Social Investment Landscape
South Korea
South Korea’s strong government support for the social economy has led to a well-developed SE ecosystem and prominent government players in green and sustainable bonds
Summary
Executive Summary
The Republic of Korea (South Korea) exhibited remarkable economic development over the past few decades with its GDP per capita based on PPP growing from USD 8,276 in 1990 to 38,335 in 2017. The strong export economy allowed South Korea to become a major industrial power, a member of the Organisation for Economic Co-operation and Development (OECD), and one of the ‘Four Asian Tigers’. Large family-run conglomerates known as chaebols dominate the business landscape and have become world-recognised brands in technology, ranging from cars to smartphones.
The growth of South Korea’s exports and economy have, however, slowed significantly in recent years, while economic inequality has risen. South Korea also faces challenges around ageing, the environment, and gender equality. The population is ageing at the fastest rate amongst OECD countries. Female employment is concentrated in low-paying and non-regular jobs that have led to a gender wage gap nearly double the OECD average.
South Korea’s social economy is distinguished for being the first in East Asia to create legislation that defines social enterprises, making it a regional leader in this area. While the corruption scandal in 2016 surrounding the South Korean president and several chaebols affected public trust of government and business, both have introduced reforms to improve governance, which is often linked with social economy activities. Government players are especially prominent in promoting social innovation tools such as green bonds and impact investment.
South Korea’s Fact File
South Korea’s 2018 Fact File
62 75 in 2016
World Giving Index Rank
41%giving money
17%volunteering time
44%helping a stranger
Source: ADB, Charities Aid Foundation, Credit Suisse, World Economic Forum, World Bank. Figures are accurate as of March 2019
Dashboard
SDG Dashboard
In 2017, newly elected President Moon Jae-in indicated that he would focus on large business reform and increased government spending to create jobs, raise wages, and build out social welfare programmes, all while addressing environmental and pollution concerns. Although the 2017 presidential election occurred amidst a political corruption scandal, the problems that South Korea is facing stretch far beyond that. South Korea is ageing faster than any other country in the world, with nearly half the elderly living in poverty. The country’s fertility rate hit a record low of 0.98 in 2018, far lower than the OECD average of 1.68 and the replacement rate of 2.1. These demographic trends are putting great pressure on workers and the pension system.
In December 2018, South Korea established the Korean Sustainable Development Goals (K-SDGs). The K-SDGs are South Korea’s adaptation of the UN SDGs to fit their national context, incorporating contextualised targets addressing chronic disease, low birth rates, alternative materials to plastic, and establishing a permanent peace regime. These goals were created following numerous task forces and public forums to drive sustainable development in the country and align national strategy with the framework of the SDGs.
Source: sdgindex.org (2018)
Note: The “traffic light” colour scheme (green,yellow, orange, red) illustrates how far a market is from achieving a particular goal
Government Initiatives
Government Initiatives to Address Development Gaps
Climate action
SDG Goals
Gap
- In the Environmental Performance Index 2018, South Korea ranked 60th out of 180. However, in air quality it dropped to 119th and specifically for PM2.5 exposure, it fell to 174th.
- Air quality in South Korea in 2017 was the worst amongst all OECD countries, with the average annual exposure to PM2.5 of 25.1 micrograms per cubic metre more than double the World Health Organisation’s recommendation.
Government Initiatives
- South Korea labelled air pollution a ‘social disaster’ in March 2019, allowing it to access reserve funds to respond to future emergencies. Additionally, all schools are now required to have an air filter in every classroom.
- Starting in April 2019, South Korea will lower taxes on liquid natural gas by as much as 74% and raise taxes on thermal coal by 27% to drive the country’s energy mix towards more sustainable sources.
Gender equality
SDG Goals
Gap
- The gender wage gap in 2018 was at 37%, the highest amongst OECD countries and more than double the OECD average.
- In the Global Gender Gap Report 2018, South Korea was ranked 115th of 149 countries, primarily due to poor performance in economic participation and opportunity and political empowerment.
Government Initiatives
- South Korea has introduced gender budgeting, which aims to increase the amount earmarked for gender equality in the government budget. In 2017, the gender-responsive budget was raised from 3.7% to 7.4%.
- Following the adoption of the Sixth Basic Plan for Gender Equal Employment 2018-2022, the government plans to mandate corporate disclosure of salary data by gender as a means to reduce pay disparity.
SME development
SDG Goals
Gap
- Although SMEs account for 99.9% of total enterprises and 82.2% of total employment, as of 2018 the 10 largest chaebols own more than 27% of all business assets in South Korea.
- The Korea Small Business Institute reported that 80.5% of SMEs have difficulty finding employees, while a 2016 survey of university students found that only 5% wanted to work in an SME.
Government Initiatives
- Government spending to support SMEs amounted to 3.0% of total spending in 2017 and 3.8% of GDP in 2016, the second-highest amongst OECD countries.
- To promote youth employment at SMEs, in 2019 the government introduced a 3-year tax credit of up to KRW 12 million (USD 10,500) per newly hired young employee.
Social protection
SDG Goals
Gap
- Public social expenditure for South Korea in 2018 was 11.1% of GDP, 9 percentage points below the OECD average.
- Poverty rates are high among the elderly. The relative poverty rate in 2015 for those above 65 was nearly 50%, compared with the national average of 13%.
