A ‘Green Bond’ literally refers to a green bond. Green bonds are one of the bonds referred to as ESG bonds, and as interest in the environment and investment opportunities grows, opportunities to see and hear related news are increasing. Recently, LG Energy Solution, Korea Water Resources Corporation, and POSCO announced green bond issuances.
Green bonds are issued to raise funds for large-scale eco-friendly projects. While they are issued in the same manner as general bonds, the funds raised must be used exclusively for eco-friendly initiatives. They are limited-purpose special bonds that can only be invested in eco-friendly processes and climate change response projects, including transportation, creating sustainable resource-use environments, energy efficiency, renewable energy facilities, and environmental pollution prevention.
*The International Capital Market Association (ICMA) classifies eligible green projects as renewable energy, energy efficiency, pollution prevention and control, sustainable management of resources and land, ecosystem and biodiversity conservation, clean transportation, sustainable water and wastewater management, climate change adaptation, circular economy, and green buildings.
Issuing bonds entails mandatory disclosure requirements. First, a Green Bond Framework (GBF) must be established. The framework includes the purpose of the green bond issuance, use of funds, and project selection and evaluation procedures, with the issuance results disclosed in a post-issuance report. South Korea codified these requirements through its ‘Green Bond Guidelines’ in 2020.
Since the European Investment Bank first issued green bonds in 2007, international organizations, public and private enterprises, and financial institutions have continued to issue them. In South Korea, the Export-Import Bank of Korea was the first to issue green bonds in 2013, and according to the Korea Institute for International Economic Policy, the cumulative amount is estimated to have reached approximately ₩52 trillion as of 2021.
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