The Financial Services Commission held the fourth Productive Finance Transformation Meeting at the Korea Chamber of Commerce and Industry on Feb. 25 and put forward a plan to expand climate finance. The climate policy finance supply plan, which had been set at 420 trillion won for 2024-2030, has grown to 790 trillion won. There are explanations that put the supply period at the 10 years of 2026-2035, and explanations that see it as a form in which about 370 trillion won covering the five years of 2031-2035 was added while the cumulative target for 2024-2035 was reset. Views split over the nature of the total, whether it is an increase or an extension of the period.
The raised reduction target is cited as the background for the expansion. In November 2025 the government confirmed the 2035 national greenhouse gas reduction target at a level of 53-61% below the 2018 base year. The argument attached in favor of the expansion is that the previous 420 trillion won plan was designed on the premise of a 40% reduction by 2030 and cannot carry the raised pathway. The new supply carries allocation standards of at least 50% for regional areas and at least 70% for small and mid-sized companies.
The new item in this plan is transition finance. It refers to funds used by sectors that emit large amounts of carbon, such as steel, cement and petrochemicals, to raise facility efficiency, switch fuels and develop technology. The guidelines confirmed the same day divided the recognition routes in two. One is a route linked to the green taxonomy (K-Taxonomy), and the other is a route based on transition strategies corresponding to sector roadmaps.
The requirements for the taxonomy route were framed as follows. If the activity criterion among the green finance recognition standards is met first and the remaining requirements are filled within five years or by maturity, it is treated as transition finance. The products covered span bonds, loans and equity securities. The responsible ministries are split, with transition activities under the taxonomy assigned to the Ministry of Climate, Energy and Environment and sector carbon reduction roadmaps and transition strategies to the Ministry of Trade, Industry and Energy.
Follow-up management devices were included as well. Policy finance institutions must check afterward whether funds have flowed outside their purpose and whether reduction plans are actually being carried out. If implementation falls short, the funds concerned can be shifted to ordinary finance, or preferential terms such as interest rate cuts and guarantee fee reductions can be trimmed or withdrawn. A provision dealing with carbon lock-in risk also went into the guidelines.
The blanks in implementation are found in two places. An official in the Financial Services Commission's Industrial Finance Division said in a phone call on the 3rd that transition finance is included within the 790 trillion won but that there is no plan setting a separate amount to be put in. There are no allocations by industry or annual targets either, and the explanation is that supply will be flexible while watching market demand. The sector carbon reduction roadmaps, one axis of the recognition routes, have also yet to be drawn up, and sectors without a roadmap are run in a way that has companies present their own transition pathways.
Japan, frequently mentioned as a point of comparison, moved with government bonds as its axis. In February 2023 it announced a plan to issue 20 trillion yen (about 186 trillion won) of GX transition government bonds over 10 years, and set out a design to draw 150 trillion yen (about 1,400 trillion won) in joint public-private investment over 10 years. After printing the world's first climate transition government bonds in February 2024, the amount of two issuances was 1.6 trillion yen (about 15 trillion won), and in January 2026 there was an auction of about 300 billion yen (about 2.8 trillion won).
In December 2025 the Ministry of Economy, Trade and Industry revised its guidelines and tightened the standards so that they look at whether science-based reduction pathways are kept and whether a transition strategy tied to financial plans is in place. Korea's transition finance was designed in a form mixing the EU-style taxonomy and the Japanese-style industry roadmap.
The measurement base comes in with a time lag. ESG disclosure becomes an obligation in stages from the 2028 business year, starting with KOSPI-listed companies with consolidated total assets of 30 trillion won or more, and Scope 3 emissions, which cover supply chains, apply in principle from 2031 after a three-year grace period. The disclosure standards were confirmed as Sustainability Disclosure Standards No. 1 and No. 2 based on the ISSB, and the channel will be run as exchange disclosure before moving to statutory disclosure under the Capital Markets Act. A financed emissions platform that calculates indirect emissions attached to loans and investments is also on the list of things to be built.
In a Feb. 26 commentary, the Green Transition Institute viewed the introduction of transition finance itself as positive, and cited the requirement to calculate separately the share of transition finance among financial companies' assets and the lowering of information requirements for small and medium-sized enterprises as measures reflecting reality. With the allocation amount and the roadmaps unset, how far the reduction incentive will work has room to be decided at the implementation stage. Around the expansion plan there also comes the point that funds whose reduction effect has not been verified come closer to a subsidy if they are used to cover the running costs of high-emitting sectors.
The points to check narrow down to a few. The ESG disclosure roadmap will take comments through March and be confirmed in April, and the climate finance web portal has given notice of a first stage in April followed by a full second-stage service in August. The transition finance working group is scheduled to start in the first half of this year. Whether the 790 trillion won becomes money that pulls up the reduction pathway is a matter that will be revealed by the allocation standards and inspection results after these schedules pass.
