Bloomberg L.P.

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31 July 2024

Bloomberg response to the SSBJ’s Exposure Drafts of
Sustainability Disclosure Standards to be applied in Japan
General comments
Bloomberg welcomes the publication of the three exposure drafts of the Sustainability DisclosureStandards and thanks the Sustainability Standards Board of Japan (“the SSBJ”) for the opportunity
to respond to the consultation.
Bloomberg broadly supports the ISSB baseline standards and emphasizes the importance ofalignment across jurisdictions for sustainability-related financial disclosures. Given the rapid pace ofdevelopments in sustainability-related disclosures, ensuring alignment across jurisdictions isparamount. To ensure clarity and avoid fragmented requirements for market players globally,
Bloomberg continues to advocate for domestic reporting standards to align progressively with the
ISSB baseline.
To this end, we welcome the decision by the SSBJ to come forward with the exposure drafts, whichmarks a significant milestone in advancing sustainability reporting in Japan. We take note of the
SSBJ’s decision to incorporate all requirements in the IFRS Sustainability Disclosure Standards(IFRS S1 “General Requirements for Disclosure of Sustainability-related Financial Information” andIFRS S2 “Climate-related Disclosures”) in its exposure drafts, and we strongly support the alignment
between the SSBJ’s proposals and the ISSB baseline.
In addition to the broader recommendations on ISSB adoption outlined in the document below, we
would like to highlight the following observations with regards to the SSBJ’s proposals:●

Bloomberg notes that the SSBJ exposure drafts do not prescribe the scope ofcompanies that would be required to apply the sustainability disclosure standards.
Bloomberg understands that authorities may want to take a phased approach to
implementing IFRS S1 and IFRS S2 to facilitate the readiness of reporting entities. However,
we believe the overarching objective should be to introduce mandatory reporting for listedcompanies to ensure a consistent application of the ISSB baseline across jurisdictions. This
would be consistent with the current local disclosure obligations, which require all listedcompanies in Japan to disclose TCFD-aligned sustainability information. Additionally, we
would strongly encourage the SSBJ to limit any potential future modifications to the ISSB
Standards: to this end, it is important to embed both IFRS S1 and IFRS S2 to the fullest
extent possible.

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Bloomberg notes that the SSBJ exposure drafts do not address assurance. To enhance
the credibility and reliability of data disclosures, Bloomberg recommends that supervisory
and regulatory authorities consider a phased approach on data assurance for information
disclosed under both sustainability- and climate-related requirements. At the minimum,
information should be reviewed by an internal audit function and eventually be verified
externally by a third party. This should start with limited assurance, and gradually progress
to reasonable assurance, where the supervisory and regulatory authorities deem
appropriate.
Bloomberg notes that the SSBJ exposure drafts permit entities to choose not to reportsustainability-related financial disclosures at the same time as related financial
statements, under certain conditions. Bloomberg believes it is key that entities be required
to report its sustainability-related financial disclosures at the same time and within the same
reporting period as its related financial statements to ensure comparability of disclosures.
Bloomberg notes that the SSBJ exposure drafts permit entities to disclosesustainability-related financial disclosures separately from related financial
statements, under certain conditions. Bloomberg believes entities should be required todisclose sustainability-related financial information as part of general purpose financial
reporting. We believe that the consistent location of disclosures across entities would allow
for easier identification and extraction of the data for value-added services, and having suchdisclosures part of mainstream financial filings would ensure the information has gone
through a rigorous review process. Furthermore, it is important to enable consolidated level
reporting for the entire report. If there’s a difference between consolidated and parent-level
disclosures, entities should explicitly state the scope of disclosure to enable the comparabilityof values.
Bloomberg notes that the SSBJ exposure drafts permit disclosures of market-based
Scope 2 greenhouse gas (GHG) emissions, in contrast to the IFRS S1 and S2 that require
disclosures of location-based Scope 2 GHG emissions only. When disclosing Scope 2 GHG
emissions, entities should explicitly mention that they used a market-based methodology aspart of their disclosures in order to avoid confusion and enable the comparability of values.
Finally, Bloomberg recommends making the SSBJ exposure drafts and entities’ disclosuresavailable in English in order to improve the accessibility and availability of the reported data
to international investors.

