KRW 177.5 Billion in Unspent Investment Capacity... Next Year's Contributions to Rise 2.5-Fold [A Closer Look at the Climate Ministry's Budget 1]

KRW 133 billion allocated for next year's budget
Ministry of Planning and Budget, National Assembly Budget Office: "Reexamine appropriateness"
Climate ministry: "Four-year staggered investment structure"
New fund allocated to support overseas expansion

The government has increased its budget for capital contributions to a policy fund supporting small and venture-sized environmental companies by 2.5 times in just one year. However, with nearly KRW 180 billion in unspent investment capacity remaining in existing sub-funds and fiscal authorities cautioning against rapid expansion, the appropriateness of the increase has come under scrutiny.

More than half of six years' cumulative contributions in just one year... KRW 133 billion allocated

According to the National Assembly Budget Office's report, "Analysis of the 2027 Budget Bill by Committee," the Ministry of Climate, Energy and Environment has allocated KRW 133 billion for contributions to the Future Environmental Industry Investment Fund next year. That is an increase of KRW 79.845 billion (150.2%) from KRW 53.155 billion this year. In effect, the government will invest in a single year an amount equivalent to 52.7% of the KRW 252.3 billion in cumulative contributions allocated over the six years from 2021 to 2026. The Future Environmental Industry Investment Fund is a policy fund through which the government contributes to a fund of funds and attracts private capital to invest in small and venture-sized companies in the environmental sector. Private venture capital (VC) firms identify companies with growth potential and invest in them.

The issue is the investment capacity remaining in existing funds. As of the end of July 2026, existing sub-funds had KRW 177.509 billion in unspent investment capacity. The funds formed in 2022 had KRW 7.194 billion in remaining investment capacity, while those formed in 2023 had KRW 12.148 billion and those formed in 2024 had KRW 22.481 billion. The funds formed in 2025 had KRW 62.786 billion in unspent investment capacity. Funds scheduled to be established this year are also in the process of forming sub-funds, with KRW 72.9 billion in investment capacity remaining, excluding operating costs. The 18 sub-funds formed from 2017 through the end of July this year raised a total of KRW 510.8 billion and invested KRW 364.9 billion in 188 companies. The investment rate was 71.4%. These figures have prompted questions about whether there is a need to substantially increase new contributions when significant investment balances remain.

Fiscal authorities also leaned toward caution in their assessment. In this year's integrated fiscal project performance evaluation, the Ministry of Planning and Budget said of the program, "Rather than expanding it rapidly, managing it flexibly within a range that maintains the previous year's level is a reasonable choice that takes both fiscal soundness and policy continuity into account." The National Assembly Budget Office also recommended reviewing the appropriateness of the government's 2027 contribution amount in light of the investment capacity remaining in existing funds.

Climate ministry: "Account for four-year staggered investments and the private VC structure... Expand overseas investment and exit markets"

The climate ministry countered that viewing unspent investment capacity simply as "poor execution" reflects a misunderstanding of the structural characteristics of a fund of funds. A ministry official said, "Ordinary government subsidies are spent within a one-year period, but a fund of funds is designed to have private fund managers identify promising companies and invest in them over four years, following negotiations and contract execution." The official explained that funds receiving contributions through 2022 had already been fully deployed, and that the investment capacity remaining today represents funding being managed normally by funds formed between 2023 and 2026, which are currently in years one through four of their investment cycles. The official added that 13 central government ministries, including the Ministry of SMEs and Startups, also use the same four-year investment structure, leading to differing views each time the budget is reviewed over how quickly uninvested balances should be used.

The ministry attributed the sharp increase in next year's budget to the fund entering its 10th year, with KRW 41 billion allocated for the first time to a fund supporting overseas expansion and a new secondary fund worth KRW 25 billion established to help investors recover their investments by purchasing shares from existing investors. Some have argued that even taking the staggered investment structure into account, the scale of the increase over such a short period calls for improvements to the execution structure, such as shortening the sub-fund investment cycle, typically four years, to two or three years to use the remaining balances sooner.

This content was produced with the assistance of AI translation services.