Korean Air plans to issue environmental, social and governance (ESG) bonds on 7 July to raise funds for its environmentally and socially responsible investments. The bonds will have maturities of 1.5 years, 2 years and 3 years, and will amount to about KRW 200 billion. The exact issue amount will be determined after the results of forecasted demand become available on June 29.
ESG bonds include green bonds, social bonds and sustainability bonds, and should be used for eco-friendly projects or to create social value. Until now, ESG bonds have been issued mainly by state-run companies, financial institutions and manufacturing companies in Korea; Korean Air will be the first Korean airline to issue these bonds.
To issue ESG bonds, the funding purpose needs to be designated. ESG bonds issued by Korean Air are green bonds, and raised funds will be used to purchase next-generation, eco-friendly Boeing 787 aircraft.
Korean Air is currently operating a total of 10 Boeing 787-9s, and the airline plans to introduce Boeing 787-10s as early as next year. This new aircraft has 25% higher fuel efficiency per seat and emits 25% less carbon emissions than similar aircraft.
Korea Investors Service (KIS), Korean Air’s ESG bond evaluator, said Korean Air was given the highest grade for the green bond due the airline’s excellent scores in terms of project eligibility, transparency and management/operations systems. KIS also evaluated that the Boeing 787, which will be funded by the green bond, will greatly reduce greenhouse gas emissions.
Korean Air is making various efforts to enhance ESG management. The airline has focused on reducing carbon emissions by introducing next-generation, eco-friendly aircraft and carrying out practices to improve fuel efficiency. The carrier has also carried out many corporate social responsibility activities such as sending emergency relief supplies to sites devastated by catastrophic events in and outside of Korea.