Final Version of Strengthened ESG Disclosure: Asset Threshold Lowered to KRW 10 Trillion with Immediate Statutory Reporting

Ruling Party and Government Announce "Sustainability (ESG) Disclosure Systemization Plan"
Scope Expanded from KRW 30 Trillion to KRW 10 Trillion... Capital Markets Act Amendment Bill to Be Prepared This Month

The government and the Democratic Party have decided to mandate ESG (Environmental, Social, and Governance) disclosures, starting in 2028 with KOSPI-listed companies whose total assets exceed 10 trillion won. Compared to the government’s draft released earlier this year, the threshold for total assets has been lowered, and the disclosures will be implemented immediately as statutory disclosures. This move significantly strengthens the disclosure system in line with international standards.

On the morning of July 8, the government and the Democratic Party held a policy consultation meeting and announced the final plan for the “Institutionalization of Sustainability (ESG) Disclosure System.” Accordingly, ESG disclosures will be introduced in 2028 for KOSPI-listed companies with total assets of 10 trillion won or more, and expanded in 2029 to listed companies with total assets of 5 trillion won or more. After reviewing compliance with these disclosure requirements during 2028 and 2029, the authorities will consider further expanding the scope in 2030 to include listed companies with total assets of 2 trillion won or more.

Notably, the government and the party have expanded the scope of companies subject to mandatory disclosure compared to the draft released in February. In addition, instead of requiring disclosures through the stock exchange, the plan now mandates immediate implementation via business reports as stipulated in the Capital Markets Act. The original government draft called for mandatory disclosures through the exchange in 2028 for KOSPI-listed companies with total assets of 30 trillion won or more, with a later transition to statutory disclosures after a set period.

Kim Mijeong, Director of the Fair Market Division at the Financial Services Commission, stated, “We have revised the disclosure roadmap more proactively to meet the information needs of global institutional investors and to support the national agenda of green transition.” She added, “We have shifted our strategy from ‘waiting for disclosure readiness’ to ‘leading and advancing it.’” The final plan actively reflects criticism following the draft’s release that many major KOSPI investment companies were excluded from the disclosure requirements and that the initial proposal fell far short of international standards.

However, to ensure a smooth transition, the plan maintains the original provision that, in the first year of implementation, domestic and overseas subsidiaries whose consolidated asset and sales ratios are both less than 10% will be excluded from the disclosure requirement. The number of companies required to disclose, including subsidiaries, is expected to reach 291 (107 + 184) in 2028 and 3,171 (157 + 3,014) in 2029.

Timing Set for Third-Party Certification ... Scope 3 Remains as in Draft Due to ‘Corporate Burden’

Since the disclosures will be immediately mandated as statutory requirements, the Safe Harbor system has also been designed more actively. For the initial three years of implementation, exemptions will be granted for civil damages, administrative sanctions, and criminal penalties under the Capital Markets Act for all disclosure information. Even after this period, Safe Harbor provisions will continue to apply to highly uncertain information, such as forward-looking statements and data collected from third parties. This measure is seen as focusing more on the stable establishment of the system. However, exemptions will not be granted for intentional greenwashing, which will remain subject to liability and administrative responsibility.

Furthermore, third-party certification to enhance the reliability of disclosed information will become mandatory starting in 2030, two years after the disclosure requirement begins. This is the first time the implementation date for institutionalization has been explicitly set in the final plan. Kim explained, “Details such as the scope and level of certification, and entry regulations for certifiers, will be specified during the process of amending the Capital Markets Act in accordance with the mandatory certification timeline.”

The final plan also maintains the draft’s three-year grace period for Scope 3 disclosures (emissions across the entire value chain), which are considered particularly burdensome for companies. Accordingly, companies required to disclose in 2028 will begin reporting Scope 3 in 2031. The government and the party explained that this measure takes into account the necessary infrastructure and the preparedness of partner companies required to calculate emissions across the value chain. Companies classified as small businesses under the Act on the Promotion of Small and Medium Enterprises and not engaged in high-carbon emitting industries will continue to be exempt from disclosure, as originally proposed.

Additionally, the final plan includes measures to promote voluntary disclosures via the stock exchange and to provide incentives to companies that make such disclosures. The government will also pursue major industry pilot tests, the establishment of a Korean-style integrated climate risk platform (by 2028), and the development of industry-specific guidelines for calculating Scope 3 emissions (by 2028).

Lee Eogwon, Vice Chairman of the Financial Services Commission, emphasized, “With the announcement of the disclosure roadmap, our direction and goals have become clear. We will swiftly implement measures such as the amendment of the Capital Markets Act and, together with relevant ministries, prepare comprehensive support to ensure reliable disclosures.” The government and the party plan to prepare an amendment to the Capital Markets Act as early as this month to ensure seamless implementation of the disclosure roadmap.

Experts: “Significant Progress... Some Concerns with Safe Harbor Provisions”

ESG experts welcomed the final plan as a significant step forward compared to the draft, especially in the context of international trends, while also expressing some reservations. Ko Eun-hae, Head of Research & Data at Sustinvest, stated, “It is positive that the scope of disclosure and the number of companies subject to it have been expanded compared to the draft. Statutory disclosures, in particular, are meaningful, as companies can now be held criminally liable, which will encourage responsible disclosure.”

However, she pointed out, “Even with the expanded scope, not all KOSPI 200 constituents are included, which leaves gaps in ESG disclosure data and makes it difficult for practitioners to make informed investment decisions.” Another ESG expert, who requested anonymity, commented, “The expansion of statutory disclosures, the broader scope of application, and the setting of a date for third-party certification all represent significant progress by international standards. However, the Safe Harbor provisions are so broad during the initial three years that it remains to be seen how much investors will be able to trust the disclosed information.”

From the business community, there are concerns about the increased burden on companies due to the expanded scope of application and the immediate implementation of statutory disclosures. Companies are expected to face increased costs for building internal systems and managing data for ESG disclosures, and the requirement to disclose directly via business reports without a preparation period through the stock exchange is seen as a particular challenge. An industry representative stated, “The overall regulations have been strengthened, including the expansion of the scope compared to the draft. The introduction of Safe Harbor provisions in the early stages is somewhat reassuring.”

This content was produced with the assistance of AI translation services.