The U.S. Securities and Exchange Commission (SEC) sent its proposal to repeal the corporate climate disclosure rule to the White House Office of Management and Budget (OMB) on May 4 local time. The rule, created under the Biden administration, required listed companies to disclose climate-related business risks and, for some companies, carbon emissions, but lawsuits followed and it never took effect. Around the same time in Korea, bills to amend the Financial Investment Services and Capital Markets Act to fix sustainability disclosure as statutory disclosure came from both the ruling and opposition parties. One side is stripping away a rule while the other is hardening one into law.
Looking first at the legislative flow in Korea, the lawmakers who introduced the bills span both parties. The bill introduced on April 21 by 11 opposition lawmakers including Rep. Lee Hun-seung of the People Power Party places sustainability reports in the same disclosure system as business reports and applies fines and criminal penalties for false statements or failure to file. It includes no safe harbor provision. Reps. Park Sang-hyuk and Min Byoung-dug of the Democratic Party of Korea had each earlier sponsored bills providing for a shift to statutory disclosure.
The three bills differ in emphasis. Rep. Park's bill skips the exchange disclosure stage and goes straight to statutory disclosure, with a timetable that widens coverage to companies with 10 trillion won or more in assets in 2028, 2 trillion won or more in 2029, and 1 trillion won or more in 2030. Rep. Min's bill puts weight on securing consistency with international standards to ease the burden of duplicate reporting, and on drawing voluntary corporate participation through safe harbors and incentives. What separates the three bills is whether they lean on mandates or on inducements.
The regulator's outline diverges from these. The draft sustainability disclosure roadmap released by the Financial Services Commission on Feb. 25 included an example that would begin with mandatory disclosure for KOSPI-listed companies with 30 trillion won or more in assets in 2028, expanding afterward to those with 10 trillion won or more. On format, it would start with exchange disclosure, with whether and when to shift to statutory disclosure reviewed later. Compared with the bills in the National Assembly, the asset size of the initial coverage differs, and the legal character of the disclosure diverges as well.
The FSC plans to release its final roadmap, after gathering opinions, early this month. There is talk that it contains stronger provisions than the draft, but nothing has been confirmed and announced. The asset threshold for covered companies, the years of application, and whether it starts as exchange disclosure or statutory disclosure are the points this announcement will settle.
Regulation on the continent is moving along yet another track. The European Commission is pursuing a plan to hand out an additional 4 billion euros (about 6.4 trillion won) worth of emissions allowances for free to industries covered by the carbon market. In calculating the basis for free allocation for 2026-2030, it will count both direct and indirect emissions.
The basis is to be finalized in early June, with actual issuance beginning as early as the second half of July. The EU also adjusted the timing and scope of sustainability disclosure through its omnibus package legislation.
The standards companies must meet were themselves sorted into two types in 2023. The EU's ESRS is oriented toward reporting compliance with regulation, while the ISSB standards under the IFRS are closer to reporting business activity to investors and shareholders. On top of that, EFRAG will release a draft reporting standard for non-EU companies and a 2026 roadmap this July. Among Korean listed companies, the larger the share of revenue from Europe, the more they must handle both sets of standards, making the response more difficult.
There is also analysis linking disclosure to financial indicators. Issue 81 of the National Assembly Budget Office's 'NABO Industry Trends & Issues' put the foreign investor ownership ratio at companies that make sustainability disclosures at 18.7%. The ownership ratio at non-disclosing companies used for comparison was not presented alongside it, so the size of the gap is hard to gauge from this figure alone.
The SEC repeal proposal will be settled only after the OMB review ends and it goes through a commission vote and public comment. In Korea, the FSC's final roadmap will be made public this month, and the EU's basis for free allocation of emissions allowances will be finalized early next month. The three schedules are packed into two months, and the decisions that emerge by then will shape the next few years of corporate disclosure practice.
