[기업경영의 뉴 패러다임] The most noticeable investment destination in the ESG era… ESG bond issuance is also’bottom’

Perhaps the most notable area for ESG finance and investment is bonds. ESG bonds are bonds that have been recognized as related to ESG, such as the environment, society, and improvement of governance structure, for the purpose of financing the issuer.

Global ESG bonds showed rapid growth in 2019 and 2020. Global ESG bond issuance increased 65% from $1980 billion in 2018 to $322.8 billion in 2019, and reached $426.7 billion by November in 2020. With the explosive increase in related demand, it is said that it is like a vacuum cleaner that absorbs market liquidity without hesitation over ESG bonds.

ESG bonds can be largely classified into green bonds, social bonds, and sustainable bonds. Green bonds, which are related to the environment, accounted for the majority, but the proportion of sustainable bonds and social bonds has recently increased. In particular, as the International Capital Markets Association (ICMA) allowed financing to cope with the socio-economic crisis in June of last year, the issuance of social bonds with relatively less restrictions on usage has increased rapidly.

The global bond market is centered on dollar bonds, but ESG bonds are mainly issued in euros. This is because Europe put environmental issues first, but there is a prospect that the proportion of the dollar in ESG bond issuance currencies will increase after the Biden government, which is highlighting environmental issues, occupies the White House.

ESG bond issuance in Korea is still in the beginning stage, but has been growing rapidly since 2019. As of 2018, the new issuance of ESG bonds in Korean won was around 950 billion won, but in 2019 it surged to 27 trillion won and already surpassed 50 trillion won until November in 2020. Much of this is Korea Housing Finance Corporation’s housing mortgage securities (MBS). For this reason, the global ESG bond market is mainly green bonds, whereas the domestic ESG bond market is dominated by social bonds.

“This year, ESG corporate bonds will become a new change in the domestic corporate bond market,” said Kim Eun-ki, senior research fellow at Samsung Securities’ Global Bonds. Occupy. As investment expanded in line with ESG management guidelines, the need for financing through ESG bonds increased.”

As ESG bonds were in the limelight, credit rating agencies began to establish an ESG certification evaluation system. Korea Credit Ratings started the ESG assessment project from last year, and Nice Credit Ratings and Korean Enterprise Ratings also established ESG certification evaluation methodologies from the end of last year and early this year, and started ESG evaluation.

Lee Seong-jae, senior researcher at the Investment Strategy Department at Shinhan Investment & Investment said, “Esg bonds are in the beginning stage in the domestic corporate bond market, but an environment in which ESG bonds can be systematically expanded is being created. From the perspective of investors, the transparency of ESG bonds has increased. Of course, there are not many issuance cases yet, so it is unclear how it will affect the market. There are issues that can be continuously raised, such as the execution details and follow-up management of funds, the issue of Green Washing, and the possibility of changes in ESG ratings. However, with the issuance of ESG bonds in earnest, the number of cases that can be verified is increasing, and it is expected that information that can be used by investors will be enriched.”