Japanese companies have issued JPY285bn (USD2.12bn) of green transition bonds in the first seven months of the year, 14 times more than their total issuance of 2021, as reported by Nikkei Asia on August 13. The skyrocketing of green transition bonds in Japan is proof of growing interest among investors in environmental, social, and governance (ESG) investing. Transition bonds are mainly issued by companies that seek additional funding in order to transition to a greener business model and realize net-zero emissions, such as oil companies and steelmakers. The issuers are required to clarify specific emissions targets and decarbonization strategies with the buyers. Statistically, Japanese companies accounted for almost 40% of the USD6bn worth of transition bonds issued globally from January 2021 to July 2022. 

Green transition bonds are part of the tools that enterprises can leverage to fund their decarbonization practices. Last July, Japanese shipping company Nippon Yusen issued JPY20bn (USD149m) in transition bonds for transforming its refining facilities into renewable energy hubs, becoming the first firm to issue the bond in Japan. To help enterprises formulate their own plans for tackling climate change, the Japanese government is working on a decarbonization roadmap for steel, chemicals, and six other industries. The roadmap is expected to be rolled out as early as FY22 and set up specific emissions reduction targets for these sectors to put off banks and financial institutions’ doubts over greenwashing and promote investments in green transition activities. Aside from that, the Japanese government also vowed to contribute JPY20tr (USD155bn) to the decarbonization activities in the next decade, with capital coming from a new green transformation bond.

Sources:

https://asia.nikkei.com/Spotlight/Environment/Climate-Change/Green-transition-bonds-surge-in-Japan-with-2bn-issued-this-year

https://www.argusmedia.com/en/news/2230528-japans-nyk-line-plans-20bn-climate-transition-bonds

https://asia.nikkei.com/Spotlight/Environment/Climate-Change/Japan-plans-green-transition-road-map-for-emissions-heavy-industries