Japan’s FSA to Require Companies to Make Mandatory Climate Risk Disclosures

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  • Japan’s FSA to Require Companies to Make Mandatory Climate Risk Disclosures

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    Japanese Financial Services Agency’s (FSA) working group intended to introduce the mandatory climate-risk related disclosure, which may start with corporate securities reports for the fiscal year ended on March 31, 2022, according to Regulation Asia on September 6. The FSA also discussed the disclosure guidelines for sustainability and governance-related factors, such as human capital, diversity, and cross-shareholding. Once it is implemented, the new requirements would be subject to both listed companies and unlisted companies like bond issuers.

    The Japan Exchange Group (JPX) has driven its transition towards an ESG oriented exchange in recent years. Earlier this year, JPX revised the corporate governance code, which recommended that certain large-cap companies listed on the Tokyo Stock Exchange should disclose climate-related risks and opportunities based on the framework set by the Task Force on Climate-related Financial Disclosures (TCFD). The FSA is also planning to build a new framework to certificate ESG-related funds. Last month, it was reported to increase the scrutiny of funds that claim to be environmentally friendly and force tighter monitoring on greenwashing practices.

    Currently, Japanese companies disclose ESG related information and other non-financial factors on a voluntary basis, such as integrated reports and sustainability reports. The widely adopted frameworks by Japanese companies include the Global Reporting Initiative (GRI) Standards, the Sustainability Accounting Standards Board (SASB) standards, the International Integrated Reporting Council (IIRC) framework, and the recommendations of the TCFD. JPX also recommended those frameworks in a practical handbook for ESG disclosures published in March 2020. However, at the moment, there is not a united framework for voluntary disclosures by Japanese companies.

    Reference

    https://www.regulationasia.com/japan-proposes-mandatory-climate-risk-disclosures/

    https://member.fintech.global/2021/09/06/fsa-moves-forward-with-potential-new-climate-risk-disclosure-regulation-in-regtech/

    https://www.lexology.com/library/detail.aspx?g=d587462f-9fa5-4d57-a6e4-363eab44d136

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