South Korea’s FSC (Financial Services Commission) has announced plans from the government to improve corporate disclosure rules for listed companies.
“The disclosure rules need to be improved to allow retail investors to more easily understand disclosure information while reducing filing burdens for companies,” FSC vice chairman Doh Kyu-sang said in a statement.
“In addition, with growing significance of environmental, social and governance (ESG) factors and responsible investing, it is necessary to set up an appropriate regulatory environment.”
Under the plan, disclosure reports will be simplified to reduce the burden on reporting companies and to ensure retail investors can better understand the information they contain. A new information booklet will also be published to provide guidance for retail investors.
Korea’s electronic disclosure system – known as DART (Data Analysis, Retrieval and Transfer System) – will also be enhanced to make it more user-friendly and to enhance its search capabilities.
According to the FSC, KRX (Korea Exchange) will publish new guidance this month on the disclosure of ESG information to promote voluntary public disclosures by KOSPI-listed companies. Currently, of the 100 companies in Korea that release ESG reports annually, only 20 disclose the report to KRX.
From 2025, ESG disclosures will become mandatory for companies with at least KRW 2 trillion in total assets. From 2030, mandatory ESG disclosures will be extended to all KOSPI-listed companies.
The disclosures will have to include response plans for environmental crises such as Covid-19, efforts to improve labour management, and information on governance structures.
Korea’s stewardship code, introduced in December 2016, will also be revised to strengthen companies’ fiduciary duties in relation to ESG matters, the FSC said.
The FSC also said disclosure requirements will be enhanced for listed tech companies and foreign-based holding companies listed on KRX, and penalties for noncompliance will be toughened.
Some of the changes will require legislative amendments, which will be submitted to the National Assembly in Q3 2021.