CDP Japan Financial Services Agency Code of Conduct Endorsement
About CDP
CDP’s mission is to focus investors, companies, cities, and governments on measuring andacting on their environmental impacts to build a net-zero, nature-positive, globally equitableeconomy. A not-for-profit charity, CDP drives change to deliver our mission through our global,
independent environmental disclosure system.
The CDP global group of organizations includes CDP Worldwide (a not-for-profit charity
headquartered in the UK), and organizational entities in Japan, China, Singapore, Hong Kong,
India, Germany, Brazil and the United States of America. Over the past 20 years we havecreated a system that has resulted in unparalleled engagement on environmental issues
worldwide from companies, investors, cities, states and regions alike.
CDP’s theory of change
Since our launch in 2000, CDP has been built on the fact that transparency and accountability
drives positive change in the world of business and investment. Key to CDP’s ability to drivechange is that our cycle of interventions has been embedded by companies, subnational
governments, and investors globally and our annual disclosure cycle has become a firm partof annual corporate reporting of major companies everywhere.
Sitting at the nexus of these key stakeholder groups, we utilize our disclosure mechanism andcycle of interventions to normalize environmental disclosure and action, continually pushing
the boundaries of the disclosure landscape. We use our questionnaire, guidance and scoring
to challenge reporting entities to shift towards best practice decision-making along a sciencebased sustainability journey.
CDP scores
As part of our disclosure process, CDP provides disclosing companies with an annual score: asnapshot of a company’s environmental disclosure and performance. Our scoring
methodology encourages responding organizations to measure and manage theirenvironmental impacts, and to take steps along demonstrating the action that is urgently
required by the world economy, markets, cities, states, regions and corporates to address themultiple, environmental crises facing global society. Our environmental data and insights help
to drive this required step-change.
ESG Investing has grown rapidly over the past decade. Increasing numbers of investors areintegrating ESG ratings, benchmarks and data products into their decision-making processes.
In 2020 the amount of professionally managed portfolios that integrated key elements of ESG
assessments exceeded $US 17.5 trillion globally, by some measures. In the same year, thegrowth of ESG-related traded investment products available to institutional and retail investors
exceeded $US 1 trillion and continues to grow quickly across major financial markets. It is
important that these tools are used to support the allocation of capital to sustainable activities
and not to enable greenwashing. ESG ratings, benchmarks and data product providers mustensure that they align with science-based methodologies to fulfil global environmental
agendas and goals. These include the Paris Agreement, the Global Biodiversity Framework,and the Sustainable Development Goals (SDGs).
ESG ratings and ESG benchmark indices have the potential to serve as a compass to guide
capital allocation. However, shortcomings associated with the quality of the input data used inthese products, lack of transparency around their methodologies and potential conflicts ofinterest, have all led regulators to take a closer look into this market.
This new policy arena reflects the acknowledgment by regulators of the rapidly changing
environment when it comes to the ESG disclosure ecosystem of operators. To guarantee theeffectiveness of disclosure, it is crucial to ensure the data reported is of high quality.
As the availability and quality of ESG data grows, regulators such as the Japan Financial
Services Agency (“JFSA”) are asking how the disclosure ecosystem uses this data to drive
more sustainable decision-making. They are requiring the providers of ESG ratings, scores,
benchmarks and data products to adopt more robust governance and transparent
methodologies. CDP believes this is vital for two main reasons:
1. To ensure these tools support an evidence-based transition to a net-zero, nature
positive economy.
2. To prevent capital from being allocated towards greenwashing schemes and instead
focused on supporting the goals and fulfilment of global environmental agendas.
As such CDP welcomes and endorses the JFSA Code of Conduct. CDP’s response to eachPrinciple of the Code of Conduct (and their associated Guidelines) on a “comply or explain”
basis, are outlined below:
Principle 1 (SECURING QUALITY)
ESG evaluation and data providers should strive to ensure the quality of ESG evaluation anddata they provide. The basic procedures necessary for this purpose should be established,including:
JFSA Guidelines:
1. formulating and providing ESG evaluation and data, establishing necessary procedures
to analyse in detail information that can be reasonably obtained;
2. establishing cross-organizational and continuously applied methodologies to provide;high-quality ESG evaluation and data, and disclosing it while paying attention toconfidentiality, intellectual property;
3. ensuring that the prescribed methodologies are applied consistently across theorganization, disseminating them throughout the organization, as well as devisingmeasures, such as horizontally reviewing under an appropriate system, or
accumulating and sharing knowledge of evaluations to be provided; and4. checking on a regular basis whether there would be any apparent discrepancy between
the evaluation results and the service provision methodologies mentioned above, andupdating methodologies as necessary (implementation of the PDCA cycle for
evaluation).
