Principles for Financial Action towards
a Sustainable Society(Principles for Financial Action for the 21st Century)

The Drafting Committee for Environmental Finance Principles

Principles for Financial Action towards a Sustainable Society(Principles for Financial Action for the 21st Century)
Foreword
The unforgiving earthquake and tsunami hit eastern Japan on 11 March2011 cruelly exposed the powerlessness of man in the face of natural
disasters. But it also shocked those of us who saw in it evidence that thescientific technologies supporting our day-to-day activities can suddenly
disappoint our society. Witnessing the fragility of our civilized society
through this so-called “March 11th” incident, we were all asked to revisit
the meaning of sustainability.
Turning to issues on a global scale, there is indeed concern that in the
future climate change and the loss of biodiversity, amongst other issues,
may cause incommensurable damage. These problems come in addition to,other daunting issues, such as poverty and the heightened risks of anincreased spreading of diseases (especially in developing countries) that
intensify existing threats to human security. We must therefore
aggressively tackle these global issues as we reconstruct Japan from theearthquake.
By rising to the challenges facing both Japan and the world, we can reacha platform from which further progress can be built on. If the postearthquake reconstruction can trigger the sustainable use of energy or
encourage us to design communities that respect ecosystems, theseexperiences may present a model social system for the 21st century. Hereinlies the key to how finance can continue to be reliable and be trusted bysociety. We see the new role of finance in the 21st century as taking action
towards the formation of a sustainable society.

Preamble
We understand the basics of a sustainable society as being able to live
today free from the fear of tomorrow. In order for this to occur, thisgeneration must seek to solve the various issues faced by humans and ourplanet - not only for our own benefit but also for future generations - bypursuing an environmentally friendly lifestyle that coexists with nature.
A fundamental part of society is the economic activity which involves amonetary intermediary. In order to steer society towards sustainability, weneed to change the flow of money to those activities which correspond tosuch sustainability goals. This would mean directing money where society
most needs it, which subsequently is the fundamental role of finance as it
contributes to the development of society. In other words, by offering
diverse financial services, it is thought that “the sustainability of society
increases as a result of the most appropriate distribution of various
resources between economic agents, regions and generations”.

The financial services industry’s cooperative action to finding solutions for
global problems originates from the formation of the United Nations
Environment Programme’s Finance Initiative in 1992. Since then, UNEP
FI’s activities have expanded from environmental issues to social andgovernance issues, so called “ESG issues”. One of the Initiative’s outputs
has been the establishment of the Principles for Responsible Investment(PRI) in 2006. As a separate programme facilitated by the International
Finance Cooperation (IFC), the Equator Principles were launched in 2003
to manage environmental and social risks in project finance. The impetus
of society for the financial services sector is for these initiatives to betranslated into concrete actions and to accelerate the overall pace ofchange. How then should the financial services sector in Japan respond tothese global demands? This should be addressed bearing in mind thesignificant responsibility it carries as the finance arm of one of the largest
economies.
The Japanese financial services sector has two main roles. The first is tocontribute to transforming Japan into a sustainable society. This requires
not only to secure the safety of vital infrastructure against natural disasters,
but also to support local communities and national industries in improving
their sustainability and strengthening their competitiveness. The secondrole is to contribute to increasing sustainability as a global citizen. For thiswe need to cooperate with international initiatives such as UNEP FI, whichworks towards solving global environmental and social issues.
In fulfilling these roles, it would be important to take a precautionary
approach. Even where scientific findings include uncertainties, if there is ahigh risk of a significant negative impact on the environment or society,then it would be beneficial to be attentive and cautious in business. Thisshould be the basic risk response in the 21st century, where future forecasts
are increasingly difficult. This risk management function will in turn leadto new business opportunities in financial services.
For its own interest, the financial services sector should also be proactivein the establishment of new markets which add economic value toenvironmental and social activities.
This set of Principles was drawn up as guidelines for action by financial
institutions concerned with the future of the planet and seeking to fulfil
their roles and responsibilities in shaping a sustainable society. It is also
intended as a starting point for like-minded financial institutions tocooperate without reference to their specific industry types, size andgeography. Signatory financial institutions will implement activities basedon the “Principles” below, to the extent possible in light of their business
context.

