May 28, 2021
European Banking Authority
Tour Europlaza, 20 avenue André Prothin,
CS 30154, 92927 Paris La Défense CEDEX, France
Japanese Bankers Association

JBA comments on the EBA Consultation Paper: “Draft Implementing Standards onprudential disclosures on ESG risks in accordance with Article 449a CRR”
Dear Sirs/Madams:
The Japanese Bankers Association 1 (JBA) appreciates the opportunity to provide our comments to theconsultation paper on the European Banking Authority’s (EBA) Consultation Paper: “Draft ImplementingStandards on prudential disclosures on ESG risks in accordance with Article 449a CRR” (hereafter “theconsultation paper”) on March 1, 2021. It is one of the most prioritized topics to enhance the disclosure about
the factors of ESG risks, including climate change. The JBA welcomes the consultation paper stimulates theglobal discussion about enhancing disclosure framework.

General Comments
We, as non-EU financial institutions operating in the EU, have provided many comments to sustainabilityrelated consultations held in the EU. Our key comments have been as below;
・ We appreciate the EU leading the climate-related policy debate, however, we often hear the EU securing
the strategic position by through the ”first mover advantage”, but we urge the EU to take a harmonizedapproach, by working with other jurisdictions, to achieve the outcome that the “responsible” EU is aimingfor. Climate change is a global challenge and requires a global solution. If fragmented framework is to be
implemented to address climate change, it would disrupt private sector’s initiatives to deal with thechallenge. The EU should seek the way to cooperate with other jurisdictions to establish the global
framework that works for all actors involved, rather than an “establish first and then export” approach that
the EU seems to be taking.
・ The EU Taxonomy and EU regulations referring to it, including the consultation paper, are not directly
applied to entities established outside the EU. However, given many firms are operating in the EU due toits strategic importance, these firms will be required to follow the EU Taxonomy (for example, if entering
into transactions with EU banks). Thus, the alignment with global framework is indispensable, if not, theEU may lose its competitive advantage as a market for international firms. The EU should not rush to theconclusion, but it should take time to secure consistency with the global framework, such as the BaselCommittee of Banking Supervision (BCBS), IFRS, and TCFD.
・ The European Commission explained the EU Taxonomy, as well as the proposed templates in the
consultation paper, being a tool to facilitate “transition” to a sustainable economy. However, the EU
Taxonomy Delegated Acts seem to only allow “green” activities that will meet the threshold set forth, andall other activities are categorized as “unsustainable”. The fact that “transitional” activities and efforts are
not captured in the EU Taxonomy would hamper the private sector to engage in finding the pathway tosustainable future, which will undermine the entire effort to achieve the Paris Agreement.
・ An excessive and prescriptive taxonomy framework might impede innovation. In order to create anenvironment to foster creativity and innovations of private sector, a taxonomy should be flexible and be
regularly reviewed to reflect the latest development.
・ We understand the EU Taxonomy has been developed to avoid “green washing”, however, using the EU
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The Japanese Bankers Association is the leading trade association for banks, bank holding companies and bankers associations inJapan. As of May 28, 2021, The JBA has 114 Full Members (banks), 3 Bank Holding Company Members (bank holding companies), 74
Associate Members (banks & bank holding companies), 58 Special Members (regionally-based bankers associations) and one SubAssociate Member for a total of 250 members. Several of its largest member banks are active participants in the EU financial markets.

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Taxonomy is being referred as a tool for risk management and disclosure, which may mislead investors
across the regions (especially those outside of the EU). For example, there would be a case when one
activity categorized as “non-sustainable” by the EU Taxonomy may be more appropriate to be categorized
as “sustainable” in other jurisdictions (e.g. in developing nations). Technical screening criteria should not
be “one size fits all” for this very reason. Instead, we believe that activities that align with each country’s
NDC should be viewed as “sustainable” or “enabling transition” to reorient capital to these areas (andimplement a mechanism to ensure “green wash” is avoided).
Under our comments above, the JBA regrets the EBA has issued the consultation paper before the global
discussion is progressed. The fundamental purpose of disclosure is to enhance the transparency of corporates tohelp investors understand corporates and benefits them. The JBA expects future detailed discussions to makethe Implementing Standards effective to achieve the purpose, reflecting the global discussion aboutsustainability disclosures.
In addition to comments to specific questions, the JBA would like to provide high-level comments as below;

