SRI (Socially Responsible Investment) Bonds
SRI bonds refer to bonds whose proceeds are used to fund environmentally-friendly projects or projects that can create social benefits. Examples of such bonds include green, social, and sustainability bonds. Terms such as ESG bonds, thematic bonds, or social contribution bonds are also widely used among issuers and market players to refer to these SRI bonds.
Green Bonds
Green bonds refer to debt securities issued with special purposes to raise capital to invest in environmentally-friendly projects such as renewable energy projects or social infrastructure.
Social Bonds
Social bonds refer to debt securities issued to raise capital to invest in businesses that can create social values.
Sustainability Bonds
Sustainability bonds refer to debt securities issued to fund businesses that are environmentally-friendly and can create social values
SRI (Socially Responsible Investment) Bonds - Principles
There are no existing laws or regulations on SRI bond issuance in Korea, but nonbinding international guidelines are generally accepted. To name a few, there are the Green Bond Principles (GBP), the Social Bond Principles (SBP), and the Sustainability Bond Guidelines, all published by the International Capital Market Association (ICMA), and there is also the Climate Bond Standards (CBS) developed by the Climate Bonds Initiative (CBI).
GBP, SBP and Sustainability Bond Guidelines
These are voluntary guidelines for issuing green bonds, social bonds, and sustainability bonds, and they are comprised of 4 core elements: 1) Use of Proceeds, 2) Process for Project Evaluation and Selection, 3) Management of Proceeds and 4) Reporting.
Climate Bond Standards (CBS)
These are standards to assess the eligibility of bonds and other debt instruments as green bonds, and their key features include: requirements on the use·tracking·reporting of proceeds based on full alignment with the Green Bond Principles (GBP), specific standards on the eligibility of low-carbon·climate adaptation projects and assets, verification process with independent verifiers and consistent procedures, and independent certification by the Climate Bonds Standard Board.
Guidelines on SRI Bond Issuance
The SRI bond issuance process is similar to that of conventional bonds, with a few differences that reflect the characteristics of SRI bonds.
SRI Bond Management Framework
This framework addresses: 1) Use of Proceeds, 2) Process for Project Evaluation & Selection, 3) Management of Proceeds, and 4) Reporting
External Review
This is to ensure that the SRI bond management framework is aligned with the applicable principles or standards such as the GBP, CBS, SBP, Sustainability Bond Guidelines, etc.
Reporting
Regular reports covering the use of proceeds and the environmental & social impact of bond issuance.
Process to register bonds in the SRI dedicated segment of the KRX
Check if the following eligibility criteria set by the KRX are met:
※ Criteria to be met for debt securities to be included in the SRI dedicated segment of the KRX (Article 4 of「KRX Guidelines for SRI dedicated Segment」)
  1. 1. The debt securities must be listed on the securities market operated by the KRX.
  2. 2. The issuance of the debt securities must be in line with any of the following SRI bond principles.
    1. (1) ICMA 「Green Bond Principles」, ICMA 「Social Bond Principles」, ICMA「Sustainability Bond Guidelines」
    2. (2) CBI 「Climate Bond Standard」
    3. (3) Other principles acceptable to the KRX
Submit application forms and other required documents
KRX reviews the eligibility and decides whether to accept the application or not
KRX notifies the decision
KRX’s Support for ESG & Sustainable Business
The KRX has been doing its utmost to ensure listed companies take more social responsibilities and grow green and sustainable finance.
  • In 2010, the KRX adopted ESG disclosure of listed companies.
  • In 2015, the KRX joined the SSE Initiative.
    Sustainable Stock Exchanges (SSE) Initiative: a partnership programme initiated by the UN to promote corporate ESG.
  • In 2015, the KRX developed ESG-related products including ESG indices.
  • In 2020, the KRX launched a webpage dedicated to SRI bonds.
Going forward, the KRX will spare no effort to promote ESG and sustainable business.