ESG bond issuance jumps by 11 times in 3 years

Higher Demand in ESG Bonds has Caused it Issuance to Jump 11x in 3 years

Source: Korea Times

The issuance of ESG bonds here has surged this year, as a growing number of entities, ranging from state-run firms to banks, have joined the trend to invest in environmental and social initiatives.

ESG bonds refer to fixed income investments aimed to finance corporate activities in the environment, social responsibility and the improvement of governance.

Data show that the issuance of ESG bonds reached 12 trillion won as of Sept. 26, sharply up from the 5.04 trillion won in 2018 and 1.8 trillion won in 2016.

Green bonds were mainly issued, but the percentage of social bonds has also grown.

The issuers have diversified, from government entities to the private sector, including financial firms.

The Export Import Bank of Korea became the first to issue a green bond in 2013.
In the past years, financial holding companies and banks were mainly involved in issuing ESG bonds, but credit card companies recently joined the initiative.

Hyundai Card issued won-denominated green bonds worth 240 billion won last month, to provide financial services for environmentally friendly vehicles, including electric cards and hydrogen-powered vehicles.

Shinhan Card recently issued ESG bonds worth 100 billion won to more swiftly provide smaller business partners with payments it owed.

In April, Woori Card issued 100 billion won worth of social bonds.

The National Pension Service is also drawing up a plan to boost investments in such sectors.

The issuance of won-denominated ESG bonds was boosted by the Korea Development Bank issuing the first such ones worth 300 billion won last year.

“This year we are seeing an increase in currencies the bonds are issued in, as we see more won-denominated bonds being issued, from mostly foreign currency denominated ones before,” Han Gwang-yeol, an analyst at NH Investment & Securities, said in a report.

“Korea was late to join, but we see an increasing interest from both the government and private sector,” Yoon Jin-soo, a research associate at the ESG business division of the Korea Corporate Governance Service, said.

He noted however, measures such as the issuer getting certification and tracking of whether the funds are used for their stated purposes may be necessary. Currently it is not mandatory for issuers to get certification when issuing ESG bonds.