4 Major Financial Holding Companies Show Clear E·S Performance... When Will 'Governance (G)' Results Appear? (Comprehensive)

Each Financial Holding Plans Tens of Trillions Investment in ESG Finance
By 2050, Financial Groups and Portfolios Aim for Carbon Emission 'Zero'
Commitment to Fund COVID-19 Support and Korean New Deal
Lack of Performance Figures and Investment Targets in Governance (G) Items

[Asia Economy Reporters Sunmi Park, Seungseop Song] The curtain has risen on the ESG (Environmental, Social, Governance) management performance war among the four major domestic financial holding companies. The chairmen of these financial groups, who unanimously shout ESG as the keyword for sustainable management, are confident that they are achieving record-high profits every year while delivering concrete results in the three ESG areas. However, compared to the aggressive strides made in the environmental and social sectors, the governance sector shows relatively fewer concrete performance figures and goals, indicating that there is still a long way to go.

According to the sustainable management reports (ESG report for Shinhan) released on the 22nd by the four major financial holding companies?KB, Shinhan, Hana, and Woori?each company has set ESG finance (products, loans, investments, bonds) targets worth tens of trillions of won by 2030. The performance against these targets was around 10% based on new transaction amounts last year.

Bold Investment of Tens of Trillions in Environmental and Social Sectors

KB Financial has established a mid-to-long-term goal of achieving 50 trillion won in ESG finance by 2030 and recorded a performance of 22.95 trillion won last year, nearly half of the target based on outstanding balances. Shinhan Financial’s ESG goal is to provide eco-friendly financial support worth 30 trillion won in the green finance sector by 2030. Last year alone, it achieved green finance support totaling 2.6773 trillion won based on new transaction amounts, including 315.3 billion won in eco-friendly loans, 659.7 billion won in eco-friendly project financing (PF), and 1.7023 trillion won in eco-friendly investments. Shinhan Financial’s total ESG support scale up to last year reached 33.95 trillion won based on outstanding balances.

Hana Financial and Woori Financial have set plans to provide 60 trillion won in loans, investments, and funding in the green and sustainable sectors by 2030, and 100 trillion won in ESG finance by 2030, respectively. Hana Financial achieved last year’s results of 4.4 trillion won in loans, 1.39 trillion won in investments (new transactions), and 680 billion won in bonds based on new transaction amounts. Woori Financial recorded a performance equivalent to 8% (8.02 trillion won) of its target last year.

ESG is the keyword that the chairmen of the four major financial holding companies regard as the core of sustainable management. KB Financial Chairman Yoon Jong-kyu recently mentioned the fierce ESG trend blowing around companies and said, "Our mission is finance that changes the world." Shinhan Financial Chairman Cho Yong-byeong stated, "The answer to resilience in an uncertain management environment lies in ESG," and Hana Financial Chairman Kim Jung-tae said, "ESG is Hana Financial’s will to take new steps for a sustainable tomorrow." Woori Financial Chairman Son Tae-seung also announced plans to lead the creation of a sustainable society with the ESG vision of "A better world we create through finance."

The four major financial holding companies have mostly achieved the goals they set themselves in the environmental (E) and social (S) contribution sectors. KB Financial spent the most on social contributions with 207.3 billion won, followed by Shinhan Financial (21.6 billion won), Woori Financial (150 billion won), and Hana Financial (143.6 billion won).

This year, financial support performance related to COVID-19 was particularly highlighted. KB Kookmin Bank issued social bonds worth 400 billion won and sustainable bonds worth approximately 500 million dollars to support COVID-19 financial aid. The scale of new loans and repayment deferrals was 19.388 trillion won as of May. Shinhan Financial Group also issued ESG bonds worth 542.5 billion won at the holding company level, with Shinhan Bank and Shinhan Card issuing bonds worth 392.1 billion won and 145.9 billion won, respectively. Woori Financial Group provided 1.6 billion won through COVID-19 pre-workout special measures and 409.3 billion won through the credit loan 119 program.

Generous investment plans were also announced in the innovative finance sector to support the Korean New Deal project and the creation of an innovation ecosystem promoted by the Moon Jae-in administration. KB Financial Group plans to support 10 trillion won by 2025 in the ‘Green New Deal’ and ‘Digital New Deal,’ two of the ten major tasks of the Korean New Deal. Shinhan Financial set a mid-to-long-term goal of 92.7 trillion won in innovative finance by 2023 and achieved 26.8 trillion won in support last year.

Hana Financial Group also invested 25 trillion won in K-New Deal and innovative finance last year, exceeding its target by 212%. Its mid-to-long-term plan to supply 60 trillion won by 2025 was raised to 83 trillion won. Woori Financial Group plans to invest a total of 50 trillion won by 2025 for the success of the Korean New Deal and fostering innovative growth companies.

Behind Environmental (E) and Social (S) Achievements, Governance (G) Improvements Remain Distant

On the other hand, in governance (G)-related items, concrete performance figures and investment targets were relatively unclear. Although all financial companies promised transparent governance, issues such as the ‘rubber-stamp’ problem where outside directors of financial holding companies vote in favor of most agenda items, and the financial sector’s unique ‘glass ceiling for women’ remain unresolved challenges.

Each company’s governance investment scale was minimal or related items were not disclosed. For example, of the 22 trillion won spent by KB Financial on ESG products, investments, and loans, only 370 billion won was related to governance.

In materiality assessments conducted by each group company, governance often ranked low. In Shinhan Financial’s materiality assessment, ‘Establishing fair and ethical governance’ ranked last at 10th place. For Hana Financial, topics such as ‘anti-corruption,’ ‘anti-competitive behavior,’ and ‘diversity and equal opportunity’ were among the lower-ranked topics.

The glass ceiling for women was also found to be firmly in place. Although financial holding companies have eagerly announced plans to nurture female talent, criticism remains that efforts are still insufficient. Among the 14 board members disclosed by Shinhan Financial Group (as of last March), only one is female. Hana Financial has one female member out of ten, KB Financial Holding has two, and Woori Financial has none.

However, changes have been detected as consumer protection gained attention due to the private equity fund redemption suspension incident and the enforcement of the Financial Consumer Protection Act. KB Kookmin Bank established and began operating the ‘Consumer Rights Enhancement Advisory Committee’ last year. Shinhan Financial Group added a ‘Financial Consumer Protection’ area to its social value measurement model. Hana Financial created a ‘Consumer Risk Management Committee’ within its board in March, and Woori Financial also formed a consumer protection product team within its consumer protection department.