FKI: Global Corporate ESG Risks Lower in Europe, Higher in Korea and China

[Asia Economy Reporter Su-yeon Woo] A claim has emerged that there are significant regional differences in ESG (Environmental, Social, and Governance) risks among global companies. ESG risks are relatively high for companies in South Korea, China, Hong Kong, India, and Canada, whereas European companies such as those in France and the United Kingdom show comparatively lower risks, which explains the confidence behind the European Union's (EU) push on ESG.

On the 22nd, the Federation of Korean Industries (FKI) announced the 'Global Corporate ESG Risk MAP' report based on the analysis of 3,456 companies worldwide (as of early August) published on the global ESG rating agency Sustainalytics' website, revealing these findings.

The analysis showed that the average ESG risk scores of listed companies on major global stock exchanges were highest in the Shanghai Stock Exchange at 36.1, Shenzhen at 32.9, Hong Kong at 30.5, and Korea Exchange at 30.1, all classified as 'High Risk.' Conversely, the lowest scores were found in the Paris Stock Exchange at 20.6, London at 21.6, Nasdaq at 22.1, Taiwan at 22.4, and Frankfurt at 22.5.

Global Corporate ESG Risk Scores by Country (Average)
※ Rankings are based on stock markets with more than 50 analyzed companies; including markets with 50 or fewer companies, Spain ranks first (19.2, 35 companies)
(Data source: Federation of Korean Industries)

The FKI attributed these discrepancies to differences in the proportions of service and manufacturing industries by country. In fact, service sectors showed lower average risk scores, while manufacturing sectors such as metals and steel exhibited relatively higher scores. According to recent statistics (2019, ISTANS), countries like the UK and France have a high service sector proportion of about 80% across all industries, whereas South Korea's service sector proportion is 62.4%, and China's is 53.4%.

By industry, sectors with high ESG risks included metals, steel, non-ferrous metals, oil and gas, and aerospace and defense, while sectors with low risks were textiles and apparel, transportation infrastructure, media, packaging, and retail. Among domestic companies, those with low ESG risks included Samsung Electro-Mechanics (15.0), Hankook Tire & Technology (15.4), Hyundai Mobis (16.0), CJ Logistics (16.1), NCSoft (16.8), Hanon Systems (17.1), Hyundai Glovis (17.3), CJ ENM (17.6), Naver (17.7), Fila Holdings (17.7), LG Electronics (17.9), Coway (18.0), Celltrion Healthcare (18.0), Pearl Abyss (18.2), and Netmarble (18.7).

Among the global total of 3,456 companies, the bottom five were China Northern Rare Earth High-Tech (China), Tokyo Electric Power Company (Japan), Inner Mongolia Baotou Steel Union (China), and Zijin Mining Group (China). Of the bottom 20 companies analyzed, 14 were Chinese, 2 Canadian, and one each from Japan, Mexico, Australia, and the United States. These companies commonly received a 'Controversy Level 5' rating, indicating major negative incidents or accidents in the past three years.

In the case of Tokyo Electric Power Company, it decided earlier this year to release contaminated water stored at the Fukushima Daiichi Nuclear Power Plant into the ocean, provoking backlash from South Korea, China, and other countries within the regional influence zone. The controversy types for Tokyo Electric Power Company were classified as 'community relations' and 'gas leaks, wastewater, and waste.'

Additionally, it is noteworthy that Equifax, which leaked personal information of 130 million people in 2017, received a controversy rating of 5, whereas Facebook, which recently experienced a personal data breach affecting 530 million people, received a rating of 4. Regarding this, the FKI explained, "While the scale of incidents is important, differences in companies' risk response levels are presumed to cause variations in ratings."

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