In the paper below, we lay out the key defining characteristics that jurisdictions should consider when
adopting the ISSB global disclosures framework. We believe that these measures will ensure
consistency, reliability, and clarity in sustainability-related financial disclosures across jurisdictions.
We would be happy to provide additional information on any of the points raised below.

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Key Discussion Points for International ISSB
Adoption
What is the current ISSB adoption landscape?
A growing number of jurisdictions have stated their commitment to adopting the ISSB global baseline
within their regulatory reporting frameworks, with more than 20 jurisdictions involved in this process
as of May 2024.
The increasing adoption of the ISSB standards is a positive development, which enhances the roleof reliable, comparable, and consistent sustainability and climate-related disclosures in supporting
the transition to a net-zero economy. Widespread adoption of ISSB standards is crucial for delivering
consistent and comparable sustainability-related financial information globally and addressing
transparency and comparability issues identified by market participants and regulatory bodies. The
IFRS Foundation has issued its Inaugural Jurisdictional Guide1 to support this process.
In addition, the extraterritorial nature of reporting rules, especially the EU’s Corporate Sustainability
Reporting Directive (CSRD)2, highlights the need for a common framework to minimize costs formarket participants affected by different regimes. Alignment with ISSB standards can further help
those using the Interoperability Guidance3 developed with the European Financial Reporting
Advisory Group (EFRAG) to meet the CSRD requirements.
However, there are notable differences in how jurisdictions are considering adopting the ISSB
standards. A jurisdiction’s commitment to adopting these standards does not mean they will adopt
them in full, and national bodies may modify the ISSB standards to better fit their domestic needs
and frameworks. As a result, there may be significant variations in terms of the scope of application,
whether reporting requirements are voluntary or mandatory, implementation dates, assurance
requirements, disclosure formats, and whether jurisdictions adopt both IFRS S1 and IFRS S2, oronly IFRS S2.
Different jurisdictions implementing their versions of the ISSB baseline with modifications can leadto market fragmentation, reduced transparency, and increased transaction costs for firms operating
1

IFRS Foundation, Preview of the Inaugural Jurisdictional Guide for the adoption or other use of ISSB
Standards.
2
DIRECTIVE (EU) 2022/2464 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 14
December 2022 amending Regulation (EU) No 537/2014, Directive 2004/109/EC, Directive 2006/43/EC and
Directive 2013/34/EU, as regards corporate sustainability reporting.
3
ESRS-ISSB Standards Interoperability Guidance.

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globally. Modifications may limit access to consistent and comparable sustainability-related financial
information. Conversely, limiting modifications promotes consistency and coherence acrossregulatory requirements, meeting investors’ needs for consistent information and reducing reporting
burdens for companies with multiple reporting obligations.

Alignment between the IFRS S1 and S2 and domestic
reporting frameworks
Jurisdictions should strive to incorporate the ISSB baseline within their regulatory frameworks to thegreatest extent possible to prevent regulatory fragmentation and maintain comparability for global
market participants. In order to enable clarity for investors and stakeholders, and to build aninteroperable reporting system, some key principles should be applied.

What key elements should be considered?
1. Climate-related Risks and Opportunities
For greenhouse gas emissions,● Companies should report gross emissions (excluding offsets) in addition to net emissions,with a breakdown by type of greenhouse gas to avoid misleading disclosures, especially for
Scope 3 emissions.
● Bloomberg welcomes the breakdown of company emissions across Scope 1, Scope 2, andScope 3 enshrined in the ISSB standards.
● Company emissions should be broken down across Scope 1, Scope 2 and Scope 3. In
addition, we believe it is important for companies to disclose, wherever applicable, abreakdown of its emissions across types of greenhouse gas. An omission of this breakdown
could result in misleading disclosures, as two companies with the same emissions could
report different aggregate amounts due to differences in assumptions about the conversionof their GHGs in terms of CO2 equivalent. This is particularly important for Scope 3
disclosures.
● It would furthermore be helpful if companies report the share of their emissions that iscovered under a regulatory emissions compliance scheme. Emissions covered under acompliance scheme create a direct cost to the company and are therefore material from areporting standpoint.
● Ideally, companies would also report on their energy consumption. This information isrelevant in itself from a climate-alignment point of view, and can furthermore be used tovalidate company-reported Scope 2 emissions.

