[finance daily reporter Jeong kyeong chun] It has been revealed that the number of Korean companies excluded from investment by global financial institutions has increased significantly.
According to an analysis of the ‘Financial Exclusion Tracker 2024 Latest Data’ by Climate Solutions, which compiles the status of financial institutions’ exclusion of companies from investment due to greenhouse gas emissions, weapons production, etc., the number of Korean companies subject to exclusion increased by 78 from 145 the previous year to 223, an increase of more than 50%.
The Financial Exclusion Tracker is a database compiled by several organizations around the world, including the Dutch civic group Banktrack, which monitors responsible investment by private banks, and announces updated status around the end of the year. Based on the new database announcement on the 12th of last month (local time in Europe), the collaborating organization Climate Solutions additionally analyzed and announced the exclusion patterns of Korean companies.
The 2024 update of the Financial Exclusion Tracker shows that 93 financial institutions in 17 countries are excluding 5,536 corporate groups in 135 countries. When aggregated by subsidiary, the total number of excluded companies reached 66,708.
The reasons for exclusion include worsening climate change and fossil fuel investment, human rights violations, worsening political instability, tobacco, and weapons production. The most common reasons were worsening climate change and fossil fuel investment, accounting for nearly half (48%) of all exclusions. Weapons (15%), tobacco (13%), and national policies (6%, including exclusion of investments in Russian companies) followed.
By country, the United States ranked first with 1,160 companies (based on corporate groups) on the list. China came in second with 852, India third with 341, Canada fourth with 290, and Russia fifth with 283. Although Korea is not ranked high with 99 companies based on corporate groups, the level of exclusion is by no means small when considering market capitalization. The total market capitalization of the United States is currently approximately 64 trillion dollars, while Korea’s market capitalization is approximately 1 trillion dollars, so the scale is not small. The number of financial institutions that excluded Korean companies from investment also increased by 21 from last year to a total of 103. The reasons for the exclusion of Korean companies were weapons (41.7%), climate (26.3%), tobacco (7.5%), human rights (6.9%), business practices (6.7%), non-disclosure motives (4.7%), and environment (3.3%).
Among the 223 companies excluded from investment in Korea, the number of companies excluded from at least 30 investment institutions increased from 8 last year to 11 this year. POSCO Holdings, Hanwha Aerospace, and Korea Western Power were newly added. In particular, Poongsan and LIG Nex1 were excluded from investment institutions by 93 and 85 investment institutions, respectively, recording the dishonorable 1st and 2nd place for being excluded by the most investors not only in Korea but also in the world. Poongsan’s production of inhumane weapons such as cluster bombs was cited as the main reason for exclusion from investment. Lockheed Martin of the U.S. was also excluded from 85 investment institutions, tying for 2nd place with LIG Nex1.
Among the companies included in the investment exclusion list, the top companies by market capitalization were Hyundai Motor Company, Kia, HD Hyundai Heavy Industries, Korea Zinc, and POSCO Holdings, and among them, POSCO Holdings was the only one excluded from a total of 30 financial institutions. Of the 30 financial institutions that decided to exclude investments, 11 financial institutions cited climate and environmental factors as the reason for exclusion.
“Financial institutions and investors will be carefully considering the Financial Exclusion Tracker as they assess the risk of new and existing customers,” said Johan Frijns, CEO of Banktrack. “If other financial institutions have excluded a firm, it can be an important signal for further risk review.” Park Hyun-jung, a researcher at Climate Solutions’ climate finance team, said, “The fact that more Korean companies are being excluded from more global investors cannot be unrelated to the chronic discount problem that the Korean stock market is experiencing,” adding, “Korean companies need to more closely examine and respond to sustainability issues, including climate and the environment, that global investors value.”
