Guidance on Climate-related
Financial Disclosures 3.0
Disclosure(TCFD Guidance 3.0) Sector-Specific
Guidance

October 2022

Table of Contents
1. Objectives of Sector-Specific Disclosure Guidance ................................1
2. Sector-Specific Recommended Disclosures ...........................................3(1) Automobiles ....................................................................................... 3(2) Iron and Steel ..................................................................................... 8(3) Chemicals ......................................................................................... 12(4) Electrical and electronics ................................................................. 16(5) Energy .............................................................................................. 18(6) Food ................................................................................................. 24(7) Banking ............................................................................................ 30(8) Life insurance ................................................................................... 36(9) Non-life insurance ............................................................................ 41(10) International Shipping ...................................................................... 45

1. Objectives of Sector-Specific Disclosure Guidance

ChemicalsElectrical andelectronics
EnergyFoodBanking
Life insurance
Non-life
insurance
International
Shipping

1

Iron and Steelhttps://www.fsb-tcfd.org/publications/final-implementing-tcfd-recommendations/

Automobiles

1

Sector-Specific
Recommended
Disclosures

The main text of TCFD Guidance 3.0 explained topics common to all industrial sectors in thefour thematic areas in which the Task Force recommends disclosure: Governance, Strategy,
Risk Management, and Metrics and Targets. In the case of disclosure on Strategy or Metrics
and Targets, however, different sectors have different climate-related risks and opportunities,
which may lead to variance in the methods for presenting strategies an in the metrics andtargets used to measure them.
The Annex to the TCFD Recommendations (Implementing the Recommendations of the Task
Force on Climate-related Financial Disclosures) include sector-specific supplemental guidance 1.
This provides recommendations for disclosure to the financial sector (Banks, Insurance
Companies, Asset Owners, and Asset Managers) and non-financial groups (Energy,
Transportation, Materials and Buildings, and Agriculture, Food and Forest Products Groups),
for groups of sectors or for individual sector. For those belong to the financial sector, specificguidance are provided on Strategy, Risk Management and Metrics and Targets. For the nonfinancial groups, guidance common to the non-financial group is provided for Strategy,
whereas sector-specific guidance on Metrics and Targets is provided.
With reference to “Key Issues considered and Areas for Further Work,” the TCFD
Recommendations also stated that “the Task Force encourages further research and analysis
by sector and industry experts to increase organizations’ understanding of climate-related risks
and opportunities.” This left the guidance for the sector-specific disclosure as a remaining issue.
Following this, the “TCFD Guidance” published by the Ministry of Economy, Trade and Industry
in 2018 included sector-specific recommended disclosures for five sectors focusing on energyintensive industries. The “TCFD Guidance 2.0” published by the TCFD Consortium in 2020
additionally included the food industry as well as three financial sectors (banking, life
insurance and non-life insurance) to expand the sector-specific recommended disclosures,with international shipping being added in 2021. With the publication of “TCFD Guidance 3.0”,
the recommended disclosures are published as a separate volume.
The recommended disclosures explained below are not presented as “tick-boxes.” Each
disclosure item presented in this Guidance is an example of a recommended disclosure for acompany if climate change is deemed to have material impacts on its business model. In
addition, such disclosures by companies can be expected to facilitate dialogue with investors
and other stakeholders, and to thereby deepen their understanding of industry-wide efforts
and contributions to climate change issues.
In formulating the recommended disclosures, characteristics of each industry wereconsidered. For automobiles, iron and steel, chemicals, electrical and electronics sectors,
recommended disclosures are classified into efforts in the manufacturing phase, use phase

Objectives ofSector-Specific
Disclosure Guidance

1. Objectives of Sector-Specific Disclosure Guidance1. Objectives of Sector-Specific Disclosure Guidance

Objectives ofSector-Specific
Disclosure Guidance
Sector-Specific
Recommended
Disclosuresand others. For other sectors, the value chain structure of corporate activities and the
expected risks and opportunities differ from one sector to another. The recommended
disclosure Items have therefore been developed according to the characteristics of therespective sectors.
Note that disclosure based on the TCFD Recommendations is still evolving worldwide. The
disclosed contents are expected to be improved as case examples accumulate. Under thesecircumstances, this Guidance has been developed as a first step to respond to the TCFD
Recommendations. Revisions to the content are assumed to be forthcoming, and sectors are
expected to be added based on reviews of the contents and sectors as the disclosure practicemakes progress in the future.

Automobiles
Iron and Steel
ChemicalsElectrical andelectronics
EnergyFoodBanking
Life insurance
Non-life
insurance
International
Shipping

22. Sector-Specific Recommended Disclosures(1) Automobiles

Description of the Transportation group in the TCFD Recommendations

Iron and Steel
ChemicalsElectrical andelectronics
EnergyFoodBanking
Life insurance
Non-life
insurance
International
Shipping

3

Automobiles

2. Transportation Group
Figure10 Transportation
The Transportation Group includes, but is
not limited to, industries listed in Figure 10.
Transportation is critical to the economy
and drives a significant portion of emissions
and demand for energy through the
production and, more important, the usephase. The industry is under increasing
policy and regulatory pressure to achieve
emission targets for the use phase.
Increasing constraints on emissions fuelefficiency will continue to impact costs in thisgroup, particularly around investments ininnovation(new
technologies
andefficiencies).126
The Transportation Group, therefore, will likely face financial challenges from two
major drivers. First, policymakers are setting stricter targets for emissions and fuelefficiency from transportation carriers. Second, new technology around lowemission/fuel-efficient carriers (e.g., electric cars) is creating a shift in the competitiveand investment landscape. New technological innovations and new market entrants canweaken companies’ market position, resulting in lower revenues, higher costs, andnarrower margins. The effects of these two drivers may be compounded by the length of
product cycles for transportation products, such as cars and trucks, and especially for air
and rail and marine equipment. As with the Energy Group, investments in long-lived
assets (e.g., manufacturing facilities, airplanes, ships) and longer planning horizons are
relevant factors that must be taken into account when considering the climate-relatedrisks and opportunities.
Consequently, disclosures should focus on qualitative and quantitative assessments
and potential impacts of the following:

Sector-Specific
Recommended
Disclosures

The TCFD Recommendations describe climate-related risks and opportunities for theTransportation group, including the automobile industry, as shown below. This section
provides supplemental guidance focusing on the automobile industry.

Objectives ofSector-Specific
Disclosure Guidance

2. Sector-Specific Recommended Disclosures

2. Sector-Specific Recommended Disclosures

Objectives ofSector-Specific
Disclosure Guidance

Sector-Specific
Recommended
Disclosuresfinancial risks around current plant and equipment, such as potential early writeoffs of equipment and R&D investments or early phasing out of current products
due to policy constraints or shifts or the emergence of new technology;
investments in research and development of new technologies and potential shifts
in demand for various types of transportation carriers; andopportunities to use new technologies to address lower-emissions standards andincreased fuel-efficiency requirements, including transport vehicles (cars, ships,
planes, rail) that run on a range of traditional and alternative fuels.

Automobiles

Transportation Group organizations should consider providing additional industryspecific metrics.127 Examples of potential metrics include sales weighted average fleet
fuel economy by region and weight/number of people transported, Energy Efficiency
Design Index (EEDI) for new ships, life cycle reporting of GHG emissions of transportation
products (air, ship, rail, truck, auto).

Iron and Steel
Chemicals

Original footnote 126: Moody’s Global Credit Research, “Moody’s: Auto sector faces rising credit risks due
to carbon transition,” September 20, 2016.
Original footnote 127: or more sector-specific information, see SASB, “Climate Risk Technical Bulletin,”
April 12, 2021 and WBCSD, “TCFD Auto Preparer Forum,” May 26, 2021.

Electrical andelectronics

Source: TCFD, 2021, Annex: Implementing the Recommendations of the Task Force on Climate-related
Financial Disclosures, p.65

EnergyFoodBanking
Life insurance

The number of vehicles sold in the automobile industry is expected to continue growing,particularly in emerging countries. On the other hand, vehicles with improved environmental
performance are required around the world more than ever with tightening regulations onfuel consumption. The industry has also faced a wave of technological innovation called CASE 2
in recent years, which requires innovations to significantly change the existing business models.
One of the new possibilities expected of automobiles is an active contribution to global
efforts to combat climate change.
From a climate change perspective, the use phase of vehicles emits the largest amount of
GHG in the automobile lifecycle. Contributions to climate change measures can thus be welldemonstrated by describing efforts to develop next-generation vehicles (HV, EV, FCV, etc.) or
to reduces emissions through “Well-to-Wheel” as an emissions reduction strategy.

Non-life
insurance
International
Shipping

I. Efforts to reduce GHG emissions in the manufacturing phase
Efforts to reduce GHG emissions in the manufacturing process
Automobiles with high environmental performance like EVs may actually emit more GHG in
2

Connectivity, Autonomous, Shared and Electric4

2. Sector-Specific Recommended Disclosures(Disclosure example)
 Targets and results of GHG emissions per vehicle manufactured

Food
Banking
Life insurance
Non-life
insurance
International
Shipping

5EnergyAn effective way to show a company’s technological level compared with the world orindustry average is to refer to benchmark values. A comparison with benchmark values foreach major market is also important to include, as consumer needs differ from market tomarket.

Electrical andelectronics(Disclosure example)
 Medium- and long-term targets and results related to GHG emissions (or fuelconsumption) from an average new vehicle

Chemicals

II. Efforts to reduce GHG emissions at the usage stage
Efforts to reduce GHG emissions from the use of products
Given the policy trend of national governments (fuel consumption regulations, etc.) and theincreasing consumer awareness of environmental issues, efforts to reduce emissions from theuse phase, the phase that accounts for the major part of GHG emissions in the automobile
lifecycle, are a crucial point to present in disclosures on GHG emissions in the automobile
industry.

Iron and Steel(Disclosure examples) Establishment of Green Procurement Guidelines
 Introduction of mechanisms to manage supplier GHG emissions

Automobiles

Efforts to reduce GHG emissions in procurement
Efforts to reduce the GHG emissions from suppliers are important for the overall reductionof GHG emissions in the procurement phase, as the automobile industry consists of a large
number of suppliers.

Sector-Specific
Recommended
Disclosures

Another important point is to assess environmental impacts through the entire automobile
lifecycle from the design stage of vehicles, and to reflect the results in the design planning.
Doing so will lead to GHG emission reductions through the entire lifecycle encompassing the
manufacturing phase as well as use and disposal phases.

Objectives ofSector-Specific
Disclosure Guidance

the vehicle manufacturing phase than conventional vehicles. An important point, therefore, isto reduce GHG emissions in the manufacturing phase as well as the use phase.

2. Sector-Specific Recommended Disclosures

Objectives ofSector-Specific
Disclosure Guidance
Sector-Specific
Recommended
Disclosures

Reference example: A comparison of the average fuel consumption of companies in Europe
The International Council on Clean energy Transportation (ICCT) calculates the average fuelconsumption of passenger vehicles sold in a given year by automaker using data compiled by
the European Environment Agency. The average fuel consumption depends not only on thefuel economy performance of each vehicle model, but also the sales mix of vehicles. The
average fuel consumption of vehicles produced by each automaker is compared by the averagevehicle weight class.

Automobiles
Iron and Steel
ChemicalsElectrical andelectronics
EnergySource: ICCT (International Council on Clean Transportation), “CO2 emissions from new passenger cars in the
EU: Car manufacturers’ performance in 2018”

Food
BankingEfforts to contribute to GHG emissions reduction through the value chain
Another important point to present is the amount of avoided GHG emissions by thosevehicle models, as the introduction of energy-efficient vehicles is expected to contribute to
reduced GHG emissions by replacing conventional vehicles. Efforts are also underway tocontribute to reduced GHG emissions by efficient energy management through the use of EVs.

Life insurance
Non-life
insurance(Disclosure example)
 Amount of avoided GHG emissions through the improvement of vehicle energy
efficiency, etc.

