Confidential

E-mailaina.fukuda@lgim.com
catherine.ogden@lgim.com

Date

31 July 2024

Sustainability Standards Board of Japan (SSBJ)
E-mail: 2024ed01@ssb-j.jp

One Coleman Street
LondonEC2R 5AA

Dear Sir/Madam_LEGAL & GENERAL IMVESTMENT MANAGEMENT (LGIM)FEEDBACK ON SUSTAINABILITY DISCLOSURE STANDARDS FOR JAPAN

Legal & General Investment Management (LGIM) is part of Legal & General’s asset management division andis one of the largest international investors globally with GBP 1.159 trillion (JPY 208 trillion) of assets undermanagement (as of 31 December 2023). We manage assets for a wide range of global clients, including
pension schemes, sovereign wealth funds, fund distributors and retail investors.
As a growing and significant investor in Japan, there is a responsibility to ensure the market operates
efficiently and we believe that the roll-out of standardized global reporting standards for climate andsustainability plays an important part in achieving this. Therefore, we are thankful for the opportunity torespond to the consultation of the Sustainability Standards Board of Japan (SSBJ) on the exposure drafts forsustainability disclosure standards.
Consolidation of the disparate reporting landscape should help both companies and investors, by avoiding
the overburdening of reporting and by providing the market with relevant, consistent, and comparable
information to support investment decision-making and capital allocation. We therefore very muchencourage the full adoption of ISSB standards globally; we are particularly supportive of the building block
approach that enables more mature markets to move beyond the baseline, to provide more granular
information and to evolve from an approach of financial materiality towards one of double materiality. As a
global investor, we are also experiencing greater regulatory and client demand for reporting on sustainability
issues at a portfolio level. The quality of these reports is highly dependent on having globally consistent
standards on company disclosure.
Given this context, we welcome SSBJ’s consideration of, and proposed alignment with a large part of IFRS S1and IFRS S2, as a required disclosure framework for preparers in your market. We believe that doing so has
the potential to position preparers in the Japanese market as leaders in how they communicate with global
investors on material topics, and as such, to enhance their access to global capital markets. Maximumalignment with and limiting modifications to ISSB Standards reduces fragmentation and promotes
comparability for investors; it streamlines the reporting burden for companies that may need to comply withmultiple requirements.

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While we recognise that SSBJ is not currently proposing a double materiality approach, we believe it isvaluable to maintain the inclusion of IFRS S1 B4-B5. These paragraphs provide context for companies to alignthe scope of their sustainability reporting with the ISSB requirements; they present important examples ofdependencies across the supply chain and point to useful resources to draw on. Even from the global
baseline perspective, we believe they are important references.
We would also like to emphasise our support for aligning the timing of reporting sustainability-related
disclosures with the reporting of related financial disclosures. This enables investors to have all material
information for decision-making available at the same time. With regards to the reporting period of GHG
emissions specifically, we would again strongly encourage alignment between the sustainability-related
reporting period and the calculation period of GHG emissions.
The Appendix sets out our responses to the specific questions outlined in the consultation on the SSBJ’s
Exposure Draft. We are also supportive of the submission made by the Asian Corporate Governance
Association (ACGA).
We thank you for considering our response and if you have any questions, please do not hesitate to contact
us directly.

Yours sincerely,

Aina Fukuda
Head of Japan Investment Stewardship

Catherine Ogden
Senior Manager, Sustainability & Responsible Investment

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Appendix

Question 1: 本公開草案の開発にあたっての基本的な方針に関する提案に同意しますか。同意しない場合には、その理由をご記載ください。また、国際的な基準との整合性を図る程度及びその方法についてどのように考えますか。理由とともにご記載ください。

