Weekly ESG Controversies (July 15~21)

Key Takeaways

1. Increased Risk of 'Competitive Behavior':

• Following last week's 30.19%, this week also recorded the highest share at 26.1%.

• Kakao and HYBE continue to be embroiled in controversies over stock manipulation and management disputes, respectively.

  
  

2. Undersea Cable Technology Leak Dispute:

• Allegations of technology theft by Korea Electric Wire from LS Cable are gaining traction, intensifying the controversy.

  
  

3. Ongoing Business Ethic Issues:

• Deutsche Motors, Kakao, and Young Poong Paper remain under scrutiny for ongoing stock manipulation controversies.

4. Communication Service Disruptions and Infrastructure Vulnerability Concerns:

• Kakao faced its fourth service outage this year with KakaoTalk, raising further concerns under 'Systemic Risk Management'.

• Microsoft's cloud service outage impacted domestic companies such as Jeju Air and Pearl Abyss, highlighting vulnerabilities in communication infrastructure.

5. Emerging Climate Change Risks:

• Hyundai Marine & Fire Insurance has seen a threefold increase in storm and flood insurance payouts over the past ten years due to climate change, raising concerns about its exposure to climate-related risks.

1. Competitive Behavior (26.10%)

• KAKAO and HYBE jointly accounted for 51.74%, each embroiled in controversies over stock manipulation during the SM acquisition battle and a management rights dispute, respectively.

• F&F faced a large-scale lawsuit amounting to 370 billion won from a partner company in the UK.

2. Business Ethics (13.10%)

• TAIHAN ELECTRIC WIRE accounted for 15.58%, with the most significant controversy being the suspected technology leak between TAIHAN ELECTRIC WIRE and LS ELECTRIC.

• DEUTSCH MOTORS, YOUNGPOONG PAPER MFG, and KAKAO are all embroiled in controversies over stock manipulation and market price rigging.

3. Systemic Risk Management (8.93%)

• KAKAO has experienced its fourth service outage this year due to a connection failure in the PC version of KakaoTalk, raising concerns about its systemic stability.

• Microsoft's cloud service outage highlighted infrastructure vulnerabilities affecting domestic companies such as JEJUAIR, sparking significant debate.

4. Labor Practices (7.81%)

• SAMSUNG ELECTRONICS and HYUNDAI MOTOR are continually exposed to labor practice risks due to ongoing strikes.

• POSCO HOLDINGS and HANWHA OCEAN have faced controversies over disputes with labor unions, including accusations of union suppression.

5. Physical Impacts of Climate Change (5.53%)

• Concerns have been raised about HYUNDAI MARINE & FIRE INSURANCE's exposure to climate-related risks due to a significant increase in storm and flood insurance payouts attributed to climate change

This week's ESG analysis report emphasizes the continuation of controversies from last week. KAKAO remains at the center of the stock manipulation controversy related to the SM acquisition, and the technology leak dispute between LS ELECTRIC and KOREA ELECTRIC POWER has gained further attention. Additionally, the stock manipulation case involving DEUTSCH MOTORS and the ongoing labor strikes at SAMSUNG ELECTRONICS continue to be key topics of discussion. If these recurring controversies and disputes persist, companies may face operational disruptions and reputational damage, making it difficult to recover without swift and appropriate responses.

This week also highlights the continuity and interconnectivity of risk categories beyond individual company controversies. For example, following last week's mention of KT due to communication disruptions during severe weather in Baengnyeongdo, this week has seen issues related to the 'Physical Impact of Climate Change.' This includes HYUNDAI MARINE & FIRE INSURANCE’s increased storm and flood insurance payouts and ongoing communication disruptions involving KAKAO and Microsoft’s cloud services, underscoring broader systemic risks.

Companies must recognize the importance of managing interlinked risks in addition to recent isolated incidents. Minimizing exposure to these risks allows businesses to focus on operations, enhancing competitiveness and securing a stronger market position.

Disclaimer: This content was made with the help of AI. It may contain errors or inaccuracies, and should not be relied upon as a substitute for professional advice. The information contained in this article is not investment advice. FairLabs does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.

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