Bank of Japan (BOJ) will conduct annual surveys of financial institutions and enterprises to explore ways of developing the country’s climate finance market, as reported by Reuters on November 27. According to BOJ Deputy Governor Masayoshi Amamiya, the survey was intended to assess the functioning of climate change-related markets. According to an initial survey launched in August, some interviewees said they faced challenges in acquiring information and appropriate methods for assessing risks relevant to climate change. Given the significant impact climate change has on economic, price, and financial development in the medium- to long-term perspective, Amamiya called on central banks to ensure long-term macroeconomic stability by supporting private sectors in tackling climate change.

The annual survey could respond to critics’ concerns over the lack of strict environmental standards for lending and investment in Japan’s climate finance sector. Specifically, BOJ launched two rounds of auctions in its climate response financing operations (CRFO) in December 2021 and July this year, allocating a total of USD26bn zero-interest climate financing for loans and investments for sustainable projects. Under the scheme, 63 financial institutions have been qualified to receive loans that can be rolled over until 2030. These banks must prove that the proceeds are used to support activities that comply with relevant national and international standards, such as the International Capital Market Association (ICMA) guidelines on green bonds. However, experts questioned the credibility of such guidelines, warning that the bonds and loans issued under them have limited effect on addressing the enterprises’ environmental impact.

Sources:

https://www.reuters.com/business/sustainable-business/boj-conduct-annual-survey-climate-finance-nurture-esg-market-2022-11-27/

https://greencentralbanking.com/2022/11/29/bank-of-japan-operations-carbon-bias/

https://greencentralbanking.com/2022/11/15/boj-climate-loanbook-grows-to-26bn/