[Asking the Future of the Korean Capital Market] AIGCC "The Later the Sustainability Disclosure, the More Global Competition Falls Behind"

③-⑴ Interview with Rebecca Mikula-Light, CEO of AIGCC
Asian consortium of over 70 institutional investors
Letter urging ESG disclosure sent to Financial Services Commission Chairman Kim Byung-hwan

Rebecca Mikula-Wright, CEO of the Asia Investor Group on Climate Change (AIGCC). Photo by AIGCC

"If Korean companies do not sufficiently disclose management information related to sustainability, they may fall behind global competitors."

Rebecca Mikula-Wright, head of the Asia Investor Group on Climate Change (AIGCC), emphasized this in a written interview with Asia Economy, stating, "The lack of comparable data and low transparency hinder global investors from thoroughly analyzing Korean companies."

If companies fail to adequately respond to climate change or fulfill their social responsibilities, it leads to issues of corporate transparency and credibility, which can ultimately affect their ability to attract investment.

Mikula-Wright said, "This can directly impact investment flows from large institutional investors aiming for Net-Zero targets," adding, "Korean companies can strengthen or maintain their global standing by mandating sustainability reporting aligned with global standards and attract additional investments. This will contribute to increasing corporate value, or what we call 'climate value-up'."

AIGCC is a non-profit organization comprising over 70 institutional investors managing assets worth approximately $28 trillion (38,600 trillion KRW). Last month on the 7th, eight institutional investors sent an open letter through AIGCC to Kim Byung-hwan, Chairman of the Financial Services Commission, urging a clear and swift stance on mandatory ESG (Environmental, Social, and Governance) and sustainability disclosures. Their two main demands were: first, that the Financial Services Commission establish a clear climate disclosure roadmap by the end of the year; second, that climate disclosures be gradually mandated starting in 2026.

Mikula-Wright emphasized, "Many investors hope the Korean government will introduce clear and strong climate policies by 2030," adding, "To attract additional capital supporting Korea’s Net-Zero transition, it is essential to build trust with investors."

An open letter sent by eight institutional investors affiliated with AIGCC to Kim Byung-hwan, Chairman of the Financial Services Commission, in October, urging the mandatory disclosure of ESG (Environmental, Social, and Governance) and sustainability. AIGCC website

She argued that to mandate sustainability reporting, the government must establish clear guidelines and a phased evaluation system. She added, "Government support can play a crucial role in mandating ESG practices, such as requiring sustainability reporting and developing transition plans."

She also explained, "The Korean government could introduce a phased evaluation system in its stewardship code like the UK, and government guidelines and incentives, similar to the US Inflation Reduction Act or Japan’s Green Transformation Bonds, can contribute to activating investments."

Korean AIGCC members include the National Pension Service (NPS) and Mirae Asset Global Investments’ Hong Kong branch. In Korea, a working group comprising 11 AIGCC member firms was launched in July. Since joining AIGCC in 2020, NPS has participated in various climate and responsible investment networks, discussed adopting negative screening strategies, and in 2023 began addressing climate change as a key negotiation topic with companies.

Mikula-Wright said, "The standards set by institutional investors like NPS send important signals to investors across Asia, including Korea," adding, "Korean investors need to strengthen their activities to maintain competitiveness."

According to AIGCC’s 2023 annual survey, 68% of major investors, including AIGCC members, are implementing climate strategies at the board level; 59% have established comprehensive climate transition plans; 70% have set decarbonization targets; and 46% are assessing alignment with Net-Zero and setting related goals.

‘Climate Action 100+,’ partnered with AIGCC, is the world’s largest shareholder engagement program, demanding accountability for climate issues, business strategies addressing climate change, and disclosure of related activities. In 2020, AIGCC and Climate Action 100+ jointly sent a letter urging Korea Electric Power Corporation to halt investments in Southeast Asian coal-fired power plants.

She explained, "The aim is not to sanction domestic companies but to emphasize the link between investment, climate risks, and costs," adding, "It is to signal that such investments are not preferred." She further stated, "It is necessary to verify how business strategies work to reduce costs from climate damages and avoid financial losses, and how emissions are being gradually reduced based on scientific evidence."

As a positive change in Korea, she cited the Constitutional Court’s ruling, evaluating its decision demanding amendments to the Carbon Neutrality Act as progress aligned with global standards.

Mikula-Wright expressed hope that "such changes encouraging the Korean economy to align with the Paris Agreement will bring more capital and opportunities to Korea," emphasizing that "the transition to a sustainable economy requires coordinated efforts between the public and private sectors."

AIGCC regards biodiversity alongside carbon reduction as a key issue. According to the report ‘Nature at a Tipping Point,’ co-published with PwC, Korea’s capital market ranks third in nature dependence after the New Zealand Stock Exchange (75%) and the Taiwan Stock Exchange (73%).

Mikula-Wright pointed out, "The Asia-Pacific economy heavily depends on nature and is vulnerable to nature-related risks such as biodiversity loss," emphasizing the need to understand and reflect the physical risks of frequent climate events and rising costs on investments.

She said, "Climate events are becoming more frequent and related costs are soaring," adding, "Investors increasingly need to understand these physical risks and assess their impacts." In fact, over 20 climate and natural disasters occurred in the US alone this year, with total costs exceeding $53 billion and at least 149 fatalities reported.

Meanwhile, concerns have been raised that ESG management values might regress if former President Donald Trump, the Republican candidate, wins the US presidential election. During his first term, Trump pursued pro-business policies, whereas the Biden administration has emphasized green energy. Indeed, battery-related stocks plunged immediately after the election. Mikula-Wright stressed, "Solar, wind, and batteries are already among the cheapest energy sources worldwide," adding, "The US election outcome will not change the necessity of these renewable energies."

Editor's NoteEarlier this year, financial authorities focused policy efforts on enhancing corporate value by promoting a ‘Corporate Value-Up Program’ to resolve the domestic stock market’s undervaluation phenomenon (Korea Discount). After the program was unveiled in May, the domestic stock market briefly rose, mainly benefiting certain stocks, but has been declining since peaking in July. Following the US presidential election, uncertainties over Trump’s second-term policies and concerns over the Korean economy due to strong dollar pressures have led to the KOSPI falling below the 2400 mark, creating a precarious situation. Foreign investors’ withdrawal has accelerated amid concerns over foreign exchange losses caused by high exchange rates. Asia Economy conducted a series of interviews with overseas institutions to explore what changes are needed for foreign investment funds to flow into Korea. Through this, we seek solutions to expand foreign investor inflows into the Korean market and examine policy tasks that need revision.