16 July 2024
Yasunobu Kawanishi
Chair
Sustainability Standards Board of Japan
20/F Fukoku Seimei Building
2-2-2- Uchisaiwai-cho
Chiyoda-ku
Tokyo 100-0011
Japan
By email to: 2024ed01@ssb-j.jp

ASIFMA AMG response to the issuance of the three Exposure Drafts of the
Sustainability Disclosure Standards by the Sustainability Standards Board ofJapan (“SSBJ”)
Dear Mr Kawanishi
On behalf of the Asia Securities Industry & Financial Markets Association (“ASIFMA”) 1 AssetManagement Group (“AAMG”), we express the views of our members which are predominantly global
asset managers operating in Asia.
We welcome the opportunity for market participants to comment on the development of the
Sustainability Disclosure Standards (or “Japanese Standards”) by the SSBJ, which are aligned with theInternational Sustainability Standards Board (“ISSB”) IFRS Sustainability Disclosure Standard (or “ISSB
Standards”). AAMG has supported the work of the ISSB since the original consultation on its formationin 2020.
As regulators, listing exchanges and standard setters across Asia start to implement the ISSB Standards
in their respective jurisdictions, we want to ensure the views and expectations of global investors areclear. We therefore take the opportunity to share our paper entitled “Adoption of the ISSB Standards
1

ASIFMA is an independent, regional trade association with over 150 member firms comprising a diverse range of leading financial
institutions from both the buy and sell side, including banks, asset managers, law firms and market infrastructure service providers. Together,
we harness the shared interests of the financial industry to promote the development of liquid, deep and broad capital markets in Asia.
ASIFMA advocates stable, innovative, competitive and efficient Asian capital markets that are necessary to support the region’s economic
growth. We drive consensus, advocate solutions and effect change around key issues through the collective strength and clarity of one
industry voice. Our many initiatives include consultations with regulators and exchanges, development of uniform industry standards,
advocacy for enhanced markets through policy papers, and lowering the cost of doing business in the region. Through the GFMA alliancewith SIFMA in the United States and AFME in Europe, ASIFMA also provides insights on global best practices and standards to benefit theregion.

DEVELOPING ASIAN CAPITAL MARKETS

in Asia: ASIFMA Asset Management Group Position Paper”. This paper provides insights on thenuances of the adoption of ISSB Standards that is currently underway throughout the region from theperspective of global investors. We hope it is useful to inform the SSBJ as it finalises the JapaneseStandards.
Please feel free to contact Yvette Kwan at ykwan@asifma.org if you have any questions regarding anyof our comments.
Yours sincerely

Yvette Kwan
Executive Adviser
Asia Securities Industry & Financial Markets Association

Page 2ADOPTION OF THE ISSB STANDARDS IN ASIA
ASIFMA Asset Management Group Position Paper
July 2024

ASIFMA is an independent, regional trade association with over 160 member firms comprising
a diverse range of leading financial institutions from both the buy and sell side includingbanks, asset managers, accounting and law firms, and market infrastructure service providers.
Together, we harness the shared interests of the financial industry to promote thedevelopment of liquid, deep and broad capital markets in Asia. ASIFMA advocates stable,
innovative and competitive Asian capital markets that are necessary to support the region’s
economic growth. We drive consensus, advocate solutions and effect change around key
issues through the collective strength and clarity of one industry voice. Our many initiatives
include consultations with regulators and exchanges, development of uniform industry
standards, advocacy for enhanced markets through policy papers, and lowering the cost of
doing business in the region. Through the GFMA alliance with SIFMA in the U.S. and AFME in
Europe, ASIFMA also provides insights on global best practices and standards to benefit theregion.
If you have any comments or questions, please reach out to Yvette Kwan, Executive Adviser,
Asset Management Group (ykwan@asifma.org).

