guidance on climate related financial disclosurescompanies can show that they can expand sustainably...

Guidance on Climate‐related

Financial Disclosures

‐ TCFD Guidance ‐

Ministry of Trade, Economy and Industry

of Japan

December 2018

Contents

Chapter I. Introduction ............................................................................................... 1

A. Background ............................................................................................... 1

B. Purpose of Developing the Guidance ....................................................... 2

C. Location of the Guidance .......................................................................... 5

1. Overall Picture of the TCFD Recommendations and Supplemental

Documents ................................................................................................ 5

2. Relationship between the Guidance and the TCFD Recommendations

and Supplemental Documents .................................................................. 6

Chapter II Commentaries on Disclosures in Accordance with the TCFD

Recommendations ............................................................................. 12

A. Introduction ............................................................................................ 12

B. Medium of Disclosure ............................................................................. 13

C. Governance ............................................................................................. 20

D. Strategy ................................................................................................... 24

1. Description of recommended disclosure a) ............................................ 27

2. Description of recommended disclosure b) (how to disclose efforts in

research and development) .................................................................... 29

3. Description of recommended disclosure c) ............................................ 33

E. Risk Management ................................................................................... 61

F. Metrics and Targets ................................................................................ 64

G. Disclosure Methods for Companies with Different Business Models .... 68

H. Steps for Implementing the TCFD Recommendations at Mid‐cap and

Small‐ and Medium‐sized Companies ..................................................... 68

Chapter III Sector‐Specific Recommended Disclosures .............................................. 70

A. Objectives of Sector‐Specific Disclosure Guidance ................................. 70

B. Sector‐Specific Recommended Disclosures ............................................ 75

1. Automobiles ............................................................................................ 75

2. Iron and Steel .......................................................................................... 81

3. Chemicals ................................................................................................ 85

4. Electrical and Electronic .......................................................................... 90

5. Energy ..................................................................................................... 93

Chapter IV Conclusion ............................................................................................ 100

A. Significance of the Guidance ................................................................. 100

B. First try disclosures ............................................................................... 100

C. For better disclosure ............................................................................. 101

D. Future direction .................................................................................... 101

1

Chapter I. Introduction

A. Background

In response to the Paris Agreement adopted in December 2015, organizations have been

increasingly working on climate change mitigation and adaption. Financial industry has also

been increasingly focusing on assessing potential impacts of climate change on their assets

worrying that climate change can have substantial impacts on corporate activities of

companies to which they provide financial solutions. In particular, institutional investors

making long‐term investments, such as pension funds and insurance companies, have been

more conscious of environment, social and governance (ESG) factors, including climate‐

related risks and opportunities for their financial decisions. The world’s ESG investments have

increased 1.7 times in the previous four years.1

On the other hand, the level of requirements to corporates’ disclosure related to potential

impacts of climate change had not been adequate. Accordingly, financial institutions had not

been able to grasp climate‐related risks and opportunities (hereinafter referred to as

“climate‐related issues”) in relation to strategy and financial planning of companies. As a

result, financial institutions had not been able to make investment, lending and insurance

underwriting decisions adequately, and thus there were concerns about the risk of financial

instability caused by a significant volatility in the asset value in future. In response to this, G20

Finance Ministers and Central Bank Governors asked the Financial Stability Board (FSB) to

review how the financial sector can take account of climate‐related issues. At the review

meeting held in September 2015, the FSB identified a clear need for better information on

climate‐related risks from companies for financial institutions to properly assess the financial

impacts of climate‐related issues on companies.

Following this, the FSB established the industry‐led Task Force on Climate‐related Financial

Disclosures (TCFD) in December 2015. The TCFD is composed of 32 members who are from

financial services companies and groups, such as banks, insurance companies and pension

funds, and non‐financial companies, such as energy, transportation and materials companies.

It published the Final TCFD Recommendations Report (hereinafter referred to as the “TCFD

recommendations”) in June 2017 following a review period of about a year and a half. The

TCFD recommendations present a framework for voluntary disclosure of climate‐related risks

1 Global Sustainable Investment Alliance (GSIA) “Global Sustainable Investment Review 2016.” http://www.gsi‐alliance.org/members‐resources/trends‐report‐2016/

2

and opportunities for companies, and 563 organizations have expressed support for the

recommendations as of December 25, 2018.

According to the Status Report2 released by the TCFD in September 2018, the majority of

1,750 companies reviewed discloses some information on climate change (hereinafter

referred to as “climate‐related information”) aligned with the TCFD recommendations. On

the other hand, the Status Report also shows that companies’ areas of focus in terms of

climate‐related financial disclosures vary significantly among different industries and regions,

and that few companies disclose information on their strategy resilience under different

climate‐related scenarios, though it is a key area of focus for the Task Force. The review results

in the report indicate that climate‐related financial disclosures are still in the early stages.3

B. Purpose of Developing the Guidance

In order to achieve the goals4 under the Paris Agreement, a drastic change in society

through major innovation is being called for. To that end, it is necessary to establish a

“virtuous cycle between the environment and economic growth” such as the one shown

below.

Companies properly visualize their efforts for creating innovation to investors and other

stakeholders (referring to investors, lenders, insurance companies and other users of climate‐

related financial disclosure; hereinafter the same shall apply in the Guidance) and investors

and other stakeholders properly provide funds to such companies. This allows companies to

realize innovation and growth; the profits generated will be distributed to investors and other

stakeholders; and such investment returns will be invested in further innovation.

In the meantime, discussions related to climate‐related financial disclosure have been

conducted mainly by the financial authorities and financial industry players against the

backdrop of changes in the financial market, such as those aforementioned in 1, and efforts

for financial disclosure by non‐financial companies have not necessarily progressed

adequately. Considering the actual situation that many non‐financial companies are affected

by climate change, it is important to recognize how climate change affects their business

activities and what its potential financial impacts are, to communicate such information to

investors and other stakeholders, and to get them understand such impacts, in case that

climate change is deemed to have significant impacts on their business models. At the same

2 Task Force on Climate‐related Financial Disclosures: Status Report 3 TCFD, 2018 Status Report: Executive Summary, accessed 20 January 2019. https://www.fsb‐tcfd.org/publications/tcfd‐2018‐status‐report/# 4 In December 2015, nearly 200 governments agreed under the Paris Agreement to step up the global response to the threat of climate change by “seeking to hold the increase in the global average temperature to less than 2 degrees above pre‐Industrial Revolution levels and pursuing efforts to limit the increase to 1.5 degrees.”

3

time, by explaining how their production activities and the products and services they provide

contribute to resolving climate change issues and how such contribution leads to their growth,

companies can show that they can expand sustainably regardless of the impacts of climate

change.

In order to realize the aforementioned “virtuous cycle between the environment and

economic growth”, it is necessary for companies not just to meet the requirements of

investors and other stakeholders but also to actively communicate their strengths to and hold

constructive dialogue repeatedly with investors and other stakeholders to deepen mutual

understanding.

The TCFD recommendations are deemed to be useful as a tool for dialogue between

companies and investors and other stakeholders. This is because the TCFD recommendations

are an international framework commissioned by G20 and a movement has already been

growing for integrating the TCFD recommendations into global frameworks of corporate

evaluation and national and regional systems. On the other hand, from within the non‐

financial companies, there are calls for closer examination for many points in the TCFD

recommendations, such as principles for deciding medium of disclosure, scenario analysis and

methods for reflecting the characteristics of each business, which consequently make it

difficult to promote disclosures in accordance with the TCFD recommendations.

For this reason, the Ministry of Economy, Trade and Industry decided to develop a guidance

designed to provide commentaries and introduce reference case examples for implementing

the TCFD recommendations and provide “sector‐specific perspectives” to be disclosed by

non‐financial companies and considered by investors and other stakeholders, and established

the “Study Group on Implementing the TCFD Recommendations for Mobilizing Green Finance

through Proactive Corporate Disclosures” (hereinafter referred to as the TCFD Study Group;

for the list of members of the study group, see the Appendixes 1 and 2) in August 2018.

Considering that the content of disclosure required by investors and other stakeholders is

related to management decisions of companies, the TCFD Study Group invited board

members in charge of the finance and the corporate planning of each company, and discussed

ways of disclosure in accordance with the TCFD recommendations through “dialogue”

between managers of companies and domestic and foreign investors and other stakeholders,

and then developed the Guidance.

Implementation of the TCFD recommendations only recently globally. As the TCFD

recommendations provide that “the Task Force expects that reporting of climate‐related risks

and opportunities will evolve over time as organizations, investors, and others contribute to

the quality and consistency of the information disclosed,” it is assumed that accumulating

companies’ disclosures and giving investors’ feedback on such information will lead to finding

ways for better disclosure.

4

The Guidance was developed to present the first step to promote implementation of the

TCFD recommendations and provides commentaries on the TCFD recommendations based

on issues extracted through discussions in the TCFD Study Group and the Working Group

established under the Study Group. The Guidance assumes that reviews of Guidance and

enhancement of commentaries will be conducted where appropriate in accordance with the

progress of disclosure practices.

5

C. Location of the Guidance

1. Overall Picture of the TCFD Recommendations and Supplemental Documents

The TCFD developed the “TCFD recommendations” and “Implementing the

Recommendations of the Task Force on Climate‐related Financial Disclosures,” a

supplemental document for implementing the TCFD recommendations, and “The Use of

Scenario Analysis in Disclosure of Climate‐Related Risks and Opportunities,” commentaries

designed to support scenario analysis.

The TCFD recommendations, as described in Figure 1, present general recommendations,

as well as recommended disclosures and commentaries structured around four thematic

areas of Governance, Strategy, Risk Management, and Metrics and Targets.

The supplemental document contains commentaries for implementing the TCFD

recommendations, and sector‐specific commentaries have been developed for the

aforementioned four thematic areas as shown in Figure 2.

Figure 1 Core Elements of Recommended Climate‐related Financial Disclosures

Source: “Final Report: Recommendations of the Task Force on Climate‐related Financial Disclosures (June 2017),” page 5.

6

Figure 2 Supplemental Guidance for Financial Sector and Non‐Financial Groups


2. Relationship between the Guidance and the TCFD Recommendations and

Supplemental Documents

The Guidance is comprised of three chapters. Chapter I describes the background which

led to the launch of TCFD’s activities, the purpose of developing the Guidance, and the

relationship between the Guidance and the TCFD recommendations and the supplemental

documents.

In Chapter II, questions on the TCFD recommendations and the supplemental documents

are sorted out and explanations on questions raised are provided. When developing the

Guidance, questions were extracted through a questionnaire survey of all members, and

explanations were prepared by referring to comments from members who belong to financial

institutions and a member who was involved in developing the TCFD recommendations, as

well as domestic and overseas case examples. Such explanations should be revised in the

process of accumulating best practices as a result of promoting disclosure by many companies

going forward. It is expected that further efforts will be made to collect case examples to

enhance the content of the Guidance.

In Chapter III, sector‐specific recommended disclosures structured around the thematic

areas of Strategy and Metrics and Targets in the non‐financial group are presented. This is

because different industries face different climate‐related risks and opportunities, and the

7

method of presenting a desirable strategy for companies to implement disclosure and metrics

and targets based on such strategy are different from industry to industry. It is expected that

facilitating dialogue between companies and investors and other stakeholders based on such

sector‐specific disclosure will lead to a more effective “virtuous cycle between the

environment and economic growth”.

The TCFD recommendations provide that “the Task Force encourages further research and

analysis by sector and industry experts to increase organizations’ understanding of climate‐

related risks and opportunities,”5 and thus it is considered that the importance of such

sector‐specific analysis has been recognized.

In addition, similar efforts are being underway for sector‐specific analysis in the private

sector. SASB6 has presented sustainability metrics for each of 79 industries, while WBCSD7

has developed a guidance to respond to the TCFD recommendations for the oil and gas

industry and is developing for the chemical industry. In this way, movements are spreading

on a global level to promote financial disclosure consistent with the TCFD recommendations

based on the characteristics of each industry. (See Column 3.)

In the meantime, such various efforts should be evolved into comprehensive activities

through the sharing of expertise and best practices accumulated in the process of carrying

out each effort. The Guidance has been developed to contribute to this discussion. For a start,

in this Guidance we selected five industrial sectors, namely, the automobile, iron and steel,

chemical, electrical and electronics, and energy industries as major industries with high GHG

emissions in the use phase or the manufacturing phase, and we presented key points for

disclosure according to the characteristics of each industry. Therefore, as is the case with

Chapter II, we expect that the content of Chapter III will be revised in the process of many

companies working on disclosure and that the content will be enhanced in the future,

including the addition of other industries covered by the Guidance.

5 “Final Report: Recommendations of the Task Force on Climate‐related Financial Disclosures (June 2017),” page 35‐36.

6 Sustainability Accounting Standards Board 7 World Business Council for Sustainable Development

8

Column 1 Japan’s Corporate Governance Code

General Principle 3 (basic policy) of the Japan’s Corporate Governance Code

provides that the board should be actively involved in disclosure and provision of

non‐financial information that describes ESG factors, etc. to ensure that such

information will be as useful for users as possible. It is important for companies to

respond to the TCFD recommendations also from this perspective.

General Principle 3

Companies should appropriately make information disclosure in

compliance with the relevant laws and regulations, but should also

strive to actively provide information beyond that required by law.

This includes both financial information, such as financial standing and

operating results, and non‐financial information, such as business

strategies and business issues, risk and governance. The board should

recognize that disclosed information will serve as the basis for

constructive dialogue with shareholders, and therefore ensure that

such information, particularly non‐financial information, is accurate,

clear and useful.

Basic policy (excerpts)

It has been noted that while the quantitative part of financial

statements of Japanese companies conform to a standard format and

therefore excel with respect to comparability, non‐financial

information, such as financial standing, business strategies, risks and

ESG (environmental, social, and governance) matters, is often boiler‐

plate and lacking in detail, therefore less valuable. The board should

actively commit to ensure that disclosed information, including non‐

financial information, is as valuable and useful as possible.

Source: Tokyo Stock Exchange inc., “Japan’s Corporate Governance Code”, June 1, 2018, page 13.

9

Column 2 Relationship with “Guidance for Integrated Corporate Disclosure

and Company‐Investor Dialogue for Collaborative Value Creation”

The Ministry of Economy, Trade and Industry compiled “Guidance for Integrated

Corporate Disclosure and Company‐Investor Dialogue for Collaborative Value

Creation: ESG Integration, Non‐Financial Information Disclosure, and Intangible

Assets into Investment” (hereinafter referred to as “Guidance for Collaborative

Value Creation”) in May 2017. The aim was to contribute to deepening mutual

understanding between companies and investors through information disclosure

and dialogue and to encourage companies and investors to take action toward

sustainable value creation. The Guidance for Collaborative Value Creation is

expected to play a role as guidelines for business owners/managers to sort out

ways of managing their companies so that they create corporate value and convey

such information to investors. It should also be guidelines for investors to grasp

the information necessary to make investment decisions, etc. to assess companies

from a medium‐ to long‐term perspective, and to be referenced when having

dialogue with companies. The Guidance is positioned as an itemized discussion of

the Guidance for Collaborative Value Creation focused on climate change.

Figure 3 Overview of the Guidance for Integrated Corporate Disclosure and

Company‐Investor Dialogue for Collaborative Value Creation

10

Column 3 Efforts for Responding to the TCFD Recommendations with Other

Frameworks.

