Japan Exchange Group launched its ESG Bond Information Platform in July 2022, bringing information on domestic, publicly offered ESG bonds together in one place. This article summarizes the background to the launch, how the platform is being operated, and possibilities for its future.
In July 2022, based on the recommendations of its Sustainable Finance Platform Development Working Group (summarized in this article: https://investmentjapan.jp/esg/3358/), Japan Exchange Group (JPX) and its subsidiary JPX Market Innovation & Research (JPXI) launched the ESG Bond Information Platform. This brings information on domestic, publicly offered ESG bonds together in one place, aiming to tackle some of the issues that have been raised with regards to the ESG bond market in Japan and thereby encourage the further spread of ESG investment.
Background to the Platform
Sustainable finance has seen exponential growth across the world in the last few years, first through ESG investment in equities and more recently through ESG-related bonds, loans, and other asset classes. Japan is no exception: ESG investment has been developing in multiple areas and ESG bond issuance is booming. Along with this expansion, however, a number of issues with the market have been brought to light that could hinder further development.
Within the Working Group, it was pointed out by investors that the costs of information gathering for ESG investment are high compared to traditional equity or bond investment. With information scattered over the websites of individual issuers, ratings providers, and securities companies, is it difficult to get a comprehensive picture of trends across the whole market such as decarbonization or environmental and social impacts.
For issuers, on the other hand, information on previous issuances by peers is crucial for making decisions on raising and utilizing funds through ESG bonds, such as which of the company's initiatives are suitable or how post-issuance disclosure should look. Many pointed out that the lack of compiled information makes these discussions unnecessarily onerous.
The ESG Bond Information Platform that JPX has created aims to tackle these issues and allow the ESG investment market to develop more smoothly. For example, in response to demand for information on ESG-related characteristics of issuers, we have included links to the issuance frameworks that each bond is based on, which provide information such as purpose of fundraising and use of proceeds, method of selecting investment targets, and fund management methods. For useful information on the actual activities of companies, the platform enables easy access to post-issuance reporting, including actual usage of funds and revisions to strategy. As there are concerns around the comparability of these kinds of information, we have chosen to provide links to the websites of each issuer, for example, rather than attempt to pick out certain data points.
The information provided on the ESG Bond Information Platform is as below:
- Bond fundamentals: ISIN, pricing date, issuer, name of bond, prospectus*, issuance amount, currency unit, term, interest rate, settlement date, maturity date, lead managers, offering format, credit rating provider, credit rating, ESG label
- Issuer information: TSE sector, framework*, reporting*
- ESG rating information: name of external reviewer, guidelines used for review, external review*
( * link to issuer website )
The inclusion period for information is until each bond's maturity date, for bonds whose pricing date is 2016 or later. Although the platform is currently aimed at domestic publicly offered ESG bonds (green, social, sustainability, and transition bonds, as well as sustainability-linked and transition-linked bonds), private placements and bonds issued outside of Japan may also be included on a voluntary basis.
Screenshot of the main page and individual bond page:
Platform Operation and Information Gathering
In some countries such as the UK or Luxembourg, ESG bonds are mostly exchange-listed, so data on those bonds naturally flows to the exchange and can be provided to market players by the exchange. In Japan, however, since the vast majority of bond trading is done over the counter, JPX is not automatically able to gather this information.
On this point, the Working Group decided that in the case of publicly offered ESG bonds, using information provided by those conducting the issuances, namely issuers or lead underwriters, would be advantageous as it would enable timely and comprehensive information gathering. With this in mind, the platform has been set up in cooperation with lead underwriters (seven at the time of launch) acting as operation partners. Information published by issuers at the time of offering and public information held by lead underwriters is provided to JPX, which gathers and disseminates it through the platform.
While JPX works hard to spread awareness of the platform and encourage its use among market players, the Working Group plans to continue observing and discussing the platform, for example whether information is being provided in a convenient way and whether it is meeting its objectives. If necessary, the Working Group may also think about whether revisions need to be made to the way the platform is operated to ensure stable operations, or whether the flow of information could be improved further.
In the slightly longer term, we will be working through the issues involved in expanding the platform's reach beyond publicly offered domestic ESG bonds, for example to private placements, overseas issuances, or other asset classes such as ESG-linked loans and investment trusts. We expect this to require multifaceted cooperation from various players.
In addition, with decarbonization initiatives accelerating around the globe, demand for more and better quality ESG information from companies is growing ever stronger. With this in mind, the extent of information and data to which the platform can or should be widened will be an important topic of discussion for the future, and we will be working on this along with all those that will need to be involved.
JPX hopes that this platform can contribute to a virtuous cycle where use of ESG information by market players increases, leading to more investment into companies that are at the forefront of ESG, which encourages more and higher quality disclosure of ESG information.
About the ESG Bond Information Platform (some information only in Japanese):