1. Yunhee Kim, Senior Analyst, yunhee.kim@assembly.go.kr yunhee.kim@assembly.go.kr Ick Jin, Director, realwing@assembly.go.kr realwing@assembly.go.kr Economic Program Evaluation Division Senior Analyst Green Bond in Korea: status and challenges

2. About NABO 2 The National Assembly Budget Office is a body of experts conducting research, analysis, and evaluation on national finances and policies of South Korea. A Guide of National Policies Credible Forecast and Analysis A Watchdog of National Finance It aims to enhance the National Assembly’s efficiency keeping the government in check and monitoring its operation of national finances. Economic Program Evaluation Division performs analysis and evaluation of major national programs.

3. Climate opportunity The bond market is an essential tool to finance the transition to a lowcarbon economy. 3 Source: CBI State of the Market 2016

4. South Korea: significant presence in the market South Korea has mainly issuance in energy and transport themes by the EXIM bank and Hyundai capital. ◦ 900 m. USD on 2013 & 2016 ◦ 500 m. USD on March 2016 In the labelled green bonds space, Hyundai issued Korea’s first corporate green bond linked to energy efficient and electric vehicles in 2016. 4 Source: CBI State of the Market 2016

5. The Export-Import Bank of Korea Expansion into the international green market High-tech Korean Companies with Great Capacity Government Support for Green Growth + ▒KEXIM’s Role in Green Growth Initiatives Eligible Industry Segements Solar, Wind, Bio, Geothermal heat, Waste, Fuel cell energy, etc. New And Renewable Energy New And Renewable Energy Energy storing facility(secondary energy storage cell), etc. Low Carbon Emission Low Carbon Emission LED, Energy Saving CO’s, Electricity IT, etc. Energy Efficiency Waste management, Green vehicles, Water treatment, Clean fuel, etc. Environmentally Friendly Industry Environmentally Friendly Industry In-depth Knowledge and Experience in Financing Capacity Strong Global Network Worldwide presence 5 Source: Korea EXIIMBANK Green Bond Newsletter, Feb.2016

6. Project Example: Off-GAS Power Project PT. Krakatau Posco Energy has constructed and operated a Off-gas power plant with the capacity of 2 x 100MW in Cilegon City, northwestern cost of Java, which is located approximately 100km west from Jakarta. The Power plant is fueled by a byproduct produced from steel making process in Pt. Krakatau Posco Integrated Steel Mill. It is an eco-friendly power plant providing a substitute for fossil fuel and reducing greenhouse gas emission by around 1 million tons per year. KEXIM committed total debt financing required for the project with US$107 million direct loan and US$87 million guarantees for commercial banks. PT. Krakatau Posco Energy Project Company The construction and operation of a Off-gas Power Plant with a capacity of 200MW grade Project at a Glance US$194m (100% of total debt financing volume) KEXIM Financing Annual reduction of 1 million tons Mitigation Partner Firm ▒Project Summary▒Description CO 2 Reduction: 1,000,000 tons / year Source: Korea EXIIMBANK Green Bond Newsletter, Feb.2016 6

7. Hanwha Q Cells Malaysia Sdn Bhd. Project Company Construction of a new solar energy module manufacturing plant R&D and revamp on an existing solar cell manufacturing plant Project at a Glance US$90mn KEXIM Financing Reduce carbon footprint by reducing greenhouse gas by generating power Mitigation Partner Firms Project Example: Solar Energy Project Solar power consumes no fuel, and emits no air pollution, unlike fossil fuel power sources KEXIM is supporting a US$90mn facility loan to Hanwha Q Cells Malaysia Sdn Bhd. in their plan to construct a new solar energy module manufacturing plant (1,650MW/year) and adopt new technology (adding 1,000MW/year ) and revamp (adding 300MW/year ) their existing solar cell manufacturing plant (1,300MW/year) Hanwha Solarone USA Inc., the sales affiliate, has secured a 1,500MW/year sales contract with NextEra ▒Project Summary▒Description Source: Korea EXIIMBANK Green Bond Newsletter, Feb.2016 7

8. How do green bond markets grow in Korea? InfrastructureSupplyDemand Strengthen local bond markets (FSC, FSS) Instruments to aggregate assets and structure risks Establish pipeline green project (X) Strategic public investment (Δ) Tax incentives (O) Develop green standards (MOSF) Strategic public issuance (KEXIM) Credit enhancement (KODIT) 8

9. Options explored by authorities in Korea ChallengeOption Lack of awareness of benefits of green bonds and existing international practices Raise awareness of benefits of green bonds via promotion, demonstration and incentives Lack of local green bond guidelinesDevelop local green bond guidelines Costs of meeting the requirements underpinning the green bond market Reduce risk premiums and facilitate cost-efficient verification and reporting Lack of green bond ratings, indices, listingsDevelop green bond indices, ratings, and stock exchange lists Difficulties for international investors to access local markets Seek international collaboration to facilitate cross-border investment in green bonds Lack of domestic green investorsIncubate local green investors Source: G20 Green Finance Synthesis Report, September 2016 9

10. Thank you for your attention Yunhee Kim (yunhee.kim@assembly.go.kr) yunhee.kim@assembly.go.kr Economic Program Evaluation Division Senior Analyst Green Bond in Korea: status and challenges