Press Releases

[Figure 1] Excerpt from the 2024 Fossil Fuel Finance White Paper at a glance 

The Korea Energy Economics Institute had projected that demand for fossil-fuel power generation would decline from 2025 while renewable demand expanded in earnest. In practice, however, investment flows have yet to break free of past inertia. As of the end of June 2024, new financing executed by Korean financial institutions came to KRW 32.8 trillion for fossil fuels versus KRW 4.8 trillion for new and renewable energy—a gap of roughly seven to one (excluding the National Pension Service). 

[Figure 2] Newly executed energy finance, global vs. domestic (2024), units: USD billion / KRW trillion 

[Figure 3] Year-by-year trend in outstanding domestic fossil-fuel finance vs. new and renewable energy finance, unit: KRW trillion 

This also runs squarely against the global trend. Major economies including the United States, China and the EU have raced to expand new and renewable energy investment, with the result that new renewable investment reached about USD 2.033 trillion—1.7 times the USD 1.198 trillion in fossil-fuel investment. The gap is just as striking in cumulative terms. Outstanding domestic fossil-fuel finance stood at KRW 121.8 trillion—five times the KRW 24.5 trillion in new and renewable energy finance. 

A still more serious problem is that domestic new and renewable energy finance is losing even its momentum. In 2023, newly executed financing fell 11 percent year on year, a steepening decline. By source, private finance accounted for KRW 17.7 trillion (72.2 percent) and public finance for KRW 6.8 trillion (27.8 percent); although the private sector leads, the sheer volume of capital falls far short of what is needed to drive the energy transition. 

KoSIF attributed the weakness in renewable investment to the previous administration’s unfavorable renewable-energy policy stance, which it said cast a negative shadow over the financial market as a whole. The report noted that the absolute volume of capital flowing in is insufficient, leaving the pace of the energy transition short of expectations, and warned that this structural constraint could also weigh on the sustainability and global competitiveness of the national economy—calling for more proactive policy support and measures to invigorate the financial market. 

KRW 173.7tn in Fossil-Fuel Finance—The Problem Is Coal Lending Skewed Toward KEPCO 

The outstanding balance of fossil-fuel investment by Korean financial institutions has already reached an enormous level. According to the 2024 Fossil Fuel Finance White Paper, as of June 2024, 112 domestic financial institutions held KRW 173.7 trillion in fossil-fuel finance (KRW 372.3 trillion including insurance) via bonds, corporate loans and project finance (PF), of which coal accounted for KRW 77.1 trillion and natural gas and oil for KRW 96.6 trillion. Given that institutions such as the Korea Post—among the top five holders of fossil-fuel finance last year—declined to submit data this year, the actual figure is likely to be even larger. 

[Figure 4] Trend in outstanding fossil-fuel finance by period (unit: KRW trillion (%)) 

Yang Choon-seung, Standing Director of KoSIF, said the core problem is that domestic fossil-fuel finance is excessively invested in KEPCO-centered coal-fired power, and that this structure has become entrenched. Indeed, KRW 55.2 trillion—one-third of the outstanding fossil-fuel finance—was found to be concentrated in KEPCO and its subsidiaries. 

Because this “KEPCO concentration” is being led by public financial institutions, questions of accountability are likely to grow louder. The National Pension Service and the Korea Development Bank alone accounted for KRW 32.5 trillion—some 99 percent of public finance’s KEPCO exposure—invested in KEPCO and its subsidiaries. 

Although public finance has a duty to lead industrial transition and send responsible investment signals to the capital market, as of June 2024 the National Pension Service was still maintaining large-scale coal-finance exposure to KEPCO. Against this backdrop, the “coal investment restriction” criterion introduced at the end of 2024 has drawn questions about its effectiveness. Because the criterion applies only to companies whose coal revenue exceeds 50 percent, KEPCO—which controls power-generation subsidiaries—falls outside its scope. The report noted that the NPS’s current criterion makes a meaningful restriction effect hard to expect and could, in the end, entrench a distorted, KEPCO-centered investment structure. It urged the NPS to move quickly to adopt an effective coal-exit strategy in line with international trends. 

A Gap Between Policy and Finance: “The Role of Climate Finance Must Be Redefined” 

Concerns were also raised that the Lee Jae-myung government’s goal of fully phasing out coal-fired power plants by 2040 could collide with financial institutions’ current investment structures. KoSIF pointed out that most financial institutions’ coal-exit pledges are limited to halting new coal projects, with no restrictions on rolling over existing financing contracts. As a result, it noted, roughly KRW 11 trillion in coal finance is expected to remain even after 2040—a structural risk that could stand in the way of the government’s energy-transition goals. 

To resolve these limitations, there is an urgent need to build an institutional foundation that strengthens the financial sector’s ability to follow through on phasing out fossil fuels. KoSIF first recommended overhauling the “coal company” classification criteria—currently applied differently by each financial institution—to align them with internationally accepted standards. When criteria differ as they do now, financing decisions on the same company diverge, which limits the market’s ability to send a consistent coal-exit signal—hence the need for improvement. 

It further warned that the risk is not confined to coal: the KRW 96.6 trillion in oil and natural gas finance also carries structural risk. In particular, because LNG power generation is classified as part of the “transition” segment, green bonds and similar funds are flowing into it intensively—a situation that could lead Korean finance to expand investment in precisely the segments most exposed to stranded-asset risk. This, KoSIF stressed, conflicts with the worldwide move away from fossil fuels and toward energy transition, underscoring once again the urgency of institutional reform and standard-setting. 

[Cover] 2024 Fossil Fuel Finance White Paper 

In his preface, KoSIF Chair Kim Young-ho said that since the new government has positioned itself as a “climate government,” bold climate-finance policy design is urgently needed. “Now is the time,” he said, “to actively consider concrete policy tools that shift the flow of capital—such as implementing financed-emissions target management for public financial institutions and having the Financial Supervisory Service mandate the inclusion of climate risk in financial institutions’ asset-soundness assessments.” 

Rep. Kim Hyun-jung, co-publisher of the white paper, said: “The reality this white paper reveals—that growth in new and renewable energy finance is not keeping pace with expectations—suggests that the flow of finance for the energy transition has yet to enter a genuine transition phase.” She added, “In the National Assembly, too, we will see our responsibility through to the end, using real policy tools such as legislation and budgets so that ESG and the response to the climate crisis do not remain mere slogans.” 

Inquiries: Myungeun Song Senior Researcher (mileysong@kosif.org), Dajeong Kim  Senior Researcher (kimdj@kosif.org)