FSS Introduces ESG Fund Disclosure Standards... "Will Contribute to Investment Activation"

Financial Supervisory Service, Yeouido, Seoul. Photo by Jinhyung Kang aymsdream@

On the 5th, the Financial Supervisory Service announced that it has established "Disclosure Standards for ESG Funds" to resolve information asymmetry among ESG (Environmental, Social, and Governance) fund investors and to encourage responsible management by asset management companies.

The revised disclosure standards will apply to public offering funds that include ESG in the fund name in the preliminary disclosure of the securities registration statement or indicate ESG-related matters in the investment purpose and strategy in the prospectus.

Furthermore, regarding the investment purpose and strategy, asset management companies must clearly state the ESG investment objectives that the ESG fund aims to achieve, and to facilitate easy verification of expertise in management, they must separately explain ESG-specialized information related to human and material resources.

To prevent investors from misunderstanding the correlation between ESG excellence and returns, cautionary statements must be displayed in the investment precautions. When paying evaluation costs using fund assets for external ESG evaluation results, specific contract details and payment records must be documented. When preparing performance reports, the implementation status of the ESG investment strategy must be recorded, and if comparative or reference indices are used, the relevant indices and management performance must be explained comparatively.

The same applies to post-disclosure in asset management reports. However, even private funds that do not submit securities registration statements must provide asset management reports to general investors, and the revised asset management report format will be applied uniformly. Additionally, major items such as investment strategy, management personnel, management progress, and fund cost status in the asset management report must be recorded according to the same standards as the revised disclosure standards.

The revised disclosure standards and asset management report preparation standards will apply not only to newly established funds after the effective date but also to existing funds. Considering the industry's preparation period for securities registration statements, the Financial Supervisory Service plans to implement the revisions starting in December this year after a two-month grace period from the revision date and operate a "concentrated review period" for correction disclosure filings for two months from the effective date. For asset management reports, submission according to the revised format will begin with reports whose preparation date arrives in February next year, after the correction disclosures of existing funds' securities registration statements are completed.

A Financial Supervisory Service official stated, "Investors will find it easier to make investment decisions on ESG funds based on pre-disclosed information and post-verification of management progress, and asset management companies will contribute to the healthy activation of ESG investment by managing responsibly as disclosed in advance." The official added, "During the concentrated review period, we will support correction disclosures of existing ESG funds and continuously refine disclosure standards according to trends in disclosure regulations in major overseas countries and the adoption status of ESG disclosure standards by domestic companies."

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