[L1] 1 ESG Overview [L4] - Non-financial elements indicating how transparently a company is operated. [L5] * Financial elements (Traditional method) + Non-financial elements (ESG), a new standard for corporate evaluation. [L4] - Acronym for Environment, Social, and Governance. [L4] - An indicator to verify if the profit-making process is correct, beyond just profit information. [L4] - Similar to CSR (Corporate Social Responsibility), but while CSR focuses on social contribution, ESG focuses on social contribution and management activities. [L5] * While CSR was optional, ESG is used as an evaluation indicator for investors' investment decisions. [L1] 2 ESG Implementation Process [L4] - Starting with the UK in 2000, mandatory ESG disclosure systems were introduced. Korea plans to expand mandatory disclosure in stages starting from 2025. [L4] - Evaluated by KCGS (Korea Institute of Corporate Governance and Sustainability) domestically, and globally by DJSI (Dow Jones Sustainability Indices) started in 1999, and ISO26000. [L4] - The importance of ESG has been highlighted due to COVID-19. [L1] 3 ESG Evaluation System [L2] 1) MSCI [L4] - Evaluates ESG items based on Risk, Opportunity, and Controversy. [L2] 2) Goldman Sachs [L4] - Scored based on internal company policies. [L2] 3) KCGS (Korea Institute of Corporate Governance and Sustainability) [L4] - Regularly announces individual ESG grades and comprehensive integrated grades. [L4] - Evaluated by dividing into Environment, Social Contribution, and Governance sectors. [L4] - Grades are divided into 7 levels: S (Excellent), A+ (Very Good), A, B+ (Good), B, C (Weak), D. [L2] 4) KRX (Korea Exchange) [L4] - Used for composing SRI (Socially Responsible Investment) indices. [L1] 4 ESG Components [L2] 1) Environment [L4] - Must systematically perform environmental management, such as reducing environmental impact during production and purchasing/producing eco-friendly products. [L4] - Recently, the level of response to climate change is being used as a high evaluation standard. [L4] - Includes environmental organization, environmental management, and environmental reporting. [L4] - Evaluated based on climate change, greenhouse gas emissions, resource depletion, waste and pollution, deforestation, etc. [L2] 2) Social [L4] - Social contribution activities. [L4] - Human resource management, industrial safety, subcontracting transactions, product safety, fair competition, etc. [L4] - Evaluated based on labor environment (child and slave labor), health and safety, conflict zones, labor relations, and diversity. [L2] 3) Governance [L4] - Means organizational structure innovation and sustainable growth. [L4] - Shareholders' rights, composition and activities of the board of directors, audit system, affiliate risks, dividends, etc. [L4] - Evaluated based on executive compensation, bribery and corruption, political lobbying and donations, board diversity and structure, tax strategy, etc. [c]