International
Shipping

6

2. Sector-Specific Recommended Disclosures

Automobiles
Iron and Steel
ChemicalsElectrical andelectronics

Zero-emission vehicles (ZEVs) such as EVs and FCVs emit GHGs not from the use phase, butduring the phases of extraction, manufacturing, and supply of fuel. An effective way to present
the contribution of a ZEV to GHG emission reduction in its lifecycle is to compare the GHG
emissions from a “Well-to-Wheel” perspective.

Sector-Specific
Recommended
Disclosures(Disclosure examples) Definition of vehicle models that contribute to reduced GHG emissions
 Specific technological development efforts and future goals (the number of vehicles
sold or the market share)

Objectives ofSector-Specific
Disclosure Guidance

Efforts to develop and disseminate emerging technologies that reduce GHG emissions in theuse phase
Another effective approach to presenting a company’s strategy to reduce GHG emissions in
the use phase is to present the efforts taken to develop and disseminate emerging
technologies, particularly those related to vehicle models that contribute to reduced GHG
emissions among the company’s products. Given the variety of the vehicle models that
contribute to reduced GHG emissions, such as hybrid vehicles, electric vehicles (EV), and fuelcell vehicles (FCV), a company needs to present its competition strategy in addition to thetypes of vehicle models it is to develop to contribute to reduced GHG emissions.

EnergyFoodBanking
Life insurance
Non-life
insurance
International
Shipping

7

2. Sector-Specific Recommended Disclosures

Objectives ofSector-Specific
Disclosure Guidance(2) Iron and SteelThe TCFD Recommendations describe climate-related risks and opportunities for the
Materials and Buildings group, including the iron & steel industry, as shown below. This section
provides supplemental guidance focusing on the iron & steel industry.

Sector-Specific
Recommended
Disclosures

Description of the Materials and Buildings group in the TCFD Recommendations

Automobiles
Iron and Steel
ChemicalsElectrical andelectronics
EnergyFoodBanking
Life insurance
Non-life
insurance

3. Materials and Buildings Group
The Materials and Buildings Group
Figure 11 Materials and Buildings
includes, but is not limited to, industries
listed in Figure 11.
Materials
andBuildings
Grouporganizations are typically capital intensive,
require high investments in plants,
equipment, and buildings that are (relatively)
fixed in terms of location, and dependent onsources of raw and refined materials. This
may reduce the flexibility of organizations inthis group to adapt to risks of climate change.
Many of this group’s activities result in
financial exposures around high GHG emissions and high energy consumption.
Furthermore, a number of industries in this group are dependent on water availability
and/or vulnerable to the effects of acute or chronic physical risks from weather events.
Since the group is capital intensive and the plants and facilities have a long life span,
accelerated R&DDD (research, development, demonstration, and deployment) is
critically important. Thus, disclosures relating to R&DDD plans and progress are valuable
to see the current and future situation and risks of organizations in the group.
Consequently, disclosures should focus on qualitative and quantitative assessments
and potential impacts of the following: Stricter constraints on emissions and/or pricing carbon emissions and related
impact on costs.
 The construction materials and real estate sectors should assess risks related tothe increasing frequency and severity of acute weather events or increasing water
scarcity that impact their operating environment.
 Opportunities for products (or services) that improve efficiency, reduce energyuse, and support closed-loop product solutions.

International
Shipping

Materials and Buildings Group organizations should consider providing additional
industry-specific metrics.129 Examples of potential metrics include building energy
82. Sector-Specific Recommended Disclosures

Source: TCFD, 2021, Annex: Implementing the Recommendations of the Task Force on Climate-related
Financial Disclosures, p.66

EnergyFoodBanking
Life insurance
Non-life
insurance
International
Shipping

9Electrical andelectronics

Furthermore, in order to show the company’s technological level compared with the worldor industry average, it is effective to refer benchmark values.

Chemicals(Disclosure example)
 Efforts to improve efficiency in the manufacturing process (energy intensity)

Iron and SteelI. Efforts to reduce GHG emissions in the manufacturing phase
Efforts to reduce GHG emissions in manufacturing processes
In the iron & steel lifecycle, the manufacturing process emits the largest amount of GHG. As
the demand for iron & steel is expected to endure worldwide, companies in the iron & steel
industry can adopt the strategy of improving the efficiency of the iron & steel manufacturing
process. Given that improved operation techniques and improvements from capital
investment at a company are reflected in intensity (GHG emissions per unit of output),
information is preferably disclosed on an intensity basis.
In understanding the numerical value quantified on an intensity basis, each company shouldtake into account the setting of boundaries, the ratio of blast furnaces to electric furnaces, etc.

Automobiles

The largest amount of GHG emissions from the iron & steel industry occurs in the
manufacturing phase. A company in this industry can therefore demonstrate its contributions
to solving climate change by indicating the efforts taken to reduce GHG emissions throughefficiency improvements in the manufacturing phase. Steel manufacturing technologies canbe categorized into blast furnaces and electric furnaces. Since raw materials for electric
furnaces are scrap steel manufactured by the blast furnace process and used as products, theWorld Steel Association (worldsteel) developed and defined ISO 20915, the idea of GHG
emissions that regards the blast furnace method and the electric furnace method as a single
steel material recycling system.
For blast furnaces, hydrogen reduction iron manufacturing and other innovativetechnologies are being developed as fundamental technologies to reduce GHG emissions. It isalso important to disclose climate change measures through such efforts.

Sector-Specific
Recommended
Disclosures

Original footnote 129; For more sector-specific information, see SASB, “Climate Risk Technical Bulletin,”
April 12, 2021 and WBCSD, “Construction and Building Materials TCFD Preparer Forum,” July 1, 2020.

Objectives ofSector-Specific
Disclosure Guidance

intensity by area, building water intensity (by occupants or square area), percent of fresh
water withdrawn in regions with high or extremely high baseline water stress, and areaof buildings, plants, or properties located in designated flood hazard areas.

2. Sector-Specific Recommended Disclosures

Objectives ofSector-Specific
Disclosure Guidance

Efforts to develop and disseminate emerging technologies that reduce GHG emissions in the
manufacturing phase
An important approach, in presenting a strategy related to future climate change measures,is to present efforts to develop emerging technologies.

Sector-Specific
Recommended
Disclosures(Disclosure example)
 Progress in or prospects for efforts to dramatically reduce GHG emissions in the
manufacturing phase (e.g., development of hydrogen-reduction iron manufacturing
technologies)

Automobiles
Iron and Steel

Reference: COURSE50 technology
A project designed to develop technologies to reduce CO2 emissions by approx. 30% by
reducing the emissions through the adoption of hydrogen reduction processes in blast
furnaces and the separation and collection of CO2 using a separation system. The project aims
to establish technologies by around 2030 and to practically utilize and diffuse them by 2050.

ChemicalsElectrical andelectronics

Efforts for resource circulation through recycling
The iron & steel industry has been promoting efforts focused on resource circulation
through the recycling of used products and byproducts generated from the manufacturingphase, as well as through the utilization of waste plastics, in order to indirectly contribute to
reduced GHG emissions. Demonstrating the contributions of those recycling efforts to reduced
GHG emissions is important.

EnergyFoodBanking(Disclosure examples) Material flow of manufacturing processes Recycling rate of byproducts generated from the manufacturing process Efforts to substitute coke through the use of waste plastic as a fuel and chemical
feedstock

Non-life
insurance
International
Shipping

10Life insurance

II. Efforts to reduce GHG emissions in the use phase
Efforts to contribute to GHG emissions reduction through the value chain
In addition to presenting the GHG emission reductions in the manufacturing phase, it is also
important to present a strategy for the development and dissemination of products that
contribute to the realization of final products with lighter weights, longer lives, and improved
energy efficiency.

2. Sector-Specific Recommended Disclosures

Automobiles
Iron and Steel(Disclosure example)
 Amount of a contribution to reduced GHG emissions through the provision oftechnologies

Sector-Specific
Recommended
Disclosures

III. Other efforts
Efforts to contribute to GHG emissions reduction through the provision of technologies
Based on the recognition that the transfer of energy-efficiency technologies overseas is
effective in reducing GHG emissions at a global level, the iron & steel industry has been actively
disseminating advanced energy-efficiency technologies to developing countries in various
ways. It is therefore important to disclose such efforts.

Objectives ofSector-Specific
Disclosure Guidance(Disclosure examples) Introduction of products that contribute to reduced GHG emissions
 Avoided emissions by each productChemicalsElectrical andelectronics
EnergyFoodBanking
Life insurance
Non-life
insurance
International
Shipping

11

2. Sector-Specific Recommended Disclosures

Objectives ofSector-Specific
Disclosure Guidance(3) Chemicals
The TCFD Recommendations describe risks and opportunities for the Materials andBuildings Group, including the chemical sector, as shown below. This section provides
supplemental guidance focusing on the chemical sector.

Sector-Specific
Recommended
Disclosures

Description of the Materials and Buildings Group in the TCFD Recommendations

Automobiles
Iron and Steel
ChemicalsElectrical andelectronics
EnergyFoodBanking
Life insurance

3. Materials and Buildings Group
The Materials and Buildings Group
Figure 11 Materials and Buildings
includes, but is not limited to, industries
listed in Figure 11.
Materials
andBuildings
Grouporganizations are typically capital intensive,
require high investments in plants,
equipment, and buildings that are(relatively) fixed in terms of location, anddependent on sources of raw and refinedmaterials. This may reduce the flexibility oforganizations in this group to adapt to risksof climate change.
Many of this group’s activities result in
financial exposures around high GHG emissions and high energy consumption.
Furthermore, a number of industries in this group are dependent on water availability
and/or vulnerable to the effects of acute or chronic physical risks from weather events.
Since the group is capital intensive and the plants and facilities have a long life span,
accelerated R&DDD (research, development, demonstration, and deployment) is
critically important. Thus, disclosures relating to R&DDD plans and progress are valuable
to see the current and future situation and risks of organizations in the group.
Consequently, disclosures should focus on qualitative and quantitative assessments
and potential impacts of the following: Stricter constraints on emissions and/or pricing carbon emissions and related
impact on costs.
 The construction materials and real estate sectors should assess risks related tothe increasing frequency and severity of acute weather events or increasing water
scarcity that impact their operating environment.
 Opportunities for products (or services) that improve efficiency, reduce energyuse, and support closed-loop product solutions.

Non-life
insurance
International
Shipping

Materials and Buildings Group organizations should consider providing additional
industry-specific metrics.129 Examples of potential metrics include building energy
intensity by area, building water intensity (by occupants or square area), percent of fresh12

2. Sector-Specific Recommended Disclosures

Original footnote 129; For more sector-specific information, see SASB, “Climate Risk Technical Bulletin,”
April 12, 2021 and WBCSD, “Construction and Building Materials TCFD Preparer Forum,” July 1, 2020.

Sector-Specific
Recommended
Disclosures

Source: TCFD, 2021, Annex: Implementing the Recommendations of the Task Force on Climate-related
Financial Disclosures, p.66

Objectives ofSector-Specific
Disclosure Guidancewater withdrawn in regions with high or extremely high baseline water stress, and areaof buildings, plants, or properties located in designated flood hazard areas.

Electrical andelectronics

I. Efforts to reduce GHG emissions at the manufacturing stage
Efforts to reduce GHG emissions from manufacturing processes
The chemical industry emits a large amount of GHG in the manufacturing phase. Companies
can thus adopt the GHG emission reduction strategy of improving the efficiency of
manufacturing processes and shifting to high value-added products with low GHG emissions.