Government Initiatives
- From 2019, the pension for elderly aged 65 and above in the lowest quintile income bracket has been increased from KRW 200,000 (USD 175) to KRW 300,000 (USD 265).
- The 2019 budget allocated a record KRW 162.2 trillion (USD 145 billion) for social welfare, 12.1% higher than 2018.
Social Economy
South Korea’s strong government support for the social economy has led to a well-developed SE ecosystem and prominent government players in green and sustainable bonds
SPOs
Investors
Enablers and Intermediaries
SPOs
Factor
Presence, size, and maturity of SEs
Rating
◕
Description
- The Ministry of Public Administration and Security calculated a total of 63,431 non-profits, social enterprises, cooperatives and village enterprises in 2015.
- Social enterprises are legally defined entities which receive tax benefits and subsidies. In 2017, there were a total of 1,877 government-certified social enterprises in South Korea.
Factor
SEs’ sectoral presence
Rating
◕
Description
- The leading impact areas for South Korean social enterprises are arts and culture, education, environment, and social welfare.
Investors
Factor
Philanthropic contributions
Rating
◑
Description
- Prominent foundations in South Korea often receive funds from corporates, financial institutions, and government. However, these foundations largely run their own programmes and examples of collaboration are scarce.
Factor
Managed funds
Rating
◕
Description
- In February 2018, South Korea became the 17th member country of GSG and established a National Advisory Board.
- The government has established several impact funds that pool government and institutional investor assets to support SEs. 2018 also saw the first instance of co-investment by impact investors.
Factor
Corporate sector
Rating
◕
Description
- Though chaebols’ reputations were tarnished in the government corruption scandal, recent measures have been introduced to restore their image, such as the Korea Stewardship Code.
- Some examples of corporates with demonstrated CSR initiatives and that have incorporated sustainability into their operations include POSCO, SK Group, Hana Bank, and Hyundai Motor Company.
Enablers and Intermediaries
Factor
Policy environment
Rating
⬤
Description
- The government is a regional leader in its support for the social enterprise ecosystem.
- Government players are driving the use of innovative tools such as green bonds and passive ESG investment.
Factor
Incubators, accelerators, and capacity-builders
Rating
◕
Description
- There are several impact investors and organisations that provide incubation or accelerator support, such as Crevisse Partners, KoSEA, Root Impact, Beautiful Foundation, Sopoong, Hyundai and D3 Jubilee, Work Together Foundation and the Happiness Foundation.
Factor
Networks and platforms
Rating
◕
Description
- Several networks and platforms exist for SE development and collaboration in the social economy. The Association of Korean Local Governments for Social Economy and Solidarity allows for collective policy efforts and a stronger network of key stakeholders.
- There are numerous examples of platforms to enhance government and private sector collaboration and co-investment.
Factor
Knowledge and research
Rating
◕
Description
- Prominent research organisations include KoSEA and Hanyang University, which offers an undergraduate course on social entrepreneurship. Most research, however, is not translated from Korean to English.
Factor
Partnerships
Rating
◕
Description
- The government is currently establishing SE investment funds with funding support from corporates and the private sector. Other examples of collaboration include Hyundai’s partnership with KoSEA and the Ministry of Labour for its SE competition.
DEAL SHARE PLATFORM
Deal Share in South Korea
ALIA: Cost Competitive and Sustainable Industry Solutions for the Environment
By Asian Lubricants Industry Association (ALIA)
ALIA will take the lead with industry-wide solutions to address cost competitiveness and sustainability. Beneficiaries are cleaner environment for society and continued business viability.
Climate Action and Environment, Energy, Governance
Food Waste Recycling: Sustainable Organic SMART and Vertical Farming in Urban Cities
By Environment & Energy Technology, Inc.
This project is a FOAKE (first-of-a-kind engineering) DEMO plant in urban city for the food waste recycling with sustainable organic vertical farming showcase with zero-waste and circular economy.
Agriculture, Climate Action and Environment, Energy
Sheco has developed a robot for marine recovery and water purification to clean floating contaminants, allowing marine businesses and organisations to easily manage contaminated water at their sites.
Climate Action and Environment, Water and Sanitation and Hygiene
Mapsea Corp.’s job matching platform SEASON is a specialised marine recruitment platform, utilising technology to link marine jobs to the right talent. The returns generated will be directed towards building a marine forest.
Employability
Raspberri Pi Foundation: Code Club and CoderDojo for youths
By Raspberry Pi Foundation
Raspberri Pi Foundation is helping youths acquire computing and digital making skills via compelling learning resources, a thriving network of volunteer-led clubs, competitions/events and partnering with youth organisations.
Education
Environmental Initiative to Go Green
By Marine Innovation
Our innovation is to replace plastics and wood with seaweed extracts and byproduct. Following the trend in the direction of sustainability, our applications will be molded fiber packaging solutions.
Climate Action and Environment
Vook
By Uniquegood Company
Vook is a social audiobook recording platform targeting over 200 million blind people in the globe, 10 percent of the population suffering from Dyslexia as well as the general public with no impairment.
Employability
REBORN aims to make our customers, plastic recycling companies, increase their revenue by enhancing the purity of recycled plastic, adding REBORN’s bioreactor to their existing process line.
Climate Action and Environment
Case Studies
Case Studies in South Korea
Catalytic Capital Investor in Asia: Merry Year Social Company
Crevisse – Building the next generation of socially innovative and financially sustainable enterprises
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