Some of the world’s leading investors have called on Japan to address discrepancies between its proposed sustainability disclosure standards and those set by the ISSB.
According to feedback from the recent consultation by the Sustainability Standards Board of Japan (SSBJ), these inconsistencies could impede the understanding of financial impacts related to sustainability risks and opportunities, claims Environmental Finance.
Investors like Norges Bank Investment Management (NBIM), Legal & General Investment Management (LGIM), and the Glasgow Financial Alliance for Net Zero (GFANZ) have expressed concerns during the consultation, which concluded this week. They believe that the Japanese standards, while largely in alignment with the ISSB, still contain certain provisions that might confuse stakeholders.
These include different reporting periods for sustainability disclosures compared to financial reporting periods, as highlighted by NBIM, and the omission of important sections on impact materiality from the ISSB’s IFRS S1 standards as noted by the University Pension Plan of Ontario (UPP).
LGIM has advocated for the inclusion of these omitted sections, emphasizing the importance of providing a clear context for companies to align their reporting scope with ISSB requirements. They also recommended mandatory English disclosures for companies listed on the Tokyo Stock Exchange’s Prime Market to attract international capital and suggested that companies report their material climate-related positions.
Further, GFANZ urged SSBJ and national regulators to incorporate guidance from ISSB’s recent partnership with the Transition Plan Taskforce into Japan’s disclosure framework. Meanwhile, non-profit organisation ClientEarth called for the standards to require companies to align with a 1.5°C scenario and disclose credible transition plans.
On the other hand, T Rowe Price advocated for a more gradual implementation of these standards, especially for companies that are already engaged with SASB and TCFD disclosures. They also proposed a safe harbour for estimates related to Scope 3 GHG emissions to protect companies from potential legal issues arising from inaccurate disclosures.
This feedback reflects a broad consensus on the need for Japan to refine its sustainability reporting standards to better align with global practices and enhance transparency in how companies manage and report their sustainability-related activities.
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