With strong government support of late, South Korea is emerging as a major player in sustainable finance, and only time will tell if the country becomes a leader in Asia Over recent years South Korea has slowly emerged as an active player in advocating sustainable finance in Asia alongside several other countries in the region.
Since the country’s first green bond by Korea Export-Import Bank (KEXIM) in 2013, the number of green bonds issues has blossomed, from Hyundai Capital’s US$500 million issue in 2016 to Korea Development Bank’s (KDB) US$300 million trade in 2017.
Last year was a particularly impressive period for the country’s sustainable finance sector. KDB and Korea Hydro & Nuclear Power Company continued to issue green bonds, whilst South Korean companies started to tilt towards social bonds and sustainability bonds.
Unlike green bonds, whose bond proceeds are funnelled towards projects with environmental benefits, social bonds have proceeds directed at projects with positive social incomes, while sustainability bonds have proceeds aimed at a combination of both environmental and social projects.
Korea East-West Power (EWP) led the charge last summer when it issued the first sustainability bond, raising US$500 million from investors, with capital generated earmarked for constructing energy storage projects and also providing employment for local South Korean communities. EWP’s landmark bond was soon followed by other social impact bonds, such as Industrial Bank of Korea’s social bond in July 2018 and Korea Housing Finance Corporation’s (KHFC) 500 million euro social covered bonds. The KHFC bond was the first time a covered bond had been structured with a sustainable social element.
This shift from green bonds in South Korea reflects similar movements in the overall sustainable finance activity in the region, with issuers looking to expand financing projects that address wider sustainability goals.