The Principles
1. We will recognize our roles and responsibilities, taking into account the precautionary approach, and promote those actions
that contribute towards shaping a sustainable society.
2. We will contribute to the formation of a sustainable global society through the development and provision of financial
products and services leading to the development and increased competitiveness of “industries contributing to a sustainable
society” as represented by the environmental technologies and services sector.
3. From the perspective of regional development and improvement in sustainability performance, we assist the environmental
programmes of small and medium enterprises. We will also back activities that will raise environmental awareness amongst
citizens and support disaster readiness and community activities.
4. In the formation of a sustainable society we will recognize the importance of cooperation with diverse stakeholders and will
not only participate in its activities but will endeavor to take a proactive role.
5. We will not be limited to complying with environmental laws and regulations but will take active steps to reduce our own
environmental footprint through resource and energy savings as well as encouraging our suppliers to do likewise.
6. We will recognize activities that will further profile sustainability as a business issue and will endeavor to disclose
information on our activities.
7. In order to implement the above actions we will aim to raise the awareness of environmental and societal issues of our own
board and support them to take an active role through their normal duties.
Translated by the United Nations Environment Programme Finance Initiative(UNEP FI)

Asset Management, Securities and Investment Banking Sector Guidelines
1. The role of the asset management, securities and investmentbanking sectors in achieving a sustainable society●● The asset management, securities and investment banking sectors, as●

leaders of the financial products market, are expected to be socially
responsible for the healthy development of capital markets. As part ofthis role, it is believed that their appropriate consideration ofenvironmental, social and corporate governance issues (ESG issues
henceforth) that may affect corporate values would contribute to theformation of a sustainable society which offers global environmental
protection and the growth and development of healthy capital markets.
● As institutional investors, banks, insurers and asset managers, within
their asset management operations have an obligation to maximize thelong-term benefit of its beneficiaries. For example when making
investment decisions, to the extent consistent with their fiduciary
responsibilities, considering ESG issues as part of investment decisions
and actively engaging with investee companies can raise the awarenessof ESG issues and progress initiatives at the investee companies. In
addition it is hoped that investors request all companies with investment
potential to disclose ESG related information as needed. To achievethese goals, investors together with relevant stakeholders are expected
to sophisticate and improve on its techniques in ESG analysis andmethods of utilization.
● From the perspective of customer protection, when conducting sales offinancial products to investors, securities companies are responsible forproviding appropriate information to enable investors to makeappropriate investment decisions. As part of this, within the boundaries
of laws and regulations, asset managers are expected to contribute to theformation of a sustainable society by providing investors with ESG
information of financial products and securities deemed necessary for
their investment decision makings. For example in research services,while responding to the needs of investors, security companies are
expected to provide necessary ESG information in its analyst reports.
Further, based on such research information, asset managers are
expected to offer necessary ESG information to its customers at point ofsale.
● In its investment banking businesses such as underwriting andstructuring of securitized products, investment banks are expected to act
as gatekeepers of capital markets in making sure only appropriate
financial products are provided. In its agent businesses such as themerger and acquisition advisory services, operations are customer led.
In performing these activities, within the boundaries of laws andregulations, investment banks are expected to contribute to theformation of a sustainable society by gathering, analyzing and reflecting
ESG information to its businesses operations as necessary and inaccordance to its importance to the subject transaction.

2. Practical Actions
In response to the issues mentioned above and in considering practicalactions, the following existing standards are referenced as either common
to all sectors or unique to the asset management, securities and investmentbanking sectors.
[Common standards for all sectors]
ISO 26000 − Guidance on Social Responsibility (November 2010)
Keidanren (Japan Business Federation) “Charter of Corporate Behavior& Its Implementation Guidance” (Revised September 2010)
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(Articles of Association and others)”
Japan Securities Investment Advisers Association “Self-Regulatory
Rules (Articles of Association and others)”
Japan Securities Dealers Association “Undertaking Social Contribution
Activities within the Securities Industry (Basic Concepts)” (September
2009)Japan Securities Dealers Association “Securities Industry’s Action Planfor Environmental Issues” (February 2008)
The Life Insurance Association of Japan “Code of Conduct” (Revised,
June 2011)
The General Insurance Association of Japan “Code of Conduct”(Revised March 2005)