How CDP complies:
CDP reviews its scoring methodology on an annual basis and publishes it on our website
before any entities are contacted inviting them to complete our questionnaires. CDP's
processes for ensuring successful and consistent application of its methodology areassessed annually. We make it clear and transparent through our disclosure terms andconditions that confidential, private disclosure will not identify the disclosing entity and suchdata will be aggregated in such a manner as to make the submission anonymous. CDP further

makes clear in disclosure terms and conditions that it is a licensee of the intellectual property
contained in the submission. CDP obtains the consent of the disclosing entity at the point ofentry into the terms and conditions, for a license (with the right to sub-license) to CDP. To
facilitate environmental progress globally CDP makes disclosure data available to customers
seeking environmental insights under data licenses reflecting these principles ofconfidentiality and protection of intellectual property rights.
A thorough evaluation of the entire disclosure and scoring cycle including testing scoringprocess outputs against the methodology is carried out annually to accompany ongoing
monitoring throughout the year, with changes made accordingly. The internal function
managing the evolution of prescribed methodologies operates globally and therefore,
organisational consistency is maintained. Currently, disclosing entities only respond to ourquestionnaires once annually, in accordance with a prescribed timeline or cycle for disclosure,and disclosing entities would not normally be permitted to reopen their disclosure after a point
in time in the cycle which is common to all disclosers for the questionnaires. If this werepermitted in exceptional circumstances, CDP's policy position is that this would be publicly
noted.
Principle 2 (HUMAN RESOURCES DEVELOPMENT)ESG evaluation and data providers should secure necessary professional human resources toensure the quality of the evaluation and data provision services they provide and should
develop their own professional skills.
JFSA Guidelines:
1. Collecting and analysing information necessary to provide appropriate evaluation anddata, and maintaining necessary professional resources and technologies to makerelevant decisions.
2. Taking necessary measures to ensure personnel engaged in ESG evaluation and data
would have professional knowledge and carry out their duties in good faith.
3. Considering the nature of personnel evaluations that would appropriately evaluate
personnel who engages in professional evaluations and working for providing highquality evaluations.
4. Recognizing, as top management of the institution, that securing and developing
human resources is important element for continuously providing high quality
evaluations, and taking actions as necessary.
How CDP complies:
To deliver disclosure and evaluation that match the needs of all users of its data and scores,
CDP engages with its clients and stakeholders, as well as all bodies such as the International
Sustainability Standards Board (ISSB) and the International Organization of Securities
Commissions (IOSCO) among others. We employ colleagues with appropriate skills,
knowledge, and experience and support ongoing learning. We bring in external expertise where
necessary and invest in state-of-the art technology to support disclosure and evaluation.
CDP employs and develops staff to have the up-to-date skills and knowledge it needs andworks closely with any outsourced partners to ensure any staff working on CDP's behalf havethe knowledge and training they need. All staff are monitored for their performance andcontinued ability to carry out the tasks expected of them. We set out the expectations of staff

working for outsourced providers in contracts and performance discussions. Our recruitment
and retention policies and processes are owned by the Executive Leadership Team with
updates to the Board.
Principle 3 (ENSURING INDEPENDENCE AND MANAGING CONFLICTS OF INTEREST)
ESG evaluation and data providers should establish effective policies so that they can
independently make decisions and appropriately address conflicts of interest that may arise
from their organization and ownership, business, investment and funding, and compensation
for their officers and employees, etc.
With regard to conflicts of interest, providers should identify their own activities and situations
that could undermine the independence, objectivity, and neutrality of their business, and avoid
potential conflicts of interest or appropriately manage and reduce the risk of conflict ofinterest.
JFSA Guidelines:
1. Identifying potential conflicts of interest that may affect the assessment and analysis
conducted by the provider or its employees with respect to the services provided, andthen establishing and disclosing effective policies to avoid, or appropriately manage
and reduce the risk of, the conflict of interest.