1) CDP

CDP is an international NGO whose predecessor is the Carbon Disclosure Project

established in 2000. CDP sends a questionnaire to companies outlining corporate

efforts related to three environmental issues of climate change, water and forests,

and conducts evaluation and analysis of companies based on the responses

obtained.

CDP revised the questionnaire items to respond to the TCFD recommendations

from 2018.

2) GRI (Global Reporting Initiative)

GRI aims to increase the understanding of the impacts of sustainability issues

globally and help disseminate opinions about such impacts. The GRI Guidelines,

published in 2000, are widely known as guidelines for sustainability reporting.

3) IIRC (International Integrated Reporting Council)

IIRC was established in 2010 with the aim of improving the quality of information

to providers of financial capital and establishing an approach for efficient

information dissemination. The International Integrated Reporting Framework

that presents an approach to preparing integrated reports was published in 2013.

Following this, companies in Japan as well as globally have been shifting from

annual reports to integrated reports.

4) SASB (Sustainability Accounting Standards Board)

SASB presents metrics that can measure the long‐term value creation capacity

of companies for all the 79 sectors. In addition to environmental metrics, SASB

presents other sustainability‐related metrics, including social and human capital

metrics, and works toward the voluntary adoption of the standards in statutory

disclosure materials by companies listed on U.S. markets.

In November 2018, SASB published new standards compliant with the TCFD

recommendations, with a revision of industry‐specific sustainability factors and

addition of results of scenario analysis.

11

5) WBCSD (World Business Council for Sustainable Development)

WBCSD is a CEO‐led organization of approx. 200 companies working toward

sustainable development, and its participating companies share efforts for

resolving issues related to sustainable development and their experience in

cooperation with governments and NGOs.

WBCSD has started to review sector‐specific disclosure practices to respond to

the TCFD recommendations, and has already published reporting guidance for the

oil and gas industries. WBCSD also plans to publish guidance for the chemical and

electric utilities industries.

12

Chapter II Commentaries on Disclosures in

Accordance with the TCFD Recommendations

The Working Group of the TCFD Study Group carried out a questionnaire survey of all

members regarding points to be confirmed in implementing disclosure in accordance with the

TCFD recommendations, and received many questions.

In Chapter II, to address such questions raised, commentaries based on discussions at the

time of formulating the TCFD recommendations, information and opinions required by

financial institutions, and case examples to draw upon for reference for implementing

disclosure are provided and commentaries are developed.

A. Introduction

Questions raised are broadly classified into those related to i) medium of disclosure, ii) four

themes (Governance, Strategy, Risk Management, Metrics and Targets) presented in the TCFD

recommendations, iii) the method of financial disclosure of companies with different business

models, and iv) steps for implementing the TCFD recommendations by mid‐cap and small‐

and medium‐sized companies.

Commentaries are provided on questions on the following topics in the order described in

the TCFD recommendations.

i) Medium of financial disclosure. (See B.)

ii) Four themes. (See C – F.)

iii) Method of financial disclosure for companies with different business models. (See G.)

iv) Steps for implementing the TCFD recommendations by mid‐cap and small‐ and

medium‐sized companies. (See H.)

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B. Medium of Disclosure

The TCFD recommendations recommend companies to implement climate‐related

financial disclosure in the “(publicly available) general annual financial filings8.”

As described in the next page, the TCFD recommendations provide that it is desirable for

all companies to implement disclosures related to the Governance and Risk Management in

the four thematic areas in their financial filings. The reason why the recommendations require

disclosure by all companies is that many investors believe almost all industries are potentially

exposed to impacts of climate change. The reason why the recommendations require

disclosure be included in financial filings is that financial filings are most frequently referenced

by investors and other stakeholders.

For disclosures related to the Strategy and Metrics and Targets, the TCFD

recommendations provide that companies should provide such information in financial filings

when the information is deemed material. For companies which do not see such information

as material in the present situation, large companies—those9 in the non‐financial group that

have more than one billion U.S. dollar equivalent (USDE) in annual revenue—for which such

information may become material in future should consider disclosing such information in

other reports.

Figure 4 Recommended disclosure medium in the TCFD recommendations

8 Financial filings refer to the annual reporting packages in which organizations are required to deliver their audited financial results under the corporate, compliance, or securities laws of the jurisdictions in which they operate. (Excerpts from Final Report: Recommendations of the Task Force on Climate‐related Financial Disclosures,” June 2017; translated by Green Pacific Co., Ltd.).

9 The TCFD recommendations selected one billion U.S. dollar equivalent in annual sales as the threshold because it captures organizations responsible for over 90 percent of Scope 1 and 2 GHG emissions in the industries represented by the four non‐financial groups (approx. 2,250 organizations out of approx. 15,000 organizations).

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2. Implementing the Recommendations

b. Location of Disclosures and Materiality

The Task Force recommends that organizations provide climate‐related financial disclosures in their mainstream (i.e., public) annual financial filings.35 In most G20 jurisdictions, public companies have a legal obligation to disclose material information in their financial filings — including material climate‐related information; and the Task Force’s recommendations are intended to help organizations meet existing disclosure obligations more effectively. The Task Force’s recommendations were developed to apply broadly across sectors and jurisdictions and should not be seen as superseding national disclosure requirements. Importantly, organizations should make financial disclosures in accordance with their national disclosure requirements. If certain elements of the recommendations are incompatible with national disclosure requirements for financial filings, the Task Force encourages organizations to disclose those elements in other official company reports that are issued at least annually, widely distributed and available to investors and others, and subject to internal governance processes that are the same or substantially similar to those used for financial reporting.

The Task Force recognizes that most information included in financial filings is subject to a materiality assessment. However, because climate‐related risk is a non‐diversifiable risk that affects nearly all industries, many investors believe it requires special attention. For example, in assessing organizations’ financial and operating results, many investors want insight into the governance and risk management context in which such results are achieved. The Task Force believes disclosures related to its Governance and Risk Management recommendations directly address this need for context and should be included in annual financial filings.

For disclosures related to the Strategy and Metrics and Targets recommendations, the Task Force believes organizations should provide such information in annual financial filings when the information is deemed material. Certain organizations—those in the four non‐financial groups that have more than one billion U.S. dollar equivalent (USDE) in annual revenue—should consider disclosing such information in other reports when the information is not deemed material and not included in financial filings.37 Because these organizations are more likely than others to be financially impacted over time, investors are interested in monitoring how these organizations’ strategies evolve.


15

On the other hand, “The Task Force’s recommendations were developed to apply broadly

across sectors and jurisdictions and should not be seen as superseding national disclosure

requirement. Importantly, organizations should make financial disclosures in accordance with

their national disclosures. If certain elements of the recommendations are incompatible with

national disclosure requirements for financial filings, the Task Force encourages organizations

to disclose those elements in other official company reports that are issued at least annually10.”

The above is an explanation of the medium of financial disclosure in the TCFD

recommendations. On the other hand, as for scenario analysis, which is described in c) under

Strategy in the TCFD recommendations (page 25), “scenarios are hypothetical constructs and

not designed to deliver precise outcomes or forecasts,” and a major issue is whether such

information based on an uncertain and long‐term outlook should be included in financial

filings.

On this point, disclosure in accordance with the TCFD recommendations has just started,

and it is expected that disclosure practices for effective information provision to investors and

other stakeholders will be refined with the accumulation of case examples. In the process of

accumulating case examples, a further review of the medium of climate‐related financial

disclosure, including scenario analysis, is expected to progress further.

The following are examples of the combination of major companies that conduct climate‐

related scenario analysis and their disclosure medium as of December 2018. It is expected

that case examples will be accumulated further by making reference to such case examples

for the time being.

10 Excerpts from page 17 of “Final Report: Recommendations of the Task Force on Climate‐related Financial Disclosures”

16

Case example 1: Companies conducting scenario analysis and the medium

they disclose the relevant information

Company

name

Financial filings Other reports

BHP Billiton In its annual report, the

company mentions that it

conducts scenario analysis

and asks readers to refer to

the individual report

(Portfolio Analysis) for

details.

The details of scenario

analysis are provided in the

individual report (Portfolio

Analysis).

Shell In its annual report, the


conducts scenario analysis

and asks readers to refer to

the sustainability report for

the details of responses to

the TCFD recommendations.

In the sustainability report,

the company mentions that it

conducts scenario analysis.

The details of scenario

analysis are included in the

individual report (Shell

Energy Transition Report)

and the company’s website.

Eni In its annual report, the


conducts scenario analysis. In

addition, the company

partially describes the

difference between the IEA

SDS scenario and its scenario.

Only the outline of scenario

analysis is included in the

sustainability report.

Source: Prepared based on information from the disclosed information in each medium and website of each company.

As shown above, there are various disclosure mediums besides financial filings, such as

integrated report and sustainability report. Therefore, it is important to make effective

information provision to investors and other stakeholders by appropriately combining such

other reports. Examples of disclosure mediums other than financial filings are as described

below.

17

1. Integrated report, annual report11

Reports that compile both financial information and non‐financial information including

sustainability‐related information of companies. Guidelines for integrated reports available

include Guidance for Collaborative Value Creation, developed by the Ministry of Economy,

Trade and Industry, and the international Integrated reporting Framework, formulated by the

International Integrated Reporting Council (IIRC). Preparation of an integrated report and

annual report is voluntary.

2. Environmental report, sustainability report, CSR report, etc.

Voluntary disclosure mediums for non‐financial information, including efforts for realizing

sustainable society. As sustainability reporting guidelines, GRI Standards, developed by GRI,

are available. Preparation of an environmental report, sustainability report, CSR report, etc.

is also voluntary.

The TCFD recommendations do not present a specific format for climate‐related disclosure.

Therefore, the point at issue when implementing disclosure in financial filings, integrated

report, and sustainability report and others of each company is how to demonstrate the

connection between disclosed information in these reports and the recommended structure

of disclosures presented by the TCFD recommendations.

How to deal with this issue is left to the inventiveness of each company. Meanwhile, some

helpful case examples include the method of following the structure of the TCFD

recommendations (case example (2)) and the method of adding a mapping table showing the

connection between the relevant content of disclosure and each element of the TCFD

recommendations (An example).

11 In Japan, “annual report” is a name for material attached to a voluntary disclosure report. In the meantime, this term sometimes indicates statutory disclosure documents overseas, such as Annual Report and Accounts in the U.K.

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Case example 2: Disclosure following the structure of the TCFD

recommendations

Mitsubishi Corporation provides an executive summary of its response to the

TCFD recommendations in its integrated report. In addition, the company has

described the status of its response to the TCFD recommendations for each of the

four thematic areas (governance, strategy, risk management, metrics and targets)

in the ESG DATA BOOK 2018.

Source: Mitsubishi Corporation, “ESG DATA BOOK 2018”, page 27‐.

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An example: A mapping table showing the content of disclosures in

accordance with the TCFD recommendations and location of disclosures in the

report is provided.

Outline of the TCFD

recommendations

The content of the

company’s disclosure

Location of

disclosures

Governance

The supervisory system of the

board for climate‐related risks

and opportunities is explained.

The content of the

committee’s discussion on

climate‐related issues is

reported to the board.

P. 5

Strategy

Short‐, medium‐ and long‐term

risks and opportunities

identified by the organization

are explained.

Explanation of medium‐ and

long‐term risks and

opportunities.

P. 15

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C. Governance

The TCFD recommendations recommend the following disclosures under Governance.


保存期

間平成○○年○○月○○日まで保存

（セット後保存期間〇年）性質/日

付機密性○、平成○○年○○月○○

日備考未定稿：個人文書

Governance: Disclose the organization’s governance around climate‐related risks

and opportunities.

Recommended

Disclosure a)

Describe the

board’s

oversight of

climate related

risks and

opportunities.

Guidance for All Sectors

In describing the board’s oversight of climate‐related issues,

organizations should consider including a discussion of the

following:

- processes and frequency by which the board and/ or board committees (e.g. audit, risk, or other committees) are informed about climate‐related issues .

- whether the board and / or committees consider climate‐ related issues when reviewing and guiding strategy, major plans of action, risk management policies, annual budgets, and business plans as well as setting the organization’s performance objectives, monitoring implementation and performance , and overseeing major capital expenditures, acquisitions, and divestitures

- how the board monitors and oversees progress against goals and targets for addressing climate‐related issues

Recommended

Disclosure b)

Describe

management’s

role in assessing

and managing

climate‐related

risks and

opportunities


In describing management’s role related to the assessment

and management of climate‐related issues, organizations

should consider including the following information:

- whether the organization has assigned climate‐related responsibilities to management‐level positions or committees ; and, if so, whether such management positions or committees report to the board or a committee of the board and whether those responsibilities include assessing and / or managing climate‐related issues

- a description of the associated organizational structure(s)

- processes by which management is informed about climate‐related issues

- how management (through specific positions and / or management committees) monitors climate‐related issues

21

Commentaries

The board generally has the authority to supervise the execution of duties of individual

directors. The TCFD recommendations require the board to also supervise climate‐related

issues and disclose the supervisory system for climate‐related issues.

In recommended disclosure b), there is a mention of the term “management‐level

positions,” but the term in this context does not refer to personnel with positions responsible

for managing the workplace in labor laws, etc. but is understood to refer to executive‐level

personnel practically given the responsibility of conducting assessment and management of

climate‐related issues by companies.

The following are representative examples of governance disclosures related to climate‐

related issues.

22

Case example 3: Establishing committees and promoting CSR activities including

climate change

The JXTG Group holds the CSR Council meeting, chaired by the President, biannually,

and the content of discussion at the meeting is reported to the board and the Executive

Council, which oversee and supervise the Group’s activities related to climate change.

The CSR Council meeting discussed and decided the priority fields of JXTG Group and

received the reports of activities from The Environment & Safety Committee. In the

environmental area, “the formation of a low‐carbon society” and “the establishment of

a circular economy” are the priority fields.

Source: JXTG Group. “JXTG REPORT for a Sustainable Future 2017,” page 27.

23

Case example 4: Establishing committees and promoting activities related to

climate change

Kao Corporation established the Sustainability Committee, chaired by the President

and CEO. The Board of Directors supervises whether the committee activities are

running appropriately.

The Sustainability Committee met four times in 2017, in January, April, July and

November. Besides three Representative Directors, Executive Officers in charge of a

total of eight divisions participated in the meeting as committee members, and

conducted deliberations about the Kao Group’s sustainability policy, strategy and

efforts.

Source: Kao, “Kao Sustainability Data Book 2018,” page 12.

24

D. Strategy

The TCFD recommendations recommend the following disclosures under Strategy.

Strategy: Disclose the actual and potential impacts of climate‐related risks and

opportunities on the organization’s businesses, strategy, and financial planning where

such information is material.

Recommended

Disclosure a)

Describe the

climate‐related

risks and

opportunities the

organization has

identified over the

short, medium,

and long term.


Organizations should provide the following information:

- a description of what they consider to be the relevant short‐,

medium‐, and long‐ term time horizons, taking into consideration

the useful life of the organization’s assets of infrastructure and

the fact climate‐relate issues often manifest themselves over the

medium and longer terms.

- a description of the specific climate‐related issues for each time

horizon (short, medium, and long term) that could have a

material financial impact on the organization

- a description of the process(es) used to determine which risks

and opportunities could have a material financial impact on the

organization.

Organizations should consider providing a description of their risks

and opportunities by sector and/or geography, as appropriate.

Recommended

Disclosure b)

Describe the

impact of climate‐

related risks and

opportunities on

the organization’s

businesses,

strategy, and

financial planning.


