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| United Nations Environment Programme Finance Initiative (UNEP FI) Korea Representative Lim Dae-woong |
Financial firms will be increasingly required to do business with robust fiscal soundness measured by their degree of compliance with the Paris Agreement, which will help them "internalize" the new environmentally sustainable and therefore desirable norm, according to an environmental finance expert, Monday.
United Nations Environment Programme Finance Initiative (UNEP FI) Korea Representative Lim Dae-woong said once the central bank and financial authorities set the directive from the top, the financial sector will follow, a possible beginning of a healthy, sustainable business cycle.
"The green initiative will be among their top priorities, not because they feel environmentally conscious or morally obliged, but because they are able to make money that way. This is capitalism at its best," he said.
The long-term temperature goal agreed upon under the Paris Agreement is to keep the increase in global average temperature to well below 2 degrees Celsius, above pre-industrial levels.
The positive sentiment comes as Bank of Korea and other financial bodies have joined or been seeking to join, as observers, the Network for Greening the Financial System.
The system is a voluntary network of central banks established in December 2017 to help promote sustainable growth and joint management of climate change-related financial risks.
"The BOK joined the system last November, a move set to be followed soon by Financial Supervisory Service (FSS) and Financial Services Commission (FSS). This will advance an industry-wide initiative by having them consider climate-related factors in setting up the business portfolio to boost profit," he added.
More specifics will be outlined after the planned publication of a handbook on climate and environmental risk management, voluntary guidelines on scenario-based risk analysis and best practice for incorporating sustainability criteria.
The central bank and financial authorities in Korea seeking to join the global efforts to identify and mitigate climate risks in the financial system is a step in the right direction, he added.
"The global discourse is moving towards effective financial management of climate change-oriented risks. This is a major improvement from the past whereby the financial sector barely took any interest in green initiatives, no more than caring about whether they would be able to boost profit by lending money to firms with an eco-friendly business model."
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