2. Taking appropriate measures to ensure that other business relationship with acompany subject to ESG evaluation or data does not affect the ESG evaluation or data,such as establishing a firewall between sales and evaluation divisions.
3. In cases evaluations are developed through questionnaire, paying attention to thecontents and structure of service and questionnaire, so that there would principally be
no such situation where the content of the questionnaire is unreasonably toocomplicated or difficult to understand and effectively respond without using theprovider’s paid services.
4. Taking appropriate steps to prevent their employees from engaging in securities orderivatives transactions that could create conflicts of interest with ESG evaluation anddata provision services.
5. Developing appropriate work and compensation structures for its own employees, andavoiding, or appropriately managing and reducing the risk of, potential conflicts ofinterest related to ESG evaluation and data provision services. For example, as
necessary, assigning a staff member to conduct evaluation, separate from the staff
member responsible for sales of ESG evaluation and data services.
6. Establishing measures to ensure that existing business relationship with companies
subject to ESG evaluation and data provision does not affect the evaluation to thecompanies.
7. For the issuer pay model where compensation is received from the company subject tothe evaluation, implementing detailed procedures to avoid conflicts of interests.
8. In cases where the same provider provides both the-subscriber-pay-model businesses
and the-issuer-pay-model businesses, taking appropriate measures to prevent conflictsof interest in this regards.
How CDP complies:

CDP has a conflicts of interest policy, oversight of evaluation processes to ensure impartiality,
an internal audit function, and a Scoring Steering Committee. Firewalls are to be implemented
between those teams dealing with ESG evaluation versus teams dealing with data provision
services, following a scheduled evaluation exercise with all relevant functions in Summer andAutumn 2023.
We are developing a much more targeted conflicts of interest management policy andprocedures, as well as the compliance measures to be able to more readily evidencecompliance with our current zero tolerance approach to impartiality and the potential for
conflicts of interest. CDP reviews its scoring methodology on an annual basis and publishes it
on our website before any entities are contacted inviting them to complete our questionnaires.
CDP's processes for ensuring successful and consistent application of its methodology areassessed annually.
In terms of Guideline 4, all successful candidates for roles must declare links to otherorganisations or shareholdings over 5%. Staff and trustees then make an annual update totheir declaration. We shall examine the introduction of measures around securities andderivatives transactions.
Principle 4 (ENSURING TRANSPARENCY)
ESG evaluation and data providers should recognize that ensuring transparency is an essential
and prioritized issue, and publicly clarify their basic approach in providing services, such as
the purpose and basic methodology of evaluations. Methodologies and processes forformulating services should be sufficiently disclosed.
JFSA Guidelines:
1. While giving necessary consideration to intellectual property, etc., ensuring thetransparency of their services by recognizing that it is an essential and prioritizedissue.
2. In order for users of ESG evaluation and data provision services to understand thebasic content of the services, including what the evaluation aims to capture and how
this is measured, disclosing the basic approach for providing services, including the
purpose and basic methodology of evaluation.
3. In order to enable users and companies subject to evaluation to understand the basic
structure of the evaluation, disclosing sufficient information on the methodologies andprocesses for formulating the evaluation, including any major updates on them, if any.
When inquiries are received from companies subject to evaluation through a contact
point, providing careful explanations to the extent practically possible.
4. Disclosing the sources of information that are used in the development of ESG
evaluation and data. In particular, if estimated data is used, disclosing this fact and thebasic methodology of estimation. If data sources and/or items are diverse or of great
numbers, doing these in a reasonable scope and manner, such as by consolidating or
limiting the scope, reflecting their importance and usefulness.
5. Disclosing, in an easy-to-understand manner, the purpose, concept, and basic
methodology of the evaluation; doing this in a reasonable scope and manner, such as
by consolidating or limiting the scope, taking into consideration a provider’s situationand the importance and relevance of individual items. The items are for example thefollowing:a. Purpose, approach, and intent of formulation of ESG evaluation and datab. Specific contents of evaluation methodologies (specific evaluation criteria,
important indicators and weights in evaluation, businesses and companies
subject to evaluation, and other contents of methodologies that can lead tosignificant differences in evaluation results)
c. Evaluation process (evaluation procedures and steps, checks and monitoring,etc.)d. Contact point where the evaluation results can be explained in detaile. Sources of information on which the evaluation is based, policy and status ofestimated data usage, the update timings and estimation methodologies ofdata that is particularly important to the overall assessment
f. With respect to the overall evaluation, the timing of evaluation and the timing ofdata creation, use, and updateg. Changes made when the evaluation methodology is updated. Especially if any
items are improved through the PDCA cycle, this fact and reasons for it.
