About This Journal

korean management review - Vol. 51 , No. 5
[Paper List] [Go to Volume List]

[ Article ]
korean management review - Vol. 51, No. 5, pp. 1323-1359
Abbreviation: kmr
ISSN: 1226-1874 (Print)
Print publication date 31 Oct 2022
Received 01 Jul 2022 Revised 23 Aug 2022 Accepted 04 Sep 2022
DOI: https://doi.org/10.17287/kmr.2022.51.5.1323

Analysis on the Disclosure Integrity of Industry-specific Material ESG Information Disclosures of KOSPI Top 10 Firms
Jihyun Kim ; Soyoung Yoo
(First Author) Samil PricewaterhouseCoopers (jkim921229@gmail.com)
(Corresponding Author) KAIST College of Business, Management Engineering (jesyyoo@kaist.ac.kr)

KOSPI 상위 10개 기업의 산업별 중요성을 반영한 ESG 공시 충실성 연구

Copyright 2011 THE KOREAN ACADEMIC SOCIETY OF BUSINESS ADMINISTRATION
This is an open access article distributed under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted, distribution, and reproduction in any medium, provided the original work is properly cited.
Funding Information ▼
Abstract

Voluntary ESG disclosure practices are on the rise, oftentimes not fully embracing material ESG information which is in increasing demand in the capital market. This calls for the adoption of financially material ESG disclosure standards. The SASB standards, with their clear industry-specific material disclosure guidelines, are gaining legitimacy in Korean and global markets. This study examines the disclosure integrity of ESG disclosures of the Top 10 companies listed on the KOSPI in terms of industry-specific financial materiality. We construct a coverage-ratio-scoring-mechanism by mapping Bloomberg ESG Disclosure datasets and sustainability reports to the SASB standards. The results show that 1) during 2018-2020, KOSPI Top 10 firms showed advanced industry-specific material ESG disclosure both in quantity and quality and 2) readily-available Bloomberg ESG Disclosure datasets did not fully capture the scope of the SASB-related disclosure practices of the sample firms.

Keywords: ESG disclosures, ESG investment, ESG ratings, the SASB, Sustainability reports
Acknowledgments

This research is supported by the Ministry of Environment’s Green Finance Professional Fostering Project Fund in 2022. The authors appreciate anonymous reviewers for providing valuable comments.

