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Korea’s ESG corporate bond issues on course to top $5 bn in 2020

Sep 21, 2020 (Gmt+09:00)

South Korean companies’ issues of environmental, social and governance (ESG) bonds have almost doubled to 5.7 trillion won ($4.9 billion) so far this year from the year-earlier period, with a broader range of companies participating in the sustainable bond market, data showed on Sept. 21.

The amount of new ESG bond sales topped the 5.1 trillion won recorded for the whole of last year, and compared to the 2.9 trillion won sold during the same period last year, according to the Korea Exchange.

The amounts did not include those sold by Korea Housing-Finance Corporation (KHFP), which makes up the vast majority of the country’s ESG bond issues, with an outstanding volume of 5.8 trillion won.

Excluding KHFP, Hyundai Card, Hyundai Capital and Woori Bank account for the remaining bulk of ESG bond issues.

First-time issuers include TSK Corp. a waste treatment firm, which sold 110 billion won worth of ESG bonds in July; and Lotte Corp., the holding company of the retail-focused Lotte Group, which floated 50 billion won worth of ESG bonds on Sept. 2.

They will use the proceeds to build environmentally friendly buildings and pollution control facilities.

Amid growing calls for corporate responsibility concerning social and environmental issues, ESG bonds were introduced in South Korea in 2018 when state-run Korea Development Bank floated 300 billion won worth of green bonds.

The South Korean government’s plan to boost environmentally friendly infrastructure and renewable energy, under the package of the so-called Green New Deal, is expected to prompt more companies to join in the ESG bond market, said bond analysts.

“The biggest merit of ESG bond issues is that they can help a company show their commitment to environmental and social values and boost their brand images,” said Korea Investment & Securities analyst Huh Young-joo.

From an investor perspective, the National Pension Service, the Government Employees Pension Service and the Public Officials Benefit Association are among the major institutions ramping up ESG investments. But many of them find it challenging to evaluate companies under ESG criteria.

Most of the 40-odd South Korean funds investing in companies with high ESG scores fail to differentiate from other funds in terms of portfolio, according to a recent study from the Korea Capital Market Institute.

NPS is working to incorporate ESG criteria into domestic equity and bond investments in a move to boost responsible investments and enhance long-term gains.

By Tae-Ho Lee

(Photo: Getty Images Bank)

Yeonhee Kim edited this article

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