TCFD, Physical Risks and Natural Capital
February 6, 2019
Satoshi IKEDA
Director, Office of International Affairs, Japan FSA
本資料の内容のうち意見にわたる部分は、あくまで作成者個人の見解であり、作成者の所属する組織の見解ではありません。

Climate Change and Financial Risks
Mark Carney
FSB Chair/BoE Governor

Climate change is the Tragedy of the Horizon. The
catastrophic impacts of climate change will be felt
beyond the traditional horizons of most actors imposing a cost on future generations thatthe current generation has no direct
incentive to fix. That means beyond the businesscycle, the political cycle, and the horizon oftechnocratic authorities.
Our role can be in developing the frameworks that
help the market itself to adjust efficiently. Any
efficient market reaction to climate change risks aswell as the technologies and policies to address
them must be founded on transparency ofinformation.

Our efforts will help smooth the transition prompted by these actions. With better
information and risk management as the foundations, a virtuous circle is being builtwith better understanding of tomorrow’s risks, better pricing for investors, better
decisions by policymakers and a smooth transition to a low carbon economy.
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TCFD Framework and Risks, Opportunities and Impact

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TCFD and Investment Chain The Corporate Governance Code of Japan encourages corporate disclosure of ESG-relatedinformation.
 The Stewardship Code of Japan encourages asset owners/managers to look into risks andopportunities of investee companies in terms of ESG.
Stewardship CodeContribution

Investment

Asset Owner

Beneficiary
Returns

Virtuous Cycle

Improvement inLong-term
Returns

Encouragement Asset Manager

Returns

Corporate Governance CodeInvestment
Constructive
dialogue

Returns

Climate-related financial disclosures
should be effectively utilized indialogues through this investment chain

Virtuous Cycle

Corporate

Deepening of thecorporate
governance reformfrom “form” to“substance”

Enhancement inLong-term
Corporate Value3

TCFD Implementation Path4

Challenge 1:
Fostering Long-termism

Corporate Value in Time Horizons
100％

Infinite years
3 years
5 years

10 years
20 years
30 years
40 years
50 years

24%
37%
60%

84%
93%
96%
98%
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Challenge 2：
Developing Risk Assessment Methodologies

Climate-related Financial Risks and Mapping of Actions
PhysicalRisksAcute Identification of channels throughwhich changes in natural
conditions stemming from climatechange will affect businesses.
 Measurement of the effects ofsuch changes (risk intelligence of
the insurance sector will help
quantify these effects.)

 The economic valuation of natural
The economic
valuation
ofcapital
will become a key tool
to naturalassess corporate value.
Integrated
capital will become a key tool to Assessment
Transition
Risksof Corporate Identificationof how the carbon
assess corporate
value.
Valuebudget restricts a particular
Chronic

Policy and LegalTechnology

MarketReputationcompany’s production of goods
and/or provision of services.
 Evaluation of how the carbon
budget impacts demands of aparticular good and/or service,and how it will affect the line ofbusiness.
 Understanding of such impact
channels (e.g., policy and legal,
technology, market, andreputation.

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