Building on recommended disclosure (a), organizations should

discuss how identified climate‐related issues have affected their

businesses, strategy, and financial planning.

Organizations should consider including the impact on their

businesses and strategy in the following areas:

- Products and services

- Supply chain and/or value chain

- Adaptation and mitigation activities

- Investment in research and development

- Operations (including types of operations and location of

facilities)

25

Organizations should describe how climate‐related issues serve as an

input to their financial planning process, the time period(s) used,

and how these risks and opportunities are prioritized. Organizations’

disclosures should reflect a holistic picture of the interdependencies

among the factors that affect their ability to create value over time.

Organizations should also consider including in their disclosures the

impact on financial planning in the following areas:

- Operating costs and revenues

- Capital expenditures and capital allocation

- Acquisitions or divestments

- Access to capital

If climate‐related scenarios were used to inform the organization’s

strategy and financial planning, such scenarios should be described

Recommended

Disclosure c)

Describe the

resilience of the

organization’s

strategy, taking

into consideration

different climate‐

related scenarios,

including a 2 °C or

lower scenario.


Organizations should describe how resilient their strategies are to

climate related risks and opportunities, taking into consideration a

transition to a lower‐carbon economy consistent with a 2 °C or lower

scenario and, where relevant to the organization, scenarios

consistent with increased physical climate‐related risks.

Organizations should consider discussing :

- Where they believe their strategies may be affected by climate‐

related risks and opportunities

- How their strategies might change to address such potential risks

and opportunities

- the climate‐related scenarios and associated time horizon(s)

considered

Source: “Final Report: Recommendations of the Task Force on Climate‐related Financial Disclosures (June 2017),” page 20‐21.

Commentaries

The relationship between the three categories of recommended disclosures a), b), and c)

in the above guidance is understood as follows.

26

Firstly, the relationship between recommended disclosures a) and b) is: recommended

disclosure a) requires organizations to identify short‐, medium‐ and long‐term risks and

opportunities (regardless of whether scenario analysis is conducted or not), while

recommended disclosure b) requires organizations to explain the impacts of climate‐related

issues on businesses, strategies and financial planning based on such risks and opportunities.

Secondly, as for recommended disclosure c), scenario analysis mentioned herein also

includes elements of recommended disclosures a) and b). Accordingly, it follows that

organizations implementing recommended disclosure c) also satisfy recommended

disclosures a) and b).

Important points at issue for recommended disclosures a), b), and c) are explained

individually below.

27

1. Description of recommended disclosure a)

The TCFD’s recommended disclosure a) under Strategy requires organizations to explain

specific climate‐related issues that would have material financial impacts in short‐, medium‐,

and long‐term time frames.

Recommended

Disclosure a)

Describe the

climate‐related

risks and

opportunities

the

organization

has identified

over the short,

medium, and

long term.


Organizations should provide the following information:

- a description of what they consider to be the relevant short‐,

medium‐, and long‐ term time horizons, taking into consideration

the useful life of the organization’s assets of infrastructure and the

fact climate‐relate issues often manifest themselves over the

medium and longer terms.

- a description of the specific climate‐related issues for each time

horizon (short, medium, and long term) that could have a material

financial impact on the organization

- a description of the process(es) used to determine which risks and

opportunities could have a material financial impact on the

organization.

Organizations should consider providing a description of their risks and

opportunities by sector and/or geography, as appropriate.

Source: “Final Report: Recommendations of the Task Force on Climate‐related Financial Disclosures (June 2017), ” page 20.

For specific context for short‐, medium‐ and long‐term time frames, descriptions in “8.

Timeframes for short, medium, and long term” in “E. Key Issues Considered and Areas for

Future Work” in the TCFD recommendations serve as a useful reference.

28

8. Time Frames for Short, Medium, and Long Term

As part of the Task Force’s second public consultation, some organizations asked

the Task Force to define specific ranges for short, medium, and long term. Because

the timing of climate‐related impacts on organizations will vary, the Task Force

believes specifying time frames across sectors for short, medium, and long term

could hinder organizations’ consideration of climate‐related risks and opportunities

specific to their businesses. The Task Force is, therefore, not defining time frames

and encourages preparers to decide how to define their own time frames according

to the life of their assets, the profile of the climate‐related risks they face, and the

sectors and geographies in which they operate.

In assessing climate‐related issues, organizations should be sensitive to the time

frames used to conduct their assessments. While many organizations conduct

operational and financial planning over a 1‐2 year time frame and strategic and

capital planning over a 2‐5 year time frame, climate‐related risks may have

implications for an organization over a longer period. It is, therefore, important for

organizations to consider the appropriate time frames when assessing climate‐

related risks. Source: “Final Report: Recommendations of the Task Force on Climate‐related Financial Disclosures (June 2017),” page 38.

The second paragraph states that climate‐related risks “may have implications for an

organization over a longer period” and “it is, therefore, important for organizations to

consider the appropriate time frames when assessing climate‐related risks.” In assessing

climate‐related risks in the long‐term time frame, which are deemed particularly difficult to

assess, one possibility is to use existing reports, as a reference. For example, information on

scenarios of the International Energy Agency (IEA), (see Reference 1) can be used as a

reference when assessing transition risk, and information from reports, of international

organizations, that examine implications by sector and region (see Reference 2) can be used

as a reference when assessing physical risk.

A more specific explanation is provided in “(3) Method for Considering Strategy Based on

Scenarios.”

29

Reference 1: Information of scenarios usable when assessing transition risk

・WEO (World Energy Outlook)

－ e.g. Trend of worldwide sales of electric vehicles

・ETP (Energy Technology Perspectives)

－ e.g. Ratio of electricity production from renewable energy to the total

worldwide annual electricity generating capacity

Reference 2: Information of scenarios usable when assessing physical risk

・Advancing TCFD Guidance on Physical Climate Risks and Opportunities

－ Physical risk, such as storms, floods, and sea level rise, is assessed on a three‐

point scale

2. Description of recommended disclosure b) (how to disclose efforts in research

and development)

The TCFD’s recommended disclosure b) under Strategy requires organizations to explain

implications of climate‐related issues for their businesses, strategy, and financial planning.

Recommended

Disclosure b)

Describe the

impact of

climate related

risks and

opportunities

on the

organization’s

businesses,

strategy, and

financial

planning.


Building on recommended disclosure (a), organizations should discuss

how identified climate‐related issues have affected their businesses,

strategy, and financial planning.

Organizations should consider including the impact on their businesses

and strategy in the following areas:

- Products and services

- Supply chain and/or value chain

- Adaptation and mitigation activities

- Investment in research and development

- Operations (including types of operations and location of facilities)

Organizations should describe how climate‐related issues serve as an

input to their financial planning process, the time period(s) used, and

30

how these risks and opportunities are prioritized. Organizations’

disclosures should reflect a holistic picture of the interdependencies

among the factors that affect their ability to create value over time.

Organizations should also consider including in their disclosures the

impact on financial planning in the following areas:

- Operating costs and revenues

- Capital expenditures and capital allocation

- Acquisitions or divestments

- Access to capital

If climate‐related scenarios were used to inform the organization’s

strategy and financial planning, such scenarios should be described


As shown above, the TCFD recommendations list “products and services,” “supply chain

and/or value chain,” “adaptation and mitigation activities,” “investment in research and

development,” and “operations (including types of operations and location of facilities)” as

areas in which the businesses and strategies of organizations are affected by climate‐related

risks and opportunities.

Commentaries on the method for describing “investment in research and development,”

for which many questions were received through the Study Group, are provided below.

When discussing investment in research and development, companies should describe why

such research and development activities are necessary in relation to future risks and

opportunities they have identified. In particular, companies should actively describe their

efforts when investing in research and development activities that contribute significantly to

reducing GHG emissions, such as efforts for energy‐efficiency technologies and effective

utilization of the CO2. From the perspective of preparing for physical risks, it is also important

to conduct research and development activities that contribute to business continuity in

times of extreme weather events (e.g. maintaining supply chains, ensuring stable supply of

energy), stable procurement of water, stable supply of food and so on.

When discussing specific research and development activities, companies should describe

the total spending on research and development activities, as well as budget allocation by

theme, outcomes achieved by commercialization of such technologies (e.g. contribution to

31

revenues, reduction of CO2 emissions) and the relationship between research and

development of such outcomes.

As for basic research and development efforts, it is deemed that organizations can clarify

the significance by describing the awareness of issues behind such efforts and areas of

technology on which such research and development would have impacts in the future.

Case example 5: Clarifying the breakdown of research and development

expenditures and the roadmap to commercialization of technologies

Sumitomo Chemical Co., Ltd. discloses the total expenditures on research and

development, capital investment, and investment and loans and allocation of spending by

theme for the past three years.

The company also describes future opportunities related to cathode material, the main

component of lithium‐ion batteries, in relation to the company’s development schedule,

and clarifies the timeline for developing next‐generation products and timing of market

launch in response to the future demand estimates.

32

Source: Sumitomo Chemical Co., Ltd., “Investor’s Handbook 2018,” page 5, 32.

33

3. Description of recommended disclosure c)

The TCFD’s recommended disclosure c) under Strategy requires organizations to describe

the resilience of their strategy, taking into consideration different climate‐related scenarios,

including a 2 °C or lower scenario.

Recommended

Disclosure c)

Describe the

resilience of

the

organization’s

strategy,

taking into

consideration

different

climate‐related

scenarios,

including a 2 °C

or lower

scenario.


Organizations should describe how resilient their strategies are to

climate related risks and opportunities, taking into consideration a

transition to a lower‐carbon economy consistent with a 2 °C or

lower scenario and, where relevant to the organization, scenarios

consistent with increased physical climate‐related risks.

Organizations should consider discussing :

- Where they believe their strategies may be affected by climate‐

related risks and opportunities

- How their strategies might change to address such potential

risks and opportunities

- the climate‐related scenarios and associated time horizon(s)


Descriptions of scenario analysis are provided below in accordance with specific

procedures from a) to d).

a) Considering strategy based on scenarios

i) Setting scenarios

The TCFD recommendations require organizations to develop two or more plausible risk

scenarios, assess the potential impacts of each scenario on their businesses, and clarify

countermeasures to such scenario. However, many companies have no experience

conducting scenario analysis, and often do not know how to develop risk scenarios and which

method to use for analysis.

Methods of scenario analysis are broadly categorized into two types: (1) a method to create

the organization’s own scenarios and (2) a method to use existing scenarios (e.g. those

provided by industry groups or international organizations) as a reference. The TCFD

recommendations provide that either of the two methods is suitable.

34

D. Scenario Analysis and Climate‐Related Issues

4. Applying Scenario Analysis

While the Task Force recognizes the complexities of scenario analysis and the

potential resources needed to conduct it, organizations are encouraged to use

scenario analysis to assess climate‐related risks and opportunities. For

organizations just beginning to use scenario analysis, a qualitative approach that

progresses and deepens over time may be appropriate. Greater rigor and

sophistication in the use of data and quantitative models and analysis may be

warranted for organizations with more extensive experience in conducting

scenario analysis. Organizations may decide to use existing external scenarios and

models (e.g., those provided by third‐party vendors) or develop their own, in‐

house modeling capabilities. The choice of approach will depend on an

organization’s needs, resources, and capabilities.


It is important to assume two or more scenarios, not a single one, when conducting

scenario analysis regardless of which of the two methods is used, considering the uncertainty

of the future to which corporate resilience is to be described using these scenarios.

When interpreting the results of scenario analysis, the important thing is to implement

disclosure not only on the results but also with scenario narratives or storylines with a logical

explanation that allows investors and other stakeholders to be convinced about the

consideration process leading up to such results, in order to deepen their understanding.

ii) Conducting scenario analysis using existing scenarios

Examples of scenario analysis using existing scenarios include the following.

a) Example in which an organization used a demand forecast for a product in the

existing scenario to analyze its efforts and explain its resilience (case example 6)

b) Example in which an organization used the rate of GHG emissions reduction in the

existing scenario to explain its efforts (case example 7)

35

Case example 6: Example of using demand forecast for a product in the

existing scenario

Toyota Motor Corporation displayed that the ratio of electric vehicles in the 2030

Milestone exceeds the levels both in IEA’s 2 °C and Beyond 2 °C climate scenarios. The

company also showed that the ratio of zero emission vehicles (ZEV) surpasses that in

the 2 °C scenario but does not reach the level of Beyond 2 °C scenario. However, the

company can make flexible changes to its line‐ups owing to the accumulation of

technological capabilities.

Source: Toyota Motor Corporation, “Environmental Report 2018,” page 9.

36

Case example 7: Example of using the ratio of GHG emissions reduction in the

existing scenario

The Japan Iron and Steel Federation, in its long‐term vision for climate change

mitigation, made reference to the GHG emissions reduction rate required of the

industrial sector (30% emission reduction by 2060) under the 2 °C scenario of the IEA

Energy Technology Perspectives (ETP). The federation concluded that the iron and steel

sector can achieve roughly the same level of GHG emissions reduction as that required

by ETP through the implementation of BAT and innovative technologies, on top of the

effects of zero emissions achieved in the electric utilities sector.

Note: The TCFD recommendations require strategy disclosure of individual

companies. Therefore, each company is required to disclose its strategy by building on

industry level efforts.

37

Source: Japan Iron and Steel Federation, “JISF Long‐term vision for climate change mitigation –A challenge towards Zero‐carbon STEEL”.

38

iii) Referring existing scenarios

As described in (A) above, companies are allowed to use existing external scenarios in

scenario analysis. This section provides representative existing scenarios for transition risks

and tools and reports related to physical risks.

Representative scenarios used to assess the impacts of transition risk include IEA’s World

Energy Outlook (WEO) scenario and Energy Technology Perspectives (ETP) scenario, as well

as NDC12 scenarios of partnership countries. Data related to transition risks in these scenarios

(type of data, time frame, region) excluding NDC scenarios are shown in Table 1. The data

include information on market changes associated with climate change, including the trends

in worldwide sales of electric vehicles and the ratio of renewable energy in annual electric

generating capacity, and can be used as a reference for identifying the organization’s

transition risks and considering related impacts.

For assessing impacts of physical risks, various organizations have published reports

assessing impacts by industry and region, as well as tools. Out of such reports and tools,

twelve introduced in the TCFD recommendations and two that largely cover different types

of physical risks (“ADVANCING TCFD GUIDANCE ON PHYSICAL CLIMATE RISKS AND

OPPORTUNITIES” covering global impacts of climate changes and “Synthesis Report on

Observations, Projections and Impact Assessments of Climate Change, 2018” covering

impacts of climate changes in Japan) are explained in Table 2.

12 NDC (Nationally Determined Contribution) is a term for a nationally determined GHG emissions reduction target which all countries that ratified the Paris Agreement under the United Nations Framework Convention on Climate Change (UNFCCC) have committed to achieve.

39

Explanation in TCFD Technical Supplement

“The Use of Scenario Analysis in Disclosure of Climate-Related Risks and Opportunities”

Category IEA datasets Source13 Timeframe

Country/region

Unit Corresponding

page Global

Several areas

Japan

Carbon price

What assumptions are made about how carbon price(s) would develop over time (within tax and/or emissions trading frameworks), geographic scope of implementation, whether the carbon price would apply only at the margin or as a base cost, whether it is applied to specific economic sectors or across the whole economy and in what regions?