3. Recommended Actions
Signatories in the asset management, securities and investment banking
sectors are encouraged to take action proactively in the following areas.
(1) Integrate environmental and social considerations into the operationsof its core business (including but not limited to the development of
products and services). For example:<Asset Management Activities>
Refer ESG-related issues in the standards, regulations and guidelines
of asset management and reflect them into the investment and lending
decision-making processes.
Specify ESG considerations in the proxy voting guidelines.
Accumulate examples of CSR report analysis in the selection of
investee companies and utilise them to improve its own CSR activities.
Utilise comments and advice from external experts to improve its own
ESG activities.
Invest in products which consider ESG issues and contribute to asustainable society to the extent consistent with its fiduciary
responsibilities.
Proactively encourage investee companies to disclose ESG informationand promote awareness and action on ESG issues amongst its
suppliers.
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<Securities and Investment Banking Activities>
Explain ESG-related issues to investors via prospectus etc.
Develop and sell financial products (bonds, mutual funds such as SRI
funds, etc.) which offer improvements and/or solutions to ESG-related
issues such as environmental issues, micro-finance, social problems(employment issues, childcare, etc.).
Build donation schemes from the sales of mutual funds such as trust
fees that contribute to the improvements and/or solutions to ESGrelated issues (same as above).
●●●(2) Integrate environmental and social considerations within its businessprocesses. For example:
Promote the reduction in paper use by electronic delivery of theprospectus.
Promote environmental considerations in paper and printed materials
such as sales and internal documents.
Promote paperless meetings and internal documents via the use of
information technology.
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[Unique standards for the asset management, securities and investmentbanking sectors]
Financial Services Agency “Guidelines for disclosure of corporate
information”
Financial Instruments Exchange “Securities Listing Regulations” and“Enforcement Rules for Securities Listing Regulations”
Financial Instruments Exchange “Preparation Guidelines for the Reporton Corporate Governance”
Expert committee on environment and finance under the Central
Environmental Council “Toward Green Finance, a new role for thefinancial sector in building a low carbon society” (June 2010)
Principles for Responsible Investment (PRI)
Responsible Property Investment (RPI)
Japan Securities Dealers Association “Self-regulatory Rules (Articles
of Association and others)”
The Investment Trusts Association, Japan “Self-regulatory Rules
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(3) Disseminate information to society and engage with various
stakeholders. For example:
Externally disclose its asset management and investment activities
based on the six principles of the Principles of Responsible
Investment.
Externally disclose on ESG considerations in its proxy voting activities
such as its position, structure and voting results.
Participate in international initiatives related to asset management.
Appropriately display and/or disclose the purposes and effects ofenvironmental and sustainability related products.
Promote public awareness on the environment and sustainability issues(such as by holding seminars for students and the business
community).
Promote employee participation in social activities such asenvironmental protection activities run by communities and otherorganizations.
Provide information to investors on its website.
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Insurance Sector Guidelines
1. The role of the insurance sector in achieving a sustainable
society●● The insurance sector has a distinctive functional role within the financial

service sector as it specializes in handling risks. It provides:- risk finance by evaluating the economic value of risks and managing
and carrying risks,- risk solution services such as loss and disaster preventions throughuse of large amounts of loss and damage data,- accumulated information on preventive medicine and health andmedical institution networks, etc.
● On the other hand, the emerging issues (so called “environmental, socialand governance issues” or “ESG issues”) are wide-ranging and complex.
For example, we are faced with the issues of climate change mitigation
and adaptation, natural resources and energy depletion, food insecurity,
poverty and social exclusion, an aging population, localized
depopulation, structural issues in health care, pension schemes andelderly nursing care, health issues, safety and disaster prevention,
human rights, and so forth. In solving these problems, it is possible toutilise the functions and roles of the insurance sector featured above.
For example, internationally, the role of insurance in climate change
adaptation and micro-insurance is drawing attention. Also, in Japan, theinsurance sector is increasingly complementing the social security
system in areas such as medical care, pensions and nursing care.
● The insurance sector will function more effectively in fulfilling its rolein achieving a sustainable society by collaborating with investment,
lending and other financial institutions coordinating with policy andpartnering with various sectors such as international organisations andcivil society.
● Through these initiatives, the insurance sector is expected to mitigate
long-term risks and thereby contribute to the development of a globally
inclusive society with sustainable, safe, secure and vigorous local
communities.

