The finance sector needs to consider carbon neutrality in its strategy… incentives are needed for ESG bonds

The first emissions report under the European Union’s Carbon Border Adjustment Mechanism (CBAM), which came into effect in October 2023, is due in January of the new year. Not only the manufacturing sector, but also the financial industry must develop strategies to accurately measure and reduce carbon emissions. 

Philippe Van Hoof, country manager of ING Bank Korea, emphasised in a recent interview, “Green finance remains very important, even amid ongoing wars.” 

CBAM is a system that applies the same carbon cost to six imported goods—such as steel, aluminium, fertiliser, and electricity—as those produced within the EU. In October 2023, Korea’s Ministry of Trade, Industry and Energy estimated that over 140 Korean companies would be affected by CBAM and announced support measures for small and medium-sized enterprises (SMEs) to help them comply. 

Van Hoof, who also serves as chairman of the European Chamber of Commerce in Korea (ECCK), noted, “Government incentives for issuing ESG bonds and clarifying the ESG certification process are crucial. We are also helping Korean companies integrate ESG into their core management strategies.” 

ING Bank operates in over 40 countries, offering retail and corporate financing, and is recognised as a leader in sustainable finance. In 2017, ING pioneered the first sustainability-linked loan (SLL) and received an ‘AA’ ESG rating from MSCI. ING established its Korean office in 1991 and provides corporate and investment banking services in the country. 

With nearly 29 years of experience in banking, Van Hoof previously served as head of Financial Institutions for Asia Pacific at ING in Singapore before assuming his current role in Korea. 

Has the war in Ukraine and increased reliance on fossil fuels weakened the status of green finance? Why is sustainable finance still important? 

Despite global conflicts, green finance remains essential. The demand for renewable energy is rising, and the EU implemented CBAM on 1 October 2023. Companies must begin reporting in January, including details on energy sources used in CBAM-covered products. This shift highlights that carbon reduction efforts extend beyond manufacturing into the financial sector. Financial institutions must improve emissions tracking and develop reduction strategies. 

What role has ING played in Asia’s green finance landscape? 

In 2022, ING mobilised over €100 billion in sustainable finance globally, progressing towards its goal of €125 billion annually by 2025. In the Asia-Pacific region, ING has rapidly expanded its sustainability coordinator roles. These coordinators navigate complex regulatory frameworks and connect multiple stakeholders to ensure loans meet sustainability criteria. 

How do you assess the state of green finance in Korea? 

Korea ranks seventh globally in ESG bond issuance. In 2021, sustainable finance in Korea reached KRW 787 trillion—a 29% increase from 2020. The National Pension Service (NPS) also raised its ESG investments from 7.8% to 12.2%, reflecting the sector’s growth. 

How is ING contributing to Korea’s green finance market? 

ING has supported various sustainable bond issuances, including Asia’s first social covered bond for Korea Housing Finance Corporation (KHFC) in 2018. It also arranged ESG bond deals for the Export-Import Bank of Korea and Woori Card, and acted as Joint Lead Manager for Kookmin Bank’s €500 million green covered bond. ING’s €194.8 million social asset-backed securities (ABS) issuance for Woori Card was named Korea’s best sustainability securitisation deal by The Asset’s Triple A Country Awards in 2022. ING also participated in an international conference hosted by the Financial Supervisory Service, discussing differences between EU and Korean taxonomies and how Korean institutions can adopt their own. 

Does green finance affect ING’s profitability? 

Green finance does not negatively impact profitability. Rather, it provides a foundation for sustainable bonds and carbon-reduction deals. ING has long been committed to sustainability, publishing its first environmental report in 1996. 

What are the benefits of green finance for Korean companies? 

To qualify for green finance, companies must be recognised as environmentally friendly. This recognition facilitates entry into global markets such as the EU and United States, diversifies funding sources, strengthens stakeholder relationships, and contributes to the United Nations’ Sustainable Development Goals (SDGs). 

What initiatives has ECCK undertaken under your leadership? 

ECCK launched the ‘ECCK Sustainability Awards’ in 2022 and actively participates in ESG conferences. The aim is to promote companies—both European and Korean—that are advancing sustainability. Government support through ESG bond incentives and clearer certification processes is vital. ECCK also encourages Korean companies to view ESG as a strategic priority rather than a compliance obligation. 

How is ING engaging with ESG criteria? 

European ESG regulations are based on the EU’s green taxonomy, the Corporate Sustainability Reporting Directive (CSRD), and CBAM. Korea has its own K-taxonomy. As regulations grow more complex, there is increasing demand for clearer global standards. Criteria influence a country’s and company’s competitiveness and market approach. ING actively participates in discussions on regulatory standards and alignment with the EU taxonomy through its banking operations. 

Originally published in Chosun Biz: Opens in a new tabhttps://economychosun.com/site/data/html_dir/2024/01/08/2024010800018.html