August 30, 2021
Platform on Sustainable FinanceEuropean Comission
1049 Brussel, Belgium

Japanese Bankers Association

JBA comments on the Platform on Sustainable Finance's draft report on taxonomy
extension options linked to environmental objectives
Dear Sirs/Madams:
The Japanese Bankers Association 1 (JBA) appreciates the opportunity to provide comments on the Platform on
Sustainable Finance’s draft report on taxonomy extension options linked to environmental objectives 2 on July12, 2021.
We hope that our comments will contribute to further discussions at the Platform.

General Comments
We welcome the proposal in this report by the Platform on Sustainable Finance which focuses on facilitatingtransition finance for economic activities which cannot reach green performance, as we have provided ouropinion since 2019 on EU Taxonomy that it should support not only purely green economic activities but also
economic activities aimed at the transition to a low-carbon economy.
However, there still are various challenges in how companies in sectors engaging in categorized as significantly
harmful (SH) activities can develop reliable transition strategies and raise funds by using the criteria defined in
the extended taxonomy.
The financial sector in Japan, like in many other jurisdictions, plays an important role to finance the energy
transition, but also to manage the risks related to this transition. From the viewpoint of sustainability, Japanesebanks have been supporting our clients for their sustainable growth by working together to explore solutions tomedium- to long-term environmental and social issues in their businesses, as well as providing support for theincubation and expansion of large-scale business opportunities in the future.
That includes continuous dialogue with our clients in carbon intensive sectors to explore technological solutions
for overall reductions in GHGs.
We believe a globally consistent ESG policy, regulatory and disclosure framework are key in this process.
Common understanding through definitions (e.g. taxonomy) is indeed important, but as we have previously
stated in our response to the previous consultations, we believe taxonomies need to be flexible enough to foster
innovation and facilitate transition. If we imagine the carbon neutral world we have committed to, we agree
sustainable economic activities defined under the EU taxonomy should have become the majority of theeconomy by 2050.

Comments on “Significantly Harmful” Taxonomy
The extended “significantly harmful” (SH) taxonomy should avoid discouraging investment towards companies
engaging in activities defined as SH and increase in costs. Therefore, it is important that SH taxonomy shouldbe accompanied by the guidance on how companies in sectors where transition is difficult can develop reliabletransition strategies and raise funds by using the criteria defined in the extended taxonomy.
1The Japanese Bankers Association is the leading trade association for banks, bank holding companies and bankers associations inJapan. As of August 30, 2021, JBA has 114 Full Members (banks), 3 Bank Holding Company Members (bank holding companies), 74
Associate Members (banks & bank holding companies), 58 Special Members (regionally-based bankers associations) and one SubAssociate Member for a total of 250 members. Several of its largest member banks are active participants in the EU financial markets.
2 https://ec.europa.eu/info/publications/210712-sustainable-finance-platform-draft-reports_en1

Also, the SH taxonomy would have additional complexity to the existing taxonomy and increase reporting
burden. In order to identify the “Intermediate Performance levels” for supporting “Intermediate Transition”, itis sufficient to use the “substantial contribution” (SC) and “do no significant harm” (DNSH) criteria under theDelegated Act and will not need “always SH” taxonomy.

Comments on “No Significant Impact” Taxonomy
While we believe that the taxonomy extension to support transition should be prioritized, we do not see sufficient
benefit in adopting the “no significant impact” (NSI) taxonomy at this stage considering the additional
complexity to the existing taxonomy and regulatory burdens.
(End)

2

August 30, 2021
[Specific Comments]
QuestionAnswer

1

Which environmental performance levels should the taxonomy distinguish, with a view to 
help the environmental transition?
Please select all of those that you would prioritise:2

How could policies ensure that recognising the transition from significantly harmful tointermediate performance will not slow down the transition to green activities (thatevidence shows we need to accelerate)?
Please select all that you agree with:3

Do you consider that recognising/naming the significant harm performance level would be important?



