FKCCI "ESG Expansion Benefits Semiconductors, Bio, and Automobiles... Oil and Steel Sectors Hit"

Survey of Heads of Research Centers at 15 Domestic Securities Firms
The Best Performing Korean Company is SK... LG Chem, Samsung Electronics, KB Financial Also Mentioned

Source: Provided by the Federation of Korean Industries

[Asia Economy Reporter Kim Heung-soon] As ESG (Environmental, Social, and Governance) management has become a hot topic in the business world, industries such as semiconductors and secondary batteries are expected to benefit, while petroleum products, petrochemicals, and steel industries are predicted to face significant challenges, according to a recent survey. Among the ESG categories, the environmental sector, particularly responses to climate change and carbon emissions, was identified as the most critical.

The Federation of Korean Industries (FKI) announced on the 25th the results of a survey conducted among research center heads from 15 domestic securities firms, investigating the impact of the global spread of ESG on domestic industries and companies. Respondents most frequently cited petroleum products (28.9%) as the industry expected to suffer the greatest damage in global investment attraction and exports due to ESG expansion among Korea’s top 15 export industries. Petrochemicals (26.7%) and steel (26.7%) followed.

Regarding industries with the brightest outlook due to the spread of ESG management, semiconductors (28.9%) were most frequently selected, followed by secondary batteries (26.7%), automobiles (11.1%), and bio (11.1%). For the automobile industry, both negative and positive forecasts were presented, which is interpreted as reflecting the current global automobile industry’s common practice of producing both internal combustion engine vehicles and electric vehicles simultaneously.

Experts rated the ESG response level of domestic companies on a scale of 10 points based on advanced countries, with large enterprises scoring 7 points, mid-sized companies 5 points, and small and medium-sized enterprises (SMEs) 4 points. Accordingly, securing the capabilities of SMEs in ESG management, which will become increasingly important in the future, was identified as urgent. In a survey of domestic and foreign companies excelling in ESG response, Microsoft ranked first among overseas companies, followed by Tesla, Apple, and Patagonia. Among domestic companies, SK received the most mentions, followed by LG Chem, Samsung Electronics, and KB Financial Group.

Source: Provided by the Federation of Korean Industries

Global ESG Craze... Environment is Most Important
Climate Change Response Tops Evaluation Criteria

According to a survey on the importance of ESG in the global market, 60.0% of respondents identified the environment as the most important factor. Regarding evaluation criteria, climate change and carbon emissions (26.7%) were considered the most important, followed by governance (17.8%), human resource management (13.3%), corporate behavior (11.1%), and clean technology and renewable energy (11.1%).

To successfully respond to the global ESG expansion trend, domestic companies cited improvement tasks such as "securing consistency in evaluation standards and establishing a transparent evaluation system" (40.0%), "providing institutional incentives to promote ESG management" (33.3%), and "developing Korean-style ESG evaluation indicators that meet global standards" (26.7%).

Kim Bong-man, head of international cooperation at FKI, stated, "Since the COVID-19 pandemic, the business environment has become uncertain, and the market has responded strongly not only to companies’ financial performance but also to non-financial performance such as environmental, social, and governance factors, leading to the global spread of ESG trends. This affects not only Korean companies operating on the global stage but also domestic companies, making it necessary to respond."

He added, "While the environment (E) is highly emphasized in the global market, domestically there is a tendency to relatively emphasize social (S) and governance (G) aspects, which may increase the burden on domestic companies both internally and externally. Therefore, it is necessary to establish a consistent and transparent evaluation system that meets global standards and to provide incentives for companies that excel in ESG management to promote its expansion."