Is a common carbon price used (at multiple points in time?) or differentiated prices? Assumptions about scope and modality of a CO2 price via tax or trading scheme?

CO2 price CO2 price in selected regions by

scenario WEO 2017 2020/30/40 〇

$2016 per

tonne

p.48 Table 1.1

Energy demand

What would be the resulting total energy demand and energy mix across different sources of primary energy e.g. coal/ oil/ gas/ nuclear/renewables (sub-categories)?

How does this develop over time assuming supply/end-use efficiency improvements?

What factors are used for energy conversion efficiencies of each source category and for end-use efficiency in each category over time?

General

Final electricity demand by sector and region, 2014‐60

ETP 2017 2014-60 〇

TWh p.279-280,

Figure 6.2,

6.3,6.4

Primary energy

Total final industrial energy consumptions by region

World primary energy demand by fuel and scenario

ETP 2017 2014-60 〇 EJ p.77, Figure

2.18

WEO 2017 2025/40 〇 Mtoe p.79 Table2.2

Final energy Energy consumption by sector and

fuel ETP 2017 2025 〇〇 EJ p.77, Figure

2.20

Final energy Average annual change in final energy

consumption in selected regions WEO 2017 2016-40 〇〇 Mtoe p.286 Figure7.3

Final energy Avoided final energy demand in 2040

due to energy efficiency policies by fuel, sector and region

WEO 2017 2040 〇 Mtoe p.289 Figure7.5

Fossil‐fuel Fossil‐fuel demand

WEO 2017 2025/30/35/40 〇〇〇 Mtoe p.145

Figure3.18

13 International Energy Agency (IEA) “World Energy Outlook 2017”, “Energy Technology Perspective 2017 –Catalysing Energy Technology Transformation”

Table 1 Data related to transition risks in IEA’s scenarios

40




Country/region

Unit Corresponding

page Global

Several areas

Japan

Fossil‐fuel Change in global oil product demand

for petrochemical feedstock WEO 2017 2025/40 〇 mb/d p.170 Figure4.7

Fossil‐fuel Difference in oil demand by sector in

the Low Oil Price Case relative to the New Policies Scenario

WEO 2017 2020/25/30/35/40 〇 mb/d p.159 Figure4.1

Coal

Gas

Share of coal consumption by technology in electricity WEO 2017 2040 〇〇〇

% p.262

Figure6.16

Renewable energy

World renewable energy consumption WEO 2017 2025/40 〇

Mtoe, TWh,

mboe/d

p.299 Table7.3

Renewable energy

Renewable energy use by sector from a consumer perspective and by region

WEO 2017 2040 Mtoe p.301 Figure7.8

Renewable energy

Bioenergy in final energy consumption by end use ETP 2017 2016 〇

% p.319, Figure

7.2

Heat

Growth in global industrial heat demand by temperature level, Change in global industrial heat supply mix by temperature level

WEO 2017 2040 〇〇 Mtoe

p.319

Figure7.16, p.320

Figure7.17

Electricity Electricity demand by region WEO 2017 2025/30/35/40 〇〇〇 TWh p.238 Table6.1

Power supply Fuel input electricity and heat

generation

ETP 2017 2025/30/35/40/45/50/55/6

0 〇 PJ

ETP2017_scen

ario_summary

41




Country/region

Unit Corresponding

page Global

Several areas

Japan

Energy mix

What would be the resulting total energydemand and energy mix across differentsources of primary energy e.g. coal/ oil/ gas/nuclear/renewables (sub-categories)?

How does this develop over time assumingsupply/end-use efficiency improvements?

What factors are used for energy conversionefficiencies of each source category and forend-use efficiency in each category over time?

Renewable energy Final energy demand in the RTS and

2DS, 2014‐60

（Biomass and waste, Natural gas,

Electricity, Commercial heat, Oil, Coal,

Other, Renewable share, Low‐carbon

share)

ETP 2017 2014-2060 〇

% p.30,Figure 1.5

Renewable energy Bioenergy use and CO2 capture in the

RTS, 2DS and B2DS

(Power, Fuel Transformation,

Agriculture, Buildings, Industry,

Transport, %BECCS)

ETP 2017 2060 〇

EJ p.38,Figure

1.13

Renewable energy

Tracking by technology and region

(Solar PV, Hydropower, Bioenergy, CSP,

Onshore wind, Offshore wind,

Geothermal, Ocean)

ETP 2017 2000-2020/2025 〇

TWh p.67, Figure 2.4

Nuclear power Top‐five regions by installed capacity

of nuclear power plants WEO 2017 2025/30/35/40 〇〇〇 GW p.250 Figure6.9

Nuclear power Nuclear electricity generation ETP 2017 2020/25 〇 TWh p.69, Figure 2.5

42




Country/region

Unit Corresponding

page Global

Several areas

Japan

Power supply

"Coal capacity development

(Subcritical, Supercritical, Ultra-supercritical)"

ETP 2017 2020/25 〇 GW p.73, Figure

2.11

Power supply Electricity generation(Total generation, Coal, Oil, Gas, Nuclear, Renewables)

WEO 2017 2025/30/35/40 〇〇〇 TWh p.651 Annex

Power supply Offshore electricity generation WEO 2017 2040 〇〇〇

TWh p.104

Figure2.21

Power supply "Power generation fuel mix by scenario, 2014 and 2060

(Fossil w/o CCS, Fossil with CCS, Nuclear, Bioenergy with CCS, Renewables)"

ETP 2017 2060 〇

Electricity mix p.37,Figure

1.12

Power plant Electrical capacity(Total capacity,

Coal, Oil, Gas, Nuclear, Renewables) WEO 2017 2025/30/35/40 〇〇〇 GW p.651 Annex

Power plant Electricity generation by existing

and new power plants by type WEO 2017 2017-25/2026-40 〇〇〇

TWh p.259

Figure6.13

CCS Power generation by source and

installed capacity WEO 2017 2040 〇 TWh p.146

Figure3.19

Investment Cumulative global energy investment

by scenario WEO 2017 2040 〇 Trillion dollars

(2016)

p.100

Figure2.20

Investment Average annual offshore energy

investment WEO 2017 2017-25/2026-40 〇 Billion dollars

(2016)

p.105

Figure2.22

Investment Cumulative investment needs by

sector in the New Policies and WEO 2017 2040 〇 Trillion dollars

(2016)

p.147

Figure3.20

43




Country/region

Unit Corresponding

page Global

Several areas

Japan

Sustainable Development Scenarios, 2017‐2040

Investment needs by scenario, 2017‐60

ETP 2017 2060 〇

Trillion USD

(2015 USD PPP)

p.263, Figure

5.16

Price of key commodities/products

What conclusions does the organization draw,based on the input parameters/ assumptions,about the development over time of marketprices for key inputs, energy (e.g. coal, oil, gas,electricity)?

Renewable energy

Solar PV LCOE and contract prices ETP 2017 2011-2021 〇〇 USD/kWh p.65, Figure 2.3

Fossil‐fuel

Fossil fuel prices by scenario

ETP 2017 2020/30/40/50/60 〇〇〇

Oil :2015

USD/bbl

Coal: 2015 USD/t

Gas: 2015 USD/

MtBu

p.408, Table

A.3

Coal

Average FOB cash costs for global seaborne steam coal trade and Richard’s Bay FOB coal price WEO 2017 2000-40 〇

Dollars per

tonne(adjusted to

6 000 kcal/kg)

p.217 Figure5.5

Macro-economic Variables

What GDP rate, employment rate, and othereconomic variables are used?

GDP Real GDP growth projections in ETP

2017 (assumed identical across scenarios)

ETP 2017 2000-60 〇 CAAGR (%) p.408, Table

A.1

Demographic variables

What assumptions are made about populationgrowth and/or migration?

General Population projections used in ETP

2017 (millions) ETP 2017 2014-60 〇 millions p.408, Table

A.2

Efficiency To what extent are positive aspects of efficiency

gains/clean energy transition/physical changesincorporated into scenarios and businessplanning?

Efficiency Natural gas‐fired power technology

intensity ETP 2017 2000-25 〇 gCO2/kWh p.71, Figure 2.8

Efficiency Global fleet average and new‐build plants emissions

ETP 2017 1990-2060 〇 gCO2/kWh p.53,Figure 2.2

Efficiency Cost components in battery storage in the scenarios ETP 2017 2040 〇 %

p.298, Figure

6.19

Efficiency Battery scale‐up in the 2DS and B2DS ETP 2017 2030/45/60 〇

GWh,

USD/kWh

p.299, Figure

6.20

44




Country/region

Unit Corresponding

page Global

Several areas

Japan

Efficiency Global energy intensity reduction WEO 2017 2016-25/25-40 〇 % p.285 Figure7.2

Efficiency Evolution of global average cost for utility‐scale solar PV and EV battery

WEO 2017 2010-40 〇

Dollars per

MWh, kWh

(2016)

p.60 Figure1.8

Efficiency Powertrain cost comparison of conventional and electric cars WEO 2017 2025 〇

Thousand

dollars (2016) p.96 Figure2.18

Efficiency Potential additional impact of material efficiency improvements on oil demand for plastics production

WEO 2017 2040 〇 mb/d p.172 Figure4.8

Efficiency Historical and projected levelised costs of electricity by selected technology

WEO 2017 2010-40 〇 Dollars per

MWh (2016)

p.269

Figure6.21

Technology

Does the organization make assumptions aboutthe development of performance/cost andresulting levels of deployment over time ofvarious key supply and demand-side technologies (e.g. solar PV/CSP, wind, energystorage, biofuels, CCS/CCUS, nuclear,unconventional gas, electric vehicles, andefficiency technologies in other key sectorsincluding industrial and infrastructure)?

CCS Share of CCS in power generation and

capacity ‐ B2DS ETP 2017 2030/45/60 〇 % p.366, Figure

8.3

CCS Globally installed electricity storage

(GW) ETP 2017 2020/25 〇 GW p.103, Figure

2.58

CCS

Global CO2 captured and stored in the chemicals and petrochemicals subsector

ETP 2017 2020/25/30/35/40/45/50/5

5/60 〇 MtCO2/year

p.179, Figure

4.10、p.189,

Figure 4.20、

p.194, Figure

4.23

CCS Share of CCS in industrial production

ETP 2017 2015-60 〇 % p.371, Figure

8,7

CCS CO2 captured

ETP 2017 2025/30/35/40/45/50/55/6

0 〇〇 Mt CO2

ETP2017_scen

ario_summary

45




Country/region

Unit Corresponding

page Global

Several areas

Japan

Fossil‐fuel Deepwater and ultra‐deepwater

production by region in the New Policies Scenario

WEO 2017 2020/25/30/35/40 〇 mb/d p.185

Figure4.14

Gas Average costs of resources developed

in the New Policies Scenario by year and average Henry Hub price

WEO 2017 2016-20/-25/-30/-35/-40 〇 Dollars per

MBtu (2016)

p.373 Figure9.3

Gas Estimated average time to procure an

extra 10% of LNG import volumes by selected importer

WEO 2017 2030/40 〇〇 Days p.391

Figure9.14

Renewable energy

Average annual global energy efficiency and renewable investments WEO 2017 2017-20/-25/-30/-35/-40 〇

Billion dollars

(2016)

p.308

Figure7.12

Investment Cumulative oil and gas supply

investment by region WEO 2017 2040 〇 $2016 billion p.201

Table4.10

Policy

What are assumptions about strength of different policy signals and their development over time (e.g. national headline carbon emissions targets; energy efficiency or technology standards and policies in key sectors; subsidies for fossil fuels; subsidies or support for renewable energy sources and for CCS/CCUS)

Policy Cross‐cutting policy assumptions by

scenario for selected regions WEO 2017 2016 以降〇〇〇 - p.728-729

TableB.1

Subsidies Estimated value of global fossil‐fuel

consumption subsidies WEO 2017 2009-2016 〇 Billion dollars

(2016)

p.84 Figure2.12

Renewable energy

Share of supported wind and solar PV generation by mechanism type WEO 2017 2010-2030 〇

% p.275

Figure6.24

CO2 emissions

Gas Average CO2 emissions intensity of

electricity generation in selected regions WEO 2017 2025/40 〇 gCO2/kWh p.454

Figure11.13

Power supply Average CO2 emissions intensity of

electricity generation in selected regions WEO 2017 2025/40 〇 gCO2/kWh p.444

Figure11.5

Coal World coal demand, production and

trade WEO 2017 2025/40 〇 Mtce p.207 Table5.1

46




Country/region

Unit Corresponding

page Global

Several areas

Japan

Predictions on production and sales

Fossil‐fuel Changes in oil production by region WEO 2017 2016-25/-40 〇 mb/d p.160 Figure4.2

Power plant Offshore oil and gas production

WEO 2017 2040 〇 mboe/d p.104

Figure2.21

47

Sector Parameters


“The Use of Scenario Analysis in Disclosure of Climate-Related Risks

and Opportunities”

IEA datasets Source Timeframe

Country/region

Unit Corresponding

page Global Several areas

Japan

Energy

Energy demand




Residential LED stock and lighting electricity demand in the New Policies Scenario

WEO 2017 2040 〇 TWh p.294

Figure7.7

Final energy demand (Oil, Coal, Natural gas, Electricity, Heat, Biomass and waste, Hydrogen)

ETP 2017 2025/30/35/40/45/50/55/60 〇〇 PJ ETP2017_sce

nario_summary

Residential - Total final energy consumption by end-use

ETP 2017 2025/30/35/40/45/50/55/60 〇 PJ

ETP2017_buil

dings_summary.

xlsx

Cement - final energy consumption

ETP 2017 2025/30/35/40/45/50/55/60 〇 PJ

ETP2017_ind

ustry_summary.

xlsx

Energy mix

Investment needs by scenario, 2017-60

ETP 2017 2015-60 〇

Trillion USD

(2015 USD

PPP)

p.263, Figure

5.16

Role of transport biofuels - final energy demand in the 2DS ETP 2017 2015-60 〇 EJ

p.325, Figure

7.7

Technology

Does the organization make assumptions about the development of performance/cost and resulting levels of deployment over time of various key supply and demand‐side technologies (e.g. solar PV/CSP, wind, energy storage, biofuels, CCS/CCUS, nuclear, unconventional gas, electric vehicles, and efficiency technologies in other key sectors including industrial and infrastructure)?

Deployment rates for renwables-based power technologies in the B2DS

ETP 2017 2014-60 〇 GW / year p.290, Figure

6.14

48

Sector Parameters





Country/region

Unit Corresponding


Japan

Policy


Recent developments in regional power sector policies included in the New Policies Scenario

WEO 2017 2016-17 〇 - p.241

Table6.2

CO2 emissions Final energy use and CO2

emissions in industry in the RTS ETP 2017 2030/60 〇 GtCO2 p.164, Figure

4.1


Average CO2 intensity of electricity production and primary aluminum production

ETP 2017 2060 〇〇

production:

Aluminium(Mt)

CO2

intensity :

gCO2/kWh

p.200, Figure

4.26

Deployment levels of solar PV WEO 2017 2040 〇 GW

p.150

Figure3.22

Transportation

Energy demand



What factors are used for energy conversion efficiencies of each

Global road freight fuel demand by vehicle category WEO 2017 2040 〇 mb/d

p.167

Figure4.5

Total final energy consumption

ETP 2017 2025/30/35/40/45/50/55/60 〇〇 PJ

ETP2017_tr

ansport_sum

mary.xlsx

"Energy intensity development under current regulation and 2DS

(Energy intensity in 2DS, Energy intensity with EEDI)"

ETP 2017 2020/25/30 MJ/tonne-

kilometre

p.89, Figure

2.39

49

Sector Parameters





Country/region

Unit Corresponding


Japan

source category and for end-use efficiency in each category over time?

