IBK to invest in green energy

By Lee Kyung-min

The state-run Industrial Bank of Korea (IBK) will organize an institutional fund to finance an eco-friendly initiative as part of global efforts to move toward a low-carbon economy, it said Monday.

The bank will set up a 137 billion won ($121 million) fund “Kiwoom Goseong Biomass Fund” with other participating institutional investors including Lotte Insurance.

The eight-and-a-half year investment fund, managed by Kiwoom Asset Management, will invest in Shinyoung Portu, a manufacturer of wood pellets in Goseong County, South Gyeongsang Province.

Wood pellets, the most common type of pellet fuel, is generally considered to be a more environmentally friendly fuel for power generation, commercial or residential heating and cooking.

IBK will spend 85 billion won to set up funds and organize loans in the form of “project financing” part of funds allocated by the banks to invest in power generation.

“Many global entities are increasingly moving to reduce carbon emissions to better deal with global warming,” an IBK official said.

“We expect the new project financing will yield high profit, as biomass-produced energy will be eligible for government subsidy calculated based on Renewable Energy Certificates (RECs),” he added.

The RECs are tradable, non-tangible energy commodities in the U.S. that represent proof that certain electricity was generated from an eligible renewable energy resource.

Unlike traditional carbon emissions trading programs which mostly penalize or incentivize certain pre-set emissions targets, RECs incentivize carbon-neutral renewable energy.

“We consider the project financing will help us achieve green initiative amid growing awareness on the importance of promoting sustainable, eco-friendly growth,” the official added.

The belated yet well-corrected efforts came less than two weeks after the state lender came under fire for having spent a substantial amount of taxpayers' money against global efforts to reduce greenhouse gases.

IBK has spent 109.6 billion won over the past six years into the “environmentally harmful” coal-powered plants, accounting for nearly half, or 43.99 percent, of its power generation budget.

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

At the time, the two state-run lenders had come under heavy criticism for failure to be responsible as state enterprises whose priorities should be to help foster the country's industries in a discriminating manner based on a long-term vision.