Most Korean companies are not ready for the mandatory ESG disclosures
By Chea Srun | XQuant
The Korean government announced on Jan 14th 2021 that companies listed on KRX with total assets valued at 2 TRL KRW (1.8 BLN USD) or more will be required to disclose their ESG activities from 2025. The obligation will be extended to all listed companies on KRX from 2030.
Financial regulators still have to decide on the framework for the reporting of the ESG related activities. Similar to EU which has adopted the EU Taxonomy this year, one possibility is that Korea will come out with its own Taxonomy which maybe more adapted to the Korean industrial landscape.
Also some major Korean companies have been already voluntarily disclosing their ESG related activities through CSR reports, but those reports can sometime cherry picking some positive issues while omitting some other controversial ones. A strict reporting framework with clear metrics will solve the issue.
Currently there are less than 40 firms among the major companies in Korea which are making their ESG related activities public through regulatory filings. Other companies are looking to follow the movement, and many internal discussions have started to be held.
Korean National Pension Service which manages KRW 833 TRL in 2020 has declared that half of the asset will go to the ESG companies by 2022. For a listed company, being able to receive an ESG label will make a significant difference in term of stock price performance or capacity of raising money.
Although there is still some time to prepare, big companies should set up a task force to work on the subject. Smaller companies with less resources should think about using agencies which have experience dealing with ESG reporting.