Japan's financial watchdog is considering obliging companies listed on the top-tier section of the Tokyo Stock Exchange to disclose information on greenhouse gas emissions throughout their supply chains.

The Financial Services Agency will set up a panel this month to work out the details of the envisioned policy in support of global efforts to accelerate decarbonization, according to its plan proposed at a meeting of the Financial System Council.

File photo taken in May 2007 shows an industrial zone in Ichihara, Chiba Prefecture. (Kyodo)

One option would be to first target major firms facing increasing scrutiny by global institutional investors, rather than applying the envisaged rule to all of the roughly 1,600 companies listed on the Prime Market at once, according to the government plan.

Japan is seeking to develop sustainability disclosure standards based on those unveiled in 2023 by the International Sustainability Standards Board, a global body that sets financial reporting rules. The country's draft standards are expected to be released by the end of March.

Since the start of the business year through March 2023, Japanese companies have been required to include information in their financial statements on how they are tackling sustainability issues, in addition to such information as wage disparities between men and women.

Some companies already disclose emissions data, even without a specific requirement to do so.

With greenhouse gas emissions blamed for global warming, the European Union is strengthening its sustainability reporting rules for companies. There are also similar moves in the United States.

The Japanese government has set a target of achieving carbon neutrality by 2050. It has been trying to encourage more private sector investment to achieve green growth.

In a survey of roughly 11,300 companies conducted last year by research firm Teikoku Databank, 17.3 percent said decarbonization efforts would have a negative impact, while 14.1 percent responded operations would be positively impacted. The remaining companies said they expected little impact or were not sure.

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