On September 19, 2024, the Financial Services Commission (“FSC”) held the “Industry Consultation on Sustainability Disclosure Standards” to gather feedback from corporations on the Announced Draft of Sustainability Disclosure Standards (“Announced Draft”) released in April of this year. The Announced Draft requires mandatory sustainability disclosure first starting with the “climate” area, for which an international consensus has been established.
According to the FSC, a total of 29 domestic investors and 17 foreign investors, as well as 111 individual corporations and 10 economic and industrial organizations, submitted feedback on the Announced Draft during the comment period.
Detailed comments from institutional investors and corporations are set out below at the end of this newsletter. On the whole, there seems to be a general consensus on adopting climate-related disclosure regulations first before other areas of sustainability disclosure. We believe this will accelerate the establishment and implementation of a climate disclosure system and also subsequently lead to an expansion of the areas of disclosure, such as policy disclosure.
In the opening remarks for the Industry Consultation mentioned above, the Vice Chairman of the FSC stressed the importance of climate disclosure, pointing out that in March of this year the FSC had announced plans to expand financial support and investment in the green, renewable energy and climate technology sectors to respond to the climate crisis. He also noted that a transparent and reliable disclosure system would be necessary in order to effectively facilitate such financial support.
Sustainability disclosure is a matter of great interest among investors both within and outside of Korea, including large institutional investors (e.g., pension funds), activist funds and minority shareholders. In addition, it is also an important matter in terms of handling investor relations and shareholders’ meetings. Relevant parties are advised to closely monitor the progress on the adoption process of the above disclosure system.
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Key comments from domestic and foreign investors were as follows:
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While climate disclosure is essential, other sustainability matters are equally important to investors. The FSC will thus need to come up with a relevant timeline. |
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Scope 3 data (indirect emissions from a company’s value chain) is necessary for investors to comprehend the risks faced by corporations, although the difficulty in measuring and protecting such data is recognized. |
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It is encouraging that the FSC has adopted the standards of the International Sustainability Standards Board (“ISSB”) in order to provide consistent and comparable sustainability information to the global capital market. |
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The following were some of the key comments from corporations and economic organizations:
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Among the 106 corporations that submitted comment letters (excluding those corporations that did not respond to the relevant question), 96 agreed that climate-related matters should first be designated as a mandatory disclosure item. |
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With respect to the scope of disclosure, some concern was raised that corporations would have difficulty in securing reliable climate-related information relating to their overseas subsidiaries. |
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Some pointed out the need to hold off on requiring the disclosure of Scope 3 emissions, given that there is no uniform global standard yet and that some key countries also do not yet require the disclosure of Scope 3 emissions. |
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An economic organization suggested that the FSC should either begin with voluntary disclosures to ensure that corporations have time to prepare or alternatively provide more detailed standards for the disclosure. |
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Regarding the so-called “policy disclosure” which has been proposed as an optional disclosure item for corporations in the Announced Draft, some raised concerns about the increased disclosure burden entailed by the disclosure while at the same time acknowledging its usefulness. |
Related Topics
#Sustainability #ESG #Disclosure Regulations #Corporation Law #Legal Update
