ESG standards in South Korea have been a concern for international investors for some time. The market continues to lag other countries in the region, both from a regulatory standpoint and from expected company practice, especially as other countries improve their ESG standards.
We have consistently engaged with South Korean companies for many years and have previously visited Seoul in the spring of 2018 and March of 2014, both as part of an international investor delegation led by the Asian Corporate Governance Association (ACGA) – a group that works with companies, regulators, and other investors to implement effective corporate governance throughout Asia. Following President Yoon’s appointment in 2022, there were questions as to how he would work on addressing both institutionalised corruption and domestic human rights, including gender equality, discrimination, and LGBTQIA+ rights. In line with his campaign promises, no improvements have materialised thus far, meaning change at companies will rely heavily on investor engagement and not through regulation.
While President Yoon represents a more conservative view on matters such as ESG compared to his predecessor, it is unlikely he will be able to effect much change in that direction given the National Assembly is still controlled by the liberal Democratic Party and likely will continue to be until April 2024 when the next general election takes place.
Despite that, President Yoon will still be able steer the direction of any regulation and enforcement. For example, it’s possible we will still see movement on financial services regulation or employment law – after all, his campaign promises included an emphasis on deregulation and reducing red tape. From a corporate governance perspective, he’s pledged to introduce measures that could insulate management from investors, which could include things such as allowing for dual class share structures with unequal voting rights.
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We visited Seoul in 2022 as part of a delegation organised by the Asian Corporate Governance Association. Progress around ESG issues has been slow with improvement notably needed around diversity, equality and inclusion. Download the full ESG Viewpoint to discover more.