Chang Yong Rhee: Welcoming remarks - International Conference on
Green Finance
Welcoming remarks by Mr Chang Yong Rhee, Governor of the Bank of Korea, at the
opening ceremony of the International Conference on Green Finance, co-hosted by the
2050 Presidential commission on Carbon Neutrality and Green Growth and the Bank of
Korea, Seoul, 20 June 2023.
* * *
Good morning, ladies and gentlemen. I am Chang Yong Rhee, governor of the Bank of
Korea. I wholeheartedly welcome all the attendees here at this conference jointly
organized by the 2050 Presidential Commission on Carbon Neutrality Green Growth
Committee and the Bank of Korea. I would like to express my sincere gratitude to
coChairman Sang-hyup Kim, who passionately serves as a "Green Man," to Mr.
Daeyoung Kwon, standing commissioner of the Financial Services Commission, for his
keynote speech on "Strategies to Pursue Korean-Style Green Finance," and to Ms.
Bénédicte Nolens, head of the BIS Innovation Hub Hong Kong Centre, for accepting our
invitation to give a presentation. I would also like to welcome all the government
officials, bankers, and corporate representatives who will be presenting and discussing
in the sessions, and all those who are attending this event. Last, but not least, I would
like to express my deep gratitude to IMF Managing Director Kristalina Georgieva for
sending a very special congratulatory video.
Today, it holds special significance for the Bank of Korea that we are hosting this
conference with the Carbon Neutrality Green Growth Committee. As we celebrate our
73rd anniversary, it is a fresh experience for the Bank of Korea to move into a new
building and to hold our first conference with a government agency. Furthermore, the
climate change response, the theme of today's conference, is a global issue that
demands individual roles and collective efforts from us all. In my speech at the Bank of
Korea's anniversary ceremony on June 12, I mentioned the need to prepare for
changes in the economic structure, namely the new normal after the pandemic. It is a
well-known fact that the climate change response is one of the key challenges to
prepare for this new normal.
I would like to explain the reasons for this with three points.
First, the environmental challenges posed by climate change directly impact our
quality of life. Over the past 20 years, approximately 4 billion people worldwide have
been affected by climate disasters, resulting in over 500,000 deaths, and estimated
1
economic damages of 3,400 trillion Korean won (US$2.6 trillion) . As the effects of
global warming intensify, natural disasters such as heatwaves, wildfires, floods and
droughts are becoming more frequent and widespread, causing immeasurable damage.
The longer the delay in the climate change response, the more these crises and health
emergencies will pose a serious threat to our daily lives. In a national awareness survey
on climate change's impact on health, approximately 63% of respondents considered it
"serious." However, in the future, the number of people who perceive the climate crisis
as a health crisis will increase even more.2
Second, the Republic of Korea has an industrial structure that makes it difficult to
achieve short-term greenhouse gas reductions, and any failure to respond
proactively could severely restrict exports due to global environmental
regulations. The fossil fuel dependency rate of the Republic of Korea (as of 2021) is
high, at 64%, while the renewable energy proportion is low, at 7%. In comparison, the
United States, Germany and Japan all have renewable energy levels between 20% and
40%. Furthermore, across all industries, the Republic of Korea has a high share of
carbon-intensive sectors, such as oil refining, chemicals, cement, and steel, which (as
of 2021) account for 5.3% of our economy, a high number compared to major advanced
3
countries like the United States (2.5%), Germany (2.8%) and France (1.7%). With such
energy and industrial structures, the transition to a low-carbon economy poses a burden
for export-oriented companies. However, considering the rapid introduction of global
environmental regulations, delays in changing the business paradigm are no longer
feasible.
Examples of these new regulations include the European Union's Carbon
4
Border Adjustment Mechanism (CBAM) , the United States' Inflation Reduction Act
(IRA), the RE100 campaign by global IT companies like Apple and Microsoft, and the
strong measures taken by major asset management companies like BlackRock and
Vanguard to exclude environmentally harmful companies that do not meet ESG
standards. Financial institutions that support exporting companies are no exception.
