September 13, 2019

Comments on Taxonomy Technical Reportissued by the Technical Expert Group on Sustainable FinanceJapanese Bankers Association
We, the Japanese Bankers Association (JBA), would like to express our gratitude
for this opportunity to comment on Taxonomy Technical Report that call for feedback
issued by the Technical Expert Group on Sustainable Finance (TEG) on June 18, 2019.
We respectfully expect that the following comments will contribute to work by the TEG
and the European Commission (EC).
1. Usability of the Taxonomy<Considerations in using the Taxonomy> The taxonomy should not be used for penalization purposes that may, for example,
result in restricting financing for non-Taxonomy-eligible project, whereas thetaxonomy is to be used for fostering and supporting Taxonomy-eligible projects.
Adequate care must be taken to avoid creating a situation where only those in thegreen list are "good" and the others, not in the green list, are "bad”.
For the purpose of differentiating financial risks associated with taxonomy-eligible
projects, accumulated data for those risks is far from sufficient. If, therefore, market
participants are subject to additional regulations that go beyond requiring disclosures,for example, requiring financial institutions under the prudential framework to adjust
risk weights based on the EU Taxonomy, careful consideration should be given inlight of the sufficiency of accumulated data and data analysis.

With regard to funding by non-EU issuers, following exception should be developed
for green assets that substantially contribute to a reduction in CO 2 emissions, even if
such assets do not meet EU Taxonomy criteria: “If green assets comply with national
GHG emission reduction standards established based on conditions unique to eachcountry, these assets shall be deemed as green bonds even if they are not directly
eligible to EU Taxonomy.” In addition, a disclosure platform should be also provided
to financial institutions so as to enable them to determine whether non-EU green

bonds comply with the exceptions set out in the EU Taxonomy.

<Review of the use of the Taxonomy (disclosure requirement)>
 For EU subsidiaries of a certain size of non-EU banks to comply with disclosure
requirement under the EU Non-Financial Reporting Directive (statutory
requirement), disclosures by recipients of funds (hereinafter referred to as "borrowers and investees ") should be further enhanced. In particular, to ensure
accurate disclosures of corporate loans that are not linked to a certain project, it
would be necessary to require borrowers and investees to provide information about
their use of funds in addition to imposing the disclosure requirement on financialinstitutions. Specifically speaking, we would like to propose to require borrowers
and investees, who receive external funding exceeding a certain amount, to provide
information about their use of funds.
2. Future Development of the Taxonomy
 The development of the taxonomy is effective for promotion of sustainable finance,
and it is meaningful to enable it to function well. While we understand that theproposed taxonomy regulation is applied at the EU level, it may serve as a referencecase for considerations by other jurisdictions, and may have impacts on pricing of
global investments and loans through changes in directly-affected EU financial
institutions' investment and financing activities. It is therefore important to consider
and design a system by taking into account such factors.
We are concerned that, if the taxonomies differ significantly and are not harmonised
across jurisdictions, regulations and systems that rely on the taxonomies may befragmented.

On the other hand, if extremely strict taxonomies are established in accordance withstandards established in developed countries and applied as “one size fits all”
standards, there is a possibility that the policy for achievement of the Paris
Agreement and a transition to low-carbon society in each country and jurisdiction is
not implemented flexibly.

Sustainable finance (taxonomy) should support not only purely green economic
activities but also economic activities aimed at the transition to a low-carbon
economy. For example, for emerging markets (developing countries) where theirlevels of economic maturity differ, it is important to include, into their taxonomies, a2

wide range of activities that contribute to improving their current situations in orderfor such markets to foster the transition to a low-carbon economy. The level ofactivities required for those markets should not be the same as the ones required fordeveloped countries.
A well-balanced framework should be developed for both developed countries andemerging countries by sharing a universal and global principle, such framework
shall lead to accommodate a variety of taxonomies developed in a harmonized way
to the extent possible, and these taxonomies should be introduced in ways that reflect
the economic or energy-related situations of each country and jurisdiction.

It is desirable that the TCFD recommendations be adopted as the “global principle,”and be regarded as a foundation to promote sustainable finance in each jurisdiction.
Each country shall develop its own taxonomy in line with such common framework
and principle.

An excessive and prescriptive taxonomy might lead to impede innovation. In orderto create an environment for fostering creativity and innovations of private sector,
we consider that taxonomy should be a flexible framework and be regularly reviewed
to reflect current trends.

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