ASIFMA would like to extend its gratitude to all the individuals and member firms who
contributed to the preparation of this Paper

ASIFMA ASSET MANAGEMENT GROUP’S POSITION ON THE ADOPTION OF THE ISSBSTANDARDS IN ASIA
ASIFMA Asset Management Group (“AAMG”) represents some of the largest global asset
managers operating in Asia. We have supported the formation of the International
Sustainability Standards Board (“ISSB”) since the International Financial Reporting Standards(“IFRS”) Foundation’s consultation on the topic in December 2020.
We welcome and support the efforts of regulators, listing exchanges and standard setters
across Asia in implementing the IFRS Sustainability Disclosure Standards (“ISSB Standards” or“IFRS S1 and IFRS S2”) in their respective jurisdictions. As jurisdictions adopt or begin toconsider adoption of the ISSB Standards within the region, we would like to share our positionon the nuances that adoption entails and hope that it will be of use for stakeholders inunderstanding the views and expectations of global investors.
TOPIC

COMMENTS(A) OVERALL
1. Global baseline

The ISSB Standards are a global baseline and will help improve theconsistency, comparability and usefulness of sustainability disclosures
on a global basis.
From an investment perspective, there is a strong rationale forregulators globally to require companies to adopt these reporting
standards as a baseline. We believe that accurate, timely disclosuresby companies are essential for market participants to effectively
assess sustainability risks and opportunities to inform financial
decision making, which is ultimately to the benefit of clients andbeneficiaries.
Disclosure standards, where all companies publish the same type of
information according to common methodologies, are essential forinvestors. Globally standardised and comparable corporate data isuseful for investors who make investment decisions across markets.
Those companies which provide more disclosures may potentiallyhave more access to markets for their products and services, equity
and debt financing, and more likely be targets for sustainable
investing. Notwithstanding this, we note that some Asian companies
will actually come into scope of the EU’s Corporate Sustainability
Reporting Directive (“CSRD”), the minimum requirements of theEuropean Sustainability Reporting Standards (“ESRS”) which may
compel them to provide more disclosures.

2. Adoption of IFRS S1and IFRS S2

It is important to adopt both IFRS S1 and IFRS S2, preferably
simultaneously, given that IFRS S1 (General Requirements for1

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Disclosure of Sustainability-related Financial Information) providesthefoundation on which IFRS S2 (Climate-related Disclosures) and futuresustainability standards will be built. For example, underlying
concepts, such as materiality, are found in IFRS S1.
Adoption in 2025 (for IFRS S2) aligns with the implementation timelinein key Asian markets, including Hong Kong and Singapore.

3. Transition relief Phased adoption by:
a. Listed companies
b. Unlistedcompanies

There is a risk of a ‘country or market discount’ until all relevant
requirements of the global baseline have been introduced within ajurisdiction.
However, we also recognise that investee companies are at different
stages in developing their reporting, and have different requirements,
motivations and aspirations for it. As such, we believe a phased
approach to adopting these standards can help improve the quality
and usefulness of disclosures and reduce superfluous reporting. We
are therefore supportive of efforts to introduce a more consistent
approach, provided there is also an emphasis on ensuring that
disclosures do not become excessively burdensome. In particular, we
believe disclosures should always maintain a focus on what is mostmaterial for each individual company.
Listed companies
Phased adoption does not allow for full comparability across a market,
but we acknowledge that the largest, most sophisticated companies(determined by size, index inclusion, or main versus growth board)
may have more resources and capabilities to comply first.
Different industries are exposed to different material climate-relatedrisks and opportunities. We would suggest that to the extent there isphased adoption by size (as determined ideally by a combination ofmarket capitalisation, revenue and headcount) it should be overlaid
with a prioritisation for those industries where climate-related risks
and opportunities are most material.
Unlisted companies
Adoption of reporting by large unlisted companies prevents publicprivate market arbitrage and can better support a jurisdiction’s
broader sustainability initiatives e.g. economy-wide net-zero targets.
We would suggest that the timeline for phased adoption by unlistedcompanies be determined after regulators have conducted reviews
before the end of transition reliefs for listed companies, and factor in
the implementation experiences of listed companies.

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4. Other reliefs

We support the ISSB Standards’ built-in reliefs.
The ISSB Standards are the global baseline of sustainability disclosures
to meet the needs of investors. There is flexibility for an individual
jurisdiction to add building blocks to meet the needs of local
stakeholders (for example, GRI Standards and their metrics) but theseshould be above and not below the requirements of the global
baseline.
We do not support additional reliefs beyond the built-in reliefs
available within the ISSB Standards. They would otherwise lead toregulatory fragmentation, undermining the purpose of a globallyconsistent baseline. For example, only requiring disclosure of certain
categories of Scope 3 emissions across all in-scope companies. The
materiality of different categories of Scope 3 emissions can vary by
sector, and thus relevance and materiality should be the determinantsof which categories a company should focus on disclosing (refer to CDPTechnical Note 1 for their relevant categories by sector).

