Climate disclosure coverage
As South Korea's roadmap for mandatory sustainability disclosure comes into view, interest in mandatory climate disclosure is increasing. With companies publishing their sustainability reports around June each year, this year's reports could provide an indication of how prepared companies are for the Korea Sustainability Standards Board's (KSSB) climate disclosure standards, which will form the basis for mandatory disclosure.
Using its internally developed AI-based climate disclosure alignment analysis tool, Impact On assesses how closely companies subject to mandatory disclosure align with the KSSB climate disclosure standards and examines their current disclosures and areas requiring improvement.
In its 2026 sustainability report, SK quantified the additional operating costs that carbon regulation and extreme heat could impose on its data center. Under a scenario involving strong carbon regulation in 2040, it estimated that additional electricity costs at the Daedeok data center would reach 793 million won annually.
Alongside the financial effects of climate risks, SK disclosed investment and revenue targets for clean technology, actual climate response spending, and arrangements linking internal carbon pricing and executive compensation. Renewable electricity accounted for 34.1% of electricity procured for its own operations in 2025, exceeding that year's target of 30%.
However, the quantitative analysis of the financial effects of climate risks focused on a single facility, the Daedeok data center. Although investments account for 85.1% of SK's Scope 3 emissions, the disclosure did not provide specific monetary estimates of how climate risks at investment subsidiaries could affect SK's asset values and financial performance. The current shares of assets and revenue attributable to clean technology businesses and the proportion of executive compensation linked to climate performance were also not identified.
The report also included environmental performance data for six listed subsidiaries, including SK Innovation and SK Telecom.
Key point 1: Stronger carbon regulation could add 793 million won to annual data center electricity costs in 2040
SK identified rising electricity prices resulting from stronger carbon regulation as a major transition risk. The Daedeok data center uses approximately 34,000 MWh of electricity annually, leaving it exposed to substantial costs from electricity price increases.
SK does not currently receive direct emissions allowance allocations under the Korean Emissions Trading System (K-ETS), but is subject to the greenhouse gas and energy target management system. However, it assessed that data center operating costs could increase if the costs generators incur from purchasing emissions allowances at auction are reflected in electricity prices.
Additional annual electricity costs in 2040 were estimated at 340 million won under the IEA STEPS scenario, which reflects current policies, and 793 million won under the IEA NZE 2050 scenario, which assumes strong carbon regulation. The latter estimate was 2.3 times higher.
SK separately analyzed electricity demand growth associated with the expansion of AI. Assuming renewable electricity accounts for 60% of procurement in 2030, it estimated additional annual electricity procurement costs of 1.4 billion to 4.6 billion won, depending on the extent of AI-driven demand growth.
Extreme heat emerged as the largest physical risk factor. Using CLIMADA, a climate risk analysis model developed at ETH Zurich, SK analyzed expected annual losses relative to asset value for seven risk factors. Under the high-emissions SSP5-8.5 scenario, the expected loss rate attributable to extreme heat increased from 3.26% in 2030 to 5.86% in 2050. Separately estimated additional cooling energy costs were projected to reach 640 million won annually in 2050. SK also disclosed that the carrying amount of the data center's buildings and structures was 7.5 billion won, approximately 2.0% of its property, plant and equipment on a separate-company basis.
SK identified improvements in cooling equipment efficiency, the operation of emergency generators and uninterruptible power supplies (UPS), and flood protection facilities as response measures.
Key point 2: Scope 3 emissions rise 2.6%, with investments accounting for 85.1%, but financial risk analysis remains limited
SK's consolidated Scope 1 emissions in 2025 were approximately 19.6 million tonnes, up from approximately 9.89 million tonnes in 2024, an increase of 98.2%. This reflected an expanded reporting boundary as SK Innovation newly incorporated data from SK Innovation E&S. Scope 1 emissions intensity per 1 billion won in revenue increased 89.3% over the same period, from 98.1 tonnes to 185.7 tonnes.
Scope 2 emissions, by contrast, declined. Location-based emissions fell 9.2%, from 3.91 million tonnes in 2024 to 3.55 million tonnes in 2025. Market-based emissions, which reflect measures such as renewable electricity procurement, declined 0.4%, from 3.42 million tonnes to 3.40 million tonnes.
