1. About JPX
  2. Sustainability
  3. JPX Corporate ESG Information
  4. Environmental Information (TCFD Disclosure)
  5. Governance, Strategy, Risk Management, Metrics & Targets (TCFD Disclosure)

Environmental Information (TCFD Disclosure)

JPX Group declared its support for the TCFD in October 2018, recognizing that climate change may have an impact on the sustainable growth of the Group in terms of both risks and opportunities.

The Group seeks to achieve greater resiliency and sustainable growth by disclosing information in line with the TCFD Recommendations and using those recommendations as guidelines when addressing climate change-related risks and opportunities.

Governance

Recognizing that addressing climate change is an important management issue, JPX Group has established a Sustainability Committee, with the Group CEO serving as Chair and the Group COO as Vice-Chair. The committee has analyzed how related issues affect business operations and is proceeding to address these.
The Group has also established a system for adequately reporting basic policies and important matters associated with climate change to the Board of Directors, which in turn provides oversight of those basic policies and important matters as appropriate.

In addition, the Group has designated sustainability-related risks including those involving climate change as a "significant risk" with respect to company-wide risk management, meaning that climate-related information is also reported to the Board of Directors from a risk management perspective, on a quarterly basis.

Moreover, the Group has appointed an executive officer in charge of sustainability, under whom the Sustainability Department spearheads efforts in analyzing and monitoring the effects of climate change so that risks to and opportunities for the Group's businesses relating to climate change can be identified and appropriately addressed.

Strategy

JPX Group has considered the possible risks and opportunities brought on by climate change and their effects on operations, strategy, and financial planning. It is accordingly implementing measures to reduce risk and increase corporate value, and has summarized these initiatives as its Green Strategy in the Medium-Term Management Plan 2024.

In addition to this, given that climate change and responses to it are long-term issues with high levels of uncertainty, in order to review the resilience of the Group's strategies, JPX carries out scenario analysis with reference to guidance such as technical supplements provided by the TCFD.

In performing this analysis, JPX identifies physical risks and transition risks/opportunities related to climate change that are foreseeable within its decided timeframes: short term (to 2025), medium term (to 2030), and long term (to 2050). It then uses multiple external scenarios to evaluate their possible impact on strategy and financial planning, as well as the company's responses.

Analysis of Physical Risks

Physical risks are those involving direct damage to assets caused by natural disasters and other such events attributable to climate change.

Process

This time, JPX identified which of the main assets held or used by the Group could be most impacted by physical risks from climate change, and used the below process to analyze those risks. However, given that property and equipment assets are only a small proportion of the Group's non-current assets, and that it has a Business Continuity Plan for risks including natural disasters, the analysis was carried out mainly from the perspective of business continuity and not the value of assets.

A) Risks identified

Classification Possible risks brought on by climate change Timeframe
Acute Instances of suspended operations or damage to facilities caused by intensifying natural disasters could prompt short-term downturns in earnings along with alienation of investors over the medium to long term. Short to long term
Chronic Business operations of JPX Group's exchanges could become subject to disruption if long-term changes in weather patterns prompt an increase in instances of suspended operations and related response measures. Long term

  • Acute physical risks refer to those that are event-driven, including increased severity of extreme weather events, such as cyclones, hurricanes, or floods.
  • Chronic physical risks refer to longer-term shifts in climate patterns (e.g., sustained higher temperatures) that may cause sea level rise or chronic heat waves.

B) Scope of analysis decided

  • Subjects: Office buildings and data centers within Japan
  • Hazards considered: Floods, storm surges, sea level rises, landslides
  • Main scenarios referenced: SSP1-2.6 and SSP5-8.5 from the Sixth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC)
  • Timeframes: Long-term (to 2050)

C) Analysis performed using scenarios
The first step was to understand the risks connected to each office building and data center in the scope of analysis, based on hazard maps and other national land-related information from the Ministry of Land, Infrastructure, Transport and Tourism (MLIT). After this, impacts were analyzed with reference to two scenarios suggested by the IPCC's Sixth Assessment Report: SSP5-8.5, which imagines very high GHG emissions, and SSP1-2.6, which imagines low emissions.

