The Financial Services Commission will introduce an implementation review procedure to strengthen the enforceability of the stewardship code. A private body will review and approve the implementation status of participating institutions, and the review results will be disclosed so implementation levels can be compared by institution. Based on this, incentives for institutions complying with the stewardship code will also be expanded.
In addition, the code will be revised to broaden the scope and targets of the stewardship code.
The stewardship code refers to the codification of institutional investors' responsibilities as fiduciaries into behavioral guidelines so that institutional investors, as trustees, manage and operate the money entrusted by shareholders to the best of their ability.
The Financial Services Commission announced on the 28th a plan to bolster the stewardship code to strengthen the fiduciary duties of institutional investors.
Under this plan, a new implementation review procedure will be introduced to encourage faithful implementation of the stewardship code. Participating institutions will prepare self-assessment reports, undergo a working-level review, and then the Stewardship Code Advancement Committee will conduct final review and approval.
The advancement committee will consist of a private-sector chair, four domestic and foreign institutional investors, two academics, and one representative each from the Korea Financial Investment Association and the Capital Markets Research Institute. The ESG Standards Institute will appoint the committee members and provide working-level support.
To minimize potential conflicts of interest during the working-level review, the stewardship code support unit within the ESG Standards Institute will be physically separated from other departments such as proxy advisory, and personnel and information exchanges will be blocked. However, in the case of pension funds, if there is a privately led committee that operates independently, the review by that committee may be used for the assessment.
The implementation review will first be carried out for asset managers and pension funds and then expanded in stages. A pilot review will be conducted within the year for asset managers and pension funds to produce best practices, followed by full implementation starting next year.
Starting in 2026, 68 asset managers and pension funds will be subject to the review, which will expand in 2027 to private equity funds (PEF) and insurers. In 2028, securities firms, banks, and investment advisory firms will be added, and in 2029 it will expand to a total of 249 institutions including venture capital (VC) firms and service organizations.
The implementation review items are: ▲ preparation and disclosure of a fiduciary duty policy ▲ disclosure of conflict-of-interest management records ▲ disclosure of shareholder engagement activities ▲ preparation and disclosure of proxy voting policies ▲ preparation and disclosure of stewardship code implementation reports ▲ establishment of a fiduciary duty execution organization and staffing ▲ oversight of external managers.
Disclosure of implementation review results will also be strengthened. Previously, participating institutions individually posted their reports on their own websites, but going forward, a comprehensive review report will additionally be disclosed on the stewardship code website. The comprehensive report will also include the individual reports submitted by participating institutions.
Through this, the results of activities under the review criteria will be compared and disclosed so the implementation details of the stewardship code by each institutional investor can be more easily compared and checked. In addition, by identifying and disclosing exemplary cases and outstanding institutions, the plan will encourage voluntary participation by institutional investors.
The use of implementation review results will also be enhanced. The Financial Services Commission will share the results with pension funds and others to expand incentives for institutions that comply with the stewardship code, and will seek improvements at institutions with low compliance rates through one-on-one feedback.
In addition, the commission will set up a consultative body among pension funds participating in the stewardship code and support its operation to increase the utilization of stewardship code review results by pension funds.
Meanwhile, the Financial Services Commission will push to revise the stewardship code. Although the role of institutional investors has been growing, the code has not been revised since it was established in 2016, leading to a limited scope and targets.
Referring to revision cases in major countries, the government will consider reorganizing the stewardship code to expand its scope and targets. Specific revisions will be prepared and finalized by the Stewardship Code Advancement Committee, a committee of experts.
During the revision, ESG factors will be strengthened among considerations in performing fiduciary duties, and the implementation scope is expected to be broadened beyond exercising shareholder rights to the entire range of shareholder activities, including investment target selection and asset management. The assets covered will also be reviewed for expansion beyond domestic listed shares to include bonds, infrastructure, real estate, unlisted shares, and even overseas assets.