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Korean financial institutions hold KRW 118.5 trillion in fossil fuel finance assets

Korean financial institutions hold KRW 118.5 trillion in fossil fuel finance assets

Public financial institutions hold 1.5 times as much fossil fuel finance as private ones

Financial authorities must set policy covering fossil fuels as a whole — oil and gas as well as coal — and financial institutions' prudential assessments must actively reflect climate risk

Korea Sustainability Investing Forum publishes the <2022 Fossil Fuel Finance White Paper>

The first report to analyze the entirety of Korean financial institutions' fossil fuel finance

Korea's public and private financial institutions held a combined KRW 118.5 trillion (approx. USD 91 billion) in fossil fuel finance assets as of 30 June 2022, a new report shows. Coal accounted for KRW 56.5 trillion (approx. USD 43 billion) and natural gas and oil for KRW 62.0 trillion (approx. USD 48 billion).

The Korea Sustainability Investing Forum announced that, jointly with the office of Rep. Wonyoung Yang-Yi, it had published the <2022 Korea Fossil Fuel Finance White Paper>, the first report in Korea to analyze how domestic financial institutions support fossil fuels. Previous estimates covered coal finance only; this is the first time the scale of oil and natural gas finance has been quantified.

The total of KRW 118.5 trillion (approx. USD 91 billion) in fossil fuel finance assets cover loans, bonds and equity investments only. Adding KRW 94.9 trillion (approx. USD 73 billion) in insured amounts underwritten by private insurers [1], which is not included in the report's figures, brings the total to KRW 213.4 trillion (approx. USD 164 billion) — equivalent to one third of this year's government budget. By contrast, renewable energy accounted for just KRW 37.2 trillion (approx. USD 29 billion) even on a cumulative basis from 2012 to the end of June 2022, a stark imbalance in investment.

Public financial institutions held KRW 61.8 trillion (approx. USD 48 billion) in fossil fuel finance assets, or 60.8% of the KRW 101.7 trillion (approx. USD 78 billion) analyzed — 1.5 times the KRW 39.9 trillion (approx. USD 31 billion) held by private financial institutions. The gap is largely due to the Korea Development Bank's stake in KEPCO (approximately KRW 20 trillion, approx. USD 15 billion). (※ Note: the report analyzes fossil fuel finance assets of KRW 101.7 trillion rather than KRW 118.5 trillion because ▲ the NPS's KRW 16.8 trillion (approx. USD 13 billion) in fossil fuel finance has been excluded. This is because the data submitted by the NPS does not separate natural gas from oil finance, which could distort the fuel-by-fuel analysis. The NPS accounts for KRW 7.3 trillion (approx. USD 5.6 billion) in coal finance and KRW 9.5 trillion (approx. USD 7.3 billion) in oil and gas finance.)

[Figure 1] Fossil fuel finance balances and shares: public vs. private financial institutions

By fuel, coal finance was the largest at KRW 49.2 trillion (approx. USD 38 billion), followed by natural gas finance at KRW 30.2 trillion (approx. USD 23 billion) and oil finance at KRW 22.3 trillion (approx. USD 17 billion). Natural gas and oil finance together totaled KRW 52.5 trillion (approx. USD 40 billion), KRW 3.3 trillion more than coal finance. These figures underscore the need for financial policy covering all fossil fuels — natural gas and oil as well as coal.

[Figure 2] Scale and share of finance assets by fossil fuel

The report states: "Reducing fossil fuel finance requires not only efforts such as establishing a government coal phase-out roadmap and enacting a coal phase-out act, but also government policy to move the financial system toward climate finance, green finance and, ultimately, sustainable finance." More specifically, it proposes that "financial regulators should actively factor climate risk into prudential assessments of financial institutions, and further policy effort is needed to make climate and other disclosures mandatory for financial institutions, as the European Union does under the SFDR (Sustainable Finance Disclosure Regulation)."

"Globally, investment in fossil fuels is falling rapidly while investment in renewable energy is rising," said Rep. Wonyoung Yang-Yi. "In 2021, renewable energy attracted USD 367 billion against USD 119 billion for fossil fuels — 3.1 times as much going to renewables. Yet as of the first half of 2022, Korean financial institutions' total outstanding fossil fuel finance stood at KRW 118.5 trillion, down just 1% year on year, while investment in renewable energy came to only KRW 7.2 trillion (approx. USD 5.5 billion)." She added: "Investment in fossil fuel assets is still not falling. The government has a role to play in enabling Korean financial institutions to engage more actively in climate action."

Youngho Kim, Chair of the Korea Sustainability Investing Forum, commented: "The figures make clear that financial institutions have acted as an unstinting source of fuel for the entire fossil fuel industry — oil and natural gas as well as coal." He added: "Financial institutions must restructure their long-term asset portfolios with a view to net zero by 2050, including an interim target for 2030."

[1] Insured amounts are covered in detail in , published separately by the Korea Sustainability Investing Forum on 29 March 2023, which analyzes the underwriting and investment policies of Korean insurers.

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