South Korea’s transition finance is missing a puzzle piece… disclosure and verification frameworks are urgently needed
By Son Ji Yeon, Dailian, 27 April 2026
- Korea has transparency but lacks standards and governance
- UK integrates sector-specific plans with finance in a unified design
- “The need is not to reduce investment, but to design the transition”
South Korea has positioned transition finance as a national strategy, but experts say it lacks the infrastructure for disclosure and information needed to evaluate corporate transition plans.
As a result, investment decision-making has become more difficult, and the inflow of private capital as well as actual implementation is being delayed.
Analysts note that even the government’s guidelines remain voluntary, limiting their usefulness as a basis for investment decisions by financial institutions.
On 23 April in Yeosu, South Jeolla Province, Dailian met with Rob Patalano, Professor at LSE and Executive Director of CETEx on the sidelines of the seminar titled ‘Emerging synergies between national and corporate transition planning: Spotlight on Korea’, co-hosted by the TPI Centre, the Centre for Economic Transition Expertise (CETEx) both at the London School of Economics (LSE), and the Institute for Green Transformation (IGT).
Antonina Scheer, Deputy Director of Policy at the TPI Centre, participated via video call.
Rob Patalano is an international financial policy expert who previously led financial markets policy at the Bank of England and the OECD. He has also participated in international forums including the G20 Sustainable Finance Working Group and the Network for Greening the Financial System (NGFS). He currently oversees global transition finance strategy and policy cooperation at CETEx.
The TPI Centre, where Antonina Scheer serves as Deputy Director, provides climate transition assessment data used by investors managing approximately $87 trillion in assets worldwide, playing a key role in setting global investment benchmarks.
Both experts were direct in their diagnosis: South Korea’s transition finance has a sense of direction, but lacks the investment decision-making infrastructure needed to translate that direction into actual capital flows.
A missing puzzle piece… granularity and governance must be strengthened
Scheer described South Korea’s transition finance policy as being “like a puzzle with one piece missing.”
She emphasised that “the most important thing when setting and estimating climate budgets is transparency,” adding that “Korea does have a good level of transparency in what it’s spending towards climate goals relative to global standards, but on what specific funds will be allocated (climate budget tagging), there is a great opportunity for improvement.”
Current transition finance guidelines are designed on a voluntary basis for financial institutions, and neither disclosure standards nor external verification mechanisms have been clearly mandated.
This leaves financial institutions without an adequate information base to evaluate corporate transition plans from an investment perspective, creating a structural barrier to private capital inflows.
The fundamental cause of delays in transition finance implementation, the experts argued, is not a lack of funds, but rather the absence of information and standards that enable investment decisions.
“‘If the plan is unclear, we can’t invest’ … no structure to attract private capital”
LSE Professor and CETEx Executive Director Rob Patalano identified clarity as the cornerstone of transition finance.
“Private actors will only move if the government is clear about what it will do, which sectors it will invest in, how much, and how funds will be allocated,” he said. “Investors look at government plans to judge whether a project has a profit-generating structure. Only when that judgement is possible will pension funds, insurers, asset managers, and other private capital participate.”
While South Korea has set a policy direction, the transition roadmaps for individual industries and the corresponding financing structures have not been sufficiently detailed, he noted.
Patalano drew on the UK as a model for transition finance in practice. “The UK’s Transition Finance Council integrates sector-specific transition plans with financing plans in a unified design process, in cooperation with the government’s Net Zero Council, the equivalent of Korea’s Ministry of Climate, Energy and Environment,” he explained. “This raises confidence in government policy and the national NDC and allows the private sector to use it as a basis for investment and business planning.”
He also highlighted the importance of clear policy signals to markets: “The UK, as a G20 nation, is working to demonstrate that it is building this kind of transition finance framework.”
Patalano added that “if South Korea establishes such a structure, it will be well-positioned to show G20 nations that it has made genuine progress in transition finance, and private capital participation will become much more active.” Given that South Korea is set to chair the G20 Summit in 2028, the remarks carry particular weight regarding the urgency of developing a more complete transition finance framework.
“Gaps in disclosure and verification… risk of disadvantage for Korean companies”
Gaps were also identified in the ESG disclosure framework, with transition plan disclosure and Scope 3 (supply chain emissions) data emerging as key risk areas.
Scheer noted: “In our responses to the public consultation of the Korean government, including the Financial Services Commission, we confirmed that there are notable gaps in transition plan disclosure and on Scope 3 in particular.”
She explained that “from an investor’s perspective, Scope 3 emissions are extremely significant, investment decisions are made based on how a company manages its total emissions and what level of carbon exposure exists in its supply chain.”
“If this information is not provided in a timely manner, investment judgements become difficult, and Korean companies may end up at a disadvantage as a result,” she warned.
She further stressed that “for fossil fuel-based industries and automobile manufacturers, supply chain emissions account for a large share of total emissions, making Scope 3 management a central element of transition plans. Without it, it is difficult to assess the genuine level of transition.”
She also noted that “when companies set targets, they must disclose how they plan to achieve them. Transition plan disclosure is directly linked to corporate credibility.”
“For high-emission industries, the key is not to divest, but to design the transition”
The experts also argued that the essence of transition finance lies not in simply reducing investment in high-emission industries, but in designing how those industries will transition.
Reducing portfolio exposure to high-emission sectors may lower reported emissions, but is unlikely to translate into real-world industrial transformation.
The true transition finance, they said, lies in capital allocation and industrial strategy that presuppose transition, in other words, in designing sector-specific transition plans, technology investments and financial structures.
Scheer explained: “Transition finance is an opportunity for investors, governments and companies alike to rethink what transition away from high-emission industries actually means. Simply reducing investment in those industries due to decarbonisation goals has its limits.” She added: “At the portfolio level, reducing exposure to high-emission sectors may lower reported emissions, but it is unlikely to lead to actual industrial transformation. What matters is a forward-looking approach, not simple divestiture, but designing how the transition will happen.”
Concretely, she outlined three requirements: science-based target setting; benchmarking against the current baseline; and alignment with sector-specific plans.
“It is necessary to set targets, then verify their feasibility and scientific validity against current levels, and ensure alignment of sector plans with the 1.5°C goal,” she said. “On that basis, concrete R&D investments (capex) and implementation plans must also be presented.”
Patalano framed industrial transition not as an environmental issue but as a matter of corporate competitiveness.
“For carbon-intensive industries like steel, it is worth setting aside the external pressures of the green transition for a moment and first asking: from a pure competitiveness standpoint, what happens if you don’t innovate in the next five to ten years?” he said.
He also pointed to the shifting global competitive landscape: “Chinese and European companies are already investing in hydrogen and advanced technologies, and over the long term, this will lower their costs and improve their competitiveness. Korean companies need to make the same judgement.”
“Even setting aside environmental factors, companies need to ask what the rational choice is from a competitiveness perspective,” he added. “Without innovation, competitiveness will decline, government burdens will increase, and there will be negative impacts on shareholders and society as a whole.”
He concluded: “When you factor in corporate efficiency, competitiveness and resilience to energy crises, transition becomes an unavoidable choice, especially for carbon-intensive industries, where technological innovation is likely the most rational path forward.”
This article was originally published in Korean by Dailian (데일리안) on 27 April 2026 . This is an unofficial translation published with permission from Dailian. In the event of any discrepancy, the original Korean text shall prevail.