5. Annual reportalignment

Our preference is for companies to include their sustainability
disclosures as part of the annual report.
Given the financial implications associated with climate change andother sustainability issues, it will be important that sustainability
disclosures can easily be linked to balance sheet, cashflow and/or
profit and loss statement, per the concept of connected information
under the ISSB Standards. We are concerned that separating
sustainability disclosures from the general-purpose financial
statements may dilute materiality and risk non-performance. Ensuringthat sustainability disclosures are embedded within the generalpurpose financial reporting will also help ensure that sustainability
disclosures are kept up to date, in line with a company’s positioning,strategy and finances.
We recognise that currently many companies may opt to issue standalone climate or sustainability reports. However, we believe this may
make it difficult to locate and access investor-focused climate and/or
sustainability information. As an interim measure, we support
companies reporting this information separately but at the same timeas the annual report. Applying existing statutory timelines for generalpurpose financial statements to sustainability-related reporting isimportant for investors, so that sustainability-related considerations
can be incorporated into proxy voting decisions.

1 CDP Technical Note: Relevance of Scope 3 Categories by Sector, Version 3.0, 2024

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6. General view ofdecision-useful
disclosures

We encourage disclosure of progress against targets, implementationplans, explanations of delays, and qualitative descriptions where
quantitative disclosures are not available.
The ISSB Standards provides transition relief from providing
comparative information in the first year in which an issuer applies thestandards. Investors would still find it useful for regulators toencourage the provision of prior year data to make disclosurescomparable and assist with trend analysis.

7. Reporting
boundaries

The reporting boundaries of sustainability reporting should align withthe financial statements. Any non-alignment runs the risk thatcompanies cherry pick entities and operations to disclose on.
For example, we do not support disclosures for principal businesssegments only. As conglomerates are prevalent in Asia, it may bedifficult to identify principal business segments.

8. Group exemptions

We encourage the provision of exemption from mandatory
sustainability reporting if a foreign parent company already prepares
ISSB-equivalent/-aligned sustainability reports which are readily
accessible, to reduce unnecessary compliance burden.

9. Financial institution(“FI”)-specificdisclosures (asset
manager, banks,
insurers)

We note that the data, controls and methodologies for computing
greenhouse gas (“GHG”) emissions associated with some asset classes
are still emerging and flexibility is needed in terms of regulatory
expectations of disclosures.
Scope 3 GHG emissions Category 15 Investments under the GHG
Protocol represent 99.84% of total emissions for the FI sector 2 .
Therefore, disclosure of this category is reliant on data from a FI’s
investment / lending portfolio. The requirements imposed on investee
companies for such disclosure items therefore needs to precede therequirements imposed on FIs.
We support the phasing of such requirements for FIs, using a “comply
or explain” approach that still encourages the disclosure of Scope 3
GHG emissions, including financed emissions.

2 Ibid4

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CLIMATE-RELATED
10. Scope 1 & 2 GHG
emissions

We advocate for mandatory disclosure of Scope 1 and 2 GHG
emissions and for the scope to be clearly disclosed. This allows
investors to understand a company’s climate impact and how it isbeing managed. Disclosure for all consolidated entities is strongly
encouraged.

11. Scope 3 GHG
emissions(“Scope 3")

Importance of Scope 3 disclosures
Scope 3 disclosures help us determine a broader understanding ofcompanies’ long term growth potential, including:•••

The relative maturity of a company’s approach to climate andcan mean it has developed the capacity to look beyond its
direct footprint to its broader value chain from a climate
perspective. This can be an indicator that the company is moreadvanced in identifying, and possibly managing, potential
climate-related risks and opportunities that could affectstability and growth.
Insights into the carbon intensity of value chains themselves,
and therefore the potential for those value chains toexperience change and disruption in future as carbon as anexternality is increasingly priced in by markets. This can in turnprovide a more holistic picture of companies themselves. It
can help us identify competitive edge in materials, sourcing,markets and customers.
Help to determine how aligned a company is to an appropriate
net zero emissions pathway. If a company has included
material Scope 3 in its strategy, and is disclosing appropriately,
this helps investors gain confidence that the strategy is robustand broad enough in its scope.

