Japan Considers Decarbonization Disclosure Rules for Companies

The government is preparing rules to encourage companies to actively disclose their decarbonization strategies and measures to combat climate change, with the aim of encouraging them to change their behavior to achieve the goal of net-zero greenhouse gas emissions by 2050.

An expert panel set up by the Financial Services Agency will begin full-scale discussions within the month, aiming to reflect this in the government’s growth strategy to be compiled this summer.

Specifically, the panel will consider including the creation and publication of clear measures for decarbonization in the corporate governance code, which describes the principles of conduct for listed companies. Although the code is not compulsory, it does put a certain amount of pressure on companies because they require them to explain their reasons to investors and others if they do not comply.

There is also a proposal to require disclosure in the annual securities reports that large companies are required to submit. Since false statements in the annual reports are subject to penalties, this would effectively make it mandatory.

Britain, China and France are among the countries that have announced policies requiring companies to disclose their climate change measures. The United States is circumspect in this regard. In Japan, some companies are voluntarily disclosing information, but this is not widespread.

Among institutional investors, there is growing interest in corporate climate change measures. Some funds are basing investment decisions on companies’ stances regarding such measures. The government believes that the disclosure of information will make it easier to compare companies and attract more funds for firms that are proactive in their measures, which in turn will boost these decarbonization efforts.