Japan firms set up consortium to enhance climate-related financial disclosure

A man looks wind turbines during sunset at the Electric Power Development Co., Ltd's Nunobiki Plateau Wind Farm in Koriyama, north of Tokyo, November 8, 2007. REUTERS/Toru Hanai (JAPAN)

TOKYO (Reuters) - Japanese companies set up a consortium on Monday to help improve reporting of the financial impacts of climate-related risks and opportunities, aiming to enhance green investments and promote innovation that helps tackle climate change issues.

Climate-related disclosure is increasing as firms align their financial reporting with recommendations made by a global task force, which was established partly in response to concerns that assets are being mispriced because the full extent of climate risk is not being factored in.

A total of 162 Japanese companies are now supporting the Task Force on Climate-Related Financial Disclosures (TCFD), created at the end of 2015 by the G20’s Financial Stability Board, including 62 which declared their support on Monday.

That makes Japan the world’s largest supporter, topping the 107 companies in the UK and 104 in the U.S., according to the Japanese industry ministry which helped create the consortium.

Japanese companies want their disclosures to be better understood and used by banks and investors when they make financing and investment decisions, an official at the industry ministry said.

The new consortium, which also includes banks, insurance firms and asset managers, plans to revise Japan’s TCFD guidance, which was mapped out by the ministry late last year, and issue green investment guidance for financial institutions.

“We strongly hope that Japanese companies will take global leadership in creating a mechanism that enhances climate-related disclosure and green financing to promote environmental innovation,” Japan’s trade and industry minister Hiroshige Seko said at the formation of the consortium.

Japan aims to hold the world’s first TCFD summit in the autumn, where it will announce its own guidelines and discuss the issue with foreign counterparts, Seko said.

To support environmental innovation, the ministry also plans to make changes to its state insurance scheme, by as early as July, to help Japanese companies fund new overseas projects in areas such as renewable energy, hydrogen and Carbon Capture, Utilization, and Storage (CCUS), Seko added.

Reporting by Yuka Obayashi; Editing by Kirsten Donovan