ESG in the Spotlight Again... Ten Key Climate Finance Policies Proposed

Private Climate Think Tanks
Green Transition Institute, Plan 1.5, KoSIF
"Climate Finance Must Become Central to Economic Policy"
Calls on Lee Jaemyung Administration to Enact Basic ESG Law and More

President Lee Jaemyung, who emphasized environmental, social, and governance (ESG) pledges during his candidacy, is now facing calls to further promote climate finance to achieve these goals. Climate finance refers to activities by financial institutions such as lending, investment, and product development aimed at reducing carbon emissions.

According to the financial sector on June 25, private climate think tanks Green Transition Institute, Plan 1.5, and the Korea Sustainability Investing Forum (KoSIF) held a press conference at the National Assembly Communication Center earlier that morning, organized by Democratic Party lawmaker Min Byungdeok. They proposed ten key climate finance policies to the Lee administration, stating, "The role of climate finance must be elevated to the core of economic policy." They added, "The climate crisis is no longer a subcategory of environmental policy but a macroeconomic risk that threatens inflation, financial stability, asset soundness, pension returns, and trade competitiveness."

First, they argued that the climate crisis should be reflected as a core agenda in monetary and financial policy. They stated that the Bank of Korea should explicitly consider climate risk and transition into a 'green central bank,' and that financial authorities should implement credit and collateral policies that reflect financial institutions' climate performance. They also recommended ensuring transparency in climate-related information, making climate disclosures legally mandatory, and establishing an ESG disclosure system. They suggested that the current stewardship code, which is based on the principle of fiduciary responsibility, should be revised to include 'climate change and ESG,' enabling financial institutions to contribute to industrial transformation. They also called for the establishment of a climate investment corporation to lead public sector responsibility regarding the climate crisis. In addition, they proposed that public financial institutions such as the Korea Development Bank and the National Pension Service declare net-zero asset portfolios, and that laws be amended so that 420 trillion won in retirement pension assets can be managed safely from climate risks.

Specific measures proposed included enacting a basic ESG law, implementing climate disclosures by the Bank of Korea, mandating climate information disclosures, requiring consideration of climate risk when assessing financial institutions' asset soundness, revising and strengthening the effectiveness of the stewardship code, achieving net-zero asset portfolios for public financial institutions, reflecting climate investment in the evaluation of public and private financial institutions, revitalizing climate retirement pension products, establishing a climate investment corporation, and strengthening taxonomy. Lee Jongoh, Secretary General of KoSIF, stated, "There can be no fundamental economic or social change without a massive movement of capital," and added, "If we do not actively build the environment and systems to allow large-scale inflows of public and private financial capital into the climate economy and sustainable economic activities, our future will become dystopian." This proposal will be delivered to the Presidential National Policy Planning Committee and, through lawmaker Min, who serves as co-chair of the National Assembly ESG Forum, will also be officially submitted to the National Assembly's standing committees such as the Political Affairs Committee.

The reason for these actions by climate think tanks is that President Lee Jaemyung made related pledges during his presidential campaign. KoSIF sent a questionnaire on 'ESG, climate, and renewable energy policy' to then-candidate Lee, and he explicitly supported six out of ten policies proposed by the think tanks, including enacting a basic ESG law, early mandatory ESG disclosure, revising the stewardship code, achieving net-zero asset portfolios, and establishing a green finance corporation.

The ruling Democratic Party is also moving to prepare relevant legislation. On June 13, lawmaker Jung Taeho, head of the first economic subcommittee of the National Policy Planning Committee, introduced the "Act on the Protection of Human Rights and the Environment for Sustainable Corporate Management." If enacted, this law will require companies to conduct annual due diligence in the areas of human rights and the environment and disclose the results. Management executives will also be required to establish implementation plans and report and obtain approval from the board of directors.