ESG Risks of KOSPI Top 10 Are Greater Than Those of S&P

ESG Risk Scores Reviewed
S&P Top Market Cap Stocks Score Higher Than Kospi Top Market Cap Stocks

[Asia Economy Reporter Hwang Junho] The ESG (Environmental, Social, Governance) risk scores of the top 10 companies by market capitalization on the KOSPI were found to be higher than those of the top companies in the U.S. S&P 500.

Top KOSPI Companies’ ESG Risk Score at 21.5 Points

According to Sustainalytics, a global ESG rating firm, as of the end of May, the average ESG risk score of the top 10 companies by market capitalization on the KOSPI was 26.8 points. This is 5.3 points higher than the 21.5 points of the top 10 companies in the S&P 500.

While ESG culture is gradually being established among U.S. companies, Korean companies, which started late, are only now beginning to take action on ESG. The average score of the top 10 U.S. companies decreased from 22.3 points in December 2019 to 21.3 points, indicating reduced risk. In Korea, the reduction was only 0.4 points.

Notably, among U.S. companies, 5 out of 10 scored in the 10-point range. In contrast, among Korean companies, only Naver recorded a score in the 10-point range. Naver has been evaluated since June last year and has reduced its risk by 9.4 points since then. However, Kakao, in the same industry, recorded 28.4 points, indicating an increase in ESG risk over the same period.

The fact that many of the top companies by market capitalization are manufacturers is also cited as a reason for the lower ESG scores compared to the U.S. Hyundai Motor Company recorded 36.2 points in this survey, making it the company with the highest ESG risk among the top 10. Generally, a score above 40 is classified as ‘severe’ risk. The company with the next highest score was Kia, with 34.9 points. Among 458 Korean companies evaluated by Sustainalytics, 41% (187 companies) scored 30 points or higher. However, considering that U.S. electric vehicle maker Tesla scored 31.3 points, it appears that the ESG risk inherent in the automobile manufacturing industry is significant. Among Korea’s top companies by market capitalization, besides Hyundai and Kia, Celltrion also scored above 30 points (32.1 points).

Wide Variations Even Within Manufacturing

Although in the same manufacturing sector, SK Hynix, which proactively engaged in ESG activities, recorded 20.1 points, lower than Samsung Electronics’ 23.2 points. This seems to reflect the corporate culture influenced by Chairman Chey Tae-won’s efforts, who is regarded as a leader in ESG management. Compared to December 2019, SK Hynix reduced its score by 2.5 points, and Samsung Electronics by 2.8 points.

Among the top KOSDAQ companies, Celltrion Pharm recorded the highest risk with 46.6 points. HL Biopharma also saw a sharp increase in risk, rising from 19.4 points in December 2019 to 44.4 points this year.

Researcher Kim Hoo-jung of Yuanta Securities Research Center analyzed, "In Korea, it has become necessary to review ESG factors across all corporate activities, and as companies voluntarily improve governance or establish ESG committees, this is a step toward enhancing ESG evaluation levels."

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