Insights

Karl Chun Seung Yang of the Korea Sustainability Investing Forum

"Mandating Sustainability Disclosure is Critical for the Lee Jae-myung Administration" (Business Post)

"I believe the most urgent task currently facing the Lee Jae-myung administration is making sustainability disclosure mandatory. Delaying this will not benefit either our government or our corporations, and it will only exert a negative impact on corporate Value-Up initiatives."

Karl Chun Seung Yang, Executive Director of the Korea Sustainability Investing Forum (KoSIF), pointed to "mandatory sustainability disclosure" as the top priority that the Lee Jae-myung administration must handle immediately during an interview with Business Post on the 24th, conducted at the KoSIF office on Nonhyeon-ro, Gangnam-gu, Seoul.

The introduction of sustainability disclosure was originally discussed during the Moon Jae-in administration and was scheduled to be finalized under the Yoon Suk-yeol administration, but it remains unconfirmed to this day. Executive Director Yang explained, "If sustainability disclosure is not realized, it will be difficult for the KOSPI to reach the 5,000 milestone. Information on Korean companies must be transparently revealed so that foreign investors can enter the Korean market without hesitation." He further emphasized, "If no information related to sustainability is disclosed, making investment choices becomes exceedingly difficult. This is why I view mandating disclosures as the absolute starting point."

Previously, the Korea Sustainability Standards Board (KSSB) unveiled the draft version of the domestic sustainability disclosure standards—the Korean counterpart to global frameworks—in May of last year. At the time, domestic corporations voiced complaints, claiming that mandating disclosures too quickly would impose an excessively heavy burden on businesses. According to a survey conducted in June of last year by the Korea Chamber of Commerce and Industry (KCCI) targeting 125 companies with domestic assets worth 2 trillion KRW or more, a vast majority of corporations viewed 2028 or later as the appropriate timeline for mandatory disclosure.

Executive Director Yang analyzed, "At any rate, considering global trends, mandating disclosure is something that must be done. To ease the burden on corporations, the government should stop putting off disclosures day after day. Instead, it needs to lock in clear baselines and an exact timeline, informing corporations well in advance so they can prepare effectively."

The final versions of IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and S2 (Climate-related Disclosures) by the International Sustainability Standards Board (ISSB), which the KSSB will utilize as its baseline, were completed and finalized in January of last year. Domestic disclosures are projected to be established based on this information.

Executive Director Yang selected the enactment of a Framework Act on ESG as the next core challenge. "Following disclosures, I believe it is necessary for the National Assembly to finalize the Framework Act on ESG," he stated. The Framework Act on ESG is a piece of legislation designed to consolidate ESG-related elements scattered across various laws and systems into a single framework for clear comprehension. Executive Director Yang emphasized, "The most fundamental issue with South Korean policymaking is that policies flip entirely every time there is a change in administration. To prevent this, a Framework Act on ESG must exist as a minimum institutional safeguard."

To enact the Framework Act on ESG, the National Assembly launched the National Assembly ESG Forum in October of last year, gathering experts from corporations, financial institutions, and civic organizations to collect feedback.

Executive Director Yang also noted, "Furthermore, to expand renewable energy in earnest, the Lee Jae-myung administration must establish a Green Financial Investment Corporation. Renewable energy projects face a structural bottleneck where they cannot attract external investment capital until they enter the Project Financing (PF) stage." Under current law, until a renewable energy project receives formal permits and licenses from the central or local government, it must be driven solely by the internal capital owned by the project entity. Executive Director Yang pointed out, "Typically, for a renewable energy project, the capital required just for the preparatory phase before permitting reaches 100 to 200 billion KRW. Who could possibly execute that with so much upfront capital at risk?"

He continued, "If a Green Finance Corporation exists, it can lend the necessary funds to the project entity prior to permitting, and receive repayment once the permitting process is complete. This framework can catalyze and vitalize far more renewable energy projects. Moreover, the very fact that a project has secured a loan from a public corporation adds credibility, making it much easier to attract private capital during the subsequent PF stage."

Karl Chun Seung Yang established the Korea Sustainability Investing Forum in 2007 as the nation's first specialized ESG think tank. The foundation of the forum was set in motion after the term "ESG" was first coined in a United Nations Global Compact (UNGC) report in 2004, undergoing a two-year preparation phase.

Executive Director Yang explained, "Even during the establishment process, intense discussions took place regarding our exact strategic direction. After launching, we also faced events that dealt a severe blow to our operations, such as the 2008 global financial crisis." During the 2008 financial crisis, KoSIF endured immense hardships, essentially being operated by only two individuals: Executive Director Yang and Secretary-General Lee Jong-oh. The forum began overcoming the crisis in the same year by introducing the Carbon Disclosure Project (CDP)—the world's leading international greenhouse gas reduction initiative—to South Korea for the first time and taking charge of the CDP Korea Committee. Since then, it has maintained active operations, serving as the Korean partner for international research organizations such as The Climate Group and the Science Based Targets initiative (SBTi).

Executive Director Yang concluded, "We are an organization that is still evolving today, and I believe we must advance even further. Reflecting back, I do have some regrets, wondering if we should have been much more aggressive in demanding sustainable operations from corporations."