ESG is a concept that collectively refers to Environment, Social and Governance, which are non-financial factors of a corporation. ESG was thrown into relief in the course of the evolution of the concept of “sustainable development,” which was sparked off in the 1970s.


Currently in Korea, though a consensus is forming around the idea that “management of ESG-related risks is key to sustainable development,” concepts about the standards for, and evaluation of, ESG has yet to be clearly established. However, as the trend of actively reflecting ESG in investment decision-making has continued with global financial companies and investment banks at the center of the trend, discussions are also accelerating in Korea, including those around the introduction of its own ESG index.

Discussions about ESG in Korea are expanding in the direction of public disclosure of corporations’ governance and sustainable management matters, having started from responsible investment centered around pension funds. ESG-related responsible investment started in earnest in Korea with the amendment of the National Pension Act on January 28, 2015, which enabled the National Pension Service of Korea to consider environmental, social, and governance factors related to the investment target when managing the Fund for the purpose of achieving a long-term and stable increase in income, and the Korea Stewardship Code Council’s release of the Stewardship Code (December 2016). Since adopting the Stewardship Code in July 2018, the National Pension Service amended its Fund Management Principles so that ESG factors would be taken into consideration.

Public disclosure of ESG-related matters is also being progressed at present through business reports (obligatory), corporate governance reports to the exchange (voluntary/obligatory), and sustainability reports (voluntary). In the case of public disclosure of corporate governance reports in particular, the disclosure started becoming obligatory in 2019 for companies listed on the securities market that have total assets of 2 trillion or more, and in 2022 the scope of its application is due to be expanded in phases to listed companies with total assets of 1 trillion or more. Disclosure of sustainability reports is currently voluntary but, among the companies that are issuing the reports, those who have voluntarily disclosed them at the Korea Exchange (KRX) are rising in their number. Looking at this in detail, in January 2021 the Financial Services Commission announced its three-phase plan for the public disclosure of sustainability reports; the expectation is that, from 2025, KOSPI-listed companies with assets of KRW 2 trillion or more would become subject to the obligation and that, in 2030, all KOSPI-listed companies would become subject to the obligation.

Furthermore, the size of ESG funds and ESG bond issuances in Korea is showing a trend of steady expansion. In the case of ESG funds, the trend of growth in size and capital inflow has accelerated in recent times, and ESG bonds are also growing rapidly, with a total of 549 listed ESG bond issues in Korea (KRW 82.6 trillion in listed amount) as of December 2020. However, there are some who consider that, with the exception of certain financial companies and public investors, the response to ESG shown by the domestic financial sector in Korea stayed at a low level across the board up until early 2021, and that the response has been growing in phases since 2021.

As the global trend of strengthening ESG standards is set to accelerate further going forward, the Korean government is also making preparations to formulate diverse policies regarding supports and benefits to enable corporations and investors to respond in a systematic manner.

In this regard, in April 2021, based on its judgment that a flood of rating agencies – with 600 odd evaluation indices in operation both domestically in Korea and overseas – was aggravating confusion on the part of corporations as the subject matter of evaluation, the Korean Ministry of Trade, Industry and Energy commenced its work on the introduction of a K-ESG index, which would an index that is most suited to the circumstances in Korea. The draft K-ESG index that has been revealed to date was prepared by focusing on the key questions that were derived from an analysis of, and which were common to, 13 reputable major indices both domestic and foreign, and is considered to have been composed of questions on public disclosure of information, environment (E), social (S), and governance (G) in balanced proportions so that it is not skewed in any particular direction. The main content of the K-ESG index is as follows.




Public Disclosure of Information
(5 questions)

Public Disclosure of Information

Method for public disclosure of sustainable management information, scope of business establishment, objective


(14 questions)

Environmental Management Policy

Environmental policy and organization, response to climate change, etc.

Environmental Management Achievements

Eco-friendly business, environmental management achievements such as waste volume and recycling rate, communication with interested parties, etc.

Verification of Environmental Management

Supporting suppliers with environmental management, etc.

Compliance with Laws

Violations of environmental laws


(22 questions)

Corporate Social Responsibility Policy

Corporate social responsibility strategy and target, etc.

Officers and Employees

Diversity of officers and employees, recruitment, etc.

Human Resource Management

Training for officers and employees, capability development, etc.

Working Environment

Matters related to safety in the workplace, etc.

Human Rights

Human rights policy, education, etc.


Supply network, results related to mutual growth, etc.

Local Community

Participation in and activities related to social contribution to the local community, etc.

Information Security

Current status of personal information security, etc.

Compliance with Laws

Violations of laws in the social category


(20 questions)

Board of Directors

Diversity of Board of Directors, activities, etc.


Shareholder rights, dividends, etc.

Ownership Structure

Ownership structure, etc.

Ethical Management and Anti-Corruption

Ethical management and anti-corruption, law-abiding status, etc.


Matters relevant to audit organization, etc.

Compliance with Laws

Violations of governance laws


In addition to this, the Korean government is currently in the process of developing a K-Taxonomy which, though based on foreign taxonomies such as the EU and ISO, would take the economic and industrial conditions in Korea into consideration; the plan is to announce the K-Taxonomy during the course of Q4 2021.

Perspectives on the important ESG issues, and the level of social agreement on those issues, vary for each county. Therefore, corporations carrying on business in Korea need to take an interest in the ESG standards and evaluation in Korea and update them on a continuous basis.

DR & AJU is thinking of ways in which corporations can enhance their corporate value through management of ESG-related risks and is providing support so that they may have an opportunity of actually creating a new driving force for business.


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Sang Bong Lee So Hyun Ki