The government will provide loan guarantees of up to 1.5 trillion won annually to small and medium-sized enterprises (SMEs) and carbon reduction companies with green technologies. The guarantee cost will be offered free of charge, and a corporate nurturing program linked with the guarantee business will be operated.
On the 5th, the Ministry of Environment announced its plan to expand financial support to low-carbon and green companies as part of its “Green Industry Guarantee Support Plan for Transition to a Low-Carbon Economy.” This was discussed in a meeting of related ministers on national policy, economic policy, and industrial competitiveness enhancement held on the same day.
This initiative has been prepared to support companies that require investment in developing low-carbon technologies and reducing carbon emissions. Until now, the government has been supplying about 7 trillion won in green funds focusing on greenhouse gas reduction projects. However, since the support method is concentrated on green bonds, asset-backed securities, and loans, SMEs with insufficient collateral have faced limitations in securing funds.
To address these issues and foster SMEs with technical capabilities, the government has decided to implement a loan guarantee business. This year, the government will provide 280 billion won in green technology innovation guarantees to companies engaged in economic activities aligned with the Korean Green Taxonomy (K-Taxonomy), such as greenhouse gas reduction.
Guarantee support will be provided for technology development and commercialization funds for small but strong companies with excellent technology that have been overlooked in the lending review stage by financial institutions. Loans of up to 10 billion won per company are possible, with a maximum guarantee ratio of 95%. The guarantee fee will be supported by the Ministry of Environment and partner banks by 0.4 percentage points (p) and 0.7%p respectively for two years. Considering that the average guarantee fee for general guarantees is 1.1%, companies could pay zero actual guarantee fees if they receive maximum support.
This year, 1.2 trillion won in guarantees will be provided to carbon reduction companies. Eligible activities include transitioning to a low-carbon business structure through facility introduction and process improvement, contributing to external carbon reductions through low-carbon technology innovation and commercialization, and engaging in renewable energy generation and industries. A loan guarantee of up to 20 billion won per company is possible, with a maximum guarantee fee reduction of 0.7%p.
To foster carbon-neutral innovative companies, the government will support the entire cycle from discovering carbon reduction projects to planning, commercialization, and post-management. A pilot project for carbon reduction planning support, which provides consulting on investment costs for reduction projects and expected reduction amounts, will be conducted for companies with carbon reduction needs. Green innovative startups with high potential to grow into unicorns (startups valued at over 1 trillion won) will be selected to receive both financial and non-financial services.
Leading companies in the green industry, such as those with excellent technology, will receive up to 50 billion won according to their growth stage, to promote the commercialization of green technologies and support the transition to a low-carbon business structure.
To foster SMEs, additional support beyond financial aid includes consulting on eco-friendly management (ESG) linked with guarantees and holding corporate presentations (IR) involving venture capital (VC). The government will also encourage overseas expansion through international validation and market development for companies benefiting from guarantees.
The government aims to accelerate the low-carbon transition across industries by expanding financial support for the green industry and fostering green technology companies with global competitiveness. The global green economy is currently estimated at 7.2 trillion dollars (10 quadrillion won), with major countries increasing their investments annually to achieve carbon neutrality and green growth.
An official from the Ministry of Environment stated, “We will continually identify companies with significant carbon reduction potential through field meetings,” and added, “We plan to support the technological innovation of SMEs in connection with financial and non-financial businesses.”