Bank of Korea: Cement Industry on 'ESG Blacklist' Accelerates Eco-Friendly Shift

[Asia Economy Reporter Kim Jong-hwa] The cement industry’s swift response following its recent inclusion on the Bank of Korea’s 'ESG Blacklist' has drawn attention.

The cement sector has collectively declared ESG (Environmental, Social, and Governance) management through shareholder meetings and other channels, accelerating its transition from a traditional polluting industry to an 'eco-friendly industry.'

On the 25th of last month, the Bank of Korea classified nine industries?including coal power, cement, metals, petrochemicals, shipbuilding, and textiles?as high-carbon sectors and placed them on a 'blacklist' in its 'March 2021 Financial Stability Report.'

Cement Industry’s Exposure Relatively Low at 22 Trillion Won, Financial Sector Likely to Avoid 'Blacklist'

At the end of last year, the exposure (the amount at risk of loss from loans, investments, and other transactions) of domestic financial institutions (banks, insurance, securities, pension funds, etc.) to the nine high-carbon industries reached 411 trillion won, accounting for 17.4% of the total exposure of 2,358 trillion won.

The Bank of Korea warned that if financial institutions fail to reduce their exposure to related companies, corporate value and credit ratings could be damaged. Accordingly, financial institutions are seeking ESG data as criteria to reduce or recover loans to these companies.

Norway’s sovereign wealth fund and Goldman Sachs make investment decisions based on ESG data, and BlackRock, the world’s largest asset manager, excludes companies generating more than 25% of their total revenue from coal-fired power production and manufacturing from investment targets.

Among high-carbon emission industries, chemical substances and product manufacturing had the largest exposure at 103 trillion won (25%), followed by coal power at 91 trillion won (22%), and primary metals at 59 trillion won. The cement industry (non-metallic minerals) had a relatively low exposure of 22 trillion won (5%), leading the industry to analyze that the likelihood of being listed on financial institutions’ 'blacklists' is low.

US Cement Association Vice President Sullivan’s Statement "Climate Change is the Biggest Challenge for the Cement Industry" Acts as ESG Catalyst

The cement industry has been moving quickly since the early 2000s, modeling the European cement industry’s recycling of circular resources and following a path toward decarbonization. The adoption of ESG management was also faster than in other industries. Last year, a statement by Ed Sullivan, Vice President and Chief Economist of the US Cement Association, served as a catalyst.

At the Eastern US Cement Industry Forum (IEEE) on October 22 last year, Vice President Sullivan said, "The recession caused by COVID-19 led to a consumption decrease up to 5% greater than during the 2008 economic crisis when dozens of cement plants closed. However, the bigger and longer-term risk is climate change," emphasizing, "The new challenge posed by climate change will be the biggest challenge for the cement industry."

Following this, industry leader Ssangyong C&E (formerly Ssangyong Cement) began operating an ESG Management Committee and last month added the word Environment to its corporate name, transforming into a comprehensive environmental company. Notably, it also announced ambitions to eliminate bituminous coal use by 2030 and increase the revenue share from environmental sectors to 50%.

Sampyo Cement also established an ESG management system this year and declared plans to expand investments in energy and environmental businesses through resource circulation. Asia Cement included air environment improvement projects and comprehensive waste recycling in its articles of incorporation, while Hanil Cement added environmental projects such as soil contamination restoration, groundwater purification, waste collection and transportation, and hydrogen gas production and sales.

According to the Korea Cement Association, as of 2019, the cement industry’s annual greenhouse gas emissions amounted to 39 million tons, accounting for 11% of the total greenhouse gas emissions from domestic industries.

A cement industry official stated, "Reducing greenhouse gas emissions has been the biggest challenge the cement industry must tackle. We have been striving to reduce greenhouse gases since the early 2000s, which was essentially the promotion of ESG management," adding, "Through ESG management, we will properly showcase the cement industry’s transformation into an eco-friendly industry."

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