When the Financial Services Commission announced on the 14th that it would be mandatory to disclose ESG (environmental, responsible, transparent management) of KOSPI listed companies in stages, companies were keen to say, “ESG management has come to life.”
The task was to raise the ESG score right away. ESG evaluation results are directly related to corporate value and affect not only finance, but also investors’ interest and institutional investors’ voting rights. One of the public announcement officers of a large company said, “I published the first sustainability report last year, and even though it was through a large accounting firm, it took a long time to prepare and cost hundreds of millions of won. We have factories in the US, China, and Europe. It was difficult to assemble the contents accordingly, and above all else, it was difficult because of the different standards such as carbon emission.”
With advanced economies mandating ESG disclosure and expanding ESG investment by global funds, voices are growing that Korean companies should also quickly reorganize into ESG management. The expansion of the ESG market could rather be an opportunity for Korean companies. An official from another large company said, “As a company, it is expected that there will be disadvantages due to the obligation to prepare ESG, but it is expected that there will be no major problems if guidance is clear and preliminary adjustment is performed.” The Financial Services Commission decided to lay an institutional foundation by expanding the disclosure of ESG information to vitalize ESG responsible investment.
To this end, it is mandatory to disclose the’Sustainability Report’ that contains environmentally friendly and social responsibility issues and the’Corporate Governance Report’ including corporate governance structure in stages.
The Korea Exchange decided to present the ESG information disclosure guidance during this month. The guidance contains not only the general principles of ESG information disclosure, but also examples considering the characteristics of each industry, evaluation procedures, best practices for communication channels with stakeholders, and international standards for notification indicators. Accordingly, the financial authorities’ plan is to encourage listed companies to continuously disclose their sustainability management reports.
Currently, about 100 companies in Korea publish sustainability reports every year, but only 20 of them publish them on the exchange. However, from 2025, KOSPI-listed companies with assets of 2 trillion won or more must disclose their sustainability reports. Then, in 2030, all KOSPI-listed companies must publish a sustainability report. The obligation to disclose corporate governance reports, which is currently applied to 211 KOSPI-listed companies with assets of 2 trillion won or more, also applies to all KOSPI-listed companies in 2026 through 2022 (more than 1 trillion won) and 2024 (more than 500 billion won). The Financial Services Commission decided to evaluate the performance of the Stewardship Code and consider ways to strengthen the ESG-related trustee responsibilities. In addition, the management and supervision of voting rights advisors will be strengthened.
Deok-chan Yoon, CEO of Sustainable Power Plant, which analyzes the status of ESG by company in real time with artificial intelligence (AI), said, “As with financial information, all investors must have easy access to ESG to accurately identify investment risks and opportunities.” “It is a very important first step toward transitioning not only to the capital market, but also to sustainable finance and even a low-carbon economy.”
According to the Korea Corporate Governance Service, there are 20 countries around the world that have made ESG disclosure mandatory. Some countries, such as Norway, publish separate sustainability reports, and others require the disclosure of ESGs in business reports or separate forms. This is because the ESG disclosure standard has not yet been established. The U.S. has made it possible to autonomously choose ESG disclosures, and in 2011 it published only 20% of its sustainability report, but last year this rate has increased to 90%.
Park Hye-jin, a research fellow at the Capital Markets Institute, explained, “The environmental issue is a global issue, so the UK is actively stepping up to elevate it to international norms.”
The Financial Services Commission decided to ease the burden on companies to write through this disclosure system reform. The quarterly report, which used to be low in utilization and high in writing burden, was reorganized to focus on core information, and the disclosure items were reduced by 40%. The scope of small-scale companies subject to special disclosures will be expanded from’asset scale of less than 100 billion won’ to’asset scale of less than 100 billion won or sales of less than 50 billion won’.
[강계만 기자 / 이유섭 기자 / 김규식 기자]
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