"日本のサステナブルファイナンスに必要な3つの視点" 5 July 2021

[ Japanese-to-English translation: Business & Human Rights Resource Centre ]

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When considering sustainable finance, it is necessary to first clearly define what is essentially a sustainable economic activity and what is green.

In Japan, however, despite not having established the definition yet, developing a definition of the finance for transition to a green economy, or transition finance, has taken precedence.

Possible reasons for this include that Japan, which lags behind other countries in environmental measures, follows after the preceding European or international standards and since it is difficult to go from brown to green in a single leap, bringing finance into the process has become a major concern.

As the first step, we need to confirm the preconditions for sustainable finance.

The Japanese government has already announced its pledge to achieve net zero greenhouse gas emissions by 2050. The pledge is based on the following principles of the Paris Agreement:

1. Align with the 1.5℃ goal of the Paris Agreement (which pursues to limit global temperature rise to 1.5℃ above pre-industrial levels)
2. Based on scientific evidence
3. Ensure transparency in information disclosure

Against this backdrop, we need to have the following three perspectives when considering sustainable finance.

1. The definition of transition finance should not be specific to Japan.
2. Not only climate change but biodiversity, circular economy, and other factors should also be incorporated from the earliest stage.
3. The entire operating performance of issuing firms should be evaluated.

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