"Companies Show Low Trust in Domestic ESG Rating Agencies... Need to Increase Transparency"

A survey revealed that companies do not highly trust domestic ESG (Environmental, Social, and Governance) rating agencies.

The Korea Chamber of Commerce and Industry in Jung-gu, Seoul, where the Commerce Day ceremony was held on the 31st. Photo by Kang Jin-hyung aymsdream@

The Korea Chamber of Commerce and Industry (KCCI) announced on the 19th the results of a recent survey conducted among ESG officers of 100 domestic companies regarding their opinions on local ESG rating agencies.

Sixty-three percent of the respondent companies answered that domestic ESG rating agencies are not operated transparently, and 85% expressed concerns about the possibility of conflicts of interest within the rating agencies.

Additionally, 60% agreed on the need for legal regulations on domestic ESG rating agencies, indicating an overall low level of trust in these agencies. The most cited issue, by 64%, was the non-disclosure of evaluation systems, criteria, and weighting. Forty-six percent also responded that there is insufficient explanation regarding evaluation results.

Challenges in responding to ESG evaluations included the significant time and cost required (53%) and difficulties in understanding and interpreting evaluation indicators and criteria (44%). Regarding the recently announced government guidance for ESG evaluation institutions, more respondents preferred operation in the form of government and related agencies’ guidelines (60%) rather than self-regulation by rating agencies (38%).

The most necessary improvements for the development of domestic ESG rating agencies were identified as enhancing fairness and transparency (46%), introducing related laws and systems (28%), and strengthening the human resources capabilities and expertise of rating agencies (23%).

Woo Tae-hee, Executive Vice Chairman of KCCI, stated, "Companies are facing difficulties due to the lack of opportunities for feedback from domestic rating agencies and the non-disclosure of evaluation methodologies related to ESG evaluations." He added, "Active support from policy authorities is necessary to enhance the transparency and reliability of rating agencies so that companies do not suffer disadvantages from ESG evaluation results."

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