This is part 13 of a series of educational posts from the IFoA’s Climate Change Disclosures Working Party about climate reporting topics. Here we focus on Japan: current practices and a brief overview of things to come.
Japan is one of the top 5 greenhouse gas emitters, contributing to about 2.6% of the total global share of emissions in 20181.
In early 2023, the Japanese government adopted the new Green Transformation (GX) Basic Policy, which is a major initiative to move from fossil energy to ‘clean’ energy. The policy is Japan’s new decarbonisation strategy, and aims to generate about 150 trillion yen (about one trillion US dollars) of public and private investment over the next 10 years. Some targets include new houses and building to be zero emission by 2030 and 30% reduction in CO2 emissions in the steel industry by 2030.
The policy comprises of 2 major parts. These are:
On saying this, the policy has drawn major criticism. For example, part of the aims of the policy is to restart its focus on nuclear power, targeting about 20% of the overall country’s power production by 2030, as well promoting ammonia / hydrogen co-firing by 2024.
Japan has the largest number of companies pledged to disclosing in line with Task Force on Climate-related Financial Disclosures (TCFD) requirements. 1,158 companies headquartered in Japan have pledged to TCFD disclosure requirements out of about 4,075 supporters of TCFD globally.
Japan’s Corporate Governance Code asks listed companies to address sustainability issues, including climate change.
In November 2022, the Financial Services Agency (FSA) in Japan proposed changes to the Annual Securities Report, requiring an additional section detailing sustainability, including climate change. This would be applicable from 20232. Currently, a company can choose whether to adopt this code or explain why they have not taken part3.
In 2022, the Tokyo Stock Exchange required certain companies to adhere to TCFD disclosure requirements3.
Currently, there are no direct, mandatory requirements for actuaries. However, there is recent voluntary collaboration between insurers as part of an initiative by the Life Insurance Association of Japan. Here insurers are looking at increased disclosure requirements and embracing TCFD requirements.
Ongoing changes from the FSA, which is looking to move away from voluntary disclosure to mandatory.
Below is a list of websites we hope you find useful:
Survey of TCFD Disclosure in Japan (FY2022) - Japan Exchange Group, Inc (jpx.co.jp)
JPX Publishes "Survey of TCFD Disclosure in Japan (FY2022)" - Japan Exchange Group, Inc (jpx.co.jp)
Main website on carbon neutrality
What are your thoughts on the points raised in this article?
We would love to hear your views in the comments on the IFoA's Sustainability Finance Community LinkedIn page.
To find out more, visit: Sustainability: research working parties
[1] State of the climate - UN (unep.org)
[2] Survey of TCFD Disclosure in Japan (FY2022) - Japan Exchange Group, Inc (jpx.co.jp)
[3] Japan's Mandatory Climate Risk Disclosures - R.Oliver (sinai.com)
The views expressed in this post are those of the individual authors, and not necessarily those of the Institute and Faculty of Actuaries or those of their employers. Information within this post is correct as at the date of writing (i.e. end of July 2023). Hence, there may be subsequent updates which are not reflected. Any reader should still reference the underlying legislation and standard, and should there be any conflict, the underlying information in the relevant standard or legislation supersedes any information presented in this post.