"Bus and rail activity by scenario and passenger transport activity by mode, 2015-60

( Share of activity for passenger transport modes)"

ETP 2017 2060 〇 % p.237,

Figure 5.7

Energy intensity improvements in global aviation by scenario ETP 2017 2000-60 〇 MJ/pkm

p.253,

Figure 5.11

Passenger transport final energy consumption

ETP 2017 2025/30/35/40/45/50/55/60 〇〇 PJ

ETP2017_tr

ansport_sum

mary.xlsx

Energy mix Role of transport biofuels - final

energy demand in the 2DS ETP 2017 2015-60 〇 EJ p.325,

Figure 7.7

Technology

Does the organization make assumptions about the development of performance/cost and resulting levels of deployment over time of various key supply and demand‐side technologies (e.g. solar PV/CSP, wind, energy storage, biofuels, CCS/CCUS, nuclear, unconventional gas, electric vehicles, and efficiency technologies in other key sectors including industrial and infrastructure)?

Global technology penetrations in LDV stock by scenario, 2015-60 ETP 2017 2025/30/35/40/45/50/55/60 〇

Million

vehicles

p.223, Figure

5.3

Comparative cost of PLDV technologies by country/region in the RTS and B2DS, 2015 and 2060

ETP 2017 2060 〇〇 USD p.228, Figure

5.5

Model shift from aviation to HSR, RTS and B2DS

ETP 2017 2010-60 〇 Passenger

km (trillions)

p.256, Figure

5.13

50

Sector Parameters





Country/region

Unit Corresponding


Japan

Policy


Selected recent initiatives for electric mobility

WEO 2017 2016 〇 - p.165

Table4.3

CO2 emissions

International well-to-wake shipping CO2-eq emissions trajectories ETP 2017 2020/25 〇

Mt of CO2

equivalent

p.89, Figure

2.37

Well-to-wheel emissions by mode

ETP 2017 2025/30/35/40/45/50/55/60 〇 PJ

ETP2017_tran

sport_summary.

xlsx

Direct CO2 emissions

ETP 2017 2025/30/35/40/45/50/55/60 〇 EJ

ETP2017_sce

nario_summary.

xlsx


Vehicle sales and technology shares in 2015 and 2060 in the RTS and B2DS , Light-duty vehicles (Gasoline internal combustion engine, Diesel combustion engine, Compressed natural gas/ Liquefied petroleum gas, Hybrids, Electric & fuel cell vehicles)

ETP 2017 2060 〇 Million

vehicles

p.36, Figure

1.11

"Share of 2-wheelers in major Asian regions and the OECD average in the B2DS, 2015-60"

ETP 2017 2030/60 〇 % p.234, Figure

5.6

Passenger kilometres

ETP 2017 2025/30/35/40/45/50/55/60 〇〇 billion

ETP2017_tran

sport_summary.

xlsx

51

Sector Parameters





Country/region

Unit Corresponding


Japan

Freight tonne kilometres

ETP 2017 2025/30/35/40/45/50/55/60 〇〇 billion

ETP2017_tran

sport_summary.

xlsx

Deployment levels of electric cars WEO 2017 2040 〇

Million

vehicles

p.150

Figure3.22

Materials and Buildings

Energy demand




Cement production energy use ETP 2017 2025 〇 EJ

p.79, Figure

2.22

Energy intensity and direct CO2 emissions intensity of global cement production by scenario

ETP 2017 2030/60 〇 Gt/t cement p.192,Figure4.

21

Sector-wide energy consumption and CO2 emissions

ETP 2017 2025 〇

Energy

consumption;

EJ

Direct CO2

emissions :

MtCO2

p.81,

Figure2.27

Final energy use by fuel and per person ETP 2017 2020/25 〇

MWh/perso

n

p.95, Figure

2.48

Global direct CO2 emissions and process energy intensities of primary chemicals by scenario

ETP 2017 2030/60 〇 Gt/ t

production

p.177, Figure

4.8

Global energy intensity and direct CO2 emissions of crude steel production by scenario

ETP 2017 2030/60 〇 Gt/t crude

steel

p.186,Figure4.

16

Floor area additions to 2060 and share of additions built by 2035 for selected regions (Non-residential, Residential)

ETP 2017 2060 〇 Billion m2 p.126, Figure

3.4

52

Sector Parameters





Country/region

Unit Corresponding


Japan

Residential - Total final energy consumption

ETP 2017 2030/45/60 〇 PJ

ETP2017_buil

dings_summary.

xlsx

Cumulative energy savings by end use relative to the RTS ETP 2017 2020/30/40/50/60 〇 EJ

p.130, Figure

3.6

Residential - Total final energy consumption by end-use

ETP 2017 2025/30/35/40/45/50/55/60 〇 PJ

ETP2017_buil

dings_summary.

xlsx

Residential - Total final energy consumption

ETP 2017 2025/30/35/40/45/50/55/60 〇 PJ

ETP2017_buil

dings_summary.

xlsx

Cement - final energy consumption

ETP 2017 2025/30/35/40/45/50/55/60 〇 PJ

ETP2017_ind

ustry_summary.

xlsx

CO2 emissions

Global direct CO2 emissions and process energy intensities of primary chemicals by scenario ETP 2017 2030/60 〇

t direct

CO2/t

production

p.177, Figure

4.8

Energy intensity and direct CO2 emissions intensity of global cement production by scenario ETP 2017 2030/60 〇

tCO2/t

cement

p.192, Figure

4.21、p.186,

Figure 4.16


ETP 2017 2025/30/35/40/45/50/55/60 〇 GtCO2

ETP2017_sce

nario_summary.

xlsx

Buildings - Total emissions by end-use ETP 2017 2025/30/35/40/45/50/55/60 〇 MtCO2

p.192, Figure

4.21

53

Sector Parameters





Country/region

Unit Corresponding


Japan


Global material production projections in the RTS and B2DS ETP 2017 2025/30/35/40/45/50/55/60 〇 Mt

p.169, Figure

4.5

Crude steel production by process route ETP 2017 2025 〇

Mt crude

steel

p.79,

Figure2.23

HVC production by process route, scenario and region ETP 2017 2060 〇 Mt/year

p.181, Figure

4.12

Production and energy intensity for primary chemicals

ETP 2017 2030/60 〇

Annual

production: Mt

Energy

intensity : GJ/t

chemical

p.81,

Figure2.26

Global HVC production by process technology in the B2DS ETP 2017 2025/30/35/40/45/50/55/60 〇 HVC(Mt)

p.180, Figure

4.11

Hot metal production in the iron and steel subsector by process route and region

ETP 2017 2025/30/35/40/45/50/55/60 〇 Mt hot

metal/year

p.189, Figure

4.19

Global hot metal production in the iron and steel subsector by process technology in the B2DS

ETP 2017 2060 〇 Mt/year p.188, Figure

4.18

54

Sector Parameters





Country/region

Unit Corresponding


Japan

Agriculture, Food, and Forest Products

Energy demand

What would be the resulting total energy demand and energy mix across different sources of primary energy e.g. coal/ oil/ gas/ nuclear/renewables (sub‐categories)?

How does this develop over time assuming supply/end‐use efficiency improvements?

What factors are used for energy conversion efficiencies of each source category and for end‐use efficiency in each category over time?

Pulp and paper - final energy consumption

ETP 2017 2025/30/35/40/45/50/55/60 〇 PJ

ETP2017_ind

ustry_summary.

xlsx

CO2 emission


ETP 2017 2025/30/35/40/45/50/55/60 〇 GtCO2

ETP2017_sce

nario_summary.

xlsx


Production of pulp, paper and paperboard ETP 2017 2025 〇

Mt pulp, Mt

paper

p.83,

Figure2.29

Product mix of pulp production by region and scenario

ETP 2017 2060 〇 Mt pulp/year Figure 4.28

55

Sector Parameters





Country/region

Unit Corresponding


Japan

Energy mix of pulp and paper production and CO2 intensity

ETP 2017 2030/60 〇

energy

mix: %

CO2

intensity :

tCO2/t paper

and

paperboard

p.203, Figure

4.29

56

Name Type Outline

Reference in the

TCFD

recommendations

Region Content

1 IPCC Special Report: The Physical

Scenario Basis Data

The fifth assessment report (IPCC AR5), which describes best‐estimate projections for future GHG emissions and climate impacts resulting from GHG concentration levels in the air based on four RCP pathways (RCP2.6, 4.5, 6.0, 8.5)

○ Global Overall

2 International Institute for Applied

Systems Analysis (IIASA) Tool

Compiled by International Institute for Applied Systems Analysis (IIASA) to provide online database of various information related to land use, energy, transition, and water, such as energy and GHG reduction strategy and climate policy compliant with the online database of various information related to land use, energy, transition, and water, such as energy and GHG reduction strategy and climate policy compliant with the 2 °C and IPCC scenarios

○ Global GHG

emissions

3 CLIPC Tool

Compiled by Climate Information Portal for Copernicus (CLIPC) to provide climate‐related information to a wide range of users, such as consultants, policy makers, scientists, as well as general citizens. CLIPC information includes data from satellite and in‐situ observations, climate models, data re‐analyses, and transformed data products enabling impact assessments and assessment of climate change

○ Global Overall

4 The Global Calculator Tool (UK

DECC, IEA, etc.) Tool

Provide a tool that allows users to visualize change of energy and mobility and physical risks (changes in temperature and precipitation) at a global level

TCFD

Knowledge Hub Global Overall

5 WRI Aqueduct Atlas (WRI) Tool A risk mapping tool useful for companies, investors, governments, and

other users to understand where and how water‐related risks and opportunities are occurring in the world

○ Global Water risks

6 WBCSD Water Tool (WBCSD) Tool

A multifunctional resource for identifying corporate water risks and opportunities that include a workbook, mapping function, and a Google Earth interface, allowing comparison of water availability, sanitation, population and biodiversity

○ Global Water risks

Table 2 Representative reports, etc. assessing impacts of physical risks

57

7 Water Risk Filter (WWF) Tool Provide a tool for assessing water risks TCFD

Knowledge Hub Global Water risks

8 MOSAICC (FAO) Tool A modeling system for agricultural impacts of climate change provided

by Food and Agriculture Organization of the United Nations ○ Global

Agricultural

resources

9 Global Agro‐Ecological Zones

(FAO) Tool

A system based on the GAEZ approach for evaluating agricultural resources and potential, allowing users to forecast change in crop and agricultural production due to climate change

○ Global Agricultural

resources

10 Climate Impact Programme (UK) Tool A database of climate‐related historical data and future projections of

climate change, which includes low, medium and high emission scenarios and is available for viewing through an online user interface and reports.

○ Global Overall

11 Assess your physical risks with

CRIS (Carbone 4) Report/Tool Provide an assessment tool for physical risks for investors

TCFD

Knowledge Hub Global Overall

12 ADVANCING TCFD GUIDANCE ON

PHYSICAL CLIMATE RISKS AND OPPORTUNITIES（EBRD）

Report Provide a qualitative assessment of impacts of physical risks by sector By

sector Overall

13

Synthesis Report on Observations, Projections and Impact Assessments of Climate Change, 2018 (The Ministry of the Environment, the Ministry of Education, Culture, Sports, Science and Technology, and the Japan Meteorological Agency, etc.)

Report

Published jointly by the Ministry of the Environment, the Ministry of Education, Culture, Sports, Science and Technology, the Japan Meteorological Agency, etc. to provide information, such as the current status and future forecast of climate change and its impacts on temperature, precipitation, and sea surface level

Japan Overall

14 Climate Strategy Assessments for

the U.S. Electric Power Industry (Ceres)

Report Describe physical risks in the energy industry TCFD

Knowledge Hub

Energy

industry Overall

58

b) Quantitative or qualitative in scenario analysis

The TCFD recommendations explain the level of quantitative disclosure in general

scenario analysis.

The Task Force believes that all organizations exposed to climate‐related risks should

consider (1) using scenario analysis to help inform their strategic and financial planning

processes and (2) disclosing how resilient their strategies are to a range of plausible

climate‐related scenarios. The Task Force recognizes that, for many organizations,

scenario analysis is or would be a largely qualitative exercise. However, organizations

with more significant exposure to transition risk and/or physical risk should undertake

more rigorous qualitative and, if relevant, quantitative scenario analysis with respect to

key drivers and trends that affect their operations.

(…)

For an organization in the initial stages of implementing scenario analysis or with

limited exposure to climate‐related issues, the Task Force recommends disclosing how

resilient, qualitatively or directionally, the organization’s strategy and financial plans

may be to a range of relevant climate change scenarios. This information helps

investors, lenders, insurance underwriters, and other stakeholders understand the

robustness of an organization’s forward‐looking strategy and financial plans across a

range of possible future states.


Feedback obtained from financial institutions says that “we do not require an

elaborate scenario analysis but use it to check how organizations see climate change

risks and opportunities and manage their businesses.”

When conducting qualitative scenario analysis, a possible way is to describe the

impacts of climate change not in absolute values but on a relative scale, such as large,

medium, and small.

59

Case example 8: Example of a company conducting qualitative scenario

analysis

Mitsubishi Corporation presents its awareness of the business environment and

related policies, and initiatives based on its global demand forecast – the trajectory

forecast for demand change, expressed in five levels, from the present until 2030

– under different climate scenarios including those in the IEA’s World Energy

Outlook (WEO) and Energy Technology Perspectives (ETP).

Source: Mitsubishi Corporation, “ESG DATABOOK 2018,” page 30‐31.

60

c) Describing resilience

The TCFD recommendations require the following disclosures to describe the

organization’s resilience.

D. Scenario Analysis and Climate‐Related Issues

4. Applying Scenario Analysis

(abbreviated)

Figure 8 Disclosure Considerations for Non‐Financial Organizations

Organizations with more significant exposure to climate‐related issues

should consider disclosing key aspects of their scenario analysis, such as

those described below.

(abbreviated)

4. Information about the resiliency of the organization’s strategy,

including strategic performance implications under the various

scenarios considered, potential qualitative or directional implications

for the organization’s value chain, capital allocation decisions,

research and development focus, and potential material financial

implications for the organization’s operating results and/or financial

position


Resilience disclosures describe the organization’s business continuity in different

future scenarios presented in scenario analysis.

Examples of resilience disclosures include identifying medium‐ and long‐term risks

(transition risks and physical risks) and opportunities and describing the status of

management and efforts to respond to such risks and opportunities.

61

E. Risk Management

The TCFD recommendations recommend the following disclosures under Risk

Management.

Risk Management: Disclose how the organization identifies, assesses, and manages

climate‐related risks.

Recommended

Disclosure a)

Describe the

organization’s

processes for

identifying and

assessing climate‐

related risks


Organizations should describe their risk management processes

for identifying and assessing climate‐related risks. An important

aspect of this description is how organizations determine the

relative significance of climate‐related risks in relation to other

risks.

Organizations should describe whether they consider existing

and emerging regulatory requirements related to climate

change (e.g. limits on emissions) as well as other relevant

factors considered.

