South Korean banking groups take small steps towards ESG finance
A customer signs documents displayed on a tablet PC installed in a booth at a branch of NH NongHyup Bank in Seoul. (NH Nong Hyup Bank)
This article is part of an analysis and interviews conducted by staff in the Korea Herald’s finance department exploring the emerging ESG investment market in South Korea, along with its potential, impact and challenges. – Ed.
Of all the changes resulting from the banking sector’s adherence to environmental, social and governance values in recent years, according to Shin Hae-jin, 53, the one that stands out the most is the lack of paper in the “red tape”.
“Since last year, I have noticed that every time I go to open or process a savings account, the documents are signed through tablet PCs installed in each booth,” said Shin, who is a loyal customer of Woori Bank for over 30 years.
“The employee also always checks if I really want to make a paper booklet, which was just given to me without any questions a few years ago,” she added.
Environmental, social and governance values became a top priority for major South Korean banking groups last year, when President Moon Jae-in pledged to achieve a zero carbon society by 2050.
The country’s five largest banking groups – KB, Shinhan, Hana, Woori and NH – have either launched special ESG task forces or hired ESG experts as external directors in hopes of keeping pace with the 73,400 billion won ($ 64.7 billion) nationwide. Green New Deal policy. The measures they have taken relate to the environmental aspects of ESG financing.
As Shin noticed, a key step is to minimize the waste of paper.
KB Kookmin Bank launched a campaign in June last year dubbed “KB Green Wave” which encourages the use of less paper in photocopiers and promotes savings accounts with better returns for those who have established. mobile-only or online-only accounts.
“The company actually cut our budget for paper for our photocopiers,” said a Kookmin official.
“It’s frustrating at times, but it’s also something we know we have to get used to.”
KB Kookmin’s rival bank, Shinhan Bank, launched a similar campaign last year, offering reward points to customers who have set up mobile accounts. Shinhan said last year that 2,879 trees were used each year to make paper bank books and that the campaign was a way to defend ESG stocks.
Hana became one of the first banks to reduce paper passbook consumption in 2019, while Woori and NH NongHyup also use customer service tablets to reduce paper consumption.
Overall, paper passbook issuance fell 10% year-on-year in 2019 and the decline appears to have accelerated since then, according to industry data.
Electric vehicles are another key area where the banking industry is striving to ‘go green’, with companies turning to electric vehicles for company cars and installing charging stations near their headquarters and offices. physical branches.
Woori Bank is an industry pioneer in the field of electric vehicles.
Woori Bank employee promotes the company’s electric vehicles (Woori Bank)
The company started with five electric company cars in 2019 and had increased that number to 16 by the end of last year. It currently operates two charging stations, one at its head office in central Seoul and the other at its comprehensive research and development center in Sangam-dong, west Seoul. The bank plans to turn all of its cars into electric vehicles by 2025 as part of a green partnership with the Seoul Metropolitan Government that began in 2017. It will also install additional charging stations in 10 branches by end of the year.
KB Kookmin started the switch to electric vehicles last year. It owns around twenty electric vehicles for the use of employees and has charging stations in three of its branches.
Other lenders are in the early stages of adopting electric vehicles or plan to do so by the end of the year.
NH NongHyup has pledged to increase the number of electric vehicles by at least 20 after starting its own transition in February. Shinhan plans to purchase and use at least 30 electric vehicles by the end of the year.
On the corporate side, the benefits of loans for companies that meet certain ESG criteria are growing in popularity among lenders, along with the issuance of ESG bonds.
Shinhan launched a special loan program last month with lower lending rates for businesses that meet its ESG standards, and NH NongHyup is offering a product that includes a higher credit limit for “eco-friendly businesses.” environment “.
As of March 29, Korean banks had issued won-denominated ESG bonds worth a total of 1.7 trillion won so far this year, according to data from the Korea Stock Exchange. This represents 70 percent of ESG bonds issued in the past year, which together were worth some 2.4 trillion won.
Long way to go
Despite this plethora of green campaigns, industry watchers say it will take much longer for ESG stocks to be truly mainstreamed into core areas of bank business such as project finance.
Since the start of the year, the leaders of the five major banking groups here have pledged to support “coal-free” financing, saying they intend to stop all financing of coal-fired power plant projects and l ‘purchase of coal bonds “. from now on.”
But their statements drew attention as the banks had no plans to halt funding for existing projects for coal-fired power plants.
Last year, for example, the state-run Export-Import Bank of Korea was selected to finance a $ 2.2 billion project to build the 1,200 Vung Ang 2 power plant. megawatts in northeast Vietnam.
According to a local civic group, the Korea Sustainability Investing Forum, KB Financial Group provided a total of 6.3 trillion won for coal-related projects from 2009 to 2020, ranking first among investments made by banking groups. NH followed with 3.5 trillion won, and Shinhan came in third with nearly 1.2 trillion won.
Among their flagship banking units, NongHyup ranked No.1 with 676.9 billion won in the cited period, while Shinhan and KB Kookmin followed with 366.7 billion won and 333.3 billion won, respectively.
“While it is important that financial institutions refrain from financing coal, the manufacturing industry must support the cause in order to create a true virtuous circle,” a financial supervisor official said on March 31 under cover. of anonymity.
By Jung Min-kyung ([email protected])