Prospects for ESG-related policy developments in 2022

2021 saw some major ESG-related policy developments, especially with regard to tackling climate change. Having said that, climate change still poses many problems, and we can probably expect to see many policy developments on this front in 2022, as well. We now give an overview of these developments.


We can expect initial moves towards establishing a new carbon credit market in Japan. METI is looking to recruit companies that like the idea by February-March and hopes to begin a pilot scheme that will include the new carbon credit market in September. It will be interesting to see how many companies sign up for the GX League and how stringent its targets are.

Early 2022:

A beta version of the TNFD's disclosure framework is due to be published early this year, although the exact timing has yet to be decided. The TCFD's disclosure framework is already seen as the de facto standard in the field of climate change, and we expect the TNFD's framework for disclosures related to biodiversity and natural capital also to be increasingly recognized as a de facto standard. It will be interesting to see to what extent it will be possible to draw up specific, quantitative disclosure recommendations by the time TNFD publishes its framework in 2023. NGFS is also due to publish a report on biodiversity (early this year).

  • TNFD:Taskforce on Nature-related Financial Disclosures
  • TCFD:Task Force on Climate-related Financial Disclosures
  • NGFS:Network for Greening the Financial System


TSE will be restructured into three new market segments: Prime, Standard, and Growth. Companies listed on the Prime Market will, to all intents and purposes, be required to disclose financial information related to climate change in accordance with TCFD's framework. Japanese companies have been gradually adopting the framework, but the requirement is likely to accelerate this process. We expect the debate between investors and the government on the "quality" of the disclosure to move up a gear.


The second part of the UN Biodiversity Conference (COP15) is due to be held in Kunming, China, from April 25 to May 8 of this year. In the 2010s the "Aichi targets" were a global biodiversity target, but successor targets have yet to be established. We expect the second part of COP15 to seek to reach an agreement on new targets for the 2020s. It will be interesting to see whether the second part of COP15 builds on the COP26 agreement to end deforestation by 2030 and aims for even more ambitious targets than those in the first draft.


The government is due to release a report on its clean energy strategy in June. We expect the report to recommend a strategy based on the existing Green Growth Strategy and Strategic Energy Plan, whereby the transformation to a society using mainly clean energy would help to drive economic growth. The government meeting held on December 16 to discuss the clean energy strategy concluded that the strategy would need to say more about (1) the green transformation (GX) of Japanese industry, especially with regard to energy, (2) the restructuring of users' energy needs, and (3) the infrastructure that will be needed to achieve the transformation.

Also by June we expect the ISSB to publish climate and sustainability disclosure standards. They will be the final version of the two sets of prototype standards the ISSB published last November and will reflect comments on the prototypes from business. The fact that in the climate prototype Scope 3 greenhouse gas emissions are treated in the same way as Scope 1 and Scope 2 emissions has attracted interest. Because of the difficulty of measuring greenhouse gas emissions across the entire supply chain, as is required by Scope 3, the issue has tended to be treated cautiously. The prototype can therefore be considered to have gone one step further than previous disclosure frameworks, and it will be interesting to see whether the final version maintains this stance on Scope 3 disclosures.

Scope 1 emissions: Direct greenhouse gas emissions that occur from sources that are owned or controlled by an entity.

Scope 2 emissions: Indirect greenhouse gas emissions that occur from the generation of purchased electricity, heat or steam consumed by an entity.

Scope 3 emissions: Indirect emissions outside of Scope 2 that occur in the value chain of the reporting entity, including both upstream and downstream emissions.

Source: IFRS

Summer 2022:

This year's World Economic Forum in Davos will be held early in the summer, although the exact date has not been announced. Normally the WEF meets every January, but, this year's meeting has been postponed because of the state of the pandemic in Europe. Although the event is mainly for businesspeople, the WEF's activities in recent years have reflected a keen interest in ESG and sustainability, including producing a set of common metrics and disclosures for sustainable value creation. One of the topics for this year's meeting is "Accelerating stakeholder capitalism."


In October-November the National Congress of the Chinese Communist Party (probably in October), the US midterm elections (November 8), and COP27 (November 8-20) are due to be held. We can expect political tensions to increase, partly as a result of the conjuncture of political events in the world's two superpowers. As we pointed out in the Nomura ESG Monthly (December 2021), rising geopolitical risk could have a negative impact on ESG investment. Of particular concern in this regard are the US midterm elections. If the Democrats fail to maintain their majority, their climate change agenda could face headwinds after the elections.

Summary from “Nomura ESG Monthly (January 2022)” published on January 12, 2022

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