KCGS Downgrades Ostem Implant ESG Rating from B to C

Results of the First Grade Adjustment This Year
Individual Grade Downgrades for 11 Companies

[Image source=Yonhap News]

[Asia Economy Reporter Minji Lee] The Korea Corporate Governance Service (KCGS) announced on the 12th that it held an ESG rating committee on the 5th and downgraded the ESG ratings of 11 companies, including Osstem Implant, SK Hynix, KT, and Hite Jinro. This reflects the ESG risks identified up to January 31 of this year since the regular ESG ratings were assigned in October last year.

ESG ratings are classified into seven grades: S, A+, A, B+, B, C, and D. In the first round of rating adjustments, two companies experienced environmental management (E) risks, while one company and eight companies were downgraded due to social responsibility management (S) and governance (G) risks, respectively.

In the governance sector, which saw the most individual rating changes, Osstem Implant was downgraded from B to D. This decision was based on the fact that internal control mechanisms did not function effectively amid an embezzlement incident involving an amount equivalent to 90% of the company's equity capital. Consequently, the integrated ESG rating dropped from B to C. Korea Special Steel, which faced a breach of trust case involving former CEO Jang Se-hyun amounting to around 4 billion KRW, was adjusted from B+ to B. Hite Jinro was downgraded from B+ to B, mainly due to Chairman Park Moon-duk being reported to the prosecution for violating the Fair Trade Act.

In the social responsibility management field, KT was downgraded from A to B+. The adjustment was based on the fact that network outages caused consumer damages, which could lead to shareholder value erosion due to customer churn and financial losses from compensation.

In the environmental sector, SK Hynix was downgraded from A to B+ following a chemical substance leakage accident, and Youngpoong was lowered from C to D after being fined 28.1 billion KRW for continuous illegal discharge of contaminated water.

A KCGS official explained, "Following these individual rating adjustments, the integrated ratings of Farmsco (A→B+), Harim Holdings (A→B+), Korea Special Steel (B→C), and Osstem Implant (B→C) each dropped by one grade.”