[Column] National Pension Social Investment Should Take Japan as a Cautionary Tale (2026-05-19)

'Calls' to Invest Pension Money in Housing and Care Projects

But the issue of social investment has quietly emerged.

The Fund Management Committee is scheduled to vote on the 2027–2031 medium-term asset allocation plan at the end of May, and on the 13th, the Democratic Party of Korea held a National Assembly seminar titled 'How Can Social Investment by the National Pension Be Made Possible?'

Kim Sung-joo, Chairman of the National Pension Service, also stayed in his seat until the very end.

The next day, the Korean Confederation of Trade Unions even released a statement urging social investment — giving the appearance that the government, the ruling camp, and the labor sector are all speaking with one voice.

But whether it is appropriate for the National Pension to make social investments is a separate question. The National Pension's mission is to guarantee the public's old-age income by raising the rate of return. If social investment offered a high rate of return, investing in it would be fine — but that is something we cannot know. There are cases such as the Canadian pension fund's successful investment in renewable energy, but there is also considerable research showing that returns fell when social value was placed ahead of returns. This is because social investment has ambiguous goals and is difficult to evaluate for performance. Under a financial-return standard, all one has to do is raise the rate of return and manage risk. Performance can even be checked every quarter. Social investment is different. How would one measure whether investing in youth housing raised the birth rate, or whether expanding care infrastructure increased the base of contributors? The political rhetoric of having done a good deed remains, while all the uncertainty is left for future generations to bear.

Let Japan's Failed 'Mobilization of National Retirement Funds' Be a Lesson

History also offers a lesson. Japan once pooled postal savings and public pension funds together and channeled them into government policy projects under the name of the Fiscal Investment and Loan Program. It poured funds so massive they were called a 'second budget' into roads, railways, and public housing. The result was disastrous. Japan National Railways alone suffered cumulative losses of 25 trillion yen. The direction the Democratic Party is now arguing for resembles the path Japan abandoned 25 years ago.

(Omitted)

Social investment belongs to the realm of political decision-making that changes priorities. It must go through deliberation in the National Assembly under the procedures set by the Constitution, and its validity must be subject to the judgment of the voters.

Social investment is something to be done with government fiscal funds — it is not something for a fund manager at the Fund Management Headquarters to decide.

The Fund Management Committee needs to bear in mind that it is even less something to be done with money that has been faithfully deducted from our paychecks and set aside, month after month.

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