IBK President Yoon Jong-won has a real-time online conversation with new employees during an "untact" training on March 24. (Photo: IBK)

Sincerity is the nub of the Industrial Bank of Korea (IBK)’s environmental, social and governance (ESG) management., according to the bank.

All IBK employees perceive ESG management as a paradigm shift, not a temporary trend. Therefore, the bank says it is focusing on internalizing ESG management and making a positive change in employees’ perspectives.

ESG management is also the ambition of top management, which says it values sustainability.

Yoon Jong-won, president of IBK, participated in setting the UN Sustainable Development Goals (SDGs) when he served as South Korean ambassador to the Organization for Economic Cooperation and Development (OECD) in 2015.

In January, the IBK established the ESG Management Team. The team belongs to the Strategic Planning Department, a key management-related department, rather than remaining an organization for social contribution.

This is because the IBK believes ESG management is recognized as core value of management and a new management paradigm.

The IBK offers special services to companies practicing ESG management. A good example is the Job Creation Fund, which supports companies that employ socially marginalized people such as the disabled and the poor.

The bank also runs the Green Consulting Program that guides companies’ energy management and environmental management.

Various loans and investment products are also available to promote ESG management. Always Blue Sky Loan is a loan with a low interest rate for energy and environmental companies making efforts to slash fine dust emissions.

Environmental and Safety Investment Fund gives financial support to companies that invest in environmental and safety facilities for air pollution prevention and the reduction of greenhouse gas emissions.

Always Blue Sky Bankbook for general customers provides preferential interest rates to customers who use public transportation systems, eco-friendly vehicles, or those who put old diesel cars out of service.

The IBK will gradually expand its participation in international standards such as the United Nations Environment Program’s Financial Initiative (FI) and join the Equator Principles.

“We plan to implement various plans step by step to internalize ESG throughout management rather than to show it to the outside based on solid expertise from the top management to dedicated units,” an IBK official said.

In the meantime, the IBK announced on March 11 that it has issued 500 billion won in ESG contingent convertible bonds in the form of social bonds.

The bonds issued this time are the largest amount ever issued by the IBK. They consisted of 200 billion won in permanent bonds with the right to early repayment within five years (a call option) and 300 billion won in permanent bonds with the right to early repayment within 10 years.

The bond with a five-year call option has a coupon rate of 2.65 percent (five-year treasury bond rate + 105bp) while the bond with a ten-year call option, a coupon rate of 3.11 percent (ten-year treasury bond rate + 108bp).

The bonds have the lowest spreads among contingent convertible bonds issued in the Korean bond market. The IBK will use the funds raised by issuing the bonds to give a helping hand to small business owners and small and medium-sized enterprises hit hard by the COVID-19 crisis.

The IBK issued Korean won-denominated ESG SME bonds which received the first-ever ESG certificate as a Korean bank in February. It has been strengthening ESG management by issuing the Korean won-denominated contingent convertible bonds.

“We have strengthened capital stability by issuing the largest-ever amount of contingent convertible bonds with the lowest-ever coupon rates,” an IBK official said. “We will make endeavors to expand financial support by preemptively expanding capital.”

The IBK’s issuance of ESG bonds reflects the bank’s long-standing commitment to ESG management.

The bank started to issue ESG bonds in 2018 and since then, has issued 3,586 billion won worth of ESG bonds.