Organizations should also consider the following :

- processes for assessing the potential size and scope of

identified climate‐related risks

- definitions of risk terminology used or references to existing

risk classification frameworks used

Recommended

Disclosure b)

Describe the

organization’s

processes for

managing climate‐

related risks


Organizations should describe their processes for managing

climate‐related risks, including how they make decisions to

mitigate, transfer, accept, or control those risks. In addition,

organizations should describe their processes for prioritizing

climate‐related risks, including how materiality determinations

are made within their organizations.

Recommended

Disclosure c)


62

Describe how

processes for

identifying,

assessing, and

managing climate‐

related risks are

integrated into the

organization’s

overall risk

management.

Organizations should describe how their processes for

identifying, assessing, and managing climate‐related risks are

integrated into their overall risk management.


As for methods for grasping the relative materiality of climate‐related risks and their

prioritization, companies can conduct materiality assessment using a materiality

matrix14.

It is also effective to concretely present the organization’s management processes for

climate‐related risks using figures and written narratives (see Case example).

Case example 8: Describing management processes and systems for

climate‐related risks

Mitsubishi Corporation describes its processes and management systems for

assessing and identifying climate‐related risks using flow charts. The company has

also specified that the results of considerations are utilized in formulating

strategies and screening investment and loan proposals of individual businesses.

14 A method of comparing the relative materiality of climate‐related risks based on a two‐axis graph plotting out various sustainability issues, with one axis charting a scale of the importance of issues to stakeholders, and the other of significance to the organization.

63

Source: Mitsubishi Corporation, “ESG DATA BOOK 2018,” page 38.

64

F. Metrics and Targets

The TCFD recommendations recommend the following disclosures under Metrics and

Targets.

Metrics and Targets: Disclose the metrics and targets used to assess and manage

relevant climate‐related risks and opportunities where such information is material.

Recommended

Disclosure a)

Disclose the

metrics used by

the organization to

assess climate‐

related risks and

opportunities in

line with its

strategy and risk

management

process


Organizations should consider including metrics on climate‐

related risks associated with water, energy, land use, and

waste management where relevant and applicable.

Where climate‐related issues are material, organizations

should consider describing whether and how related

performance metrics are incorporated into remuneration

policies

Where relevant, organizations should provide their internal

carbon prices as well as climate‐related opportunity metrics

such as revenue from products and services designed for a

lower‐carbon economy.

Metrics should be provided for historical periods to allow for

trend analysis. In addition, where not apparent, organizations

should provide a description of the methodologies used to

calculate or estimate climate‐related metrics.

Recommended

Disclosure b)

Disclose Scope 1,

Scope 2, and, if

appropriate, Scope

3 greenhouse gas

(GHG) emissions,


Organizations should provide their Scope 1 and Scope 2 GHG

emissions and, if appropriate, Scope 3 GHG emissions and the

related risks.

GHG emissions should be calculated in line with the GHG

Protocol methodology to allow for aggregation and

65

and the related

risks.

comparability across organizations and jurisdictions. As

appropriate, organizations should consider providing related,

generally accepted industry‐specific GHG efficiency ratios.

GHG emissions and associated metrics should be provided for

historical periods to allow for trend analysis. In addition, where

not apparent, organizations should provide a description of

the methodologies used to calculate or estimate the metrics

Recommended

Disclosure c)

Describe the

targets used by the

organization to

manage climate‐

related risks and

opportunities and

performance

against targets.


Organizations should describe their key climate‐related targets

such as those related to GHG emissions, water usage, energy

usage, etc., in line with anticipated regulatory requirements or

market constraints or other goals. Other goals may include

efficiency or financial goals, financial loss tolerances, avoided

GHG emissions through the entire product life cycle, or net

revenue goals for products and services designed for a lower‐

carbon economy. In describing their targets, organizations

should consider including the following:

- whether the target is absolute or intensity based

- time frames over which the target applies

- base year from which progress is measured, and

- key performance indicators used to assess progress against

targets.

Where not apparent, organizations should provide a

description of the methodologies used to calculate targets and

measures


As for Metrics and Targets disclosures, the TCFD recommendations require

organizations not just to implement recommended disclosures but to use narratives for

disclosures to allow investors and other stakeholders to understand how such metrics

66

and targets are linked to the organization’s value creation and that such metrics are

suited to the organization’s strategy.

A company implementing disclosure can deliver information more effectively to

investors and other stakeholders by clarifying the premises used in working out metrics

and setting targets.

We need to take note that while the TCFD recommendations require organizations to

disclose Scope 1, Scope 2, and Scope 3 GHG emissions, strictly speaking, each company

has different boundaries of assessment when calculating Scope 3 GHG emissions, and

therefore we cannot compare companies only by amounts of emissions15.

15 “Corporate Value Chain (Scope3) Accounting and Reporting Standard” includes the following information.

1.5 Scope of the standard (…) Use of this standard is intended to enable comparisons of a company’s GHG emissions over time. It is not designed to support comparisons between companies based on their scope3 emissions. Differences in reported emissions may be a result of differences in inventory methodology of differences in company size or structure. Additional measures are necessary to enable valid comparisons across companies. Such measures include consistency in methodology and data used to calculate the inventory, and reporting additional information such as intensity ratios or performance metrics.

(Source) GREENHOUSE GAS PROTOCOL “Corporate Value Chain (Scope3) Accounting and Reporting Standard”

67

Column 4 Method for assessing and disclosing GHG emissions reduction

contribution through the global value chain

The metrics of the TCFD recommendations include “avoided GHG emissions

through the entire product life cycle”. Disclosing GHG emission reductions in the

use phase of products and services, not GHG emissions of a single company, allows

the company to demonstrate how much it contributes to reducing GHG emissions

globally through its products and services.

For methods of quantifying contribution to the GHG emission reductions

(avoided emissions), the following materials will be useful as references.

1) Guidelines for Quantifying GHG emission reductions of goods or services

through Global Value Chain (Ministry of Economy, Trade and Industry)

The guidelines designed to present fundamental principles and framework for

organizations for quantifying the reduction of GHG emissions in each phase of

the life cycle of products and services (i.e. from the raw materials procurement

phase to the manufacturing phase, use phase, and disposal phase).

The guidelines provide descriptions of the definitions of avoided emissions,

steps for quantifying them, and methods for reporting the results of calculation

and others.

2) “Contributing to Avoided Emissions through the Global Value Chain — A

new approach to climate change measures by private sectors (GVC Concept

Book)” (KEIDANREN (Japan Business Federation))

The book presents the idea and significance of contributing to GHG emissions

reductions through the Global Value Chain (GVC) with case examples of

“visualizing” such contributions by various industries and companies.

68

G. Disclosure Methods for Companies with Different

Business Models

Companies with multiple different business models have multiple business domains

with different characteristics. For such companies, the materiality of climate change and

the business strategy are different from business to business. Accordingly, the point at

issue when implementing company‐wide disclosure is for which business and to what

extent they should describe a strategy.

Such companies can start by identifying climate‐related risks and opportunities for

individual business models and subsequently examine the potential impacts on the

company as a whole based on the current or future revenues and the magnitude of the

materiality of climate change.

In addition, if companies expect future expansion of business scale in a field which is

currently a small business, companies should implement disclosure with their future

business portfolios in mind by focusing their explanation on such business.

H. Steps for Implementing the TCFD Recommendations at

Mid‐cap and Small‐ and Medium‐sized Companies

The TCFD recommendations recommend all companies, regardless of size, to

implement disclosure related to Governance and Risk Management in their financial

filings. For disclosures related to the Strategy and Metrics and Targets, the Task Force

recommends non‐financial companies that have more than one billion U.S. dollar

equivalent (USDE) in annual revenue to consider disclosing such information in other

reports when the information is not deemed material and not included in financial filings.

In the meantime, implementing disclosure in accordance with the TCFD

recommendations is a large burden for mid‐cap and small‐ and medium‐sized

companies, and it is difficult to require them to implement disclosure on all

recommended disclosure items immediately. Therefore, it is desired that mid‐cap and

small‐ and medium‐sized companies, in particular, start disclosing information that is

manageable first and expand the coverage of disclosure in stages.

69

There are cases in which mid‐cap and small‐ and medium‐sized companies are

required to disclose their GHG emissions as part of efforts their large company

customers for reducing GHG emissions throughout the supply chain. Considering this,

mid‐cap and small‐ and medium‐sized companies can draw attention from large

companies that seek to reduce GHG emissions throughout the supply chain by disclosing

the organization’s efforts for reducing GHG emissions and increase their business

opportunities.

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Chapter III Sector‐Specific Recommended

Disclosures

A. Objectives of Sector‐Specific Disclosure Guidance

Chapter II explains common matters for all industrial sectors concerning four thematic

areas that the Task Force recommends to disclose: Governance, Strategy, Risk

Management, and Metrics and Targets. In the case of disclosure of Strategy or Metrics

and Targets, however, different sectors have different climate‐related risks and

opportunities, which may also lead to difference in how strategies should be presented

and what metrics and targets should be used to measure them.

The TCFD recommendations include sector‐specific supplemental guidance for

Strategy and Metrics and Targets. For the Strategy, there is a guidance covering the two

categories: the financial sector and non‐financial groups. For the Metrics and Targets,

the non‐financial groups are further categorized into four sectors: Energy,

Transportation, Materials and Buildings, and Agriculture, Food, and Forest Products.

In addition, the TCFD recommendations mention “Key Issues considered and Areas

for Further Work” by saying that “the Task Force encourages further research and

analysis by sector and industry experts to increase organizations’ understanding of

climate‐related risks and opportunities.” This positions the guidance for the sector‐

specific disclosure as a remaining issue.

Investors and other stakeholders require information on companies’ ability to

respond to change in their business environments caused by climate change. This means

that companies should specify how companies respond to those changes and how each

company’s business activity affects climate change. In particular, it is important to clarify

specific contributions leading to resolution of domestic and overseas issues and

demonstrate that a company is sustainable even in a changing business environment.

Therefore, this chapter focuses on effective disclosure in each industrial sector for

demonstrating a company’s contribution to climate change issues.

When implementing disclosure in accordance with the recommended disclosures

proposed in this chapter, companies should clarify financial impacts of their efforts for

reducing GHG emissions – e.g. reduction of energy costs, increase in revenues from the

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sale of goods and services that can contribute to resolving climate‐related issues – as

the TCFD recommendations require.

Recommended disclosures explained below are not presented as “tick‐boxes.” Each

disclosure item presented is an example of recommended disclosure for companies if

climate change could have significant impacts on their business models. On the other

hand, such disclosures by companies will facilitate dialogue with investors and other

stakeholders, deepening their understanding of industrial efforts and contributions to

climate change issues.

The recommended disclosures include the following eight efforts, which are divided

into the manufacturing and use phases of products and others. Figure 4 shows the

relationship between the value chain of corporate activities and the recommended

disclosures. Among these, the Guidance explains particularly about efforts regarded as

important for each sector.

The recommended disclosures

Figure 5 shows the relationship between the recommended disclosure item and

covered sectors.

Note: Industries shown in brackets are provided with sector‐specific guidance. The

energy industry has a value chain structure different from that of other manufacturing

industries, which makes it important for energy industry to work to reduce GHG

emissions through the entire value chain from the materials procurement phase to the

supply and use phases of energy. Therefore, the recommended disclosures for the

energy industry are presented separately from the following recommended disclosures

for other manufacturing industries.

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16 Contribution to GHG emissions reduction through the value chain means the effect of replacing products or services with other products or services in their use phase in reducing GHG emissions.

(1) Efforts for reducing GHG emissions in the manufacturing phase

a) Efforts for reducing GHG emissions in the manufacturing process

b) Efforts for reducing GHG emissions in procurement

c) Efforts for development and dissemination of pioneering technologies to

reduce GHG emissions in the manufacturing phase

d) Efforts for reducing GHG emissions through recycling and resource

circulation

(2) Efforts for reducing GHG emissions in the use phase

a) Efforts for reducing GHG emissions from the use of products

b) Efforts for contributing to GHG emissions reduction through the value

chain16

c) Efforts for development and dissemination of pioneering technologies to

reduce GHG emissions in the use phase

(3) Other efforts

a) Efforts for contributing to GHG emissions reduction through provision of

technologies

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Figure 5 Relation between value chain of corporate activities and the

recommended disclosures

Figure 6 The relationship between the recommended disclosure item and

covered sector

Procurement

Manufacturing

Use

Disposal

(Note) Sales phase of products and transportation phase is omitted in the figure.

Recycling

Value chain of corporate activities

Use of other products/services

Companies in other country/region

Avoided GHG emissionby provision of technologies

Avoided GHG emission by substitution of other products/services

R&D for manufacturing

phase(1)a

(1)b

R&D for use phase

(1)c

(1)d

(3)a

(2)a

(2)b

(2)c

AutosIron and Steel

Chemicals EnergyElectrical

and Electronics

(1) GHG emissionreductions in manufacturing phase

a) Manufacturing process ■ ■ ■

*explained independently

■

b) Procurement ■ ■

c) Pioneering technologies ■ ■

d) Recycling and resource circulation ■

(2) GHG emissionreductions in use phase

a) The use of products ■ ■

b) Through valuechain ■ ■ ■ ■

c) Pioneering technologies ■ ■ ■

(3) Other effortsa) Through provision of technologies ■

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Note that disclosure based on the TCFD recommendations is still at the early stage

around the world, and it is expected that disclosed contents will be improved as case

examples are accumulated. Under such circumstances, this guidance has been

developed as the first step to respond to the TCFD recommendations and assumes that

the contents will be revised or sectors will be added based on a review of the contents

and the sectors as disclosure practice makes progress in the future.

For the selection of industries with sector‐specific guidance, the Guidance covers

major sectors with the high GHG emissions in the manufacturing or use phase.

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B. Sector‐Specific Recommended Disclosures

1. Automobiles

The TCFD recommendations describe climate‐related risks and opportunities for

the Transportation group, including the automobile industry, as below. This section

provides supplemental guidance focusing on the automobile industry.

Description of Transportation group in the TCFD recommendations

2. Transportation Group

Transportation is critical to the

economy and drives a significant portion of

emissions and demand for energy through

the production and, more important, the

use phase. The industry is under increasing

policy and regulatory pressure to achieve

emission targets for the use phase.

Increasing constraints on emissions fuel

efficiency will continue to impact costs in

this group, particularly around investments

in innovation (new technologies and

efficiencies)17.

The Transportation Group,

therefore, will likely face financial challenges from two major drivers. First,

policymakers are setting stricter targets for emissions and fuel efficiency from

transportation carriers. Second, new technology around low‐emission/fuel‐efficient

carriers (e.g., electric cars) is creating a shift in the competitive and investment

landscape. New technological innovations and new market entrants can weaken

companies’ market position, resulting in lower revenues, higher costs, and narrower

margins. The effects of these two drivers may be compounded by the length of

product cycles for transportation products, such as cars and trucks, and especially for

17 Moody’s Global Credit Research, “Moody’s: Auto sector faces rising credit risks due to carbon transition.” September 20, 2016.

Figure11 Transportation

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air and rail and marine equipment. As with the Energy Group, investments in long‐lived

assets (e.g., manufacturing facilities, airplanes, ships) and longer planning horizons are

relevant factors that must be taken into account when considering the climate‐related

risks and opportunities.

