Diversifying Funding Sources
Shinhan Financial Group Co., a major financial holding firm in South Korea, has successfully issued US$500 million (590.50 billion) worth of ESG bonds in the United States.
An ESG bond is a special purpose bond that combines green bonds for investment in environmental improvement and renewable energy projects and social bonds for investment in projects to help low-income households and smaller companies.
The group successfully sold US$500 million (590.50 billion) worth of ESG subordinated bonds with maturity of 10 years and 6 months, becoming the country’s first financial holding firm in Korea to issue such bonds in the United States.
The bonds are foreign currency-denominated contingent convertible bonds meeting the Basel III capital requirements, according to Shinhan Financial. They carry a coupon rate of 3.34 percent, 150 basis points above the 5-year U.S. Treasury note.
Shinhan Financial Group attracted subscriptions from 200 institutional investors totaling US$4.30 billion (5.08 trillion won), about 8.6 times more than the total issuance.
Shinhan Financial said the latest bond sale represents a significant step towards diversification of funding sources from Asia to the United States. The global bonds were offered only to qualified institutional buyers in accordance with Rule 144A, instead of the RegS which is more commonly used by domestic banks. Rule 144A requires a bond issuer to acquire an international credit rating from more than two global credit agencies and provide a detailed investment prospectus. It also uses a stricter public disclosure rule and a more complex issuance procedure than Reg S. But by following Rule 144A, Shinhan could access institutional investors in the United States and raise its status as a global financial group.
Before the latest issuance, chairman Cho Yong-byoung attended a United Nations Environment Program Finance Initiative (UNEP FI) event in November last year, joining a global movement in setting up the "Principles for Responsible Banking," an international treaty drafted among noted financial institutions to strengthen cooperation toward a sustainable finance system. Shinhan Group was listed in the Global 100 Most Sustainable Corporations this year for the seventh consecutive year. The list is compiled by the Toronto-based media and investment advisory firm Corporate Knights, and announced at the World Economic Forum in Davos, Switzerland. It also became the first financial group to be listed on the Dow Jones Sustainability Indices World for six straight years.