"Korea Must Advance Mandatory ESG Disclosure to Prevent

'Galapagosization' of Domestic Industries"

[Business Post] "If South Korea postpones the timeline for mandatory ESG (Environmental, Social, and Governance) disclosure to 2029 as requested by the business community, it faces a high risk of being sidelined by global investors, ultimately resulting in the 'Galapagosization' (industrial isolation) of Korean industries."

At a press conference held on June 23 at the National Assembly Communication Hall in Seoul to demand the prompt introduction of "Korean Mandatory ESG Disclosure," Jong-oh Lee, CIO of the Korea Sustainability Investing Forum (KoSIF), stated, "The global economy is rapidly restructuring into a sustainable market, and global institutional investors are hyper-focused on ESG disclosures.“

The press conference was jointly organized by KoSIF, Greenpeace, the Green Transition Institute (GTI), and 'Emergency' (the Climate Action Lawmakers' Coalition of the Democratic Party of Korea).

CIO Lee pointed out, "Investors are well aware that a company’s long-term value and core competitiveness are directly tied to its ESG reporting capabilities. To prevent South Korean enterprises from being marginalized in global capital markets, the government must advance the timeline for mandatory sustainability disclosure as much as possible.“

Background: The Tug-of-War Over Korea's ESG Disclosure Roadmap

"Korean ESG Disclosure" refers to the mandatory reporting standards currently being formulated by the Korea Sustainability Standards Board (KSSB) under the Korea Accounting Institute (KAI), designed to align the International Sustainability Standards Board (ISSB) framework with the domestic market.

The mandate will initially apply to listed companies with total assets of 2 trillion KRW or more, before gradually expanding to cover other enterprises. The required reporting includes climate-related disclosures such as greenhouse gas (GHG) emissions, reduction targets, and environmental impact assessments.

The Financial Services Commission (FSC), the regulatory body responsible for setting the implementation timeline, originally planned to introduce the Korean ESG disclosure mandate in 2025. However, in October last year, the FSC abruptly postponed the schedule to "2026 or later.“

This delay is presumed to reflect the pushback from the domestic business community. According to a survey released by the Korea Chamber of Commerce and Industry (KCCI) in June this year, 58.4% of 125 domestic companies with assets over 2 trillion KRW viewed 2028–2030 as the appropriate timeline for implementing ESG disclosures. Furthermore, over 90% of respondents stated that the disclosure of Scope 3 emissions (indirect emissions across the value chain) should either be excluded or deferred in the Korean framework.

Global Capital Markets Demand Strict ISSB Alignment

In response to the business sector's pushback, Executive Director Jong-o Lee emphasized the escalating pressure from global asset owners:

"In May this year, over 120 global investment-related institutions urged jurisdictions to adopt the ISSB’s ESG disclosure standards starting from 2025. Global institutional investors, particularly public pension funds, are increasingly raising their voices regarding standardized ESG disclosures.“

He elaborated on specific global precedents:

"The Government Pension Fund Global (GPFG) of Norway, the world's largest sovereign wealth fund, recently submitted an opinion on Japan's upcoming ESG disclosure standards, stating that they must strictly align with ISSB standards. Similarly, the Canada Pension Plan Investment Board (CPPIB) issued a statement demanding that Canada's domestic ESG disclosure requirements meet the global benchmarks set by the ISSB."

Lee further noted that the United Nations-supported Principles for Responsible Investment (PRI) recently sent a letter expressing concern over South Korea's regulatory approach:

"The PRI voiced concerns that the current KSSB draft standards might fail to guarantee globally credible information disclosure, strongly urging South Korea to adhere strictly to the ISSB framework."

The PRI, the world's largest network of institutional investors dedicated to responsible investment, has officially endorsed the joint statement by Korean NGOs calling for the mandatory integration of sustainability disclosure standards into the statutory reporting framework starting from 2026.

In its official submission to the KSSB, the PRI highlighted:

"The current lack of consistent, high-quality sustainability data severely hampers investor decision-making and prevents capital from flowing effectively toward broader sustainability goals. The current draft under discussion in Korea may fall short of the core principles of international alignment, comparability, and reliability."

