MOE has endeavored for some time to build a decarbonized society, a sound material-cycle society, society in harmony with nature, but we’ve always been aware of the huge financing gap between where we are and where we wish to be.  Public funding alone is insufficient to realize the kind of society we envision, so we need cooperation from the private sectors.  That’s why we’ve focused on ESG.  We’re working to build a system that supports a sustainable environment and sustainable economic growth by building a financial system based on ESG considerations.  The private finance sector holds the necessary leverage to encourage corporations to change their behavior.  In addition to driving change through private funding, we aim to restructure corporate business models.

MOE has worked to build a decarbonized society, a sound material-cycle society, and society in harmony with nature for the last 10 years or so via “environmental finance” and promoting more environmentally conscious forms of finance.  Since 2017, MOE has made it a policy to promote ESG investment and has done so, for example, by creating the ESG Finance Award and establishing the ESG Finance High Level Panel.

ESG is also promoted by the Financial Services Agency (FSA) and the Ministry of Economy, Trade and Industry (METI).  MOE exchanges information and coordinates with them on various policy themes.  For example, METI and FSA join MOE’s Positive Impact Finance Task Force as observers.  We both work to promote sustainable growth in Japan by deploying the units of expertise within our institutions.

One of our efforts is a newly created website called “Green Finance Portal” (http://greenfinanceportal.env.go.jp/), which disseminates information about green finance policies and movements in Japan and abroad.  Before the website, Japanese policy information barely reached the public, which we recognized as a problem.  When we created the platform, mainly to support the sale of green bonds, there was virtually nowhere to find accurate information about Japan’s green bond market.  The market was practically invisible, so there was no progress.  We started the Green Finance Portal, in Japanese and English, to inform people worldwide of the Japanese effort.

Basically, we want to highlight Japan’s ESG initiatives for professionals in direct financing markets, such as securities.  However, Japan’s financial market also includes a significant component of indirect financing by regional financial institutions, and we want to highlight their ESG activities, too.  We are planning to produce content in English that describes ESG efforts in Japan by region.  It would be interesting for foreigners to see things that are particularly Japanese.

The previously mentioned ESG Finance Award was started last fiscal year with a goal of expanding ESG financing both in direct and indirect financial areas.  We need to examine every entity in the investment chain, including investors and private companies, and consider how they can contribute to ESG goals.  By publicly recognizing prominent and advanced ESG efforts, we hope other entities will take notice and pursue their own ESG efforts.  We would like to bestow more awards this fiscal year, especially to those projects that demonstrate Japan’s progress.

To realize a decarbonized society, a sound material-cycle society, and society in harmony with nature, what areas of ESG are you focusing on?

The underlying problem in promoting ESG is that there are many cross-sectoral issues, for instance, how to proceed with disclosures and dialogues, how to increase the number of ESG investors, how to evaluate impacts, and so on.  Among those issues, it is especially important to be able to measure the actual impact of any particular investment.  I think promoting impact finance is one of the duties MOE needs to take on.

“Impact finance” is a big part of ESG in the U.S., i.e. investing in things that will produce a measurable environmental, social, or governmental impact.  In Japan, ESG investments are gaining stream.  MOE summarized the basic ideas of impact finance and the flow of the finance.