Non-life
insurance

Iron and Steel
Chemicals
EnergyFoodBanking
Life insurance
International
Shipping

13

Automobiles

Companies in the chemical sector conduct a wide range of business activities, and theindustry has a very complex structure overall. Manufacturing processes in the chemicalindustry can be divided into the following categories: basic chemicals such as ethylene andpropylene produced using naphtha, etc. as raw materials; intermediate chemicals, including
plastics, produced using basic chemicals as raw materials; and final chemical products, such as
molded plastics, produced from intermediate chemicals. The processes of manufacturing basic
chemicals generate a large amount of GHG emissions in cracking naphtha, etc., and generally
emit more GHG emissions than the processes of manufacturing intermediate chemicals andfinal chemical products.
Given that the chemical industry emits a large amount of GHG in the manufacturing phase,as described above, efforts to reduce GHG emissions in the manufacturing processes in theindustry are important. Chemical products are made mainly from fossil resources at present.
Over the medium- to long-term, the industry has prospects for achieving reduced GHG
emissions by working on the diversification of raw materials using biomass, etc. as raw
materials.
Many chemical products are intermediate materials that can contribute to reduced GHG
emissions through the use phase of final products in sectors such as automobiles and homeelectronics. A wide range of products in the chemical industry are produced and used fordiverse applications in the use phase, contributing to reduced GHG emissions. An important
step in disclosure, therefore, is to describe business opportunities by identifying those
products and demonstrating their applications, the mechanisms of GHG emissions reduction(the mechanisms by which they lead to reduced emissions), and the amounts of avoided GHG
emission.

2. Sector-Specific Recommended Disclosures

Objectives ofSector-Specific
Disclosure Guidance
Sector-Specific
Recommended
Disclosures

The sheer variety of products handled in the chemical industry makes it difficult to assess such
efforts using a single type of metric. One possible metric related to energy intensity is energy
consumption per total production, revenues, and profit. Another is the use of total GHG
emissions.
These metrics, however, are affected by changes in the product mix and production volume.
Any disclosure, therefore, should describe the reasons for such changes.

Automobiles(Disclosure examples) Efforts to improve energy intensity and reduce total GHG emissions (e.g., efforts tosave energy through the conversion of the production system, use of waste heat in acascaded manner, fuel switch in captive power generation)

Iron and Steel
Chemicals

Efforts to reduce GHG emissions in procurement
Some types of chemical products may emit more GHG emissions in the procurement phasethan in the manufacturing phase. In such a case, a company should disclose its efforts to
reduce GHG emissions in procurement.

Electrical andelectronics(Disclosure examples) Targets for reduced energy intensity in logistics
 Efforts for supply chain management (establishment of a green procurement policy,
etc.)

EnergyFoodBankingEfforts to develop and disseminate emerging technologies that reduce GHG emissions in the
manufacturing phase
On a medium- to long-term basis, it is important to develop new manufacturing methods
using innovative technologies that will replace conventional manufacturing methods. When acompany is working on the development of advanced technologies to reduce GHG emissions
in a chemical product life cycle, it should describe such efforts and the GHG emissions
reduction potential in its disclosure.

Life insurance
Non-life
insurance(Disclosure examples) Efforts to develop emerging technologies (e.g., development of a membrane
separation process, conversion of CO2 to raw materials (CCU 3), use of biomass as araw material, use of natural gas, use of methane hydrate as a resource) Expected effect of technology development in GHG reduction

International
Shipping

3

Carbon Capture and Utilization

14

2. Sector-Specific Recommended Disclosures

ChemicalsElectrical andelectronics

 Efforts and the amount of investment in research and development ofenvironmentally beneficial products
 Mechanism for reducing GHG emissions through environmentally beneficial products

Iron and Steel(Disclosure examples)

Automobiles

Efforts to develop and disseminate emerging technologies that reduce GHG emissions in theuse phase
A key step, for a company developing environmentally beneficial products (e.g., highthermal insulation materials and high-strength lightweight materials), is to provide a detailed
description of its research and development. Explanations on how environmentally beneficial
products reduce GHG emissions (i.e., how they bring about reduced emissions) are also useful,as they help investors better understand the products and their benefits overall.

Sector-Specific
Recommended
Disclosures(Disclosure examples) Definition of environmentally beneficial products and their contribution to sales
 Amount of avoided GHG emissions through environmentally beneficial products

Objectives ofSector-Specific
Disclosure Guidance

II. Efforts to reduce GHG emissions in the use phase
Efforts to contribute to GHG emissions reduction through the value chain
The chemical industry manufactures a wide variety of chemical products, many of which areintermediate materials. In planning out its strategy, therefore, a company can choose to supply
products that contribute to the resolution of climate change issues in the use phase.

EnergyFoodBanking
Life insurance
Non-life
insurance
International
Shipping

15

2. Sector-Specific Recommended Disclosures

Objectives ofSector-Specific
Disclosure Guidance(4) Electrical and electronics

Sector-Specific
Recommended
Disclosures
Automobiles
Iron and SteelCompanies in the electrical and electronics industry can be roughly categorized into devicecompanies and assembly companies. Device companies are those that primarily manufacture
semiconductors and other electronic components that are built into electronic devices but not
used on their own. Therefore, it is important for device companies to reduce GHG emissions
in the manufacturing phase. Assembly companies, meanwhile, manufacture final products
from various parts. As many of their products emit a large amount of GHG from energy
consumption in the use phase as opposed to the manufacturing phase, it is important for themto demonstrate their contributions to climate change reduction by reducing emissions in
product use. Some types of products consume relatively little energy in the use phase (e.g.,cameras, audio devices), For these products, the reduction in GHG emissions is more
important in the manufacturing phase.
Given the wider range of products produced in the electrical and electronics industry, bothdevice and assembly companies should ideally identify the products or technologies that
contribute to reduced GHG emissions in the use phase, describe their usage, and explain how
they contribute to reduced emissions.

ChemicalsElectrical andelectronics
EnergyI. Efforts to reduce GHG emissions at the manufacturing stage
Efforts to reduce GHG emissions in manufacturing processes
If a device company, or an assembly company which primarily manufactures products withlower energy consumption in the use phase, its products emit no GHG emissions in the usephase (or emit a smaller amount of GHG emissions than in the manufacturing phase). This
type of company should therefore describe its efforts to reduce emissions in the
manufacturing phase.

Food(Disclosure example)
 Efforts to improve manufacturing process efficiency (energy intensity)

Banking
Life insurance
Non-life
insurance
International
Shipping

II. Efforts to reduce GHG emissions in the use phase
Efforts to reduce GHG emissions from the use of products
In the case of assembly companies that primarily manufacture products with larger energy
consumption in the use phase, it is important to disclose specific efforts for reducing GHG
emissions in the use phase.
In view of the ongoing improvements in electrical and electronics products year after year,
it is also important to demonstrate the superior performance offered by such products, alongwith the progress in energy efficiency.

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2. Sector-Specific Recommended Disclosures

ChemicalsElectrical andelectronics
EnergyFoodBanking(Disclosure examples) Technological development to improve the energy efficiency of products Technological development of IoT solutions leading to reduced GHG emissions (energy
management, etc.)

Iron and Steel

Efforts to develop and disseminate emerging technologies that reduce GHG emissions in theuse phase
Another important step is to describe efforts for technological development to reduce GHG
emissions in the product use phase. Specific efforts may include technological development ofenergy management using IoT solutions, in addition to technological development related tothe energy efficiency of each product.

Automobiles(Disclosure examples) Introduction of products and services that contribute to reduced GHG emissions
 Amount of avoided GHG emissions through products and services

Sector-Specific
Recommended
Disclosures

Efforts to contribute to GHG emissions reduction through the value chain
The electrical and electronics industry produces a wide range of products, many of which
can contribute to reduction in GHG emissions. An important step in disclosure, therefore, is to
identify products or technologies that contribute to reduced GHG emissions, and disclose theircontribution to reduction. In the particular case of renewable energy facilities or otherproducts which do not emit GHG, it is important to disclose the avoided GHG emissions.
Furthermore, that if a company gives definitions for its environmentally beneficial products,
it is important to describe those definitions and to disclose the sales of the products so defined(in total or per product).

Objectives ofSector-Specific
Disclosure Guidance(Disclosure example)
 Efforts to improve the energy efficiencies of primary products(e.g., improvement of energy efficiencies during the use of products)

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2. Sector-Specific Recommended Disclosures

Objectives ofSector-Specific
Disclosure Guidance(5) Energy
The TCFD Recommendations describe risks and opportunities for the Energy Group, asshown below. This section provides supplemental guidance focused on the Energy Group.
Description of the Energy Group in the TCFD Recommendations

Sector-Specific
Recommended
Disclosures
Automobiles
Iron and Steel
ChemicalsElectrical andelectronics
EnergyFoodBanking
Life insurance
Non-life
insurance
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1. Energy Group
Figure 9 Energy Group
Energy is a critical element in the economy,
serving as a primary or necessary input in mosteconomic activities. This group comprisesorganizations extracting, processing, producing,and distributing fossil fuels or electric energy toother sectors of the economy. It includes, but is
not limited to, industries listed in Figure 9.
While many climate-related issues impact the Energy Group, organizations in thisgroup should consider providing disclosures related to financial implications of potential
physical impacts (e.g., reliance on water in areas of high water stress, severe storm/flood
mitigations) and transition impacts (e.g., policy requirements, carbon prices, newtechnology, changes in market demand) of climate-related risks and opportunities.
As fossil fuel and electricity providers, the organizations in this group generally havesignificant financial exposure around transition issues related to GHG emissions and, inmany cases, are dependent on the availability of water. For example, a majority of thecurrent electricity supply comes from non-renewable fossil fuel resources, resulting in asignificant exposure to transitions around global GHG emissions—either directly throughutility companies’ own energy use for production or indirectly through combustion offossil fuels.120 Electric utilities, therefore, face significant transition risk (i.e., the financial
risk arising from the changes in asset valuations caused by the structural shift toward a
low-carbon energy system). This is because the utility sector’s asset valuations are at risk
from the disruptive impact of the policy, technology, and portfolio changes that will occur
over the next two to three decades as policies, technology, and markets shift to a lowcarbon energy system.
In addition to GHG emissions, both hydroelectric power generation and cooling for
nuclear and nonnuclear power generation use large quantities of water.121 Physical risks
affecting water supplies creates a potentially important exposure for this industry.
Oil, gas, and coal extraction face similar transition risks as key suppliers to electricutilities. These industries also rely on water to a significant degree.122 123 124
These characteristics make the Energy Group particularly sensitive to physical, policy,
or technological changes affecting fossil fuel demand, energy production and usage,
emission constraints, and water availability. The regulatory and competitive landscape18

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Food

Original footnote 122: IPIECA, Water Resource Management in the Petroleum Industry, 2005.

EnergyOriginal footnote 121: van Vilet, M., et al., “Power-generation system vulnerability and adaptation tochanges in climate and water resources,” 2016.

Electrical andelectronics

Original footnote 120: According to International Energy Agency (IEA) data, CO2 emissions from fuelcombustion across all energy sectors and activities totaled 33.5 Gigatons (Gt) in 2018, thereby accountingfor 65 percent of total anthropogenic GHG emissions (51.9 Gt CO2e). Electricity and heat production on its
own accounted for 14Gt, representing 42 percent of all CO2 emissions from fuel combustion and 27
percent of all anthropogenic GHG emissions. To put this into context, the next highest emitting industrial
sector was transportation, which accounted for 8.3Gt (25 percent of all CO2 emissions from fuelcombustion, and 16 percent of total anthropogenic GHG emissions). IEA, CO2 Emissions from Fuel
Combustion: Highlights, 2020; PBL Netherlands Environmental Assessment Agency, Trends in Global CO2
and Total Greenhouse Gas Emissions: 2020 Report, 2020.

Chemicals

Energy Group organizations should consider providing additional industry-specificmetrics.125 Examples of potential metrics include percent of water withdrawn in regionswith high baseline water stress and amount of gross global Scope 1 emissions from (1)combustion, (2) flared hydrocarbons, (3) process emissions, (4) directly vented releases,and (5) fugitive emissions/leaks.

Iron and Steel

Automobiles

changes in compliance and operating costs, risks, or opportunities (e.g., older, lessefficient facilities or un-exploitable fossil fuel reserves in the ground);exposure to regulatory changes or changing consumer and investor expectations(e.g., expansion of renewable energy in the mix of energy supply); andchanges in investment strategies (e.g., opportunities for increased investment inrenewable energy, carbon-capture technologies, and more efficient water usage).