2006)
Websites of the General Insurance Association of Japan and the Life
Insurance Association of Japan and CSR reports etc. of insurancecompanies offers case studies and examples

4. Recommended Actions
Signatories in the insurance sector are encouraged to take action
proactively in the following areas:(1) Integrate environmental and social considerations into the developmentof financial products and services. For example:
Endeavor to widely disseminate and propose policy measures toaccelerate the development of insurance products and services thatmitigate risks associated with the development of green technology
and environmental business opportunities.
Assess the relevancy and connections between ESG issues andinsurance underwriting and rate calculation processes.
Integrate ESG issues into risk solution services such as risk andvulnerability assessment, loss prevention, loss control service, andbusiness continuity management.
●●●(2) Integrate environmental and social considerations into businessprocesses. For example:
Promote the sustainable use of materials, especially paper
documentations used throughout the overall value chain such as
application forms, charters, insurance policies or manuals used to offer
explanations to customers.
Draft and execute a carbon emission reduction plan for transportation,
logistics and office-based activities and operations.
●●(3) Disseminate information to society and engage with various
stakeholders. For example:
Disclose activities through corporate social responsibility reports andother channels.
Join international initiatives on insurance particularly those that
address ESG issues.
Promote social action programmes among employees, such asreforestation, local nature protection and biodiversity conservation
projects.
Promote the development of personnel in the field of disasterprevention. Raise awareness of the availability of natural disasterinsurance such as earthquake insurance through school and consumer
education programmes.
In the non-life insurance sector, promote ecological and safe driving
behavior.
In the non-life insurance sector, promote use of recycled materials.
Promote and support the development of personnel in the field ofhealth and nursing care. Raise awareness of the availability of medical
and nursing care insurance through medical institutions, and school
and consumer education programmes.
Promote preventive health and check-ups by supporting and offering
information to academic and medical institutions and offering school
and consumer education programmes.
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2. Practical Actions
In response to the issues mentioned above and in considering practicalactions, the following existing standards are referenced as either common
to all sectors or unique to the insurance sector.
[Common standards for all sectors]
ISO 26000 − Guidance on Social Responsibility (November 2010)
Keidanren (Japan Business Federation) “Charter of Corporate Behavior& Its Implementation Guidance” (Revised September 2010)
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[Unique standards for the insurance sector]
UNEP Finance Initiative “Principles for Sustainable Insurance”(Forthcoming June 2012)
The Life Insurance Association of Japan “Code of Conduct” (Revised
June 2011)
The Life Insurance Association of Japan “Action Guidelines forEnvironmental Issues” (November 2006)
The Life Insurance Association of Japan “Life Insurance Industry’s
Commitment to a Low Carbon Society” (February 2011)
The General Insurance Association of Japan “Code of Conduct”(Revised March 2005)
The General Insurance Association of Japan “The Environment Policyof The General Insurance Association of Japan” (Revised June 2006)
General Insurance Industry “Action Plan for the Preservation of theEnvironment” (March 2006)
Action Policy and Plan of the Environmental Sub-committee of The
General Insurance Association of Japan
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Governing Structure of the Principles●

Annual General Assembly●

Steering Committee

3. References to Good Practice Examples
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UNEP Finance Initiative, Principles for Sustainable Insurance “ThePrinciples in Action --- Case studies from around the world”(Forthcoming June 2012)
Input to the UNFCCC from the United Nations Environment
Programme and the United Nations Environment Programme FinanceInitiative (February 2011)
A Ceres Report From Risk to Opportunity 2008: Insurer Response to
Climate Change (September 2009)
Results of the survey on the current state of CSR activities of financial
institutions conducted by the Financial Services Agency (February

Secretariat(Ministry of the Environment)