Major Economies Powering Ahead vs. Korea's Institutional Inaction

Globally, major jurisdictions have either already codified or are on the verge of enforcing their own mandatory ESG disclosure standards:

The European Union (EU): Enacted the Corporate Sustainability Reporting Directive (CSRD) in January last year and rolled out the European Sustainability Reporting Standards (ESRS)—the mandatory reporting framework under CSRD—in January this year.

The United States: The Securities and Exchange Commission (SEC) unveiled its final climate disclosure rule in March this year, with implementation set to begin sequentially next year.

Legal experts warn that if South Korea remains the outlier by delaying mandatory disclosure to 2029 or beyond, domestic companies will fail to build the necessary capacity required to comply with overseas jurisdictions, severely undermining their international competitiveness.

Hyun-young Ji, an attorney at the Green Transition Institute (GTI), drew a stark comparison with Japan:

"Even Japan, which has set its mandatory disclosure timeline to 2027—a target often criticized as lagging behind other major economies—has already established its legal foundation. The Financial Services Agency (FSA) of Japan has formed a working group on disclosure and assurance, providing a transparent, step-by-step roadmap. They publish the outcomes of every meeting transparently so that Japanese companies can prepare well ahead of the enforcement date.“

Ji criticized the lack of regulatory leadership in Korea:

"In contrast, South Korea’s Financial Services Commission has failed to provide a concrete, comprehensive roadmap since discussions began in 2021. This regulatory inaction is directly eroding the competitiveness of our domestic companies and capital markets. In modern global capital markets, a country’s robust framework for sustainability-related financial disclosures heavily influences how international capital evaluates a company’s strategy and corporate practices.“

She urged immediate regulatory action:

"The FSC must present a concrete roadmap as soon as possible to make sustainability disclosures mandatory starting from 2026. This is the only viable path to protecting our enterprises and the broader economy. To support this infrastructure, the Financial Investment Services and Capital Markets Act must be amended by the National Assembly without delay.“

The Green Transition Institute further analyzed that the corporate anxieties reflected in the KCCI's survey are a direct byproduct of the regulatory ambiguity caused by the FSC’s failure to provide a clear timeline.

Attorney Ji explained:

"According to recent surveys, 75% of domestic companies and 85% of institutional investors actually agree with the draft sustainability disclosure standards. Major domestic corporations are not asking for a delay; they are urging the regulator to eliminate market uncertainty by providing a swift, transparent roadmap and detailed compliance guidelines. Major business lobbies do not accurately represent the stance of the majority of forward-looking enterprises."

Cross-Party Political Support to Advance the Timeline

In a joint statement, participating environmental and civil society groups emphasized that the FSC must enforce ESG disclosures as a statutory mandate—rather than a voluntary framework—starting from 2026, and that Scope 3 emissions reporting must be mandatory.

A large coalition of lawmakers from the opposition Democratic Party of Korea—including Reps. Ji-hye Park, Seong-hwan Kim, Jung-hyun Park, Seong-gon Wi, So-young Lee, Mi-ae Eom, and Jung-ae Han—attended the press conference to voice their political support for advancing the mandatory ESG disclosure timeline.

Representative Ji-hye Park concluded:

"The ISSB established the IFRS Sustainability Disclosure Standards so that companies aligned with global markets can start climate reporting from 2025. Yet, the Korean government and the FSC continue to respond with passivity, turning a blind eye to global market realities.“

"The government claims it wants to resolve the 'Korea Discount' through its Corporate Value-up Program. However, true corporate value-up cannot be achieved through short-term profit maximization; it requires institutional measures that guarantee long-term sustainability. The mandate for climate disclosure must be understood as the bedrock of this exact strategy.“ [END]

Original from - widsg@businesspost.co.kr

Inquiries: Jong-O Lee CIO (argos68@kosif.org), Dajeong Kim  Senior Researcher (kimdj@kosif.org)