Sector-Specific
Recommended
DisclosuresObjectives ofSector-Specific
Disclosure Guidance

that surrounds electric utilities also differs significantly between jurisdictions, thus
making assessment of climate-related risks very challenging.
As a result, both the transition risks and physical risks associated with climate change
may impact the operating costs and asset valuation of organizations engaged in energy
activities. In particular, organizations within the Energy Group are generally capitalintensive, require major financial investments in fixed assets and supply chain
management, and have longer business strategy/capital allocation planning horizons
relative to many other sectors—horizons that may be particularly affected by climaterelated risks and opportunities. This requires careful assessment of climate-related risks
and opportunities to inform decisions about future sustainability and profitability.
Transparent and decision-useful climate-related disclosures are crucial to fully
understand the impact of climate change on business strategy and financial plans inenergy activities. Consequently, disclosures should focus on qualitative and quantitative
assessments and potential impacts of the following:2. Sector-Specific Recommended Disclosures

Objectives ofSector-Specific
Disclosure GuidanceOriginal footnote 123: International Council on Mining and Metals (ICCM), In Brief: Water stewardshipframework, 2014.
Original footnote 124: World Resources Institute (WRI), Water-Energy Nexus: Business Risks and Rewards,
Washington, DC, 2016.

Sector-Specific
Recommended
Disclosures

Original footnote 125: For more sector-specific information, see SASB, “Climate Risk Technical Bulletin,”
April 12, 2021, WBCSD, “TCFD Oil and Gas Preparer Forum,” July 18 2018, and WBCSD, “TCFD Electric
Utilities Preparer Forum,” July 16, 2019.
Source: TCFD, 2021, Annex: Implementing the Recommendations of the Task Force on Climate-related
Financial Disclosures, p. 63-64

Automobiles
Iron and Steel
Chemicals

Premises: National energy policy
Energy companies play a role in the stable supply of energy for a country. The energy
industry is exposed to geopolitical risks associated with the procurement of resources, and thebusiness activities of each company are integrated with national energy policy. The disclosureof an energy company, therefore, should ideally describe its strategy based on the relevant
national energy policy.

Electrical andelectronics
EnergyFoodBanking
Life insurance
Non-life
insurance
International
Shipping[Principle of energy policy in Japan]
Energy is an infrastructure that supports every human activity. A precondition for thefurther development of Japan is the creation of an energy supply and demand structurethat can achieve a stable energy supply with a lower social burden. Based on thisprinciple, the Cabinet approved the fifth strategic energy plan under the Basic Act on
Energy Policy in July 2018. The plan presents the basic direction of Japan’s energy policy
as making maximum efforts to achieve a low-cost energy supply through the
improvement of economic efficiency on the premise of safety and with energy security
as the nation’s top priority, while at the same time promoting environmental
sustainability (3E plus S).
Japan is dependent on imports from overseas for most of its energy sources. As aconsequence, the country has difficulty securing resources by itself when a problem withthe energy supply arises overseas. This is a fundamental vulnerability that cannot be
eliminated simply by curbing energy consumption. Japan has thus made efforts todiversify risks by developing alternative energy sources and securing domestic energy
sources.
As a country prone to natural disasters such as large-scale earthquakes (e.g., the Great
East Japan Earthquake) and frequent typhoons, Japan must establish a robust supply anddemand structure that ensures a stable energy supply even at a time of crisis.
Each energy source has its own strengths and weaknesses in the supply chain. No
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Food

Gas companies are contributing to environmental measures by promoting the diffusion ofnatural gas, a fuel with superior environmental performance. It is important for them toEnergy(Disclosure examples) Emissions and efforts in each process of, or through, the entire supply chain, such asenergy conservation related to their manufacturing processes (oil refineries) Efforts to introduce biomass fuels by considering sustainability

Electrical andelectronics

Oil companies are making efforts, such as advanced and effective utilization of oil andintroduction of sustainable renewable energy. It is important for them to disclose their efforts
related to the life cycle that includes the product consumption phase, such as measures for
reducing CO2 emissions in their manufacturing processes.

Chemicals Efforts to increase the proportion of non-fossil energy sources Efforts to reduce CO2 emissions through the efficiency improvement of thermal power
generation

Iron and Steel(Disclosure examples)

Automobiles

Electric utility companies are actively contributing to environmental measures, such as
reduction of CO2 emission intensity based on the 3E plus S principle, as well as working on
disclosure of information such as composition of power sources. It is important for them tocontinue to disclose their efforts for reducing GHG emissions on the demand side through thepromotion of introduction of renewable energy, etc.

Sector-Specific
Recommended
Disclosures

The recommended disclosures
Medium- and long-term target setting and efforts to reduce GHG emissions
Energy companies in sectors such as electric power, gas, and petroleum refinery are working
to set medium- and long-term targets appropriate for their businesses in addressing climatechange issues. Their aim, in doing so, is to establish a supply structure that can achieve a stable,
low-cost, environmentally friendly energy supply in a well-balanced manner with security as a
top priority.

Objectives ofSector-Specific
Disclosure Guidance

single source can support a stable and efficient energy supply and demand structure. As
such, Japan needs to diversify its energy sources rather than concentrating intensively
on any one source. Japan’s energy policy must be suited to the environment surrounding
the country. Establishing a stable energy supply and demand structure based on thebasic principle of achieving 3E plus S is essential.

2. Sector-Specific Recommended Disclosures

Objectives ofSector-Specific
Disclosure Guidance

disclose their efforts to reduce CO2 emissions through the value chain, from the manufacturing
to the use and consumption of city gas.

Sector-Specific
Recommended
Disclosures(Disclosure examples) Efforts to reduce CO2 emissions intensity and energy intensity in the process ofmanufacturing city gas, etc.
 Efforts to contribute to energy conservation and reduce GHG emissions by promoting
the diffusion and use of cogeneration systems, fuel cells, etc.

Automobiles
Iron and Steel
Chemicals

Efforts in research and development
In many countries, GHG emissions are chiefly related to energy use. It becomes vital, undersuch circumstances, to promote efforts to reduce GHG emissions related to energy use, bothon the energy demand side and energy supply side.
An electric utility company, on the energy supply side, must therefore disclose its researchand development efforts in the energy manufacturing phase, along with its efforts in various
other phases such as its transmission systems and consumers.

Electrical andelectronics
Energy(Disclosure example)
 Principles and efforts related to the development of technologies that contribute tolower carbon emissions, such as thermal power technology for reducing
environmental impacts, addressing the introduction of a large quantity of renewableenergy, and development of technologies for efficient energy utilization.

Food

For oil and gas companies, the disclosure should focus on efforts related to research anddevelopment on the following items.

Banking
Life insurance
Non-life
insurance
International
Shipping(Disclosure examples) Principle and efforts related to research and development on efficiency improvements
in production facilities and the development of products with superior fuel-saving
performance, as well as the efficiency-improvement effects achieved through suchtechnologies [oil companies]
 Principle and efforts related to the development of technologies for further efficiency
improvements and low carbonization related to gas usage, such as combustion
technology and cogeneration [gas companies]
 Research and development efforts focused on technologies such as hydrogen andmethanation technology for significant CO2 reduction [gas companies]

22

2. Sector-Specific Recommended Disclosures

Iron and Steel
ChemicalsElectrical andelectronics
EnergyEfforts to contribute to reduced GHG emissions through overseas business
Energy companies are actively engaged in overseas business by leveraging technologies andknow-how cultivated through domestic businesses. Therefore, it is important for them todisclose their efforts to contribute to reducing GHG emissions overseas through their overseas
energy supply business and consulting business on energy conservation, etc.

Automobiles

Efforts for resource circulation and recycling
From the perspective of reducing environmental impacts, it is important to disclose efforts
for resource recycling, waste reduction, and water consumption reduction, etc.

Sector-Specific
Recommended
Disclosures(Disclosure examples) Efforts to reduce GHG emissions on the demand side by promoting the diffusion ofhigh-efficiency electrical equipment, etc. [electric utility companies] Efforts related to products and services that contribute to energy-saving in the usephase of oil [oil companies] Efforts related to smart energy networks and energy management systems [gascompanies]

Objectives ofSector-Specific
Disclosure Guidance

Efforts to encourage actions to save energy and GHG emissions by customers
In addition to making supply-side efforts, a country seeking to rationalize its energy supply
and demand structure needs to create an environment where customers have diverse options
that allow them to work towards curbed GHG emissions based on rational decisions. It thus
becomes important for energy companies to disclose information on services designed toencourage customers to take actions to save energy and GHG emissions at their own initiative.

Food
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2. Sector-Specific Recommended Disclosures

Objectives ofSector-Specific
Disclosure Guidance(6) Food
The TCFD Recommendations describe risks and opportunities for the Agriculture, Food, andForest Products Group, including the food sector, as shown below. This section provides
supplemental guidance focusing on the food sector.

Sector-Specific
Recommended
Disclosures

Description of the Agriculture, Food, and Forest Products Groupin the TCFD Recommendations

Automobiles
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4. Agriculture, Food and Forest Products GroupThe Agriculture, Food and Forestry
Figure 12 Agriculture, Food and Forest
Products Group
Products Group includes, but is not limited
to, the industries listed in Figure 12.
Climate-related risks and opportunities inthis group largely emanate from GHG
emissions
and
water
and
waste
management driven by land use, production
practices, and changing land-use patterns.129
The absolute and relative impacts ofclimate-related transition and physical risks
will vary between producers and processorsof food and fiber.
Producers, such as agriculture and forestry enterprises, will likely be impacted
financially to a somewhat greater degree by GHG and water risks (including extreme
weather events and shifts in precipitation patterns) than processors. Agriculture andforest producers generate significant non-point GHG emissions, primarily through landuse practices and changes to them (e.g., grazing, soil tillage practices, conservation
practices, feedlot practices, deforestation, or afforestation).130
Processors, such as food, beverage, and fiber processors (e.g., paper), will likely be
impacted relatively less by direct GHG emissions (Scope 1), but more by indirect GHG
emissions (Scope 3) arising from their supply and distribution chains. Processors will also
have a similar emphasis on water and waste risks and opportunities as compared withproducers. Beverage production and paper production, for example, depend on access tosignificant water resources and, in the case of beverage production, high-quality water
resources. Risks and opportunities around waste include residual materials such as paper
and wood waste, wastewater, and post-processing animal byproducts.
Assessing the impacts of climate-related risks and opportunities for the Agriculture,
Food, and Forest Products Group involves a number of interactions and trade-offs among
the climate-related aspects of land use, water, waste, carbon sequestration, biodiversity,and conservation, complicated by short-run competing goals around food security (e.g.,24

2. Sector-Specific Recommended Disclosures

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Sector-Specific
Recommended
Disclosures

Agriculture, Food, and Forest Product Group organizations should consider providing
additional industry-specific metrics.131 Examples of potential metrics include total water
withdrawn and total water consumed, percent of water withdrawn and consumed inregions with high or extremely high baseline water stress, emissions from biologicalprocesses, changes in carbon stocks as a result of land use, and land use changes.

