The South Korean government and the ruling Democratic Party finalized mandatory ESG (sustainability) disclosure requirements for KOSPI-listed companies starting in 2028 (2027 fiscal year). Companies with consolidated assets of 10 trillion won or more will be required to disclose sustainability information. The regulation will be implemented through amendments to the Capital Markets Act, integrating ESG disclosures directly into annual business reports submitted by the end of March each year. The government aims to enhance information usefulness and timeliness by aligning sustainability reporting with financial reporting deadlines. This regulatory framework represents a shift from the initial proposal, which suggested a phased approach beginning with exchange-level voluntary disclosure before transitioning to statutory requirements.
FSC Sets 10 Trillion Won Threshold for Initial ESG Disclosure Mandate
The Financial Services Commission (FSC) announced that 107 KOSPI-listed companies with consolidated assets of 10 trillion won or more will be subject to mandatory sustainability disclosure in the first year of implementation in 2028. This threshold is lower than the 30 trillion won initially proposed in the draft roadmap. Lee Eok-won, Chairman of the FSC, presented the final plan at a government-party consultation meeting held at the National Assembly Members' Office Building in Yeouido, Seoul.
Government Expands Coverage to 5 Trillion Won Companies in 2029
The disclosure requirement will expand to 157 listed companies with consolidated assets of 5 trillion won or more in 2029. The government plans to evaluate the disclosure situation during 2028-2029 and consider further expansion to 259 companies with assets of 2 trillion won or more in 2030. For the initial year, subsidiary companies with assets and revenue below 10% of consolidated figures will be excluded from disclosure requirements to support smooth implementation for parent companies and major subsidiaries. However, when the threshold expands to 5 trillion won or more in 2029, the number of subsidiaries included in disclosure scope will increase from 184 companies in 2028 to 3,014 companies in 2029.
Capital Markets Act Amendment Integrates ESG into Business Reports
The final plan eliminates the staged approach of mandatory exchange disclosure followed by statutory disclosure conversion that was outlined in the initial proposal. Instead, sustainability disclosures will be integrated directly into business reports through Capital Markets Act amendments starting in 2028. Companies will submit sustainability information alongside their annual business reports by the end of March each year. Greenhouse gas emissions will also be disclosed in business reports by the end of March each year using verified figures under the Emissions Trading Act.
Three-Year Liability Exemption Applies to Initial Disclosure Period
The government will exempt all disclosed information from damages liability, administrative sanctions, and criminal liability under the Capital Markets Act for the first three years of implementation. However, intentional greenwashing practices will remain subject to damages liability and administrative responsibility. Third-party verification to enhance disclosure reliability will be introduced in 2030, two years after mandatory disclosure implementation begins.
Scope 3 disclosure, which includes emissions from suppliers across the value chain, will maintain the three-year grace period from each company's disclosure start date as outlined in the initial proposal. Companies with consolidated assets of 10 trillion won or more will begin Scope 3 disclosure in 2031. Companies with 5 trillion won or more will start in 2032, and those with 2 trillion won or more are under consideration for 2033 implementation. Institutional investors and financial institutions are expected to utilize disclosed information for investment and financing decisions.
The FSC plans to submit a Capital Markets Act amendment bill reflecting the final plan this month and aims to complete the legislative process with National Assembly passage by the end of the year.
Business Groups Raise Implementation Concerns with FSC
Six major business organizations, including the Korea Chamber of Commerce and Industry and the Korea Enterprises Federation, issued a joint statement expressing concerns about implementation burdens and various risks. The groups stated that "sustainability disclosure is a medium- to long-term task that requires considerable time and cost for data collection across the supply chain, verification, and training of specialized personnel." They argued that "since much of the disclosure data consists of forecasts and estimates, legal risks arising from uncertainty could increase burdens when statutory disclosure is implemented."
Business groups are particularly concerned about the structure that bypasses the exchange voluntary disclosure stage and directly incorporates sustainability information into Capital Markets Act business reports. They maintain that sufficient liability protection, disclosure infrastructure, and detailed guidelines are necessary for sustainability disclosures containing many forecasts and estimates, as business report disclosures can be linked to investor damages liability, administrative sanctions, and criminal liability issues. They also emphasized that pace adjustment is needed for target companies and implementation timing.
The Korea Forum of Sustainable and Responsible Investment (KoSIF) issued a commentary stating, "We welcome the expansion of disclosure targets compared to the initial proposal and the policy to start with business report disclosure," but argued that "applying a three-year exemption to all disclosed information may weaken disclosure accountability and reliability."
FAQ
What is the asset threshold for mandatory ESG disclosure in South Korea starting in 2028?
KOSPI-listed companies with consolidated assets of 10 trillion won or more will be required to disclose sustainability information starting in 2028 (2027 fiscal year). This threshold will expand to 5 trillion won or more in 2029, covering 157 companies. The government is considering further expansion to 2 trillion won or more in 2030, which would include 259 companies.
When will Scope 3 emissions disclosure become mandatory for South Korean companies?
Scope 3 emissions disclosure, which includes emissions from suppliers across the value chain, will have a three-year grace period from each company's initial disclosure start date. Companies with consolidated assets of 10 trillion won or more will begin Scope 3 disclosure in 2031. Companies with 5 trillion won or more will start in 2032, and those with 2 trillion won or more are under consideration for 2033 implementation.
What liability protections apply during the initial ESG disclosure period?
The government will exempt all disclosed sustainability information from damages liability, administrative sanctions, and criminal liability under the Capital Markets Act for the first three years of implementation. However, intentional greenwashing practices will remain subject to damages liability and administrative responsibility. Third-party verification requirements will begin in 2030, two years after mandatory disclosure implementation starts.
