[Financial New Paradigm ESG] Consumer Protection and Startup Investment... Evolving Social Responsibility

Compliance and Consumer Protection Become Crucial Amid Private Equity Scandal
Startup Investment Linked to Innovative Finance
Strengthening Social Contributions Including COVID-19 Recovery

[Asia Economy Reporter Park Sun-mi] The common 'mission' mentioned in the New Year's speeches of the chairpersons of the top five domestic financial groups this year is the strengthening of Environmental, Social, and Governance (ESG) management. Among these, social value, social responsibility, and mutual growth, which correspond to the 'S (Social)' aspect, are consistently emphasized by financial group chairpersons when discussing ESG management. This can be seen as the core of ESG management pursued by the financial sector for a long time.

Especially this year, due to a series of private equity fund incidents, restoring the trust of the financial sector through compliance management has become important, and in the post-COVID-19 era, the social responsibility of the financial sector has become more urgent, making it inevitable to put more emphasis on the 'S'. Moreover, 'innovative finance,' considered a survival breakthrough for the financial sector, is closely connected to the 'S' in ESG, so steady investment is expected to continue this year as well.

According to the Korea Corporate Governance Service (KCGS) on the 13th, the 'S' in corporate ESG evaluation can be broadly divided into four categories. ▲ Aspects related to employees such as employment and working conditions, labor-management relations, workplace safety and health, workforce development and support, and basic rights in the workplace ▲ Aspects related to partners and competitors such as fair trade, anti-corruption, and promotion of social responsibility ▲ Aspects related to consumers such as fair trade, consumer safety, and consumer personal information protection ▲ Aspects related to local communities such as community participation, social contribution, and communication with local communities.

Compliance and Consumer Protection Become Crucial Due to Private Equity Fund Incident

Financial holding companies, which suffered difficulties from last year's private equity fund incident, have reorganized and made personnel changes this year to strengthen compliance management. This is interpreted as a measure to supplement the 'S' in ESG management, especially consumer protection.

Woori Financial Group established an audit division within the organization and appointed Shin Min-chul, former auditor from the Board of Audit and Inspection known as a 'principlist,' as Executive Vice President and 2nd Deputy General Manager. Hana Financial Group, which in 2019 became the first in the financial sector to simultaneously acquire international standard certifications for compliance and anti-corruption management systems, also established a Consumer Risk Group within the bank for the first time in the financial sector during this year's organizational restructuring and executive appointments, strengthening the evaluation of risk ratings for each product and the appropriateness check of sales limits according to risk levels.

Shinhan Financial Group promoted Wang Ho-min, Compliance Officer, and Kim Sung-joo, Head of the Audit Team, to Executive Vice Presidents to strengthen compliance monitoring functions. They established a platform for real-time sharing of compliance support and audit departments regarding key management issues within Shinhan Financial Group, including its subsidiaries and banks, enhancing pre- and post-monitoring and ensuring thorough financial consumer protection.

Startup Investment Connected to Innovative Finance

In the financial sector, which emphasizes innovative finance amid intensified competition with big tech companies, mutual growth with startup companies is actively pursued by all five major financial holding companies. Supporting startups accelerates the digitalization trend in the financial sector and aligns with the K-New Deal project, which aims to advance the Korean economy to the next level.

KB Financial Group plans to actively promote investment, financing, and support to discover and nurture startups and fintech companies this year. Under the goal of 'promoting mutual growth through expanding social value creation,' the plan includes strengthening the ecosystem for social enterprises and startups, supporting consulting for prospective entrepreneurs and small business owners (enhancing step-by-step management consulting linked to corporate loan products), and expanding loan products and support to strengthen the market competitiveness of small and medium-sized enterprises and small business owners.

Since July last year, KB Financial Group has expanded the KB Innovation Finance Council to the 'KB New Deal & Innovation Finance Council' and is operating it. Centered on this council, they plan to accelerate financial support totaling 76 trillion KRW, including 66 trillion KRW for innovative finance support by 2023 and 10 trillion KRW for the Korean New Deal by 2025.

Shinhan Financial Group is also expanding cooperation with startup support institutions and startup support programs to enable fintech startups to receive support in various areas. To support the practical growth of fintech companies, they have nurtured 195 companies and invested 33.1 billion KRW (25.8 billion KRW in direct investment) through the accelerator program 'Shinhan Futures Lab,' and plan to expand investment in this area this year as well.

Shinhan Financial Group operates and is establishing startup incubation spaces such as S Bridge in Seoul and Incheon and D Bridge in Daejeon, with plans to expand to Busan, Gwangju, and Jeju to complete a nationwide startup ecosystem support platform. They plan to house startups that can provide foundational technologies for New Deal projects and invest an additional 200 billion KRW in resident companies. They will also actively support New Deal-related startups to grow and play a significant role in creating youth jobs.

Strengthening Social Contributions Including Overcoming COVID-19

The scale of principal and interest maturity extensions on loans to small and medium-sized enterprises and small business owners, who have many customer touchpoints in the banking sector, surpassed 100 trillion KRW as of November last year, reaching 109.1509 trillion KRW. The amount of interest repayment deferrals also exceeded 100 billion KRW last month, reaching 102 billion KRW. Considering the spread of COVID-19, the five major financial holding companies plan to continue financial support for vulnerable and marginalized groups this year as they did last year. All chairpersons of the five major financial holding companies emphasized from the beginning of the year that financial support for companies experiencing temporary liquidity crises due to COVID-19 remains necessary.

Woori Financial Group has been rolling out COVID-19 support measures since the beginning of the year. They are conducting the 'Our Neighborhood Good Store' support project, selecting 100 small business owners suffering economic difficulties due to COVID-19 to support living expenses, promotion, and marketing activities. Separately, for the next six months, they will reduce monthly rent by 30% for small business owners and micro-enterprises renting their own buildings and fully exempt rent for businesses forced to close due to social distancing level 3 measures.

NongHyup Financial Group is actively expanding the supply of low-income financial products such as Sae Hope Holssi and mid-interest loans through NongHyup Bank and is making efforts to strengthen support for small and medium-sized enterprises by activating the 'Personal Business Loan 119' system. Hana Financial Group plans to strengthen social contribution efforts to create social value in various fields such as job creation, future talent development, and fostering a well-being culture. They are also considering developing a platform that introduces crowdfunding techniques to practice inclusive finance linked with innovative technologies.

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