Discussions going forward
Referring to the CRR2, after this consultation, the EBA is tasked to continue working and finalize the report by
the end of 2021. The phased-in approach is proposed until June 2024 in the consultation paper. In addition, theEBA will consider how to incorporate the ESG factors in the Pillar 1 requirements, as well as in the Pillar 2
requirements, which the JBA already submitted the response letter to the discussion paper. The JBA requests
the EBA to continue engaging with the industry periodically during their work, like the ongoing consultation,
as well as before finalizing the report. The JBA believes the EBA should secure transparency and the inputs arereflected in the final output.
International setting bodies like TCFD, BCBS and IFRS are continuing the discussion of ESG disclosure
framework establishment, as well as regional regulators. We strongly suggest the EBA to cooperate with themand discussion should be aligned. The EBA should not take the approach to establish too detailed and nonpractical requirements only within the EU.

Scope of application or extension to third-country banks of supervision in EU
The JBA understands the scope of direct application is aligned with CRR Article 449a and Article 4 (146),
which specify the requirements on prudential disclosures on ESG risks, and apply to large institutions whichhave issued securities that are admitted to trading on a regulated market of any Member State. The definition oflarge institutions is also specified in the CRR, in Article 4 (146). As the third-country institutions, the JBA
understands that most Japanese banks are generally excluded from the scope of direct application, however, theJBA requests the clarification of scope of application including the possibility of direct application to thirdcountry institutions.
As the consultation paper says, we strongly request the proportionate approach, based on the size of theinstitutions’ balance sheet/truncations. For example, proportionality should be applied to disclosure scope,
granularity or frequency. The JBA also would like to request the proportionate approach will be applied tosmaller institutions, which are out of scope of direct application mentioned above, if the implementation
standard would be referred to in any cases, such as the supervisory communication.
It is extremely important for the EU policy makers to consider that if and when our home regulator (or othermajor host regulators in other jurisdictions where Japanese banks operate) sets forth an ESG related disclosure
framework, Japanese banks would be required to comply with those expectations/requirements. However, if
there are differences and/or inconsistencies between such framework and then those deriving from thisconsultation paper, the compliance exercise would unavoidably be inefficient and possibly ineffective to comply
with multiple requirements. To avoid such inefficiencies and additional inconsistency in requirements, we
encourage the EU policy makers to incorporate the framework of equivalency/deference with respect to the third
country regulatory requirements, based on the communication and dialogues with regulators in otherjurisdictions.

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Importance of globally standardized definitions/Securing the flexibility
The JBA understands the implementation standard has been proposed aligning with existing frameworks, suchas the EU Taxonomy or TCFD recommendation.
Standardized definitions are useful but need to be flexible enough to foster innovations and facilitate transition.
Limiting the flexibility of definitions would impede the future development of risk management framework at
each financial institution. Considering banks business model and proportionality, a flexible approach should beallowed.

Establishment of practical framework
The JBA generally supports EBA’s basic approach to establish the common template as a useful tool to all
stakeholders.
However, the EBA should secure the alignment with the discussion in the other relevant stakeholders such as
TCFD, BCBS or IFRS, defining what information should be included in the template. In addition, the EBA
should secure the consistency with current banking global business and practice. Requiring too detailed
disclosure will not benefit stakeholders/investors.
Disclosure is the tool of enhancing financial institutions’ transparency, but not the tool of penalty. For example,
to disclose specific firm by name as the “carbon-intensive” firm will be definitely the penalty of that firm. It isalso concerning as the confidentiality perspective. We cannot achieve the goal from this treatment.
Also, enhancement of disclosure from corporate sector is mandatory to enhance financial institutions’ disclosure.
This shows when implementing any kinds of disclosure requirements to financial institutions, the EBA should
secure the appropriate transition period after the implementation of revised CSRD, which requires corporates todisclose ESG information. At least, to enhance the disclosure from financial institutions, guidelines to calculate
financed emission should be useful, in addition to templates proposed in the consultation paper. Currently thecalculation method has not been provided, so this would be the lack of consistency among financial institutions,which would confuse investors.
To elaborate the EBA’s understanding in this consultation paper to be practical and usable, we request the EBA
to continue discussions and engagement with various stakeholders not only in EU but also globally.
(End)

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May 28, 2021
[Specific Comments]
Question
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Are the instructions, tables and templates clear to the 
respondents?