References
1. Baker, S.(2020), “Global ESG-data driven assets hit $40.5 trillion,” https://www.pionline.com/esg/global-esg-data-driven-assets-hit-405-trillion (retrieved May 2022).
2. Baldini, M., Maso, L. D., Liberatore, G., Mazzi, F., and Terzani, S.(2018), “Role of Country- and Firm-Level Determinants in Environmental, Social, and Governance Disclosure,” Journal of Business Ethics, 150(1), pp.79-98.
3. Benz, C. and Ptak, J.(2020), “Jon Hale: ESG Is a Paradigm Shift,” https://www.morningstar.com/articles/962413/jon-hale-esg-is-a-paradigm-shift (retrieved May 2022).
4. Bermejo Climent, R., Garrigues, IF-F., Paraskevopoulos, I., and Santos, A.(2021), “ESG Disclosure and Portfolio Performance,” Risks, 9(10), 172.
5. BlackRock, Inc.,(2021), 2020 Sustainability Disclosure, BlackRock, Inc.
6. Bloomberg(n.a.), “Global Environmental, Social & Governance - ESG Data,” https://www.bloomberg.com/professional/dataset/global-environmental-social-governance-data (retrieved March 2022).
7. Bloomberg Intelligence(2021), “ESG assets may hit $53 trillion by 2025, a third of global AUM,” https://www.bloomberg.com/professional/blog/esg-assets-may-hit-53-trillion-by-2025-a-third-of-global-aum (retrieved March 2022).
8. Buallay, A.(2018), “Is sustainability reporting (ESG) associated with performance? Evidence from the European banking sector,” Management of Environmental Quality, 30(1), pp.98-115.
9. Busco, C., Consolandi, C., Eccles, R. G., and Sofra, E.(2020), “A Preliminary Analysis of SASB Reporting: Disclosure Topics, Financial Relevance, and the Financial Intensity of ESG Materiality,” Journal of Applied Corporate Finance, 32(2), pp.117-125.
10. Carter, M., McGovern, M., and Filosa, M.(2022), “Towards a Global ESG Disclosure Framework,” https://corpgov.law.harvard.edu/2022/01/09/towards-a-global-esg-disclosure-framework (retrieved May 2022).
11. Chang, T. M.(2021), “ESG rising as the main stream of investment...broadly expanding to the domain of bonds beyond stocks,” https://cnews.fntimes.com/html/view.php?ud=202101211421525381d94729ce13_18 (retrieved May 2022).
12. Chen, Z. and Xie, G.(2022), “ESG disclosure and financial performance: Moderating role of ESG investors,” International Review of Financial Analysis, 83, 102291.
13. Christensen, D. M., Serafeim, G., and Sikochi, A. (2022), “Why is Corporate Virtue in the Eye of the Beholder? The Case of ESG Ratings,” The Accounting Review, 97(1), pp.147-175.
14. Clarkin, C. M, Sawyer, M., and Levin, J. L.(2020), “The Rise of Standardized ESG Disclosure Frameworks in the United States,” https://corpgov.law.harvard.edu/2020/06/22/the-rise-of-standardized-esg-disclosure-frameworks-in-the-united-states (retrieved May 2022).
15. Coates, J.(2021), “ESG Disclosure - Keeping Pace with Developments Affecting Investors, Public Companies and the Capital Markets,” https://www.sec.gov/news/public-statement/coates-esg-disclosure-keeping-pace-031121 (retrieved February 2022).
16. CSES(2021), ESG Handbook, Center for Social value Enhancement Studies.
17. Eccles, R. G., Serafeim, G., and Krzus, M. P.(2011), “Market interest in nonfinancial information,” Journal of Applied Corporate Finance, 23(4), pp.113-127.
18. Eccles, R. G., Krzus, M. P., Rogers, J. and Serafeim, G.(2012), “The Need for Sector-Specific Materiality and Sustainability Reporting Standards,” Journal of Applied Corporate Finance, 24(2), pp.65-71.
19. European Commission(2021a), Proposal for a Directive of the European Parliament and of the Council amending Directive 2013/34/EU, Directive 2004/109/EC, Directive 2006/43/EC and Regulation (EU) No 537/2014, as regards corporate sustainability reporting, The European Commission.
20. European Commission(2021b), Questions and Answers: Corporate Sustainability Reporting Directive proposal, The European Commission.
21. European Commission(2022), Consultation Document: Targeted Consultation on the Functioning of the ESG Ratings Market in the European Union and on the Consideration of ESG Factors in Credit Ratings, The European Commission.
22. FSC(2021), “Comprehensive improvement plan for corporate disclosure to reduce corporate burden and enhance investor protection,” https://www.fsc.go.kr/comm/getFile?srvcId=BBSTY1&upperNo=75176&fileTy=ATTACH&fileNo=6 (retrieved May 2022).
