Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
Samjong KPMG urges businesses to align portfolios with ESG
Samjong KPMG partner Lee Dong-seok
By Park Jae-hyuk
By Park Jae-hyuk
Samjong KPMG called on Korean companies to carry out drastic business portfolio restructuring by taking into account opportunities and risks from environmental, social and corporate governance (ESG) factors, instead of considering their portfolios as separate from ESG management.
“Business portfolios and ESG management systems should be aligned because the new ESG trend has had a significant impact on the attractiveness and valuation of businesses in which companies engage,” said Samjong KPMG partner Lee Dong-seok, who leads the accounting firm's ESG team.
Lee emphasized the necessity of reviewing details on the attractiveness and valuation of businesses, as ESG has caused significant changes in the business environment. He mentioned the U.S. government's reinforced ESG-related policies to cope with climate change, the European Union's introduction of a carbon border adjustment mechanism and global credit ratings agencies' ESG assessments affecting credit ratings of companies.
“Investors started halting their investments in companies with poor ESG efforts, and this trend will have a significant impact on their fundraising,” he said.
BASF was cited as an exemplary case as the German chemical company categorized its products into four groups and invests 60 percent of its R&D budget in the best one in terms of creating social value. It decided to withdraw from the worst one, if it fails to improve its social value creation within five years.
Lee viewed SK Group, British Petroleum and Panasonic as firms that are trying to enter new businesses because of difficulties in counteracting the ESG trend with improvements in their existing business portfolios only.
“When making decisions on investments in new businesses, the system considering opportunities and risks in terms of ESG should come first,” he said. “When Japan's Itochu chooses companies to make investments, it takes into account ESG risks and financial factors. After making the investment, it evaluates their profitability and how much they make in accordance with its strategy, before deciding whether or not to continue the investment.”
He also noted that ESG principles are merely the means and activities for sustainable growth for companies, saying higher ESG scores should not be their ultimate goal.