Despite Calling for 'ESG Management,' Financial Firms' Governance Rated B or C... 'G' Remains Empty Talk

Hana, Woori, and IBK Bank Governance Ratings 'B'
Potential Shareholder Value Damage Due to Non-Financial Risks
23 Major Insurance and Securities Firms Also Listed

[Asia Economy Reporter Song Seung-seop] Despite the ESG (Environmental, Social, and Governance) craze among major financial companies, the 'G' sector received failing grades. It has been pointed out that improvements are needed, such as enhancing the transparency and diversity of the board of directors and establishing thorough internal control standards, rather than only focusing on easily visible aspects like 'E' or 'S'.

According to the Korea Corporate Governance Service (KCGS) on the 1st, among the leading affiliates of the five major financial groups?KB, Shinhan, Hana, Woori, and NH Nonghyup?many companies received a B grade in the governance category this year. A B grade is classified as 'average,' but it indicates a stage where there is potential for shareholder value damage due to non-financial risks. Efforts are also needed to establish a sustainable management system, including governance. Unlike the holding companies that received high grades, these companies received relatively poor report cards.

Among the five major banks, Hana Bank and Woori Bank only received a B grade. Hana Bank dropped one level from B+ last year. IBK Industrial Bank of Korea, which was B+ last year, also fell to a B grade this year.

Overall evaluation is A, but many B and C grades in governance

In particular, many major insurance companies and securities firms were listed with a B grade. Twenty-three financial companies, including Heungkuk Fire & Marine Insurance, Heungkuk, AIA, ABL, KDB Life Insurance, and Shinhan, DB Financial Investment, Eugene, Mirae Asset, Kiwoom, and eBest Investment & Securities, received a B grade. In addition, eight companies such as Yuhwa, Buguk, and Hanyang Securities received a C grade, and four companies including Sangsangin Securities, Q Capital, Leaders Technology Investment, and Mason Capital received the lowest D grade.

KCGS announces ESG ratings annually to promote sustainable management of companies and assist capital market participants in investment decision-making. The ratings are divided into seven levels: S, A+, A, B+, B, C, and D. Although only listed companies are usually evaluated, in the case of financial companies, even unlisted firms are separately evaluated for governance. The governance evaluation factors for listed companies include shareholder rights protection, board of directors, audit organizations, and information disclosure. Financial companies are additionally examined on CEO, compensation, risk management, and internal control items.

Meanwhile, the five major financial holding companies all received grades of A or higher in both individual ESG categories and overall evaluations this year. KB Financial and Shinhan Financial both achieved A+ grades in all categories.

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