Banking Sector Accelerates ESG Management... Active ESG Bond Issuance Following Coal Phase-Out Declaration

The scene of the KB Financial Group ESG Committee meeting held on the 25th of last month

[Asia Economy Reporter Sunmi Park] As the banking sector actively establishes strategies for Environmental, Social, and Governance (ESG), it is supporting the government's Green New Deal policy.

According to the banking sector on the 4th, KB Financial Group recently held an ESG committee meeting and declared a 'coal phase-out finance' initiative involving all affiliates, including Kookmin Bank, to proactively respond to the climate change crisis. KB Financial plans to completely halt participation in new project financing and bond underwriting for domestic and international coal-fired power plant construction to reduce coal-fired power generation, a prerequisite for curbing global warming.

Additionally, it plans to actively explore investment opportunities in new business areas considering eco-friendly factors and expand investments in private environmental investment projects, renewable energy, and eco-friendly ships and automobiles.

In March this year, KB Financial significantly strengthened its ESG management execution by establishing an 'ESG Committee' composed of all directors, including Chairman Yoon Jong-kyu, two inside directors, and seven outside directors, to accelerate ESG management strategy. In August, it announced 'KB Green Way 2030,' aiming to reduce the group's carbon emissions by 25% compared to 2017 by 2030 and expand 'ESG products, investments, and loans,' currently about 20 trillion KRW, to 50 trillion KRW.

The issuance of ESG bonds in the banking sector is also accelerating.

Shinhan Bank issued a 5-year foreign currency Kangaroo bond worth 400 million Australian dollars last month. Kangaroo bonds are bonds issued by offshore foreign institutions in the Australian capital market in the local currency, Australian dollars. Named the 'COVID-19 Damage Support Bond,' this bond is the first domestic ESG bond specifying the use of raised funds for supporting companies affected by COVID-19 and activities to prevent the spread of COVID-19. The bond was issued in two types: floating rate bonds (250 million AUD) and fixed rate bonds (150 million AUD).

Industrial Bank of Korea issued green bonds worth 200 billion KRW to major institutional investors. Green bonds are a type of ESG bond specifically designated for funding projects in the 'green industry' sector. The maturity of the issued green bonds is three years, with a fixed interest rate of 1%. The raised funds will be used to support domestic low-carbon green projects such as renewable energy (solar power generation) and eco-friendly transportation (upgrading eco-friendly ship facilities).

Woori Bank also issued 300 billion KRW worth of won-denominated ESG bonds in August to provide financial support to small business owners and SMEs affected by COVID-19. The bond maturity is three years, with an annual fixed interest rate of 1.01%.

Baekdusan, an analyst at Korea Investment & Securities, explained, "Since the first issuance in 2018, the outstanding balance of ESG bonds from the four major domestic financial holding companies has reached 7 trillion KRW," adding, "The ESG bond market will grow at an even faster pace in the future and will be utilized as an effective funding channel for financial companies."

This content was produced with the assistance of AI translation services.