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State-run, private financial firms joining low-carbon drive
By Lee Kyung-min
A growing number of state-run organizations are seeking to prioritize an anti-coal drive in selecting banks that will handle a combined 34.1 billion won ($29 million) in state funds.
The move is part of the environmental, social and corporate governance (ESG) initiative, defined by the three central factors in measuring the sustainability and societal impact of an investment in a company or business.
Of 16 education offices nationwide, five including Seoul, Daegu, Gangwon, Jeju and Busan will see the contract with their current partner banks expire in 2020, followed by nine in 2021.
Anti-coal campaign a plus
Seoul Metropolitan Office of Education (SMOE) said Sept. 2 that a new criterion will be added to evaluation standards to be met by banks that apply to manage its 1 billion won fund.
According to the education office, banks seeking to handle its fund for four years starting 2021 will be evaluated on their degree of corporate social responsibility (CSR) contributions to education as well as anti-coal campaigning efforts.
This means banks that invest in coal-fueled energy will be eliminated from selection and those making investments in green renewables will be up for consideration in a move to encourage financial firms to join the fight against climate change, a global concern emerging as the most devastating public health crisis to humankind.
Banks will be evaluated on whether they have renounced investments into coal and subsequent plans on ways to reduce carbon emissions.
In the neck-and-neck race are KB Kookmin Bank and NongHyup Bank, the latter of which has been the handler of the education office's fund since 1964.
KB Financial Group, the holding firm of Kookmin Bank, has set up a long-term objective whereby the group's investment portfolio will reduce investment in carbon-heavy projects via increased investment in solar and wind among other renewable energy generation sources.
NongHyup in response will highlight its five-year investment of 8 trillion won into ESG businesses as a key task undertaken by Green Finance Taskforce set up under the bank.
The eco-friendly drive is expected to spread rapidly to other municipal governments nationwide pending the passage of a related bill submitted by Rep. Min Hyung-bae of the ruling Democratic Party of Korea.
Under the bill, municipal governments are to consider how much ESG investment was made by banks that apply to handle state funds and whether they have a long-term plan to contribute to carbon emission reduction.
Financial firms joining in
Brokerages and state-run lenders have already renounced carbon-heavy investment plans.
Industrial Bank of Korea (IBK) said Aug. 27 that it will no longer participate in business projects that undermine environmental safety, including one involving Adani Abbot Point Terminal (AAPT) through which coal from Adani's controversial Carmichael coal mine in Australia will be exported. This was a day after Korea Investment and Securities and Sansung Securities made a similar announcement, Aug 26.
The two financial firms were the latest to join the anti-coal campaign following Samsung Securities and Hanwha Investment and Securities, both of which made the announcements in July.
An activist Oh Dong-jae of For Our Climate, an environment advocacy group, said the series of renouncements should be a sobering reminder of how coal energy will no longer be a lucrative business plan.
"Investing in AAPT is a backward-looking growth model, to put it mildly," Oh said. "The risk and repercussions of current business portfolios based on fossil fuel energy have been increasingly becoming a worldwide concern more directly felt by people in low sea level areas. I hope Korean financial firms would consider this a chance to rearrange their business portfolio in a more sustainable, future-oriented way."
Bank portfolio adjustment inevitable
Many state-run and commercial lenders will have little choice but to reorganize their business portfolio, an inevitable step following the notable push backing anti-coal campaigns.
Data submitted from Financial Supervisory Service (FSS) to Rep. Kwon Eun-hee of the People's Party who sits on the National Assembly National Policy Committee, indicates the country's five major commercial lenders ― KB Kookmin, Shinhan, Woori, Hana and NongHyup ― spent 917.2 billion won to finance coal-powered energy businesses between 2015 and June 2020.
Woori topped the list having spent 227.3 billion won in seven projects, followed by Shinhan (223.9 billion won), KB Kookmin (205.2 billion won), Hana (188 billion won) and NonhHyup (123.9 billion won).
Export-Import Bank of Korea (Eximbank) spent a combined 428.8 billion won to finance two coal-powered plants, 292.3 billion won in Indonesia April 2017 and 136.5 billion won in Vietnam in April 2018.
Korea Development Bank (KDB) has invested 372.1 billion won in similar projects since 2015 including 16.5 billion won in refinancing involving Saemangeum Seawall in Gunsan.
The IBK financed 22.6 billion won in the fossil fuel-related projects including 21.1 billion won in equity investment.
Financial firms are increasingly urged to do business with robust fiscal soundness measured by their degree of compliance with the Paris Agreement, a crucial step to help them "internalize" the new environmentally sustainable and therefore desirable norm, according to the United Nations Environment Programme Finance Initiative (UNEPFI) Korea Representative Lim Dae-woong.
"The green initiative will be among their top priorities, not because they feel environmentally conscious or morally obliged, but because they are able to make money that way. Many Korean financial firms and state-run entities seeking to embrace anti-coal campaign is capitalism at its best," the environmental finance expert.
This is a major improvement from the past whereby the financial sector barely took any interest in green initiatives, no more than caring about whether they would be able to boost profit by lending money to firms with an eco-friendly business model, a reason why Lim says there is cause for hope.
"The global discourse is moving towards effective financial management of climate change-oriented risks. It is heartening that more organizations are seeking to adopt the environmentally conscious drive regardless of their profit motive."
