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By Kim Bo-eun
Sustainable finance is still considered a new concept here, but financial groups are increasingly aligning themselves with environmental and social causes to keep up with global market standards.
In September, three financial groups ― Shinhan, KB and Hana ― signed the "Principles for Responsible Banking" under the United Nations Environment Program Finance Initiative at the U.N. headquarters in New York.
The principles are aimed at protecting the environment, reducing negative societal impact and managing risks, as well as seeking shared economic prosperity. This is intended to be done through active engagement with stakeholders, creating a corporate culture supporting such efforts and enhancing transparency.
A core part is financing corporate activities that protect the environment, promoting social justice and improving corporate governance, through issuing ESG (environmental, social and governance) bonds.
Data shows the issuance of ESG bonds has jumped more than 10-fold over the past three years. As of Sept. 26, ESG bonds amounting to 12 trillion won ($10 billion) were issued this year. This compares with 1.08 trillion in ESG bonds issued in 2016.
Green bonds were mainly issued, but social bonds are also on the rise.
The first moves were made by state-run institutions, but now the bulk of ESG bonds are issued by companies in the private sector, including financial firms.
This is backed by growing demand from investors, who have become increasingly environmentally and socially conscious.
It presents new business opportunities for banks, as they are able to finance large-scale projects such as those involving renewable energy.
From a corporate point of view, this is also seen as a means to manage risk. While Korea is in the early stages of this, not being aligned with sustainable values can pose a risk when shareholders, customers, business partners or the government call for this in later years.
Shinhan declared it would play a leading role in switching to a low-carbon economy, as part of its eco-friendly management scheme. The group plans to invest 20 trillion won in green industries by 2030 and aims to reduce greenhouse gas emissions by 20 percent.
"Since Chairman Cho Yong-byoung took his position, the group has made establishing a sustainable management system a strategic task for 2019 and has set up mid- to long-term projects," a Shinhan Financial official said.
"We believe that companies should seek sustainable profit rather than immediate profits and that coexisting with society will guarantee a sustainable future for companies."
Among other key efforts is promoting social values such as gender equality in the traditionally male-dominant sector.
Last year, Shinhan began a mentoring program to foster female leadership within the group.
KB became the first Korean entity to be included in Bloomberg's list of 230 global companies committed to transparency in gender reporting and advancing workplace equality.
The group was recognized for its efforts to foster female CEOs and executives, guaranteeing maternity leave, and setting up daycare centers at its affiliate units.
Hana, meanwhile, has focused on building daycare centers not just for its employees, but also for non-employees, by establishing state- and regional government-operated centers across the country. It stated its plan in October 2018 to invest 150 billion won by 2020 to build 100 daycare centers, to create a better environment for workers to raise their children.
"Aligning management and investments to environmental protection and inclusive growth is the global trend," Park Kwang-woo, professor of banking and corporate finance at KAIST College of Business, said.
"Investments for corporate sustainability management bring up costs, but in the long-term has a positive effect on companies."
Citing studies, he said a company known to protect the environment will see the effects of its reputation being built up as an environmentally friendly company.
