DGB Financial Group (DGBFG) is a South Korean banking holding company headquartered in Daegu, Korea. DGBFG operates five wholly-owned subsidiaries: DGB Data System, DGB Capital, Daegu Bank, U-Payment, and Daegu Credit Information. In 2013, 96% of the company’s income and 98% of its assets were derived from Daegu Bank. Daegu Bank is a regional bank offering deposits, loans, foreign exchange services, and various financial products.
Banks can encourage environmental stewardship through their products and services. For instance, banks can offer green mortgages with better rates or terms to buyers with energy efficient homes. Green credit cards can be used to support local charities and green checking accounts may reward customers with higher rates for personal behaviors that reduce individual impacts.
DGB’s Daegu Bank applies an environmental management checklist to its credit evaluation process. Based on the checklist results, loans with prime interest rates and fee discounts are awarded. Additionally, the bank offers green deposits with interest rate incentives to customers who participate in carbon reduction activities, such as weekly no-drive days, use of low emission vehicles, bicycles, or lowering at-home energy use.
According to a 2012 Global Sustainable Investment Alliance report, at least $13.6 trillion worth of professionally managed assets incorporate environmental, social, or governance (ESG) concerns into investment selection and management.1
Daegu Bank demonstrated leadership in 2008 when it began selling the “Woori Frontier Sustainable Business SRI Equity Fund.” These equities are screened according to socially responsible investing (SRI) criteria and utilize a quantitative scoring system. Ten percent of sales and operating profits are contributed to a public service fund.
All financial institutions have a direct environmental impact stemming from their retail branches and office locations. To minimize a bank’s direct environmental impact, common initiatives include online banking to minimize paper use, energy efficiency efforts for buildings and data centers, and videoconferencing to minimize business travel.
Daegu Bank became the first financial institution in Korea to acquire the Green Management System Certification, which includes ISO 14001 (Environmental Management System), ISO 50001 (Energy Management System), ISO 14064 (International Standards for Greenhouse Gas Emissions Inventories and Verification), and ISO 26000 (International Standards on Social Responsibility).
Daegu Bank offers several green financial products, however, they account for a small portion of the company’s total deposit and loan portfolios. Portfolio 21 applauds the bank for setting goals to increase the sales of its green products and will monitor future progress.
Portfolio 21 supports the bank’s SRI fund product offerings, however, we would like to see Daegu Bank provide additional information on the screening methodologies used to evaluate its the equities.
To the best of our knowledge the above information is accurate and was obtained from sources we believe to be reliable. Neither the information presented above nor any opinion expressed shall be construed as an offer to sell or a solicitation to buy the security. The views expressed are those of portfolio management as of 5/31/14 and may not reflect current opinions or subsequent events.