"Basic Guidelines on Climate Transition Finance" Announced

1. Background

In order to achieve a carbon-neutral, decarbonized society by 2050, it will be important to promote financing for decarbonized projects such as renewable energy. In addition, financing transition efforts will encourage the decarbonization of the largest GHG emitting industries. Japan has declared its goal to become carbon neutral by 2050. As a step toward achieving this, it will continue to promote transition finance domestically while taking stock of the progress made by international efforts. To that end, METI, FSA, and MOE jointly established a "Taskforce on Preparation of the Environment for Transition Finance " (hereinafter the "Taskforce") to formulate Japan's Basic Principles for transition finance.

Public comments regarding the "(Draft) Basic Guidelines on Climate Transition Finance" were gathered between April 5 and April 16, 2021 and compiled by the Taskforce. In parallel, expert opinions were also collected from the International Capital Market Association (ICMA), a body publishing the Green Bond Principles and principles for other financial instruments.

In addition to compiling the public consultation's results, a third review meeting was held, and the "Basic Guidelines on Climate Transition Finance" were formulated in light of gathered opinions.

2. Outline of the basic guidelines

The aim of these basic guidelines is to contribute to the achievement of the Paris Agreement and carbon neutrality in Japan by 2050 through the provision of funds to ensure the transition to low carbon, especially in hard-to-abate sectors. The guidelines intend to encourage the recent spread of climate transition finance (hereinafter referred to as "transition finance") and increase its credibility.

Transition finance focuses not only on individual projects requiring funding (eligible for transition finance), but also conducts a comprehensive evaluation of the project operators' "transition strategy" toward decarbonization, as well as the strategy's reliability and transparency.

ICMA published the Green Bond Principles and the "Climate Transition Finance Handbook" (hereinafter the "Handbook") in December 2020. The Handbook presents the four key elements: (1) transition strategy and governance, (2) business model environmental materiality, (3) "science-based" strategy, and (4) implementation transparency. Details on the disclosure of these elements and additional information such as the issuance process are covered in the guidelines. ICMA confirmed that it welcomed the proposed alignment with its Handbook.

Related material

·Basic Guidelines on Climate Transition Finance

·Basic Guidelines on Climate Transition Finance (Overview)

·Results of the public consultation

·Overview of and responses to comments from the public consultation

·Overview of and responses to opinions from overseas organizations

Contact

Environment and Economy Division

Minister's Secretariat

Ministry of the Environment, Japan

Imai/Yamamoto

Tel:+81-3-5521-8240　

For Japanese

Attached File:

• Basic Guidelines on Climate Transition Finance [PDF 3.1 MB]
• Basic Guidelines on Climate Transition Finance(Overview) [PDF 537 KB]