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The proposal includes risks that are still not well defined yet (e.g. Social Risk in Table2,
Governance Risk in Table3 etc.), so these Templates/Tables do not necessarily enhance
the comparability. While the proposal is very granular that it puts a heavy burden on
institutions, it does not seem to benefit investors/stakeholders by providing them withimproved transparency, thus we must conclude that the effectiveness is rather low
despite the load. We would like to ask the EBA to reconsider the “Right-Balance” forinstitutions.
It may not be reader-friendly to contain many abbreviations in the Template. We would
suggest that the EBA create List of Abbreviations in the Instruction Paper.
There are some obscure descriptions in the Templates that we are not sure whether weare instructed to fill in the Amount or the Narrative. (i.e.Template 3 Column K)
Instruction P.14: Those institutions that are already estimating information on the
carbon footprint and scope 3 emissions of their collaterals, shall disclose thisinformation in column K, and shall explain in the narrative accompanying the template
the methodology and sources of data used.
The purpose of disclosure itself is to enhance the transparency and to fill theinformation asymmetry between investors/stakeholders and companies. Based on thisunderstanding, the JBA is sure disclosure requirement should be simpler rather than

current proposed templates.
Third country institutions would be required to follow double/triple standards which
create additional burden for compliance exercise.

Do the respondents identify any discrepancies 
between these tables, templates and instructions andThere is a discrepancy between Template 1 and Instruction as below. We would likethe EBA to clarify it.
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the disclosure requirements set out in the underlying
regulation?

Template 1 Column f: Of which exposures towards companies exluded from EU Paris-aligned
Benchmarks in accordance with points (b) to (g) of Article 12.1 and with Article 12.2 of Climate
Benchmark Standards Regulation.
Instruction P.11: The gross carrying amount of those exposures towards counterparties that are
excluded from the EU Paris-aligned Benchmarks as specified in Article 12.1, points (d) to (g) and
Article 12.2 of Commission Delegated Regulation (EU) 2020/18188.

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Do the respondents agree that the new draft ITS fits the purpose of the underlying regulation?

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Do the respondents agree that the tables with 
qualitative information proposed capture properly
the information that institutions should provide?
The Liability Risk/liability transmission channel is a concept to be included in“Transition Risk” in TCFD recommendation. Separating them and deviating from
Global Standards might cause fragmentation.
Table 1~3 are free format, so more detailed instruction about what information and towhat extent should be included is needed.

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Regarding template 1 – ‘Banking book - Climate change transition risk: Quality of exposures bysector’, do the respondents agree with the proposals
in terms of sector and subsector classification
included in the rows of the template and theindentification of the most exposed sectors in columns f to k and p to u?

The sectorial management that is aligned with the BAU of institutions is preferable. It
will be Double-Standard management, only to meet the disclosure requirements, if thedisclosure of sectors based on the internal definition is not accepted. We concern thatthe management that does not align with the BAU will not contribute to theenhancement of the Risk Management Framework.
While we recognize that the comparability of disclosure is essential, the room fordiscretion of institutions should be allowed in cases when it is deemed to be alignedwith the Global Standard (e.g. GICS, SICS, NAICS etc.).
At the same time, to secure the global comparability, globally consistent definition of“sector” is indispensable. The JBA would like the EBA to consider the two sides, theglobal consistency and flexibility.
2Question
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Do the respondents agree with the proposal included in templates 1 and 3 to disclose information on scope
3 emissions and with the transitional period
proposed?

To promote smooth and fair disclosure of financed emissions, it is desirable that the
EBA provides emission factor with financial institutions.
- The EBA sets the transitional period (until June 2024). However, it needs
enormous amount of time to gather emission data and measure financed emissionin all sectors.
- There are a lot of companies not disclosing their GHG emissions, such as SPC or

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unlisted company. In those cases, financial institutions have to estimate their GHG
emissions from various data (e.g. P/L statement, physical activity data, generalemission intensity in that area, etc.)
All financial institutions could not avoid these tasks. So, it is desirable that the
EBA provides data set (e.g. emission factor) with financial institutions to reducethe burden of financial institutions.
The data set is also preferable for investors because it leads to fair comparison. If

each financial institution uses different emission intensity data, their financed
emission results are markedly different.
We recognize that Carbon footprint is a useful source of information for decisionmaking as well as communication with stakeholder (e.g. investor), hence we would
like to estimate CO2/GHG emissions from our portfolio as soon as possible.
On the other hand, there are many companies that do not collect or disclose their carbon
footprint. That is the reason why obtaining or estimating GHG emissions is a major
issue for institutions. (We recognize that the Global Standards have not yet been
established regarding the estimation methodology).
The above-mentioned issues could be relieved by (i) standardization of metrics related
to carbon footprint measurement and/or (ii) disclosure of carbon footprint reference
data of each sector by the government. We would strongly ask the EBA to take part in3

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standardizing metrics and/or encourage governments to disclose relevant data, as these
activities are expected to boost the disclosure of institutions.
The infrastructures of legislation should be developed at first when considering
implementing EPC (Energy Performance Certificates). Careful consideration isessential for including EPC as a disclosure requirement in the viewpoint of avoiding
fragmentation.

