Korea Financial Regulator Calls for Mandatory ESG Reporting for KOSPI-listed Firms
Korea’s financial regulator, the Financial Services Commission (FSC) introduced plans for the Korea Exchange to require ESG reporting by all KOSPI-listed firms.
The new rules were introduced as part of a series of new disclosure requirements aimed at improving transparency for investors. In a release outlining the new disclosure requirements, the FSC stated:
“Considering a surge in retail investors’ participation in stock markets last year, the disclosure rules need to be improved to allow retail investors to more easily understand disclosure information while reducing filing burdens for companies. In addition, with growing significance of environmental, social and governance (ESG) factors and responsible investing, it is necessary to set up an appropriate regulatory environment.”
In order to promote responsible investing and improve information for investors, the regulator has called on the Korea Exchange to provide guidance on ESG disclosure by listed companies until 2025. From 2025 until 2030, mandatory filing will begin for firms over a certain size threshold. Mandatory filing of ESG disclosure reports will begin for all KOSPI-listed companies in 2030.
Commenting on the new rules, credit ratings agency Fitch Ratings applauded the move, while cautioning that growing calls for mandated ESG reporting highlights the need for global sustainability reporting standards. Fitch Ratings wrote:
“The growing number of ESG reporting requirements should help to improve transparency around corporate practices and enable investors to make more informed judgements. Nevertheless, the proliferation of requirements may also aggravate existing challenges with ESG data consistency and comparability. We believe this will increase the urgency of greater harmonisation of ESG reporting standards, although achieving this is likely to be challenging.”