JFSA published a summary of the March 2021 meeting of its Council of Experts. The Council proposed revisions to the Corporate Governance Code and guidelines for investor and company engagement, in an effort to require listed companies to enhance disclosures on climate risk and diversity. The Corporate Governance Code establishes fundamental principles for effective corporate governance at listed companies in Japan. The proposed revisions are intended to enhance Board independence, promote diversity, and increase focus on environmental, social and governance (ESG) factors. The comments period on the proposed revisions ends on May 07, 2021.
The key proposals include the following:
- Develop a basic policy and disclosure initiatives on the sustainability of a company
- Enhance the quality and quantity of climate-related disclosures based on Task Force on Climate-related Financial Disclosures (TCFD) recommendations or equivalent international frameworks at Prime Market listed companies
- Increase the number of independent directors from two to at least one-third of the board for Prime Market listed companies (where necessary, a majority of the board members should be elected as independent directors)
- Establish a nomination committee and a remuneration committee
- Appoint independent directors having managerial experience at other companies
- Disclose a policy and voluntary measurable targets in respect of promoting diversity in senior management by appointing females, non-Japanese, and mid-career professionals
- Disclose human resource development policies ensuring diversity, including the status of implementation
In April 2022, the Tokyo Stock Exchange will put its new market segmentation in force. Among the principles and supplementary principles of the revised Code, there are items that apply to companies listed on the Prime Market, items that apply to companies listed on other markets, and items that apply to both of them following the new market segmentation. Companies are expected to submit their corporate governance reports reflecting the revised Code by December 2021 at the latest. In addition, with respect to the principles that apply only to companies listed on the Prime Market, time may be needed for preparation, so that it is conceivable for companies to be asked to submit their corporate governance reports reflecting the revised principles in the timing soon after the conclusion of their general shareholder meetings that will take place after April 2022.
Comment Due Date: May 07, 2021
Related Links: Asia Pacific, Japan, Banking, Corporate Governance, ESG, Climate Change Risk, TCFD, Disclosures, JFSA
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
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