KDB IBK rapped for 'anti-green' investment

By Lee Kyung-min

Korea's two state-run banks have come under increasing criticism for having spent a considerable amount of taxpayers' money to finance coal-powered plants in recent years.

This flies in the face of global efforts to reduce greenhouse gases, a lawmaker said Tuesday.

The money, in the form of “project financing,” was part of funds allocated by the banks to invest in power generation.

According to a report released by Rep. Chang Byoung-wan of the minor opposition Party for Democracy and Peace, the Industrial Bank of Korea (IBK) has spent 109.6 billion won ($96 million) over the past six years into the “environmentally harmful” business, accounting for nearly half, or 43.99 percent, of its development investment.

The Korea Development Bank (KDB) has spent 164.1 billion won over the past eight years, accounting for 11 percent of its total.

The KDB's investments, in particular, largely go against its previous move where it issued $300 million in “green bonds” as the first financial institution here to become an executive arm of the Green Climate Fund (GCF) in 2016.

The GCF was established as a financial entity within the framework of the United Nations Framework Convention on Climate Change to assist developing countries in adaptation and mitigation practices to counter climate change.

The years-long investment should have been made after careful consideration about where the state-run enterprise should place its priorities, according to the lawmaker.

“Many global entities not only in the public sector but also the private sector are increasingly moving toward a low-carbon economy to better deal with global warming. The ill-targeted investment clearly goes against the much-shared awareness on the importance of promoting sustainable, eco-friendly growth,” Chang said.

The state-run bank's endeavors should also prioritize financing struggling, capital-strapped businesses and budding entities with limited means to attract investors, he added.

“The state-run banks should be always aware of the responsibility of the government to help foster the country's industries in a discriminating manner based on a long-term vision.”

A KDB official said the investment was in compliance with international guidelines recommended by the OECD.

“The KDB's financing met OECD standards, under which coal-powered plants with ultra-supercritical coaling plants are eligible for project financing,” the official said.

However, the OECD only allows lending to high-efficiency coal plants as part of broader efforts to tackle global warming.

In a text message, the IBK said, “The bank will continue to expand investment into eco-friendly businesses in accordance with global movements.”