Eliminating Paper and Lowering Interest Rates for Eco-Friendly Collateral... Savings Banks' ESG 'Fever'

Participants are discussing at the Savings Bank 'ESG Management Committee' held on the 9th. Photo by the Korea Federation of Savings Banks

[Asia Economy Reporter Song Seung-seop] The savings bank industry is actively taking steps toward ESG (Environmental, Social, and Governance) management. Eco-friendly policies and social contribution projects, which were mainly focused on commercial banks and financial public institutions, are also expanding.

According to the industry on the 22nd, the Korea Federation of Savings Banks held the ‘1st ESG Management Committee’ earlier this month. The meeting was organized to discuss ways to enhance trust in the savings bank sector and to promote sustainable management.

The committee is an advisory body newly established in June by the Federation to create an ESG-related management and investment environment and to develop implementation and improvement plans. It is a follow-up measure to the ‘ESG Management Declaration Ceremony’ held in April to strengthen the social responsibility role of the savings bank sector and establish transparent governance.

Considering the role and expertise, Lee Jae-yeon, Vice President of the Korea Institute of Finance, was appointed as the committee chair. In addition, seven members including external ESG experts, professional directors, industry representatives, and Federation executives are active.

At the meeting, discussions were held under the theme of ‘Current Status and Practical Tasks of ESG Adoption in the Savings Bank Sector’ to achieve sustainability for savings banks. They agreed to build a digital counter service environment and expand support for financially and socially vulnerable groups as well as social contribution activities. Opinions were also raised that internal risk management systems should be reviewed and financial consumer rights expanded to ensure transparent management. A Korea Federation of Savings Banks official explained, “We plan to actively support sustainable management of savings banks, including encouraging the adoption of ESG in savings banks.”

There is also a movement to introduce ESG management into the financial product sales process. Shinhan Savings Bank announced on the 6th that customers who have joined the ‘Carbon Point System (Eco Mileage)’ will receive preferential interest rates when opening new installment savings accounts. A special preferential interest rate of 0.5 percentage points will be additionally granted on the 12-month installment savings interest rate for one account per person.

The Carbon Point System is a program that provides incentives based on the reduction rate by reducing electricity, water, and city gas energy consumption. Customers can join online through the website or at the relevant city, county, or district office. Lee Hee-soo, President of Shinhan Savings Bank, said, “This was planned to create an opportunity to raise interest and participation in energy saving and greenhouse gas reduction campaigns,” and emphasized, “We will continue various activities such as conducting in-house ESG campaigns.”

Some institutions are earning solid profits with eco-friendly products. As of July, Pepper Savings Bank’s ‘Pepper Green Financing’ sales exceeded 80 billion KRW. Green Financing is Pepper Savings Bank’s green finance program aimed at promoting low-carbon economic growth and encouraging the use of renewable energy.

For example, if you borrow money using eco-friendly cars or green-certified buildings as collateral, the loan interest rate is discounted. The green building interest rate preferential program, launched in January last year, offers up to a 1 percentage point annual discount when individual business owners apply for loans using green-certified buildings as collateral. If applying with electric vehicles, hydrogen cars, hybrid cars, or plug-in hybrid cars as collateral, discounts of up to 2 percentage points are possible.

Efforts to build eco-friendly offices are also active. SBI Savings Bank, the industry leader in asset size, introduced a digital counter system at 20 branches nationwide in June, establishing a ‘paperless’ environment by eliminating paper documents.

OK Savings Bank also participated in the ‘2030 Korean-style Zero-Emission Vehicle Transition 100 (K-EV100)’ declaration ceremony hosted by the Ministry of Environment earlier this year. OK Savings Bank plans to convert 100% of its business vehicles to zero-emission vehicles such as electric and hydrogen cars by 2030.

JT Savings Bank recently switched various in-house office supplies, including chairs, to green products. It also plans to replace all business vehicles with eco-friendly electric cars by 2024.