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[Green & New] Financial circles rush to keep pace with ‘Green New Deal’

Lenders’ ESG investment expansion, however, feared to press their financial capacity under pandemic


(Hana Financial Group)
(Hana Financial Group)


The Korea Herald is publishing a series of articles to address the Moon Jae-in administration’s “Green New Deal” policy, one of the key pillars of the so-called “Korean New Deal” economic stimulus package. -- Ed.

“Green” has fast risen as the new buzzword for South Korea’s financial players as they strive to adapt to the Moon Jae-in administration’s “Green New Deal” initiative.

They are striving to move away from thermal power generation while focusing on renewable energy in their investment and operation paradigms.

The underlying concern, however, is that such a policy-driven transition may double the burden of financiers who are already weighed down by the COVID-19 fallout. Some market watchers are of the view that the latest green rush may end up as an anticlimax, similar to what happened the disputed Green Growth initiative in the past.

The Green New Deal, a policy pillar based on a budget of 73.4 trillion won ($62 billion), constitutes the 160 trillion won-worth midterm economic blueprint of the Korean New Deal, along with the Digital New Deal and projects on the sidelines to reinforce social safety nets.

Standing out among the country’s major banking groups was KB Financial Group which earlier this month unveiled a new midterm sustainable growth management slogan dubbed “KB Green Way 2030.”

Under the new management and investment framework, KB Financial Group will seek to reduce its carbon dioxide emissions by up to 25 percent from its 2017 figure and to expand the volume of its environment, social, governance products to 50 trillion won from the current 20 trillion won over the next decade.

It also pledged to abide by the Equator Principles, a risk management framework adopted by financial institutions across the world to make environmental and social risk assessments when making financing decisions in projects that cost $10 million or more.

The group will be investing some 9 trillion won until 2025 in the Korean New Deal projects -- Digital New Deal and Green New Deal -- to account for about 30 percent of the government’s target for related private investments.

Shinhan Financial Group, one of the nation’s top two banking groups, similarly underlined ESG management when releasing its 2019 social responsibility report last month.

Chairman Cho Young-byoung rolled out the group’s responsive actions to the prolonged COVID-19 crisis, as well as its involvement in the Task Force on Climate-related Financial Disclosures and the Sustainability Accounting Standards Board.

The two top-tier banking groups have vowed to establish themselves as the “leading” and “first-class” players in ESG investment, connoting that the green-driven paradigm will henceforth be the keyword in their competition.

Woori Financial Group, which realigned itself into a financial holding company structure in 2018, presented its corporate social responsibility activities and policies in association with the United Nations’ Sustainable Development Goals.

Woori Financial specifically vowed to add 4.5 trillion won into Green New Deal projects over the next five years out of its 10 trillion won budget allocated to the initiative, while other groups mostly suggested a comprehensive budget that comprises both Digital New Deal and Green New Deal.

It also initiated a Green New Deal investment platform, following its recent certification of ISO14001, an international standard that specifies requirements for an effective environmental management system.

Hana Financial Group last month signed an agreement with Doosan Group, vowing to provide direct and indirect financing to the group’s renewable energy businesses, focusing on Doosan Heavy Industry & Construction’s wind power and Doosan Fuel Cell’s hydrogen fuel cell projects.

Brokerages have also followed suit in the banking groups’ green drive.

Both Samsung Securities and Hanwha Investment & Securities have recently dropped out of their ongoing coal investments in Australia, recognizing that the given projects are detrimental for their brand value in light of the globally escalating climate crisis.

Adding spur to the financial circles’ green road map was the regulator Financial Services Commission which recently said that it will soon kick off a task force with the private sector to fully support the Green New Deal policy pillar.

Meanwhile, some market observers are skeptical that the drastic rise of green financing may be but the reproduction of the much-criticized Green Growth initiative under the former President Lee Myung-bak.

“At the time, banks rolled out numerous ‘green’ financial products such as loans for replacing conventional lamps with energy-efficient, eco-friendly light emitting diode ones,” said an industry official who wished to remain anonymous.

“Many such products received a lackluster response back then. This year, with the impact of COVID-19, an excessive push (for green financing) may act as a burden for lenders.”

Responding to the suspicion that the Green New Deal 2020 resembles the Green Growth 2009, the government stressed that its green drives will focus on digital infrastructure instead of relying on construction projects.

By Bae Hyun-jung (tellme@heraldcorp.com)
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