Korean Regulator Outlines Green Finance Initiatives

Financial Services Commission to draw up a climate risk management and oversight plan by March and develop a green taxonomy within H1.

South Korea’s FSC (Financial Services Commission) has unveiled plans to promote green financing in 2021, which include strengthening the role of the public sector, promoting green financing in the private sector and improving the regulatory framework.

During the third green finance taskforce meeting held on Monday, the FSC emphasised the importance of the government’s 2050 zero carbon initiative and called for close cooperation from all financial sectors. Last August, the FSC kicked off its first meeting of new green finance taskforce as part of Korea’s so-called ‘Green New Deal’.

Priority plans under the green finance initiatives include preparation of an investment strategy for state-backed FIs to double their investment in green sectors from the current 6.5 percent to about 13 percent and launch of a new green finance lending programme once the so-called ‘K-taxonomy’ on green industries becomes available.

The FSC also intends to create ‘green financing teams’ within state-backed FIs to improve their work and promote cooperation across different FIs.

The regulator said it is also considering launching a consultative body on green financing between different state-backed FIs to help draw up an integrated strategy on green finance, promote information sharing and boost international ties.

The FSC said it may seek revisions to the guidelines on the management of water resources funds to ensure that the green and environmental indicators are taken into account when selecting fund managers.

In addition, the regulator will develop the ‘K-taxonomy’ within H1 this year to help the industry clearly distinguish between green and non-green industries and activities, as well as introduce best practice guidelines on green financing to be equally applied to all financial sectors.

Furthermore, the FSC intends to pilot the issuance of green bonds according to the green bond issuance guidelines announced in December last year, and draw up a climate risk management and oversight plan for FIs by March 2021.

This is meant to enable regular stress testing on the impact of the devaluation of carbon-intensive industries on the soundness of FIs, and to study whether regulators should apply climate risk factors in the financial sectors’ prudential regulation and supervisory frameworks.

As announced earlier this month, the FSC intends to gradually strengthen corporate disclosures of environmental factors and to require all KOSPI-listed firms to disclose their environment data from 2030. Larger KOSPI companies will have to mandatorily make these disclosures from 2025.

The FSC said it will also consider introducing revisions to the stewardship code to further encourage environmentally responsible investment by institutional investors and draw up an evaluation model to carry out an effective environmental impact analysis on domestic companies.

Further, the FSC said it may set up a platform on green financing to promote information sharing, networking and fund matching between green enterprises, FIs and investors.

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