South Korean Regulator Announces Measures To Promote ESG And Responsible Investing

• Published date: 05 February 2021
• Subject Matter: Finance and Banking, Corporate/Commercial Law, Financial Services, Commodities/Derivatives/Stock Exchanges, Corporate and Company Law
• Law Firm: Mayer Brown
• Author: Mr Mark Uhrynuk and Alexander Burdulia

On 14 January 2021, the Financial Services Commission (FSC) announced a series of measures to improve corporate disclosure rules in South Korea, including initiatives to promote environmental, social and governance (ESG) and responsible investing (the "Measures"). The Measures include the implementation of mandatory ESG disclosures for listed companies and potential changes to the Korean Stewardship Code to strengthen fiduciary duties related to ESG matters. In a press release, the FSC recognizes the "growing significance of ESG factors and responsible investing" and concludes that "it is necessary to set up an appropriate regulatory environment."

This Legal Update discusses these new Measures, the sustainable finance regulatory environment in South Korea more broadly, and the implications for foreign investors in South Korea. We discuss the global evolution of ESG for asset managers and investors and provide additional practical advice in our comprehensive article, "Private Equity for the Public Interest: The Evolution of ESG and Considerations for Asset Managers and Investors".

Sustainable Finance in South Korea

The FSC's announcement of the Measures builds upon significant sustainable finance developments in South Korea last year. In June 2020, the Korea Exchange (KRX) launched a platform dedicated to Socially Responsible Investment (SRI) Bonds to promote green, sustainability and social bonds. Issuers can register bonds on the platform by demonstrating compliance with international standards (e.g., International Capital Market Association (ICMA)'s Green Bond Principles or Climate Bonds Initiative (CBI)'s Climate Bonds Standard) and completing a review process. As of January 2021, there are approximately 550 products registered on the platform. KRX is also a member of the UN's Sustainable Stock Exchanges Initiative and, as noted below, will issue guidance on ESG disclosures in the future.

In July 2020, the Ministry of Economy and Finance announced the "Korean New Deal", an ambitious national development strategy to support recovery from the COVID-19 crisis focused on digital transformation, improving the social safety net, and a "Green New Deal" to promote the transition to a low-carbon economy. The Korean New Deal provides for approximately US$140 billion of investment by 2025, including funding for green transition of infrastructure (e.g., turning public facilities into zero-energy buildings), the promotion of low-carbon and decentralized energy and...