Report by the Expert Panel on Sustainable Finance (Overview)
Building a Financial System that Supports a Sustainable Society

Chapter 1 Basic concept
Underlying Principle

Sustainable finance is an
infrastructure that supports
sustainable social and economicsystems. It should be driven not only
by private initiatives but by policy
initiatives.
Overarching Issues

2021.6.18

Chapter 2 Enhance Corporate Disclosure
Broad discussion needs to be held on appropriate corporate disclosure regarding sustainability for constructive dialogue withinvestors and financial institutions.
Sustainability

Towards comparable and consistent sustainability reporting standards worldwide, it is important toactively participate in the process of developing sustainability reporting standards at the IFRS Foundation.

Climate Change

Following the revisions of the Corporate Governance Code (June 2021), the quality and quantity ofclimate-related disclosure should be enhanced based on the TCFD recommendations or an equivalentframework. Continued discussion is recommended with close attention paid to international development.

Chapter 3 Demonstrate Capital Market Functions
Developing a “green international financial center” can contribute to more loans and investment towards sustainable societies
in Asia and rest of the world. Market participants needs to play their role to demonstrate capital market functions.

Consideration of ESG factors isfavorable to fulfill fiduciary duties.

Institutional Investors

Institutional investors should enhance ESG investments and engagement with investees. They shouldseek to accumulate knowledge and skills in this regard, for instance by participating in global investors’
initiatives that collectively call for decarbonization of invested corporations.

A wide range of approaches needs tobe sought to raise awareness andaccumulate business practices
regarding impact finance.

Opportunity for
Retail Investors

Asset managers should carefully explain the characteristics of an ESG-related investment trust at its
establishment and distribution, and be accountable for ESG aspects of the selected issues on anongoing basis. The FSA should monitor asset managers in this regard.

It is important to participate ininternational discussions ontaxonomies for sustainable activities
and promote transition finance(including the formulation ofroadmaps for high emission
industries).

ESG Rating and DataProviders
ESG Platform

FSA is encouraged to promote discussions on issues of ESG rating and data providers, including code ofconduct.
As illustrated by initiatives of foreign securities exchanges, it is encouraged to develop a platform forpractical information of ESG-related bonds including green bonds and a mechanism which provides
objective certification of the eligibility of ESG-related bonds.

Chapter 4 Financial Institutions’ Support for Borrowers and Investees, and Risk Management
Financial institutions need to support the transition of the real economy, integrating sustainability opportunities and risks intotheir business strategies and risk management.
Support forBorrowers
Risk Management

To support loan recipients and investees’ climate transition, financial institutions are expected toaccumulate know-how, improve skills, and develop analytical tools.
FSA should continue to discuss with financial institutions the effective use of scenario analysis andencourage them to develop a risk management system for climate change (supervisory guidance on
climate transition support and risk management to be developed).