Objectives ofSector-Specific
Disclosure Guidance

maintaining production sufficient to meet the rising demand for food, fiber, fodder, andbiofuels).
Policies and regulations around land use and conservation requirements, for example,
may constrain or preclude certain uses of land and water resources (e.g., deforestation,
riparian rights, tillable land). Such policies may lead to significant asset impairment if
forest or agricultural lands cannot be used to produce food or fiber.
Opportunities in the Agriculture, Food, and Forest Products Group largely fall into three
categories: Increasing efficiency by lowering the level of carbon and water intensity per unit ofoutput (e.g., through drought-resistant hybrids, nutrient-efficient geneticallymodified organisms (GMOs), feed and feed practices that reduce livestock methane
emissions).
 Reducing inputs and residual waste for a given level of output (e.g., nutrient
management practices, tillage practices, conservation practices, biofuels, food waste
reduction).
 Developing new products and services with lower carbon and water intensity (e.g.,
bioplastics).
Disclosures, therefore, should focus on qualitative and quantitative information related
to both the group’s policy and market risks in the areas of GHG emissions and water, andits opportunities around carbon sequestration, increasing food and fiber production, andreducing waste, including: Efforts to reduce GHG emissions and water intensity, including such non-point GHG
sources as crop nutrient processes, livestock management processes, erosion, tillage
practices, watershed practices, and forest management.
 Efforts to improve sustainability through better recycling of outputs and residual
waste (e.g., wood products, food waste, and animal byproducts).
 Climate-related impacts on food and fiber production (e.g., extreme weather orwater events).
 Opportunities that capture shifts in business and consumer trends toward food andfiber products, processes and services that produce lower emissions and are lesswater-/waste intensive while maintaining adequate food security (e.g., bioplastics,
GMOs, new uses for wood/animal byproducts)., and forestry/livestock by-products)

2. Sector-Specific Recommended Disclosures

Objectives ofSector-Specific
Disclosure Guidance
Sector-Specific
Recommended
Disclosures

Original footnote 129: According to the Intergovernmental Panel on Climate Change (IPCC), agriculture
and forestry is responsible for “just under a quarter of anthropogenic GHG emissions mainly fromdeforestation and agricultural emissions from livestock, soil, and nutrient management. Anthropogenic
forest degradation and biomass burning (forest fires and agricultural burning) also represent relevant
contributions.” (IPCC. “Agriculture, Forestry and Other Land Use (AFOLU),” In: Climate Change 2014:
Mitigation of Climate Change, 2014. Contribution of Working Group III to the Fifth Assessment Report of
the Intergovernmental Panel on Climate Change). Agriculture is also a heavy user of water, primarily for
irrigation.
Original footnote 130: For more information, see definitions of land use change and indirect land usechange on page 1,265 of the IPCC’s Climate Change 2014: Mitigation of Climate Change.

Automobiles

Original footnote 131: For more sector-specific information, see SASB, “Climate Risk Technical Bulletin,”
April 12, 2021 and WBCSD, “Food, Agriculture and Forest Products TCFD Preparer Forum,” April 9, 2020.

Iron and SteelSource: TCFD, 2021, Annex: Implementing the Recommendations of the Task Force on Climate-related
Financial Disclosures, pp. 67-68

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It should be noted that the food sector offers a wide range of products, and the risks andopportunities for changing demand and procuring raw materials due to climate change are notuniform across products.
Physical risks are the primary subject of disclosure for agricultural, livestock, and fisheryproducts used as raw materials for food. Climate change has various potential impacts on raw
material procurement through changes in plant and animal growth associated with risingtemperatures, reduced or increased production, changes in the quality of raw materials due
to pest and disease outbreaks, increased procurement costs associated with investment in
adaptation, and shifts in production areas.
Attention should also be paid to instability in the supply of water necessary for foodproduction linked to weather disasters such as droughts or floods, worsened water quality due
to changes in precipitation patterns, decreased glacier melt water, the excessive use of fossil
water, or regulatory trends such as restrictions of water intake. In addition, weather disasters
linked to climate change, such as heavy rains, floods, or droughts, may also increase the riskof interruptions in the supply of goods due to disruptions in plant operations or distribution.
While efforts are being made to reduce GHG emissions at the manufacturing of foodproducts, the GHG generated in raw material production, or emissions throughout the supply
chain (including packaging, transportation, and delivery) should also be considered. Several
other sources of GHG emissions should also be noted, such as the conversion of forests tofarmland and grassland, and emissions from production of agro-livestock products such as therumination of livestock and composting.
In addition, efforts to reduce energy consumption, water conservation and food loss areimportant because they not only reduce GHG emissions but also reduce energy costs.
GHG emission reduction through reductions in food loss and the use of byproducts as feed26

2. Sector-Specific Recommended Disclosures

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27

Chemicals

Roundtable on Sustainable Palm Oil: A non-profit organization that develops and operates certification schemes forsustainable palm oil (website: https://rspo.org/). In the case of palm oil, the rapid expansion of oil palm plantations andinappropriate plantation management lead to massive emissions due to the deforestation of tropical rainforests orgreenhouse gas emissions from waste oil in extraction facilities. Procurement of RSPO-certified raw materials can reduce or
avoid these climate change risks.
5 Rainforest Alliance: A non-profit organization that certifies farms that are working to solve climate problems in the terrestrial
environment by improving land management methods such as more sustainable agriculture, as well as conserving andrestoring forests (website: https://www.rainforest-alliance.org/).
6 Forest Stewardship Council: An independent non-profit organization that aims to promote responsible forest management
throughout the world and operates an international forest certification system (website: https://fsc.org/en).
4

Iron and Steel

Addressing Water Risks
Ideally, a company should describe an impact assessment on business operations and themeasures to be taken to address water-related risks.
As water is essential for both raw materials and cleaning in food production, a company
should appropriately assess and address the risks pertaining to water supply and wastewater

Automobiles(Disclosure examples) Assessment of the impact of procurement risks (reduction of raw material yields andquality, increase in procurement costs, etc.) on business operations, and the status ofcountermeasures considered Efforts to reduce risks through the diversification and change of procurement areas Procurement of raw materials with third party certification in sustainable production
and distribution, such as RSPO 4, the Rainforest Alliance 5, FSC 6 or raw materials thathave undergone in-house assessment in accordance with equivalent standards
 Initiatives to support producers in sustainable agriculture and livestock industries(Examples: dissemination of sustainable production methods, support for producers'
management, etc.)

Sector-Specific
Recommended
Disclosures

Efforts to stabilize raw material procurement
In the food sector, it is important to identify and assess risks such as increased procurement
costs due to the impact of climate change on raw material production, or insufficient
procurement, an issue that may entail problems with quality. The identification andassessment of these risks forms the basis of disclosure on measures to stabilize raw material
procurement.

Objectives ofSector-Specific
Disclosure Guidance

and fertilizer is an issue unique to the food industry. A food producer can effectively
demonstrate its contribution to climate change by describing efforts to address these issues.
The business opportunities created by climate change in the food industry include thedevelopment of products to meet increased demand stemming from changes in consumer
preferences linked to extreme temperatures, and increased purchasing activities that takeenvironmental impact into account.

2. Sector-Specific Recommended Disclosures

Objectives ofSector-Specific
Disclosure Guidanceassociated with climate change.
Physical risks include meteorological disasters (typhoons, heavy rains, floods, droughts, etc.)
on production and distribution 7. Mitigation measures should therefore be considered.

Sector-Specific
Recommended
Disclosures(Disclosure examples) Assessment of the impact of water risk on business operations and the status ofcountermeasures considered Support for dissemination of sustainable agriculture and livestock farming (Examples:water-saving agriculture, etc.)
 Water resource conservation activities (Examples: forest conservation, the flooding of
paddy fields, etc.)
 Efforts to reduce water withdrawal and consumption (Examples: reduction of water
use per unit of production, recycling of water, etc.)
 Utilization of methane gas generated in wastewater treatment for power generation
 Evaluation of the impact of meteorological disasters (storm and flood damage risks)on projects and consideration of countermeasures (Examples: disaster response, plant
relocation, reviews of distribution routes and distribution centers, and BCP measures
such as power outages and water outages.)

Automobiles
Iron and Steel
ChemicalsElectrical andelectronics
EnergyFoodBanking
Life insurance

Efforts to reduce GHG emissions
It is important for the food industry to reduce GHG emissions throughout the supply chain,from the procurement of raw materials to the production, transportation and delivery of
products. To effectively reduce emissions from the production of agricultural, livestock andfishery products, and improve the efficiency of transportation and delivery, food producers
must make multifaceted efforts towards cooperation with related business operators andreview the use of containers and packaging.
Efforts to reduce food loss and to make use of by-products and animal and plant residues as
feed and fertilizer are unique to the food industry. As such, food producers must appropriately
make their efforts better understood by disclosing the GHG emission reduction mechanisms
they seek to promote. Through this approach, the sector can take advantage of the trend
towards ethical consumption as a business opportunity.

Non-life
insurance
International
Shipping

For example of the impacts of floods on businesses, finances, and finance pathways, see below:
WBCSD Food, Agriculture and Forest Products TCFD Preparer Forum,“Disclosure in a time of system transformation: Climaterelated financial disclosure for food, agriculture and forest products companies“, April 2020, P 47 (Figure 20)(https://docs.wbcsd.org/2020/04/WBCSD-TCFD-Food-Agriculture-and-Forest-Products%C2%AC-Preparer-Fourm-report.pdf)

728

2. Sector-Specific Recommended Disclosures

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Iron and Steel(Disclosure examples) Efforts to develop products that match the needs arising from climate change(Examples: development of products to relieve thirst in response to extremely hot
weather and products to help prevent heat stroke and infectious diseases, etc.)
 Promotion of ethical consumption through environment-friendly products (Examples:
procurement of certified raw materials or materials that have undergone in-houseassessments based on equivalent standards, support for producers, and procurementof materials selected in consideration of sustainability in containers and packaging.)

Automobiles

Description of business opportunities
The development of products expected to be in higher demand with the progress of climatechange, especially rising temperatures, may lead to new business opportunities in the foodindustry in the future.
The development of environment-friendly products will also contribute to reduced GHG
emissions and open up opportunities for market expansion through the spread of ethicalconsumption and other purchasing behaviors guided by considerations of environmental
impact.
It is important to disclose such efforts to create opportunities linked to climate change.

Sector-Specific
Recommended
Disclosures

 Efforts to utilize byproducts and animal and plant residues as feed, fertilizer, etc.
(Example: reduction of petroleum-derived fertilizers, etc.)

Objectives ofSector-Specific
Disclosure Guidance(Disclosure examples) Development of alternative materials and products (Example: reducing GHG emissions
from livestock feeding through the use of plant-based meat substitutes and culturedmeat) Efforts to reduce GHG emissions during manufacturing (Examples: reduction of energy
consumption and introduction of renewable energy by expanding the installation ofenergy-saving equipment) Reducing the weight and thickness of containers and packaging, and switching toalternative materials (Examples: 3R initiatives, switch to sustainable paper containers
and packaging, such as recycled or biomass-based materials or FSC-certified materials)
 Reducing GHG emissions during transportation and distribution (Examples: joint
distribution, modal shift, and efforts to optimize lead times for placing and receiving
orders.) Efforts to reduce food loss (Examples: reducing food loss in the manufacturing process,extending expiration dates by improving containers and packaging, reducing food loss
throughout the supply chain by indicating the year and month on labels, refining
demand forecasts using AI, etc.)

2. Sector-Specific Recommended Disclosures

Objectives ofSector-Specific
Disclosure Guidance(7) Banking
The TCFD Recommendations describe risks and opportunities in the banking sector, as
shown below. This section provides a supplemental guidance focused on banking.
Description of Banks in the TCFD Recommendations

Sector-Specific
Recommended
Disclosures
Automobiles
Iron and Steel
ChemicalsElectrical andelectronics

1. Banks
Banks are exposed to climate-related risks and opportunities through their lending andother financial intermediary activities as well as through their own operations. As
financial intermediaries, banks may assume exposure to material climate-related risks
through their borrowers, customers, or counterparties. Banks that provide loans or trade
the securities of companies with direct exposure to climate-related risks (e.g., fossil fuelproducers, intensive fossil fuel consumers, real property owners, or agricultural/foodcompanies) may accumulate climate-related risks via their credit and equity holdings. In
particular, asset-specific credit or equity exposure to large fossil fuel producers or users
could present risks that merit disclosure or discussion in a bank's financial filings. In
addition, as the markets for lower-carbon and energy-efficient alternatives grow, banks
may assume material exposures in their lending and investment businesses. Banks could
also become subject to litigation related to their financing activities or via parties seeking
damages or other legal recourse. Investors, lenders, insurance underwriters, and otherstakeholders need to be able to distinguish among banks’ exposures and risk profiles sothat they can make informed financial decisions.

