Steel is more than just another carbon-intensive industry. It is a linchpin of the broader industrial transition, acting as a major driver of financed emissions, downstream sectors’ value chain emissions, and hydrogen market development. Accordingly, beyond urging individual steel companies to take climate action, institutional investor engagement with steelmakers can serve as an effective strategy to manage climate transition risks in investment portfolios while unlocking growth opportunities in low-carbon industrial transformation.

• Financed emissions management: An analysis of 242 companies within the National Pension Service’s domestic equity portfolio shows that the steel sector accounts for only about 1.5% of the portfolio value, yet it represents 24% of financed emissions based on the operational emissions (Scope 1 and 2) of the investees.

• Downstream industry transition: Downstream steel sector accounts for approximately 21% of the portfolio value based on the 242 holdings analyzed, yet they contribute roughly 64% of financed emissions on a Scope 1, 2, and 3 basis and approximately 68% on a Scope 3 basis alone.

• Hydrogen economy opportunities: By adopting hydrogen-based direct reduced iron (H2-DRI) technology at scale, the steel industry can anchor long-term demand for clean hydrogen production, low-carbon electricity, power grid, and hydrogen storage and transportation infrastructure.

For engagements to have a meaningful impact, investors must assess whether steelmakers' transition plans are translating into actions, focusing on the following three areas.

• Transition plan specificity: A 2050 carbon neutrality target alone is insufficient to assess the feasibility of a steelmaker’s asset transition. Therefore, once long-term targets are established, investors must assess the company’s transition plans at the asset level.

• Capital expenditure alignment: A company’s commitment to transition is often reflected more clearly in its capital allocation decisions than in its stated targets. Accordingly, to assess the credibility of a transition plan, it is critical to distinguish investments that advance the low-carbon transition from those intended to maintain or extend existing blast furnaces.

• Public policy strategy: Steel transition is heavily influenced by policy support and regulatory environments. This requires an assessment of whether policy frameworks—such as the K-Steel Act, K-GX, Korea’s Emissions Trading Scheme, and electricity and hydrogen policies—translate into actual investment in low-carbon facilities, and whether industry association activities are aligned with the carbon neutrality target.

Global investors have already moved past merely calling for enhanced climate-related disclosures from steelmakers. Today, they are demanding 1.5°C-aligned reduction targets, low-carbon asset investment, capital expenditure alignment, climate-linked executive remuneration, and transparent policy engagement. As these cases demonstrate, investor engagement is a process of turning the climate agenda into financial and operational business questions.

Following the passage of the K-Steel Act in November 2025, the steel industry's transition has emerged as a major policy priority. Institutional investors must now assess whether this policy signal is translating into tangible business strategies and investment decisions. This requires closely monitoring whether companies are executing transition plans and deploying capital toward low-carbon initiatives, including transitioning to low-carbon steelmaking, procuring clean hydrogen and low-carbon electricity, and expanding electric arc furnaces (EAF) and hydrogen-based direct reduced iron (H2-DRI) capacity. Engaging with steelmakers offers institutional investors a practical strategy to manage climate transition risks in the portfolio and capture growth opportunities in the low-carbon economy through a single point of intervention