ESG Bonds Flooding in Trillion-Won Units

Expected to Surpass 1 Trillion Won This Month Again
Exceeds Past Annual Issuance in Just One Month
High Demand from Institutional Investors Boosts Popularity
Corporate Social Responsibility Also Plays a Role

[Asia Economy Reporter Park Jihwan] Domestic companies are rushing to issue ESG (Environmental, Social, and Governance) bonds. Following last month, the issuance scale this month is also expected to exceed the trillion-won mark. In just one month, the issuance volume has surpassed the previous annual issuance scale. The popularity is attributed to not only companies fulfilling their social responsibilities but also the high demand from institutional investors, enabling bond issuance at low interest rates.

According to the investment banking (IB) industry on the 3rd, Hyundai Motor received purchase orders worth 2.11 trillion won during a preliminary demand forecast conducted for institutional investors ahead of issuing 300 billion won worth of ESG bonds the day before. Due to overwhelming demand, Hyundai Motor is considering increasing the issuance from the initial 300 billion won to up to 600 billion won.

This month, SK (300 billion won), Hyundai Heavy Industries (150 billion won), and Lotte Rental (150 billion won) plan to issue a total of 600 billion won worth of ESG bonds. Earlier in January, the demand forecast for corporate ESG bonds was 580 billion won. However, actual issuance nearly doubled to 1.1 trillion won due to high demand.

Considering the recent trend of increased issuance, the industry expects this month’s issuance to also surpass 1 trillion won. Given that past annual ESG bond issuance amounts were 100 billion won in 2018, 900 billion won in 2019, and 800 billion won in 2020, this represents an explosive growth trend.

The main reason companies are increasing ESG bond issuance recently is closely related to the asset management strategies of domestic institutional investors. For example, the National Pension Service, a major player in the capital market, announced plans to invest half of its total managed assets in companies reflecting ESG criteria by next year. For companies, issuing ESG bonds has emerged as a financing method that can secure more investment demand than regular corporate bonds. In fact, the proportion of ESG bond issuance, which was about 1% of past corporate bond issuance volume, has increased to over 10% since the new year, indicating the start of active issuance.

Additionally, the recent emphasis on corporate social responsibility also plays a role. ESG bonds require issuers to use the funds raised exclusively for environmentally friendly projects, solving social issues, or improving governance transparency.

Kim Eun-gi, Senior Research Fellow at Samsung Securities, said, "Currently, ESG corporate bond issuance is increasing mainly in industries with high carbon emissions, but in the future, ESG bond issuance will extend to the semiconductor and electronic components industries." He added, "If the issuance trend in January and February continues, annual ESG bond issuance is expected to exceed 10 trillion won."

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