23. Gifford, J.(2015), The changing role of asset owners in responsible investment: reflections on the principles for responsible investment - the last decade and the next in The Routledge Handbook of Responsible Investment, Routledge, pp.459-467.
24. Grewal, J., Hauptmann, C., and Serafeim, G.(2021), “Material Sustainability Information and Stock Price Informativeness,” Journal of Business Ethics, 171(3), pp.513-544.
25. GSIA(2021), Global Sustainable Investment Review 2020, Global Sustainable Investment Alliance.
26. Guillot, J.(2021), “Materiality: The Word that Launched a Thousand Debates,” https://www.sasb.org/blog/materiality-the-word-that-launched-a-thousand-debates (retrieved March 2022).
27. Han, J. Y., Yun, S. J., Soh, Y., Kim, J., and Kim, J. H.(2019), “Assessment of Korean Enterprises’ Response to Climate Change: Focusing on the Field of Electrical, Electronic and Communications Sector,” Journal of Environmental Policy and Administration, 27(3), pp.105-133.
28. Han, JJ., Kim, H. J., and Yu, J.(2016), “Empirical study on relationship between corporate social responsibility and financial performance in Korea,” Asian Journal of Sustainability and Social Responsibility, 1(1), pp.61-76.
29. Hawley, J. P (2015), Setting the scene: the basics and basis of responsible investment in The Routledge Handbook of Responsible Investment, Routledge, pp.40-57.
30. Hong, J. G.(2021), “ESG investment is essential for the National Pension Service - a long-term investor,” https://www.chosun.com/economy/stock-finance/2021/07/09/MMKSTWPNPRBJPJ3PL4URDF6SZM (retrieved March 2022).
31. IFRS(2018a), Amendment issued: IASB clarifies its definition of ‘material’, The International Financial Reporting Standards Foundation.
32. IFRS(2018b), Use of IFRS Standards around the world, The International Financial Reporting Standards Foundation.
33. IPSF(2021), State and trends of ESG disclosure policy measures across IPSF jurisdictions, Brazil, and the US, The European Commission.
34. ISSB(2021), Summary of the Technical Readiness Working Group’s Programme of Work, The International Sustainability Standards Board.
35. ISSB(2022a), [Draft] IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information, The International Sustainability Standards Board.
36. ISSB(2022b), [Draft] IFRS S2 Climate-related Disclosures, The International Sustainability Standards Board.
37. Jeon, K. A. and Cheung. J. H.(2022), A study on the establishment of Korean domestic sustainability disclosure standards and policy proposals related to the establishment of the KSSB, Korea Accounting Institute.
38. Jessop, S. and Kerber, R.(2020), “BlackRock backs harmonising sustainability reporting rules,” https://www.reuters.com/article/us-blackrock-sustainability-reporting-idUSKBN26Y27R (retrieved March 2022).
39. KASB(2019), Translation on Materiality, Korea Accounting Standards Board.
40. Katz, D. A., McIntosh, L. A., and Lipton, W.(2021), “SEC Regulation of ESG Disclosures,” https://corpgov.law.harvard.edu/2021/05/28/sec-regulation-of-esg-disclosures (retrieved May 2022).
41. KCGS(n.a.), “ESG Evaluation,” http://www.cgs.or.kr/eng/business/esg_tab01.jsp (retrieved May 2022).
42. Khan, M., Serafeim, G., and Yoon, A.(2016), “Corporate Sustainability: First Evidence on Materiality,” The Accounting Review, 91(6), pp.1697-1724.
43. Kim, H. K.(2021a), “ESG trends and a direction for companies,” https://m.ecomedia.co.kr/news/newsview.php?ncode=1065572430019572 (retrieved February 2022).
44. Kim, M. S.(2021b), “Sustainability Report - somewhere between green washing and communication,” https://futurechosun.com/archives/56590 (retrieved April 2022).
45. Kim, S. M.(2014), “Bloomberg ESG score status of Korean domestic and foreign companies,” CGS Report, 4(4), pp.7-10.
46. Kim, Y. K.(2020), “Effects of Non-financial Information Disclosure on Firm Performance and Firm Value,” Journal of Regulation Studies, 2020, 29(1), pp.35-59.
47. Koo, E. S.(2021), “Exploding ESG funds...net inflow of 93 billion won in the first half alone,” https://www.hankyung.com/finance/article/202107022842i (retrieved February 2022).
48. Kumar, R.(2019), R-Factor™ Reinventing ESG Investing Through a Transparent Scoring System, State Street Global Advisors.
49. Lee, A. H.(2021a), “A Climate for Change: Meeting Investor Demand for Climate and ESG Information at the SEC,” https://www.sec.gov/news/speech/lee-climate-change (retrieved April 2020)