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Do respondents agree that information in terms of maturity buckets by sector proposed in template 2 isrelevant to understand the time horizon of when theinstitution maybe more exposed to climate changetransition risk?

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Do respondents agree that information in terms of alignment metrics and relative scope 3 emissions

It is desirable that the EBA provides detailed methods with financial institutions. (e.g.
allocation rule for general-purpose business loans given to integrated companies.)

proposed in template 4 is relevant to understand andcompare the transition risk phased by institutions?
What are the respondents’ considerations withregard to the alignment metrics proposed and thesectors that should be covered by this disclosure? Do
respondents agree with the transitional period
proposed?

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9Regarding the same template 4, what are the 
respondents’ considerations with respect to the

Examples of alignment metrics are described in template 4. (e.g. Power: Average
tones of CO2 per MWh)In many cases, even if companies are categorized to Electricity or Mining sector
in NACE, their businesses range over various sector. (Especially, integrated
companies such as Total).
If banks accommodate general-purpose loan to those company, a portion of theloan is used to power or mining business. So, banks have to calculate financed
emissions by taking it into account.
This is only one instance among many. Detailed guidelines for alignment metrics
should be published if the EBA expects banks to disclose it until June 2024.

Several scenario options as the reference are allowed to choose in the existing scenario
analysis program like NGFS scenario analysis, so scenario alternatives other than 2
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choice of the 2 degrees reference scenario, would
respondents opt for a different scenario?

degrees reference scenario should be allowed as well.

10 Do respondents agree that information proposed in 
template 5 is relevant to understand the level ofclimate change transition risk and that information
on exposures towards the most polluting companies

Because of legal and confidentially concerns, careful consideration is necessary fordisclosing borrower-specific information.
- TCFD recommendation has already encouraged financial institutions to disclose
carbon related asset ratio and a lot of banks follow its recommendation.

is a good complement to the sectorial information
included in other templates? Specific feedback issought on possible alternative formats for thepresentation of the information required in template
5. In particular, the EBA seeks feedback on whether aggregate information on exposures towards the top 
20 polluting companies in the world, at EU level or-at member state level, instead of company-bycompany information, would be sufficient tounderstand how climate-change transition risk may
exacerbate the exposition of institutions to credit risk. Feedback is also sought on the specificinformation that a template on aggregate exposures
should include to be meaningful, including possible effects on business transactions with disclosed companies. Moreover, we are also
concerned about disclosure of customer information from the viewpoint ofconfidentiality.
The purpose of disclosure itself is to enhance the transparency and to fill theinformation asymmetry between investors/stakeholders and companies. Disclosing
specific firms’ name is “penalizing” those firms.
Supporting companies’ transition to low carbon economy is a banks’ role and the JBA“buckets” of information on exposures (e.g.
exposures towards top 5 polluting firms, next top 5 and so on, or other alternative presentations).

does not agree disclosing specific firms’ name.
The phasing approach should be applied, instead of the immediate application. We
support the necessity of the “engagement period” (as the phase in period till June 2024
is not accepted in Template 5).
From the above perspective, we agree with the proposed alternative formats in the-However, the EBA template would require institutions to disclose borrowerspecific information for up to 20 counterparties.
There are legal and confidentially concerns with this disclosure requirement, so
the EBA should reconsider it.

“Carbon-Intensity” should be defined.
While we agree that the disclosure of Carbon-Intensive companies would be a goodcomplement to the sectorial information, we are strongly concerned about adverse

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document; "aggregate information on exposures towards the top 20 polluting
companies in the world, at EU level or at member state level, instead of company-bycompany information". We consider that disclosure of the aggregated information on
exposures towards the top 20 companies would be sufficient, from the viewpoint ofmonitoring the concentration ratio of the portfolio.

