From fiscal years beginning on or after January 1, 2027, listed companies above a certain size must state sustainability information in their business reports. That is the timetable contained in the partial amendment to the Capital Markets Act introduced on the 5th by Han Jung-ae, chair of the Democratic Party of Korea's policy committee. The amendment defines sustainability-related matters that can affect financing and financial condition as subject to mandatory statement. Application will proceed in stages according to a company's asset size.
Until now, ESG disclosure in Korea has been voluntary disclosure through the Korea Exchange. With no statutory duty, companies chose what to write and how far to go. If the amendment passes, this information moves inside the business report, a statutory disclosure document.
The asset size of companies subject to disclosure and the disclosure items were not written into the law itself and were left to a presidential decree. An explanation presenting assets of 10 trillion won or more as the first-stage target has also appeared, but whether that figure is fixed in the text of the amendment has to be checked separately. The bill's explanation states that it is follow-up legislation for the sustainability disclosure framework confirmed at the party-government consultation on July 8. It is also explained that the Financial Services Commission and the ruling party's policy committee prepared it together after discussion.
For companies with a December fiscal year end, fiscal 2027 content will first appear in the business report filed in 2028. The duty of assurance by an independent third party is pushed back two more years from there, applying to fiscal years beginning on or after January 1, 2029. The point at which assured information is actually disclosed becomes the 2030 filing.
Among 208 voluntary ESG disclosures filed by KOSPI-listed companies, the share reflecting the Korean Sustainability Disclosure Standards (KSSB) came to only 13.9%. It means nearly nine out of ten are still writing their reports on a different framework. The public explanation of this tally's scope and of the criteria that decided whether the standards were reflected is brief.
An analysis comparing greenhouse gas reduction target disclosures at Korea's 10 largest companies also confirmed variation. How far transition plans were written out, in what scope and by what formula the financial impact of climate risk was measured, and whether climate performance was tied to executive compensation differed from company to company. Hyundai Motor and LG Electronics presented quantitative reduction targets for the product use phase, and SK Hynix and LG Electronics linked climate performance indicators to compensation.
Provisions opening a new assurance market were also included. Assurance providers must register with the Financial Services Commission, meeting requirements of equity capital of 1 billion won or more, professional staff, and a system to prevent conflicts of interest. Violating the duty to prevent conflicts of interest, or writing a false assurance report in breach of assurance standards, carries a penalty surcharge of up to five times the assurance fee along with sanctions. Registration cancellation, business suspension and criminal punishment are also stipulated.
The liability relief measures are concentrated in the first three fiscal years. Explanations diverge over the scope of exemption from administrative, civil and criminal liability during this period, with one holding that intentional false disclosure is excluded from the exemption and another that only criminal liability is exempted for three years. For information accompanied by uncertainty, such as estimates or forecasts, no liability for damages or criminal liability applies even after three years absent intent or gross negligence.
The disclosure standards and assurance standards will be drawn up by the Financial Services Commission, following deliberation by the Securities and Futures Commission and taking international standards into account. If the timing of the standards and companies' reporting cycles do not line up, the quality of disclosure in the first fiscal year could waver.
What the law has set is only the starting year. Which companies fall within scope and what and how many items must be written are for the presidential decree to determine, and only once its content is made public can companies know how far they must overhaul their own reporting systems. The time remaining until January 1, 2027 is one year and five months.
