Japan’s FSA considers introducing new criteria and definitions for ESG funds

It is the latest in a series of initiatives on ESG to be announced by the regulator

Japanese financial regulator the Financial Services Agency (FSA) has indicated that it may soon issue new rules and standardised criteria for investment funds which are marketed as being ESG or sustainability-focused.

According to a local daily which reported the news, the FSA will first conduct interviews with asset management companies and sellers of investment products to identify potential issues which need to be addressed. The new measures are expected to be introduced sometime in the current Japanese fiscal year, which ends in March 2022. 

The move has been in the works for some time. Earlier this year, FSA officials said that the agency was looking at ways to address greenwash by investment providers after a popular ESG-branded Mizuho investment fund was criticised for providing investors insufficient disclosures regarding its environmental and social performance. 

It comes as the EU considers introducing minimum sustainability requirements for ‘light green’ or Article 8 products under the new phase of its sustainable finance action plan.  

 Separately, the FSA is collaborating with the Tokyo Stock Exchange  to develop a certification framework for green and transition bonds, in addition to developing  low-carbon transition guidelines for key industries and technologies in the country. The FSA has also  confirmed that it will look at aligning the Japanese Corporate Governance Code with the recommendations of the Taskforce for Climate-related Disclosures.