Do you agree with the basic policy recommendations for the development of this exposure
draft? If you do not agree, please state the reasons for your disagreement. What do you think
about the degree of harmonization with international standards and how this will be achieved?
Please state your reasons.
A1: Yes, we strongly support the development and roll-out of standardized global reporting
standards for climate and sustainability. We believe it is important for companies and investors toconsolidate the disparate reporting landscape, helping to avoid the overburdening of reportingand providing the market with relevant, consistent, and comparable information to support
investment decision making and capital allocation. We therefore very much encourage the uptakeof ISSB standards globally and we are particularly supportive of the building block approach, thatenables more mature markets to move beyond the baseline, to provide more granular
information and to evolve from an approach of financial materiality towards double materiality.
Question 2: 「ガイダンスの情報源」における「SASB スタンダード」及び「産業別ガイダンス」の取扱いに関する提案に同意しますか。同意しない場合には、その理由をご記載ください。

Do you agree with the proposed treatment of SASB Standards and industry guidance in theguidance sources?
A2: Yes, we are supportive of SASB materiality guidance being one of the building blocks of ISSB
and the proposed treatment of SASB Standards and Industry guidance in the SSBJ Exposure Draft.
Indeed, materiality as a starting point is important, and we want the company to be focused on
the issues that are material to their industry, which SASB helps to refine.
Question 3: スコープ 1、スコープ 2 及びスコープ 3 の温室効果ガス排出量の合計値に関する提案に同意しますか。同意しない場合には、その理由をご記載ください。

Do you agree with the proposal regarding the total amount of greenhouse gas emissions for
Scope 1, Scope 2, and Scope 3? If not, please explain why.
A3: Yes, we are very supportive of SSBJ exposure draft in mandating Scope 3 GHG emissions
reporting. The inclusion of Scopes 1, 2, and 3 in mandatory disclosures will promote thealignment with international standards, including the ISSB which mandates scope 3 GHG
emissions reporting. In addition to disclosing the absolute sum of GHG emissions across the three
scopes, which is required in the SSBJ’s draft standards, we expect companies to disclose a breakdown of material scope 3 emission categories and calculation methodologies.

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Question 4: 温対法に基づく温室効果ガス排出量の報告に関する提案に同意しますか。同意しない場合には、その理由をご記載ください。

Do you agree with the proposals regarding reporting of GHG emissions under the Act on
Promotion of Global Warming Countermeasures? If not, please explain why.
A4: We understand that this question on the reporting period may be unique to Japan, due to theexisting mandatory GHG disclosure requirements under the Act on Promotion of Global WarmingCountermeasures. Nevertheless, we believe that it would be preferable for issuers to have thesame period for GHG emissions calculation and financial reporting, and therefore suggest that thedraft standards remove the exceptions to align with the IFRS Sustainability Disclosure Standards(S1. 64). We agree with the ISSB which proposes aligning the timing of reporting to ensure
investors have all material information for decision making available at the same time.
We believe that the standards should, at minimum, require Prime Market listed companies tohave sustainability-related financial disclosures covering the same reporting period as the related
financial statements, regardless of existing reporting requirements under the Act on Promotion of
Global Warming Countermeasures.
That said, it is important that the standards are pragmatic and that they do not impose overly
burdensome processes. We would therefore be supportive of transitional relief (exemptions
stated in paragraph 69 of SSBJ Exposure Draft) being applied initially to companies not listed on
the Prime Market. (We note the roadmap and timetable of the roll out of the standards publishedby the Japan FSA Working Group).
We would also like to take this opportunity to emphasize that we continue to strongly advocate
for the company’s annual financial report including the audited financial statements (Yuho) to be
published before the annual general meeting (AGM). Following the adoption of the SSBJ
Standards, we would expect both sources of information to be provided to investors well before
the AGM.
Question 5: スコープ 2 温室効果ガス排出におけるロケーション基準とマーケット基準に関する提案に同意しますか。同意しない場合には、その理由をご記載ください。

