The Bank of Korea published an issue note assessing whether Korean climate benchmark indexes modeled on the European Union's Paris-Aligned Benchmark and Climate Transition Benchmark could help expand green finance through the stock market. Using simulated K-PAB and K-CTB indexes based on KOSPI-listed companies, the study found that both indexes broadly tracked the parent index while materially reducing portfolio carbon intensity and increasing the weight of lower-carbon companies. In the simulation, weighted average carbon intensity in 2024 was 92.4 tons per KRW billion for K-PAB and 129.4 for K-CTB, compared with 217.0 for KOSPI. The study period also showed cumulative excess returns relative to KOSPI of 5.6 percentage points for K-PAB and 4.6 percentage points for K-CTB. Carbon intensity improved notably in manufacturing and the science and technology sector, while the study argues that EU-style benchmarks could improve the transparency and comparability of climate finance products and provide quantitative low-carbon investment standards for Korea's equity market. The note says broader use is currently constrained by limited domestic climate data, including incomplete emissions and fossil-fuel revenue data, and by weak demand for low-carbon investment from both institutional and retail investors. It identifies a domestic climate disclosure framework, more effective climate policy settings including realistic carbon pricing and policy-backed climate finance, stronger participation by long-term institutional investors, and a phased pilot approach tailored to Korea's industrial structure as key conditions for wider adoption.

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