US, EU Strengthen Climate Disclosure Trends, Korea's Response Slower
Bank of Korea Report on 'Trends in Domestic and International Climate Risk Disclosure Standards'
As advanced countries such as the United States and the EU (European Union) strengthen climate-related disclosures, it is anticipated that domestic companies will also be affected. There are calls for our financial authorities to quickly present related standards in line with global trends.
According to the report "Trends in the Introduction of Domestic and International Climate Risk Disclosure Standards" by the Sustainability Growth Office of the Bank of Korea on the 18th, the U.S. Securities and Exchange Commission (SEC) recently finalized a plan to gradually implement a system from 2026 that requires listed companies to disclose information related to climate risks, including greenhouse gas emissions.
The Sustainability Growth Office of the Bank of Korea was established earlier this year under the direct supervision of Governor Lee Chang-yong. It was newly created at the central bank level to conduct research on sustainable growth, including climate change and ESG (Environmental, Social, and Governance).
According to the SEC, U.S. listed companies must disclose reports not only on greenhouse gas emissions but also on corporate strategies, risk management, and targets related to climate risk response. For greenhouse gases, companies are required to report both direct emissions (emission standard: Scope 1) and indirect emissions from energy purchased for business operations (Scope 2).
Europe plans to introduce related systems even faster than the U.S. The EU established the Corporate Sustainability Reporting Directive (CSRD) in November 2022 and plans to gradually mandate related disclosures from large corporations to small and medium-sized enterprises starting next year.
Accordingly, EU companies will be obligated to disclose detailed aspects of ESG, including carbon emissions, pollution management targets, water consumption status, and climate risk response strategies. The EU is expected to implement stronger regulations than the U.S., such as requiring companies to report greenhouse gases emitted by customers using their products (Scope 3).
The report anticipates that a total of 19,350 Korean companies, including 13 domestic companies listed in the U.S. and 19,337 domestic export-oriented small and medium-sized enterprises within the EU supply chain, will be exposed to climate change disclosure risks due to policies in advanced countries.
Kim Jae-yoon, head of the Sustainability Growth Office at the Bank of Korea and author of the report, emphasized, "The strengthening of climate risk disclosure regulations in international communities such as the U.S. and Europe will directly affect large domestic companies operating or listed in those countries, as well as indirectly impact small and medium-sized enterprises within global supply chains."
He particularly noted, "As the EU introduces Scope 3 greenhouse gas emission disclosures targeting companies within its region, domestic export companies within related supply chains may indirectly bear disclosure obligations."
The report expressed concern that, unlike the EU or the U.S., the introduction of related systems is delayed domestically. The Financial Services Commission initially planned to gradually introduce sustainability disclosure standards from the International Sustainability Standards Board (ISSB) starting in 2025, but postponed the implementation to after 2026 due to corporate burdens and insufficient capabilities.
The Financial Supervisory Service also established climate risk management guidelines in December 2022, requiring domestic financial companies (banks, insurance companies, etc.) to disclose their climate risk management status and potential impacts of climate risks, but has yet to finalize specific disclosure indicators.
The Korea Exchange operates an ESG portal, but it relies on voluntarily prepared sustainability management reports by companies (162 companies as of 2023), which limits the amount of information and poses challenges in verifying objectivity.
Kim stated, "Financial authorities need to promptly establish and present climate risk disclosure standards that meet global regulatory levels so that domestic companies can smoothly respond to the strengthening of global climate risk disclosure regulations." He added, "Considering that building infrastructure for climate risk disclosure requires considerable time, companies should proactively enhance their own climate disclosure capabilities."
He also added, "Export-oriented small and medium-sized enterprises should closely examine the disclosure regulations and implementation timelines in their target regions and prepare plans for measuring greenhouse gas emissions and securing related data necessary for regulatory compliance."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
