Press Releases
Press Releases
Korea’s ESG Finance Surpasses KRW 2,000 trillion, but Growth Slows: "Consistent Policy Signals from Government Urgently Needed"
Korea’s ESG Finance Surpasses KRW 2,000 trillion, but Growth Slows:
"Consistent Policy Signals from Government Urgently Needed"
- Environmental (E) Sector Accounts for Only 17% of Total ESG Finance ... Regulatory predictability is crucial to driving capital into green projects
- Transition Finance Must Rely on ESG Data – The credibility of corporate sustainability disclosures will determine the success of the green transition
- Korea Sustainability Investing Forum and Representative Byoung Dug Min’s Office jointly release the 「2024 Korea ESG Finance White Paper」
Korea’s domestic ESG finance market has achieved a quantitative milestone, surpassing KRW 2,000 trillion for the first time in history. However, the market's overall dynamism has visibly slowed down. With growth in the private sector stalling, experts stress that clear policy signals are urgently required to eliminate market uncertainties and drive an authentic transition. On February 23, the Korea Sustainability Investing Forum (KoSIF), along with National Assembly Member Byoung Dug Min’s office, published the 「2024 Korea ESG Finance White Paper」, based on extensive survey and analysis of 167 domestic financial institutions, and urged the government to secure policy consistency for the qualitative growth of ESG finance.
According to the survey, Korea’s total ESG finance volume reached KRW 2,012.6 trillion as of the end of 2024, more than doubling over a five-year period since 2019. However, excluding the National Pension Service (NPS), an analysis by sector reveals a staggering imbalance skewed toward specific fields. Specifically, the Social (S) sector accounted for an overwhelming share of KRW 763.7 trillion (72.3%), whereas the Environmental (E) sector, which is directly linked to the climate crisis response, stood at a mere KRW 180.5 trillion (17.1%). This was followed by the Integrated/Other sector at KRW 107 trillion (10.1%) and the Governance (G) sector at KRW 4.9 trillion (0.5%). Analysts point out that this extreme imbalance is since the quantitative expansion of ESG finance has been heavily led by social finance performance such as policy-backed loans from the Korea Housing Finance Corporation which are relatively easy to classify and carry lower risks.
By type, ESG investments (KRW 945.5 trillion, 47%) and ESG loans (KRW 753.0 trillion, 37.4%) formed the central pillars of the market, followed by ESG bonds (KRW 247.5 trillion, 12.3%) and specialized ESG financial products (KRW 66.6 trillion, 3.3%), confirming that the structure remains centered around investment and credit.
Behind this quantitative growth, however, the rapid contraction of market dynamism is a major cause for concern. The annual growth rate, which had maintained a robust 20% to 30% range in recent years, plummeted to a single-digit growth of 8.9% in 2024. Squeezed by high interest rates and deteriorating profitability, the private sector's ESG financial volume contracted by 0.6% year-on-year, marking its first negative growth in five years. Youngho Kim, Chairman of the KoSIF, diagnosed the situation, stating, “The financial industry is an area that is extremely sensitive to regulations and government policies. The previous administration's passive stance on ESG policies drained vitality from the market and led to this stagnation”. He emphasized that “consistent policy signals from the government are vital.”
| Environmental (E) Sector Stagnates at 17% Share; Sustainability-Linked Loans (SLL) Also Plunge by 20.8%
The Environmental (E) sector, which is directly linked to the implementation of net-zero carbon goals, remained stuck at KRW 180.5 trillion accounting for only 17% of the total ESG finance. Furthermore, 61.4% (KRW 110.8 trillion) of that environmental capital was concentrated solely on conservative bank loans. This indicates that financial institutions' deep-seated 'flight to safety' is holding back the progress of climate finance.
The financial supply required to meet real corporate demands, such as achieving RE100 commitments, is also failing to gain momentum. As of 2024, only 29 financial institutions offered specialized renewable energy financial products. When asked about the biggest hurdle in developing renewable energy products, financial firms pointed to "policy and regulatory uncertainty" (29.4%). This clearly demonstrates that without institutional predictability, it is difficult for private capital to flow into high-risk green projects.
Additionally, experts urge the vitalization of "Transition Finance” funding designed to encourage hard to abate non-green industries, such as steel and construction, to gradually shift toward decarbonization. Namyoung Park, Senior Researcher of KoSIF, stated, "Transition finance must be robust enough to encompass long-term, high-risk, and large-scale projects capable of fundamentally restructuring high-carbon industries." Given that the current administration has declared a commitment to the 'Korea Green Transformation (K-GX)' with an emphasis on 'productive finance,' the white paper stresses that bolder expansionary policies are required to actively induce private capital participation.
Consequently, Sustainability-Linked Loans (SLLs) which offer interest rate incentives to companies when they meet specific carbon reduction targets are drawing attention as a critical steppingstone for greening traditional high-carbon industries. However, according to the ESG Finance White Paper, the SLL balance stood at a meager KRW 4.7 trillion, a sharp 20.8% drop compared to the previous year. The white paper analyzed that financial institutions are avoiding transition finance, which helps fundamentally improve a company's corporate structure, citing risk management costs as the primary reason.
| “Transition Finance Also Relies on ESG Data” … Credibility of Sustainability Disclosures Will Determine Success of Green Transition
Meanwhile, domestic financial institutions reported a total of KRW 3.8 trillion in LNG (Liquified Natural Gas) financing under the category of 'ESG Finance.' While some taxonomies, including the K-Taxonomy, conditionally classify LNG as a transitional energy source for achieving carbon neutrality and include it in the green category, controversies regarding its appropriateness and 'greenwashing' concerns persist.
In this context, Youngho Kim emphasized, “ESG disclosure is a core policy for building a virtuous cycle in the ESG market ecosystem, and both transition finance and stewardship codes are entirely based on ESG data.” For ESG finance to drive an authentic transition, an infrastructure where corporate ESG data is transparently disclosed must be established beforehand. Because transition finance depends on verifying a company’s decarbonization pathway through empirical data, 'sustainability disclosure' is considered the foundational bedrock that determines the success of the policy. Youngho Kim pointed out the contradiction, stating, "It is deeply contradictory for the government to push for corporate transformation through market discipline while simultaneously taking a conservative and hesitant approach toward making sustainability disclosures mandatory."
Byoung Dug Min also echoed this sentiment, emphasizing, “Sustainability data is no longer just a non-financial element; it directly dictates financial decision making and investment judgements. It has now become imperative that sustainability information be provided in a highly reliable, transparent, and comparable format.”