D) Risk response approach and measures confirmed
(1) Responses to acute risks

  • As part of Group-wide risk management, JPX positions business continuity risks, such as the occurrence of a natural disaster that causes tremendous damage, as one type of significant risk that could affect the Group. In response to these kinds of risks, as well as ensuring awareness of the risks and preparing/operating preventative measures, JPX Group has also put in place frameworks that allow it to respond swiftly and appropriately when a risk materializes or is likely to materialize.
  • The Group has established a Business Continuity Plan (BCP) and implemented measures to ensure business continuity in the event that a natural disaster or other such risks materialize.
  • To ensure that natural disasters or other such events do not hinder the continuity of operations, the Group is working to enhance its mutual backup capabilities in the east and west, such as by establishing sites in the Tokyo Metropolitan area and the Kansai region for both operations (offices) and systems (data centers). In addition, to prepare for the risk of employees being unable to commute to the office due to suspended public transportation services or other reasons, the Group is proceeding with the development of remote working environments to enable stable market operations, while also promoting the use of and further developing the operation of remote work during normal times.
  • If a situation arises where trading participants are unable to participate in trading of stocks or other securities because of a natural disaster or other such event, the Group considers the necessity of a trading halt based on its Contingency Plan, which is published on the below page.
     
    Contingency Plan

(2) Responses to chronic risks
JPX Group considers the impact of natural disasters, along with other risks, when choosing locations for offices or data centers, and monitors the possible impacts on each facility with reference to the latest hazard maps, weather data, and other information. The Group also enacts dialogue with the providers of infrastructure services that it uses and requests improvements where necessary.

Results

Based on the above, JPX Group considers that the physical climate change risks that are currently foreseeable are covered by its present Group-wide risk management processes, and that as a result, possible impacts on the Group's business continuity, strategy, and finances are limited.

Analysis of Transition Risks and Opportunities

Transition risks are those that arise from changes in government policies, legal affairs, technological innovation, market preferences and other such developments that occur in conjunction with transition to a low-carbon economy.

Process

This time, JPX identified the transition risks that could affect the Group, and used the below process to analyze those risks.

