Hang Jea of the Democratic Party Proposes Mandatory ESG Disclosure Bill: "Liability Exempt for First 3 Years"

Follow-up Legislation After Ruling Party-Government Consultation on July 8

Jung Ae Han, a member of the Democratic Party of Korea, on August 5 sponsored a partial amendment bill to the Act on Capital Markets and Financial Investment Businesses, aiming to institutionalize ESG (Environmental, Social, and Governance) disclosures for companies and to enhance the reliability of disclosure information.

The amendment bill requires listed companies above a certain scale to mandatorily include information related to sustainability—which affects the company’s fundraising and financial status—in their business reports.

Jung Ae Han, Chair of the Policy Committee of the Democratic Party of Korea. Photo by Yonhap News.

A third-party certification system will also be introduced to ensure the reliability of disclosed information. The relevant companies must receive certification from independent sustainability certification bodies for their disclosure information, and the Financial Services Commission will establish disclosure and certification standards that take international standards into account. Certification bodies must meet certain requirements, such as having at least KRW 1 billion in equity capital and securing professional personnel, and must be registered with the Financial Services Commission.

Measures to mitigate liability and provide protection have also been introduced to support the stable implementation of the system. For projected or estimated information that contains uncertainty, exemption from civil and criminal liability will be granted if there is no intent or gross negligence. In addition, for the first three years after the implementation of the system, companies will be exempt from administrative, civil, and criminal liability related to sustainability disclosure—except in cases of intentional false disclosure—to minimize the burden and confusion that may arise as companies adapt to the regulatory changes.

This amendment bill is a follow-up legislation to support the plan to institutionalize ESG disclosure systems, which was finalized through discussions between the party and the government on July 8. By incorporating corporate sustainability information into the statutory disclosure system, it aims to enhance transparency and trust in the capital market.

Jung Ae Han stated, "ESG disclosure has become a key factor that determines a company’s competitiveness and investor trust in the global capital market, going beyond just social responsibility." She added, "It is important to promptly establish a disclosure system that aligns with international standards while providing sufficient support to help companies adapt to these changes."

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