Tokio Marine and Nichido Fire Insurance, Japan’s major insurance provider, is set to launch a new service to calculate companies’ financial risks from environmental regulations abroad, as reported by Nikkei on October 19. Tokio Marine will partner with UK risk analytics firm Risilience, which specializes in climate-specific risk assessment. The partnership aims to develop an advanced risk model that not only assesses physical risks from climate-related natural disasters such as floods and fires, but also financial implications from local policies, such as carbon tax and changes in fuel subsidies. In addition, the model will consider sales implications from climate-related social movements such as environmental boycotts. The model will conduct several calculations based on different scenarios, such as varying decarbonization pathways of the target country within the next five years. The service is expected to launch officially in fiscal 2022.

Japan’s Financial Services Agency (FSA) has introduced climate disclosures into Japan’s corporate governance code since June 2021, based on a “comply-or-explain” model. In early October, the FSA proposed to make climate-related risk disclosures mandatory for large public companies beginning in April 2022, then expand disclosure requirements to cover all companies that submit annual securities reports after fiscal 2023. Such disclosures will be in line with the Task Force on Climate-related Financial Disclosures (TCFD), an international standard established by the Financial Stability Board (FSB). Globally, demand for climate-related risk prediction services is growing. TCFD has reported a dramatic increase in support since 2019. As of October 2021, TCFD-supporting organizations have reached a combined market capital of USD25tr.

Sources:

https://asia.nikkei.com/Spotlight/Environment/Climate-Change/Tokio-Marine-to-help-companies-analyze-decarbonization-costs

https://www.tokiomarine-nichido.co.jp/company/release/pdf/211019_01.pdf

https://www.investmentweek.co.uk/news/4038723/tcfd-increase-climate-disclosure

https://asia.nikkei.com/Spotlight/Environment/Climate-Change/Japan-to-require-4-000-companies-to-disclose-climate-risks

https://www.esginvestor.net/japans-fsa-to-mandate-climate-disclosures-from-april-2022/