Forecast, Financial Risk Review Published: "Caution Needed for ESG Washing by Large Financial Holding Companies"
Major Financial Holding Companies' ESG (Environmental, Social, and Governance) Bond Issuance Cases. Photo by Korea Deposit Insurance Corporation
View original image[Asia Economy Reporter Song Seung-seop] A warning has been issued to financial holding companies to be cautious of 'ESG (Environmental, Social, and Governance) washing' controversies. It is pointed out that they should engage in genuine ESG management rather than merely increasing bond issuance.
On the 30th, Park Gwang-rok, team leader of the Large Financial Company Management Department's Analysis Team at the Korea Deposit Insurance Corporation, stated in the Financial Risk Review that "large bank holding companies must be careful to avoid ESG washing controversies when managing ESG bonds."
ESG washing refers to the act of pretending to have a positive impact on environmental and social issues when, in reality, there is no actual contribution.
Team leader Park said, "Although banks claim to have supplied funds to low-income groups and small and medium-sized enterprises by issuing social bonds, if the total amount of related loans has actually decreased, or if green bonds are issued while increasing investments in companies that cause environmental pollution, such actions can lead to washing controversies." He advised, "To enhance the positive effects of ESG bonds and prevent washing controversies, it is necessary to provide objective and transparent information on how ESG bonds contribute to improving environmental and social issues."
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The issuance of financial companies' ESG bonds is gradually increasing as calls for corporate responsibility regarding environmental and social issues grow louder. In the first half of this year, the issuance amount of ESG bonds by financial holding companies reached approximately 9 trillion won, surpassing last year's annual issuance amount of 8 trillion won. As each holding company has pledged to strengthen ESG management, the issuance volume is expected to continue increasing in the future.
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