Invest KOREA

According to Yonhap News,

SEOUL, Apr 21 (Yonhap) -- As entrepreneurs’ across the world have started to put much emphasis on sustainability and social impact of running a business, the government has launched laying out a set of standards, called environmental, social and corporate governance (ESG) criteria, particularly designed to help investors use to better determine and screen potential investments into Korea.

The decision came at a time when business leaders have raised questions over the credibility and accuracy of such ununiformed, over 600 confusing ratings which have begun to incur entrepreneurship fatigue. As such, the Ministry of Trade, Industry and Energy (MOTIE) of South Korea hosted a meeting on Apr 21 to unveil a draft of K-ESG, universally applicable scoring methodologies developed in Korea. President Moon Jae-in has once highlighted the government’s role of providing full support of the industrial standards development at the 48th Commerce & Industry Day event hosted by the Korea Chamber of Commerce and Industry (KCCI) at its headquarters in Seoul. Partnering with Korea Productivity Center and a few industry specialists, MOTIE has set up an ESG guideline, based upon statutory references to environmental, social and governance standards since last year.

Too many rating agencies and unreliably differences in scoring methodologies have thus far resulted in dramatically variable interpretations even for the same company. With different set of criteria and measuring factors that rarely take a country’s own business climate or a company’s distinct management characteristics into consideration, ESG developed overseas, moreover, have made some of Korean businesses encounter reverse discrimination.

For instance, some of criteria adopted across the world have questions evaluating racial justice and diversity of a company. Such barometer cannot be unexceptionally applied to countries like Korea, which shows substantially lower rate of racial or ethnic diversity than countries such as the U.S. or the EU where residents of foreign nationality or migrants take up relatively large proportion of the overall population. This demographic difference can lead to unfair results in measuring a country or a company’s business performance.

Under such circumstances, Korean government has kicked off developing a clear, uniformed ESG criteria with 61 questions, analyzing a dozen of widely applied indexes at home and abroad.

Environmental criteria, which consist of 14 questions, look at a broad range of business practices such as the amount of total energy use from renewable sources or emission control efforts etc. Social criteria includes 22 questions asking how many full-time employees a company has and the percentage of industrial disasters a company have undergone over the past three years. With regards to corporate governance, the questionnaire assures that if a company has put efforts into avoiding conflict of interest in their choice of board members (e.g., how many female board members a company has etc.).

MOTIE is planning to release the final version of the draft by the end of this year. “This criteria is more than just ‘adding a new standard’. Rather, it would be a standardized guidance for ESG rating agencies. We’ll further spur our efforts for a widespread adoption of the K-ESG worldwide, so as to help relive businesses weighed on assessment and advance capabilities to meet the new standards.”, a MOTIE official said.

Source Text

Copyrights Yonhap News. All Rights Reserved.
Reprint or redistribution without permission is prohibited.

Source:Yonhap News (Apr 21, 2021)