[ESG Symposium] Kim Hyungsoo "Standards Needed to Evaluate Corporate ESG Improvement and Goals"

'2021 Asia ESG Symposium' Presentation

Kim Hyungsoo, Head of PF/ESG Evaluation Division at Korea Ratings, is giving a presentation on the topic of "Sustainable Development of Companies and the Direction of K-ESG" at the '2021 Asia ESG Symposium' held on the 29th at the Westin Chosun Hotel in Jung-gu, Seoul. Photo by Kang Jinhyung aymsdream@

[Asia Economy Reporter Jeong Hyunjin] Kim Hyungsoo, Head of the PF/ESG Evaluation Division (Executive Director) at Korea Ratings, emphasized the need to establish a K-ESG investment model that can effectively evaluate companies' ESG-related improvements and achievement of goals in line with the global ESG (Environmental, Social, and Governance) trend in financial markets.

On the 29th, Kim delivered a presentation titled "Corporate Sustainable Development and the Direction of K-ESG" at the '2021 Asia ESG Symposium' held at the Westin Chosun Hotel in Jung-gu, Seoul. Kim stated, "Countries worldwide are increasingly adopting sustainable finance and showing a shift toward sustainable corporate management systems that emphasize social responsibility," adding, "Korea's ESG investment is very minimal compared to global advanced countries. Most investments are in stocks, and the proportion of bond investments is negligible."

He continued, "In the domestic ESG bond market, the share of bond issuance was 6.7% until last year, which was low, but it has been rapidly increasing this year," diagnosing, "Until last year, social bonds were predominant, but green bonds have significantly increased this year." Kim noted that the COVID-19 pandemic has heightened domestic and international awareness of climate and environmental issues, the government is promoting policies driving related social responsibility investments, and companies are showing interest in environmentally friendly and low-carbon projects and sustainable investments, creating a spreading atmosphere of voluntary participation.

According to Kim, in line with these trends, the Ministry of Trade, Industry and Energy is promoting K-ESG and developing Korean industrial standard ESG benchmark indicators, but there are still limitations. He stressed the need to create benchmark indicators that allow companies to understand how much they improve ESG-related aspects in the future and effectively achieve their goals. He said, "Various organizations such as the Korea Corporate Governance Service and Sustainvest provide evaluation results, but the standards are inconsistent, causing confusion among target companies, the government, and investors about which criteria to use to evaluate corporate ESG." He added that it is necessary to align standard items and terminology that can examine ESG management activities, similar to financial statements that review corporate performance.

Kim proposed sustainability-linked bonds (SLB), whose financial conditions or structural characteristics can vary depending on whether pre-set goals are achieved, as one direction. Companies need to set management goals related to sustainable management development, and this should not end with merely setting and reporting these goals but should be linked to tangible rewards.

Kim said, "The characteristic of SLBs, introduced in 2019, is that they focus on future improvements rather than past absolute performance," and added that the government should be able to standardize data and evaluation criteria that show the current status of companies' ESG management so that investors can provide such benefits.