Press Releases

FSC’s Draft ESG Disclosure Roadmap Critiqued

Internationally as the “Most Delayed Proposal”

- Korea Sustainability Investing Forum (KoSIF) Publishes 'Issue Brief' Comparing Global Standards and Proposing Issue-by-Issue Alternatives

- Korea’s Disclosure Timeline, Target Scope, Channels, and Third-Party Assurance Lag Entirely Behind Major Economies and Supply Chain Competitors

- Proposal Contradicts Current Government Policies—Including Climate Finance, the Corporate Value-up Program, and K-GX… Threatening a Prolonged “ESG Information Vacuum”

An analysis has revealed that the Financial Services Commission’s (FSC) draft ESG disclosure roadmap lags significantly behind major economies and South Korea’s supply chain competitors across all dimensions, including disclosure timeline, target scope, Scope 3 greenhouse gas (GHG) emissions, disclosure channels, and third-party assurance. This directly contradicts the core principles of "international alignment" and "information usefulness" originally established by the FSC as the fundamental directions for designing the disclosure roadmap.

The Korea Sustainability Investing Forum (KoSIF) announced on the 15th that it has published a "KoSIF Issue Brief." The brief compares the core bottlenecks of the FSC's draft ESG disclosure roadmap with those of major countries and supply chain competitors, while offering constructive alternatives and identifying key challenges.

Disclosure Timeline and Target Scope Lag Significantly Behind Major Economies… "Phased Application Starting for Assets of 5 Trillion Won or Higher is Necessary"

On February 25, the FSC announced a roadmap mandating climate disclosures starting in 2028 (FY27) for companies with consolidated total assets of 30 trillion won or higher, citing international trends. The draft outlines a plan to initially implement disclosures via the Korea Exchange (KRX) for a set period before transitioning them into statutory disclosures within annual business reports.

However, according to KoSIF’s analysis, the initial disclosure timelines for the compared countries and regions are concentrated much earlier, between 2025 (FY24) and 2027 (FY26). Furthermore, the number of companies subject to these initial mandates vastly exceeds South Korea's figures. These international roadmaps are designed to expand the disclosure scope in phases, completing their full implementation frameworks by 2030.

Specifically, the European Union (EU) will commence its mandatory Corporate Sustainability Reporting Directive (CSRD) in 2025 (FY24), starting with approximately 11,000 companies. California (USA) and Australia will follow in 2026, targeting 4,000 and 700 companies, respectively. While the United Kingdom will implement its ISSB-based mandatory disclosure in 2028 (FY27)—similar to South Korea—it has already enforced mandatory reporting aligned with the Task Force on Climate-related Financial Disclosures (TCFD) since 2023 (FY22). The UK's initial target scope for ISSB-aligned disclosures is roughly 600 companies.

Among South Korea’s direct supply chain competitors, China will begin mandates in 2026 (FY25) for approximately 450 companies. Japan and Taiwan will follow in 2027 (FY26) with around 70 and 120 companies, respectively, while India already initiated disclosures for 1,000 companies in 2023 (FY22). Notably, Japan—which begins its initial disclosures in 2027 for Prime Market-listed companies with a market capitalization of 3 trillion yen or higher—starts with a target size of about 70 companies, similar to South Korea. However, Japan plans to swiftly expand this scope to approximately 340 companies in 2028 (FY27) by lowering the threshold to 1 trillion yen.

In stark contrast, South Korea’s initial mandate in 2028 applies to a mere 58 companies. Compounding the issue, this group is heavily centered around financial institutions, failing to properly encapsulate high-climate-risk industrial sectors. Consequently, the analysis warns that a substantial majority of domestic enterprises will be left in a prolonged ESG information vacuum, which could trigger capital flight by global investors and the exclusion of Korean firms from client supply chains.

To avert these risks and sharpen the climate competitiveness of domestic enterprises, KoSIF argued that the disclosure mandate must begin with companies holding a minimum asset size of 2 trillion won. If corporate burdens must be accommodated, KoSIF proposed a phased implementation starting with a threshold of 5 trillion won in total assets—the exact baseline used by the Fair Trade Commission (FTC) to designate "large business groups subject to disclosure."

