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| Financial Supervisory Service Governor Yoon Suk-heun speaks at the agency's international conference on green financing, held at Ewha Womans University in Seoul, Tuesday. / Yonhap |
By Kim Bo-eun
Financial Supervisory Service (FSS) Governor Yoon Suk-heun emphasized the need for monitoring climate-related risks Tuesday and presented a related stress test model developed by the agency.
He referred to recommendations from the Network for Greening the Financial System (NGFS) for central banks and supervisory bodies to assess climate-related risks of financial systems, and including this in the supervision of financial stability. The NGFS is a global network of central banks and supervisory authorities advocating a more sustainable financial system.
"Serious damage can be wrought on the financial system due to the shock stemming from climate change in the not too far future if no action is taken," Yoon said at an annual international conference hosted by the FSS from Ewha Womans University. This year's conference was held online due to the COVID-19 pandemic.
Yoon said the FSS' stress test model has been developed, taking into account Korea's plans to deal with climate change as well as the business environment for financial firms.
The model centers on risks that could arise in the real economy and financial systems when the transition is made to a low-carbon, eco-friendly economy.
Yoon said the FSS would also draw up guidelines for sustainable management reports, so that the private sector is better able to comply with requirements.
The governor's remarks come at a time when the government and the private sector are increasingly incorporating ESG (environment, social and governance) values.
In Korea, regulations on sustainable development were set up in 2007; while those on low-carbon green growth were drawn up in 2010.
In 2015, principles were established for the National Pension Fund's (NPS) investments, and it became subject to ESG-related assessments.
In the private sector, the issuance of ESG bonds has risen rapidly since 2016. ESG bonds issued here in the first eight months of this year amounted to $11.9 billion ― the largest in Asia.
In 2019, a total of $12 billion in ESG bonds were issued in Korea, a surge from $5 billion in 2018, $500 million in 2017 and $100 million in 2016, according to data from the FSS.
In August, the government launched a taskforce with the private sector on green financing, and is currently working on the taxonomy of green financing.
The FSS conference hosted figures from the Green Climate Fund (GCF) and Intergovernmental Panel on Climate Change (IPCC), as well as officials representing private firms in the IT, automotive and financial sectors.
Speakers included Financial Services Industry Lead at Google Cloud APAC Thurain Tun and Bank of England Executive Director Sarah Breeden.
Among the presenters from local firms were Hyundai Motor Senior Vice President Kim Se-hoon and KB Kookmin Bank's ESG Group Head Jeong Mun-cheol.
Attending from the GCF was Private Sector Facility Director Tony Clamp, and from the IPCC was senior scientist Alaa Al Khourdajie.
The GCF was established within the framework of the United Nations Framework Convention on Climate Change (UNFCCC) to assist developing countries in adaptation and mitigation practices to counter climate change. The organization is based in Songdo, Incheon.
The IPCC is an intergovernmental body of the U.N. that provides scientific information on understanding the risks of climate change.
This was the FSS' third annual international conference on innovative finance. Since 2019, the supervisory agency has been partnering with Ewha in hosting the event.
