Leading global investors have urged Japan to address discrepancies between its proposed sustainability disclosure standards and those set by the International Sustainability Standards Board (ISSB). According to Environmental Finance, feedback from a recent consultation by the Sustainability Standards Board of Japan (SSBJ) highlighted that these inconsistencies could hinder the understanding of financial impacts related to sustainability risks and opportunities. 

Prominent investors such as Norges Bank Investment Management (NBIM), Legal & General Investment Management (LGIM), and the Glasgow Financial Alliance for Net Zero (GFANZ) have voiced concerns during the consultation. While Japan’s standards largely align with the ISSB, certain provisions might confuse stakeholders. For instance, NBIM pointed out the differing reporting periods for sustainability and financial disclosures, and the University Pension Plan of Ontario (UPP) noted the omission of key sections on impact materiality from the ISSB’s IFRS S1 standards. 

LGIM emphasized the need for including these omitted sections to provide a clear context for companies to align their reporting 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. 

GFANZ urged the SSBJ and national regulators to incorporate guidance from the ISSB’s partnership with the Transition Plan Taskforce into Japan’s disclosure framework. Non-profit organization ClientEarth called for the standards to require companies to align with a 1.5°C scenario and disclose credible transition plans. 

Conversely, T Rowe Price advocated for a more gradual implementation of these standards, especially for companies already engaged with SASB and TCFD disclosures. They 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 underscores a broad consensus on the need for Japan to refine its sustainability reporting standards to better align with global practices. Enhancing transparency in how companies manage and report their sustainability-related activities is crucial for achieving consistency and clarity in ESG disclosures. 

By addressing these discrepancies, Japan can ensure its sustainability standards are in line with international expectations, fostering greater confidence among global investors and stakeholders. 

Sources: 

https://fintech.global/2024/08/05/investors-urge-japan-to-harmonise-disclosure-standards-with-global-issb-norms/ 

https://www.responsible-investor.com/gri-urges-japan-to-adopt-double-materiality-approach-in-sustainability-standards/