Press Releases

 “Sustainable Finance Action Plan Highly Likely to be Established”
“Environment for Corporate Renewable Energy Procurement to Further Improve”

- Korea Sustainability Investing Forum Releases Results of Analysis on ESG Policy Questionnaires Answered by Political Parties

- Special Event for the 22nd General Election: Held on March 29 at the FKI Tower

The possibility of establishing a 'Sustainable Finance Action Plan and Roadmap' in South Korea has increased significantly. In addition, the environment for corporations to purchase renewable energy is expected to improve further compared to the present. Regarding the Framework Act on ESG, the ruling party opposes it while all opposition parties support it, suggesting that its enactment remains possible depending on the legislative intent and the adjustment of the regulatory stringency of the bill.

The Korea Sustainability Investing Forum (KoSIF, Chairperson Kim Young-ho) disclosed these findings at , a special event organized for the 22nd General Election held at the FKI Tower on March 29, while presenting the results of its analysis on the ESG policy questionnaires returned by each political party.

Prior to this forum, KoSIF dispatched policy questionnaires to inquire about the positions of each political party regarding a total of 14 laws, systems, and policies deemed necessary for establishing and vitalizing a virtuous ESG market ecosystem, and subsequently analyzed the responses.

The People Power Party, the Democratic Party of Korea, the Green Justice Party, the New Progressive Alliance, and the Progressive Party submitted their responses, while the Reform New Party did not. Parties that split or were newly formed after the time the questionnaires were dispatched were excluded from the scope.

Every party that responded to the policy questionnaire expressed support for the 'Establishment of a Korean Sustainable Finance Action Plan and Roadmap.'

The People Power Party promised to establish a Climate Special Committee in the 22nd National Assembly for discussions and to promote linkage with the current administration's stance on the 'Value-Up' program. The Democratic Party of Korea stated that it would promote the plan by preparing model guidelines for establishing a sustainable finance action plan.

The Sustainable Finance Action Plan is a policy introduced by the European Union in 2018, firmly recognizing finance as the core mechanism that drives ESG. It presented 3 Overarching Objectives (reorienting capital flows towards a sustainable economy, mainstreaming sustainability into risk management, and fostering transparency and long-termism) along with 10 Action Points (including establishing a sustainable activity taxonomy, developing green financial products and labels, developing sustainability benchmarks, and integrating sustainability into prudential requirements). As the European Union built these 10 action plans into laws, systems, and policies, it has become the region leading global ESG today.

In South Korea, the Moon Jae-in administration announced the 'Green Finance Activation Strategy' in January 2021, and the Yoon Suk-yeol administration also released the 'Measures to Expand Financial Support for Responding to the Climate Crisis' in March this year. However, these strategies and measures have faced criticism for being limited strictly to green finance rather than encompassing sustainable finance as a whole.

The environment for corporate renewable energy procurement is also expected to improve.

KoSIF inquired about four specific policies to improve the procurement environment: ▲ Procurement incentives for corporate renewable energy (including direct PPAs, subsidies for self-generation, exemptions or reductions of incidental costs like network usage fees, and investment tax credits) ▲ Introduction of a planned siting system for corporate renewable energy (such as government-led development of renewable energy complexes exclusively for corporate PPAs) ▲ Renewable energy procurement support for small and medium-sized enterprises (SMEs) and middle-market companies (such as financial subsidy policies) ▲ Enhancing the transparency of corporate renewable energy information (including information on renewable energy consumption volumes and usage rates by company, and the specific use of Green Premium funds).

The two major parties, the People Power Party and the Democratic Party of Korea, as well as the Green Justice Party, expressed support for all four policies. However, the New Progressive Alliance expressed temporary support for strengthening renewable energy procurement incentives and supporting procurement for SMEs and middle-market companies. The Progressive Party stated that while it supports supporting procurement for SMEs and middle-market companies and enhancing information transparency, it opposes strengthening procurement incentives and introducing a planned siting system. The party explicitly cited its official party platform opposing power PPAs (Power Purchase Agreements)—a method where a company signs an electricity purchase contract with a power generation operator—stating that it represents a textbook policy leading to electricity privatization.

