Summarizing Korea's Green Bond Guidelines

Even though the profit is not outstanding, 

everyone jumps in to buy it

This is the story of Green Bonds heating up Korea recently

The Ministry of Environment of Korea announced the guidelines for green bonds in December 2020 (April 2022, the latest version so far)

Although the guidelines are not legally binding, they are expected to be used as standards for market participants related to the issuance, investment, and evaluation of green bonds, so an understanding of the guidelines is needed. This guideline is of great significance in that it presented guidelines (especially environmental-related investments) to market officials. All or part of the bond revenue is used for eco-friendly projects such as renewable energy and climate change response. Korea's green bonds have nearly doubled from $14.7 billion in 2013 to $305.2 billion in 2020. 

Green bonds are not very attractive in terms of profitability alone

This is because interest rates are often lower than general bonds. Additional costs are incurred, such as having to obtain certification from international organizations and disclosing the use of profits. Nevertheless, the reason for buying and selling green bonds is to gain the justification of "investing in the environment and the future of the earth." One evaluation company said, "We will have a positive marketing story of dealing with green bonds, and we can also be recognized for complying with international ESG." In developed countries, investing in green bonds also gives tax benefits.

Summary of Green Bond Guidelines of Korea

Until early 2021, Korea's Green Bonds were often issued by "overseas bonds" by companies with good creditworthiness. The situation will change a lot in 2022, and the role of green bonds from Korea for the green industry is expected to grow for the following reasons.

(1) Increasing the need for companies to raise investment in eco-friendly and low-carbon-related businesses

(2) Increased investment in public pension funds such as the National Pension Service of Korea

(3) announcement of the government's comprehensive Green New Deal plan

(4) Adopting the Government's 2050 Carbon Neutral Vision

Please refer to the official letter of the Ministry of Environment of Korea for the exact information... 

Link >>> Green Bond Guidelines of Korea

Main Contents of Guidelines

This is the meaningful definition of green bonds in the guideline.

(1) Funds will be used for "green projects" that meet one of the six environmental goals below.

① climate change mitigation

② adaptation to climate change

③ conservation of natural resources

④ biodiversity conservation

⑤ pollution prevention and management

⑥ conversion to circulating resources

(2) It is a bond that meets one of the four obligations of the Green Bond Principle (GBP). 

① use of procurement funds

② project evaluation and selection process

③ management of procurement funds

④ follow-up report

Green Bond Framework (GBF)

Green bond issuers should establish a green bond management system autonomously and manage green bond issuance accordingly. 

(1) green bond management system The following should be interpreted descriptively.

① Green Bond Issuance Overview: 

② The purpose of issuing green bonds, 

③ Matters concerning the linkage between publisher's green management strategy and environmental improvement goals

(2) use of procurement funds 

Funding raised should be involved in green projects (which contribute to at least one of the six environmental objectives listed above), and whether there is any conflict with other objectives should be considered. 

In addition, it is necessary to determine whether there is a violation of Korean environment-related laws. In addition, the International Labor Organization's Declaration on the Basic Principles of Labor Human Rights and the Minimum OECD Multinational Corporate Guidelines, the UN Corporate and Human Rights Implementation Guidelines, should be applied to examine non-environmental factors.

In the future, these contents will be revised once the K-Taxonomy (Korean Green Classification System) being developed by the Ministry of Environment is confirmed. 

(3) project evaluation and selection procedures

Green bond issuers must inform investors of the procedures, eligibility criteria, and exclusion criteria through the Green Bond Framework (GBF).

(4) management of procurement funds

Green bond issuers should manage the amount of green bonds in an appropriate way that can be tracked through internal control procedures so that the funds can only be used for green projects.

(5) follow-up report

Green bond issuers are required to prepare and publish reports on the latest relevant information and expected environmental improvement effects.

(6) consideration by external agencies

Green bond issuers must undergo external review of the allocation of funds and impact reports prepared by the issuer.

Korea's green fund leader is none other than SK Group

Name : SK (formerly known as SUNKYOUNG)

Foundation : April 8, 1953

Headquarters : 26 Jongno-gu, Jongno-gu, Seoul (Seorin-dong)

Current Chairman : Choi Tae-won

Industrial fields : telecommunications, chemicals, semiconductors

Sales : $116 billion

Market capitalization : $175 billion

Home page : http://www.sk.co.kr/

Stock Status : SK, KRX: 034730

SK Group Chairman Choi Tae-won is insisting on creating a "good financial story" that strengthens ESG. It is also important that financial stories are expected to occupy a significant portion of his group's CEO evaluation model. As the impact of ESG management is strengthened, the management's KPI will evaluate including ESG management items starting this year.

Accordingly, SK Group affiliates are releasing financial stories one after another in the second half of the year. SK Innovation said it will invest to change the company's identity from carbon businesses such as oil refining to green-oriented businesses. SK Co., Ltd. and SK Materials Co., Ltd. then announced plans to expand their businesses in the high-tech materials sector through a merger, while SK General Chemicals Co., Ltd. plans to change its name to SK Geocentric and leap forward as the world's largest urban genetic company. SK E&S announced that it will challenge the world's No. 1 hydrogen operator.