SC First Bank Signs Korea's First ESG-Linked Derivative Contract with POSCO Construction

Jongbok Park, CEO of SC First Bank (right), and Seonghee Han, CEO of POSCO Construction, are posing for a commemorative photo at the 'Memorandum of Understanding (MOU) Ceremony for Establishing a Global ESG Financial Ecosystem' held on the 5th at the SC First Bank headquarters in Jongno-gu, Seoul.

[Asia Economy Reporter Kim Hyo-jin] SC First Bank announced on the 6th that it participated as the main contractor in the ESG (Environmental, Social Responsibility, and Governance)-linked derivative contract worth approximately 100 million euros, which POSCO Construction signed for the first time in Korea on the 12th of last month.

This ESG-linked derivative contract adds an incentive condition based on POSCO Construction's ESG activity goals to the forward exchange transaction related to the Warsaw incinerator project in Poland, which POSCO Construction won last year.

Generally, domestic companies enter into forward exchange contracts, a type of derivative product, to minimize foreign exchange risk in overseas operations by agreeing in advance to buy or sell a certain amount of foreign currency at a fixed exchange rate on a specified future date.

This contract specifically links POSCO Construction's greenhouse gas reduction targets as additional conditions, providing incentives if POSCO Construction achieves these goals.

SC First Bank introduced this ESG-linked derivative product by adding environmental protection incentive conditions to derivative transactions to practice corporate social responsibility and encourage the achievement of ESG management goals. This is the first case not only in Korea but also within its parent company, Standard Chartered (SC) Group.

Separately, on the 5th, SC First Bank and POSCO Construction signed a Memorandum of Understanding (MOU) for the establishment of a global ESG financial ecosystem at SC First Bank's headquarters in Jongno-gu, Seoul, attended by Park Jong-bok, President of SC First Bank, and Han Sung-hee, CEO of POSCO Construction.

At this meeting, the two parties discussed policies and measures to create a global ESG financial ecosystem, exchanged comprehensive practical tasks, and agreed to strategically collaborate in various detailed areas such as trade finance, project financing (PF), and green loans based on global eco-friendly and renewable energy projects going forward.

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