Q&A with Big Wave on steel decarbonisation in Korea
Min Kim is from Big Wave, a Korean Youth Climate Change organisation focused on engaging investors on steel decarbonisation.
How do you see the state of play on steel decarbonisation in Korea?
I currently think the current state of play is not sufficient. We recently had a big announcement of the sixth Intergovernmental Panel on Climate Change (IPCC) report and to achieve the Paris Agreement goal of 1.5C what we do in the coming 10 years is very critical. But if you look at the steel industry in particular our goal in Korea is not sufficient. At our organisation, we are targeting POSCO Holdings and they have announced they will reduce carbon emissions by 10 per cent by 2030. However, if you compare their target to other global steel companies it is lagging far behind. Of course, different companies have different contexts and their target setting and their targeting setting is coming from different time points but often they have between 15 per cent reduction and up to 25 per cent reduction, so compared to those we can say that POSCO’s targets are not sufficient.
What do you see as the key challenges to decarbonising the sector?
I think that it is very critical how fast the steel companies introduced hydrogen manufacturing methods in manufacturing their steel. As I mentioned global steel companies have 15 to 20 per cent higher goals for decarbonisation by 2030 compared to POSCO. That is because global steel companies have a target to introduce green steel, using the hydrogen reduction method earlier than POSCO. As they are introducing it faster, they can achieve decarbonisation faster. Steel is one of the critical materials used in various industries and steel is also very critical for us to achieve the decarbonisation goals by 2050. In many other methods, we are introducing to achieve zero-carbon, such as solar, wind and EV, steel is used very importantly in those industries as well. That is why steel is very critical in achieving the entire decarbonisation goal. However, if you look at the plans of POSCO they are trying to introduce a hydrogen reduction method from 2030 and this is five to ten years later than most of the global steel companies. If you look at where that steel is being used, it usually goes to the automobile industry and construction and shipbuilding industries and these industries are now demanding green steel in great volume and if POSCO has such a delayed target to introduce green steel and fails to occupy the market, other global steel companies will be taking the market share. If that happens then this decarbonisation goal that POSCO has – which is already smaller than other global steel companies and is already insufficient – could also fail to be met.
And what do you see as the opportunities for steel decarbonisation?
In Korea, the greenhouse gas being emitted by steel companies take up a huge proportion of the entire greenhouse gas emissions and if you look at POSCO, they emit around 11 per cent of all the greenhouse gas being emitted in Korea. So if I can talk about any opportunities, maybe the Carbon Trading Scheme that we have here in Korea could be reinforced in the future and in the EU, they plan to introduce CBAM, which will mean that even if taxes and fines are not being imposed in Korea, they will later be imposed for companies by the EU while they are exporting to foreign markets. As I said POSCO is the number 1 emitter in Korea and if they reduce their greenhouse gas emissions it means they will not be shouldering any additional cost when they are exporting. So far, we thought that reducing greenhouse gas emissions is just doing something good for the environment but actually it has a connection to the profits of the company. Even before 2030 comes the importance of this greenhouse gas reduction in companies’ profits will grow and become a reality.
What action is needed from the private sector, and investors, to see a real move toward steel decarbonisation?
I would point out two things regarding the private sector and investors can do. Firstly, regarding investors they need to place closer attention to what kinds of greenhouse gas reduction activities companies are taking and in the case of POSCO they are in a very interesting situation even if they try their best to meet this 1.5C goal of the Paris Agreement still they are still making plants, one in Pohang and the other in Gwangyang that might be inundated due to climate change. This means that by 2030, the people that invested in POSCO might suffer loss because of climate change and that was proven through simulation.
If investors pay attention to how much effort is being made by companies to reduce greenhouse gas, it actually has a direct connection to protecting their own investment. In Korea, all investors, including institutional investors, are not yet very active in engaging with companies to urge them to respond to climate change or to check on their progress towards cutting greenhouse gas emissions but I think that will become very important in the future. It is especially in the case of POSCO, where the majority shareholder is the National Pension Fund of Korea which holds 8-9 per cent of the total share. For the National Pension Fund, we can say almost all Koreans are signed on to this because it is mandatory to sign on to the National Pension Fun if you are a Korean national. So, we can say that POSCO is literally being run by taxpayers’ money. That is why we really need to urge them to really look into all the risks that are being burdened by all these steel companies, particularly POSCO, because it has to do with taxpayers’ money and the National Pension Fund, and all the other investors should be more scrutinising into how those risks are being managed.
For the demand side of steel, there are three major industries, automobiles, construction and shipbuilding, and these industries have already declared 2050 zero carbon for their industry and they have put that as their first priority. If I can cite one example of a global steel company – SSAB – they did the collaboration with the car manufacturer Volvo to do the pilot for the manufacturing of steel that is using no fossil fuel in manufacturing their car. I think that we can do a similar thing in Korea with POSCO which is the leading steel company in Korea and Hyundai Motors which is the leading automobile company in Korea. Hyundai Motors already declared 2050 zero carbon and they are going beyond scope 2 and into scope 3 which means they are also looking into their external parties in their supply chain to call for greenhouse gas reduction from their suppliers as well. For the supply side, steel cannot be an exception. If you look at the high-quality steel manufactured by POSCO most of them, go to the automobile components side. This means that the demand for green steel will continue to rise from the demand side in the future.
In line with that, I think the government should set the standards on what will define green steel and help facilitate the use of green steel in the industry.
Can you tell me about the work of Big Wave with the Korean steel sector?
At Big Wave we have various campaigns that we are trying to carry out to make an impact on the shareholders of POSCO holdings. If you look at the Korean stock market, the minority shareholders so far were not very active and even where they were they were mostly focused on growing their own assets. However, I think in the future they will be paying closer attention to whether their money is being spent responsibly, meaning that the investment they are making is being used in a socially sustainable way. At Big Wave we held a campaign where citizens can participate, mostly targeting the individual investors. Based on our past analysis, we held an explanatory session with individual investors to explain to them about the current state. We have also sent a letter to POSCO Holdings to make proposals and call for an answer from their board members and we continue those activities in the future.
What we are trying to do in the future is work together with similar agencies like us – for example at universities there are student gatherings where they are studying investment and using their own money to make investments. We will be calling for solidarity and alliance with them so we can expand the organisation with individual shareholders.
We are also trying to carry out our own activities as Big Wave and make alliances with individual investors so that we can call for more responsible actions by POSCO Holdings and urge them to cut their greenhouse gas emissions even more. In Korea, one of the major institutional investors is the Korean Pension Fund and also many institutional investors of Korea and overseas. We understand that these institutional investors have their own guidelines on how to be responsible in their investments by considering the climate action of the companies. Some of them have signed on to CA100+ or have their own global investor initiatives or have signed on to TCFD etc. This means they have their own guidelines on deciding whether a company is being climate responsible or not. So what we will do at Big Wave is to check if those guidelines set by institutional investors are being applied to POSCO Holdings. We will create alliances with institutional investors who share similar messages as we do. We have made a proposal to POSCO Holdings, but there are so many messages in there. We think we have to set the priority on what are the key messages to be delivered and strengthen our alliance with institutional investors so that maybe next year or in two years we can influence the general shareholders meeting, for example through a shareholder resolution campaign, and can expand those activities in the future.
