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Korea is championing low-carbon development in Asia Pacific, with strong support from the government and regulators. While it is one of the top seven emitters of carbon dioxide in the world, only time will tell if the country will become a leader in the region.
South Korea is the seventh largest emitter of carbon dioxide in the world, and the twelfth largest emitter of total greenhouse gas emissions. Nonetheless, the country is slowly emerging as an active player in advocating sustainable finance. The government has committed to reducing emissions by 37% by 2030, and in 2015 it became the first country in Asia Pacific to implement an emissions trading scheme . Local Korean companies have also shown stronger commitment to embedding environmental, social and governance (ESG) principles in their business strategies. However, only time will tell if the country will become a leader in the region.
Following the Korea Export-Import Bank's (KEXIM) first ever green bond issuance by in 2013, South Korean borrowers have gradually joined the sustainable finance revolution. While the country's green bond issuance remains small in the global context, it is the fifth largest climate bond market in Asia Pacific, behind China, India, Japan and Australia. South Korea's market has much potential to grow and institutions are increasingly tilting towards social and sustainability bonds.
Moving towards a low-carbon worldAt BNP Paribas' second Sustainable Future Forum in Seoul this year, industry experts debated how they can put the UN's Sustainable Development Goals (SDGs) into action, using sustainable finance to create a positive impact for both stakeholders and society.
"Businesses can no longer afford to ignore sustainability as climate change disrupts business operations. Finance can play a central role in driving change and fast-tracking the process towards a low-carbon world."Pierre Rousseau, Senior Strategic Advisor, Sustainable Business, BNP Paribas
"Sustainability is at the forefront of our business strategy where we have embedded nine of the SDGs in our business and plan to prioritise issuing ESG bonds in the future. We are particularly keen on using the sourced funds on renewable energy projects as we work towards the government's Renewable Energy 3020 Implementation Plan," notes Eun Hwa Jung, Head of Financial Management Department, Korea East-West Power.
On the investor side, South Korea is still in the early stages. However, led by the largest investors including Korea National Pension Service and Korea Investment Corporation, ESG investing is becoming increasingly relevant in the investment process. The aim is to generate sustainable returns with a long-term view and look to invest in companies that can demonstrate commitment to sustainability.
Nicholas Gandolfo, Associate Director, Asia Pacific, at Sustainalytics, notes that sustainable finance is still fairly new and understanding the dynamics of the market will take time. "However, taking ESG considerations into account is quickly becoming an important strategic business imperative," he says. "Against this backdrop, corporations that work with an experienced bank and external review provider can help to move sustainable finance initiatives forward."