Workgroup●●●

Asset management/Securities/Investment Banking
Insurance
Deposits/loans/leasingDeposits, Loans and Leasing Sector Guidelines
1. The role of the deposits, loans and leasing sectors in achievinga sustainable society●● Financial institutions engaged in the deposits, loans and leasing sectors

are expected to contribute to solving environmental and social issues
through their businesses. Their roles are diverse and depend on its
business contents and the characteristics of its customers. By
considering the sustainability of society when undertaking its financial
intermediary functions (i.e. information production and riskunderwriting functions), each signatory institution is expected to provide
positive impacts to both the providers and recipients of capital.
● Support towards the transition to a sustainable society is a challenge that
may be pursued within the conduct of the deposits, loans and leasing
businesses. They include activities such as undertaking environmental
measures, developing finance mechanisms for new funding demands inthe fields investing in sustainable society, and the utilising of leasing
functions to promote eco-products.

2. Practical Actions
In response to the issues mentioned above and in considering practicalactions, the following existing standards are referenced as either common
to all sectors or unique to the deposits, loans and leasing sectors.

●

the value chain (application forms, agreements, securities, manuals,etc.) and work on its resource efficiency and recycling.
Develop and implement plans to reduce carbon emissions frompremises, company-owned cars, movement of people and logistics.
Consider environmental performances of capital investment(procurement of premises, equipment, etc.) such as the use of recycledresources.

(3) Disseminate information to society and engage with various
stakeholders. For example:
Appropriately display and/or disclose the purposes and effects ofenvironmental related products.
With the cooperation of customers, reduce own environmental impacts
through energy efficiency of premises, digitalizing of forms, etc.
Promote environmental awareness raising activities at schools,
amongst consumers, etc.
Promote employee participation in social activities such as local natureand biodiversity conservation activities.
Endeavour to contribute to the development of environmental
industries by exchanging environmental information between
companies.
Endeavour to raise the environmental awareness of its customers byproviding national and international information on environmental
issues.
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[Common standards for all sectors]
ISO 26000 − Guidance on Social Responsibility (November 2010)
Keidanren (Japan Business Federation) “Charter of Corporate Behavior& Its Implementation Guidance” (Revised September 2010)●●[Unique standards for the deposits, loans and leasing sectors]
The Japanese Bankers Association “Code of Conduct” (November
2005)
The Japanese Bankers Association “Banking Industry Action Plan for
the Environment” (September 2001)
The National Association of Shinkin Banks “Shinkin Banking Industry
Action Plan for the Environment” (July 2007)
The National Association of Shinkin Banks “Policy on Environmental
Activities of Shinkin Banks” (November 2010)
National Central Society of Credit Cooperatives “Credit Cooperatives
Action Plan for the Environment” (October 2007)
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3. Recommended Actions
Signatories in the deposits, loans and leasing sectors are encouraged totake action proactively in the following areas.
(1) Integrate environmental and social considerations into the developmentof financial products and services in its core business. For example:
Support corporate borrowers in integrating environmental and social
considerations in its management techniques and equipment purchases
and assist activities that strengthen the competiveness of related
businesses.
Endeavor to be updated on how increasing environmental risks affectthe business of its customers.
For loans to large-scale development projects, assess its social andenvironmental impacts. Where impacts are significant, necessary
measures should be taken such as to call for action against theborrowers.
In collaboration with various stakeholders, endeavor to secure the flowof funds in the region.
Provide financial mechanisms to meet new funding demands in theconstruction of a sustainable society such as the maintenance ofenvironmental infrastructures.
Develop and promote financial products that finance a sustainable
society such as eco deposits.
Within the leasing business, contribute to a sustainable society bytaking advantages of the financial and equipment procurement
functions of leasing. For example, promote equipment and facilities
with high environmental performances, supporting energy and resource
conservation efforts, take reduce-reuse-recycle (3R) approaches andmake appropriate disposal of leased property.
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(2) Integrate environmental and social considerations within its businessprocesses. For example:
Consider green procurement of paper and other resources used acrossDrafting Committee Members
Aioi Nissay Dowa Insurance Co., Ltd.
Chuo Mitsui Asset Trust and Banking Company, Limited
Chuo Mitsui Trust Holdings, Inc
Citigroup Global Markets Japan Inc.
Daiwa Institute of Research LTD.
Development Bank of Japan Inc.
Mitsubishi UFJ Lease & Finance Company, Limited
Mitsubishi UFJ Trust and Banking Corporation
Mitsui Sumitomo Insurance Co., Ltd.
Mizuho Financial Group Inc.
Mizuho Securities Co., Ltd.
Mizuho Trust & Banking Co., Ltd.
Nikko Asset Management Co., Ltd.
NIPPONKOA INSURANCE CO., LTD.
Nissay Asset Management Co., LTD.
NLI Research Institute
Nomura Holdings, Inc.
Nomura Asset Management Co., Ltd.
ORIX Bank Corporation
ORIX Corporation
SEIBU SHINKIN BANKSMBC Nikko Securities Inc.
SOMPO JAPAN INSURANCE INC.
Sumitomo Mitsui Asset Management Company, Limited
Sumitomo Mitsui Banking Corporation
Sumitomo Mitsui Trust Holdings, Inc.
Taiyo Life Insurance Company
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
The Bank of Yokohama, Ltd.
The Dai-ichi Life Insurance Company, Limited
The HACHIJUNI BANK, LTD.
The Keiyo Bank, Ltd.
THE SEISHIN SHINKIN BANKTHE SHIGA BANK, LTD.
The Shizuoka Bank
Tokio Marine & Nichido Fire Insurance Co., Ltd.

