September 24, 2021
Platform on Sustainable FinanceEuropean Commission
1049 Brussel, Belgium

Japanese Bankers Association

JBA comments on the Platform on Sustainable Finance'srecommendations for technical screening criteria for the EU taxonomy

preliminary

Dear Sirs/Madams:
The Japanese Bankers Association1 (JBA) appreciates the opportunity to provide our comments on the Platformon Sustainable Finance’s preliminary recommendations for the EU taxonomy 2 technical screening criteria
released on August 3, 2021.
We hope that our comments will contribute to further discussions at the Platform.
We welcome the extensive discussion in the EU and its proposal on the Technical Screening Criteria (hereafter“TSC”).
We understand that all four environmental objectives (namely “the sustainable use and protection of water andmarine resources,” “the transition to a circular economy,” “pollution prevention and control,” and “theprotection and restoration of biodiversity and ecosystem”) , as well as “climate change mitigation” and “climatechange adaptation,” are important to achieve a sustainable society.
Needless to say, these challenges need a global solution. Separate and fragmented implementation of multiple
frameworks in each jurisdiction will lead to the disruption to the initiatives of each corporation. Therefore, theEU is requested to cooperate with other jurisdictions to establish a global framework. We would like the EU toconsider the following comments.

Usability of the Taxonomy
The taxonomy should not be used for penalization purposes that may, for example, result in restricting financing
for non-taxonomy-eligible project, whereas the taxonomy should be used to foster and support taxonomyeligible projects. The EU should avoid creating a trend where only those in the green list are "good" and theothers that are not in the green list are "bad.”
Our intention is not to make a list, but to use a list. To use the list effectively, the list should be simple and easy
to understand. The proposed TSC is very complex and difficult to understand. It seems to be far from beinguser-friendly as it is too detailed to read through. The EU has already proposed a regulatory framework reflecting
EU Taxonomy, such as Pillar 2 or Pillar 3 of the Basel framework. Then, the more complex EU taxonomy is,
the harder it is to use. For example, it is realistically impossible to disclose the Green Asset Ratio (GAR) basedon the TSC.
In addition, it is unclear to which of the six environmental objectives an economic activity will ultimately beclassified. There could be a case where an activity is compliant with plural objectives of taxonomy. In this case,1

The Japanese Bankers Association is the leading trade association for banks, bank holding companies and bankers associations inJapan. As of September 24, 2021, JBA has 114 Full Members (banks), 3 Bank Holding Company Members (bank holding companies),
75 Associate Members (banks & bank holding companies), 58 Special Members (regionally-based bankers associations) and one SubAssociate Member for a total of 251 members. Several of its largest member banks are active participants in the EU financial markets.
2 https://ec.europa.eu/info/publications/210803-sustainable-finance-platform-technical-screening-criteria-taxonomy-report_en1

how would the activity be treated from the regulatory perspective, including the GAR disclosure? How to use
the taxonomy, or how to apply the six objectives to economic activities is completely unclear.
Furthermore, compared with activities such as reducing GHG emissions, it is difficult to set quantitative criteria
for activities providing a positive impact to the economy (e.g. enhancing diversity). We would like to request
the EU to establish a practical framework on how an activity is evaluated and determined as “taxonomycompliant.”

Future Development of the Taxonomy
Taxonomy should support not only purely green economic activities, but also economic activities aimed at thetransition to a low-carbon economy. For example, for emerging markets or developing countries with different
levels of economic maturities, it is important to include a wide range of activities that contribute both toimproving their current economic situations and fostering the transition to a low-carbon economy into theirtaxonomies.
From this perspective, we welcome the proposed “significant harm taxonomy” which contains the essence oftransition that has been proposed during the consultation on “Platform on Sustainable Finance's draft report on
taxonomy extension options linked to environmental objectives” (hereafter “extended taxonomy”). The JBA
submitted our response3 to the consultation on the extended taxonomy, and we request the inclusion of theessence of transition in this TSC.
A well-balanced framework should be developed for both developed and emerging countries by sharing auniversal and global principle. Such framework shall lead to accommodate a variety of taxonomies developedin a harmonized way to the extent possible, and these taxonomies should be introduced in ways that reflect theeconomic or energy-related situations of each country and jurisdiction.
An excessive and prescriptive taxonomy might lead to impede innovation. In order to create an environment for
fostering creativity and innovations of the private sector, we consider taxonomy to be a flexible framework andbe regularly reviewed to reflect current trends.
This TSC document consists of more than one thousand pages. We understand that all documents will be a partof a delegated act. For this, we request the EU to develop clear instructions and to allow enough time prior toimplementation of the delegated act.
(End)

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https://www.zenginkyo.or.jp/fileadmin/res/abstract/opinion/opinion330840.pdf

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