July 7, 2023
European Commission
1049 Brussel, Belgium

Japanese Bankers Association

JBA comments on the draft delegated regulation for the European sustainability
reporting standards by the European Commission (EC)Dear Sirs/Madams:
The Japanese Bankers Association 1 (JBA) appreciates the opportunity to provide our comments on the draft
delegated regulation for the European sustainability reporting standard 2 proposed by the European Commission(EC) on June 9, 2023. We hope that our comments will contribute to further discussions in the EC.

General Comments
Materiality assessment
Since the European Sustainability Reporting Standards (ESRS) currently under public comment have been
expanded to include listed SMEs, transitional measures have been taken according to the attributes of thecompanies, and it is stipulated that the undertaking is not required to disclose non-material items based onmateriality assessments except for the General Disclosures Standard (ESRS2) which is mandatory. The
determination of the scope of disclosure obligations with due consideration of the feasibility of these measures
should be very much welcomed. Taking the materiality assessment as a baseline promotes dialogue with internaland external stakeholders and prioritises those issues that are crucial and within the sphere of influence of thereporting company.
However, the Sustainable Finance Disclosures Regulation (SFDR), the standards for financial institutions which
are already in place, have no provisions for limited disclosure of materiality. Therefore, there is a possibility
that there will be a data gap between financial institutions and the companies in their portfolios as the former
has stricter disclosure rules. Additional data gaps may also occur between companies in their portfolios
depending on the criteria for determining materiality.
We expect that the requirements as well as the standards of SFDR, ESRS and the International Sustainability
Standards Board (ISSB)’s standards will realize consistency and interoperability in the future, with due
consideration on feasibility and safe harbour rules.
1 The Japanese Bankers Association is the leading trade association for banks, bank holding companies and bankers associations inJapan. As of July 7, 2023, JBA has 114 Full Members (banks), 3 Bank Holding Company Members (bank holding companies), 76
Associate Members (banks & bank holding companies), 51 Special Members (regionally-based bankers associations) and one SubAssociate Member for a total of 245 members. Several of its largest member banks are active participants in the EU financial markets.
2 https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13765-European-sustainability-reporting-standards-firstset_en1Interoperability
Comparable non-financial information across firms on a global scale enables a level playing field and fairtreatment of all counterparties. We encourage changes that harmonise the Corporate Sustainability Reporting
Directive (CSRD) with other reporting standards such as ISSB, Task Force on Climate-related FinancialDisclosures (TCFD) and Taskforce on Nature-related Financial Disclosures (TNFD).
We understand that the European Financial Reporting Advisory Group (EFRAG) and the ISSB have done further
work to ensure that the climate related reporting standards of both EFRAG and the ISSB are interoperable.
While this is welcomed, it would be helpful to clearly understand whether third country banking institutions canassume that for the elements or data points assigned and acknowledged by both EFRAG and ISSB as‘interoperable’, whether these can indeed be used by financial institutions doing sustainability reporting asinterchangeable. This clarification may result in enabling financial institutions not only to fully utilize theexpertise and knowledge from extensive voluntary sustainability reporting, but also centralize and consolidate
its sustainability reporting efforts across various jurisdictions where the institution operates.
Implementation dateIn general, the financial sector as a stakeholder has concerns on the implementation date and warns that itremains difficult to implement the ESRS on a very tight time schedule. Expecting to provide stakeholders with
sufficient time to prepare for implementation given the widespread impact of regulations on operations of thestakeholders.

Specific Comments on Annex I
StandardParagraph etc.

ESRS 1

Para 7.6

Comment[Consolidated reporting and subsidiary exemption]
Article 7.6 of the ESRS provides for an exemption from reporting for EU
subsidiaries, provided that these subsidiaries are included in ‘consolidated’
reporting efforts. In order for companies or financial firms to determine
whether they may consider providing centrally coordinated reporting tosatisfy the EU reporting obligations, it would be helpful to i) have further
detail on the scope of ‘group-wide material impacts, risks and opportunities
for the entire consolidated group’ to ensure that ‘all subsidiaries arecovered’ and ii) which entity would be responsible for providing therequired information in the event that consolidated reporting is currently
performed by an entity outside the EU.

ESRS 1AR 16[Sustainability matters to be included in the materiality assessment]
We understand that the list described as Topical ESRS is a tool to support
the undertaking’s materiality assessment, as described in AR16, and thatthe scope of assessment is not limited to the Topical ESRS described in this2

StandardParagraph etc.

Commentlist. However, if these environmental issues, which are consistently listedfrom the EU taxonomy, are expanded to include other key items (noise,vibration, odours, land subsidence, etc.) that need to be reviewed under theglobally pervasive international standards of the Environmental and Social
Risk Management (ESRM) (e.g., IFC Performance Standards), it iswelcomed as this enables supporting the assessment of impact materiality
and enhances interoperability with international standards related toESRM.

ESRS 2Para 17[Use of phase-In provisions]
If an undertaking omits information on a material item from its disclosuresthis would breach local accounting standards in many jurisdictions. We
therefore encourage the addition that undertakings should publish relevant
information on material topics during the phase-in period.

ESRS E1

Appendix A[Transition plan for climate change mitigation]

AR1 to AR6

We invite the European Commission and the co-legislators to recognise thatnet-zero transition planning is a group level consolidated activity, which
financial institutions use to ensure their business model and operationsalign with a net-zero economy. Prescriptive requirements to introduce
transition plans at the subsidiary level in the EU might therefore interferewith the ability of an international financial institution headquarteredoutside the EU to implement a groupwide transition plan, which could be
subject to home country regulations.
Since other jurisdictions are currently discussing mandatory requirements
to introduce transition plans, the European Commission should discusswith international partners how to ensure compatibility between different
obligations to avoid conflicting requirements, which could be detrimental
to overall decarbonisation efforts.

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We thank the EC for the opportunity to comment on the draft delegated regulation for the European sustainability
reporting standards and hope our comments will contribute to further consideration in the EC.
Yours faithfully,
Japanese Bankers Association3