South Korea Halts ESG Reporting Amid Regulatory Easing: What It Means for Investors
South Korea’s Financial Services Commission (FSC) has recently announced a significant delay in the country’s ESG disclosure roadmap. This decision reflects the ongoing evolution of the global regulatory landscape and the increasing calls for harmonization in environmental, social, and governance (ESG) practices.
Details of the ESG Disclosure Update
The FSC’s announcement came during the fifth meeting of the ESG Finance Promotion Task Force on April 23, 2024, held at the Korea Financial Investment Association in Yeouido, Seoul. This task force, established in February 2024, aims to unite various government departments, industry groups, and regulatory bodies to improve ESG disclosure policies.
Aligning with Global Trends
During the recent meeting, the task force discussed the need to align South Korea’s ESG roadmap with international developments while considering the unique characteristics of the country’s manufacturing-heavy economy. FSC Vice Chairman Kim So-young noted significant shifts in global regulations, particularly highlighting:
- The European Commission’s decision to ease sustainability regulations, which exempts disclosures for companies with fewer than 1,000 employees.
- A deferral of disclosure timelines for large non-listed EU companies by two years, along with simplified disclosure standards.
- Japan’s phased approach for large-cap listed companies, set to begin in 2027.
- Ongoing developments in ESG frameworks in the US, UK, and Canada.
Despite these global initiatives, challenges remain, particularly regarding the inconsistency of regulations across different countries. Currently, 19 nations, including France, have begun implementing ESG disclosures under the EU’s Corporate Sustainability Reporting Directive (CSRD).
Impact on South Korea’s ESG Disclosure Plans
Due to these global inconsistencies, South Korea’s original timeline for initiating ESG disclosures in 2025 for KOSPI-listed firms with assets over 2 trillion won has now been postponed to after 2026, with potential for further delays. Kim emphasized the importance of observing global trends in determining appropriate disclosure standards and roadmaps.
Technical Aspects of the Reporting Framework
The task force also reviewed several key technical aspects of the reporting framework, including:
- Base disclosures will be grounded on consolidated financial statements, excluding non-material subsidiaries.
- A proposal to defer Scope 3 emissions reporting due to tracking complexities and associated costs.
For more insights on the evolving ESG landscape, visit Business Korea.
