[Maekyung Economic] “Green Bonds” remain popular despite low interest rates
Professor Youngju Nielsen (SKK GSB) has written a column about green bonds on MK News (Maekyung Economic).
The latest change in Korea to attract my attention is the issuance of ”green bonds” . SK Rent-a-Car announced in early January that they would issue green bonds worth up to 90 billion won. The Ministry of Environment also published a guidebook in December 2020 to encourage revitalization of the green bond market. As we can assume from their name, green bonds are bonds that are related to the environment. Then what exactly is a green bond?
A green bond is a type of bond. Bond investors are paid interest by the issuing entity at regular intervals. When a bond matures, its face value is returned, just as the principal is returned[JPB2] . Companies can use the money received from bond investors for corporate activities. However, funds accrued by issuing green bonds should only be invested in assets or business related to environmental protection. Prime examples of such green projects are development of renewable energy, clean transportation, and sustainable water resources.
Green bonds cannot simply be issued under the name ‘green bond’. Rather, they are certified by the Climate Bonds Standard Board.
There is no problem if regular bonds are used for green projects, so why is there a need for green bonds? An expense is incurred when companies issue bonds, and green bonds must satisfy more conditions, so these inevitably cost more to issue. However, companies can reap more benefits, outweighing the greater issuance cost.
Original article in Korean: https://news.mk.co.kr/v2/economy/view.php?year=2021&no=79978
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