Japanese financial regulator issues supervisory guidance on climate risk management

Japan’s Financial Services Agency (FSA) has issued supervisory guidance aimed at financial sector institutions (FIs) and their climate risk management practices. The guidance states that climate risk management must be seen as a management issue and an area of strategic focus for the company. The guidance recommends the use of scenario analysis in risk management. Further, FIs must support their clients’ transition plans as well as communicate effectively with their own stakeholders. The guidance states, “FIs are encouraged to accumulate their knowledge of climate change and understand the effect on clients of the evolution in technologies, industries, and natural environments caused by climate change”.