Second-Party Opinion Download

Sustainalytics is of the opinion that the Korea Housing Finance Corporation (KHFC) Social Covered Bond Framework is credible and impactful, and aligns with the four core components of the Social Bond Principles 2018. This assessment is based on the following:

USE OF PROCEEDS

The eligible category for the use of proceeds, affordable housing, is aligned with those recognized by the Social Bond Principles that seek to achieve positive socio-economic outcomes. Sustainalytics considers that KHFC’s mortgage loan products will help to achieve two social objectives: (i) to improve the housing welfare of targeted vulnerable populations, specifically low and middle-income households, and (ii) to provide stable supply of affordable and sustainable housing finance in South Korea through its long-term, low-interest, fixed-rate loans. Additionally, KHFC’s mortgage loans advance the UN Sustainable Development Goal 11.

PROJECT EVALUATION/SELECTION

KHFC’s loan products reflect the government’s housing policy and market situation. Mortgage loan products are reviewed by the KHFC Risk Management Committee chaired by KHFC’s Vice President and approved by the Managing Director of the Securitization Business Group. The KHFC Securitization Working Group, comprised of cross-departmental team members, will review the issued social covered bonds’ cover pools and annual reports. Additionally, KHFC has processes in place to pre-screen a majority of the borrowers to ensure that they meet loan eligibility criteria. KHFC has sufficient oversight internally to ensure that its mortgage loan products meet the eligibility criteria and that loans are disbursed to eligible borrowers as per the eligibility criteria. This process is in line with market practice.

MANAGEMENT OF PROCEEDS

The process for the management of proceeds is aligned with market practices, as KHFC is required to (i) physically separate the purchased mortgage loans from KHFC’s other asset, and (ii) separately manage the mortgage loans according to a securitization plan as per Article 30 of the KHFC Act. Proceeds from the social covered bonds will be immediately allocated. In case this does not occur, proceeds will be invested in cash or cash equivalents, in accordance with KHFC’s usual sound and prudent liquidity management policy. This is in line with market practice.

REPORTING

KHFC commits to disclosing an allocation and impact report on its website annually comprising relevant transaction information along with social impact metrics. Sustainalytics anticipates the level of disclosure to be aligned with current market practices.