"Building A Financial System that Supports a Sustainable Society" 18 June 2021

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In Japan, the government announced in October 2020 that it would aim to become carbon neutrality by 2050, and in April 2021, it announced that it would raise its greenhouse gas (GHG) reduction target for FY2030. The challenge for the entire government is to link this challenge to a "virtuous cycle between the economy and the environment”.

As the world moves toward decarbonization, it is necessary for Japanese financial sector to seize this new growth area. It is also important for financial institutions and financial and capital markets to function properly so that the world's ESG investment funds, estimated at 3,000 trillion yen, can be attracted to Japan and domestic and international growth funds can be used to support the efforts of these companies.

From this perspective, the Financial Services Agency (FSA) established the "Expert Panel on Sustainable Finance" in December 2020, which held online eight meetings from January 2021 to discuss various measures to promote sustainable finance, while holding hearings with relevant parties. In discussing sustainability, the Panel focused on climate change as the most urgent and important issue for the time being, at the same time covering a wide range of environmental and social issues.

This report summarizes the results of the discussions at the Panel in the form of recommendations with the aim of promoting sustainable finance in financial administration in the future.

Chapter 1 summarizes the basic principles and cross-cutting issues related to sustainable finance, and Chapters 2 through 4 are organized on the basis of participants in financial and capital markets; namely corporations raising funds through equity or borrowing (Chapter 2), capital market participants particularly in direct finance (Chapter 3), and financial market participants mainly in indirect finance (Chapter 4).

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