31 July 2024
Sustainability Standards Committee
Sustainability Standards Board of Japan
Submitted via email: 2024ed01@ssb-j.jp
Exposure Drafts of Sustainability Disclosure Standards including the Application of the Sustainability
Disclosure Standards (the Application ED), Theme-based Sustainability Disclosure StandardExposure Draft No. 1 General Disclosures (the General ED), and Theme-based Sustainability
Disclosure Standard Exposure Draft No. 2 Climate-related Disclosures (the Climate ED).
MSCI1 welcomes the opportunity to comment on the Sustainability Standards Board of Japan’s(SSBJ) Exposure Drafts of the Sustainability Disclosure Standards (“SSBJ EDs”). As a leading
provider of sustainability and climate data and analytics to the global financial industry, MSCI
has collected climate and sustainability-related disclosures from thousands of companies
globally for over two decades and developed tools to assist financial institutions in analyzing
climate and sustainability risks within their investment and lending portfolios.
MSCI supports the publication by the Sustainability Standards Board of Japan – the Exposure
Drafts of the Sustainability Disclosure Standards that aligns with the ISSB standards.
We have the following general comments set out for your kind consideration.
1. Mandatory disclosure of Scope 1-3 emissions, including upstream and downstream
emissions. Scope 3 disclosures should be made mandatory even if the company believes
that climate-related risk is not material for the company. Consistent Scope 3 disclosures are
crucial for comparability and provide a comprehensive view of transition-related risks. Asper MSCI research, of the 1068 Japanese companies in the MSCI Japan IMI, currently 66%of the constituents disclose Scope 1 and 2 emissions, and 55% disclose some categories ofScope 3. (Please refer Exhibit 1 in the Annex). While breaking down Scope 3 disclosures intoupstream and downstream categories, we found that more than 42% of MSCI Japan IMI
constituents report Scope 3 categories (1-7, and 12) whereas less than 32% of theconstituents report Scope 3 categories (8-11,13,14 and 15). (Please refer Exhibit 2 inAnnex). Standardized disclosures across all categories enable comparative analysis andprovide decision-useful information for investors.
2. Ensure that the disclosure of GHG emissions is aligned with the standards of the GHG
Protocol2 over time. Considering the critical role of data comparability for investors, theSSBJ could align the disclosures of GHG emissions as closely as possible with the GHG
Protocol and ISSB. Aligning the disclosures with the ISSB standards would result incomparable non-financial disclosures for better decision making by investors. The GHG
1 MSCI ESG Ratings, research and data are produced by MSCI ESG Research LLC, a subsidiary of MSCI Inc.
2 GHG Protocol

Page | 1
7 World Trade Center | 250 Greenwich Street | 49th Floor | New York, NY 10007 | United States
Office: T +1 212 804 3900 | F +1 212 804 2919
msci.comProtocol's direct referencing3 in IFRS S2 Climate-related disclosures (IFRS S2) regulations
and in other global regulations on climate disclosures emphasizes its significance, offering
standardized reporting methodologies for greenhouse gas emissions, including Scope 3
categories, thus promoting consistency and reliability in environmental disclosures.
3. Financed emissions disclosures in the financial sector are now on the rise and availability ofdata is no longer a major obstacle. The comparability of financed emissions reporting could
be further enhanced with a detailed sector-level breakdown wherever possible, and reporting
gross absolute emissions disaggregated by Scopes 1, 2, and 3. To facilitate comparisons
between financial institutions of varying sizes, disclosure of the gross financed emissions
intensity could also be recommended.
4. Mandatory cross-industry and industry-specific metrics disclosure. Mandatory disclosureof TCFD cross-industry metrics is crucial as many jurisdictions currently lack requirements,
limiting quantity and quality of decision-useful information for investors. MSCI researchhighlights that such disclosures allow investors to assess climate risk exposure, anticipate
impacts, and evaluate companies' transition plans. The TCFD's 2021 recommendation
includes seven cross-industry metrics categories.4 Incorporating industry-specific metrics
and aligning with standards like GICS5 (used for reporting under the IFRS S2 climatestandards) and NACE6 (which is used for reporting under the European Sustainability
Reporting Standards) will enhance comparability of sector specific risks globally. To
improve transparency, the SSBJ should provide a mapping table for the Japan Standard
Industrial Classification (JSIC) sector codes7 to NACE and GICS.
5. Climate scenario analysis and guidelines involve applying climate scenarios across short-,
medium-, and long-term horizons. Climate scenario analysis is an important tool for
examining how future changes in the climate could impact companies’ business models,value chains and resilience. We are supportive of scenario analysis guidance from theTCFD8,9 as these documents highlight a step-by-step guide on how disclosing entities could
get started in applying scenario analysis, acknowledging the importance of key principles
such as transparency, comparability of results, consistency of methodology and adequate
documentation. Exploring physical climate-related risks across various scenarios and time
horizons is essential for recognizing the potential differences in outcomes under different
scenarios and time frames, especially for long-term impacts beyond 2050. In addition toconsidering the 2030- and 2050-time horizons for disclosure purposes, it is also helpful tounderstand: i) the near-term and long-term impacts on an entity’s operations, supply chain,and infrastructure; ii) the appropriateness of climate mitigation and adaptation strategies,iii) and the financial projections of these risks, including cost estimates for adaptation andimpact on future revenues and expenses.
3 Overview of GHG Protocol Integration in Regulatory Climate Disclosure Rules (GHG Protocol, March 2024)
4 TCFD Guidance on Metrics, Targets and Transition Plans (TCFD, October 2021)
5 Global Industry Classification System
6 Statistical classification of economic activities in the European Community
7 Japanese Industrial Standards Committee
8 Technical Supplement: The Use of Scenario Analysis in Disclosure of Climate-related Risks and Opportunities (TCFD, June 2017)
9 Guidance on Scenario Analysis for Non-Financial Companies ((TCFD, October 2020))

