Secondary Financial Sector Also Aligns with 'ESG Management'

Second-Tier Financial Sector Announces Paperless and 탈석탄 Finance Initiatives
Moves Aligning with Government and Financial Authorities' Eco-Friendly Policy Direction
Industry Voices Self-Reflection, Saying "Many Areas Still Insufficient"

Poster for Eco-friendly Car Collateral Loan Product Operated by Pepper Savings Bank
Photo by Pepper Savings Bank

[Asia Economy Reporter Song Seung-seop] Movements to practice ESG (Environmental, Social, and Governance) management are emerging in the secondary financial sector, including savings banks. Following the green finance policies of the government and financial authorities, as commercial banks launch numerous ESG-related projects, the secondary financial sector is beginning to keep pace.

According to the financial sector on the 4th, Welcome Savings Bank plans to strengthen ESG management starting this year by expanding donations and social contribution activities while establishing green offices. Accordingly, Welcome Savings Bank intends to reorganize its system to enable paperless operations and approvals across all branches and internal group reporting processes.

On the 5th of last month, Hanwha Savings Bank, along with five other financial affiliates within the Hanwha Group, declared a ‘coal phase-out finance’ policy, deciding to halt domestic and international investments and loans related to coal power generation. Hanwha Savings Bank will no longer participate in project financing (PF) for coal power plants nor purchase bonds issued by special purpose companies (SPCs) established for coal power plant construction. Instead, it will continuously increase investments in eco-friendly assets, including renewable energy.

In the case of Saemaeul Geumgo, on the 26th of last month, it decided to promote ‘MakeGreen Saemaeul Geumgo’ with the goal of establishing a model for ‘Green New Deal’ social contribution projects. This involves supporting social enterprises engaged in environmental fields and expanding eco-friendly facility installations. Additionally, activities such as cultivating seed kits for donation, reducing the use of disposable products in offices, and campaigns encouraging the use of personal cups are being carried out.

Secondary Financial Sector Offers Interest Rate Discounts for Eco-Friendly Buildings and Vehicles

There are also cases where direct benefits such as preferential interest rates on financial products are provided. Pepper Savings Bank has applied preferential interest rates since last year when applying for secured loans on green building-certified properties with a high proportion of renewable energy use. Depending on the green building grade and the building’s energy efficiency rating, a 0.3 to 1.0 percentage point discount is applied. For secured loans on electric and hydrogen vehicles, interest rate reductions of 2 to 4 percentage points per annum are offered, while hybrid and plug-in hybrid vehicles receive reductions of 1 to 2 percentage points per annum.

The financial authorities launched a Green Finance Promotion Task Force (TF) to support the government’s ‘Green New Deal’ and established 12 tasks last month to practice carbon neutrality. From policy financial institutions, the proportion of support for environmental projects will be doubled over ten years, and provisions exempting financial institutions from losses related to green finance support are included. Plans to gradually expand disclosures related to environmental information are also underway. A financial sector official explained, "Since the government and financial authorities have emphasized corporate efforts in the environmental field, there is an atmosphere in the secondary financial sector to proactively do what they can."

There are also internal voices that the secondary financial sector’s efforts are still insufficient compared to commercial banks. A savings bank official said, "Although there are many slogans about practicing ESG in the secondary financial sector, some places are only expanding existing social contribution projects," adding, "Compared to the primary financial sector, which issues ESG bonds worth hundreds to thousands of billions of won, it is true that there are many shortcomings in ESG management."