Implementation of mandatory Scope 3 disclosures
We appreciate that companies are at different stages on theirdisclosure journey, but we believe that Scope 3 disclosures can be anindicator of potential investment risks or opportunities and are
therefore useful to the research process.
We believe companies should be free to determine the most material
categories to disclose, per the ISSB Standards. This should be explained
clearly in a way that allows shareholders to challenge the company ifneeded.
Given the challenges associated with data coverage, poor estimation
models and differing interpretations of materiality, we encourage thelargest companies to help with capacity building along their value
chains to improve their own Scope 3 disclosures. Regulators may findit useful to support such endeavours through policy initiatives.

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12. Sectoral guidance

Many useful climate / sustainability metrics are specific to individual
sectors. ISSB requires sector-specific disclosures although guidancefrom SASB Standards remains voluntary. The Transition Plan Taskforce
has also published Sectoral Guidance that includes metrics and targets
by sector, as well as deep-dive guidance for seven sectors. We would
encourage companies to refer to guidance provided by international
bodies as relevant, as consistent and comparable sector-specificdisclosure is important to investors.
We find Scope 3 reporting useful especially for key sectors where
Scope 3 emissions are material. For example, Scope 3 account fornearly 90% of total GHG emissions in the oil & gas sector 3 .
Additionally, different categories of Scope 3 are relevant and material
for different sectors (refer to CDP Technical Note 4 more generally andTopic 9 of this Paper for commentary on FI-specific disclosures).
Some of our members already expect investee companies to provide
material Scope 3 disclosures by the 2025 reporting year at the latest.
For very large or heavy emitting companies, they may already haveexpected these disclosures for the 2023 reporting year. Investors’
expectations will evolve as data availability and quality improves.

13. Scenario analysis

We see value in the disclosure of anticipated effects and scenario
analysis to help understand related risks and opportunities. We wantcompanies to have internal processes and thinking on the topics.
Analysis can be qualitative for those companies that are just starting
out.
Full transparency, including of the scenarios utilised and otherassumptions made, should be mandatory so that investors canunderstand the source of estimates. Physical risk assessments are
critical for many sectors.

14. Evolving
methodologies

We expect industry standards to evolve and standardise over time,
and we see a role for regulators to ensure full transparency in thedisclosure of methodologies in the meantime.
For example, some of our investors would like to see consistentreporting of emission intensity. This is especially important for
emerging markets companies as they commonly set intensity-basedtargets. Disclosure is not always comparable or informative, sincecompanies may use different denominators (e.g. for real estate, theuse of gross floor area versus conditioned floor area; or the use ofrevenue as a denominator which could lead to fluctuation over years

3 Ibid
4 Ibid6

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due to, say, commodity prices). Investors would find it useful if there
are industry-specific guidance / standards on how GHG emission
intensity should be calculated and reported, including the appropriate
unit of production as denominator.

(B) NON-CLIMATE-RELATED
15. Governance –Remuneration

We note that remuneration linked to the management ofsustainability risk and opportunities is incorporated into the ISSB
Standards. Our members are keen to understand the linkage between
remuneration and broader performance metrics and targets, andwould expect that sustainability risk and opportunities areincorporated into any balanced scorecard assessment, whereappropriate to the business.
Where companies choose to include sustainability criteria in
remuneration, they should be as rigorous as other financial or
operational targets. When companies integrate sustainability-related
criteria in their incentive plans, it is helpful if they clearly explain theconnection between what is being measured and rewarded and thecompany’s strategic priorities. Not doing so may leave companies
vulnerable to reputational risks and/or undermine their sustainability
efforts.
As companies plan for low-carbon transition scenarios, we anticipate
more will respond to investor interest that they include relevant GHG
emissions reduction targets or energy transition-related metrics intheir incentive plans. Appropriate use of financial and other metrics
aligned with long-term risk management – as well as investment inrenewable energy and product innovation, to name a couple ofexamples – may be increasingly important to some companies, given
the materiality of these issues to their business models. As investors,
we find it helpful when companies disclose these.

