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Fund Solutions

Korea Creates New Disclosure Standards for ESG Funds

South Korea’s Financial Supervisory Service has unveiled new disclosure standards for ESG funds that will be fully implemented in February next year. The standards will require funds that promote ESG to include explanations in their securities reports on how they integrate ESG elements in their investment process. The standards will initially come into effect in December for a two-month “intensive review period” ahead of full implementation in February 2024. They will also require ESG fund managers to clearly state their ESG investment goals and explain in detail the connection between fund investment strategy and ESG. This includes the selection criteria and procedures for investment targets, and the ESG evaluation methods they use. In the case of ESG evaluation methods, both self-assessments and external evaluations must be described in detail. If ESG fund managers actively engage in shareholder activities, they must also disclose the details of these activities. In addition, ESG fund managers will have to disclose whether their management personnel have experience handling ESG funds, and make clear to investors that strong ESG performance does not necessarily result in strong return performance. The disclosure requirements will apply to both established and new public offering funds that include ESG in their name, or promote ESG in their management strategy even without ESG in their name. As of end March, there were 173 ESG funds in Korea that will become subject to the new disclosure standards, managing total assets worth KRW 8.6 trillion (US$6.4 billion).  

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