Food

In the banking sector, the aim of TCFD is the stabilization of the financial system in the eventof the emergence of climate change risks. As financial supervisors and central banks move to
integrate climate change into prudential regulation and monitoring, it is useful to enhance
disclosure, particularly in terms of risk.
An important point, in this case, is to specify quantified risk of climate change together withframework for controlling risk. Based on the scenario analysis, it is desirable to clarify
measures to enhance resilience against climate change by disclosing not only concrete figures
such as the amount of future assumed physical risks and transition risks and the degree ofconcentration of carbon-related assets, but also internal governance and risk management
systems related to climate change risks and policies for dealing with specific sectors.
On the other hand, with regard to opportunities, it is important to specify a medium- andlong-term strategy for environmental consideration using financial functions and disclose how
they support the efforts taken by their customers toward a low-carbon society.

Banking

EnergySource: TCFD, 2021, Annex: Implementing the Recommendations of the Task Force on Climate-related
Financial Disclosures, p. 25

Life insurance
Non-life
insurance
International
Shipping

30

2. Sector-Specific Recommended Disclosures

Automobiles
Iron and Steel
ChemicalsElectrical andelectronics(Disclosure examples) Estimation and disclosure of total credit costs based on the probability of flooding foreach climate change scenario (IPCC “RCP 2.6, RCP 8.5”, etc.)
 Estimation and disclosure of total credit costs based on changes in sales and costs inborrower sectors under the transition risk scenario (IEA “sustainable development
scenario”, etc.)

Sector-Specific
Recommended
Disclosures

Scenario analysis
It is desirable to share the future amount of risk with stakeholders by estimating anddisclosing the expected increase in credit costs under climate change scenarios. Though somestudies on scenario analysis are given as examples 8 , there is no international or uniform
method for analysis as of this writing. In performing an analysis, a bank must begin by deciding“in what manner”, “with which scenarios”, and “for which assets”. These assumptions that go
into the analysis must be specified when the analysis is disclosed.

Objectives ofSector-Specific
Disclosure Guidance

In disclosing both risks and opportunities, it is important to share the concept of TCFD
Recommendations through engagement with customers and to clearly explain the actions thatcan be taken in the future, in order to demonstrate a stance of advancing climate change
responses with customers.

EnergyFoodBanking
Life insuranceInternational
Shipping

31

Non-life
insurance

Examples of studies on scenario analysis in the banking sector include the following:
Bank of England, 2019, Discussion Paper: The 2021 biennial exploratory scenario on the financial risks from climatechange (https://www.bankofengland.co.uk/paper/2019/biennial-exploratory-scenario-climate-change-discussionpaper)
Network for Greening the Financial System, 2020, Guide to climate scenario analysis for central banks and supervisors(https://www.ngfs.net/sites/default/files/medias/documents/ngfs_guide_scenario_analysis_final.pdf)
8

2. Sector-Specific Recommended Disclosures

Objectives ofSector-Specific
Disclosure GuidanceReference: SMBC’s Scenario Analysis Process and Estimated Credit Costs<physical risk>

Sector-Specific
Recommended
Disclosures
Automobiles
Iron and Steel
ChemicalsElectrical andelectronics
EnergySource: Sumitomo Mitsui Financial Group, Inc. “Sustainability Report 2019” p. 55

Food
Banking
Life insurance
Non-life
insurance

 Risk events are identified as water disasters (floods), and the amount of loss expected tooccur in the future due to water disasters is analyzed for each climate change scenario.
 Estimation of the current estimated credit costs based on (1) the amount of collateral
damage in the event of a flood and (2) the financial impact on business partners (decline
in sales), after identifying collateral and business partners of banks located on the water
disaster hazard map prepared by the Ministry of Land, Infrastructure, Transport andTourism.
 Calculate potential future losses by multiplying the probability of flooding in eachclimate change scenario (IPCC “RCP scenarios”).
 The total cumulative credit cost is expected to increase by approximately 30 to 40 billion
yen through 2050.

International
Shipping

32

2. Sector-Specific Recommended Disclosures

Objectives ofSector-Specific
Disclosure Guidance<transition risk>

Sector-Specific
Recommended
Disclosures
Automobiles
EnergyFoodBanking
Life insurance(Disclosure example) Ratio of carbon-related assets to loans (or credit amounts)

Electrical andelectronics

Concentration of carbon-related asset exposures
The TCFD recommends that banks disclose “concentrations of credit exposure to carbonrelated assets” that are likely to be vulnerable to climate change impacts 9.
While carbon-related assets are defined to a degree in the TCFD Recommendations, eachbank has different interpretations of detailed estimation methods, such as whether theconcentration of carbon-related assets is a loan-based ratio or credit-based ratio, and how to
deduct renewable-energy- and nuclear-power-related exposures of electric power companies.
It should be noted that comparability cannot be warranted at present.

Chemicals The effects of expected changes in oil and gas prices and demand are estimated,
together with power generation costs under the IEA scenarios on credit risks in theenergy and power sectors.
 The estimated credit cost under the 2°C scenario is expected to increase byapproximately 2 to 10 billion yen per year up to 2050, compared to the 4°C scenario(Stated Policies Scenario).

Iron and SteelSource: Sumitomo Mitsui Financial Group, Inc. “Sustainability Report 2019” p. 56

Non-life
insurance

33

International
Shipping"Energy" "Utilities" in GICS (Global Industrial Classification Standard). However, water utilities, independent power
producers, and renewable energy producers are excluded.
9

2. Sector-Specific Recommended Disclosures

Objectives ofSector-Specific
Disclosure Guidance
Sector-Specific
Recommended
Disclosures

Governance and risk management systems
In order to control the future risks identified through scenario analysis and exposure tocarbon-related assets, it is necessary to integrate the elements of climate change into the
bank's internal governance and risk management systems, and to operate them strategically.
In doing so, it is important for a bank to clarify the involvement of its management andboard of directors in climate change-related issues, and incorporate climate change risks into
its risk appetite framework in the future.

Automobiles
Iron and Steel(Disclosure examples) Reflect climate change initiatives in business strategies based on discussions at the
management committee, and periodically report to the board of directors
 Report on climate change risk in a “risk committee”
 Recognize climate change as a top-priority risk and implement measures to strengthen
scenario analysis and consider countermeasures at the management level

ChemicalsElectrical andelectronics
EnergyFoodBanking
Life insurance

Capturing opportunities
It is important, in the theme “Strategy” to disclose the positive impact of capturing
opportunities in addition to minimizing the negative impact of climate change, and to disclose
the impact on medium- and long-term projects and strategies in order to contribute to thetransition to a low-carbon society from the perspectives of risk management and capturing
opportunities.
As regards scenario analysis disclosed under “Strategy”, it is encouraged that the banking
sector to consider not only how to strengthen risk management, but also how to capture
opportunities by utilizing its outcome to better understand customer needs and issues, as wellas to engage with customers.
It would be useful, in this regard, to make the medium- and long-term targets clear tocustomers and other stakeholders, along with the roadmap for achieving those targets, and to
disclose the actual progress of financing through the issuance of green bonds (providing
finance for green sectors), financing for renewable energy projects, and financing for projects
that contribute to climate change countermeasures such as loan products that encouragecustomers to address ESG and SDGs.
It should be noted that the definition of finance (whether to specialize in the environmental
and climate change fields, including social fields, etc.), the types of financial services subjectedto the target, and the timeline to achieve the target are left to each bank in setting its targets.

Non-life
insurance
International
Shipping

34

2. Sector-Specific Recommended Disclosures

Objectives ofSector-Specific
Disclosure Guidance(Disclosure examples) Issuance of green bonds (providing funds for green sectors)
 Provision of project finance for renewable energy businesses
 Provision of loan products related to ESG and SDGs
 Medium- and long-term targets for sustainable finance

Sector-Specific
Recommended
Disclosures
Automobiles
Iron and Steel
ChemicalsElectrical andelectronics
EnergyFoodBanking
Life insurance
Non-life
insurance
International
Shipping

35

2. Sector-Specific Recommended Disclosures

Objectives ofSector-Specific
Disclosure Guidance(8) Life insurance
The TCFD Recommendations describe risks and opportunities in the insurance sector, as
shown below. This section provides a supplemental guidance focusing on life insurancecompanies.

Sector-Specific
Recommended
Disclosures

Description of insurance companies and asset owners in the TCFD Recommendations.

Automobiles

2. Insurance companies53
For insurance companies, climate-related risks and opportunities constitute a key topic
affecting the industry’s core business (e.g., weather-related risk transfer business). The
scientific consensus is that a continued rise in average global temperatures will have asignificant effect on weather-related natural catastrophes and will account for an
increasingly large share of natural catastrophe losses.54

Iron and Steel
ChemicalsElectrical andelectronics

Users of climate-related financial disclosures are specifically interested in how
insurance companies are evaluating and managing climate-related risks andopportunities in their underwriting and investment activities. Such disclosure will support
users in understanding how insurance companies are incorporating climate-related risks
into their strategy, risk management, underwriting processes, and investment decisions.
This guidance applies to the liability (underwriting) side of insurance activities. For
insurance companies’ investment activities, refer to the supplemental guidance for asset
owners.

EnergyOriginal footnote 53: Insurance companies include both insurers and re-insurers.

Food

Source: TCFD, 2021, Annex: Implementing the Recommendations of the Task Force on Climate-related
Financial Disclosures, p. 31.

Original footnote 54: Intergovernmental Panel on Climate Change, Fifth Assessment Report (AR5),
Cambridge University Press, 2014.

Banking
Life insurance
Non-life
insurance
International
Shipping

3. Asset Owners
Asset owners are a diverse group that include public- and private-sector pension plans,
re-/insurance companies, endowments, and foundations and invest assets on their own
behalf or on behalf of their beneficiaries. Asset owners invest according to a mandate orinvestment strategy set out by their oversight body or their beneficiaries. Asset owners
have various investment horizons that influence their risk tolerance and investment
strategies. Many asset owners have broadly diversified investment portfolios acrossinvestment strategies, asset classes, and regions and portfolios with thousands ofunderlying individual company and government exposures. Asset owners may hire asset
managers to invest on their behalf.67
36

2. Sector-Specific Recommended Disclosures

Iron and Steel
ChemicalsElectrical andelectronics
EnergyFoodBanking
Life insurance
Non-life
insurance
International
Shipping

37

Automobiles

Asset owners have contributed to the success of the TCFD in many ways, including by
voluntarily publishing their own “TCFD reports.” In these reports, asset owners havehighlighted GHG emissions data from their respective portfolios and how theirgovernance structures have developed to manage climate-related risk. Governancestructures have developed to collect and analyze GHG emissions data as a proxy forclimate-related risk from investee companies, either directly or via third party asset
managers and data analytics specialists. The Task Force recognizes asset owners often
issue reports, including ones containing climate-related information, directly to theirbeneficiaries or members rather than making them available publicly as would generally
be the case with public companies. As a result, some of the cross-industry, climate-related
metrics described in Appendix 2 may be less relevant for asset owners than for otherorganizations, particularly where flexibility is needed on the specific metrics andmethodologies used.68 Nevertheless, the Task Force believes the cross-industry, climaterelated metrics have some applicability to asset owners because, by asking for thisstandardized information, asset owners encourage all organizations to publish TCFDaligned information.

Sector-Specific
Recommended
Disclosures

Asset owners sit at the top of the investment chain and, therefore, have an importantrole to play in influencing the organizations in which they invest to provide better climaterelated financial disclosures. Disclosure of climate-related risks and opportunities byasset owners —to the extent possible given existing data and methodology constraints—
allows beneficiaries and other audiences to assess the asset owner’s investment
considerations and approach to climate change. This may include an assessment of theasset owner’s integration of appropriate climate-related financial information into its
investment activities in various ways, for example, in setting investment strategy, making
new investment decisions, and managing its existing portfolio. By encouraging climaterelated financial disclosures by asset owners, beneficiaries and other stakeholders will bein a position to better understand exposures to climate-related risks and opportunities.
Further, climate-related financial disclosures by asset owners may encourage better
disclosures across the investment chain—from asset owners to asset managers tounderlying companies—thus enabling all organizations and individuals to make betterinformed investment decisions.

