Towards a More Decision-Useful TCFD Disclosure
July 2020
The Japan TCFD Consortium-Climate change is an urgent issue, and realizing the goals of the Paris Agreement is becoming
increasingly important. To achieve this, it is necessary to finance companies that actively addressenvironmental issues, and it is crucial that information which contributes to appropriate decision-making
by investors and other stakeholders be disclosed from the companies.

-In Japan, companies and investors hand-in-hand established the TCFD Consortium in May 2019 as aprivate sector-led initiative to promote the disclosure of information based on TCFD recommendations,and enhance constructive dialogue (engagement) based on this disclosure. The private sector and thegovernment have since been working together on implementing TCFD recommendations, with theparticipation of government agencies as observers.
Specifically, the Consortium has published the "Green Investment Guidance", which aims to enable
investors and other stakeholders to effectively utilize the information disclosed based on TCFD
recommendations, and established “GIG Supporters,1” to disseminate the guidance. In addition, inOctober 2019, the Consortium and WBCSD co-hosted the TCFD Summit which was organized by theMinistry of Economy, Trade and Industry (METI). The Consortium have further convened various working
groups as well as roundtables which provide opportunities for dialogue between companies andinvestors. Through these activities, the Consortium has been contributing to the improvement of TCFDaligned disclosures in Japan in terms of both quantity and quality.2-Regulatory foundation regarding the disclosure of environment-related information in Japan has alreadybeen in place with the obligation to report on greenhouse gas emissions set out in the Act on Promotionof Global Warming Countermeasures, etc.3 In addition, the Corporate Governance Code revised in 2018,
which requires “comply or explain” reporting on a principle basis, specifically spells out ESG elements
within its concept of disclosure.
Based on this regulatory foundation, Japanese companies have been promoting disclosures based on
TCFD recommendations with a voluntary and flexible approach. The recent revision of the TCFD
Guidance (TCFD Guidance 2.0) is one such effort, with an aim to encourage voluntary TCFD-aligneddisclosure more broadly and deeply.

1

Investors and other financial institutions who support and utilize the "Green Investment Guidance" are registered as “GIG Supporters”, and examples

provided by these GIG Supporters on the use of the Guidance are posted on the TCFD Consortium website along with statements from the government,
business and financial stakeholders.
Green Investment Guidance: https://tcfd-consortium.jp/en/news_detail/19100802
GIG Supporters: https://tcfd-consortium.jp/en/gig_supporters
2

The number of organizations supporting TCFD in Japan is 290 (As of July 27, 2020) and 38 companies were rated A by the CDP in 2019, the most of any

country worldwide (See page 3, TCFD Guidance 2.0).
3

As regulatory foundation for climate-related information, there are the Act on Promotion of Global Warming Countermeasures, the Act on the Rational Useof Energy and the Cabinet Office Ordinance on the Disclosure of Corporate Affairs, etc. have been implemented. (See page 15, TCFD Guidance 2.0).

-While various discussions on TCFD-aligned disclosure have been taking place internationally, some ofthe Consortium members have expressed concern that prescriptive approach to disclosure may lead to amere “box-ticking” exercises and lack in substance, and that such a disclosure will no longer be decisionuseful. The flexible disclosure of information that sheds light on the originality and ingenuity of companies
needs to be ensured by utilizing initiatives such as this TCFD Guidance 2.0.
Though there are remaining issues related to the appropriate disclosure medium and style, it is also
imperative to encourage companies to disclose forward-looking information including uncertainties, suchas scenario analyses, in a framework that enables them to disclose such information in a proactivemanner.
(Opinions from members of the TCFD Consortium)· While clarification and specification of disclosure content have the effect of ensuring objectivity and verifiability, and may
have a positive impact on reliability, we are concerned that this disclosure will just be for the sake of disclosing
information and result in the minimal and formalistic disclosure.
· TCFD disclosure is in a growth stage; and detailed standardization under such circumstances may lead to box-ticking
type disclosure and lower the quality and reliability of disclosure content, possibly harming investors.
· The degree of impact of the climate change varies by industry and depends on the circumstances of individualcompanies. Therefore, voluntary disclosure should be encouraged rather than requiring companies to provide
mandatory and uniform disclosure.
· In some countries, the inclusion of forward-looking information, including uncertainties, in financial filings poses alitigation risk to companies, which can cause companies to hesitate with regards to pursuing its own initiatives anddisclosure, making it difficult for this information to become a tool for dialogue with investors.
· (In Japan,) financially material information for investors is required to be disclosed in Annual Securities Reports and it
would be decision-useful to effectively link them with other disclosure media (such as mentioning that TCFD based
information is disclosed in other reports).

-As described above, the TCFD Consortium calls on policymakers and stakeholders in Japan and aroundthe world to ensure a framework concerning TCFD-aligned disclosure in each country, in which
companies can actively pursue disclosure while maintaining its voluntary nature and flexibility according
to the circumstances of each company, leading to a more decision-useful TCFD-aligned disclosure.
The TCFD Consortium will contribute to promoting TCFD-aligned disclosures in companies both inJapan and abroad, by sharing its experience and knowledge worldwide acquired through promoting
discussions and dialogue between companies and investors, and through collecting and sharing
information on best practices.
(Opinions from members of the TCFD Consortium)· The primary purpose of the TCFD when it was first established was to encourage companies to disclose information thatare decision-useful to investors, and it is imperative to ensure it.
· If rigorous details are included in the TCFD framework without allowances being made according to the actual
circumstances of a country or region, there may be more harm done than good, and the nature of the disclosure may
deviate from the original intentions of disclosure based on TCFD recommendations.
· Given the diversity in each country, it is important that Japan considers an approach appropriate for itself. The content,extent, necessity, and effectiveness of mandatory disclosure vary from a country to a country, so such things should beleft to the discretion of each country.