Govt. to mandate sustainability disclosures: Starting with KOSPI-listed firms over 10 trillion won in 2028

South Korea is set to mandate Environmental, Social, and Governance (ESG) disclosures for its largest listed companies, beginning in 2028. The requirement will initially apply to KOSPI-listed corporations with consolidated assets exceeding 10 trillion won (approximately $7.3 billion USD).

Finance Minister Lee Bok-hyun announced the plan following a meeting with the ruling Democratic Party and government officials. He emphasized that proactively managing climate and energy risks is essential for sustainable growth and is becoming increasingly important for capital market participants' investment decisions. Lee noted that this initiative is more ambitious than similar measures taken in Japan.

The initial roadmap proposed by the Financial Services Commission (FSC) had set the threshold at 30 trillion won in consolidated assets. However, the government has decided to lower this to 10 trillion won, reflecting a stronger commitment to ESG transparency.

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Proactively managing climate and energy risks is an indispensable task for sustainable growth, and its importance as an investment decision factor for capital market participants is growing. This is a more proactive measure than Japan's.

The government plans to prioritize climate-related disclosures and incorporate them into the Capital Markets Act, aiming for legislative enactment within the year. While the mandatory disclosures will commence in 2028, the government intends to offer exemptions where appropriate, ensuring that the responsibility for disclosure is not compromised. Plans are also underway to gradually expand the scope of mandatory disclosures to companies with consolidated assets of 5 trillion won in 2029 and 2 trillion won in 2030.

Rep. Han Jeong-ae, policy chief of the Democratic Party, stated that ESG disclosures will encourage companies to identify and manage climate-related risks and opportunities, ultimately fostering management innovation. She believes that improved ESG reporting will lead to better corporate management processes and more accurate evaluations from the capital market.

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ESG disclosure can promote management innovation by enabling companies to identify and manage risks and opportunities related to climate and sustainability, and to reorganize their overall decision-making and risk management systems. Through ESG disclosure, actual corporate management processes will be improved, and they will receive appropriate evaluations from the capital market.