[KH Finance Forum] S. Korea to promote ESG policies with support, not regulation: finance minister

South Korea’s chief economic policymaker vowed Tuesday to pursue environmental, social and governance-related policies with support, not regulations, to build a stronger cornerstone for the nation’s sustainable growth.

Deputy Prime Minister and Finance Minister Hong Nam-ki, in his congratulatory speech at the second Korea Herald Finance and Investment Forum, said that the government will make various efforts such as helping industries establish a market-oriented system, creating new markets by bolstering ESG investment and supporting businesses in their ESG shifts.

To build a market-oriented ESG ecosystem, the government plans to come up with ESG guidelines in line with global ESG assessment indicators to promote transparency across industries. Special ESG data platforms that provide market players with the latest information on the market and investment will be established as well.

In creating the new market, Hong shed light on the Moon Jae-in administration’s 2050 carbon neutral drive. The government plans to funnel some 12 trillion won ($10 billion) into next year’s budget for a carbon neutral economy. A 2.5 trillion-won climate fund will be launched to accelerate the nation‘s transition to a zero-carbon society and promote green finance.

A specific taxonomy and guidelines for social bonds will be drawn up, he said. The administration, on top of it, aims to introduce sustainable bonds directly tied to the companies’ ESG performance in order to create grounds for private ESG investments. The government will cover outside consulting fees needed for green bond issuance, while continuously expanding the ESG investment from the pension funds. ESG evaluation will be considered when reviewing the funds’ management performances and handpicking the operators of the pension funds.

The businesses’ ESG shift will be accelerated with the state self-evaluation tool, which will enable the small and medium-sized enterprises to recognize their current ESG status and adapt to the strengthening global ESG regulations

To bring about a swifter change among SMEs, the government will expand tax benefits for businesses who seek to adopt ESG standards.

“Since the COVID-19 outbreak, the economic paradigm is shifting in the global economy that will lead the post-corona era,” Hong said.

The minister pointed to the global shift towards ESG values, including the EU’s “Fit for 55 Package” that aims to reduce greenhouse gas emissions by at least 55 percent by 2030 and the US’ commitment to make the country carbon neutral by 2050.

“Since the changes in the countries’ policies and the global financial market are creeping on to us as both a threat and a window of opportunity, the government has been taking preemptive and active measures,” he added.

By Jung Min-kyung and Byun Hye-jin (mkjung@heraldcorp.com)