Substantial contribution
Intermediate performance
Significantly harmful - but can improve to sustainability
Significantly harmful - but can improve not to do significant harm
Distinguish different levels of environmental performance clearly throughout the taxonomy and in other instruments
Require continued improvement beyond the relevant investment plan
Require associated entity level transition strategy to understand the credibility of the intermediate transition
Recognise multiple ways of transition depending on type of Technical Screening Criteria
Yes

3.1 Please select the answer you agree with:agree with the staged approach in the report to first work with voluntary disclosures / guidance and in a later stage
introduce mandatory reporting4

improve the communication of transitions and transition plans on activity level
help companies to develop strategies and investment plans for moving away from significantly harmful performancelevels and meeting environmental objectives
help markets define and develop instruments for financing the transition
enhance risk management frameworks

In your view what would be the advantages and disadvantages of a ‘significantly harmful’taxonomy as designed by the Platform (i.e. accompanied by an assessment of the existingand needed EU policy and legislative initiatives aimed at incentivising finance for urgent
transition away from significantly harmful activities, for building climate-resilience andto support greening of the whole economy)?

Advantages – a ‘significantly harmful’ taxonomy would:
Please elaborate on your answer on the advantages of a ‘significantly harmful’ taxonomy. Transparency is of core essence since it allows for further education of the market participant on the real impact of the activity
Could advantages be further enhanced? If so how?
of both environment and social considerations. For a fuller picture, this however needs to be accompanied by a clear
benchmarking against industry averages, recognized frameworks; with an indication of the required solutions to allow tobridge the gap to reach the necessary performance threshold level.
In addition, the current EU taxonomy for environmental objectives is considered binary and unable to encourage investments
and capital flows in transitions to sustainable business models for “non-green” activities. By introducing SH taxonomy, it will
be possible to identify “intermediate performance levels” and to facilitate transitions from SH levels. This is an important andpreferable point to review the existing EU taxonomy. This will also encourage companies to develop a business strategy fortransition.
Disadvantages – a ‘significantly harmful’ taxonomy would:

negatively impact the ability of companies to raise finance for transition
accelerate transition risks and risks creating “stranded asset by legislation”
negatively impact banks with high shares of lending to certain companies both among retail customers and on thewholesale markets
disadvantage EU companies vs non-EU jurisdiction
1Question

Answer

increase complexity, reporting burden

Please elaborate on your answer on the disadvantages of a ‘significantly harmful’ We appreciate the review of EU taxonomy in order to enhance transition, but it is necessary to consider not to misleadtaxonomy. How could they be addressed?
stakeholders in disclosures. For banks enhancing transition finance, their share of loans for SH activities will increase in theshort term, but it is necessary to send correct messages to stakeholders. In addition, it is preferable to apply the SH taxonomy
after a sufficient preparatory period as banks will need close dialogue with clients on transition plans.
On the other hand, In SH taxonomy, some activities may be categorized as SH with no transition possibility even if they havepotential to overcome the issues by future technology innovation. In addition, an excessive credit crunch in certain SH
activities or an excessive concentration of credit in certain non-SH activities could raise a risk to financial stability.
Even if SH taxonomy is to be developed, adequate and appropriate consideration should be given particularly for using it for
prudential regulation.
－5

Do you agree with the following statements?
Please check all boxes that you agree with:

6

Do you consider recognising/naming the intermediate performance level useful to 
encourage mitigating significant harm?
Please explain your answer to question 6:

7

Yes

Activities categorized as green is limited under current Taxonomy Regulation. In order to enhance companies’ transition, it isimportant to define and support activities in “intermediate performance levels” and to support such transition plans.
It is not always easy to reach SC levels, but by introducing “intermediate performance level” to evaluate the progress intransition we expect that it will enhance the mobilization of investments and capitals for the transition of activities that do notreach green but may contribute to green.