Objectives ofSector-Specific
Disclosure Guidance

Whether asset owners invest directly or through asset managers, asset owners bear
the potential transition and physical risks to which their investments are exposed.
Similarly, asset owners can benefit from the potential returns on the investment
opportunities associated with climate change.

2. Sector-Specific Recommended Disclosures

Objectives ofSector-Specific
Disclosure GuidanceOriginal footnote 67: In this role, asset managers also act as fiduciaries. Asset managers invest within theguidelines specified by the asset owner for a given mandate set out in the investment managementagreement or the product specification.

Sector-Specific
Recommended
Disclosures
Automobiles

Original footnote 68: The Task Force also understands asset owners may need several years to implement
relevant cross-industry, climate-related metrics, particularly where assets are held through third party
mandates such as pooled funds. The data and methodologies for some of these metrics, such as theimpact of climate change on investment income or asset valuations, are very much in the early stages ofdevelopment; and it may take time before methodologies have been developed and can be applied inpractice. The Task Force also recognizes the methodological challenges of calculating GHG emissions
associated with certain asset classes (e.g., sovereign bonds) and accepts research is ongoing. In
determining whether a particular category of metric is relevant, asset owners should consider whether the
information is used as part of the management of climate-related risks or investment decision-making
processes.

Iron and SteelSource: TCFD, 2021, Annex: Implementing the Recommendations of the Task Force on Climate-related
Financial Disclosures, p. 37

ChemicalsElectrical andelectronics
EnergyFoodBanking

Life insurance companies have two positions: as underwriters of life insurance and as
institutional investors. It thus becomes necessary, in addressing TCFD Recommendations, to
pay attention to what is recommended for each position.
In the life insurance business, the impact of climate change on human life and health will beassessed, and the impact of climate change on business will be examined. While the impact
on the life insurance business is not deemed to be substantial at present, the research being
done on the relationships of climate change with health damage and mortality is still in its
early stages. Life insurance companies thus need to consider how information is to be collected
and incorporated into their business.
As institutional investors, insurance companies need to consider the impact of climatechange on the companies they invest in, as well as their own information disclosure. These
companies are required to better disclose the physical and transition risks and opportunities
they experience in their engagement activities and to have an adequate understanding of theinformation disclosed.

Life insurance
Non-life
insurance

Policies for addressing climate change and ESG investments and loans
Life insurance companies need to make continuous efforts to address climate change ascompanies. It thus becomes important to indicate how a company perceives the impacts ofclimate change, how this perception is reflected in its business activities, and what basic
policies it has adopted. In this way, the communication of the company's basic position can bepromoted to the company's investment and loan recipients as well as to the fund providers.

International
Shipping

38

2. Sector-Specific Recommended Disclosures

Electrical andelectronics
EnergyFoodBanking
Life insurance
Non-life
insurance
International
Shipping

39

Chemicals(Disclosure examples) Examples of investments and loans to companies, technologies, and projects that
contribute to low carbon emissions (Green Finance), as well as its cumulative
investments and loans, etc.
 Items to be emphasized in making decisions on investments and loans, points of view,etc.
 Engagement activities for investment and loan recipients (implementation of climatechange-related dialogue)

Iron and SteelInvestment and loans focusing on the risks and opportunities of climate change
As institutional investors, life insurance companies need to view the transition to a lowcarbon society as an opportunity for providing investments and loans, and to continuously
monitor the status of the sustainable growth of its investment and loan recipients throughengagement activities, etc. It thus becomes important to show how a company perceives therisks and opportunities of climate change in its investment and financing strategy, and how
those perceptions are considered and reflected in its investment and financing. Ideally, acompany should disclose items such as those shown in the following examples.

Automobiles(Disclosure examples) Efforts to analyze the impact of short-term impacts on insurance payments due tofactors such as changes in the frequency or scale of abnormal weather or natural
disasters Efforts to identify risks such as increased morbidity and mortality due to medium- tolong-term effects such as average temperature increases

Sector-Specific
Recommended
Disclosures

Addressing Climate Change Risks in the Life Insurance Business
The impact of climate change on human life and health may affect insurance payments. It
thus becomes important for life insurance companies to show how they understand the risks
to human health caused by climate change, and how those findings are reflected in theirbusiness. In this way, life insurance companies are expected to demonstrate how they takeaccount of climate change risks in their business strategies.

Objectives ofSector-Specific
Disclosure Guidance(Disclosure examples) Status of policy formulation for dealing with the environment and climate change Development of ESG investment and loan policy

2. Sector-Specific Recommended Disclosures

Objectives ofSector-Specific
Disclosure Guidance
Sector-Specific
Recommended
Disclosures

Climate-related risk management process
As long-term institutional investors, it is important for life insurance companies to indicate
how the portfolios are positioned with respect to transition risks and physical risks, and how
they are managed. In other words, it is important to indicate how a company as an institutional
investor evaluates and analyzes the information disclosed by investment and loan recipients.
It thus becomes desirable to disclose specific matters such as those shown in the following
examples.

Automobiles
Iron and Steel(Disclosure examples) Status of preparation of investment and loan standards
 Analysis of climate change-related impacts on investments and loans (risks of loss invalue of investments and loans associated with the transition to a low-carbon society,along with the responses to such risks)[References]

Chemicals

For more on how life insurers are responding to climate change, see The Life Insurance Association ofJapan, 2019, “Climate Change Starter's Guide: Impacts and Key Considerations for the Life Insurance
Industry”

Electrical andelectronics(downloadable from:https://www.seiho.or.jp/activity/sdgs/climate/pdf/handbook(en).pdf)

EnergyFoodBanking
Life insurance
Non-life
insurance
International
Shipping

40

2. Sector-Specific Recommended Disclosures

The TCFD Recommendations describe risks and opportunities in the insurance sector, as
shown below. This section provides a supplemental guidance focusing on non-life insurancecompanies.

Banking
Life insurance
Non-life
insurance
International
Shipping

41

Food

As noted in the TCFD Recommendations, the continuing rise in the global averagetemperature is said to have a significant impact on large-scale natural disasters. In Japan, therecent increases in heat waves and torrential rains, as well as the frequent occurrence of
typhoons and other natural disasters, have raised concerns about the frequency of further
large-scale natural disasters due to climate change.
The insurance to compensate for damage caused by natural disasters is a social
infrastructure that plays a part in climate change countermeasures. The non-life insurance
sector provides compensation to reduce the economic burden on companies and individuals
that suffer damage, and is expected to continue playing that important social role. At the sametime, the growing severity of natural disasters has increased concerns about the impacts ofEnergySource: TCFD, 2021, Annex: Implementing the Recommendations of the Task Force on Climate-related
Financial Disclosures, p. 31.

Electrical andelectronics

Original footnote 54: Intergovernmental Panel on Climate Change, Fifth Assessment Report (AR5),
Cambridge University Press, 2014.

Chemicals

Original footnote 53: Insurance companies include both insurers and re-insurers.

Iron and SteelUsers of climate-related financial disclosures are specifically interested in how
insurance companies are evaluating and managing climate-related risks andopportunities in their underwriting and investment activities. Such disclosure will support
users in understanding how insurance companies are incorporating climate-related risks
into their strategy, risk management, underwriting processes, and investment decisions.
This guidance applies to the liability (underwriting) side of insurance activities. For
insurance companies’ investment activities, refer to the supplemental guidance for asset
owners.

Automobiles

2. Insurance companies53
For insurance companies, climate-related risks and opportunities constitute a key topic
affecting the industry’s core business (e.g., weather-related risk transfer business). The
scientific consensus is that a continued rise in average global temperatures will have asignificant effect on weather-related natural catastrophes and will account for an
increasingly large share of natural catastrophe losses.54

Sector-Specific
Recommended
Disclosures

Description of insurance companies in the TCFD Recommendations

Objectives ofSector-Specific
Disclosure Guidance(9) Non-life insurance

2. Sector-Specific Recommended Disclosures

Objectives ofSector-Specific
Disclosure Guidance
Sector-Specific
Recommended
Disclosures
Automobiles
Iron and Steel
Chemicals

climate change on the sustainability of the non-life insurance sector.
Climate-related risks include not only physical risks, such as increased natural disasters due
to climate change, but also transition risks that affect businesses via the environmental
changes brought by the transition to a decarbonized society.
For the stable provision of insurance, the non-life insurance sector has implemented
comprehensive risk management (ERM, etc.) to appropriately manage its own risks, including
measures against large-scale disasters. Based on the TCFD Recommendations, it is important
to show how non-life insurance companies including their management, view, manage, andrespond to these climate-related risks.
The non-life insurance sector also provides various services to support disaster prevention
and mitigation, along with insurance products (products for Green Infrastructure, etc.) that
contribute to climate change responses. These measures are taken to increase society's
resilience to climate change and drive partner companies’ innovation toward a decarbonizedsociety, and are focused on areas where the non-life insurance sector can actively contribute.
A company can effectively demonstrate the contribution of the non-life insurance sector toclimate change responses by explaining how such measures are addressed.
Based on these considerations, the following disclosures may be considered.

Electrical andelectronics
EnergyPotential impacts of climate change (risk identification and assessment)
The following examples show disclosures that are expected, under the TCFD
Recommendations, to indicate the climate-related physical risks and transition risks that may
affect the insurance business, related services, and financial conditions in the future, as well
as how the impacts are perceived. If quantitative disclosure is difficult, the information may
be disclosed in a qualitative form.

Food
Banking
Life insurance(Disclosure examples) Impacts under the assumption that the frequency and magnitude of natural disasters
changed (increased insurance claim payments, impact on underwriting profit, etc.)
 Impact of environmental changes accompanying the transition to a decarbonizedsociety (impact on insurance premiums from the changes in the industrial structure
resulting from strengthened laws and regulations and the development of newtechnologies)

Non-life
insurance
International
Shipping

Management of strategies and risks related to climate change
Based on the risks identified above, it is recommended to indicate the strategies and policies
in place and the internal systems established to address climate-related issues and manage
risks.
There may be ways to develop strategies and policies specific to climate-related issues, as42

2. Sector-Specific Recommended Disclosures

ChemicalsElectrical andelectronics
EnergyFoodBanking
Life insurance
Non-life
insurance
International
Shipping

43

Iron and Steel(Disclosure examples) Initiatives to enhance risk assessment and stress testing / scenario analysis related toclimate change (research projects and participation in international initiatives, etc.)
 Disaster prevention and mitigation initiatives (research projects and enlightenment
activities, etc.)

Automobiles

Enhancing risk management and reducing risks
As risks related to climate change are changing, methods and analysis for risk assessment
may be improved through in-house research and studies, and through participation in external
initiatives. Efforts such as these can increase a company's resilience to climate change byenhancing risk management and risk reduction.
Non-life insurance companies have also traditionally provided risk consulting to customers
through insurance contracts, carried out activities to raise stakeholder and community
awareness of disaster prevention and mitigation, and engaged in various research activities incooperation with external organizations. By disclosing efforts that help to improve theresilience of society as a whole to climate change, companies can effectively demonstrate theircontributions to society.

Sector-Specific
Recommended
Disclosures(Disclosure examples) Strategies and policies on climate-related issues (indicate if they are implemented aspart of an integrated risk management system) Internal review system (structure of the board of directors / committees, roles of the
management, etc.)
 Climate risk management Initiatives (initiatives in integrated risk management, etc.)
 Stress testing / scenario analysis as part of climate-related risk management, use ofreinsurance, etc.

Objectives ofSector-Specific
Disclosure Guidancewell as to include climate-related elements in strategies and policies for integrated risk
management. Each company may explain its own strategies and policies based on its situation.
In addition, given that the TCFD Recommendations encourage companies to explain their
responses to climate-related issues, including the roles of their boards of directors andmanagements, and to indicate their approaches to managing climate-related risk, it is a good
way to indicate how climate change is integrated, in the case where climate change is included
in integrated risk management, as well as the internal review system including the structureof the board of directors and committees and the role of management. In addition, efforts
such as stress testing and scenario analysis conducted as part of climate-related risk
management, and utilization of reinsurance may be presented.

