Environmental Policy

Green Bond Guidelines, 2017

The Ministry of the Environment, Japan (MOEJ) has established the "Green Bond Guidelines, 2017" on March 28, 2017 with the purpose of spurring issuances of Green Bonds and investments in them in Japan. The English translation of the Guidelines is attached.

In order to discuss the content of the Guidelines, MOEJ has set up a study group composed of scholars and practitioners on Green Bonds. The Guidelines have been developed by MOEJ based on discussions at the study group. Translations are to be used solely as reference material to aid in the understanding of the Guidelines. The Government of Japan will not be responsible for the accuracy, reliability, or dissemination of this translation, or for any consequence resulting from use of the information in this translation.

Background and purpose of the Guidelines

In December 2015, the "Paris Agreement," an international agreement on climate change, was adopted at the COP 21, held in Paris, France. In this agreement, the global long-term goal was set to hold the increase in the global average temperature to well below 2℃, and pursue efforts to limit the temperature to 1.5℃ above pre-industrial levels. In order to address the long-term substantial reduction of greenhouse gas emissions in Japan, and to achieve this "2℃ goal", it is necessary to mobilize large amounts of private investment in Green Projects such as renewable energy projects.

Furthermore, the "2030 Agenda for Sustainable Development", adopted at the United Nations Sustainable Development Summit held in September 2015 in New York, lays out the Sustainable Development Goals (SDGs) which include the conservation of oceanic and terrestrial ecosystems. This has also increased expectations for the role of private investments in projects for the prevention of natural capital deterioration and other environmental purposes.

In recent years, issuances of Green Bonds ― bonds issued by organizations including corporations and local governments to raise funds for Green Projects ― and investments in the bonds have significantly increased at an international level. Green Bonds are becoming an effective tool to raise funds for Green Projects which contribute to the reduction of GHG emissions and the prevention of natural capital deterioration. These trends have been particularly notable since the establishment of the "Green Bond Principles" (hereinafter referred to as "the GBP") in January 2014. Although Green Bond issuances and investments have also begun to appear in Japan, they have not spread sufficiently, compared with overseas.

In light of the above, this "Green Bond Guidelines" (hereinafter referred to as "the Guidelines") have been developed with the purpose of spurring issuances of Green Bonds and investments in them in Japan. In the course of the development, in order to maintain credibility of the green characteristics of Green Bonds, the Guidelines seek to prevent "green-wash" bonds (bonds labelled as "green", despite the fact that they have no environmental benefits, or that their proceeds have not been appropriately allocated to Green Projects) from being issued and invested in.

The Guidelines, with due consideration to the consistency with the GBP, which is widely accepted in the Green Bond markets in the world, provide issuers, investors and other market participants with illustrative examples of specific approaches and interpretations tailored to the characteristics of the Japan's bond market which will aid these market participants to make decisions on working-level matters related to Green Bonds. It will lead to both the establishment of credibility of the green characteristics of Green bonds and the alleviation of costs and administrative burdens for issuers, thereby spurring Green Bond issuances and investments in Japan.