ESG disclosure to be mandatory in phases for Kospi-listed firms

South Korea will mandate listed companies with more than 2 trillion won ($1.8 billion) in assets to disclose their environmental, social and governance (ESG) report starting 2025, announced the country’s financial regulator on Thursday.

Currently, 100 or more companies in Korea release ESG reports annually but only around 20 of them disclosed the report to the Korea Exchange, the nation’s sole stock exchange operator. But starting 2025, companies listed on the country’s main Kospi market with assets of more than 2 trillion won will be required to publicly post the report, and the requirement will be extended to all Kospi-listed firms in 2030, according to the Financial Services Commission (FSC).

The governance disclosure rule that is now subject to 211 Kospi-listed companies with more than 2 trillion won assets will also be extended to firms with more than 1 trillion won assets in 2022, 500 billion won in 2024 and all companies in 2026.

The KRX said it will present an ESG reporting guidance within this month. The guidance will contain necessary information on ESG factors that companies would be required to include in their reports, exemplary cases by sector, assessment procedure and international standards.

Yoon Duk-chan, CEO of corporate data provider Who’s Good, said that easy access to ESG reports is necessary for investors to identify investment risk and opportunity. He added that ESG disclosure is a very important first step to enhance the capital market and promote sustainable finance as well as speed up transition to low-carbon economy.

Korea Corporate Governance Service (KCGS) said there are about 20 countries that have mandatory ESG disclosure rule in place. Rules vary by country because there is no established global ESG disclosure standard yet. In the U.S., which allows voluntary ESG reporting, almost 90 percent of companies release ESG reports in 2020, up from 20 percent in 2011.

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