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Japan’s Ministry of Environment issues first green bond guidelines

Advisory text aims to spur issuance in the country.

Japan’s Ministry of Environment has issued its own green bond guidelines in a bid to spur issuance in the market.
In Japan, the development of the green bond market has been slow, which is partially due to a lack of assets to issue bonds against after changes were made to the country’s renewable energy support scheme: see related RI article.
The Ministry says in the guidelines, which are only published in Japanese at the moment, that one of the merits of green bonds for issuers is that they can lead to building relationships with new investors interested in supporting environmental solutions to climate change, etc. and strengthen the pool of funds available for related financing.
In terms of content, the Ministry has developed the guidelines in line with the international Green Bond Principles. The Japanese guidelines are legally non-binding. They are aimed at building a basis for discussions between investors and issuers on what to expect from green bonds and seek to avoid greenwashing by building trust in the green quality of the use of proceeds of the bonds.
Yo Takatsuki, Associate Director Governance and Sustainable Investment at BMO Global Asset Management, says that the Japanese guidelines are a reflection of the current Green Bond Principles in that they support the objective to drive the growth of the Japanese bond market.

He says their legally non-binding character gives issuers the possibility to familiarise themselves with the concept and learn about issuing green bonds.They can receive feedback from domestic and international investors on how to improve their draft bond frameworks and then issue them within an internationally accepted framework and in an international currency.
During the development of the guidelines, the Ministry of Environment sought to create consistency with the internationally recognised Green Bond Principles on four key aspects: (1) use of procurement funds, (2) project evaluation and selection process, (3) procurement fund management, and (4) reporting. It explained that bonds which fulfill these four conditions are more likely to attract interest from international investors.
Most recently, Nippon Life, the Japanese life insurance company, unveiled plans to invest 200bn yen in ESG related bonds between 2017 to 2020.
Seperately, Daiwa Securities Group and the Asian Development Bank (ADB) have announced that ADB plans to issue its first Green Bond Uridashi (a secondary offering). The bond aims to mitigate climate change in Asia and the Pacific. Daiwa Securities will arrange and distribute the bonds to Japanese retail and institutional investors in May 2017.
ADB says it plans to raise its annual climate financing two-fold, from $3 bn in 2015 to $6bn by 2020. By the end of this decade, ADB’s spending on tackling climate change will increase to around 30% of its total investment. The $6 bn financing break downs as follows: $4 bn for mitigation through scaling up support for renewable energy, energy efficiency, sustainable transport, and building smart cities, and $2 bn for adaptation through more resilient infrastructure, climate-smart agriculture, and better preparation for climate-related disasters.