LG Develops and Manages Its Own ESG Index

[Asia Economy Reporter Jeong Hyunjin] LG Group is developing and managing its own ESG (Environmental, Social, and Governance) index as part of advancing ESG management. In the mid to long term, the group is also considering linking the ESG index with executive performance evaluations (KPI).

According to the business community on the 20th, LG is currently developing its own ESG index. The index is being designed by combining and standardizing 2 to 3 indicators used by domestic and international evaluation agencies such as S&P, Dow Jones Sustainability Index (DJSI), Morgan Stanley Capital International (MSCI), Sustainalytics, and Korea Corporate Governance Service (KCGS), along with 1 to 2 specialized indicators, and summing them into a score.

For example, within the Environmental (E) category, the climate activity index could be composed by summing the greenhouse gas reduction rate, the implementation rate against greenhouse gas reduction targets, and the renewable energy transition rate, making these measurable indicators. An LG official stated, "This is to transparently communicate the group’s ESG strategic intentions and continuously monitor performance," adding that they will reflect stakeholders' demands and standards.

This year, the ESG Committee discussed analysis results in five areas: climate change, water management, human resources, diversity, equity, and inclusion (DE&I), and safety. LG plans to develop indices for each area and conduct simulations based on actual data, aiming to submit them for approval by the ESG Committee by next year.

Following the establishment of the ESG management foundation this year, LG plans to strengthen ESG management next year by establishing the group’s mid- to long-term strategies and tasks, and by creating related policies and regulations. LG officially launched the ESG Committee in July, formed an external ESG advisory group in August, and held the second ESG Committee meeting this month. The group also plans to build and develop a common ESG IT platform by 2023 to promote data-driven ESG management.