The green bond, one of the ESG bonds¹, issued by Hyundai Steel as a green management strategy, has become a hot commodity in the investment market.
On January 18, a forecast on institutional investors predicted that there would be a demand for USD 225 million worth of green bonds, scheduled to be issued by Hyundai Steel. However, it was later found that USD 1.86 billion worth of the green bonds, more than eight times the value initially scheduled to be issued, were in fact in demand. In response to this overwhelming demand, Hyundai Steel is now considering increasing the value of its corporate bonds to be issued to USD 450 million. This is the first time, with the exception of affiliated financial companies, that a Hyundai Motor Group company has issued ESG bonds.
A green bond is a type of ESG(environment, social, governance) bond, issued for investment in social responsibility. The use of green bonds is limited to environmentally-friendly tasks, such as carbon reduction, energy optimization, renewable energy, and electric vehicles, and other green industry-related tasks, such as those related to the funding of renewable energy.
In keeping with the purpose of these green bonds, Hyundai Steel is poised to invest one hundred percent of the proceeds from the sales of the bonds in green projects, up until the bonds mature. This is a testament to Hyundai Steel’s dedication to investing in the environment.
What makes the issuance of these green bonds particularly significant is that their ESG certification was executed by a credit rating agency that gave the bonds a rating of GB1 (E1/M1)², the highest rating possible. Since the process of getting a bond certified by a credit rating agency is demanding and the rating obtained is regularly reviewed, bonds that are certified through this type of process typically gain a higher level of trust from investors.
“Hyundai Steel is making a company-wide effort to perform green management,” a Hyundai Steel spokesperson said. “The issuance of ESG bonds is in line with this intent, and we at Hyundai Steel, as a green and socially responsible company, will continue to keep the environment as a top priority when making management decisions.”
1) ESG bond
A bond issued for investment in social responsibility. “ESG” stands for “environmental, social, and governance.” The three major types of ESG bond are green bonds, social bonds, and sustainability bonds.
2) Criteria for the assessment of ESG bonds
– Assessment Part 1 (E1-E5) : Assessment of project propriety and funding scale
– Assessment Part 2 (M1-M5) : Assessment of funds management/operating systems
– Highest rating obtainable : “E1/M1”
– Ratings issued to green bonds : GB1-GB5; ratings issued to social bonds : SB1-SB5; ratings issued to sustainability bonds : STB1-STB5