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By Kim Bo-eun
The finance sector is increasingly incorporating the term ESG into their management strategies, to keep up with global trends and meet investors and shareholders' demands.
ESG stands for environmental, social and governance, and employing these values into a company's management means the entity seeks to protect the environment, fix societal problems and improve corporate governance through its business.
A number of major financial groups have established separate divisions focusing on devising related strategies for this year. This is seen as a move to go a step further from supporting the idea to drawing up action plans and executing them.
In a reorganization conducted in December, KB group created an ESG strategy division, to strengthen the group's ESG management. Its bank also set up a similar arm.
"Let's establish KB as an exemplary financial group leading sustainable management, by internalizing and expanding this," group Chairman Yoon Jong-kyoo told executives at a workshop held on the weekend.
KEB Hana Bank also created a similar unit. Protecting financial consumers and ESG management were the first principles under which the reorganization took place, according to the group.
"Now we must satisfy the interests of not only shareholders but also customers and employees and members of society," Hana Financial Group Chairman Kim Jung-tai said in his New Year address.
"We need to develop new businesses through which we can solve the problems of customers and society," he said.
As a related measure, banks have altered their employee performance evaluation systems to put greater weight on customer gains and protection.
Shinhan Financial Group has included sustainability as one of its five principles for management as well as one of seven of the group's strategic tasks.
On Dec. 20, Shinhan declared a set of principles on responding to climate change, the first such effort among local financial firms.
It outlines that climate change is an important factor of consideration for the group's management, and that the group needs to come up with a strategy to respond to the changes and execute it.
It seeks to expand financing of green businesses and projects, identify the risks associated with climate change and manage those risks. The principles also state that the group must contribute to reducing CO2 emissions and using renewable energy.
In October, the group pledged to pour 20 trillion won into green projects by 2030 and reduce greenhouse gas emissions by 20 percent. The group invested a total of 16.8 trillion won in green industries last year.
Banks are also increasingly issuing ESG bonds. Going a step further, financial groups are seeking to incorporate ESG criteria into corporate loans.
If businesses prove to be engaging in environmental protection, making efforts to be socially responsible and have transparent management structures, they may be prioritized in being granted loans.
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