11 What are respondents view on the way template 6 

Trading book should not be included into the requirement. Trading book is based onreflects how the trading book of institutions may be
impacted by climate change transition risk? Do
respondents agree that the threshold proposed todetermine which institutions have to disclose thistemplate is the appropriate threshold? Feedback onwhether there are alternative ways to present
information on the trading book that may allow for

short-term transaction and the purpose of using trading book is to seek benefit fromshort term market transaction, so it does not fit the nature of transition risk which takes
time to be revealed.

a better understanding of how climate changetransition risk may impact the trading portfolio.
12 Do respondents agree that the information included in template 7 is appropriate to understand how andto what extent the institution may be exposed toclimate change physical risk and that thedifferentiation between a simplified and an extended
template is necessary in the short/medium term?
13 Regarding template 7, specific feedback is asked regarding the methodologies and data sources that
institutions may use to identify the relevant
geographies. Feedback is also required on the 

Regional categorization would be useful for global banks as the breakdown. There areregional features in physical event, for example, wildfire occurs mainly in the North
America, flood tends to occur in Japan and Asia etc.
Categorization of exposure differs bank by bank, so the JBA does not recommend to6

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content and disclosures proposed in the extended
version of the template and on the transitional period
proposed.

specify in detail by establishing detailed templates. Rather, flexibility should be
acknowledged as long as banks' categorization is aligned to globally agreement.

14 Regarding templates 8 and 9, do respondents 
consider that this template should be enriched
including information not only on assets aligned

The EBA should provide clear definition of "Green Asset".
- Even if referring to the EU taxonomy, it is difficult to determine the eligibility for
general-purpose business loans.

with the taxonomy but also in the interest income
generated by those assets? Do respondents agreewith the timeline proposed and transitional period 
proposed for the disclosure of these templates?

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To encourage disclosure of "Green Asset Ratio", it is desirable that the EBA
publishes detailed guidelines.
The JBA requests more detailed information before judging whether these templates
are acceptable. For example, we request more information about scope of disclosureand timeline for compliance. If the EBA requests calculation and disclosure of the GAR
should be based on detailed investigation of “whether the exposure will contribute toclimate change mitigation/adaptation” etc. the JBA would not agree with thesetemplates.

15 Specific feedback is required from respondents on the way template 10 is defined, and on whether there
is additional information that should be added.
Feedback is sought on alternative disclosure formats
that may contribute to a more standardised andcomparable disclosure.
16 Finally, respondents feedback on whether the draft ITS should include a specific template on forward
looking information and scenario analysis, beyond
the qualitative information currently captured in thetables and templates under consultation and the7Question

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information required in template 4.
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Other comments

(paragraph38) For our global business model, we will need a consistent international
set of data to agreed parameters.
- Our view is that the fundamental challenge here is as follows:
1. Definitions are unclear.
2. Source of this information is unclear.
-

Both of these challenges are further complicated by the need to report this forinternational portfolios with exposures and clients not purely EU based andtherefore subject to different standards and information availability.
- It therefore follows that given firms will be dependent on the EBA and otherexternal bodies to resolve these points it is difficult to confirm at this stage if thetimeline is viable.
(paragraph69) It is requested to clarify the scope of disclosure qualitative risk
management information on ESG risks.
- 3.4 Qualitative disclosures states that institutions shall disclose "Processes to
identify activities and exposures sensitive to each ESG risk categories". We would
like the EBA to clearly define the scope so that market participants can make a faircomparison of disclosure.
- Also, we ask the EBA to give us the expectation of disclosure on stress testing andscenario analysis for social and governance risk.

(Coverage of assets included in the quantitative templates and in the GAR)
- We would like the EBA to clarify whether this is required at counterparty or
facility level. Also, we would like the EBA to explain how this will be assessed
where the exposure is not geographically specific.
- Green asset ratio: We would like the EBA to clarify what approach would be taken
8Question

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where the use of funds is unclear or multi-purpose.
Our view is that the fundamental challenge here is as follows: Definitions are unclear.
 Source of this information is unclear.
Both of these challenges are further complicated by the need to report this forinternational portfolios with exposures and clients not purely EU based andtherefore subject to different standards and information availability.
- It therefore follows that given firms will be dependent on the EBA and otherexternal bodies to resolve these points it is difficult to confirm at this stage if thetimeline is viable.
In order for financial institutions to properly manage and disclosure climate-related
financial risks, appropriate disclosure in the corporate sector is a major prerequisite.
With regard to the timing of the application, we appreciate it if the EBA takes into
account the progress in disclosure by the corporate sector.
(End)9