A) Transition risks/opportunities identified

Risks

　
Classification Possible risks brought on by climate change Timeframe Impacted financial indicator(s) Related actions
Policy and legal Greenhouse gas emissions costs associated with business activities and costs associated with investments to reduce emissions may increase if government policies and regulations pertaining to reductions in greenhouse gas emissions become more stringent (introduction of carbon tax, fines, etc.). Medium to long term Expenses ・To comply with current rules, JPX Group has been implementing measures such as upgrading air conditioning and water heating systems and switching to LED lights.
・The Group will switch 100% of electricity consumed to renewable energy by FY2024 and is aiming for carbon neutrality across the Group on the same timeline.
Products handled by the Group, markets operated by the Group, and its own business operations would likely be affected if laws and regulations became more stringent regarding ESG information disclosure practices and relevant products and services. For instance, the Group's earnings could be affected if there were products that could not comply with more stringent laws and regulations or if market users moved away from the market having become weary of more stringent regulations. Short to long term Revenue (equities) ・The Group endeavors to strengthen ties with regulatory authorities and other relevant parties in order to address changes in laws and regulations in a timely and appropriate manner. The Group has furthermore placed focus on keeping track of global trends by utilizing the World Federation of Exchanges (WFE) and the Sustainable Stock Exchanges (SSE) Initiative, international forums for cooperation between exchanges.
・For listed companies, the Group makes efforts to promote understanding about and reduce the burden of ESG information disclosure through resources such as the JPX ESG Knowledge Hub.
Technology If innovation intensifies around technology creation relating to the drive for decarbonization, costs associated with capital investment could increase as it becomes necessary to incorporate new technologies into IT systems or other areas of business. Medium to long term Expenses ・For facilities related to our IT systems, which serve as the infrastructure for JPX Group's business, we utilize the latest technologies to achieve high performance and high quality, and to contribute to high efficiency and low emissions. Even if additional costs are incurred, the Group believes that these efforts will lead to lower running costs over the short term and facilitate the transition to a decarbonized economy over the medium to long term, thereby contributing to improved corporate value.
Market If climate change initiatives or information disclosure practices by companies or related to products listed on markets operated by the Group are deemed inadequate as investors demand higher standards, demand for products and services provided by JPX Group could fall, affecting the Group's earnings. Short to long term Revenue (equities) ・In order to provide products and services aligned with the needs of market users, the Group works closely with related parties to identify these needs and develop products and services. Having established JPX Market Innovation & Research, Inc. (JPXI) in April 2022, the Group intends to further expand its range of ESG-related services.
・Under Japan's Corporate Governance Code, listed companies are asked to actively work on addressing sustainability issues and disclosing information in a manner that contributes to increasing corporate value.
Reputation If initiatives to address climate change in terms of the Group's market operations and commitment, or in terms of management policies of Japanese companies, are considered insufficient, leading to a decline in confidence in and evaluations of the Group and the Japanese market overall, this could result in diminishing business opportunities and rising financing costs. Short to long term Revenue (equities, derivatives, market-related services) ・In its long-term vision and Medium-Term Management Plan 2024, the Group set out its active stance in addressing climate change and other sustainability issues, and has been pushing forward with related projects while focusing on information disclosure and dialogue with stakeholders.
・The Group has also been focusing its efforts on taking part in and contributing information to discussions in Japan and abroad, participating in forums such as the Financial Services Agency's Expert Panel on Sustainable Finance, and communicating opinions particularly through the SSE and WFE. In addition, JPX established the "Sustainable Finance Platform Development Working Group" and is incorporating this group's practical discussions into its actual activities.

Opportunities

　
Classification Possible opportunities brought on by climate change Timeframe Impacted financial indicator(s) Related actions
Products and services Income related to ESG could increase if JPX Group were to expand its provision of products and services related to climate change and other ESG issues in response to growing ESG investment. Short to medium term Revenue (equities, derivatives, market-related services) ・Having listed the objective of "promoting sustainability that connects society and economy" as an area of focus under the Medium-Term Management Plan 2024, the Group has been placing emphasis on "strengthening dissemination of sustainability-related information," "calculating ESG indices and listing related ETFs/futures," and "vitalizing the energy market; advancing the creation of an emissions trading market."
The Group may be able to reduce financing costs by utilizing green bonds and other forms of sustainable finance. Short to medium term Expenses ・In June 2022, JPX issued a Digitally Tracked Green Bond as part of its plan to support the shift to carbon neutrality by generating renewable energy through ownership of its own renewable energy power generation facilities.
Energy source The Group may be able to reduce its exposure to price volatility related to energy procurement and to potential increases in carbon taxes and other carbon emissions costs by seeking greater diversity in its means of procuring energy, including ownership of renewable energy generation facilities. Short to medium term Expenses ・The Group aims to achieve carbon neutrality by FY2024 through self-generation of renewable energy using multiple approaches, namely ownership of solar power generation facilities and biomass power generation facilities that use discarded cooking oil for fuel.

B) Scope of analysis decided
Analysis was focused on revenue related to the cash equity market, as this comprises around 60% of JPX Group's revenue and can also be thought to impact on revenue from other areas (derivatives, market-related services) in the medium to long term.