2. Sector-Specific Recommended Disclosures

Objectives ofSector-Specific
Disclosure Guidance
Sector-Specific
Recommended
Disclosures
Automobiles
Iron and Steel

Opportunities brought by climate change
The TCFD Recommendations call for disclosure of information not only on the risks causedby climate change, but also on the opportunities brought by climate change. Climate change
may change the needs of customers for insurance, other products, and insurance-related
services. Responding to these new needs also represents a new business opportunity for nonlife insurance companies.
Meanwhile, new technologies with lower environmental impact are emerging toward thetransition to a low-carbon society, and their emergence generates a demand for new products
and services for their adoption. Furthermore, the compensation provided for new
technologies is expected to make it easier for business partners to develop and promote suchtechnologies. Compensation will thus help to spread and promote new technologies toward
the transition to a low-carbon society, and will also encourage innovation by business partners.
If a company has taken measures to provide products and services that respond to these
new risks and technologies, or has developed completely new products and services, orrevised its existing products and services, in response to changes in the environment andcustomer needs, it may also present such measures in its disclosure.

ChemicalsElectrical andelectronics
Energy(Disclosure examples) Provision of new products and services to respond to natural disaster risks
 Provision of products (insurance products for green infrastructure) that aim topromote climate change countermeasures
 Provision of various services to support disaster prevention and mitigation (provisionof consulting services on climate-related risks to corporations, etc.)

Food
Banking
Life insurance
Non-life
insurance
International
Shipping

44

2. Sector-Specific Recommended Disclosures

The TCFD Recommendations describe climate-related risks and opportunities for theTransportation group, including the shipping industry, as shown below. This section provides
supplemental guidance focusing on the international shipping industry.

Iron and Steel
ChemicalsElectrical andelectronics
EnergyFoodBanking
Life insurance
Non-life
insurance
International
Shipping

45

Automobiles

2. Transportation GroupThe Transportation Group includes, but is
Figure10 Transportation
not limited to, industries listed in Figure 10.
Transportation is critical to the economy
and drives a significant portion of emissions
and demand for energy through the
production and, more important, the usephase. The industry is under increasing policy
and regulatory pressure to achieve emission
targets for the use phase. Increasing
constraints on emissions fuel efficiency willcontinue to impact costs in this group,particularlyaroundinvestmentsininnovation(new
technologies
andefficiencies).126
The Transportation Group, therefore, will
likely face financial challenges from two major drivers. First, policymakers are setting
stricter targets for emissions and fuel efficiency from transportation carriers. Second, newtechnology around low-emission/fuel-efficient carriers (e.g., electric cars) is creating ashift in the competitive and investment landscape. New technological innovations andnew market entrants can weaken companies’ market position, resulting in lower
revenues, higher costs, and narrower margins. The effects of these two drivers may becompounded by the length of product cycles for transportation products, such as cars
and trucks, and especially for air and rail and marine equipment. As with the Energy
Group, investments in long-lived assets (e.g., manufacturing facilities, airplanes, ships)
and longer planning horizons are relevant factors that must be taken into account when
considering the climate-related risks and opportunities.
Consequently, disclosures should focus on qualitative and quantitative assessments
and potential impacts of the following: financial risks around current plant and equipment, such as potential early writeoffs of equipment and R&D investments or early phasing out of current products
due to policy constraints or shifts or the emergence of new technology;

Sector-Specific
Recommended
Disclosures

Description of the Transportation group in the TCFD Recommendations

Objectives ofSector-Specific
Disclosure Guidance(10) International Shipping2. Sector-Specific Recommended Disclosures

Objectives ofSector-Specific
Disclosure Guidanceinvestments in research and development of new technologies and potential shifts
in demand for various types of transportation carriers; andopportunities to use new technologies to address lower-emissions standards andincreased fuel-efficiency requirements, including transport vehicles (cars, ships,
planes, rail) that run on a range of traditional and alternative fuels.

Sector-Specific
Recommended
Disclosures
Automobiles

Transportation Group organizations should consider providing additional industryspecific metrics.127 Examples of potential metrics include sales weighted average fleet
fuel economy by region and weight/number of people transported, Energy Efficiency
Design Index (EEDI) for new ships, life cycle reporting of GHG emissions of transportation
products (air, ship, rail, truck, auto).

Iron and Steel

Original footnote 126: Moody’s Global Credit Research, “Moody’s: Auto sector faces rising credit risks due
to carbon transition,” September 20, 2016.
Original footnote 127: or more sector-specific information, see SASB, “Climate Risk Technical Bulletin,”
April 12, 2021 and WBCSD, “TCFD Auto Preparer Forum,” May 26, 2021.

Chemicals

Source: TCFD, 2021, Annex: Implementing the Recommendations of the Task Force on Climate-related
Financial Disclosures, p.65

Electrical andelectronics
EnergyFoodBanking
Life insurance

International shipping accounts for the majority of international trade in terms of weightand supports global logistics. While the CO2 intensity per ton-kilometer (specific CO2
emissions) of international shipping is lower than most transport modes, CO2 emissions frominternational shipping account for about 2% of global CO2 emissions, and emissions reductions
are being required. The International Maritime Organization (IMO), an United Nations
specialized agency for maritime affairs, is promoting GHG reduction in international shipping.
One of the characteristics of the shipping industry is that ships generally have a long service
life of about 20 to 30 years, and it takes several years from ordering to completion. For thisreason, it is important to consider CO2 reduction measures from a medium- to long-term
perspective. Other notable characteristics are a) vessels are basically custom-made, making it
difficult to retrofit standard equipment, and b) the shipping industry needs to be cautious
about introducing new technologies since breakdowns on the high seas must be avoided at all
costs.

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Shipping companies use vessels chartered by ship owners, along with vessels owned by thecompanies themselves. Therefore, it is necessary for the entire charter chain (owners andusers) to make efforts when installing energy-saving equipment that requires additional costs.

International
Shipping

Initiatives for medium- to long-term transition
Two major changes are expected in international shipping along the decarbonization46

2. Sector-Specific Recommended Disclosures

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Iron and SteelA financial instrument designed to support GHG reduction efforts in accordance with a long-term strategy for
decarbonization. Including funding to achieve steady low carbon emissions even when decarbonization technologies are nottechnically and economically feasible at present.
11 Carbon dioxide capture and storage. CO capture and storage technology, in which CO2 emitted from power plants and2chemical plants is separated from other gases, collected, stored and injected deep into the earth.
12 Energy Efficiency Design Index (EEDI) is an index and requirement to keep CO emissions related to fuel efficiency of new
2
vessels below a certain level.
13 Energy Efficiency Existing Ship Index (EEXI) regulation requires to keep an index similar to EEDI below a certain level withan objective to impose equivalent fuel efficiency standard for existing ships as newly-built ships.
14 Carbon Intensity Indicator (CII) rating is a system that evaluates annual average fuel economy performance on a 5-point
scale of A-E.
10

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Initiatives to reduce short-term GHG emissions
In order to reduce GHGs, an international treaty (MARPOL Convention) provides for the
improvement of energy intensity (EEDI 12) for new ships (applying to ships above a certain size,
to be reduced by 30% from the baseline from 2025 with more stringent targets for container
ships). In addition to reducing GHG emissions, ships are also required to significantly reduce
the sulfur content of their fuels from 2020. For this reason, introduction of LNG-fueled vessels
is being promoted as described above.
As a short-term measure in the GHG emission reduction strategy, two systems of regulation
will be imposed: EEXI regulation 13 for technical regulation and CII rating 14 for operational

Sector-Specific
Recommended
Disclosures(Disclosure examples) Efforts to utilize ships applying new technologies such as energy efficient vessels andalternative fuel vessels in merchant fleets.
 Efforts to cooperate with shipbuilders and shipowners on the conversion to ships
applying new technologies such as energy efficient vessels and alternative fuel vessels.
 Changes in freight movement (i.e., changes in freight and their countries of origin)along the pathway to carbon neutrality.
 How transition risk are analyzed and reflected in governance.

Objectives ofSector-Specific
Disclosure Guidance

pathway: change in ship fuel and change in the transported freight. Regarding the former, inthe long term, it is necessary to implement vessels which consume fuels that are not currently
used. In addition to the introduction of LNG-fueled ships, which is considered as a mediumterm measure, many options such as hydrogen, ammonia are under discussion, and shipping
companies are required to adapt flexibly. LNG-fueled vessels are also effective as a measureagainst air pollution, and there are some pioneering cases of introducing LNG-fueled ships byusing transition finance. 10
In addition, freight to be transported may change significantly due to changes in demand
stemming from global reduction of fossil fuel consumption, increase of alternative fuels suchas hydrogen and ammonia, transportation of CO2 for CCS 11, and increase in renewable energy
devices and rare metals. It is desirable that efforts to address such changing demands aredisclosed.

2. Sector-Specific Recommended Disclosures

Objectives ofSector-Specific
Disclosure Guidance
Sector-Specific
Recommended
Disclosures
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performance (Adopted in June 2021, effective from 2023). In particular, the EEXI regulation
will establish a standard on CO2 emission factor, and imposes restrictions on engine power
output when the index is not attained. The CII rating on the other hand will have a five-level
rating based on actual performance of fuel consumption.
In addition, one method of GHG emissions reduction which is characteristic of shipping isslow steaming. Slow steaming without facility renewal is effective, but slow steaming involving
changing the ship shape to suit reduced speed as well as retrofitting of engines, etc. are being
carried out. Cooperation with shippers and ports is important in implementing slow steaming.
Customers are requesting that CO2 emissions be reduced throughout the supply chain, andthese measures will reduce the transition risk to the shipping industry. In addition, reducing
the CO2 emissions and intensity of commercial vessels operated by the company can reducebusiness risks and create opportunities.

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Chemicals(Disclosure examples) CO2 emission intensity of vessels used by the company (applicable standards andperformance. AER 15, EEOI 16, CII ratings, etc.)
 Improvements in operation (cooperation with shippers and ports to realize thesegoals) such as slow steaming, reduced offshore waiting, weather routing, andimproved maintenance, and technical improvements such as retrofitting energysaving equipment.

Electrical andelectronics
EnergyInitiatives to Reduce Physical Risk
The industry may be impacted by both acute and chronic risk such as the increase infrequency and severity of natural disasters, changes in ocean currents, and the effects ofreduced sea ice. Impacts of ports and docks due to sea level rise are also expected.

Food
Banking(Disclosure examples) Establishment of guidelines and efforts for physical risk reduction such as hullstrengthening.
 A system to identify physical risks and reflect them in governance.

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Business Opportunities
Social change towards decarbonization also provides a new business opportunity for the
shipping industry. If shipping companies adopts the use vessels using new technologies suchas high-efficiency vessels, alternative fuel vessels, owns vessels with lower CO2 emissions thanInternational
Shipping

Annual Efficiency Ratio (AER) is an index of operational carbon intensity calculated using the designed deadweight of thevessel.
16 Energy Efficiency Operational Indicator (EEOI) is the operational CO2 emissions factor, based on amount of freighttransported.
1548

2. Sector-Specific Recommended Disclosures

Automobiles
Iron and Steel Organizational structure to identify risks and opportunities related to the above andreflect them in corporate governance.

Sector-Specific
Recommended
Disclosures(Disclosure examples) Policies and outcomes for handling new freight movements such as transport ofhydrogen, ammonia, and CO2 toward carbon neutrality
 Initiatives to introduce high-efficiency vessels, alternative fuel vessels, and othervessels that use new technologies, and to work on novel method of navigation

Objectives ofSector-Specific
Disclosure Guidance

conventional vessels, or if their fleet actively take measures to improve operational efficiency
such as slow steaming, such measures will lead to a reduction in CO2 emissions through thevalue chain of freight, and disclosure of such measures may be competitively advantageous.
In order to transport hydrogen and ammonia, specialized ships will be needed. In addition,
demand for copper and rare metals is expected to increase as a result of electrification. It is
important to accurately grasp these new changes in demand and freight movements, and todemonstrate flexibility in responding to them.

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