KCGS: "68% of Listed Companies Have ESG Management Levels Below Average"

[Asia Economy Reporter Minji Lee] The Korea Corporate Governance Service (KCGS) evaluated the ESG levels of domestic companies and found that 68% of listed companies are not properly implementing ESG management.

According to the ESG evaluation grades announced by KCGS on the 14th, 68% of the 760 companies listed on the Korea Exchange with assigned grades received a grade of B or below. KCGS stated, "A significant number of companies still have weak ESG management levels," and added, "Continuous education and policy attention are necessary to raise the ESG standards of domestic companies."

The ESG grades assigned by KCGS assess the environmental, social, and governance levels of domestic companies. These grades are used to encourage sustainable management and serve as indicators for capital market participants to recognize companies' ESG management levels. Starting this year, the frequency of grade adjustments was expanded from once every six months to once every quarter, and the regular grades are decided through the 4th grading committee. The grading system is divided into S (Excellent), A+ (Very Good), A (Good), B+ (Fair), B (Average), C (Weak), and D (Very Weak).

Nonetheless, awareness of ESG and the management environment have shown improvement. The number of companies with A grade or higher increased, and the proportion of B+ grade companies was maintained, resulting in a slight increase in companies moving up to higher grades. No companies received an S grade, while the number of A+ companies rose from 8 last year to 16 this year, and A grade companies increased from 50 to 92. The number of B+ grade companies was 134, similar to last year's 135.

By category, environmental management, social responsibility management, and governance levels all generally improved. In the environmental sector, the number of companies and groups making efforts to manage environmental performance and overall environmental management increased. Companies receiving A grade or higher rose from 41 last year to 68 this year.

In the social sector, improvements were reflected due to strengthened laws and systems related to compliance management and a general trend toward enhancing fairness and human rights management across society. In the governance sector, the introduction of the Stewardship Code and improvements in corporate practices related to shareholders' meetings in response to changes in the capital market were observed. Companies receiving A grade or higher increased significantly from 47 last year to 103 this year.

Among the Korea Exchange listed companies that received an A+ grade in this year's integrated ESG rating were 16 companies including Doosan, SK Networks, S-Oil, SK Telecom, Pulmuone, KT, Hyosung Advanced Materials, POSCO International, Shinhan Financial Group, KB Financial Group, BNK Financial Group, DGB Financial Group, JB Financial Group, Hyosung Chemical, Hyosung TNC, and SK.

A total of 92 companies received an A grade, including Samsung SDI, Samsung Electronics, LG, Korea Electric Power Corporation, Hotel Shilla, SK Hynix, and Kia Motors.