South Korean banking teams take small steps in direction of ESG finance
[#WeFace] Electrical autos, inexperienced loans and fewer paper: South Korean banking teams take small steps in direction of ESG finance
A buyer indicators paperwork displayed on a pill PC put in in a sales space at a department of NH NongHyup Financial institution in Seoul. (NH NongHyup Financial institution)
This text is a part of an evaluation and interviews by employees at The Korea Herald’s finance workplace exploring South Korea’s rising ESG funding market, together with its potential, influence and challenges. – Ed.
Of all of the modifications stemming from the banking trade’s adoption of environmental, social and governance values in recent times, in keeping with Shin Hae-jin, 53, the one which stands out probably the most is the shortage of paper within the “crimson tape”. “.
“Since final yr, I’ve observed that each time I’m going to open or handle a financial savings account, the paperwork are signed via pill PCs put in in every sales space,” mentioned Shin, who’s a loyal buyer of Woori Financial institution for over 30 years.
“The worker additionally all the time checks if I actually need to make a paper booklet, which was given to me with none questions just a few years in the past,” she added.
Environmental, social and governance values turned a high precedence for main South Korean banking teams final yr, when President Moon Jae-in pledged to attain a zero carbon society by 2050.
The nation’s 5 largest banking teams – KB, Shinhan, Hana, Woori and NH – have both launched particular ESG activity forces or employed ESG specialists as exterior administrators within the hope of protecting tempo with the 73, The nation’s 4 trillion gained ($ 64.7 billion). Inexperienced New Deal coverage. The measures they’ve taken concentrate on the environmental elements of ESG financing.
As Shin observed, a key step is to attenuate the waste of paper.
KB Kookmin Financial institution launched a marketing campaign in June final yr, dubbed “KB Inexperienced Wave,” which inspired using much less paper in photocopiers and promoted financial savings accounts that supplied higher returns for many who created accounts. cell accounts solely or on-line solely.
“The corporate truly minimize our paper price range for our photocopiers,” mentioned a Kookmin official.
“It is irritating at occasions, nevertheless it’s additionally one thing we all know we’ve to get used to.”
KB Kookmin’s rival Shinhan Financial institution launched the same marketing campaign final yr, providing reward factors to clients who’ve created cell accounts. Shinhan mentioned final yr that 2,879 bushes had been used annually to make paper financial institution books and that the marketing campaign was a approach to defend ESG shares.
Hana turned one of many first banks to scale back paper financial institution books in 2019, whereas Woori and NH NongHyup are additionally utilizing pill computer systems for customer support in an effort to scale back paper use.
General, paper passbook issuance fell 10% yr on yr in 2019 and the decline seems to have accelerated since then, in keeping with trade information.
Electrical autos are one other key space during which the banking trade is striving to ‘go inexperienced’, with firms turning to electrical autos for firm automobiles and putting in charging stations close to their head places of work and places. their bodily branches.
Woori Financial institution is an trade pioneer within the subject of electrical autos.
Woori Financial institution worker promotes the corporate’s electrical autos (Woori Financial institution)
The corporate began with 5 electrical firm automobiles in 2019 and had elevated that quantity to 16 by the top of final yr. It at present operates two charging stations, one at its head workplace in central Seoul and one at its complete analysis and improvement heart in Sangam-dong, west Seoul. The financial institution plans to return all of its company-owned automobiles to electrical autos by 2025 as a part of a inexperienced partnership with the Seoul Metropolitan Authorities that started in 2017. It’ll additionally arrange extra charging stations in 10 branches by the top of the yr.
KB Kookmin began the swap to electrical autos final yr. It owns round twenty electrical autos for worker use and has charging stations in three of its branches.
Different lenders are both within the early phases of adopting electrical autos or plan to take action by the top of the yr.
NH NongHyup has pledged to extend the variety of electrical autos by a minimum of 20 after beginning its personal transition in February. Shinhan plans to buy and use a minimum of 30 electrical autos by the top of the yr.
On the company aspect, lending advantages for firms that meet sure ESG standards are gaining recognition with lenders, together with the issuance of ESG bonds.
Shinhan launched a particular mortgage program final month with decrease lending charges for companies that meet its ESG requirements, and NH NongHyup is providing a product that features a larger credit score restrict for ‘eco-friendly companies’. atmosphere”.
As of March 29, Korean banks had issued won-denominated ESG bonds value a complete of 1.7 trillion gained up to now this yr, in keeping with information from the Korea Inventory Alternate. This represents 70% of ESG bonds issued all through the previous yr, which collectively had been value some 2.4 trillion gained.
Lengthy approach to go
Regardless of this plethora of inexperienced campaigns, trade watchers say it’s going to take for much longer for ESG shares to be really mainstreamed into core areas of financial institution enterprise, comparable to venture finance.
For the reason that begin of the yr, the heads of the 5 main banking teams have pledged to help ‘coal-free’ financing, saying they intend to halt all venture funding for coal-fired energy vegetation and l ‘buy of coal bonds. any longer.”
However their statements drew criticism because the banks had no plans to finish funding for current initiatives for coal-fired energy vegetation.
Final yr, for instance, the Nationwide Export and Import Financial institution of Korea was chosen to finance a $ 2.2 billion venture to construct the 1,200 megawatt Vung Ang 2 energy plant within the north. -est of Vietnam.
Based on an area civic group, the Korea Sustainability Investing Discussion board, KB Monetary Group offered a complete of 6.3 trillion gained for coal-related initiatives from 2009 to 2020, rating No. 1 when it comes to investments made by banking teams. NH adopted with 3.5 trillion gained, and Shinhan got here third with almost 1.2 trillion gained.
Amongst their flagship banking models, NongHyup ranked No. 1 with 676.9 billion gained within the cited interval, whereas Shinhan and KB Kookmin lagged behind with 366.7 billion gained and 333.3 billion gained. of gained, respectively.
“Whereas it is crucial for monetary establishments to chorus from financing coal, the manufacturing trade should help the trigger in an effort to create a really virtuous circle,” an official from the monetary monitoring service mentioned on March 31. on situation of anonymity.
By Jung Min-kyung ([email protected]aldcorp.com)