Consequently, disclosures should focus on qualitative and quantitative assessments

and potential impacts of the following:

・ financial risks around current plant and equipment, such as potential early write‐

offs of equipment and R&D investments or early phasing out of current products

due to policy constraints or shifts or the emergence of new technology;

・ investments in research and development of new technologies and potential

shifts in demand for various types of transportation carriers; and

・ opportunities to use new technologies to address lower‐emissions standards and

increased fuel‐efficiency requirements, including transport vehicles (cars, ships,

planes, rail) that run on a range of traditional and alternative fuels.

Source: “Implementing the Recommendations of the Task Force on Climate‐related

Financial Disclosures” (June 2017) P.56

In the automobile industry, the number of vehicles sold is expected to continue to

increase primarily in emerging countries. On the other hand, the improvement of

environmental performance of vehicles is required around the world more than ever

through severer regulations on fuel consumption. In recent years, the industry has also

faced the wave of technological innovation called CASE18, which requires innovation that

would significantly change the existing business models.

In particular, one of the new possibilities expected of automobiles is to actively

contribute to global efforts to combat climate change.

From the perspective of climate change, because use phase of vehicles emits the

largest amount of GHG in the automobile lifecycle, it is possible to demonstrate

contribution to climate change measures effectively by describing efforts for developing

next‐generation vehicles (HV, EV, FCV, etc.) or efforts for reducing emissions through

“Well‐to‐Wheel” as a strategy to reduce emissions.

18 Connectivity, Autonomous, Shared and Electric

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Efforts for reducing GHG emissions in the manufacturing process

In the case of developing automobiles with high environmental performance like EV,

more GHG may be emitted from the manufacturing of vehicles than in the case of

conventional vehicles. Therefore, it is important to reduce GHG emissions in the

manufacturing phase as well as in the use phase.

(Example disclosures)

Targets and results of GHG emissions per vehicle manufactured

In addition, it is important to assess environmental impacts through the entire

automobile lifecycle from the design stage of vehicles and reflect the results in design

planning as it leads to reducing GHG emissions through the entire lifecycle, including the

manufacturing phase as well as the use and disposal phases.

Efforts for reducing GHG emissions in procurement

Efforts for reducing GHG emissions from suppliers are important in reducing GHG

emissions in procurement phase because the automobile industry consists of a large

number of suppliers.


Establishment of a green procurement guideline

Implementation of a system to manage GHG emissions from suppliers


Efforts for reducing GHG emissions from the use of products

Given the policy trend of national governments (fuel consumption regulations, etc.)

and the increasing consumer awareness of environmental issues, efforts for reducing

emissions from use phase, which accounts for the major part of GHG emissions in the

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automobile lifecycle, are most important in presenting strategy to reduce GHG

emissions in the automobile industry.


Medium‐ and long‐term targets and results related to GHG emissions (or fuel

consumption) from average new vehicle

In order to show the company’s technological level compared with the world or

industry average, it is effective to refer benchmark values. It is also important to provide

a comparison with benchmark values for each major market because consumer needs

differ from market to market.

(Reference) An example of comparison of average fuel consumption of companies in

Europe

ICCT (the International Council on Clean Energy Transportation) calculates the

average fuel consumption of passenger vehicles sold in a given year by automaker using

data compiled by the European Environment Agency. The average fuel consumption

depends on not only fuel economy performance of each vehicle model but also the sales

mix of vehicles, and the average fuel consumption of vehicles of each automaker is

compared by average vehicle weight class.

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Source: ICCT (the International Council on Clean energy Transportation), “CO2

emissions from new passenger cars in the EU: Car manufacturers’ performance in

2017”

Efforts for contributing to GHG emissions reduction through the value chain

It is also important to present the amount of avoided GHG emissions by those vehicle

models because the introduction of energy‐efficient vehicles is expected to contribute

to GHG emissions reduction by replacing conventional vehicles.

In addition, efforts are underway to contribute to reducing GHG emissions by efficient

energy management through the use of EVs.

It is important to demonstrate the amount of avoided GHG emissions achieved

through those efforts.


Amount of avoided GHG emissions through the improvement of vehicle

energy efficiency, etc.

80

Efforts for development and dissemination of emerging technologies to reduce GHG

emissions in the use phase

In order to present strategy to reduce GHG emissions in the use phase, it is also

effective to present efforts for the development and dissemination of emerging

technologies particularly related to vehicle models that contribute to reducing GHG

emissions among the company’s products. Since there are various vehicle models that

contribute to reducing GHG emissions, including hybrid vehicles, electric vehicles (EV),

and fuel cell vehicles (FCV), it is necessary to present what vehicle models will be

developed to contribute to reducing GHG emissions in addition to each company’s

competition strategy.


Definition of vehicle models that contribute to reducing GHG emissions

Specific efforts for technological development and future goals (the number

of vehicles sold or share)

In the case of zero‐emission vehicles (ZEV) including EV and FCV, GHG is not emitted

from use phase but emitted in the phases of mining, manufacturing, and supply of fuel.

Therefore, in order to present ZEV’s contribution to GHG emission reduction in its

lifecycle, it is effective to compare GHG emissions from the perspective of “Well‐to‐

Wheel.”

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2. Iron and Steel

The TCFD recommendations describe climate‐related risks and opportunities for

the Materials and Buildings group including the iron & steel industry as below. This

section provides supplemental guidance focusing on the iron & steel industry.

Description of Materials and Buildings group in the TCFD recommendations

3. Materials and Buildings Group

The Materials and Buildings Group

includes, but is not limited to, industries listed

in Figure 12.

Materials and Buildings Group

organizations are typically capital intensive,

require high investments in plants, equipment,

and buildings that are (relatively) fixed in terms

of location, and dependent on sources of raw

and refined materials. This may reduce the

flexibility of organizations in this group to

adapt to risks of climate change.

Many of this group’s activities result in

financial exposures around high GHG emissions and high energy consumption.

Furthermore, a number of industries in this group are dependent on water availability

and/or vulnerable to the effects of acute or chronic physical risks from weather events.

Since the group is capital intensive and the plants and facilities have a long life span,

accelerated R&DDD (research, development, demonstration, and deployment) is

critically important. Thus, disclosures relating to R&DDD plans and progress are

valuable to see the current and future situation and risks of organizations in the group.

Consequently, disclosures should focus on qualitative and quantitative

assessments and potential impacts of the following:

Stricter constraints on emissions and/or pricing carbon emissions and

related impact on costs.

Figure 12 Materials and Buildings

82

The construction materials and real estate sectors should assess risks

related to the increasing frequency and severity of acute weather events or

increasing water scarcity that impact their operating environment.

Opportunities for products (or services) that improve efficiency, reduce

energy use, and support closed‐loop product solutions.



In the iron & steel industry, because the largest amount of GHG is emitted in the

manufacturing phase, efforts have been promoted to reduce GHG emissions through

the improvement of efficiency in the manufacturing phase. Steel manufacturing

technologies can be categorized into blast furnaces and electric furnaces. Since raw

materials for electric furnaces are scrap steel that was manufactured by the blast

furnace process and used as products, the World Steel Association (worldsteel)

developed and defined as ISO 20915 the idea of GHG emissions that regards the blast

furnace method and the electric furnace method as a single steel material recycling

system.

For blast furnaces, hydrogen reduction iron manufacturing and other innovative

technologies are being developed as fundamental technologies to reduce GHG

emissions. It is also important to disclose climate change measures through such efforts.



In the iron & steel lifecycle, the manufacturing process emits the largest amount of

GHG. As iron & steel is expected to be demanded continuously worldwide, a strategy

that companies in the iron & steel industry can take is to improve efficiency of the iron

& steel manufacturing process. Since the effect of improved operation techniques and

improvement from capital investment at each company is reflected in intensity (GHG

emissions per unit of output), it is preferable to disclose information on an intensity

basis.

83

In understanding the numerical value quantified on an intensity basis, it is necessary

to take into account the setting of boundaries, ratio of blast furnaces/electric furnaces,

etc. of each company.


Efforts for improving efficiency in the manufacturing process (energy

intensity)

In order to show the company’s technological level compared with the world or

industry average, it is also effective to refer benchmark values.


emissions in the manufacturing phase

In order to present a strategy related to future climate change measures, it is useful

to present efforts for developing emerging technologies.


Progress in or prospect for efforts for dramatically reducing GHG emissions in

the manufacturing phase (e.g., development of hydrogen reduction iron

manufacturing technologies)

(Reference) COURSE50 technology

A project designed to develop technologies to reduce CO2 emissions by approx. 30%

by reducing CO2 emissions through hydrogen reduction in blast furnaces and by

separating and collecting CO2 through a separation system. The project aims to establish

technologies by around 2030 and practically utilize and diffuse such technologies by

2050.

Efforts for resource circulation through recycling

In the iron & steel industry, efforts have been promoted for resource circulation

through recycling used products and byproducts generated from manufacturing process

as well as utilizing waste plastics, contributing to indirectly reducing GHG emissions. It is

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important, therefore, to demonstrate contributions to reducing GHG emissions through

those recycling efforts.


Material flow of manufacturing processes

Recycling rate of byproducts generated from manufacturing process

Efforts for substituting coke through the use of waste plastic and utilizing

waste plastic as a fuel and chemical feedstock


Efforts for contributing to GHG emissions reduction through the value chain

In addition to the reduction of GHG emissions at manufacturing phase, it is also

important to present a strategy for development and dissemination of products which

contribute to lighter weight or longer life of final products as well as improved energy

efficiency.


Introduction of products which contribute to reducing GHG emissions

Avoided emissions by each product

(3) Other efforts

Efforts for contribution to reducing GHG emissions through provision of technologies

Based on the recognition that transfer of energy‐efficiency technologies to overseas

is effective in reducing GHG emissions at a global level, the iron and steel industry has

been actively disseminating excellent energy‐efficiency technologies to developing

countries in various ways. Therefore, it is important to disclose such efforts.


Amount of contribution to reducing GHG emissions through provision of

technologies

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3. Chemicals

The TCFD recommendations describe risks and opportunities for the Materials and

Buildings Group including the chemical industry as below. This section provides

supplemental guidance focusing on the chemical industry.

Description of Materials and Buildings Group in TCFD recommendations (Reprint)

3. Materials and Buildings Group

The Materials and Buildings Group

includes, but is not limited to, industries listed

in Figure 12.

Materials and Buildings Group

organizations are typically capital intensive,

require high investments in plants, equipment,

and buildings that are (relatively) fixed in terms

of location, and dependent on sources of raw

and refined materials. This may reduce the

flexibility of organizations in this group to

adapt to risks of climate change.

Many of this group’s activities result in financial exposures around high GHG

emissions and high energy consumption. Furthermore, a number of industries in this

group are dependent on water availability and/or vulnerable to the effects of acute or

chronic physical risks from weather events.

Since the group is capital intensive and the plants and facilities have a long life span,

accelerated R&DDD (research, development, demonstration, and deployment) is

critically important. Thus, disclosures relating to R&DDD plans and progress are

valuable to see the current and future situation and risks of organizations in the group.

Consequently, disclosures should focus on qualitative and quantitative

assessments and potential impacts of the following:

Stricter constraints on emissions and/or pricing carbon emissions and

related impact on costs.

Figure 12 Materials and Buildings

86

The construction materials and real estate sectors should assess risks

related to the increasing frequency and severity of acute weather events or

increasing water scarcity that impact their operating environment.

Opportunities for products (or services) that improve efficiency, reduce

energy use, and support closed‐loop product solutions.



In the chemical industry, companies conduct a wide range of business activities, and

the industry has a very complicated structure. Manufacturing processes in the chemical

industry can be divided into those of manufacturing basic chemicals including ethylene

and propylene by using naphtha, etc. as raw materials; those of manufacturing

intermediate chemicals including plastics by using basic chemicals as raw materials; and

those of manufacturing end chemicals such as plastic molding from intermediate

chemicals. The processes of manufacturing basic chemicals generate a large amount of

GHG emissions in cracking naphtha, etc., and generally emit more GHG emissions than

the processes of manufacturing intermediate chemicals and end chemicals.

Since the chemical industry emits a large amount of GHG emissions in the

manufacturing phase as described above, efforts for reducing GHG emissions in the

manufacturing processes are important in the industry. In addition, chemical products

are made mainly from fossil resources. Therefore, the industry has prospects for

achieving a GHG emissions reduction by working on the diversification of raw materials

by using biomass, etc. as raw materials as a medium‐ and long‐term issue.

Many chemical products are intermediate materials and can contribute to

reducing GHG emissions through use phase of the final products, such as automobiles

and home electronics. In the chemical industry, a wide range of products are

produced and used for diverse applications in the use phase, contributing to reducing

GHG emissions. Accordingly, it is important to describe business opportunities by

identifying such products and demonstrating their applications, the mechanism of

GHG emissions reduction (on what principles they lead to a reduction in emissions),

and the amount of avoided GHG emissions.

87



The chemical industry emits a large amount of GHG in the manufacturing phase.

Therefore, a strategy that a company can take to reduce GHG emissions includes

improving the efficiency of manufacturing processes and shifting to high value‐added

products with low GHG emissions. The chemical industry handles a wide variety of

products, and it is difficult to assess such efforts using a single type of metrics.

Meanwhile, an example of possible metrics related to energy intensity is energy

consumption per total production, revenues, and profit. Another example is the use of

total GHG emissions.

However, such metrics are affected by changes in product mix and production volume.

Therefore, it is important that the disclosures include descriptions of the reasons for

such changes.


Efforts for improving energy intensity and reducing total GHG emissions (e.g.

efforts for energy‐saving through conversion of production system,

utilization of waste heat, fuel transition for private power generation)

Efforts for reducing GHG emissions in procurement

Some types of chemical products may emit more GHG emissions in the procurement

phase than in the manufacturing phase. In such a case, it is important to disclose efforts

for reducing GHG emissions in procurement.


Targets of reducing energy intensity in the logistics

Efforts for supply chain management (establishment of green procurement

policy, etc.)

88


emissions in the manufacturing phase

On a medium‐ to long‐term basis, it is important to develop new manufacturing

methods using innovative technologies that will replace conventional manufacturing

methods. When a company is working on the development of advanced technologies

for reducing GHG emissions in the chemical product life cycle, it is important to describe

such efforts and GHG emissions reduction potential.


Efforts for development of emerging technologies (e.g., development of

membrane separation process, conversion of CO2 to raw materials (CCU19),

use of biomass as raw materials, use of natural gas, use of methane hydrate

as resources)

Expected effect of technology development in GHG reduction


Efforts for contribution to GHG reduction through the value chain

Many of chemical products are intermediate materials, and a wide variety of products

are manufactured in this industry. Therefore, a strategy that a company can take

includes supplying products that contribute to the resolution of climate change issues in

the use phase.


Setting method of environmentally conscious products and their contribution

to sales

Amount of avoided GHG emissions through environmentally conscious

products

19 Carbon Capture and Utilization

89



When a company develops environmentally conscious products (e.g. high thermal

insulation materials and high‐strength lightweight materials), it is important to describe

their research and development specifically. In addition, in order for investors to

understand environmentally conscious products better, it is useful to explain how those

products reduce GHG emissions (on what principles they lead to a reduction in

emissions).


Efforts for and the amount of investment in research and development of

environmentally conscious products

Mechanism of reducing GHG emissions through environmentally conscious

products

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4. Electrical and Electronic

Companies in the electrical and electronic industry can be roughly categorized into

device companies and assembly companies. Device companies are those that

primarily manufacture semiconductors and electronic components that are built into

electronic devices but are not used on independently. Therefore, it is important for

device companies to reduce GHG emissions in the manufacturing phase. Assembly

companies are companies that manufacture final products based on various parts,

and because many of their products emit a large amount of GHG emissions from

energy consumption in the use phase, it is important to demonstrate a contribution

to climate change measures through reducing emissions in the use phase. Since some

types of products consume a relatively small amount of energy in the use phase (e.g.,

cameras, audio devices), the reduction in GHG emissions is more important in the

manufacturing phase in such a case.