For activities that are in the intermediate performance space (in between significant harm and substantial contribution):

Don’t know / no opinion / not applicablea) should all turnover from such activities be recognised as intermediate turnover, and all
opex as intermediate opex?
Please explain your answer to question 7. a):－b) should all capex be recognised as ‘intermediate capex’ irrespective of whether or not it 
improves environmental performance of the activity and by how much?
Please explain your answer to question 7. b):

8

Don’t know / no opinion / not applicableTo fully understand the risk of transition on the credit scoring of the entity, it is important to understand which activities could
have a substantial negative effect on the environment without a pathway to significantly improve its environmentalperformance, thus potentially raising a risk of becoming stranded which would have an knock-on effect on the revenue of thebusiness and ultimately its ability to service its debt.

What do you think are the essential conditions for recognizing such intermediate a) that the activity reaches the intermediate performance level, in other words does not do significant harm to that2

Question

Answertransitions for activities that can make a substantial contribution to the given
environmental objective:
The criteria for ensuring that the activity will improve to reach substantial contribution should include to:You selected option b) in question 8.

particular environmental objectiveb) in addition, that the activity continues to improve its environmental performance in order to stay in that intermediate
performance level and not to do significant harm even if in the future the criteria are tightened.
c) in addition, that the activity continues to improve its environmental performance in order to reach substantial
contribution (green) in the futuree) in addition, that the activity does no significant harm to any of the other environmental objectives, with the exceptionof adaptation (because failing to meet the do no significant harm criteria to adaptation means only a harm on the activityitself)have a transition plan in place
set a deadline for the transition
have the transition plan validated by the Board
publish the transition plan
audit the transition plan
disclose how the intermediate transition fits within the entity level transition strategy
otherPlease specify to what else should the criteria include, in relation with option b) in question Be able to be benchmarked against industry and recognized frameworks.
8.
You selected option c) in question 8.
The criteria for ensuring that the activity will improve to reach substantial contribution should include to:have a transition plan in place
set a deadline for the transition
have the transition plan validated by the Board
publish the transition plan
audit the transition plan

Please specify to what else should the criteria include, in relation with option c) in question －8:
9Do you have other suggestions for extending the taxonomy framework for significantly Among the Significantly harmful activities, we have concerns of “Disadvantages” responded in Question 4 above regarding
harmful activities, intermediate performance, intermediate transition?
the classification of 'always Significantly harmful' (no technical option to transition to an environmental performance notcausing signal harm).In order to identify the “intermediate performance levels” for supporting “intermediate Transition”, it issufficient to use the SC levels and the DNSH criteria under the Delegated Act. We believe that classification of “always SH”
activities is less meaningful and has greater disadvantages from the standpoint of supporting transition.
Some sectors which is not currently covered by the Delegated Act (DA) (e.g. natural gas) and sectors for which the DNSH
criteria are not defined in the DA should also be covered by the “intermediate transition”.

10In your view what would be the advantages and disadvantages of a ‘no significant －(environmental) impact’ taxonomy?
Advantages – a ‘no significant environmental impact’ taxonomy would:

3

Question

AnswerPlease elaborate on your answer on the of advantages a ‘no significant (environmental) We cannot find any advantages in defining NSI taxonomy which has very little impact on the environment either positively
impact’ taxonomy. Could advantages be further enhanced? If so how?
or negatively, and rather it takes time and make taxonomy complex.
From pros and cons of NSI extension described in the draft report, it is unclear whether NSI is beneficial for SMEs. Also, it
is difficult to identify and prove economic activities which do not contribute to DNSH nor SC.
Disadvantages – a 'no significant environmental impact' taxonomy would:otherPlease elaborate on your answer on the of disadvantages a ‘no significant (environmental) From pros and cons of NSI extension described in the draft report, it is unclear whether NSI is beneficial for SMEs. Also, it
impact’ taxonomy. How could they be addressed?
is difficult to identify and prove economic activities which do not contribute to DNSH nor SC.
We also agree with the “Cons” of NSI as stated in the draft report:- Scientific basis may not be well defined for all sectors.
- Potential challenge of choosing which sectors to develop criteria for first and then how to maintain a list of NSI activities
up-to-date in the dynamic services sector.
－11

Can you give examples of activities which you think would be considered as NSI?

