#Japan #Tokyo #Financial Council #Sustainability Information #Disclosure Standards

The 9th Meeting of the Financial Council's Sustainability Information Disclosure and Assurance Working Group

On October 30, 2023, the 9th meeting of the Financial Council's working group focused on the disclosure and assurance of sustainability information. Chaired by Kazusaka, the meeting was conducted in a hybrid format, enabling both in-person and online participation. This article summarizes key insights and discussions from the meeting, as well as notable recommendations.

Meeting Overview

The meeting commenced promptly at 9:30 AM, where the chair thanked the attendees for their participation despite their busy schedules. The agenda included the presentation of documents by the secretariat, followed by discussions and a question-and-answer session.

The secretariat provided an overview, discussing the agenda topics, which primarily centered on the disclosure and assurance of sustainability information. The meeting aimed to address unresolved issues from previous discussions and gather further insights from members.

International Trends in Sustainability Information Disclosure

During the meeting, the secretariat highlighted recent international trends related to the disclosure and assurance of sustainability information, particularly referencing movements in the European Union and Australia. In June this year, the UK published a draft proposal on sustainability disclosure and assurance, which mandates that businesses must ensure compliance with specified frameworks.

The proposed approach involves allowing companies to voluntarily use registered assurance providers while also setting the foundation for future mandatory compliance.

Key Discussion Points

One crucial point of discussion was the timeline for companies classified in the Prime Market with a market capitalization of between 500 billion and 1 trillion yen to start implementing the SSBJ standards by fiscal year 2029. Members voiced support for this timeline as it would allow for adequate preparation.

Another topic revolved around whether to extend the filing deadline for securities reports in instances where third-party assurance is involved. It was agreed that early disclosures are preferable, despite concerns that the submission timeline may place additional burdens on companies.

Members' Opinions

Numerous committee members expressed their views on various topics. For instance, some suggested that the average market capitalization over the past five years be the deciding standard for applying SSBJ criteria. Others echoed the importance of aligning assurance with international standards to enhance trust in sustainability disclosures.

Additionally, several members stressed the necessity of ensuring that the quality of assumptions regarding sustainability disclosures is consistent with organizational expectations and compliance requirements.

Next Steps and Recommendations

The meeting concluded with a consensus that further consultations and discussions are necessary to refine the proposed frameworks for disclosing sustainability information and the role of third-party assurance providers. Recommendations included:
1. Ensuring clarity on the guidelines for firms with varying sizes and resources;
2. Exploring the establishment of an independent regulatory body overseeing sustainability assurance initiatives;
3. Maintaining ongoing dialogue with stakeholders to adapt the frameworks to industry needs.

The secretariat reiterated its commitment to publish the minutes of this meeting on the Financial Services Agency’s website in due course, and conveyed anticipation for future discussions on sustainability reporting and assurance.

In sum, the meeting proved productive in taking steps towards enhancing sustainability disclosure practices and aligning them with global standards. The insights gained underscore the importance of clear guidelines and adequate timelines as companies navigate this evolving landscape.