Press Releases
Press Releases
Fossil Fuel Finance Reaches KRW 331.5 Trillion, Red Flagging Financial Institutions' 2050 Net-Zero Goals
English translation of KoSIF’s Korean content — the Korean version is the authoritative source.
Fossil Fuel Finance Reaches KRW 331.5 Trillion,
Red Flagging Financial
Institutions' 2050 Net-Zero Goals
- · Korea Sustainability Investing Forum Publishes '2023 Fossil
Fuel Finance White Paper': "Equivalent to Half of the 2024 National
Budget"
- · Despite Coal Phase-out Declarations, New Disbursements Surge
Annually to KRW 40.9 Trillion (2022)
- · Surging Natural Gas and Oil Finance in Policy Blind Spots
Sparks Stranded Asset Risk Concerns
- · Urgent Need for Regulatory Frameworks Mandating Climate Risk
Considerations in Asset Quality Evaluations
- 1. The total support for fossil fuel companies by domestic financial institutions has reached KRW 331.5 trillion as of the end of June 2023. Equivalent to half of the 2024 national budget, this figure signals a red light for domestic financial institutions aiming to achieve their 2050 net-zero targets. Through the '2023 Fossil Fuel Finance White Paper' published on the 27th, the Korea Sustainability Investing Forum (KoSIF, Chairman Young-ho Kim) warned that financial institutions' inertial support for fossil fuels threatens both their coal phase-out commitments and asset quality. Accordingly, the Forum emphasized the urgent need for a policy shift, including mandating the integration of climate risk when evaluating financial institutions' asset quality.
- 2. According to data submitted by 130 public and private financial institutions and analyzed by KoSIF alongside the Office of National Assembly Member Yi Won Young Yang (21st National Assembly), the total volume of fossil fuel finance stood at KRW 331.5 trillion as of H1 2023 (including insured exposure of KRW 138.1 trillion). Specifically, coal finance accounted for KRW 133.8 trillion, while natural gas and Oil finance stood at KRW 197.8 trillion. Private finance totaled KRW 211.2 trillion and public finance reached KRW 120.3 trillion, with private finance representing 63.7% of total fossil fuel finance. This high proportion is largely driven by substantial insured amounts (KRW 134.0 trillion) provided by private non-life insurance companies [See Chart 1]. Notably, new disbursements have also shown an upward annual trajectory, rising from KRW 27.9 trillion in 2021 to KRW 40.9 trillion in 2022. While surging energy prices and exchange rates drove up corporate operating capital and facility investment demand, the report noted that business inertia, where financial institutions remain entrenched in short-term profit-seeking despite warnings regarding the declining future value of fossil fuels, remains a more fundamental issue.
- [Chart 1]
- 3. The increase in fossil fuel finance poses a serious obstacle to
financial institutions achieving net zero by 2050. Future exposure
projection modeling focused solely on coal finance indicates that domestic
financial institutions are off track to reach 2050 net-zero targets. If
financial institutions maintain their current coal maturity schedules, KRW
27.6 trillion in corporate bonds and project financing (PF) outstanding
will remain in 2053 from the KRW 62.9 trillion recorded as of the end of
June 2023 [See Charts 2 and 3]. The primary reason coal finance is not
declining rapidly is that financial institutions' coal phase-out
declarations apply only to new contracts, while outstanding commitment
amounts under existing contracts continue to be disbursed. In fact,
remaining balances under pre-existing contracts continue to be drawn down
for the Samcheok Blue Power, Goseong Hai, and Gangneung Anin thermal power
plants. This directly contradicts the International Energy Agency's (IEA)
scenario recommending a global coal phase-out by 2040.
- 4. Fossil fuel financial risks are not confined to coal;
incorporating natural gas and oil finance makes achieving net zero by 2050
even more elusive for domestic financial institutions. The analysis
revealed that natural gas and oil finance outstanding accounted for 59.7%
(KRW 197.8 trillion) of total fossil fuel finance, surpassing the scale of
coal finance. Although natural gas power plants carry a high probability
of becoming stranded assets similar to coal-fired plants, they currently
lack policy attention. Nam Young Park, Senior Researcher at KoSIF, noted,
"It is crucial for financial institutions to recognize that natural
gas should serve only a 'transitional role' toward a renewable energy
transition, and government-level financial policies are essential for
achieving ultimate net zero and an orderly transition."
- 5. Young-ho Kim, Chairman of KoSIF, emphasized, "Financial
institutions are providing the lifeline that extends the business lifespan
of fossil fuel companies. It is time to implement strong institutional
measures, such as mandating climate risk considerations in financial
institution asset quality evaluations and aligning financial supervision
to mandate loan-loss provisioning based on these assessments, to redirect
capital from fossil fuels to green sectors." Assembly Member Yi Won Young
Yang added, "The role of the government and the National Assembly is
vital in encouraging domestic financial institutions to participate more
actively in addressing the climate crisis."
- 6. Meanwhile, following the initial release of the '2022 Fossil Fuel Finance White Paper' last year, KoSIF has conducted comprehensive surveys and analyses on the status of fossil fuel finance across domestic financial institutions for two consecutive years. These efforts aim to support the formulation of government policies to phase out fossil fuels and facilitate active climate risk management by financial institutions. Established in 2007, KoSIF is a non-profit organization dedicated to building a sustainable society through ESG initiatives. The '2023 Fossil Fuel Finance White Paper' is available on the official KoSIF website. (End)
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