The brief also underscored the critical importance of Scope 3 disclosures (value chain emissions), which represent 75% to 80% of total aggregate GHG emissions. Scope 3 data serves as pivotal intelligence for assessing a company’s broader climate impact and climate-related financial risks, making it the highest-priority data requested by global investors and corporate buyers. Reflecting this, major economies and regional competitors have mostly capped their grace periods at one year: the EU in 2026 (FY25), California at 180 days to one year, the UK in 2029 (FY28), Australia in 2027 (FY26), and Japan in 2028 (FY27). Taiwan has opted for a 3-year grace period, with disclosures commencing in 2030 (FY29). Conversely, South Korea put forward a plan to delay Scope 3 reporting until 2031 (FY30) by granting a 3-year grace period, citing deficient corporate infrastructure and disclosure capabilities.

However, critics point out that this layout underestimates the true readiness and capability of domestic enterprises. Looking at CDP (formerly the Carbon Disclosure Project)—which functions as a "de facto disclosure platform" based on global standards and is evaluated on par with official climate reporting—the number of South Korean companies disclosing Scope 3 information surged from 127 in 2023 to 222 in 2025. Furthermore, these participating enterprises have already calculated and reported data across 8 out of the 15 total Scope 3 categories. This demonstrates that with proactive government backing, such as administrative infrastructure and technical measurement tools, domestic firms are fully capable of executing Scope 3 disclosures. Based on this evidence, KoSIF proposed shortening the Scope 3 grace period to one year, premised on the inclusion of a robust safe harbor clause.

Global Standard Focuses on 'Statutory Disclosure'… Exchange Disclosure Periods Must Be Minimized and Third-Party Verification Roadmaps Cemented

The choice of "disclosure channels"—which directly correlates with the credibility of ESG data and the influx of investment capital—has also come under heavy scrutiny. The FSC’s draft suggested starting via stock exchange disclosures to give companies an adjustment period before transitioning to statutory disclosures within formal annual business reports. However, with the exception of China, the vast majority of major jurisdictions—including the EU, California, the UK, Japan, Australia, Taiwan, and India—have firmly adopted statutory disclosure from the outset. Unlike statutory filings, exchange-hosted disclosures make it difficult to hold entities legally accountable for misstatements. Under this structure, the burden of proof for damages rests entirely on investors to demonstrate a company’s intent, negligence, and direct causality, which will inevitably restrict the inflow of ESG investment capital.

Accordingly, KoSIF maintained that disclosures should initiate via statutory channels by passing amendments to the Financial Investment Services and Capital Markets Act (Capital Markets Act) within the year. Even if corporate adjustment friction must be prioritized, KoSIF urged the establishment of a structural framework that strictly limits exchange disclosures to a single year before transitioning systematically to a statutory regime.

Furthermore, the brief highlighted a critical limitation in the current draft: the complete omission of a concrete roadmap for mandatory third-party assurance, which is the foundational tool for verifying the reliability of disclosed information. Major economies like the EU and Australia have locked in third-party verification alongside their initial mandates. Japan has established a finalized timeline to debut limited assurance one year post-implementation, with a structured transition toward reasonable assurance. Consequently, KoSIF advised that the final ESG disclosure roadmap must explicitly incorporate the exact rollout dates and required levels for third-party assurance.

Another profound defect identified in the FSC's draft roadmap is its alignment mismatch, failing to match international expectations while simultaneously clashing with domestic policy initiatives. The current administration’s flagship policies—including Climate Finance (Green Finance + Transition Finance), the Stewardship Code, the Corporate Value-up Program, and K-GX (Korea Green Exchange)—all rely fundamentally on transparent, highly verifiable ESG data to function. The draft roadmap, however, paradoxically locks in a structural vacuum of vital ESG data for an extended duration.

Byoung-dug Min, Co-Chair of the National Assembly ESG Forum and National Assembly Member, previously introduced a Capital Markets Act amendment on April 8 that incorporates protective "safe harbor" provisions and market "incentives" to smooth this transition.

Jong-oh Lee, CIO of KoSIF, emphasized:

"All investments are fundamentally driven by credible, highly verifiable information, and the same applies to the ongoing supply chain realignments being executed by global corporate clients under mandates like the Corporate Sustainability Due Diligence Directive (CSDDD). South Korea’s draft ESG disclosure roadmap has been engineered in a way that risks being entirely bypassed by both international investors and corporate buyers. If left unchanged, this structure will not only jeopardize the 'Korea Premium' in capital markets but will heavily increase the likelihood of failure for various state-driven transition initiatives, including industrial and energy overhauls. A bold, progressive overhaul of this draft is absolutely imperative."

[Read the Issue Brief]

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 Inquiries: Jong-O Lee CIO (argos68@kosif.org), Hanjin Yu  Team Lead (hwcharisma89@kosif.org)