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Japan FSA Looks to Enhance Sustainability Disclosure Rules

Japan’s Financial Services Agency (FSA) has announced amendments to its sustainability and corporate governance disclosure requirements for listed companies. These changes apply to annual securities reports and securities registration statements for financial years ending on or after 31 March 2023. Additions include a section in securities reports for describing corporate initiatives related to sustainability, where ‘governance’ and ‘risk management’ are designated as mandatory items, and ‘strategy” and ‘indicators and targets’ as important items. The amendments offer clarification on forward-looking statements and liability for misstatements. In general, firms will not be held liable when forward-looking information differs from the actual results, if reasonable explanations were provided that have undergone appropriate internal examinations, and the content considered, assumptions and reasoning were also provided. Companies should also provide information on their human resource development policies, internal environment improvement policies, diversity policies, and indicators related to these policies. The gender-related disclosures include the “ratio of female managers”, the “ratio of male employees taking childcare leave”, and the “gender wage gap”, with related indicators needing to be described in securities reports. The amendments also require companies to disclose the activities of the Board of Directors, Nominating Committee, and Compensation Committee – including the frequency of meetings, specific deliberations, and attendance.  

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