SOUTH KOREA Law and Practice Contributed by: Bo Hee Park, Minhyun Cho, Ian Kim and Jun Hee Kwon, Jipyong LLC
6.2 Risk Management and Internal Controls Korean law does not treat geopolitical risk as a sepa - rate category of board-level risk under a specific stat - utory framework. There is no single rule that expressly requires boards to identify or manage geopolitical risk as such. In practice, however, geopolitical risk is addressed through the board’s broader oversight responsibilities, including supervision of major business risks, compli - ance and internal control systems. Where geopolitical developments, such as international sanctions, trade restrictions or supply chain disruption, are material to the company’s business, they are typically considered at board or senior management level as part of enter - prise risk management. This practice is more clearly articulated in the financial sector. Under the Act on Corporate Governance of Financial Companies, boards are required to approve and oversee internal control and risk management standards and related policies, and certain institu - tions must operate dedicated risk management com - mittees. In that context, sanctions compliance and cross-border regulatory risk are generally treated as core elements of the risk management framework. Korea has not yet adopted a single, generally applica - ble regime requiring all companies to publish an inte - grated ESG report. The current disclosure framework is therefore multilayered. The most formalised element is the corporate governance report regime operated through the Korea Exchange for KOSPI-listed com - panies, while broader sustainability reporting remains largely separate. In practice, the most established ESG-related report - ing obligation is governance-focused. The KRX frame - work includes 15 core governance indicators covering matters such as shareholder rights, board composi - tion and operation, audit bodies and internal control arrangements. These indicators do not amount to a comprehensive ESG reporting code, but they make 7. Environmental, Social and Governance 7.1 ESG Requirements
governance disclosure more structured and compa - rable across listed issuers. By contrast, broader environmental and social report - ing has not yet become a fully mandatory, economy- wide disclosure regime. Nonetheless, many Korean companies continue to publish sustainability reports voluntarily, often by reference to internationally used frameworks such as the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), the Task Force on Climate-related Financial Disclosures (TCFD) and the UN Sustainable Develop - ment Goals (SDGs). 7.2 ESG Developments The most noticeable shift in Korea is that climate- related disclosure is moving ahead more quickly than the rest of the ESG agenda. On 26 February 2026, the Korea Sustainability Standards Board (KSSB) pub - lished the first set of Korean sustainability disclosure standards: KSSB Standard No 1 on general require - ments and KSSB Standard No 2 on climate-related disclosures. This suggests that the next stage of Korean ESG reporting is likely to develop first around climate and financially material sustainability infor - mation, rather than through a broad, integrated ESG reporting regime. That said, the regime is not yet fully mandatory. The standards are currently available for voluntary appli - cation, but they are framed as domestic sustainabil - ity disclosure standards aligned with the International Sustainability Standards Board (ISSB) framework. In practical terms, many companies are now in a transi - tion phase. They may continue to publish conventional sustainability reports but are increasingly expected to prepare for more disciplined, investor-facing dis - closure on governance, strategy, risk management, metrics and targets, particularly in relation to climate. Accordingly, the most clearly evolving component of ESG in Korea is the environmental pillar, and more specifically climate. Governance disclosure is already relatively institutionalised through the KRX reporting regime, while broader sustainability reporting is begin - ning to move towards an ISSB-style, financially mate - rial disclosure model.
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