Climate change advocacy group to seek audit of government-owned lenders

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By Lee Kyung-min

A climate advocacy group filed a request seeking a public audit of seven government-owned lenders and financial services institutions, for what it claims to be irresponsible spending of taxpayer money on a coal-fired power plant in Samcheok, Gangwon Province.

The seven lenders include the Korea Development Bank (KDB), the Industrial Bank of Korea (IBK) and the National Agricultural Cooperative Federation.

Companies with low credit ratings are required to submit detailed plans on how they intend to repay loans extended by state-run lenders. These lenders should then evaluate the plans before providing the loans. According to Solutions for Our Climate, the lenders did not follow this procedure.

Solutions for Our Climate's local chapters in Masan, Changwon and Jinhae called for the Board of Audit and Inspection (BAI) to step in on the matter, asking why the lenders failed to withdraw financing for one of the power plant's investors, Doosan Heavy Industries & Construction, despite the firm's BBB- credit rating as assessed by the Korea Investors Service and NICE Investors Service in June 2020.

According to the local chapters, investors in the power plant are required to submit a plan in writing on how to finance the project for the remainder of the contract period, if they have a credit rating of BBB- or lower from the two credit rating agencies.

But Doosan failed to meet the deadline for submission, set for Aug. 23, 2020, and therefore constituted a cause for the lenders to withdraw financing mid-project. The apparent lack of revision of the plan is all the more problematic since Doosan was granted an “unusual favor” from the lenders.

They allowed Doosan to open an escrow account, meaning that the borrowed money need not be paid back as long as they put some amount ― however small ― into the account in installments over a long period of time.

“The KDB should have withdrawn loans granted to Doosan, thereby managing taxpayers' money in an effective manner. Failure to do that led to a serious breach of duty to the public,” said the group's lawyer, Park Ji-hye.

Another representative of the group, Jeong Jin-young, said the lender's investment behavior went against President Moon Jae-in's pledge to go carbon neutral by 2050.

“The lax attitude of major government-owned lenders toward the low-carbon drive should be ended as soon as possible, through the public audit we are seeking to launch. Only through this rigorous BAI audit, will they change their current business practices which show that they have yet to grasp the gravity of climate change.”