Do you agree with the proposal for location-based and market-based criteria for greenhousegas emissions? If not, please explain why.
A5: Yes, we are supportive of the SSBJ Exposure Draft which we believe is consistent with the IFRS
disclosure standards requiring disclosure of a) location-based scope 2 emissions and b) additional
information about any contractual instruments that is necessary to inform users’ understandingof the company’s Scope 2 greenhouse gas emissions. We see no problem with the SSBJ standards
allowing market-based scope 2 emissions, where this is in addition to location-based (not as analternative to location based). We agree that this can be a way to incentivize issuers to supply
renewable energy and reflect their efforts (particularly in Japan, where sourcing renewableenergy can be a challenge). From our data perspective, we see location-based reporting as apriority – however information on “contractual instruments that is necessary to inform users’3Confidential

understanding of the company’s Scope 2 greenhouse gas emissions” or “market-based Scope 2
greenhouse gas emissions” is still something we would encourage on top.
Question 6: スコープ 3 温室効果ガス排出の絶対総量の開示における重要性の判断の適用に関する提案に同意しますか。同意しない場合には、その理由をご記載ください。
Do you agree with the proposal regarding the application of materiality judgments in disclosing
absolute Scope 3 GHG emissions? If not, please explain why.
A6: Yes, in principle, we agree that some flexibility is appropriate with regards to the disclosure ofabsolute Scope 3 GHG, based on materiality. We support the current draft’s prompt forcompanies to determine the materiality of Scope 3 on a category basis. Determining which
categories are material is best done on a sector basis and should be a product of the absolute
Scope 3 emissions within that category, as well as the company’s ability to influence and mitigate
them. This will be useful for both companies – to focus their resources and efforts on material
categories – and investors – to allow for better comparability among investee companies.
We would recommend aligning to CDP’s sector-based Scope 3 category guidance1 and would liketo highlight emerging guidance from IIGCC that highlights how investors may be approachingcategory emissions of corporate Scope 3.2
Question 7: 産業横断的指標等（気候関連のリスク及び機会）に関する提案に同意しますか。同意しない場合には、その理由をご記載ください。

Do you agree with the proposal regarding cross-industry indicators (climate-related risks andopportunities)? If not, please explain why.
A7: We do not necessarily agree with the SSBJ Exposure Draft, which gives companies the option
to provide “information about the magnitude” instead of quantitative information. We would
instead encourage mandatory reporting of quantitative information on both “amount andpercentage”, which would align the SSBJ Standards with the IFRS Sustainability DisclosureStandards. We believe that such quantitative information on these metrics helps to put
information on a company’s climate-related transition risks into perspective, allowing
stakeholders to better plan approaches to managing them.
Question 8: 産業横断的指標等（資本投下）に関する提案に同意しますか。同意しない場合には、その理由をご記載ください。
Do you agree with the proposals regarding cross-industry indicators (capital investment)?

A8: Yes, we agree with the draft, and would emphasize that the disclosure of capital expenditure,
financing or investments related to climate-related risks and opportunities is certainly
information investors would like to see. This helps investors understand if and how a company’scommitments and actions align with its long-term GHG emission reduction objectives.
1 CDP-technical-note-scope-3-relevance-by-sector.pdf
2https://www.iigcc.org/hubfs/2024%20resources%20uploads/2024%20Scope%203%20Supplementary%20Gu

idance.pdf

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Question 9: 産業横断的指標等（内部炭素価格）に関する提案に同意しますか。同意しない場合には、その理由をご記載ください。
Do you agree with the proposals regarding cross-industry indicators (internal carbon prices)?

A9: Yes, we agree with Exposure Draft’s proposal to include disclosures about (i) how an internalcarbon price is used in decision-making and (ii) the internal carbon price (the price for each metrictonne of GHG that the company uses to assess the costs of its GHG emissions). Additional
guidance on what constitutes an effective internal carbon price may be helpful for companies toensure internal carbon prices are appropriate and effective in relation to a company’s capital
allocation decisions and decarbonisation efforts.
Question 10: 経過措置に関する提案に同意しますか。同意しない場合には、その理由をご記載ください。

