National Policy Banks Practicing ESG Win-Win Cooperation

[Asia Economy Reporter Song Hwajeong] National policy banks are actively increasing investments and support to promote ESG (Environmental, Social, and Governance) management among small and medium-sized enterprises (SMEs).

According to IBK Industrial Bank of Korea on the 12th, the 'ESG Management Success Support Loan,' launched in February in collaboration with the Korea Chamber of Commerce and Industry, has supported 51.9 billion KRW (105 cases) to SMEs as of the end of June. The ESG Management Success Support Loan is the first sustainability-linked loan (SLL) in Korea incorporating the government's K-ESG guidelines, allowing companies to select necessary ESG areas, set goals and evaluation criteria, and receive financial support upon implementation. After setting ESG management goals, interest rate reductions of up to 1 percentage point are provided depending on the achievement level.

Additionally, 68.4 billion KRW (309 cases) has been provided this year for the Energy Use Rationalization Fund, which supports companies needing new or expanded energy-saving facilities.

Recently, IBK Industrial Bank signed a business agreement with the Housing and Urban Guarantee Corporation to support ESG management and mutual cooperation for SMEs. Through this agreement, IBK plans to establish a 20 billion KRW fund to provide low-interest loans to ESG management SMEs, SMEs affected by COVID-19, small housing construction companies, and SMEs located in Busan. The loan limit is up to 500 million KRW per company, with an automatic interest rate reduction of 1.80 percentage points annually. Additionally, based on transaction contribution and credit rating, an extra reduction of up to 1.40 percentage points is available.

An IBK official stated, "We plan to introduce phased support measures tailored to each company's ESG management level to support the successful transition of SMEs to ESG."

The Export-Import Bank of Korea (KEXIM) decided on the 10th to invest 100 billion KRW in a fund to activate corporate ESG investments and support overseas expansion such as exports and overseas investments by small and medium-sized enterprises and mid-sized companies. The final fund size aims to exceed 500 billion KRW. KEXIM plans to maximize private investment inflows by allocating investment amounts differentially according to the ESG and overseas expansion investment proposals from fund managers.

Last June, KEXIM established the 'ESG Credit Program,' providing 16.8 trillion KRW in funding for ESG sectors. The ESG Credit Program offers preferential conditions to companies engaged in businesses related to 145 ESG items selected by KEXIM, supporting sustainable growth, energy transition promotion, and growth of early export companies. A KEXIM official said, "Through this investment project, we intend to encourage private-led investment activation in long-term and high-risk future new industries and respond to the new government's early national agenda. We will support sustainable growth of our companies by promoting ESG management expansion, entry into eco-friendly and new promising industries, and low-carbon transition in line with the government's 2050 carbon neutrality goals."

As ESG management gains importance, whether companies practice ESG is increasingly influencing their financing and investment attraction. Accordingly, SMEs are actively engaging in ESG management practices. However, SMEs inevitably have less capacity to respond compared to large corporations, making related support crucial. According to the 'SME ESG Difficulty Survey' conducted by the Korea Federation of SMEs in September last year targeting 300 SMEs, 53.3% felt that 'ESG management introduction is necessary,' but 89.4% felt that the environment was 'not prepared and difficult' for introduction.

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