Japan: New support for green bond

Author: | Published: 27 Apr 2018
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Nagashima Ohno & Tsunematsu

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Green bonds are generally defined as a type of bond instrument whose proceeds are used mainly for investment in projects that offer environmental benefits, such as renewable energy or other efficient types of energy. The number of issuances of green bonds has been increasing worldwide since the establishment of the Green Bond Principles (GBP) in January 2014, by the International Capital Market Association. In March 2017, the Japanese Ministry of Environment (MoE) published the Green Bond Guideline, which was drawn up in accordance with the GBP, aiming to make green bonds more popular and increase the number of issuances and investments within Japan in line with the global development of the green bond market. The Guideline was expected to encourage issuances of green bonds, and accordingly, several corporations and local governments in Japan have issued debt structured as green bonds.

Notwithstanding the above efforts to publish the Guideline, the number of issuances of green bonds has not been growing rapidly. One reason for this is that, in addition to the usual procedures required to issue other types of bonds, it is recommended that issuances of green bonds also meet certain framework requirements in accordance with the Guideline. Therefore, the MoE launched a new project to support issuances of green bonds starting from the fiscal year beginning April 2018, aiming to stimulate corporations or local governments into considering issuing green bonds. This new project mainly consists of: (a) the development of a platform encouraging companies to issue green bonds; and (b) the development of a support system for issuers of green bonds.

As for the development of the platform, the MoE will: (i) register the party wishing to issue green bonds and publicise the relevant list of that party; (ii) collect information on cases and other relevant information regarding issuances of green bonds and make that information available to the public; and (iii) analyse information in connection with green bonds both in Japan and overseas and provide that information to the public. The MoE plans to outsource part of the development work mentioned above to private companies.

As to the development of a support system for issuing green bonds, the MoE will provide financial aid of up to JPY50 million ($468,000) per person to parties who gather as a group and collectively provide efficient and comprehensive support for companies or local governments wishing to issue green bonds.

Although the number of issuances of green bonds in Japan remains fairly low, this new support project is expected to stimulate the market for issuing green bonds in Japan.

Ryuji Okai