KB Securities, First Sole Manager of Sustainability-Linked Bonds for Public Institutions

KB Securities announced on the 1st that it solely underwrote the Sustainability-Linked Bond (SLB) issued by Korea South-East Power on the 31st of last month.

Korea South-East Power issued a total of 110 billion KRW in corporate bonds, including a 50 billion KRW SLB with a 3-year maturity and a 60 billion KRW corporate bond with a 5-year maturity. This is the first case of SLB issuance by a domestic public institution, marking a significant expansion of the SLB market base to include not only private companies but also public institutions.

SLBs are a type of ESG (Environmental, Social, and Governance) bond introduced domestically in September 2022. Unlike the global market, where ESG bonds have become a major pillar, the domestic SLB market is still in its early stages and somewhat unfamiliar territory.

KB Securities co-underwrote the first domestic SLB issuance by a private company, Hyundai Capital’s 220 billion KRW SLB in July last year, building a track record in the private sector SLB market. Leveraging this experience, KB Securities focused its capabilities on enhancing investor understanding and encouraging participation in this sole underwriting.

SLBs are characterized by the issuer setting sustainability performance targets (SPTs) in advance and providing a certain premium to investors if these targets are not met. Korea South-East Power set a target to reduce greenhouse gas emissions by more than 41% by 2025 compared to the 2018 baseline year, which is the reference year for the national greenhouse gas reduction target (NDC). If this target is not achieved, the issuer will pay an additional premium of 0.02 percentage points per annum on top of the bond interest at maturity.

KB Securities has maintained its position as the number one in the Debt Capital Markets (DCM) sector for 13 consecutive years (as of the end of 2023, according to Bloomberg) and continues to lead in the ESG bond underwriting sector. Along with this SLB issuance, KB Securities has pioneered new markets with issuers in global bonds, covered bonds, foreign currency short-term bonds, and secured bonds, and plans to continue supporting the expansion of financing channels for domestic public institutions.

Jung-ho Park, Head of Corporate Finance Division 1 at KB Securities, said, "SLBs are a type of ESG bond that offer flexibility in the use of raised funds and strongly announce ESG management strategies to the market. We were able to successfully complete the issuance by combining KB Securities’ underwriting expertise with Korea South-East Power’s new challenge and preparation, marking the first SLB issuance by a domestic public institution." He added, "We will continue to promote participation from issuers and investors in the SLB market and strive to further activate the domestic ESG bond market."

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