Banking Association's New ESG Organizational Restructuring... Accelerating ESG Management in the Financial Sector

Kwangsoo Kim, Chairman of the Korea Federation of Banks, "Responding Quickly and Flexibly to Changes in the Financial Environment"

[Asia Economy Reporter Park Sun-mi] The Korea Federation of Banks has reorganized its structure to respond to the changing financial environment, including the spread of ESG (Environmental, Social, and Governance) management and digital transformation, and to efficiently support member banks' operations. The board of directors of the Federation, composed of the heads of 10 major commercial banks and Chairman Kim Kwang-soo, held a meeting last week and finalized a reorganization plan that includes the establishment of dedicated departments for ESG and legal support. This reorganization is interpreted as aligning with the banking sector's emphasis on ESG management by creating dedicated ESG organizations and ESG committees under the board of directors.

The reorganization, effective from this month, changes the current structure from 8 divisions and 2 offices to 9 divisions and 3 offices, notably establishing the Sustainable Management Department to handle ESG and related matters, and the Legal Support Department to assist with legal and compliance issues. The Bank Management Support Department will be abolished, with its duties transferred to other departments. Additionally, by introducing an agile organization, the Federation plans to enhance organizational flexibility to respond swiftly to issues in the banking industry.

Chairman Kim Kwang-soo of the Korea Federation of Banks stated, "Through this reorganization and personnel changes, we plan to respond quickly and flexibly to changes in the financial environment, strengthen legal compliance, and systematically carry out social contribution activities to continuously support the development of the banking industry."

Banking Sector ESG Management Gains Momentum

ESG management in the banking sector is gaining more momentum this year. The chairpersons of the five major financial groups?KB, Shinhan, Hana, Woori, and NH Nonghyup?are promoting ESG management as one of their key tasks this year, establishing and expanding various ESG-related organizations.

Shinhan Financial Group established an ESG Promotion Committee last month as an organization to manage ESG management performance within the group, with all subsidiary CEOs as members. It plans to build an ESG performance management system that quantitatively measures and evaluates the ESG projects pursued 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 Chief Sustainability Officers (CSSOs) from subsidiaries, 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 this month at the holding company's board meeting to establish an ESG Management Committee to enhance efficient decision-making and execution related to ESG. The ESG Management Committee will serve as the highest decision-making body for the group's ESG management overall, establishing group ESG strategies and policies and receiving reports on various ESG initiatives.

NH 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. It will also establish an ESG Strategy Council chaired by Chairman Son Byung-hwan and an ESG Working Meeting. 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 Center for International Finance, 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."