The Glasgow Financial Alliance for Net Zero (GFANZ), comprised of banks, investment
firms and others, is urging financial institutions to demonstrate tangible results in
achieving the targets they have voluntarily disclosed for carbon neutrality. As we
approach 2030, the pressures of global regulations and goal attainment related to
environmental issues will only intensify. In line with this, the Republic of Korea has
made a commitment to reduce greenhouse gas emissions by 40% from 2018 levels by
2030, and to increase Official Development Assistance (ODA) for green projects. While
our economy may face challenges during this transition, when we fulfill our
responsibilities as members of the international community, we will then be able to
actively demand that advanced countries, which have historically emitted significant
amounts of greenhouse gases during their development process, fulfill their
technological and financial support responsibilities to developing countries.
Third, tackling climate change presents both risks and opportunities. The
COVID19 pandemic has caused a global health crisis, but it has also presented unprecedented
growth opportunities for bio-tech companies such as BioNTech and Moderna, who have
successfully developed vaccines. The climate change crisis will also present
opportunities for companies that are prepared. Global climate venture companies like
Opower in the U.S., a provider of big data for energy conservation, or like ClimateWorks
in Switzerland, which converts carbon dioxide into solid carbon for sale, or like Rubicon,
also in the U.S., which creates resource circulation platforms, are all experiencing rapid
growth. Globally, climate tech investment funds have grown threefold in two years,
reaching US$45 billion in 2021. Innovative technologies in the fields of environment,
energy, agriculture, and geographic observation are being commercialized at an
astonishing pace. This will provide challenging business opportunities for the young
ITsavvy generation in Korea.
The Bank of Korea is also making multifaceted efforts in response to climate change.
We are continuously expanding research and conducting stress tests to evaluate the
impact of climate change on financial institutions. This includes the development of
5
stress test models. Additionally, we are actively expanding our efforts in foreign
exchange reserve management by incorporating ESG investments, along with other
initiatives, to address climate change.
Moving forward, we intend to explore market creating measures to promote green
finance and policy tools to alleviate the transition burden on small and medium-sized
enterprises (SMEs) in collaboration with financial authorities. Supporting SMEs in green
finance is an important policy task because if SMEs fail to transition smoothly to
environmentally friendly practices, large corporations connected through export supply
chains will also find it difficult to evade global environmental regulations. However,
these SMEs face difficulties in benefiting from green finance due to their low credit
ratings. Therefore, it will be necessary to explore various approaches, such as
aggregating bank loans to SMEs and securitizing them, and issuing bonds that meet
international standards of green finance, to indirectly provide these SMEs with the
benefits of green finance.
Lastly, the Bank of Korea is also dedicated to enhancing communication with the
Korean people regarding the importance of green finance. We are committed to
fostering a stronger dialogue and understanding between the central bank and the
public on matters related to sustainable finance.
Through this joint conference, I hope we can share insights and ideas on how to
promote green finance, develop sustainable industries, and contribute to the
achievement of carbon neutrality. I am confident that the discussions and outcomes
from this conference will serve as valuable input for policy formulation and
implementation.
Once again, I extend my warmest welcome to all participants, and I hope you have a
productive and meaningful conference. Thank you very much.
st
1
For more details, please refer to "Main Contents of the 1 Master Plan for the Climate
Change Response Technology Development" (December 2022, Ministry of Science
and ICT)
2
For more details, please refer to the result of a survey on public awareness of impacts
of the climate change on national health. (October 2022, the survey was jointly
conducted by the Korea Disease Control and Prevention Agency and the Korean
Society for Preventive Medicine)
3
For more details, please refer to Box 7 of the Financial Stability Report (December
2022, Bank of Korea) titled "Comparison of Greenhouse Gas Emissions across
Countries and Assessment of Domestic Firms' Vulnerabilities to Climate Risks."
4
For more details, please refer to Box 9 of the Financial Stability Report (Bank of
Korea, June 2023), titled "Current Status of the Embodied Carbon Emissions from the
Export Industry and Vulnerability Factors of the Corporates."
For more details, please refer to Box 7 of the Financial stability Report (June 2021,
Bank of Korea), titled "Bank Stress Test to Measure Transition Risk from Climate
Change" and Box 7 of the Financial Stability Report (June 2022, Bank of Korea), titled
"Impact of Rising Carbon Prices on Sectoral Value-Added"