In addition, because there are a wider range of products in the electrical and

electronic industry, both device and assembly companies recommend to identify

products or technologies that contribute to reducing GHG emissions in the use phase

and describe their usage and how they contribute to reducing emissions.



In the case of device companies or assembly companies that primarily manufacture

products with lower energy consumption in the use phase, their products do not emit

GHG emissions in the use phase (or emit a smaller amount of GHG emissions than in the

manufacturing phase). Therefore, it is important to describe efforts for reducing

emissions in the manufacturing phase.


Efforts for improving manufacturing process efficiency (energy intensity)

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Efforts for reducing GHG emissions from the use of products

In the case of assembly companies that primarily manufacture products with larger

energy consumption in the use phase, it is important to disclose specific efforts for

reducing GHG emissions in the use phase.

In addition, because electrical and electronic products are improving their

performance year after year, it is important to demonstrate that such products are

offering greater performance as well as greater energy efficiencies.


Efforts for improving energy efficiencies of primary products

(e.g. improvement of energy efficiencies during the use of products)

Efforts for contributing to GHG reduction through the value chain

Since the electrical and electronic industry produces a wide range of products and can

contribute to reducing GHG emissions through various products, it is important to

identify products or technologies that contribute to reducing GHG emissions and

disclose the amount of their contribution to reduction. In particular, in the case of

renewable energy facilities or other products which does not emit GHG, it is effective to

disclose the avoided GHG emissions.

In addition, if each company defines environmentally conscious products, it is

effective to describe those definitions and disclose the sales amounts of

environmentally conscious products (in total or per product).


Introduction of products and services that contribute to reducing GHG

emissions

Amount of avoided GHG emissions through products and services



It is also important to describe efforts for technological development for reducing

GHG emissions in the product use phase. Specific efforts may include technological

92

development of energy management using IoT solutions as well as technological

development related to energy efficiency for each product.


Technological development for improving energy efficiency of products

Technological development of IoT solution leading to reduction in GHG

emissions (energy management, etc)

93

5. Energy

The TCFD recommendations describe risks and opportunities for the Energy Group as

below. This section provides supplemental guidance focusing on the Energy Group.

Description of the Energy Group in TCFD recommendations

1. Energy Group

Energy is a critical element in the

economy, serving as a primary or necessary input

in most economic activities. This group comprises

organizations extracting, processing, producing,

and distributing fossil fuels or electric energy to

other sectors of the economy. It includes, but is not limited to, industries listed in

Figure 10.

While many climate‐related issues impact the Energy Group, organizations in

this group should consider providing disclosures related to financial implications of

potential physical impacts (e.g., reliance on water in areas of high water stress, severe

storm/flood mitigations) and transition impacts (e.g., policy requirements, carbon

prices, new technology, changes in market demand) of climate‐related risks and

opportunities.

As fossil fuel and electricity providers, the organizations in this group generally

have significant financial exposure around transition issues related to GHG emissions

and, in many cases, are dependent on the availability of water. For example, a majority

of the current electricity supply comes from non‐renewable fossil fuel resources,

resulting in a significant exposure to transitions around global GHG emissions—either

directly through utility companies’ own energy use for production or indirectly through

combustion of fossil fuels20. Electric utilities, therefore, face significant transition risk

20 According to data compiled by the IEA, CO2 emissions from fuel combustion in the energy sector and its activities amounted to 32.2 Gt in 2015, which accounted for 60% of the total human‐induced GHG emissions. CO2 emissions from the electric utilities sector were 13.6Gt, which accounted for 42% of the total energy‐induced CO2 emissions and 25% of the total human‐induced GHG emissions. After taking these into consideration, the next important industry sector is the transportation sector, whose CO2 emissions amounted to 7.4Gt (23% of the total energy‐induced CO2 emissions and 14% of the total human‐induced GHG emissions). IEA, CO2 Emissions from Fuel Combustion: Highlights. 2015

Figure10 Energy Group

94

(i.e., the financial risk arising from the changes in asset valuations caused by the

structural shift toward a low‐carbon energy system). This is because the utility sector’s

asset valuations are at risk from the disruptive impact of the policy, technology, and

portfolio changes that will occur over the next two to three decades as policies,

technology, and markets shift to a low‐carbon energy system.

In addition to GHG emissions, both hydroelectric power generation and

cooling for nuclear and nonnuclear power generation use large quantities of water21.

Physical risks affecting water supplies creates a potentially important exposure for this

industry.

Oil, gas, and coal extraction face similar transition risks as key suppliers to

electric utilities. These industries also rely on water to a significant degree22,23,24.

These characteristics make the Energy Group particularly sensitive to physical,

policy, or technological changes affecting fossil fuel demand, energy production and

usage, emission constraints, and water availability. The regulatory and competitive

landscape that surrounds electric utilities also differs significantly between

jurisdictions, thus making assessment of climate‐related risks very challenging.

As a result, both the transition risks and physical risks associated with climate

change may impact the operating costs and asset valuation of organizations engaged

in energy activities. In particular, organizations within the Energy Group are generally

capital intensive, require major financial investments in fixed assets and supply chain

management, and have longer business strategy/capital allocation planning horizons

relative to many other sectors—horizons that may be particularly affected by climate‐

related risks and opportunities. This requires careful assessment of climate‐related

risks and opportunities to inform decisions about future sustainability and profitability.

Transparent and decision‐useful climate‐related disclosures are crucial to fully

understand the impact of climate change on business strategy and financial plans in

energy activities. Consequently, disclosures should focus on qualitative and

quantitative assessments and potential impacts of the following:

21 Michelle T.H., van Vliet, et al. “Power‐generation system vulnerability and adaptation to changes in climate and water resources.” Nature Climate Change 6 (2016): 375‐380.

22 IPIECA, Water Resource Management in the Petroleum Industry. 2005.. 23 International Council on Mining and Metals (ICCM), In Brief: Water stewardship framework. London: International Council on Mining and Metals, 2014.

24 World Resources Institute (WRI), Water‐Energy Nexus: Business Risks and Rewards, Washington, DC: 2016.

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・ changes in compliance and operating costs, risks, or opportunities (e.g., older,

less‐efficient facilities or un‐exploitable fossil fuel reserves in the ground);

・ exposure to regulatory changes or changing consumer and investor

expectations (e.g., expansion of renewable energy in the mix of energy supply);

and

・ changes in investment strategies (e.g., opportunities for increased investment

in renewable energy, carbon‐capture technologies, and more efficient water

usage).


Financial Disclosures” (June 2017) P.52‐53

<Premises> National energy policy

Energy companies play a role in stable supply of energy for a country. In addition, the energy industry is exposed to geopolitical risks associated with the procurement of

resources, and the business activities of each company are integrated with national

energy policy. Therefore, it is preferable that the disclosures of energy companies

include descriptions of the strategy of each company based on the energy policy of each

country.

[Principle of energy policy in Japan]

Energy is infrastructure that supports every human activity, and a precondition for

the further development of Japan is to create an energy supply and demand structure

that can achieve a stable energy supply with a lower social burden. Based on this

principle, the cabinet approved the fifth strategic energy plan under the Basic Act on

Energy Policy in July 2018. The plan presents the basic direction of Japan’s energy

policy of making maximum efforts to achieve a low‐cost energy supply through the

improvement of economic efficiency on the premise of safety and with energy

security as the nation’s top priority, at the same time as promoting environmental

sustainability (3E plus S).

Japan is dependent on imports for the stable procurement of most of its energy

sources overseas. As a result, the country has a fundamental vulnerability that it has

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difficulty in securing resources sustainably. Since such vulnerability cannot be

eliminated simply by curbing energy consumption, Japan has made efforts to

diversify risks through developing alternative energy sources and securing domestic

energy sources.

Japan is prone to frequent natural disasters including large earthquakes, such as

the Great East Japan Earthquake, and frequent typhoons, and thus it is vital that the

country should establish a robust energy supply and demand structure that can

ensure a stable energy supply even at a time of crisis.

Each energy source has its own strengths and weaknesses in the supply chain and

no single energy source can support a stable and efficient energy supply and demand

structure. Therefore, it is necessary not to concentrate too much on a certain energy

source but to diversify energy sources. Japan needs to adopt its own energy policy

suited to the environment surrounding Japan, and it is important that the country

establish a stable energy supply and demand structure based on the basic principle

of achieving 3E plus S.

<The recommended disclosures>

Medium‐ and long‐term target setting and efforts for reducing GHG emissions

Energy companies are working to set medium‐ and long‐term targets appropriate for

their businesses, such as the electric power business, gas business, and petroleum

refinery business, while addressing climate change issues. They are doing this with the

aim of establishing a supply structure that can achieve a stable, low‐cost, and

environmentally friendly energy supply in a well‐balanced manner with security as a

major premise.

Electric utilities companies are actively contributing to environmental measures, such

as reduction of CO2 emissions intensity based on the 3E plus S principle, as well as

working on disclosure of information, such as composition of power sources. It is

important for them to continue to disclose their efforts for reducing GHG emissions on

the demand side through the promotion of introduction of renewable energy, etc.

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Efforts for increasing the ratio of non‐fossil energy sources

Efforts for reducing CO2 emissions through the shift to high‐efficiency thermal

power generation

Oil companies are making efforts, such as advanced and effective utilization of oil and

introduction of renewable energy. It is important for them to disclose their efforts

related to the life cycle that includes the product consumption phase, such as measures

for reducing CO2 emissions in their manufacturing processes.


Emissions and efforts in each process of or through the entire supply chain,

such as energy‐saving related to the manufacturing processes (oil refineries)

Efforts for introducing biomass fuels by giving consideration to sustainability

Gas companies are contributing to environmental measures through the promotion

of diffusion of natural gas that has superior environmental performance. It is important

for them to disclose efforts for reducing CO2 emissions through the value chain, from

manufacturing to use and consumption of city gas.


Efforts for reducing CO2 emissions intensity and energy intensity in the

process of manufacturing city gas, etc.

Efforts for contributing to energy‐saving and reducing GHG emissions through

the promotion of diffusion and utilization of cogeneration systems and fuel

cells, etc.

Efforts for research and development

In many countries, most GHG emissions are related to energy use. Considering this, it

is vital to promote efforts for reducing GHG emissions related to energy use, regardless

of whether on the demand or supply side of energy.

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Accordingly, it is important for electric utilities companies, which are on the energy

supply side, to disclose efforts for research and development in the energy

manufacturing phase as well as efforts in various phases, such as transmission systems

and consumers.


Principles and efforts related to the development of technologies that

contribute to lower carbon emissions, such as thermal‐power technology for

reducing environmental impacts, responses to the introduction of a large

quantity of renewable energy, and development of technologies for effective

energy utilization.

For oil and gas companies, it is important to disclose efforts related to research and

development on the following items.


Principle and efforts related to research and development of improving the

efficiency of production facilities and products with superior fuel‐saving

performance, as well as the effect of improving efficiency through such

technologies [oil companies]

Principle and efforts related to the development of technologies for further

improving efficiency and low carbonization related to gas usage, such as

combustion technology and cogeneration [gas companies]

Efforts for research and development, such as hydrogen and methanation

technology for significant CO2 reduction [gas companies]

Efforts for encouraging actions to save energy and GHG emissions by customers

In order to rationalize the energy supply and demand structure of a country, it is

necessary to create an environment that can present diverse options to customers to

allow them to contribute to curbing GHG emissions based on rational decisions, in

addition to making supply‐side efforts. Accordingly, it is important for energy companies

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to disclose information on services designed to encourage customers to take actions to

save energy and GHG emissions under their own initiative.


Efforts for reducing GHG emissions on the demand side by promoting

diffusion of high‐efficiency electrical equipment, etc. [electric utilities

companies]

Efforts related to products and services that contribute to energy‐saving in

the use phase of oil [oil companies]

Efforts related to smart energy networks and energy management systems

[gas companies]

Efforts for resource circulation and recycling

From the perspective of reducing environmental impacts, it is important to disclose

efforts for resource recycling, waste reduction, and water consumption reduction, etc.

Efforts for contributing to reducing GHG emissions through overseas business

Energy companies are actively engaged in overseas business by leveraging

technologies and know‐how cultivated through domestic businesses. Therefore, it is

important for them to disclose their efforts for contributing to reducing GHG emissions

overseas through their overseas energy supply business and consulting business on

energy‐efficiency technologies, etc.

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Chapter IV Conclusion

A. Significance of the Guidance

The Task Force’s discussions have previously been led mainly by the financial

authorities and financial industry players. However, it is necessary for non‐financial

companies not only to meet requirements of the financial authorities but also to actively

communicate their strengths to investors and other stakeholders, and for non‐financial

companies and investors and other stakeholders to have constructive dialogue to

deepen mutual understanding, in order to realize the virtuous cycle between the

environment and economic growth.

The TCFD recommendations are useful as a tool for dialogue between non‐financial

companies and investors and other stakeholders. Therefore, the guidance presents

commentaries on the TCFD recommendations and supplemental documents and sector‐

specific recommended disclosures to allow non‐financial companies to make effective

climate‐related financial disclosures in accordance with the TCFD recommendations.

It is expected that many companies will support the TCFD recommendations and

make better disclosures in accordance with this Guidance.

B. First try disclosures

On the other hand, disclosure in accordance with the TCFD recommendations

involves many points, especially scenario analysis, that require companies to make

careful examination in providing information [before starting disclosure]. As a result,

there may be cases where companies become too hesitant to make disclosures and to

support the TCFD recommendations. However, the TCFD has presented a illustrative

roadmap encouraging companies to start implementing disclosure on types of

information that are manageable, such as Governance and Risk Management, and

gradually move on to disclosures related to Strategy and Metrics and Targets over the

course of three years. As seen above, disclosure in accordance with the TCFD

recommendations should not necessarily be thorough from the start; rather, it is

important to start implementing disclosure and improve disclosures on a step‐by‐step

basis.

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C. For better disclosure

By having many companies start working on disclosure, the expertise of preparers and

best practices of disclosure will be accumulated. As a result, there will be more

“questions” that need to be explained in Chapter 2 of the Guidance and case examples

of disclosures that clarify such questions.

If more non‐financial companies disclose, it will be possible to improve the sector‐

specific recommended disclosures presented in Chapter 3 and to consider expanding

the industrial sectors. On a global level, the Sustainability Accounting Standards Board

(SASB) has presented sector‐specific sustainability metrics, while the World Business

Council for Sustainable Development (WBCSD) has started activities for sector‐specific

disclosures. As seen above, there have already been moves to work on sector‐specific

disclosure globally, and Japan is ready for actively contribute to such moves.

D. Future direction

It is expected that by providing settings for dialogue between the industry sector and

investors and other stakeholders to deepen discussions on better disclosures while

companies accumulate best practices of disclosure in accordance with the Guidance, it

will be possible to demonstrate quality case examples of disclosure that helps investors

and other stakeholders make better investment and loan decisions.

We will continue to discuss how to enhance case examples and best practices of

disclosure, improve sector‐specific guidance and enrich commentaries on the

“questions” presented in Chapter 2 toward further developing the Guidance in the

future.