Climate disclosures to become mandatory in Japan from April 2022

Japan’s Financial Services Agency (FSA) has revealed it intends to make climate disclosures mandatory for large Japanese companies from April next year.

According to Regulation Asia, companies listed on the Tokyo Stock Exchanges ‘Prime’ market will be required to comply with mandatory climate risk disclosure requirements aligned with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations first.

The TCFD recommendations structure disclosures around the areas of governance, strategy, risk management, and metrics and targets. The disclosure contain information about estimates of the negative impacts of climate change of firms, greenhouse gas emissions, the measures how the companies are managing their risks and the methodologies companies use to determine risks associated with climate change.

The FSA has already previously introduced climate disclosures into Japan’s corporate governance code since June this year. 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 will replace its First and Second sections, the tech-focused JASDAQ and the ‘Mothers’ market for startups, in order to introduce three new segments – Prime, Standard and Growth.

Nikkei has claimed that by fiscal 2023, the FSA will expand the disclosure requirements to cover all businesses that submit annual securities reports.

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