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Korea Pushes Sustainability Bonds in Effort to Boost Economy

Korea Pushes Sustainability Bonds in Effort to Bolster Economy

(Bloomberg) -- South Korea has become the world’s biggest source of so-called sustainability bonds this year as borrowers rush to sell notes that can fund projects to help the middle class and smaller firms in a sluggish economy.

Sales of debt globally for sustainability projects have more than doubled this year to $16.4 billion, and Korea makes up about 16% of that total, Bloomberg-compiled data show. Korea’s Finance Ministry sold its first green and sustainability note last week, following issuance of such debt in 2019 by five Korean firms including KEB Hana Bank and Kookmin Bank.

Korea Pushes Sustainability Bonds in Effort to Boost Economy

As a global slowdown and falling exports batter Korea’s trade-dependent economy, South Korean President Moon Jae-in is trying to support local demand with measures to create jobs and more income for the middle class and small- and mid-sized companies. For issuers of sustainability bonds, most of whom are banks, selling the debt to fund such projects will help burnish their reputation.

“The purpose of sustainability bond issuance is in line with the government’s policies for low-income families and SMEs,” said June Won, managing director of capital markets origination at Citigroup Global Markets Korea Securities Ltd., the top arranger of Korean offshore bonds. “Such sales will likely increase further.”

While green bonds finance environmental projects and social bonds fund socially beneficial ventures, sustainability notes have a broader choice of goals as they fund either green or social projects.

Read more about Korea’s recent dollar bond sale

The growing volume of sovereign sustainable bond sales highlights the increasing focus of authorities on raising capital for climate change mitigation and adaption efforts, Moody’s Investors Service said in a note.

Asia’s fourth-largest economy is following the global expansion in issuance of debt to pay for environmental, social and governance projects. Offshore sales of green, social and sustainability bonds by Korean issuers reached $5.8 billion this year, compared with last year’s full-year offerings of $4 billion and $699 million in 2017, according to Bloomberg-compiled data.

To contact the reporter on this story: Kyungji Cho in Seoul at kcho54@bloomberg.net

To contact the editors responsible for this story: Andrew Monahan at amonahan@bloomberg.net, Ken McCallum

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