Efforts needed to improve ESG disclosure system: report – The Korea Herald

Efforts needed to improve ESG disclosure system: report  The Korea HeraldEfforts needed to improve ESG disclosure system: report  The Korea HeraldEfforts needed to improve ESG disclosure system: report  The Korea Herald

(123rf)In the midst of the COVID-19 pandemic, South Korea’s financial groups have been gearing up for the so-called “sustainable financing,” centered on environmental, social and governance factors, or ESG, but global ESG experts urged them to make their ESG disclosure system more sophisticated, according to research shared with the Korea Herald report Wednesday.Sustainable financing refers to a bank’s financial services like loans for companies’ sustainable economic activities. This topic has been in the spotlight as investors and global bankers have begun to consider non-financial considerations in their investment decisions. The nation’s four largest financial holding companies, Shinhan Financial (KB Financial), Hana Financial (and Woori Financial) have put a strong emphasis on financial support for local businesses that incorporate ESG factors in their operations. They also launched top decision-making bodies for ESG financing. These groups accounted for 9 per cent, 6 per cent, 2 percent and 35% of the total as of November according to data from Asia Research and Engagement, a Singapore-based non-profit organization. It is encouraging to see Korean banks making long-term commitments to portfolio decarbonization. This will allow them to align their portfolios with national goals and reduce risk. They must accelerate from here with strong short and medium-term implementation plans with concrete actions for moving away from fossil fuels, high carbon industries, and other issues,” stated Benjamin McCarron (Managing Director of ARE). The non-profit research agency specialized on responsible finance was founded in 2013 to represent investors in Asia’s sustainable development issues. It is currently reviewing 32 banks in 8 Asian markets, including China, Japan, and Korea, in order to assess their responses to climate-related risks and opportunities. Its review aligns with the recommendations of G20-backed Task Force Climate-related Financial Disclosures. The nonprofit ESG rating agency Korea Corporate Governance Service has given high ESG ratings to the banks giants due to their sustainability efforts. The organization analyzed the ESG efforts of 950 listed businesses between January and October, and announced an integrated rating that each firm received. Hana Financial Woori Financial received the A rating.
Market experts raised concerns about the Korean banks’ ESG reporting and disclosure. These are crucial to ESG evaluations. The ARE stated that they looked into the sustainability reports of each group and also the ESG-related disclosure. They also communicated with the officials to learn more about their ESG management. “This creates a stumblingblock to accurate ESG assessments.” There are increasing calls for detailed guidelines on ESG disclosure for local financial institutions only from the authorities. Korea Exchange, the country’s only bourse operator, published a comprehensive framework for ESG reporting from Kospi-listed companies in January. However, it doesn’t address specific criteria such as the scope of sustainable finance or the risks of climate changes by business sector. There is little discussion about how to do this. Lee Sang-ho, a researcher from the Korea Capital Market Institute, stated that the financial regulator should assist banks and other market players in reporting ESG management in an standardized manner. By Choi Jaehee (cjh@heraldcorp.com).

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