Lotte Shopping Issues First ESG Bond in Retail Industry ... Supporting Small and Medium Partner Companies

Injection of 170 Billion KRW into Shortened Payment Cycles and Low-Interest Loans

[Asia Economy Reporter Jo In-kyung] Lotte Shopping has issued ESG (Environmental, Social, and Governance) bonds worth 170 billion KRW, the first in the retail industry. The funds raised will be invested in co-growth projects with small and medium-sized partner companies.

Lotte Shopping announced through a disclosure on the 16th that it issued three unnamed, coupon-bearing, unsecured bonds totaling 395 billion KRW.

Among them, the 89-1 unsecured bond is an ESG bond with a total issuance amount of 170 billion KRW. The 89-2 and 89-3 bonds issued together are worth 190 billion KRW and 35 billion KRW, respectively. The bond underwriters include Korea Investment & Securities (100 billion KRW), KB Securities (100 billion KRW), Samsung Securities (100 billion KRW), Daishin Securities (40 billion KRW), NH Investment & Securities (30 billion KRW), and Kiwoom Securities (25 billion KRW).

ESG bonds must meet issuance purposes and usage criteria according to guidelines set by the International Capital Market Association. As special-purpose bonds for ESG management, such as solving environmental or social issues, they have mainly been issued by financial institutions or public enterprises, but recently, issuance by general companies related to renewable energy and eco-friendly businesses has increased. Lotte Shopping’s ESG bond issuance is the first case in the retail industry.

The interest rate on ESG bonds is generally set lower than the issuance rate evaluated by private bond rating agencies. The interest rate on Lotte Shopping’s ESG bond was set at 1.631%, lower than the 2.132% and 2.947% rates of the other two bonds. Issuing ESG bonds sends a positive signal that the company and management are committed to ESG management, which can also have a positive effect on improving corporate image.

Domestic institutional investors are also showing great interest in ESG bond investments. The National Pension Service announced that it would invest 50% of its total assets in ESG companies by 2022.

Lotte Shopping plans to use the 170 billion KRW raised from this bond issuance to provide financial support to small and medium-sized partner companies. It will invest 70 billion KRW in a co-growth fund to support low-interest loans for partner companies and 100 billion KRW to shorten payment cycles.

A company official explained, "As corporate social responsibility becomes a key issue and institutional investors’ interest in ESG bond investments increases in the bond market, we decided to issue these ESG bonds."