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Editorial Supervisor: UNEP FI

Developing Principles for Financial Action towards a Sustainable
Society
Background
In June 2010, the “Expert Committee on Environment and Finance” under the Central
Environmental Council (chaired by Mr. Takejiro Sueyoshi (Special Advisor to UNEP
Finance Initiative)) issued a report titled “Towards Green Finance, the New Role of the
Financial Sector in Building a Low Carbon Society”. This report included a policy
recommendation for establishing the “Principles for Financial Action towards a
Sustainable Society” aiming at expanding environmentally friendly finance in Japan.
With the passionate chairperson, Japanese financial institutions from most of the financial
sub-sectors (such as financial holding companies, banks, trust banks, cooperative financial
institutions, securities firms, insurance companies, and asset management companies)
voluntarily participated in the Drafting Committee. The Ministry of the Environment
Government of Japan supported the process as the Secretariat.
The plenary Drafting Committee meetings were held seven times in total from September
2010 through October 2011, consisting of extensive discussions. For the sake ofestablishing Sector Specific Guidelines and discussing how each sector should take action
in line with the core Principles, the following working groups were created: Deposit/Loan/
Leasing, Asset Management/Securities/Investment Banking, Insurance and General/
Follow-up. Meanwhile, the Great East Japan Earthquake in March 2011 changed people’s
minds and attitudes to reconsider global “Sustainability” beyond the “Environment”.

Structure of the Principles(1) “Foreword” and “Preamble”“Foreword” outlines a statement which may be modified to better convey the roles
financial institutions should play in any unanticipated era to come, by referring only toissues with higher materiality to reflect our changing circumstances. On the other hand,“Preamble” declares the universal and fundamental nature of the relevancy between theroles of the sustainable society and financial business.
(2) The Principles and Guidelines
The “Principles” comprise generic contents and have been accepted by signatories; whilethe “Guidelines” show concretely to some extent how to implement the Principles for subsectors as a guide.

The Principles in Relation to Global Initiatives Such as UNEP FI and PRI
The philosophy and direction of the Principles are consistent with those of global
initiatives such as UNEP FI and PRI.
Financial institutions in Japan must be relevant in the discussions of sustainability on a
global scale. The roles and responsibilities assumed by the financial institutions in eachregion, as well as their contribution to the Japanese economy and regional economy, willbe the key to help tackling global issues.
Hence, one of the missions of the Principles is to function as a stepping stone to initiatives
in order to incorporate sustainable finance into regional society.

Written and edited by Secretariat of the Drafting Committee forEnvironmental Finance Principles, Ministry of the Environment
Government of JapanFirst Edition: March 2012
Image Source: NASA (http://visibleearth.nasa.gov/view.php?id=56512)