The FSA plans to establish a new framework for the certification of ESG-related funds. It is also exploring mandatory climate risk disclosures.
Japan’s Financial Services Agency (FSA) will step up scrutiny of funds claiming to be environmentally friendly and be on the lookout for “greenwashing”, Reuters reports.
Junichi Nakajima, who became Head of the FSA last month, said in an interview that one of the regulator’s priorities for the current year is to establish a framework to verify the eligibility of funds that relate to ESG issues.
Nakajima said the new verification system should be equivalent to international standards, to ensure reliability and comparability of ESG data asset managers disclose.
In Japan, companies that issue ESG-related funds typically obtain certification from private rating agencies such as Rating and Investment Information (R&I) and Japan Credit Rating Agency.
According to Nakajima, there should be a separate organisation that provides additional certification to add legitimacy and ensure customer protection.
Separately, NHK News has reported that the FSA is looking to set up a panel of experts in the coming months to explore ways to ensure businesses are more transparent about how climate change could threaten their operations or earnings.
The panel will also reportedly explore the introduction of regulations that would compel firms to state these risks on their financial statements.
In the recently revised corporate governance code, the FSA has introduced TCFD-style disclosures to enhance the quality of information available on the impact of climate change-related risks.
However, the code uses a ‘comply-or-explain’ approach and is not mandatory.