Japan’s FSA to Mandate Climate Disclosures from April 2022

Companies listed on the TSE’s ‘Prime’ market will be required to comply with mandatory climate risk disclosure requirements first.

Japan’s Financial Services Agency (FSA) is planning to make it mandatory for large companies to make climate-related disclosures from as early as April next year.

The FSA has already introduced climate disclosures into Japan’s corporate governance code since June, however the code is not legally binding and the disclosures were introduced on a ‘comply-or-explain’ basis.

In April 2022, the Tokyo Stock Exchange (TSE) will be replacing its First and Second sections, the ‘Mothers’ market for startups, and the tech-focused JASDAQ – with three new segments: Prime, Standard and Growth.

According to Nikkei, companies listed on the Prime market will be required to comply with disclosure requirements aligned with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations starting in April 2022.

The TCFD recommendations structure disclosures around four thematic areas – governance, strategy, risk management, and metrics and targets. The disclosures include information about greenhouse gas emissions, estimates of the negative impacts of climate change on businesses, the methodologies companies use to determine the risks associated with climate change, and the measures how they are managing those risks.

After fiscal 2023, the FSA will expand the disclosure requirements to cover all companies that submit annual securities reports, Nikkei says.

Last month, ESG Investor reported that regulators were planning to impose mandatory climate risk-related disclosure requirements that would apply not only to listed companies, but also to unlisted companies such as those which submit securities filings for bond issuance.

Moody’s Investors Service had said mandatory disclosures would be a positive development, allowing for stronger enforceability than the ‘comply or explain’ approach, while also improving transparency and data availability around climate-related risks.

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