South Korean conglomerate Hanwha Group has made the first corporate retreat from coal of 2021, with six of the company’s financial services affiliates pledging to cease financing of the fossil fuel, which is the largest man-made source of greenhouse gas emissions.
In a press statement released on Tuesday (5 January), Hanwha said its subsidiaries would not be involved in any financing of future domestic and overseas coal projects, nor would they purchase any corporate bonds issued for the construction of domestic and foreign coal plants.
The affiliates included Hanwha Life Insurance, Hanwha General Insurance, Hanwha Investment & Securities, Hanwha Asset Management, Hanwha Savings Bank, and Carrot General Insurance.
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The move follows the withdrawal of Hanwha Investment & Securities from a refinancing arrangement with Abbot Point Terminal in Australia, with Hanwha officials stating in August that coal-related businesses lack growth potential.
The commitments follow coal divestment pledges from major Korean financial groups made in 2020, including Shinhan, Samsung, and Woori Financial Group. Hanwha’s announcement also comes three months after South Korea, the world’s seventh largest national carbon emitter, declared a climate emergency and set a net-zero emissions target for 2050.
If Korea wants to really stand out for climate action in the region, it needs to start taking action on ongoing coal projects at home and abroad.
Sejong Youn, director, climate finance, Solutions for Our Climate
Hanwha president Kim Seung-yeon said the firm would “work to act decisively on climate change, and incorporate more environmentally friendly practices to usher in a net-zero society.”
Sejong Youn, director of climate finance at Seoul-based green group Solutions for Our Climate, welcomed the move and said that Korea’s financial sector is “quickly coming to terms with the significant financial risks of support to coal power projects.”
However, the non-governmental organisation commented that coal financing remains an issue in Korea, where public and private financial institutions pumped US$55 billion into coal power projects between 2009 and 2020. That level of financing makes Korea’s stranded asset risk from coal the largest in the world, according to a 2019 Carbon Tracker Initiative report.
Despite the flurry of decarbonisation commitments from Korean entities, Youn told Eco-Business that the East Asian country’s financial institutions are “slow movers” on climate action compared to other international players. Japanese and Singaporean banks had exited coal between 2019 and 2020, and other global players had divested even earlier, he said.
The issue with Korea’s retreat from coal is that its financial institutions continue to support ongoing projects, noted Youn. For instance, Samsung’s financial arm had declared it would go coal free in November, three months after Samsung’s construction subsidiary moved to participate in the controversial Vung Ang 2 coal project in Vietnam.
Korea also has seven coal power plants under construction, and many of the major Korean banks have investments in these projects, he told Eco-Business. “The market trend in coal already indicates that there will be very few new projects going forward anyway. So if Korea wants to really stand out in the region, it needs to start taking action on ongoing projects at home and abroad.”
Youn added that Korea’s public sector has been the most resistant to a coal exit. Korea’s largest financier of coal is the National Pension Service (NPS), the world’s third-largest pension fund, which has invested US$9 trillion in domestic coal over the last decade. Meanwhile, Korea Development Bank, Korea Trade Insurance Corporation and the Export-Import Bank of Korea backed Vung Ang 2 and Indonesia’s Jawa 9, 10 coal project last year.
“If Korea’s public finance sector makes a move on managing climate risks, Korea can certainly lead decarbonisation efforts in East Asia, particularly with climate finance,” he said.