Financial Services Agency Strengthens ESG Investment Disclosure Requirements for Asset Managers

The Financial Services Agency (FSA) announced mandatory Environmental, Social, and Governance (ESG) disclosure requirements for all licensed asset management companies operating in Japan. The new regulations require detailed reporting on ESG integration strategies, impact measurement methodologies, and actual environmental outcomes of investment portfolios. Asset managers must disclose carbon footprint calculations for all funds marketed as sustainable or ESG-focused, using standardized measurement protocols. The framework addresses concerns about greenwashing by establishing clear criteria for ESG fund classification and marketing claims. Non-compliance penalties include fines up to 100 million yen and potential license suspension for repeated violations. The FSA created a public database where investors can compare ESG metrics across different funds and asset managers. Implementation includes a transition period allowing managers to adjust existing fund structures and documentation. The regulations align with international standards while incorporating Japan-specific sustainability priorities. Quarterly reporting requirements begin April 2025, with annual third-party verification mandatory for funds exceeding 50 billion yen in assets. This regulatory enhancement positions Japan as a regional leader in sustainable finance transparency.