CDP reviews its scoring methodology on an annual basis and makes it publicly available on
our website before any entities are contacted inviting them to complete our questionnaires.
CDP's processes for ensuring successful and consistent application of its methodology isassessed annually. All potential or actual disclosing companies can contact CDP forclarification on questions on methodology. All scores are based on information self-reported
to CDP by disclosing entities which is made clear in our published methodology.
Principle 5 (CONFIDENTIALITY)
ESG evaluation and data providers should establish policies and procedures to appropriately
protect non-public information obtained in the course of business.
JFSA Guidelines:
1. Establishing, disclosing and implementing the policies and procedures to protect
information provided as confidential in the course of ESG evaluation and data services.
2. Establishing, disclosing, and implementing the policies and procedures so that suchconfidential information will be used in accordance with the purpose of provision andnot for the purposes other than ESG evaluation and data services, unless otherwise
agreed.
How CDP complies:
CDP has policies, procedures, and systems for the protection of both personal and disclosed
environmental data. These have not previously been published and are currently being
reviewed in the light of regulatory requirements but will be published in due course. In addition,
CDP has an established Data Governance function to manage its custodianship of personal
and ESG data. CDP provides disclosure data to third parties under legally binding contracts
that prohibit certain use cases (particularly commercial uses other than ESG evaluation)
unless otherwise agreed.
Principle 6 (COMMUNICATION WITH COMPANIES)ESG evaluation and data providers should devise and improve the way they gather informationfrom companies so that the process becomes efficient for both service providers andcompanies or necessary information can be sufficiently obtained. When important or
reasonable issues related to information source are raised by companies subject toevaluation, ESG evaluation and data providers should appropriately respond to the issues.

JFSA Guidelines:
1. When and if collecting information through surveys from a company subject toevaluation, notifying the company of the collection period sufficiently in advance. If
available and where appropriate, entering, prior to the request, information that isalready known to the providers, such as those publicly disclosed or submitted in thepast, then seeking verification by the company in question.
2. Establishing a dedicated contact point where companies can send inquiries and raiseissues regarding ESG evaluation and data provision, and informing the companies
concerned or posting it in an easy-to-find manner.
3. When disclosing ESG evaluation and data, subject to the institution's evaluation
methodologies and customer service policies, to the extent practically possible,
expeditiously notifying or communicating to a company of the essential information
sources of the evaluation and data, thereby allowing time for the company to check
whether there are any significant deficiencies in the sources, such as factual errors.
4. When a company subject to evaluation raises important or reasonable issues about
the information source of evaluation and data, subject to its own evaluation
methodologies and customer service policies, taking timely and appropriate measures
such as allowing the company to at least assess the accuracy of the underlying
important data and correcting errors if any.
5. As an ESG evaluation and data provider, disclosing a "procedures of engagement"
regarding how it normally interacts with companies to be evaluated with respect to theevaluation and data it provides. The procedures would include elements such as when
it requests information from companies, when and what companies could check with,how they could raise issues if any, and how the provider would be able to respond tosuch issues.
6. Subject to providers’ evaluation methods and customer service policies, considering
the necessity of managing conflict of interest, and to the extent practically possible,
conducting constructive dialogue with companies to be evaluated (for example, by
providing feedback on evaluation results)
How CDP complies:
CDP transparently communicates the window during which disclosers can respond to CDP’squestionnaires. Disclosers can log in and see or download their previous responses ahead ofpreparing their responses for the current year. We have a contact system for all disclosers
who send enquiries, where questions are answered separate to any sales contacts. All scores
are based on information self-reported to CDP by disclosers, which is made clear in our
published methodology. The questionnaires, instructions, and how to raise issues is set out on
CDP's website. Potential disclosing entities are provided with the location of this information
at the point that they are invited to disclose. CDP welcomes discussion with disclosing entities
and regularly seeks feedback from organisations that disclose, and those that choose not to.
We will remain open to suggestions for enhancements in this area.