Watchdog vows to ramp up ESG oversight of Korean financial firms

Yoon Suk-heun, chief of South Korea‘s financial watchdog, pledged on Friday to beef up its oversight to prevent a spillover of risks associated with environmental, social and governance factors in the Korean finance industry.

In a keynote speech at a seminar held in Seoul on Friday, the Financial Supervisory Service governor pledged to shape up a framework to gauge climate risks that could undermine the health of financial companies, in the nation where such standardized framework is practically nonexistent.

“In the face of a new normal of carbon neutrality, the FSS will proactively take climate finance into account in supervision of financial companies,” Yoon said.

He also underscored the role of a separate unit dedicated to international coordination to forge a sustainable finance ecosystem in Korea in a January shakeup.

As for the governance improvement, Yoon said the FSS plans to review stewardship codes by Korean investors later this year, looking back on how they contributed to the performance of investment targets, in order to “lay a cornerstone for responsible investing” by Korean institutional investors. He added more companies will be subject to disclosure requirements of their ownership structure.

The FSS will also play the role of facilitating financial services for private-sector players in regards to social finance.

“Considering the gravity of financial services in the business world, ESG factors are increasingly indispensable for the financial sector,” Yoon said.

Korea is still in the early stages of creating an ESG-friendly environment in the finance world. The Environment Ministry introduced guidelines for green bond issuance and investing in December 2020, while the Financial Services Commission is looking to force Korean firms to come up with a corporate ESG disclosure framework starting in 2025.

By Son Ji-hyoung (consnow@heraldcorp.com)