50. Lee, I. H. and Lee, S. H.(2021), Discussion for the implementation of sustainability reporting obligations, Korea Capital Market Institute.
51. Lee, J. O.(2021b), “ESG disclosure obligation - the need to advance the schedule,” http://www.impacton.net/news/articleView.html?idxno=1161 (retrieved March 2022).
52. Lee, S. H.(2021c), ESG Corporate Disclosure Improvement Plan, Korea Capital Market Institute.
53. Lee, S., Kim, B., and Ham, S.(2018), “Strategic CSR for airlines: does materiality matter?” International Journal of Contemporary Hospitality Management, 30(12), pp.3592-3608.
54. Li, Y., Gong, M., Zhang, X., and Koh, M.(2018), “The impact of environmental, social, and governance disclosure on firm value: The role of CEO power,” The British Accounting Review, 50(1), pp.60-75.
55. Pyles, M. K.(2020), “Examining Portfolios Created by Bloomberg ESG Scores: Is Disclosure an Alpha Factor?” The Journal of Impact and ESG Investing, 1(2), pp.39-52.
56. Robeco (n,a,), “Materiality,” https://www.robeco.com/en/key-strengths/sustainable-investing/glossary/materiality.html#:~:text=Financially%20material%20ESG%20factors%20are,from%20one%20sector%20to%20another (retrieved May 2022).
57. Sætra, H. S.(2021), “A Framework for Evaluating and Disclosing the ESG Related Impacts of AI with the SDGs,” Sustainability, 13(15), 8503.
58. Santay, M.(2018), “Materiality,” https://us.aicpa.org/content/dam/aicpa/research/standards/auditattest/asb/documents/mtg/1810/2018-10-asb-itema.pdf (retrieved June 2022).
59. SASB(2018), SASB Standards Application Guidance, The Sustainability Accounting Standards Board.
60. SASB(2020), Proposed Changes to the SASB Conceptual Framework & Rules of Procedure, The Sustainability Accounting Standards Board.
61. SEC(1999), “SEC Staff Accounting Bulletin: No. 99 - Materiality,” https://www.sec.gov/interps/account/sab99.htm (retrieved March 2022).
62. Soehner, C. and Boujoukos, G. J.(2021), “ESG disclosures and traps for the unwary ― what's workable?” https://www.reuters.com/legal/legalindustry/esg-disclosures-traps-unwary-whats-workable-2021-06-30 (retrieved March 2022).
63. Tamimi, N. and Sebastianelli, R.(2017), “Transparency among S&P 500 companies: An analysis of ESG disclosure scores,” Management Decision, 55(8), pp.1660-1680.
64. TCFD(2017), Final report - Recommendations of the Task Force on Climate-related Financial disclosures, https://www.fsb-tcfd.org/wp-content/uploads/2017/06/FINAL-TCFD-Report-062817.pdf (retrieved July 2021).
65. TSC Industries, Inc v. Northway, Inc., 426 U.S. 438(1976), “TSC Industries, Inc. v. Northway, Inc.,” https://tile.loc.gov/storage-services/service/ll/usrep/usrep426/usrep426438/usrep426438.pdf (retrieved June 2022).
66. U.S. Congress(2021), “H. Rept. 117-54 - ESG Disclosure Simplification Act of 2021,” https://www.congress.gov/congressional-report/117th-congress/house-report/54/1 (retrieved December 2021).
67. UNPRI(2021), “Principles for Responsible Investment,” Principles for Responsible Investment.
68. Vasantham, K. and Shammai, D.(2020), “Institutional Investor Survey 2020,” https://corpgov.law.harvard.edu/2020/03/25/institutional-investor-survey-2020 (retrieved April 2022).

∙ The author Jihyun Kim is currently a consultant at the Assurance ESG Platform Team, Samil PricewaterhouseCoopers. Jihyun Kim earned his master’s degree in Green Business and Policy at Korea Advanced Institute of Science and Technology (KAIST) College of Business. He received his bachelor’s degree in History from Korea University. His field of research focuses on ESG disclosures, integrated reporting, non-financial report auditing, etc.

∙ The author Soyoung Yoo is currently a visiting professor at KAIST College of Business. After graduating from Ewha Womans University, she obtained an MBA and a Ph.D. in Management Engineering from KAIST and performed management consulting, Valuation, and business feasibility assessment at PwC and Korea Ratings. Her major research areas include sustainability disclosure standards, green project evaluation, climate change risk analysis, and the relationship between environmental management and financial performance.

 
Mail : editor_kmr@daum.net
COPYRIGHT ⓒ 2011 Korean Academic Society Of Business Administration. All rights reserved