Page | 2

6. The use of high-temperature scenarios to be encouraged. According to the ISSB standards,
disclosing entities must report whether their analysis includes a diverse range of climaterelated scenarios, including one that aligns with the latest international agreement onclimate change. MSCI provides a wide range of scenarios in line with the Network forGreening the Financial System (NGFS).10 Additionally, to better understand the evolving
nature of climate-related financial risks, we recommend that disclosing entities include ahigh-temperature scenario in their analysis, such as the NGFS's 3°C scenario or anequivalent. This approach will help evaluate the most severe impacts of physical climaterelated risks, including chronic and acute hazards from wildfires, floods, and extreme heat(non-exhaustive).
7. Differentiating between acute and chronic risks. More specific guidelines on disclosing
acute and chronic risks would provide better information for investors and other users ofdisclosures. We recommend that physical risk disclosures clearly distinguish between
chronic and acute hazards. Acute hazards are sudden events that cause immediateimpacts, such as infrastructure damage and supply chain disruptions. In contrast, chronichazards develop more gradually, yet they can pose financial risks of a similar magnitude tothose of acute hazards.
8. Disclosure of carbon credits. IFRS S1 and S2 require companies to disclose their planned
use of carbon credits, which could enhance the transparency of their commitments andstrengthen accountability. Such disclosures also inform investors about the role that carbon
credits will play in a company’s transition plan. Alignment with the ISSB will provide
investors and other stakeholders with the information needed to assess the credibility andambition of the company’s commitment, such as: i) the type of credit used, ii) what standard
it was verified against, and iii) other information needed to assess the integrity of the credit.
Disclosure of the use of carbon credits against ISSB-aligned standards can improve
Japanese companies' attractiveness to investors by demonstrating how they plan to offset
unabated emissions in a credible manner. It is important to disclose current carbon credit
usage to provide insight into near-term actions and how they complement internal emission
reductions, enabling investors to assess associated risks and opportunities effectively.
9. A standardized approach to the disclosure of transition plans. The disclosure of climaterelated risks can have a greater positive impact on achieving climate targets where thecontribution to adaptation or mitigation strategies to tackle those risks is explicitly laid out
by the disclosing entity. As the ISSB recently announced11 that it would take over
responsibility for the disclosure requirements of the Transition Plan Taskforce (TPT)
framework12, to ensure future alignment with the ISSB’s standards, the SSBJ may consider
incorporating the TPT’s disclosure framework into standardized disclosures.

10 NGFS Scenarios Portal
11 ISSB delivers further harmonization of the sustainability disclosure landscape as it embarks on new work plan (IFRS, June 2024)
12 Transition Plan Taskforce | Setting a gold standard

Page | 3

A robust transition plan could include: i) an appropriate level of ambition, ii) clear actions(through an implementation and engagement strategy within both the value chain andbusiness operations), iii) accountability (metrics, targets, the planned use of carbon credits,and effective governance). The relevance of the intended use of carbon credits or offsets toachieve emissions reductions as part of transition plan disclosures could also beconsidered. Important information to disclose could include: i) credit type (such as whether
credits would be emission reductions, or technology based or nature-based removals), ii) thecarbon credit standard used for verification, and iii) the extent to which the strategy relies oncredits.

Please do not hesitate to contact us to discuss our submission.
Yours sincerely,/sMeggin Thwing Eastman
Managing Director, ESG Research
MSCI ESG Research LLC

Page | 4

Annex
Exhibit 1: Emissions disclosure rates in the MSCI Japan IMI

Source: CDP. Company Disclosures. MSCI ESG Research as of July 01, 2024. Notes: When companies did not define the categories of Scope
3 emissions they disclosed, we assumed companies have reported all categories of Scope 3 emissions. We are currently in the process ofcollecting FY 2023 corporate emissions data. There are in all 1,068 Japanese companies in the MSCI Japan IMI.

Exhibit 2: Emissions disclosure rates per scope and category in the MSCI Japan IMI

Source: CDP. Company Disclosures. MSCI ESG Research as of July 01, 2024. Notes: When companies did not define the categories of Scope
3 emissions they disclosed, we assumed companies have reported all categories of Scope 3 emissions. We are currently in the process ofcollecting FY 2023 corporate emissions data. There are in all 1,068 Japanese companies in the MSCI Japan IMI.

Page | 5