The South Korea Ministry of Health and Welfare announced on Thursday that the National Pension Service (NPS), the third largest Retirement Fund in the world, will gradually withdraw from investments in the Coal sector starting next year.

The Fund will stop investing in companies where coal-fired power generation or production accounts for more than 50% of their three-year average income. These restrictions will apply to overseas companies starting next year and to domestic companies in South Korea starting in 2030.

Under stricter climate policies, NPS will need to sell some shares of overseas Coal producers, possibly including shares of China’s state-owned public utility companies.

South Korea has pledged to achieve net zero emissions by the middle of this century, but the government's slow transition to clean Energy has alleviated the pressure on NPS to exit fossil fuel investments. South Korea initially made a commitment to phase out Coal in 2021. Norway's $1.7 trillion Fund has been one of the global pioneers, having stated in 2016 that it began excluding companies that use Coal from its investment portfolio, while Japan's $1.6 trillion Fund has also been criticized for lagging in sustainable investments.

The Fund declined to provide further details on potential divestments. Lee Jong-O, a board member of the nonprofit advocacy and research organization 'Korea Sustainable Investment Forum,' stated that under the new policy, shares in about 28 overseas companies will need to be sold starting next year, while shares in Korea Electric Power and its five subsidiaries will start to be divested in 2030. NPS's website shows that as of the end of 2023, the Fund holds shares in producers like India's Coal companies and Whitehaven Coal Ltd.

According to Thursday's statement, for domestic companies in South Korea, the Fund may continue to invest if they have Energy transition plans and provide evidence of progress.

NPS manages total assets of about 1,146 trillion won (approximately $791 billion). Nearly 5% of its 399 trillion won Global Equity investment portfolio is invested in the Energy industry.