6. ESG Champion

Isn’t ESG Three Words?

Can any company say it is good at ESG, when actually it’s good on one of only three?

Many companies in Korea emphasize “Environmental” but neglect “Governance”, which is often their most sensitive issue to talk about.

Improving governance can sound theoretical, but our view is simple: it is to have the right manager, and the aligned incentive between management team and shareholders.

We think ESG should be called GES; without proper G, there can be no real improvement in E or S.

Exclusion Strategy

We find it hard to believe, this is a stance most funds take on ESG. For example, “we will not invest in coal industry, because coal is bad for environment”, “we will never invest in tobacco companies, because tobacco is bad for health.” It is totally their decision where to invest, but is their claim correct that they are contributing to ESG by excluding these sectors? Or is it just a convenient way to avoid criticism?

So, if coal and tobacco are bad, how should we improve them? We ignore them, and they go out of business? Well, do you think the exclusion strategy made oil companies go bankrupt, or green?

Companies listen to their shareholders, more than anyone else. If we really want to change any companies, we should become their shareholders and drive the change. When we find people in need, we don’t ignore them; we should help them. This is how we can make real impact on ESG: responsibility and engagement, not criticism and exclusion.

Ginseng Farmers

According to KT&G, as of 2020 there were 4,137 farmers KGC buys ginseng from, all in Korea.

PMI Stock Price

Below is an excerpt from Financial Times (July 2021):

“(Phillip Morris) made nearly a quarter of … net revenues last year from its reduced risk portfolio…” and “… Phillip Morris commands a much higher price per earnings ratio than anything else in the sector… investors are voting with their feet”.

Phillip Morris International is also known to plan to stop selling cigarettes in UK within the next decade. (Source)

Who is Our BOD Nominee?

We will recommend nominees for directors who can represent the interests of our shareholders.

Our BOD nominees represent independent perspectives as well as global expertise, and will bring significant improvement to KT&G’s governance.

We will share more info on other BOD director candidates soon.