Failure to green-transform Korea’s steel industry could cost it global competitiveness

By Kim Min-ho, Biz Hankook, 23 April 2026

UK financial policy expert Professor Patalano: “Bank of Korea’s climate-related policy could be a golden opportunity”

Global financial markets are now demanding substantive change beyond mere ‘eco-friendly’ rhetoric. In particular, Korea’s flagship industries, including steel, petrochemicals and automotive manufacturing, have been placed on the firing line of ‘decarbonisation transition’. Moving beyond the outdated approach of simply divesting high-emitting sectors from investment portfolios, ‘transition finance’, designed to facilitate a soft landing of high-emitting industries into a low-carbon paradigm, has emerged as the central topic of discourse.

BizHankook attended the UNFCCC 3 Climate Week and Korea Green Transformation International Week, held in Yeosu, South Jeolla Province on 23 April. There, we met with Robert D. Patalano, LSE Professor and Executive Director of CETEx, and Antonina Scheer, Deputy Director of Policy at the TPI Centre. The two respectively served as moderator of the panel discussion and keynote presenter (attending via videoconference) at the seminar, titled ‘Emerging synergies between national and corporate transition planning: Spotlight on Korea’. Following the seminar, we spoke at length with both on Korea’s decarbonisation transition.

Professor Robert Patalano is a financial policy expert who previously served as Head of the Financial Markets Division at the OECD and as Head of Market Intelligence and Analysis at the Bank of England. Professor Patalano issued a stark warning to Korea’s carbon-intensive industries, which must simultaneously undertake structural restructuring and decarbonisation transition. He addressed the potential consequences if Korea’s steel industry were to opt for conventional structural restructuring over green transformative innovation over the next five to ten years.

Professor Patalano stated that “even setting aside environmental considerations and looking purely from a competitiveness standpoint, the situation is serious,” noting that “China, Scandinavian countries, the United Kingdom, and other European nations have already committed astronomical investments in clean technologies such as hydrogen.” He cautioned that “when these technologies become progressively more cost-competitive, if Korea fails to secure technological leadership, Korean steel companies will lose their competitive edge in international markets and ultimately become an enormous economic liability to the nation.”

He further stressed that “technological upgrading of high-carbon industries is essential, even as a means of mitigating exposure to geopolitical risks that drive energy price volatility,” adding that “this is the self-evident answer from the perspective of protecting shareholder value and advancing societal efficiency.”

Deputy Director Antonina Scheer advised that transition finance must go beyond mere capital injection and flow in a direction that improves corporate fundamentals. In the past, investors preferred the approach of simply divesting from high-emitting companies to reduce portfolio carbon intensity, an approach characterised as mere ‘Paper Decarbonisation’ that did little to deliver actual emissions reductions.

Deputy Director Scheer articulated that “genuine transition finance means focusing on high-emitting industries and measuring whether companies’ forward-looking targets are aligned with the scientific benchmark, ie, the 1.5-degree pathway.” She added that while the chemicals sector is particularly complex to evaluate, the Centre recently introduced a methodology that rigorously applies to assess whether corporate targets and R&D investments are substantively aligned.

She also expressed critical views on Korea’s sustainability disclosure framework. Deputy Director Scheer raised concerns about the gap between Korea’s draft disclosure standards and the global benchmark set by the International Sustainability Standards Board (ISSB), particularly regarding delays in the disclosure of ‘Scope 3 (value chain emissions)’ and ‘transition planning requirements. Investors regard Scope 3 data, which can account for 70 to 90 per cent of total emissions, as critical to understanding the extent of transition risk exposure within supply chains.

She noted that “in particular, automotive manufacturing and fossil fuel-based industries have very high Scope 3 emissions, and in the absence of this information, Korean companies are highly likely to be disadvantaged in global investment markets.”

As he concluded the interview, Professor Patalano identified central bank leadership as the final missing piece for Korea’s successful decarbonisation transition. He expressed high expectations for Shin Hyun Song, the incoming Governor of the Bank of Korea, with whom he had previously worked at the Bank for International Settlements (BIS).

He remarked that “at a time when central bank commitments to climate policy are wavering in the United States and elsewhere, having an expert with both theoretical knowledge and practical experience at the helm of the Bank of Korea represents an extraordinary opportunity for Korea.”

Professor Patalano argued that central banks must integrate climate factors into their monetary operations, risk management frameworks, collateral frameworks and investment portfolios. The logic is that when a central bank incorporates climate considerations into its securities valuations, it sends a signal to financial markets that companies performing well on transition carry lower risk than those lagging behind.

Professor Patalano urged that “should the Bank of Korea now collaborate with the government to create an innovative market environment, it will find itself at a golden moment to reward companies at the forefront of transition and penalise those that fall behind.”

This article was originally published in Korean by Biz Hankook (비즈한국) on 23 April 2026. Written by Kim Min-ho. This is an unofficial translation published with permission from Biz Hankook. In the event of any discrepancy, the original Korean text shall prevail.