Scope 3 emissions were reported on a separate-company basis. Scope 3 emissions from SK's own business and value chain increased 2.6%, from 14.21 million tonnes in 2024 to 14.59 million tonnes in 2025. In particular, emissions from the use of sold products, Category 11, increased approximately 16.7-fold, from 111,791 tonnes in 2024 to 1,871,023 tonnes in 2025. Emissions from capital goods, Category 2, also increased substantially, from 351 tonnes to 163,731 tonnes.
SK explained that it sold the Pangyo data center in June 2025 and, beginning in 2025, moved the associated emissions previously included in Scope 1 and Scope 2 into the Scope 3 investments category. However, it did not separately explain the sharp increases in Scope 3 Category 2 and Category 11 emissions.
Key point 3: Cumulative clean energy transition investment target of 14 trillion won by 2030, with 2.112 billion won allocated to climate responses in 2025
SK divided its clean technology investment areas into four categories: the clean energy transition, carbon dioxide (CO₂) treatment, electric vehicle materials and infrastructure, and digital products and services for climate responses.
For the clean energy transition, SK set targets of 14 trillion won in cumulative investment by 2030, revenue of 10.8 trillion won, and earnings before interest, taxes, depreciation and amortization (EBITDA) of 2.6 trillion won. For electric vehicle materials and infrastructure, it set targets of 1 trillion won in cumulative investment, revenue of 2.9 trillion won, and EBITDA of 500 billion won. It also disclosed company-specific investment amounts for businesses including small modular reactor (SMR) designer TerraPower and ultrafast electric vehicle charger manufacturer SK Signet.
Investment to improve energy efficiency also took place at SK's own data center. SK disclosed that it allocated a total of 2.112 billion won in 2025, including 593 million won for Green Premium purchases and 1.519 billion won to replace cooling equipment at the Daedeok data center with high-efficiency equipment.
SK also quantified the expected benefits of equipment improvements. It assessed that replacing aging cooling equipment and improving the data center infrastructure management system (DCIM) could save 2,300 to 5,400 MWh of electricity annually, equivalent to approximately 400 million to 900 million won. It estimated that adding AI-based server operation optimization could save a further approximately 8,600 MWh and 1.4 billion won annually.
However, SK did not disclose the current financial share of its businesses associated with climate opportunities. Its opportunity assessment procedures also require improvement. Rather than presenting separate criteria for identifying and assessing opportunities, SK only described them within its risk management procedures.
Key point 4: Internal carbon price of 11,066 won and climate-linked KPI weighting of 5%, but actual compensation amounts and investment effects remain undisclosed
SK aims to reduce Scope 1 and Scope 2 emissions from its own operations by 60% by 2030 compared with 2023 and achieve net zero in 2040. It plans to reduce Scope 3 emissions by 90% by 2050 compared with 2021. The group's environmental business committee, chaired by SK's CEO, reviews each subsidiary's reduction plans and implementation annually. Each subsidiary incorporates emissions reduction targets into its key performance indicators (KPIs).
Implementation of reduction targets is also linked to investment decisions. SK applies an internal carbon price to new investments and portfolio management, covering not only its own emissions but also its supply chain and investment portfolio.
The internal carbon price in 2025 was 11,066 won per tonne. SK updates the price annually to reflect the previous year's closing emissions allowance price and international carbon price projections. When assessing a new data center's business feasibility, it incorporated the cost calculated by multiplying expected emissions by the internal carbon price into profit-and-loss simulations.
Climate targets were also linked to employee and executive compensation. SK's 2025 KPIs included strengthening net-zero implementation, weighted at 3%, and developing a strategy for consolidated sustainability and climate disclosure, weighted at 2%. Achievement against these KPIs is reflected in performance bonuses for all employees and executives, including the CEO.
However, although SK disclosed the weighting of each KPI, it did not specify the amount or proportion of executive compensation for the reporting period linked to climate performance.
To see SK's KSSB climate disclosure alignment score, view the analysis report.
Impact On's paid corporate subscribers can view the report free of charge.
Original Korean article: Impact On
English brief by Korea Wind Intelligence, koreawindintel.com
