2025: Our active stewardship illustrated

Korean equities have historically traded at a valuation discount relative to global peers, driven in part by persistent corporate governance shortcomings. Against the backdrop of improving governance standards in Asia—particularly Japan—and growing domestic political and retail investor attention, our objective was to leverage this momentum to encourage meaningful governance reforms at the company.

Our key asks were:

• Strengthen board independence and committee effectiveness
• Enhance the board’s skills and experience (finance, technology, business expertise)
• Improve diversity across gender, nationality and professional background
• Encourage alignment with broader governance trends and value creation initiatives

We conducted a multi‑year, escalating engagement using a combination of written communication, voting actions, and in‑person dialogue.

• 2023: Initial Expectations and Voting Action
  During our engagement with the company, we clearly communicated our expectation that all board committees should be entirely independent, highlighting particular concerns over the Chief Financial Officer’s (CFO) involvement in the remuneration committee, which we believed compromised its impartiality. As a result, we informed the company that we would vote against the CFO’s re election due to this conflict of interest. Additionally, we urged the appointment of directors with appropriate business expertise—especially in finance and technology—and encouraged the company to broaden board diversity, spanning gender, nationality, and sector experience, to strengthen its governance framework.

• 2024: Reinforcing Priorities In-Person
  We reiterated all 2023 governance expectations directly to management and the board during an in‑person engagement meeting. We emphasised the link between improved governance structures and long‑term valuation uplift.

• 2025: Follow‑Up Meeting and Monitoring of Progress
  We met again with the company to review progress, provide feedback on changes, and highlight remaining areas for improvement. We also discussed future governance priorities, including the need to address circular ownership structures.

The company made substantial progress across several governance dimensions:

• Board Independence: The remuneration committee is now fully independent following the removal of executive representation.
• Board Diversity: Board gender diversity increased from 15% in 2023 to 33% in 2025.
• Board Skills and Experience: Three new independent directors with relevant backgrounds in finance and technology were appointed at the 2025 AGM. Reduced reliance on academic profiles (fewer professors on the board) in favour of directors with practical business expertise.
• Leadership and Cognitive Diversity: Management restructuring in 2025—including the appointment of a co‑CEO and a VP for ICT—further strengthened strategic oversight and cognitive diversity at the top.
• Alignment with Market Reform Trends: Governance improvements reflect Korea’s “Value Up” agenda and growing investor pressure for better capital allocation and shareholder returns.

To build on this progress, we will continue to monitor the company and proactively engage with them.

As part of the pre‑investment due diligence for Article 8 fixed income funds, we assessed if an investment in this private Czech defence manufacturer specialising in small, medium, and large‑calibre ammunition was permitted. Due to the fact that defence exposure within sustainable fund classifications remains a contentious area, therefore, the issuer was subjected to an enhanced level of scrutiny.

In addition to the general sensitivities associated with defence activities, several governance‑related risks were identified during the preliminary screening stage. These warranted a deeper assessment involving sector specialists and direct engagement with the company’s Chief Financial Officer (CFO).

We conducted a comprehensive due diligence process combining:

• Internal ESG analysis and sector‑specific red‑flag review
• Consultations with external defence sector experts
• In June 2025, we had a dedicated engagement meeting with the CFO to obtain detailed disclosure, test governance robustness, and validate risk‑mitigation measures.

The engagement aimed to clarify governance practices and risk management frameworks that could materially impact the issuer’s eligibility for inclusion in Article 8 funds.

Key topics addressed with the CFO included:

• Contracting processes and oversight mechanisms
• Management of country risk exposure, including end use and re sale controls
• Anti corruption policies and implementation
• Nature and extent of the company’s relationship with the Czech government
• Governance implications of family ownership
• Supply chain management and traceability
• The establishment of Environmental and Social targets for the company to support alignment with Article 8 expectations.

The enhanced due diligence, supported by direct engagement with the CFO, allowed us to conclude that the issuer meets the minimum governance and sustainability standards required for inclusion in Article 8 funds. The company was deemed investable and subsequently included in Article 8 fixed income portfolios.

We will continue to monitor delivery of the company’s formal Environmental and Social targets once published.