South Korea’s plan to introduce mandatory environmental, social and governance (ESG) disclosures is facing mounting pressure for an overhaul, with the country’s pension fund and the ruling party calling for an earlier rollout, wider corporate coverage and stricter reporting standards than those proposed by regulators.
The Financial Services Commission (FSC) in February unveiled a draft roadmap to phase in ESG disclosures from 2028, starting with companies listed on South Korea’s benchmark KOSPI stock index with more than KRW30 trillion (US$22 billion) in assets, before expanding coverage over time.
The proposal, which would initially apply to around 58 companies – roughly half of them financial firms – has drawn criticism for being too narrow and slow compared with global peers.
In a formal submission to the FSC on 30 March, the National Pension Service (NPS) – South Korea’s largest institutional investor – said the 2028 timeline “lags behind global standards” and risks limiting the usefulness of ESG data for investment decisions. It urged authorities to bring forward implementation to the 2026 fiscal year and expand coverage to all KOSPI-listed companies with at least KRW2 trillion (US$1.3 billion) in assets.
“A high asset threshold of KRW30 trillion would leave most mid- to large-cap stocks in which the NPS invests outside the disclosure framework,” the fund said, adding that the current proposal fails to sufficiently capture transition risks in manufacturing sectors.
The pension fund also warned that delays in disclosure could lead to capital outflows and higher financing costs for domestic firms.
South Korea’s timeline trails other jurisdictions, the NPS noted. The European Union has begun applying its Corporate Sustainability Reporting Directive (CSRD) from the 2024 fiscal year. Japan is set to begin mandatory disclosures from 2026 for large-cap companies on its Prime market. Singapore has mandated Scope 1 and 2 emissions disclosures for all listed firms from 2025, but in August pushed back rules for large non-listed firms to 2028 and smaller companies from 2030.
The NPS raised concerns over the FSC’s plan to allow a three-year grace period for Scope 3 emissions – indirect emissions across a company’s value chain – which would only become mandatory from 2031.
“Scope 3 emissions are the most critical data for assessing climate-related transition risks,” the fund said, warning that delayed disclosure could hinder timely investment decisions. It called for the grace period to be shortened to one to two years and for companies to be allowed to use “best estimates” to enable earlier reporting.
The fund also flagged potential gaps in the proposed reporting scope, noting that excluding subsidiaries contributing less than 10 per cent of assets or revenue could overlook key ESG risks, particularly in overseas units or lower-tier suppliers where environmental damage or human rights violations often occur.
To improve data reliability, the NPS urged the FSC to accelerate the transition from exchange-based disclosures to legally binding filings, arguing that weaker penalties under exchange rules could undermine accuracy. It also called for ESG disclosures to be integrated into financial statements and published at the same time, in line with International Sustainability Standards Board (ISSB) guidelines.
“Separate disclosure channels and timing would increase analysis costs for investors and weaken the link between financial performance and sustainability risks,” the NPS said.
New bill to broaden scope of ESG disclosure
Separately, the country’s ruling Democratic Party (DP) is pushing legislation to significantly broaden the scope of ESG disclosure.
A DP lawmaker Park Sang-hyuk has introduced a bill to expand mandatory disclosures to KOSPI-listed firms with at least KRW10 trillion (US$6.6 billion) in assets from 2028, compared with the FSC’s KRW30 trillion threshold. The proposal would further lower the threshold to KRW2 trillion in 2029 and KRW1 trillion in 2030, effectively bringing most listed firms into the regime.
The bill also seeks to bypass the FSC’s plan to begin with exchange-based disclosures, requiring ESG information to be included in statutory business reports from the outset, which carry stronger legal liability including fines and potential criminal penalties for false reporting.
To ease the transition, the proposal includes temporary “safe harbour” provisions. Companies would be exempt from civil damages and administrative penalties during the first two years of mandatory reporting, while criminal liability would not apply during the initial phase.
The DP plans to hold consultations with the government this month to coordinate its position, as the FSC moves to finalise its roadmap after gathering stakeholder feedback.
South Korea’s push to formalise ESG disclosures comes after years of delays and growing reliance on voluntary reporting frameworks such as TCFD, GRI and ISSB standards, which have led to inconsistencies in data and limited comparability across companies.
