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ESG management

Korea’s corporate HQ buildings are becoming clean power generators

The country's late infatuation with the ESG agenda is transforming office buildings into urban power plants

By Jun 04, 2021 (Gmt+09:00)

Lotte Group's Lotte World Tower
Lotte Group's Lotte World Tower

ESG is one of the most frequently mentioned keywords in South Korea today.

It stands for environmental, social and corporate governance, the three main factors that impact the level of sustainability in an organization.

The country’s major public institutions from the central bank to the public pension fund have made strategic changes in investment direction due to the growing importance of the ESG agenda. The government will obligate the publicly traded firms to disclose ESG activities starting from 2025.

The private sector is even more passionate about making the transition to greater sustainability. Samsung Electronics Co. will incorporate ESG criteria to assess the business performance of its major divisions. SK Group’s financial story essentially is about transforming itself as an ESG-themed business organization.

LG Group has set up ESG committees within the holding company and its 13 key affiliates. Hanwha Group recently raised $4.4 billion from the state-run Korea Development Bank to finance its ESG projects.

Some major South Korean conglomerates have even turned their office buildings into generators of renewable energy. Others have adopted AI-based energy management systems to significantly reduce power consumption within the workplace.  

OFFICE BUILDINGS ARE GENERATING CLEAN ENERGY

The 123-story Lotte World Tower located in the Songpa District of Seoul is South Korea’s tallest building at 555 meters. The building houses Lotte Group, the country’s fifth-largest conglomerate. The tower, while at first look seems to be an excessive energy consumer, is actually a power generator.

The building is equipped with hydrothermal systems that use the temperature difference between hot and cold tap water to annually generate 17,000 megawatts of electricity. The amount is enough to be used by around 4,500 households a year.

The building’s outdoor lawn square also generates wind power from 12 generators. Lotte uses the generated wind energy to power the streetlights installed within the square.

Hanwha Group's office building covered with solar panels
Hanwha Group's office building covered with solar panels

Hanwha Group’s office building located in the Jung District of Seoul is often referred to as an “urban solar power plant.” In 2016, the building underwent a complete remodeling to cover the building surface with solar panels made by Hanwha Q CELLS under Hanwha Solutions.

Hanwha says that these building integrated photovoltaic (BIPV) panels generate about 3% of the electricity used in the building.

Gran Seoul, the office building of GS Engineering & Construction Co., has adopted an advanced building energy management system (BEMS) that enabled the company to cut 15% of energy usage compared to before. Its BEMS collects real-time energy usage data within the building and offers methods to minimize energy consumption.

LG Science Park, a research complex of LG Group, installed more than 8,300 solar panels on the rooftop areas of 18 buildings as well as on the streets.  The complex also has an energy storage system (ESS) facility that can store up to 4 megawatts of electricity, enough to be used by 400 households over a day.

Kolon Group’s One & Only Tower, located near LG’s research complex in Seoul, is renowned for its eco-friendly construction materials. The building also has solar panels and geothermal power generators.

Kolon Group's One & Only Tower
Kolon Group's One & Only Tower

Kolon says its office building has achieved net-zero energy usage, meaning that the amount of renewable energy that the building generates is enough to power all energy consumed in the common areas within the building.

Industry insiders say that there are multiple reasons behind the country’s major business groups transforming their offices into small-scale power plants.

First, the companies can raise their ESG ratings. The influential Morgan Stanley Capital International (MSCI) ESG Indexes grant additional points to the firms that have eco-friendly office buildings and facilities. Other ESG rating firms also have similar criteria.

Second, positioning as an ESG-oriented organization gives them positive corporate images.

“The corporate headquarters building can be referred to as the very first gateway to the company. The building can change how the clients, customers and consumers are perceiving our company. A slight remodeling can overturn the corporate image that we previously had,” said a representative of a major conglomerate.

Third, it adds extra financial value to the building. The eco-friendlier buildings were recently traded with higher premiums in both domestic and overseas real estate markets.

The Namsan Square building, originally built in 1978, is a good example. Its previous owner National Pension Service (NPS) conducted an ESG remodeling in 2011 and made a profit of 180 billion won ($161 million) when the building was sold to a consortium of investors headed by KKR last year.

Write to Hyung-suk Song at click@hankyung.com

Daniel Cho edited this article.

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