Do you agree with the proposals regarding transitional arrangements?
A10: We agree that a company may be allowed to adopt these transitional arrangements during
the first year of mandatory reporting, in which the SSBJ Standards become mandatory under the
Financial Instruments Exchange Act. However, companies should be required to justify why they
are delaying their disclosure on those items. We have provided additional comments on theimplementation schedule under A11 below.
Question 11: その他、本公開草案に関して、ご意見がありましたら、ご記載ください。なお、本公開草案の定めに関するご意見の場合、適用基準案、一般基準案又は気候基準案のいずれに対するご意見なのか、また、どの項番号に関するご意見なのかを明確にご記載ください。

If you have any other comments regarding this exposure draft, please state them here. If you
have comments regarding the provisions of this exposure draft, please clearly state whether
your comment is regarding the proposed application standards, the proposed generalstandards, or the proposed climate standards, and which paragraph number your comment isregarding.
A11:
Implementation timeline
While we support the approach of initially applying the SSBJ standards to companies with a larger
market capitalisation and expanding over time to all companies listed on the Prime Market, we
also recommend that the significance of the company’s GHG emissions be considered as anadditional layer in determining which companies will be subject to the SSBJ standards.
English disclosures
In order to attract foreign capital, and also given the level of foreign ownership of Japanese listedcompanies, we would support additional guidance from regulators and/or the stock exchange,
requiring companies on the Prime Market to make disclosures in English, in line with the SSBJ
Standards.

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Resources, relationships, dependencies, and impacts
We note that references to resources and relationships (IFRS S1 paragraph B4) and dependencies
and impacts (paragraph B5) have been omitted from SSBJ’s Exposure Drafts due to being
interpreted as explaining the concept of ‘impact materiality’.3 We have concerns that the SSBJ
considers these paragraphs to be irrelevant for SSBJ Standards, as these paragraphs in IFRS S1provide context for companies to align the scope of their sustainability reporting with the ISSB
requirements.
Financed emissions
We would welcome clarification of the wording in Paragraphs 60 and 61 (below) of the SSBJ’s
Climate Exposure Draft4 and an explanation of the implications of these exemptions.
60. 報告企業が次の 1 つ以上の活動を行う場合、ファイナンスド・エミッションに関する追加的な情報を開示しなければならない（別紙 C 参照）。
(1) 資産運用に関する活動(2) 商業銀行に関する活動(3) 保険に関する活動
61. 報告企業が第 60 項(1)から(3)に定める活動を行う場合であっても、それらを業として営むことについて企業が活動する法域の法律等により規制を受けていないときは、ファイナンス
ド・エミッションに関する追加的な情報を開示しないことができる。開示しないことを選択す
る場合、その旨を開示しなければならない。
Translation:
60. A reporting entity that participates in one or more of the following activities shall disclose
additional information about financed emissions: (1) asset management activities; (2)commercial banking activities; and (3) insurance activities/
61. A reporting entity may choose not to disclose additional information about financed
emissions if the entity engages in these activities and is not regulated by the laws andregulations of the jurisdiction in which it operates to engage in such activities. If an entity
chooses not to disclose such information, it shall disclose that fact.

Disclosures on climate-related policy engagements
We would encourage the SSBJ Standards to consider requiring companies to report on a) theirmaterial climate-related positions taken through indirect (e.g., industry group memberships) anddirect policy engagement with governments and regulators and b) the governance of such policy
engagement. We believe this requirement is particularly relevant for companies with significant
policy influence, which tend to be those with high market capitalisation in sectors with large
emissions.
LGIM has been closely involved in the development of the UK TPT's disclosure framework5, whichsets out clear expectations of both industry and government/regulators in Section 3 3 2024ed01_06.pdf (ssb-j.jp)
4 2024ed01_04.pdf (ssb-j.jp)
5 https://transitiontaskforce.net/wp-content/uploads/2023/10/TPT_Disclosure-framework-2023.pdf

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Engagement Strategy. We share the TPT's view that policy engagement is an important aspect ofa credible plan and an integral part of their 'strategic and rounded approach', contributing to an
economy-wide transition. We are aware that the ISSB incorporates TPT materials into its
knowledge base, and we would be supportive of policy engagement disclosure requirements
remaining an element of the framework and considered for market-level adoption where relevant.

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