Japan Sustainable Finance Policy Update October 2021 – January 2022

This IGES Issue Brief is an update of policy developments related to sustainable finance in Japan between October 2021 and January 2022.

The highlights of developments on sustainable finance in this period was work pertaining to sustainability-related disclosure. At the Financial Services Agency (FSA), the ‘Disclosure Working Group’ continued with its work, holding its second, third, fourth and fifth meetings. The Working Group, while sharing and assessing related global developments, is deliberating on how Japan’s regulatory measures, through mandatory disclosure in securities reports, should include sustainability-related / non-financial corporate disclosures. Specific themes included climate, diversity, human capital and governance. The discussion is moving in favour of adding a new section dedicated to sustainability disclosure within the securities report.

In parallel to the work by the FSA, the Ministry of Economy, Trade and Industry (METI) continued with its sustainability-related / non-financial disclosure work in the ‘Study Group on Disclosure Policies for Non-financial Information,’ which held its fourth and fifth meetings and published an Interim Report. The Study Group is closely following developing global discussions of the International Sustainability Standards Board at the International Financial Reporting Standards Foundation (IFRS/ISSB) while building consensus on Japan’s position on sustainability-related disclosure. The published Interim Report makes recommendations (key approaches or values which should shape ongoing discussions) and summarises the Study Group’s understanding and discussions to date.

Work on green/sustainability/transition related financial instruments also made progress with respective work streams under METI, FSA and the Ministry of the Environment (MOE). METI moved forward with its work related to transition finance, publishing a roadmap for chemicals (in addition to the existing roadmap on steel and shipping) and debating draft roadmaps for electricity, gas and oil. The FSA published the Social Bond Guidelines and lead cross-ministerial work on compiling impact indicators for social projects. MOE newly established the ‘Green Finance Review Committee’ to undertake the revision of currently existing guidelines on green instruments and the drafting of the sustainability-linked bond guidelines.