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For climate-related targets,● Bloomberg welcomes the reporting of Target Year, Base Year, Target Scope (part of theentity to which the target applies), Target Ambition (metric used to set the target) as outlinedby the ISSB standard for each target as these elements are critical to capturing consistentreporting of climate targets.
● It would furthermore be helpful if companies, in addition to reporting whether Scope 1, Scope
2 or Scope 3 greenhouse gas emissions are covered by the target, also reported the percent
of total emissions of the selected Scope(s) that are covered by the respective target.
Similarly, when disclosing whether Scope 1, Scope 2 or Scope 3 greenhouse gas emissions
are covered by the target it would be beneficial if the company makes an explicit disclosure
as to the Scope 2 reporting methodology associated with the target (e.g., location or market
based).
● Ideally, companies would also report the status of each of their targets on an annual basis.
This would reduce confusion for stakeholders when evaluating which targets are active inany given reporting period.
For physical risks, it is key to have data on:● Company asset locations, as depending on where an asset is located, it may be more or lessvulnerable to climate-related risks, such as floods and wildfires. Companies should be
encouraged to report asset locations and metrics pertaining to the economic value of thoseassets (e.g. asset value, or the asset’s share of production or revenue) and their resilience
to climate-related risks to be able to serve the financial impact from asset impairment.
● Opportunities for adaptation to climate change, and specifically any actions the company istaking to increase its resilience to physical risks.

2. Standardized Metrics and Categorical Answers
Bloomberg recommends using standardized metrics and quantitative information for better
comparability. In addition, for open-ended disclosure requirements, predetermined categoricalanswers should be provided to aid comparability.
● For disclosure requirements that are open-ended, it will aid comparability of responses if
there are pre-determined categorical answers to choose from.
● For example, for IFRS S2 disclosure requirement 6a (ii), “how and how often the body(s) orindividual(s) is informed about climate-related risks and opportunities,” categorical answers
could be:○ At least once per month;○ At least once per 3 months;○ At least once per 6 months;○ At least once per year;

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Other.

3. Unit of Reporting
For quantitative reporting requirements, guidance should be given on the unit of reporting (e.g.,monetary value, percentage of revenues).
● For example, for IFRS S2 disclosure requirement 29e, “capital deployment—the amount of
capital expenditure, financing or investment deployed towards climate-related risks andopportunities,” disclosures would benefit from guidance on whether this should be expressed
as a monetary value, a percentage of revenues, or categorically (e.g. “high,” “medium” or“low”).

4. Scenario Analysis Parameters
Companies should follow specified parameters for scenario analysis, including considering both“Paris Aligned” and “Hot House World” scenarios, defining time horizons, indicating metrics used,and specifying the scope of analysis. Specifically, the disclosure requirements could specify that:● At least one “Paris Aligned” scenario (<2°C global warming) and one “Hot House World”
scenario (>2°C global warming) should be considered;● The following time horizons should be considered: short term (<5 years), medium term (5 to15 years), and long term (>15 years);● The metric(s) used to measure the results of the scenario analysis should be clearly
indicated;● The scope of the analysis (e.g. which physical assets, business units or supply chain partners
are in scope) should be indicated;● When results are presented in a qualitative way, they provide a sense of whether themeasured risk is low/medium/high, along with an interpretation of those classifications.

