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On January 15, 2023, South Korea’s Financial Supervisory
Service (“FSS“) issued new guidelines (the
“Guidelines“) (Korean language only) to
enhance transparency on the methods and procedures used by credit
rating agencies to perform ESG bond certification evaluations. In
announcing the Guidelines, the FSS noted that, prior to their
introduction, there were no specific rules or regulations in South
Korea covering the ESG certification process. The FSS also
indicated that currently it is difficult to compare ESG ratings
performed by different agencies due to the lack of consistent
standards and that the Guidelines are intended to improve the
comparability and utility of related evaluation reports.
We set out below some of the highlights of the Guidelines:
- The Guidelines reflect the International Organization of
Securities Commission’s recommendations for regulating ESG
ratings and data product providers including those relating to
documenting the rating procedure and strengthening the independence
of evaluators. - The FSS has also supplemented the Guidelines with local
features including the disclosure of minimum investment ratios
required for ESG bond recognition and the introduction of a
validity period of the certification. - Credit rating agencies will be subject to certain requirements
including verifying the use offunds when undertaking ESG bond
certification evaluations. The FSS expects that this aspect of the
Guidelines will help prevent greenwashing.
The Guidelines will be implemented as Korea Financial Investment
Association best practice and will become effective from February
1, 2023.
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