  • Subject: Revenue related to the cash equity market
  • Main scenarios referenced: Network for Greening the Financial System (NGFS) scenarios (Net Zero 2050, Delayed Transition, Current Policies)
  • Timeframes: Long term (to 2050)

C) Analysis performed using scenarios
Since the vast majority of companies listed on the equity market that JPX Group operates are domestic companies, a certain level of correlation can be expected to exist between Japanese GDP and the variables (trading value, market capitalization) that impact revenue related to the cash equity market. Based on this, JPX estimated the impact of Japanese GDP figures suggested by three NGFS scenarios (Net Zero 2050, Delayed Transition, and Current Policies) on said revenue.

D) Risk response approach and measures confirmed
As transition risks and opportunities hold a high level of uncertainty, JPX works to keep track of changes in the regulatory environment and trends in the market. While doing this, in order to both manage the risks and realize the opportunities, JPX positions them as management issues and has integrated climate change responses into Group-wide risk management and business planning processes to inform its actions.

Results

The results of the above analysis showed that there could be negative impact on revenue related to the cash equity market in the short term, if emissions reduction policies were to be rapidly implemented. Over the long term, though, more success in avoiding temperature rises in the relevant scenario correlated with less negative impact on JPX Group.

Also, since the differences between the figures calculated from each scenario were at most still less than 5% of the Group's overall revenue related to the cash equity market, the estimated impact is limited. This being said, as JPX sees supporting an orderly transition to net zero as important for both reducing negative impacts on the Group from climate change and creating business opportunities, it will make sure to complete the projects it is currently working on under its Green Strategy, while also continuing to search for new fields and projects that can contribute even further.

Risk Management

JPX Group has established a Risk Policy Committee chaired by an outside director, and a Risk Management Committee chaired by the Group CEO, in order to address the various risks faced by the Group. In line with the Group's Risk Management Policy, these committees are responsible for identifying risks as well as developing and implementing preventative measures, and also form a system which ensures a swift and appropriate response in the case that risks do or are likely to materialize.

Under the Risk Management Policy, the Group identifies and classifies the risks faced by the company, each of which is managed by the department with jurisdiction. Information on assessments of these operations and issues to be addressed are periodically brought before the Risk Policy Committee (semiannually) and Risk Management Committee (quarterly) and reported in each case to the Board of Directors.

The Risk Policy Committee has identified sustainability related risks, including climate change, as a significant risk under "business environment and business strategy risk." These risks are managed by the Sustainability Department.

For more information on JPX Group’s risk management structure, see the below page.

Response to Risk Management

Metrics and Targets

In preparation for more stringent policies and regulations regarding greenhouse gas emission reductions, JPX Group has reviewed its approach to procuring electricity, which is the primary factor in its emissions. This move aims to eliminate Scope 2 emissions by switching 100% of electricity consumed throughout the Group to renewable energy by FY2024, and to achieve carbon neutrality (Scopes 1 and 2) across Group companies in the same time frame. The Group began calculating other CO2 emissions (Scope 3) in FY2020. In this respect, the Group will appropriately manage emissions throughout the value chain while taking the steps required to reduce greenhouse gas emissions. Also, in its Medium-Term Management Plan 2024, the Group set "aim for carbon neutrality in securities market operations by 2030" as a long-term ESG target.

With these targets in mind, for Scope 2, the Group has been switching electricity contracts for several facilities to RE100-compliant or other renewable energy contracts in stages since autumn 2021, and started generating its own renewable energy through holding its own energy generation facilities in FY2022. Meanwhile, a majority of the Group's Scope 1 emissions are attributable to its consumption of city gas and gasoline, and the Group intends to offset these emissions using J-Credits and similar methods.

The capital goods that account for the majority of Scope 3 emissions are connected to the development of the software that supports the Group's IT infrastructure. The Group aims to gradually reduce these emissions through emissions management while maintaining the investment required for stable market operations.

Environmental data for JPX Group, including Scope 1, Scope 2, and Scope 3 emissions, are disclosed on the below page.

Environmental Data