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Solutions for Our Climate (SFOC) has disclosed that significant Korean financial institutions, comprising KEXIM, K-SURE, and KDB, allocated a noteworthy $127.1 billion for overseas oil and gas projects in the previous decade, outstripping coal funding. The report stresses the environmental impact, calling for rapid action to align with the goals of the Paris Agreement. SFOC calls into question the suitability of public funds supporting oil and gas, citing potential risks to domestic industries and financial institutions. The SFOC has pledged to undertake continuing analysis of the financial and environmental implications of these investments.
The Export-Import Bank of Korea (KEXIM), Korea Trade Insurance Corporation (K-SURE), and Korea Development Bank (KDB), the Korean public financial institutions under investigation, have been providing colossal sums – amounting to $127.1bn in total – in financing for overseas oil and gas projects over the past ten years (2011- 2020).
For the past few years, there has been a growing awareness across society that public financial institutions’ financing of coal-fired power generation accelerates the climate crisis, but problems with their support for other fossil fuels – including oil and gas – have yet to become well known. Solutions for Our Climate (hereinafter, “SFOC”) is publishing this report to shed light on the current status of financing provided for overseas oil and gas projects by major Korean financial institutions, as well as to present the issues with, and propose ways of improving, such public financing.
SFOC's analysis has revealed that the Export-Import Bank of Korea (KEXIM), Korea Trade Insurance Corporation (K-SURE), and Korea Development Bank (KDB), the Korean public financial institutions under investigation, have been providing colossal sums – amounting to $127.1bn in total – in financing for overseas oil and gas projects over the past ten years (2011- 2020). This is almost 13 times the public financial support provided for coal-fired power generation projects in the same period, which stood at $9.9bn.
When this support is examined by oil and gas project segments, financing of nearly $32.2bn was provided for the upstream segment, which includes oil and gas field development projects, and approximately $49.7bn was deployed in the midstream segment, which is associated with the transportation of oil and gas. Finally, $45.2bn was provided to the downstream segment, where the finished products are made. It was also possible to see that financing of around $57.7bn, which accounted for 46% of total amount, was provided in relation to construction of offshore plants and shipbuilding, which is analyzed separately.
Carbon dioxide emissions from oil and gas amount to half of global emissions, and in order to achieve the temperature goals of the Paris Agreement, swiftly reducing production and consumption of these fossil fuels is essential. The International Energy Agency (IEA) has also predicted that, to achieve carbon neutrality by 2050, the demand for oil and gas would fall by 75% and 55% respectively, and that new development of oil and gas would be unnecessary after 2021.
Oil and gas-related industries take up a significant portion of the Korean economy. Further, it is possible that if coal were to be replaced with gas in the power generation sector, the demand for gas would increase even more. However, considering the threat from the climate crisis, it is inappropriate for public financial institutions to provide public funds to oil and gas projects, and it will increase the transition risk for the domestic industries and stranded asset risk for the financial institutions if it continues.
SFOC will continue to analyze the financial and environmental problems of Korean public financial institutions' investment in oil and gas.
