Samsung Electronics launches 1 trillion won ESG fund

Samsung Electronics will launch a 1 trillion won investment fund with five major banks to help suppliers meet ESG criteria, aiming to support sustainable growth.

From left, NongHyup Financial Group Chairman Lee Suk-joon, Hana Financial Group Chairman Ham Young-joo, KB Financial Group Chairman Yang Jong-hee, Financial Supervisory Service (FSS) Gov. Lee Bok-hyun, Samsung Electronics Vice Chairman Han Jong-hee, Shinhan Financial Group Chairman Jin Ok-dong and Woori Financial Group Chairman Yim Jong-yong pose for a photo Tuesday at the office building of Korea Federation of Banks in Myeong-dong, central Seoul. [SAMSUNG ELECTRONICS]

Samsung Electronics has agreed to create a 1 trillion won ($748 million) investment fund dedicated to helping its suppliers meet environmental, social and governance (ESG) criteria jointly with the country’s five largest financial holding companies.

The electronics giant and its subsidiary Samsung Display will provide 1 trillion won, and the five major banks — KB, Shinhan, Hana, Woori and NH Nonghyup — will run a separate 1 trillion won interest-free loan program for domestic small and medium-sized companies.

Tier 1 suppliers that directly conduct business with the Korean manufacturer will be eligible for funding starting in October should their purpose concern safety, environment or the reduction of energy use.

Hundreds of the direct suppliers will be eligible, according to a Samsung Electronics spokesperson who did not name specific firms.

Each supplier can get up to 2 billion won in loans for the period of three years without interest as the funding vehicle will be run for the next six years.

The commitment is intended to ensure sustainable growth at small and medium enterprises against the backdrop of tough economic conditions.

“All of us are under a challenging circumstance due to uncertain management conditions, but it is critical for corporations big and small to engage in ESG management in order to drive sustainable growth across the entire supply chain,” said Samsung Electronics Vice Chairman Han Jong-hee.

A signing ceremony of the agreement brought together Samsung Vice Chairman Han, KB Financial Group Chairman Yang Jong-hee, Shinhan Financial Group Chairman Jin Ok-dong, Hana Financial Group Chairman Ham Young-joo, Woori Financial Group Chairman Yim Jong-yong, and NongHyup Financial Group Chairman Lee Suk-joon Tuesday at the office building of Korea Federation of Banks in Myeong-dong, central Seoul. Also attending was Financial Supervisory Service (FSS) Gov. Lee Bok-hyun.

The five financial institutions will carry out screening processes to determine which companies are eligible.

The FSS expects that the funding will help the beneficiaries eliminate 850,000 tons of yearly carbon emissions.

The investment fund is born out of Samsung’s earlier pledge to invest 60.1 trillion won into balanced growth across regions, which it announced last March.

Many of big corporations’ suppliers have expressed difficulties in fulfilling ESG demands as they carry tight budgets.

In a survey conducted by the Korea Federation of Small and Medium Business last year, 20.4 percent of respondents cited ESG-related equipment and facilities as the area that needed support the most, followed by subsidies and education.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]