Lotte Corp to include ESG bonds in $126.5 mn corporate bond offering in September

Lotte Corporation is set to become the first South Korean holding company to issue environmental, social, and governance (ESG) bonds, according to investment banking industry sources on August 12.

The Korean conglomerate plans to issue corporate bonds worth 150 billion won ($126.5 million) at the beginning of September, as part of which the company is considering issuing 50 billion won worth of 10-year bonds as either green or sustainability bonds.

A sustainability bond is an ESG bond that combines green and social bonds.

Lotte Corporation plans to use the proceeds to expand Lotte Group’s training center in Osan, Gyeonggi Province. The building is being constructed in an eco-friendly manner, in line with an ESG bond issue.

Recently, ESG factors have become more important in evaluating investments, prompting increased participation among private companies on the ESG landscape.

“Major pension funds, including the National Pension Service, have taken interest in ESG investments. Following this trend, we expect to see a wide range of private companies issuing ESG bonds,” said an investment banking industry source.

Until 2017, mostly state-owned and financial companies issued ESG bonds, but this has changed in the past two years with private companies such as Lotte Property & Development Co., Posco, LG Chem Ltd., and LG Display Co. joining the ESG bond market.

Lotte Property & Development, an affiliate of Lotte Group, issued sustainable bonds totaling near $500 million - $300 million in 2019 and $200 million in 2018 -- to pay off borrowings for the construction of Lotte World Tower, which is endorsed as an eco-friendly building.

 

Hyundai Capital Services Inc. issued 230 billion won worth of sustainability bonds in June, and Taeyoung Engineering & Construction subsidiary TSK Corp issued 110 billion won of green bonds in July.

Most recently, Woori Bank issued 300 billion won worth of sustainability bonds on August 6.

ESG funds have grown in size globally, drawing in increased investment demand for a positive impact on the ESG bond market. On August 3, Google's parent company Alphabet issued $5.75 billion worth of sustainability bonds as part of a $10 billion bond offering making it the largest-ever ESG bond issuance.

 

Write to Jin-sung Kim at jskim1028@hankyung.com


Featured Image: Courtesy of Lotte Museum of Art