(E) DATA AVAILABILITY / LIABILITY FRAMEWORK
16. Comply-or-explain

We encourage a ‘comply-or-explain’ regime, in preference to a
voluntary regime, to encourage more rather than less disclosureswhen relevant climate data, science, standards, controls, andreporting methodologies are still evolving and may diverge among
different sectors. Where jurisdictions may choose to adopt a voluntary
regime, wording should be strong enough to encourage disclosures,
where it is practicable.
We are mindful that adopting a regime with mandatory prescriptive
requirements for premature and onerous disclosures could have the7

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unintended consequence of discouraging early adopters or divert
companies’ efforts from other disclosure items.
When relevant standards and methodologies are not developed
enough for data to be properly collected and rigorously reviewed, it isuncertain how the disclosure of such data would help long-term
investors. We believe that under a “comply or explain” regime, issuers’
determinations of whether to comply or explain will inevitably change
as standards and methodologies mature and become more widelyadopted, as well as when reporting infrastructure becomes more welldeveloped, leading to increasingly more comprehensive climate
disclosures over time.
We support the adoption of a liability framework that provides
meaningful protection from legal liability for disclosures provided ingood faith as standards continue to evolve.

17. Lack of data
Concerns that morecomprehensive
disclosures could impact
negatively on a company

We are interested in direction of travel i.e. improvement in
performance, versus perfect disclosures from the outset.
Where no data is provided, ESG data providers will likely incorporate‘nil’ response rather than an estimate. It is preferable to provide data
even if it is not ‘perfect’.
A company which reports more comprehensively may disclose higher
emissions which potentially penalises them against a company that
does not. Transparency is therefore important so investors canunderstand underlying assumptions, challenges, and estimations.
Disclosure of variations should include attribution to changes inmethodology and estimations.

(F) ASSURANCE
Independent assurance can help to improve the quality and accuracyof companies’ reporting, although we need to be mindful of“qualified” opinions on certain metrics which may have less value andothers where only a “qualified” opinion may be received.
We support further international standardisation as offered by the
proposed International Standard on Sustainability Assurance (ISSA)
5000, General Requirements for Sustainability Assurance
Engagements. We would encourage regulators to delay mandating
assurance requirements until after the finalisation of ISSA 5000.
We refer to the International Federation of Accountants’ position5 thatin order for sustainability disclosures to be trusted they must be

5 International Federation of Accountants, IFAC's Vision for High-Quality Sustainability Assurance, 2021

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subject to high-quality, independent, external assurance. We believethat over time and subject to appropriate feasibility studies, thecurrent expectation in certain jurisdictions of obtaining limited
assurance should transition to reasonable assurance to further
enhance trust and confidence on sustainability information.
We understand the merits of financial auditors also providing
sustainability reporting assurance. However, we are concerned that
this could lead to a further concentration of the audit market. As such,our preference is a sustainability-assurance regime that is professionagnostic and where companies have the option to choose a provider
not limited to their financial auditor.

REFERENCES•

CDP, CDP Technical Note: Relevance of
Scope 3 Categories by Sector, Version
3.0, 2024
https://cdn.cdp.net/cdpproduction/cms/guidance_docs/pdfs/0
00/003/504/original/CDP-technicalnote-scope-3-relevance-bysector.pdf?1649687608•

International Federation of
Accountants, IFAC's Vision for HighQuality Sustainability Assurance, 2021
https://www.ifac.org/knowledgegateway/discussion/sustainabilityassurance•

IFRS Foundation, The jurisdictional
journey towards globally comparable
information for capital markets, 2024
https://www.ifrs.org/content/dam/ifrs/
supporting-implementation/adoptionguide/inaugural-jurisdictional-guide.pdf•

Transition Plan Taskforce, Sector
Summary, 2024
https://transitiontaskforce.net/sectorguidance/#:~:text=The%20TPT%20Sect
or%20Summary%20provides%20an%20
overview%20of,a%20glance%20of%20k
ey%20information%20and%20guidance%20sources

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Contact us at
ykwan@asifma.com
www.asifma.com