Mandatory ESG Disclosure That Shook Companies... Draft to Be Released in March-April

Kim So-Young, Vice Chairman of the Financial Services Commission, to Hold Meeting on the 14th

The draft mandatory ESG (Environmental, Social, and Governance) disclosure standards for publicly listed companies in South Korea will be announced between March and April this year. The financial authorities initially aimed to implement the standards in 2025 but postponed the introduction to after 2026 in response to domestic and international circumstances and companies' requests for more preparation time.

On the 14th, Kim So-young, Vice Chairman of the Financial Services Commission, emphasized at the 'Domestic ESG Disclosure Standards Field Meeting' held at the Korea Chamber of Commerce and Industry, "We will establish ESG disclosure standards aligned with global consistency to alleviate the burden of dual disclosures on companies," adding, "We will fully consider the conditions of the domestic economy and companies."

The Financial Services Commission is preparing to establish ESG disclosure standards (sustainability disclosure standards) in collaboration with related organizations such as the Korea Accounting Standards Board. The purpose is to systematically provide investors with information on corporate sustainability and to reduce information asymmetry between investors and companies. The goal is to enable comparison of ESG issues, which have so far been voluntarily disclosed by companies, according to domestic disclosure standards. It is expected to be piloted starting with KOSPI-listed companies with assets exceeding 2 trillion won.

This meeting was also held to discuss the draft domestic ESG disclosure standards being prepared by the Financial Services Commission. The financial authorities plan to initially promote disclosure through stock exchange filings, which impose relatively less legal burden on companies, and to apply minimal sanctions during the early stages of the ESG disclosure system. They are also considering applying the standards first to climate-related areas where international consensus has been formed.

Vice Chairman Kim stated, "Unlike advanced countries such as the United States and Europe, South Korea has a high proportion of manufacturing, making carbon reduction and other efforts structurally challenging," and expressed agreement that "the unique characteristics of the domestic industry need to be sufficiently reflected in the process of establishing ESG disclosure standards."

She continued, "We will also promote efforts to support companies, such as translating global ESG disclosure standards and providing disclosure guidelines, to help them smoothly adapt to strengthened overseas ESG regulations," and explained, "We will strengthen efforts to enhance companies' ESG management capabilities, including expanding corporate consulting."

Companies have continuously expressed concerns about the burden of mandatory ESG disclosure. In fact, the Financial Services Commission held the '3rd ESG Finance Promotion Team Meeting' in October last year and postponed the mandatory ESG disclosure for companies from 2025 to after 2026. This is because the majority of domestic companies are not yet prepared for ESG disclosure, and major countries such as the United States have also delayed the mandatory implementation of related systems. The specific timing will be decided after discussions with relevant ministries.

An industry official said, "It takes at least 2 to 3 years to accumulate sufficient data and organize systems according to disclosure standards, so even after 2026, the burden remains significant," adding, "If the uncertain expressions included in the disclosure standards are also specified, it is expected that confusion in the industry will decrease."

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