Regarding the establishment of an ESG Finance Corporation, the Democratic Party of Korea and the Progressive Party expressed support, whereas the People Power Party, the Green Justice Party, and the New Progressive Alliance all expressed opposition. The ESG Finance Corporation can be considered another name for a Green Finance Corporation, and it was a policy reviewed by the presidential transition committee of the current Yoon Suk-yeol administration. During the Moon Jae-in administration, discussions regarding the establishment of a Green Finance Corporation were conducted under the leadership of the National Assembly.

The Democratic Party of Korea stated that under the condition of first coordinating mandates with other existing institutions performing similar functions, such as the Korea Development Bank and the Export-Import Bank of Korea, it will review and propose a bill centered around the introduced during the 21st National Assembly. The Progressive Party also registered its support.

The People Power Party voiced its opposition, stating that it is necessary to fully utilize the know-how and specialized human capital of existing policy finance institutions such as the Korea Development Bank. As an alternative, it proposed expanding the Climate Response Fund and creating green investment funds to nurture climate-related industries.

The Green Justice Party expressed opposition, arguing that the Korea Development Bank could fulfill the role of a green finance corporation by transforming into a Green Investment Bank. The New Progressive Alliance expressed opposition citing concerns over redundant investment, market costs, and weakening the momentum for the Korea Development Bank’s own ESG transition, presenting the strengthening of the Korea Development Bank's ESG capital raising role as an alternative.

The laws, systems, and policies related to promoting and vitalizing ESG in South Korea are currently fragmented and lack organic integration. This is precisely why an overarching Framework Act on ESG is required to encompass these laws and systems systematically into a virtuous market ecosystem.

Regarding the enactment of a Framework Act on ESG, the Democratic Party of Korea, the Green Justice Party, the New Progressive Alliance, and the Progressive Party all expressed support. However, the People Power Party expressed opposition, citing that making ESG management mandatory could operate as a regulatory burden and that state policy should instead focus on support policies to enable voluntary corporate adoption. Nevertheless, if the Framework Act on ESG is designed as an upper-level statute to build legal and policy infrastructure for promoting ESG—emphasizing the role of the government while focusing on supporting the private sector—it cannot be ruled out that the ruling party, which emphasizes autonomy, may also agree to it.

Regarding amending the National Finance Act to mandate ESG integration and expand shareholders' rights across all public pension funds, enforcing a Net-Zero asset portfolio declaration and roadmap for all public pension funds and public financial institutions, and enacting a Korean Supply Chain Due Diligence Act, the People Power Party expressed opposition across all measures, while the Democratic Party of Korea, the Green Justice Party, the New Progressive Alliance, and the Progressive Party all expressed support.

In relation to the responses of each political party to these ESG policy inquiries, Lee Jong-oh, CIO of KoSIF, emphasized, "Given that the global economy and society are being reorganized around ESG issues led by carbon neutrality, ESG directly dictates the competitiveness of corporations, financial institutions, and the nation. In that sense, ESG-related laws, systems, and policies are not a matter of progressive versus conservative politics. Furthermore, there is a need to break away from the perception that ESG is merely a regulation that increases corporate burdens. As leading economic blocks across the world, led by the European Union, are establishing a virtuous ESG ecosystem through strong regulation coupled with robust support, South Korea must also swiftly construct an equivalent ESG regulatory infrastructure."

Meanwhile, the Korea Sustainability Investing Forum plans to provide active legislative and policy support for these 14 laws, systems, and policies to both the executive branch and the newly formed 22nd National Assembly following the April 10 General Election.

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 Inquiries: Jong-O Lee CIO (argos68@kosif.org), Yumin Jung  Senior Researcher (yumin@kosif.org)