12If there was to be an extension of the taxonomy to address NSI activities, should it be a requirement for companies or investors wishing to report activities under the NSI
taxonomy to first participate in an environmental labelling or certification scheme (suchas EMAS) to validate minimum levels of environmental performance?
Please explain your answer to question 12:

13

Don’t know / no opinion / not applicable－Do you consider it would be helpful if the Platform prepared non- binding guidance on 
NSI activities which could be published by the Commission for voluntary use bytaxonomy users?

Don’t know / no opinion / not applicable

13. If you consider it would be helpful, what should be the scope of such guidance, for instance －1 in relation to minimum standards of environmental performance?
Please explain your answer to question 13:
14

Are you in favour of a phased approach where NSI could be recognised as a generic 
category (through guidance) without L1 change?
Please explain your answer to question 14:

15－Yes but it should be done in future only

We believe that supporting “intermediate transition” should be prioritized and introducing the NSI category is not a apriority(or unnecessary).

Prior to any L1 change (if at all), do you consider that the Platform should recommend to 
include some NSI activities in the taxonomy by e.g. creating a generic category for 'green'
service providers under the adaptation or other objectives?

No4

Question

AnswerPlease explain your answer to question 15:－Should you wish to provide additional information (e.g. a position paper, report) or raise
specific points not covered by the questionnaire, you can upload your additional
document(s) below. Please make sure you do not include any personal data in the file you
upload if you want to remain anonymous.

We welcome the proposal in this report by the Platform on Sustainable Finance which focuses on facilitating transition financefor economic activities which cannot reach green performance, as we have provided our opinion since 2019 on EU Taxonomy
that it should support not only purely green economic activities but also economic activities aimed at the transition to a lowcarbon economy.
However, there still are various challenges in how companies in sectors engaging in categorized as significantly harmful (SH)
activities can develop reliable transition strategies and raise funds by using the criteria defined in the extended taxonomy.
The financial sector in Japan, like in many other jurisdictions, plays an important role to finance the energy transition, butalso to manage the risks related to this transition. From the viewpoint of sustainability, Japanese banks have been supporting
our clients for their sustainable growth by working together to explore solutions to medium- to long-term environmental andsocial issues in their businesses, as well as providing support for the incubation and expansion of large-scale business
opportunities in the future.
That includes continuous dialogue with our clients in carbon intensive sectors to explore technological solutions for overall
reductions in GHGs.
We believe a globally consistent ESG policy, regulatory and disclosure framework are key in this process. Common
understanding through definitions (e.g. taxonomy) is indeed important, but as we have previously stated in our response to
the previous consultations, we believe taxonomies need to be flexible enough to foster innovation and facilitate transition. Ifwe imagine the carbon neutral world we have committed to, we agree sustainable economic activities defined under the EU
taxonomy should have become the majority of the economy by 2050.
Comments on “Significantly Harmful” Taxonomy
The extended “significantly harmful” (SH) taxonomy should avoid discouraging investment towards companies engaging inactivities defined as SH and increase in costs. Therefore, it is important that SH taxonomy should be accompanied by theguidance on how companies in sectors where transition is difficult can develop reliable transition strategies and raise funds
by using the criteria defined in the extended taxonomy.
Also, the SH taxonomy would have additional complexity to the existing taxonomy and increase reporting burden. In order
to identify the “Intermediate Performance levels” for supporting “Intermediate Transition”, it is sufficient to use the“substantial contribution” (SC) and “do no significant harm” (DNSH) criteria under the Delegated Act and will not need“always SH” taxonomy.
Comments on “No Significant Impact” Taxonomy
While we believe that the taxonomy extension to support transition should be prioritized, we do not see sufficient benefit inadopting the “no significant impact” (NSI) taxonomy at this stage considering the additional complexity to the existingtaxonomy and regulatory burdens.
(End)5