Green Finance Emerging as Crucial Factor for Banks
By Kim Tae-gyu
Staff Reporter
Under the Lee Myung-bak administration, the buzzword seems to be ``green'' ― its stimulus package is a ``Green New Deal'' and its most sought-after economic development path is ``green growth.''
In this climate, even green finance has emerged. The question is how finance can be re-engineered to be environmentally friendly.
The Korea Institute of Finance (KIF), a Seoul-based think-tank, said green finance is not only plausible but also crucial for domestic banks to be successful down the road.
``Financial institutions can contribute to the eco-friendly world via lending money to companies seeking low-carbon industries,'' KIF researcher Lee Yoon-seok wrote in a recent article.
``Such a trend could take a root in the not-so-distant future, both at home and abroad. Our financial institutes need to be prepared for the imminent change,'' he said.
Lee went on to say that green finance will become one of the top priorities for banks or insurers in terms of boosting their bottom line on top of tackling global warming.
``The widespread belief is that green finance is for the benefit of the world, but not for financial institutions themselves. In other words, people think the environment and money cannot mix,'' Lee said.
``Let's think of a bank that lends big money to polluters. If they fold due to increasing regulations on them, the burdens are on the bank. Such risks will pile up, hence, green finance is a must for banks. That's why global lenders focus on it,'' he said.
Indeed, the rush toward green finance is underway.
Citibank revealed its plan in 2007 to invest $50 billion to address global climate change in the banking titan's corporate social-responsibility program.
In the same year, the Bank of America announced a scheme to spend $20 billion on environmentally-friendly services. JP Morgan Chase also launched its own green initiatives.
In Korea, green finance also shows signs of sprouting, headed by the country's biggest lender, Kookmin Bank.
Kookmin plans to donate 50 billion won to the Kibo Technology Fund this month so that the state-run entity can guarantee banks' loans to eco-friendly firms.