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  5. METI Formulates TCFD Guidance and Declares its Support for TCFD

METI Formulates TCFD Guidance and Declares its Support for TCFD

December 25, 2018

In August 2018, the Ministry of Economy, Trade and Industry (METI) launched a TCFD* Study Group on Implementing TCFD Recommendations for mobilizing green finance through proactive corporate disclosures. Since then, the study group has been advancing discussions on climate-related financial disclosures that TCFD requests. On December 25, 2018, the study group formulated the Guidance for Climate-related Financial Disclosure (TCFD Guidance), and METI hereby releases the guidance. Moreover, on December 25, 2018, METI declared its support for the TCFD Recommendations.

*Note: The term “TCFD” is an acronym for the Task Force on Climate-related Financial Disclosures.

1. Background

Since the adoption of the Paris Agreement by the 21st Session of the Conference of the Parties (COP 21) in 2015, global society has been facing dramatic changes in social and economic situations surrounding climate change. Looking at the fields of investments and finance, an increasing number of investors and other stakeholders have been requesting that companies disclose corporate information on ESG factors along with the expansion of ESG investments. In particular, in June 2017, the TCFD, an organization established by the Financial Stability Board (FSB) responding to the instruction of the G20 Finance Ministers and Central Bank Governors, released its recommendations (referred to as the “TCFD Recommendations”) and triggered by this release, a further growing number of investors and other stakeholders have been requesting that companies disclose corporate information on their efforts involving climate change.

In light of this situation, in August 2018, METI launched the TCFD Study Group on Implementing TCFD Recommendations for mobilizing green finance through proactive corporate disclosure, and since then, the study group has been conducting discussions on ideal approaches to corporate information disclosures in accordance with the TCFD Recommendations through dialogues between business operators and investors and other stakeholders inside and outside Japan.

On December 25, 2018, the study group held its third meeting, and based on the results of its past discussions, and aiming to encourage companies to effectively disclose the strong points of their proactive efforts for addressing climate change, it formulated its Guidance for Climate-related Financial Disclosures (TCFD Guidance). The TCFD Guidance aims to: provide information to explain approaches to information disclosures in accordance with the TCFD Recommendations; explain case examples as references; and provide industry-based viewpoints that companies should take to show their efforts.

Moreover, on December 25, 2018, METI declared its support for the TCFD Recommendations.

2. Outline of the TCFD Guidance

The TCFD Guidance aims to show companies the first steps that they should take in starting information disclosures in accordance with the TCFD Recommendations. The text consists of the four chapters below.

Chapter 1 (introduction)
This chapter explains the background to the formulation of the guidance, its purpose and the relationship between the TCFD Recommendations and the guidance.

Chapter 2 (explanation section)
This chapter aims to solve questions raised by companies and financial institutes on the TCFD Recommendations and provides opinions submitted by financial institutions, case examples of leading companies’ disclosures and explanations based on discussions held in formulating the TCFD Recommendations.

Chapter 3 (industry-based guidance section)
As the potential risks and opportunities that may be caused by climate change vary among industries, this chapter focuses on five major industries (the automobile, iron and steel, chemical, electrical and electronic and energy industries), explains favorable approaches to presenting corporate strategies and describes key points and viewpoints that METI recommends for companies in disclosing information.

Chapter 4 (conclusion)
This chapter explains approaches to advancement of future information disclosures in light of the details of the guidance, METI’s efforts for further improvement of the guidance, and other information.

3. Future directions

The guidance, as seen above, is the first step in the effort for promoting companies’ information disclosures related to climate change and enhancing the quality of company-investor dialogues. METI will discuss better details and utilization methods of the guidance, while ascertaining and analyzing outstanding case examples of companies’ information disclosures, investors’ assessment results concerning companies’ efforts, and other data and will revise the guidance.

Appendix

Division in Charge

Environmental Economy Office, Industrial Science and Technology Policy and Environment Bureau