What additional elements should be considered?
1. Scope and timeline of disclosures
Some jurisdictions may wish to phase in sustainability reporting requirements to ease the reporting
burden on companies. Jurisdictions should consider a timetabled approach based on the company’s
size and the industry in which it operates, which enables firms to prepare and adapt their reporting
strategies accordingly. However, the overarching objective should be to introduce mandatory

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reporting for listed companies to ensure a consistent application of the ISSB baseline acrossjurisdictions.

2. Frequency and location of reporting
Entities should be required to report their sustainability-related financial disclosures at the same time
and within the same reporting period as their related financial statements.
It is important to enable consolidated level reporting for the entire report. Climate-related disclosures
should cover the same scope of entity as financial statements to avoid misleading information.

3. Digital reporting of data
It is important for disclosures to be available in both machine-readable (such as XBRL) and humanreadable (such as HTML) formats to facilitate digital consumption of sustainability-related
information, while retaining full control over the appearance of the statement. To this end, werecommend using the iXBRL format, which allows reporting entities to add machine-readable tags
(XBRL) to an electronic file that can be read by humans.
The IFRS Sustainability Disclosure Taxonomy4 has been designed for tagging sustainability-related
financial disclosures prepared applying IFRS Sustainability Disclosure Standards, and will help:
1. users of general purpose financial reports to consume sustainability-related financial
information digitally;
2. regulators that require the digital reporting of sustainability-related financial information; and3. an entity to implement digital reporting of sustainability-related financial information, enablingtagging without undue cost.
Using a global format for machine-readable sustainability information will help improve accessibility,
enable easier extraction, and foster less error-prone data collection by users of this information.

4. Assurance
Both IFRS S1 and IFRS S2 do not address assurance. To enhance the credibility and reliability ofdata disclosures, Bloomberg recommends that supervisory and regulatory authorities consider aphased approach on data assurance for information disclosed under both sustainability- and climaterelated requirements. At the minimum, information should be reviewed by an internal audit function
4

IFRS Sustainability Disclosure Taxonomy 2024.
https://www.ifrs.org/content/dam/ifrs/publications/amendments/english/2024/issb-tu-2024-1-ifrssustainability-disclosure-taxonomy.pdf.

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and eventually be verified externally by a third party. This should start with limited assurance, andgradually progress to reasonable assurance, where the supervisory and regulatory authorities deem
appropriate.

5. Comparability across multiple periods
To ensure comparability over time, entities should disclose quantitative information for both current
and preceding periods. Entities should clearly point to material errors made in prior periods to ensure
data comparability over multiple periods.

What is the impact of the EU Corporate Sustainability
Reporting Directive (CSRD)?
The CSRD aims to harmonize sustainability disclosures across the EU by introducing detailed
reporting rules that will require roughly 50,000 companies to report against a mandatory set ofsustainability standards – the so-called European Sustainability Reporting Standards (ESRS) –encompassing environment, social and governance issues.
The extraterritorial nature of the CSRD underscores the importance of having a common frameworkfor data inputs to minimize the costs of market participants captured by these different regimes. The
European Financial Reporting Advisory Group (EFRAG) – which is responsible for preparing the
ESRS – and the ISSB have jointly issued interoperability guidance5 to describe the alignment of
disclosure requirements and information that an entity starting with each set of standards needs toknow to enable compliance with both sets of standards. Close coordination between local regulatory
authorities and the ISSB can help create and promote common baseline metrics and inputs formarket participants, as well as consistent terminology and definitions, where feasible.
The CSRD covers:
A. All listed companies on an EU regulated market (including listed SMEs, but not microenterprises);
B. All large companies exceeding two of the three following criteria:
a. 250 employees during the financial year;
b. Balance sheet total EUR 20 million;c. Net turnover EUR 40 million;
5

ESRS-ISSB Standards Interoperability Guidance. https://www.ifrs.org/content/dam/ifrs/supportingimplementation/issb-standards/esrs-issb-standards-interoperability-guidance.pdf.

