Mr. Peter Bakker, WBCSD President and CEO, stated we must now focus on how climate and sustainability-related information is used in the investor-corporate relationship and create a capital market that recognizes and rewards sustainable business, attracting a lower cost of capital and more financial capital to lead the transition and transformations across critical systems.

Mr. Ito Kunio, Chair of the TCFD Consortium and Professor of the Graduate School of Business Administration, Hitotsubashi University, explained that under the cooperation framework between the public and private sectors, the TCFD Consortium, the world’s largest body consisting of supporters for the TCFD recommendations, revised the TCFD Guidance 2.0, with best practices and started a project, called GIG Supporters by investors who utilize the Green Investment Guidance for actual investment decisions and engagement. Following this, he suggested that to achieve sustainable society, we should take climate change as an opportunity to shift corporate management over the medium to the long-term period

Panelists who are representatives of business entities and investors presented their views on impacts caused by the pandemic and future directions of responses in reviewing their efforts for TCFD disclosures for the past one year. Some investors explained that companies taking into consideration ESG factors have been showing a positive correlation with their performance even in the situation of the pandemic, and also that some value chains as a whole have been engaging in net-zero emissions of CO2. Some representatives of business entities explained, against the backdrop of the quick changes seen in global-wide business environments backed by the pandemic, the need for accelerating responses, as well as the importance of investments in innovations to strike a balance between economic value and social value.

The panelists discussed that TCFD is the best framework for disclosures currently available for ESG investments as information useful for decision making on investments is necessary and that it is significant to: fill gaps with other standards through further harmonization; assess long-term risk management and business opportunities, in particular, by making use of scenario analyses; disclose information; and hold dialogues with investors. Moreover, they stated that in some cases, the sector per se should be changed. Investors should be further committed to disclosures in order to assess companies that encourage players in and outside companies to bring about innovations.

Climate change is an important issue for a wide variety of industries. However, in light of the characteristics of risks and opportunities varying among industries, disclosures in accordance with the TCFD recommendations should be evaluated based on the understanding of materiality unique to the respective industries, rather than check box type of evaluation. This session held discussions on: methods that companies should use for applying climate-related risks and opportunities unique to them into business strategies and effectively managing such strategies; approaches to constructive dialogues and engagement based on the materiality of each industry.

Through these discussions, panelists shared recognition that investors should consider the materiality of each industry in their investment decision from a long-term viewpoint and that companies should build a mechanism for identifying potential climate risks and opportunities and deliberating them at a management level. It was noted that disclosures are step-by-step efforts and companies do not need to make perfect disclosures from the beginning. It is considered effective for industries having the same materiality to share their sense of crisis among them, while companies should take their unique, own approaches to strategies for managing materiality.

A scenario analysis under the TCFD recommendations is one of the key challenges in carrying out disclosure. Conducting a scenario analysis, applying the analysis into business strategies and proceeding with them should lead to explore business opportunities. Focusing on such scenario analysis, this session shared experiences of: implementation of the TCFD recommendations by companies and assessment of companies by investors and financial institutes based on companies’ TCFD disclosures. The panel also discussed awareness from such experiences.

Through these discussions, panelists shared the importance of starting and continuing a scenario analysis and the involvement of management and related divisions. They also shared recognition that as a positive effect, a series of processes for sharing recognition with management team has a favorable influence on management, such as implementation of a scenario analysis may change the awareness of management team.

Mr. Yamashita Ryuichi, Director-General, Industrial Science and Technology Policy and Environment Bureau, METI, introduced the "Climate Innovation Finance Strategy 2020."

Financing for transition, green and innovation is indispensable for global reduction of CO2. In response to the keynote speech, this session held discussions on: the importance of financing for transition and environmental innovations, and approaches that financial institutes and investors should take in assessing companies engaging in transition and innovations by making use of TCFD disclosures.

Panelists stated that companies should conduct TCFD aligned with disclosures with creativity and ingenuity, while investors proactively assess such disclosures to promote financing transition and innovation. Efforts for the Zero-Emission Challenge project are considered as one of the first step.

Panelists confirmed that Japan will secure voluntary and flexible disclosures, and regulatory foundation of disclosure has already been built with soft laws including the corporate governance code. Taking this as a starting point, Japan further encourages voluntary efforts and proceed to enhance such foundation working with industries.

Mr. Mizuno Hiromichi, Special Advisor of METI as well as TCFD Summit Ambassador, delivered closing remarks, stating some suggestions including the following.

Climate change is the primary threat to the international community but on the contrary, this can be a great opportunity. All innovations support transition to sustainable economies and these innovations need proper analyses and investments. The TCFD framework also serves as a process to fairly assess companies engaging in decarbonization. Financing for transition, green and innovations is essential for global reduction of emissions, and TCFD disclosures should include information for decision making on financing those areas. The TCFD Consortium has been advancing discussions, under the leadership of Japan, on approaches to introducing such information into the disclosure framework. Japan will strive to enrich these discussions with international support.

Although situations and economic environments in different regions and countries are things to consider in proceeding mandatory disclosure, we should not use these factors as excuses. There may be a variety of approaches to establishing such requirements other than legislation. Accordingly, governments and industry should discuss more creative approaches to this end, such as establishing substantial requirements. It is also necessary for us to consider the balance between voluntary efforts and mandatory requirements in order to respect companies taking on more aggressive disclosures under their voluntary efforts.