[녹색금융시대]①’Deduction’ when investing in coal, changing bank evaluation

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[이데일리 이승현 기자] The financial authorities introduce standards related to climate change in the financial soundness assessment of financial institutions such as banks. It is to reflect the concept of climate change in the soundness evaluation of financial companies, such as imposing an obligation to accumulate more provisions for assets invested in fossil fuel power generation. It means that green finance does not end with just a declarative slogan, but becomes a key criterion for the survival of financial companies in the future.

Steel structure in a coal mine (Image Today)

According to the financial sector on the 22nd, the Financial Services Commission is pushing ahead with a plan to join the Green Finance Council (NGFS) as early as next year. NGFS is an international consultative body created by major central banks and financial supervisory organizations around the world for green finance. The Financial Services Commission has formed a’Green Finance Promotion Council (TF)’ in August with the Ministry of Environment to discuss such a plan.

When Korea joins NGFS, the method of evaluating financial soundness of financial companies will change. Bonds from companies with high carbon emissions are considered investments in high-risk, risky assets and forced to accumulate more provisions. Already in the international market, investment assets related to fossil fuel power generation are classified as’stranded assets’, which can lose their asset value in the future.

Financial institutions have no choice but to reduce their carbon-related bonds to maintain financial soundness. The risk of climate change is reflected in the health assessment of financial companies. The Financial Services Commission is currently discussing specific classification criteria and establishment of an evaluation model.

[이데일리 이미나 기자]

Green finance is a global trend. Fifty percent of European funds are concentrated in ESG (environmental, social and governance) related funds. The proportion of US ESG-related funds also exceeded 25%. There is a clear flow of funds. It is difficult for Korean financial companies to survive unless they follow the trend of the times.

However, it is also true that the burden on the financial sector increases. According to a recent report by the Financial Supervisory Service, as a result of applying the’climate stress test’ pilot model that reflects climate change soundness indicators, Korean banks who are unable to adapt to change are concerned that the BIS equity capital ratio may drop to a minimum of 4.7% in 2028. . Currently, major commercial banks maintain a BIS ratio of around 15%.

On the other hand, the Financial Supervisory Service predicted that if the domestic financial sector and financial authorities responded proactively, the BIS ratio would remain at 11.7%. This means that the level of financial soundness of financial companies can differ greatly depending on how they respond to changes.

Kim Jong-dae, director of Inha University’s Sustainability Management Research Institute (Professor of Business Administration), advised, “The UK is leading the climate change issue and is using it as a means of securing competitiveness in the financial industry.

●Green Finance Council (NGFS): An international consultative body created by major central banks and financial supervisory organizations around the world to discuss financial risk management standards related to climate change. When Korea joins NGFS, the criteria for evaluating financial soundness of financial companies will change, such as having to accumulate more provisions for bonds with high carbon emissions.

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