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C. Non-EU companies generating a net turnover of more than EUR 150 million and having a
subsidiary in the EU that follow the criteria applicable to EU companies (i.e., being listed on
the European market except micro or being within the large company threshold in point b)
above) or a branch in the EU generating more than EUR 40 million net turnover;
D. Captive insurance and reinsurance undertakings, as well as small and non-complex
institutions, provided they also qualify as large companies or SMEs.
The law entered into force on 5 January 2023 and must be integrated into EU Member States’
national policy frameworks within 18 months of that date. The Directive’s implementation will takeplace on a phased-in basis:
●
●
●

●

From 1 January 2024 (first reports due in 2025) for companies that are already in scope of
the Non-Financial Reporting Directive (NFRD);
From 1 January 2025 (first reports due in 2026) for other large companies;
From 1 January 2026 (first reports due in 2027) for listed SMEs (SMEs have the option to
opt-out the first two years if the SME provides a statement explaining why their management
does not capture sustainability information);
From 1 January 2028 (first reports due in 2029) for non-EU companies with
branches/subsidiaries captured by the thresholds.

The first set of sector-agnostic ESRS entered into force on 1 January 2024. The sector-specific
ESRS and the reporting standards for non-EU companies are due to be adopted by 30 June 2026.
The sector-specific standards will describe disclosure requirements that are specific to different
industry sectors. The standards for non-EU companies will cater specially for the case of non-EU
companies that are in scope of the CSRD. The standards for SMEs will contain a simpler set ofreporting requirements in comparison to large companies.
The EU defines6 SMEs as companies with:● Fewer than 250 employees; and● Annual turnover that does not exceed EUR 50 million; or● Annual balance sheet not exceeding EUR 43 million.
Microenterprises are also included in this general definition of SMEs, but they are excluded from thescope of the CSRD. All other companies are encouraged to voluntarily create reports to help support
the overall transition to a sustainable economy.

6

European Commission, Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs,
User guide to the SME definition, Publications Office, 2015, https://data.europa.eu/doi/10.2873/620234.

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It is important to note that the CSRD includes an equivalence mechanism for non-EU companies.
For example, if the non-EU parent of an EU subsidiary reports under so-called “equivalent” reporting
standards to the ESRS (and the EU subsidiary reporting is included within the consolidated report),
certain reporting exemptions may apply. At this stage, it is challenging to understand which otherstandards may be considered equivalent to the ESRS, largely because the ESRS are extremelycomprehensive and granular. Moreover, the ESRS integrate the “double materiality” principle, incontrast to the standards developed by the International Sustainability Standards Board (ISSB).
The criteria for assessing equivalence have not yet been established by the European Commission.
One possibility that it may consider when determining equivalence is whether the non-EU company’s
home jurisdiction has a local sustainability taxonomy (including reporting rules against thistaxonomy) that maintains the same principles of net-zero alignment as the EU Taxonomy. In theabsence of equivalence, in-scope non-EU companies would be required to report against the EU
Taxonomy as per Article 8 of the Taxonomy Regulation.

Concluding points
In conclusion, regulators should consider the following points when implementing the ISSB
standards:
1. Standardized metrics: Regulators should prioritize standardized metrics and quantitative
information for better comparability.
2. Comparative data: Entities should disclose quantitative information for both current andpreceding periods.
3. Phased-in reporting requirements: Regulators should favor a timetabled approach basedon company size and industry, and prioritize carbon-intensive sectors, with the overarching
objective to move toward mandatory reporting for listed entities.
4. Minimum KPIs: Entities should report minimum KPIs, including Scope 1, 2 and 3 GHG
emissions, carbon emission targets, and scenario analysis for company resilience.
5. Digital reporting: Reporting disclosures in both machine-readable (XBRL) and humanreadable (HTML) formats can facilitate digital consumption of sustainability-related
information. We recommend using the iXBRL format, which allows reporting entities to add
machine-readable tags (XBRL) to an electronic file that can be read by humans.
6. Assurance of reported information: A review by an internal audit function, at the minimum,and ultimately by a third party, is recommended where the supervisory and regulatory
authorities deem appropriate.
7. Consolidated-level reporting: Climate-related disclosures should cover the same scope asfinancial statements to avoid misleading information.

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