Samsung, top banks to create W2tr green growth fund for SMEs

Samsung Electronics and the nation’s top five lenders have collaborated to create a 2 trillion won ($1.5 billion) fund to support small and medium-sized companies struggling to meet toughening carbon regulations at home and in overseas markets.

On Tuesday, the tech giant, together with the nation’s top five financial groups and the Financial Supervisory Service, vowed to offer low-interest rates on loans to smaller businesses seeking to invest in low-emissions facilities, equipment or technologies.

Samsung Electronics and its sister unit Samsung Display will deposit 80 million won and 20 million won, respectively, for the new Partner ESG Fund, while the five lenders -- KB, Shinhan, Hana, Woori and NH NongHyup -- will contribute 20 million each as loans.

“Everyone is facing difficulties due to the uncertain business environment, but it is necessary for not only large companies, but also small and medium-sized partner companies to participate in ESG management for the sustainable growth of the entire supply chain,” said Samsung Electronics Vice Chairman and co-CEO Han Jong-hee.

“We will spare no effort in providing various support, including funds, human resource training and technology, to help our partner companies establish a foundation for ESG management,” he added.

Hana Financial Group Chairman Ham Young-joo said, "With this business agreement, we expect that small and medium-sized firms will be able to proactively respond to global carbon regulations and reduce carbon emissions costs and financial costs.”

"Hana Financial Group will expand win-win financing with small and medium-sized businesses and continue to promote various ESG activities that can help Korea transition to a low-carbon economy," Ham added.

The ESG fund will be implemented starting next month and will be used over the next six years to establish an ESG management foundation for partner companies.

When a partner company establishes an ESG investment plan, such as to improve the workplace environment and safety or to reduce energy use, and applies for a loan, Samsung and the banks will review whether the purpose of the fund aligns with ESG objectives and provide support.

Depending on review results, each company can receive an interest-free loan of up to 2 billion won for up to three years. After the initial loan, they can apply for an extension up to two times per year.

Recently, SMEs have increasingly recognized the need to transition to ESG management. However, investments related to ESG, such as converting to high-efficiency production facilities and adding environmental and safety facilities, are challenging, as they do not immediately contribute to sales and take a long time to recoup.

In response, Samsung announced a plan last year to support ESG funds for smaller businesses as part of the 60.1 trillion won investment for balanced regional development announced in March last year. This agreement will be the start of its full-scale implementation.

Meanwhile, Samsung achieved an “AA” rating, the highest level in the domestic information communication and technology industry, in the 2023 MSCI ESG evaluation. The overall rating improved by one level compared to the previous year.

The tech giant promotes the early achievement of carbon neutrality. It announced its “new environmental management strategy” in September last year after joining RE100 and plans to achieve carbon neutrality by reducing direct and indirect carbon emissions to zero by 2050.

According to the Financial Supervisory Service, the new fund is expected to help SMEs reduce an annual 850,000 tons of carbon emissions. When the European Union’s Carbon Border Adjustment Mechanism takes effect in 2026 as planned, each SME will be able to save some 90 million in emissions-related costs.

The financial watchdog said it will oversee the loan process and encourage more stakeholders to join the climate initiative.

“With Samsung Electronics and the top five financial groups joining, more diverse support measures, including funding schemes, will be offered this year for SMEs to respond to regulations globally,” said FSS Gov. Lee Bok-hyun at the fund’s launch event.