Japan promotes green financing with common platform, scenario analyses

TOKYO, Sept. 1 (Reuters) – Japan will step up efforts to promote sustainable finance, for example by nurturing the green bond market and analyzing financial institutions’ resilience to climate risk, according to the government’s new regulatory guidance.

In collaboration with the central bank, the Financial Services Agency (FSA) will conduct scenario analyzes on Japan’s three megabanks and the top three non-life insurers to measure their resilience to climate change risks.

The analyzes will be based on common climate risk scenarios and run as a pilot exercise until June next year, Japan’s financial regulator FSA said in its fiscal 2021 regulatory guidance released Tuesday.

Japan will also set up a scheme to certify green bonds and partner with Japan Exchange Group – the operator of Tokyo Stock Exchange – on a common platform that issuers and investors can tap into for green bond information, under the directive.

“It is important to create an environment where market participants can smoothly and accurately make investment decisions that contribute to decarbonization,” the FSA said.

The measures follow the Bank of Japan’s decision in June to increase funding for efforts to combat climate change. read more

Japan is one of the world’s most disaster-prone countries with a history of major typhoons. It has been hugely affected by climate change, with flooding taking many victims.

But many Japanese banks have dragged their feet on climate issues compared to their European counterparts, in part because of the country’s heavy reliance on thermal and coal energy.

Prime Minister Yoshihide Suga last year set a goal of making Japan carbon neutral by 2050, bringing it closer in line with other countries as global attention to climate change increases.

Japan’s green bond market is growing, but still small at about 775 billion yen ($7 billion), versus the $300 billion global asset market.

($1 = 110,1000 yen)

Reporting by Leika Kihara; Editing by Christopher Cushing

Our standards: The Thomson Reuters Trust Principles.