Japan’s 2026 Sustainability Disclosure and Assurance Reform

JAMP Compliance Newsletter No. 71 | Part 3: Corporate Sustainability Disclosure and Assurance

JAMP Financial Solutions Co., Ltd., a subsidiary of JAMP Corporation, publishes the JAMP Compliance Newsletter for Financial Instruments Business Operators and firms seeking registration in Japan. The newsletter provides updates on regulatory developments and other matters relevant to financial business and compliance operations.

This five-part series examines the Bill to Partially Amend the Financial Instruments and Exchange Act and the Payment Services Act (provisional English title; Japanese: 金融商品取引法及び資金決済に関する法律の一部を改正する法律案; the “Bill”), which was submitted to the 221st session of the National Diet on April 10, 2026. The Bill was passed by the Diet on July 15, 2026. This third article focuses on corporate sustainability disclosure and assurance.

1. Overview and Policy Context
2. Review of Cryptoasset Regulation
3. Corporate Sustainability Disclosure and Assurance (this article)
4. Promoting Funding for Startups (planned)
5. Review of Unfair Trading Regulations for Securities (planned)

Common Disclosure Standards for Sustainability Information

Corporate sustainability information relating to climate change, human capital and other matters is regarded as important for investors assessing medium- to long-term corporate value. In Japan, sustainability disclosure in Annual Securities Reports has been mandatory for listed companies and certain other issuers since the fiscal year ended March 2023. However, the existing framework did not prescribe a detailed common standard, making cross-company comparison difficult.

Against this background, the Sustainability Standards Board of Japan (SSBJ) issued its inaugural sustainability disclosure standards in March 2025. Japan’s new framework requires certain companies to prepare sustainability-related disclosures in their Annual Securities Reports in accordance with the SSBJ Standards.

Application is scheduled to be phased in among companies listed on the Tokyo Stock Exchange (TSE) Prime Market, starting with larger companies by average market capitalization. Under the current roadmap, companies with average market capitalization of JPY 3 trillion or more are scheduled to begin applying the standards from the fiscal year ending March 2027; companies with average market capitalization of JPY 1 trillion to less than JPY 3 trillion from the fiscal year ending March 2028; and companies with average market capitalization of JPY 500 billion to less than JPY 1 trillion from the fiscal year ending March 2029.

Many companies already disclose initiatives relating to climate change, human capital and similar areas, but presentation methods and metrics differ from company to company. This can limit the usefulness of the information for investment decisions. If the new framework improves comparability and reliability, sustainability information itself may become more useful in corporate analysis and investment decision-making.

Standards and Assurance as Two Pillars of Decision-Useful Disclosure

Another notable feature is the Financial Services Agency’s emphasis on an assurance framework. In addition to disclosure based on the SSBJ Standards, the framework provides for mandatory third-party assurance. Under the FSA’s roadmap, assurance is expected to begin from the fiscal year following the first year in which each company cohort becomes subject to the SSBJ Standards. Assurance providers will also be subject to a registration regime, with requirements relating to staffing, quality management and independence.

The structure of the sustainability assurance regime is notable because it resembles, in important respects, the audit framework used for financial information. The introduction of assurance can therefore be understood as an effort to bring sustainability information closer to the level of reliability investors expect from financial information. How investors ultimately evaluate and use assured sustainability information will be an important issue to watch.

What Sustainability Information May Reveal About Corporate Governance

The reform is not only a new disclosure obligation for companies. It is also designed to make sustainability information easier for investors to use. If comparability and reliability improve, information on climate change, human capital and related matters may become a more important part of investment analysis.

For investment management and investment advisory firms, however, the relevant question is not limited to the numerical value or rating assigned to individual ESG factors. It may also be important to assess whether a company can appropriately collect and manage sustainability information and reflect it in management decisions.

For example, the way a company collects and analyzes information on climate-related or human-capital risks, and how it reflects the results in business strategy and operations, can reveal the maturity of its internal management and governance. In that sense, the reform may make corporate governance and actual management practices more visible through sustainability disclosure.

Sustainability Data as a New Input for Corporate Value Analysis

Today, investors use a wide range of financial indicators, including return on equity (ROE), earnings growth and price-to-book ratio (PBR). As sustainability data accumulates over time, it may become possible to analyze relationships such as those between climate-related initiatives and the cost of capital, investment in human capital and earnings growth, employee turnover and corporate value, or governance structures and the incidence of corporate misconduct with greater precision.

Large volumes of qualitative information relating to climate response, human capital and other non-financial matters—including corporate strategy—may be particularly suitable for analysis using AI and related technologies. As AI capabilities and their use continue to develop rapidly, it may not be long before sustainability information becomes an indispensable input into assessments of future corporate value.

JAMP Commentary

If comparability and reliability improve, what investors focus on and how they analyze companies may change significantly. Sustainability information, when considered together with data on increasingly frequent natural disasters and climate-related risks, could help investors identify companies and projects engaged in disaster-prevention infrastructure, regional revitalization and post-disaster reconstruction, potentially opening new investment opportunities through which capital can be directed to those activities.

Ultimately, the value of the sustainability information made available under the new framework will depend on how investors interpret it. Using that information in corporate valuation and capital allocation may be one of the important roles of those of us working in the asset management industry.

Author: JAMP Compliance Team, JAMP Financial Solutions Co., Ltd.

About This Article
This article is an adapted English edition of JAMP Compliance Newsletter No. 71, originally published in Japanese on [PUBLICATION DATE]. It has been edited and supplemented where necessary to explain Japan-specific legal, regulatory and market context to readers outside Japan. It is therefore not a direct translation of the original Japanese article.

Legal and Translation Notice
Unless otherwise stated, English translations of the names of Japanese bills, proposed amendments and other terms for which no official English translation has been confirmed are provisional translations prepared for this article. The original Japanese materials should be consulted for authoritative wording.

This article is provided for general informational purposes only and does not constitute legal, regulatory, tax, accounting or investment advice. Laws, regulations, bills, official interpretations and implementation schedules may change. Readers should consult the relevant official Japanese materials and obtain advice from appropriately qualified professionals before taking action.