ESG Update: South Korea

• Published date: 23 October 2023
• Subject Matter: Finance and Banking, Corporate/Commercial Law, Environment, Media, Telecoms, IT, Entertainment, Financial Services, Corporate Governance, Environmental Law, Advertising, Marketing & Branding
• Law Firm: Ius Laboris
• Author: Min Ho Lee (Yulchon LLC), Yong Hee Yoon (Yulchon LLC), Seong Mun (Yulchon LLC), Weon Jin Kim (Yulchon LLC) and Jun Young Choi (Yulchon LLC)

In this article we look at this year's ESG trends from a South Korean perspective. What impact can we expect from international reporting measures? And what local measures are being considered?

Background

In the first half of 2023, ESG trends in Korea have continued to be as dynamic as in the past few years. The Federation of Korean Industries (FKI) conducted a survey on the 2023 ESG Trends among 100 of the top 500 companies, ranked by sales. 93% of respondents indicated that ESG management would increase this year. Key areas of interest were mandatory ESG disclosure, improvement of ESG evaluation, and the response to the EU Directive on Corporate Sustainability Due Diligence. Korean government is also taking steps to strengthen its policies to promote ESG management. To this end, in February 2023, it established the Private-Public Joint ESG Policy Council, comprised of relevant government agencies (including the Ministry of Strategy and Finance, the Ministry of Commerce, Industry and Energy, the Ministry of Environment and the Financial Services Commission) and private sector organisations (including the Korea Chamber of Commerce and Industry and the Korea Federation of Small and Medium Business), which has been holding regular meetings. The key ESG trends of the first half of 2023 are explained in further detail below.

ESG disclosure

In January 2021, the Financial Services Commission announced its plan to adopt mandatory ESG disclosure rules for the first time. According to the plan, ESG disclosure, which is not currently mandatory, will become mandatory for KOSPI-listed companies with assets exceeding KRW 2 trillion from 2025 and for other listed companies by 2030. We are seeing an uptick in ESG disclosure by companies, in line with the global trend towards more widespread ESG disclosure. With the adoption of the EU's European Sustainability Reporting Standards (ESRS), the US Securities and Exchange Commission's (SEC) Climate Disclosure Mandate, the International Sustainability Standards Boards's (ISSB) S1 (General Requirements), and S2 (Climate Disclosure), Korea is also preparing its own disclosure standards and timelines for mandatory disclosure by establishing the Korea Sustainability Standards Board (KSSB). The KSSB was established within the Korea Accounting Institute in February 2023 to review disclosure policy. The Korean government has also formed the ESG Financial Promotion Group at the Financial Services Commission.

Key issues in the current...