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Messages from Keidanren Executives April, 2020 How We Should Address the Issue of "Climate Change"

Yasuyoshi KARASAWA Vice Chair of the Board of Councillors, Keidanren
Chairman of the Board, Mitsui Sumitomo Insurance Co., Ltd.

The takeaway of the Global Risks Report 2020 published by the World Economic Forum was that all of the top-five "long-term global risks by likelihood over the next 10 years" were related to environmental issues, including "major natural disasters" and "extreme weather events." The results of the survey, which were comprised of questionnaires to government and business leaders, reflect the reality that we have no time to waste in addressing climate change.

In fact, the enormous damage caused by last year's typhoons is still fresh in our memory. And globally, the hurricanes that hit North America in 2017 and recent wildfires indicate the increasing scale and frequency of natural disasters. It would be safe to say that not only natural disasters but also risks derived from climate change as a whole are likely to vary and materialize.

The business implications of climate change have been changing, especially when it comes to corporations. It could be a disaster risk entailed by a company in the course of economic activities, but it could also be a financial risk under the recent wave of assessment. Add to this the possibility that ESG investment and lending would change the inflow of money, climate change has now become a significant challenge for the business sector to address.

This new reality, having spread globally along with the framework of FSB's TCFD (Task Force on Climate-related Financial Disclosures), which has gained support from many financial institutions since its announcement back in 2017, has now led to the "EU Taxonomy", recently released by the EU as a set of criteria for environmentally-sustainable economic activities. However, we should also bear in mind in pursuing the transition to a carbon-free society that the poor and many developing countries may not be able to afford the transition. Each and every country is required to act in accordance with their common but differentiated responsibilities and respective economic capabilities in building a transition mechanism that "leaves no one behind."

Companies are required to demonstrate the way in which they will address the issue of climate change for the goal of "achieving a resilient and sustainable society." We should proactively release information on possible solutions, at the same time striving to improve corporate value by way of innovations and other initiatives, as it is we that bear accountability for a sustainable economy toward the goal of building "Society 5.0". Failure to address these issues might "compromise the ability of future generations to meet their own needs." An effort to improve corporate value and an active drive for a carbon-free society are not mutually exclusive.

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