focus on ESG values in real asset investment

The Korean Federation of Community Credit Cooperatives (KFCC), a South Korean community bank managing 70 trillion won ($55.1 billion) in assets, is eyeing global real estate as a hedge against inflation, Chief Investment Officer Park Chun-seok (Richard CS Park) said in his keynote speech at ASK 2022. The ASK forum is The Korea Economic Daily's biannual conference on global alternative investment.

The bank will expand exposure to overseas alternative investment with more global due diligence this year, as well as intensify environmental, social and governance (ESG) scrutiny for real asset investments.  

KFCC has increased alternative investments while slashing exposure to public bonds by more than 20% over the past two years, the CIO said. As of the end of 2021, the bank’s overseas alternative assets amounted to 5.2 trillion won via blind pool funds, comprising private equity, real estate and infrastructure. It is planning to ramp up the overseas investments up to 8 trillion won by the end-2024.    

Although the price risk has increased in the real estate market, some properties will maintain their values in the high-interest rate era, the CIO said.    

“We expect real estate will be stable despite growing macroeconomic risks. Logistics centers will be backed by the continuous expansion of the e-commerce industry. Multifamily and student housing will reflect price rises in rentals. Offices in some global major cities will also be able to increase rental rates amid the rate hikes,” Park said.

“On the other hand, we are considering value-add and opportunistic strategies to enhance profitability,” he added.     

KFCC will keep increasing infrastructure investment, the CIO said. “We will expand digital infrastructure, such as data centers, communications towers and fiber-optic cable. Also, we plan to keep investing in liquefied natural gas (LNG), including LNG plants and carriers that are facing supply and demand shocks amid the Russia-Ukraine war,” he added. 

KFCC is stepping up efforts in ESG activities, such as by establishing an investment decision-making process that evaluates ESG factors and avoiding investment in coal power, the CIO said. The bank upgraded its infrastructure finance division to become the ESG infrastructure finance department in April for better-organized investments.

For real estate investment, the bank is prioritizing properties with green building certifications that reduce carbon emissions, raise energy efficiency and use renewables and eco-friendly materials.

For infrastructure investment, it will select investment targets in carbon capture & storage, waste recycling, hydrogen production & storage as well as the hydrogen fueling infrastructure.

Write to Hyun-Ju Jang at blacksea@hankyung.com
Jihyun Kim edited this article.