Despite currently heavily relying on coal and nuclear power for energy production, the South Korean government like many countries around the world has made a commitment to being green conscious, pledging to be carbon neutral by 2050.
Looking to adhere to government policy, several South Korean issuers have been re-examining their financing schemes to support the country’s overall sustainability drive in 2021. This week alone, South Korean-based issuers, including Industrial Bank of Korea (IBK) and Korean Electric Power Corporation (Kepco), were in the market for their respective sustainability and green bonds.
In the case of IBK, the issuer's US$500 million offering was able to tighten pricing by 30bp inside the initial price guidance of 50bp above US treasuries. The final orderbook was over US$1.43 billion, 2.9 times oversubscribed, from more than 77 accounts.
Proceeds will be allocated to finance or refinance new and existing loans extended to entities or projects that are eligible under IBK’s Social, Green and Sustainability Bond Framework.
BofA Securities, Citi, HSBC and Standard Chartered acted as joint bookrunners and joint lead managers for the offering, while IBK Securities and KB Securities acted as co-managers.
In Kepco's case, it raised US$300 million from international investors. During the book-building process, the order book drew US$2.1 billion from 86 accounts. Demand mostly came from banks, which took up 42% of the offering.
Net proceeds from the deal will be allocated to eligible green categories in accordance with Kepco’s sustainability finance framework. Joint bookrunners on this deal included Citi, Crédit Agricole CIB and HSBC.
The two deals represent just the tip of the iceberg for South Korean issuers pivoting their financing towards a more sustainable focus. In 2021, the likes of Korean Development Bank, KIA, SK Hynix, Incheon International Airport, NongHyup Bank and LG Chem have tapped the international markets with environmental, social and governance (ESG)-themed bonds.
So far this year (January 1 to August 31), around 116 Korean entities have issued either green, social or sustainable development bonds worth a record 60.6 trillion won (US$52.3 billion), according to data from the Korea Exchange. In 2018, only 1.2 trillion won (US$1.03 billion) of ESG-themed bonds were issued, highlighting the momentous shift taking place in the South Korean bond market.
