Banking Association Establishes Dedicated ESG Team... Accelerating ESG Management in the Financial Sector

Organization Restructuring Plan Confirmed at This Afternoon's Board Meeting

[Asia Economy Reporter Park Sun-mi] Amid the banking sector's efforts to strengthen ESG (Environmental, Social, and Governance) management, the Korea Federation of Banks confirmed the establishment of a dedicated ESG organization at its meeting on the 22nd to support ESG management in the banking sector. There is great anticipation that this year will see increased issuance of ESG bonds, launch of ESG-related products, and enhanced ESG cooperation among industry players.

According to the financial sector on the 22nd, the board of directors of the Korea Federation of Banks, composed of CEOs from 10 major commercial banks and Chairman Kim Kwang-soo, held a non-face-to-face meeting at 5 p.m. and finalized an organizational restructuring plan that includes the creation of dedicated ESG and legal support departments. This restructuring aligns with the banking sector’s emphasis on ESG management and the trend of establishing dedicated ESG organizations and ESG committees under the board of directors.

Although the specific duties of the dedicated ESG department have not yet been disclosed, it is expected to be an organization that supports ESG management in the banking sector at the federation level and discusses related matters to strengthen the momentum for ESG management in the industry. A federation official stated, "Previously, ESG-related tasks were divided among departments such as the social contribution department whenever such work arose," adding, "As the banking sector emphasizes ESG management, there have been many requests from member companies to establish a dedicated ESG department at the federation level, and the federation also recognized the need for a department to handle this, leading to the plan to create the organization." The official further explained, "The new organization will not handle only ESG tasks but will be responsible for ESG-related work within the federation."

This is the first organizational restructuring under Chairman Kim, who took office at the end of last year. Having served as chairman of NongHyup Financial Group before his current role, Kim has observed ESG management trends in the banking sector and reflects a strong intention to align the federation’s ESG organization with the banking sector’s ESG management.

Momentum Builds for ESG Management in Banking Sector

In fact, ESG management in the banking sector is gaining more momentum this year. Chairmen of the five major financial groups?KB, Shinhan, Hana, Woori, and NH NongHyup?are promoting ESG management as a key task this year and are establishing and expanding various ESG-related organizations.

This month, Shinhan Financial Group established an ESG Promotion Committee, composed of all subsidiary CEOs as members, to manage ESG management performance within the group. It plans to build an ESG performance management system that quantitatively measures and evaluates ESG projects promoted by each subsidiary, a first among domestic financial companies. Along with the existing ESG Strategy Committee within the board, the Group ESG CSSO Council composed of subsidiary Chief Sustainability Officers (CSSOs), and the ESG Working Council, a systematic ESG management organization has been completed.

Woori Financial Group, after establishing the ESG Management Department as a dedicated ESG unit at the end of last year, plans to obtain final approval for the establishment of an ESG Management Committee at the holding company’s board meeting next month to enhance efficient decision-making and execution related to ESG. The ESG Management Committee will serve as the highest decision-making body overseeing the group’s ESG management, including establishing group ESG strategies and policies and receiving reports on various ESG initiatives.

NongHyup Financial Group plans to establish a ‘Social Value and Green Finance Committee’ within its board this year to enable direct oversight of ESG strategies by the board. It will also create an ESG Strategy Council and ESG Working Meeting chaired by Chairman Son Byung-hwan. KB Financial Group already established an ESG Committee within its board in March last year and is operating an ESG management system. Hana Financial Group has also renamed its long-standing Happiness Sharing Committee to the Social Value Management Committee since last year.

Kim Yoon-kyung, a senior researcher at the International Finance Center, recently stated in a report, "Triggered by COVID-19, financial institutions are increasingly incorporating ESG into their investment decision-making processes, and this market is emerging not as a niche but as mainstream."