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🇰🇷 South Korea /Economy & Trade

BOK stalls on climate action, widening gap with global peers

From Hankyoreh · (10h ago) Korean Critical tone

Translated from Korean, summarized and contextualized by DistantNews.

TLDR

  • The Bank of Korea has failed to implement key climate change response policies it proposed four years ago, widening the gap with international central banks.
  • Of 10 proposed tasks, only two have been fully implemented, with four not yet initiated and four only partially completed, according to a report by the Green Transition Institute and Positive Money.
  • The delay, attributed partly to the principle of market neutrality, risks macroeconomic instability and significant financial losses due to climate change, while South Korea ranks poorly among G20 central banks in climate action.

The Hankyoreh reports that the Bank of Korea (BOK) is lagging significantly in its climate change response efforts, failing to implement crucial policies proposed in 2021. This inaction not only puts Korea behind its international counterparts but also raises concerns about the central bank's commitment to its stated goals. The report highlights that out of ten key policy directions, a mere two have been fully realized, with a substantial number still pending or only partially addressed.

Key unimplemented measures include the explicit recognition of green bonds as collateral for financial institution loans and the integration of environmental, social, and governance (ESG) principles into foreign asset management. While the BOK has increased its ESG investment, the proportion of green bonds remains minimal. Furthermore, the central bank's reluctance to disclose information on the carbon footprint of its foreign assets contrasts sharply with global trends among major central banks.

Climate change makes macroeconomic stability, which the BOK considers its mission, structurally impossible.

— Choi Ki-wonThe head of the Green Transition Institute's Economic Transition Team and a report author, emphasizing the systemic threat climate change poses to the central bank's core mandate.

The report criticizes the BOK's adherence to 'market neutrality' as a justification for inaction, arguing that this principle inadvertently perpetuates the dominance of carbon-intensive industries. This delay is not merely a policy gap; it poses a structural threat to macroeconomic stability, as climate change impacts, estimated to cause up to 45 trillion won in financial sector losses by the end of the century, could undermine price and economic stability. South Korea's investment in carbon neutrality falls far short of the required GDP percentage, and its central bank ranks poorly in global climate action indices.

From a Korean perspective, this situation is deeply concerning. The BOK, tasked with maintaining economic stability, appears to be failing in a critical area that directly threatens that stability. The Hankyoreh, as a progressive voice in Korean media, emphasizes the urgency for the new BOK governor to address these climate risks proactively. The failure to act decisively on climate change is not just an environmental issue; it is an economic imperative that requires bold policy shifts, including explicit support for green finance and greater transparency in asset management.

The new BOK governor must devise a role to resolve the climate risk of the Korean economy.

— Choi Ki-wonThe report author urging leadership action to address the economic implications of climate change.
DistantNews Editorial

Originally published by Hankyoreh in Korean. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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