Guidebook on Financial Instruments
Contributing to the SDGs
1. What Are the SDGs?
 The Sustainable Development Goals (SDGs) were listed in the 2030 Agenda for Sustainable
Development (the 2030 Agenda) adopted at the UN Sustainable Development Summit held in
September 2015, as a set of international development goals to be achieved by 2030.
 They consist of 17 goals and 169 targets for realizing a sustainable world, along with the pledge
that “no one will be left behind.” The SDGs are universal goals and targets for all jurisdictions, not limited to developing
economies, which integrate the economic, social, and environmental dimensions. In Japan, as
well, the goals are being taken up by various organizations and individuals, in both thegovernmental and private sector.
 Specific indicators have been defined to measure progress in achieving the SDGs, and are usedin reporting this progress.

(Source: United Nations Information Centre)
Purpose and Use of this Guidebook
This Guidebook has been prepared mainly for officers and employees of securities firms to further their knowledge of the SDGs. It
provides an overview of the SDGs, explicates their relationship to investment, and underlines the markets and financial instrumentsthat relate to the SDGs. This Guidebook succinctly summarizes the basic information regarding these matters, while also touching on
the role to be played by securities firms toward the realization of the SDGs.
Although this Guidebook is aimed mainly at officers and employees of securities firms, it would be a pleasure if it serves useful alsoin providing basic knowledge to members of the general public who wish to contribute toward the realization of the SDGs, as well as
to investors who wish to help solve environmental and social problems through their investments.
Please note that this Guidebook has been prepared only for the purpose of providing explanations and information about the SDGs
and financial instruments that contribute to their realization, and does not constitute an investment invitation. Note also that theterminology used in this document may not be in strict conformity with the definitions prescribed in laws and regulations, etc.

p. 1

2. SDGs and the Securities Industry: Relationship between the SDGs and Investment, andFunctions of the Securities Industry
The SDGs are wide-ranging; various corporations, NPOs, government agencies, and internationalorganizations are involved in projects on behalf of the SDGs, both in Japan and abroad. All of theseprojects to achieve the SDGs will require enormous amounts of funding, which will need to be supplied
not only by the official funds of each country and region but by the private sector as well, including
the general public.
The financial instruments handled by securities firms, such as bonds and investment trusts, include
those that supply funds to issuers engaged in contributing to the achievement of the SDGs
(corporations, countries and regions, government agencies, international organizations, etc.) andsupport their activities. The funds invested in these financial instruments are used, through theirissuers, in projects that contribute to the achievement of the SDGs.
That is, it can be said that investors, by investing in these financial instruments, can at once expect
economic return in line with the risks, while at the same time contribute to the realization of the SDGs.
As for securities firms, in exercising the functions of a market intermediary that comprises their main
business, they can contribute to the achievement of the SDGs by connecting the funding needs oforganizations engaged in contributing to the SDGs (issuers) with the needs of investors wishing tosolve environmental and social problems through their investments.

Conceptual diagram

Investors

Issuers

Securities
firms(corporations, internationalorganizations, etc.)

Contribute to the
SDGs by supporting
issuance

Carry out work
contributing to the
SDGs

Projects
contributing to
SDG realization

Bondarrangement,
etc.

Bonds, etc.
Investment
Sell/explain
to investors
Contribute to the
SDGs throughinvestment

Contribute to the
SDGs by selling toinvestors

Support people andorganizations working tosolve environmental andsocial issues

p. 23-1. Overview of Financial Instruments Contributing to SDGs (History, etc.)
Looking closely at the history of financial instruments contributing to the SDGs, one may see thatthey have undergone a long evolution, tracing back to the 1920s with such concepts as SRI, ESG
investment, and impact investment.
In recent years, against the backdrop of worsening resource depletion and climate change due toglobal warming, even while regulations have tightened, investment opportunities in renewable energy
and other new areas have been growing. In this situation, awareness has increased of the idea thatin the long term, by affecting sales and costs, responding to environmental and social issues may
impact not only investment returns but also corporate sustainability. Along with this, amidst greaterpublic interest such as the drafting of the UN Principles of Responsible Investment (PRI) and adoptionof the SDGs, a growing number of investors have come to consider ESG (Environmental, Social andGovernance) issues such as climate risk and social responsibilities when making investment
decisions. Responding to this trend, issuers (corporations, international organizations, etc.) andfinancial institutions including securities firms have been expanding issuance and provision of, anddisclosure of information related to, financial instruments conscious of ESG and the SDGs.
[Figure: Evolution of Environmentally and Socially Conscious Investment]

Green Bond Principles (GBP) formulated
Religious/ethical motivation: Start of SRI
Human rights, labor, environmental and other social movements

Start of green bond issuance by Japanese issuers
Paris Agreement adopted at COP21

CSR and corporate strategy
SDGs adopted at UN summit
UN Principles of Responsible Investment (PRI)
formulated: Start of ESG investment
Start of Vaccine Bond issuance by IFFIm

GPIF signed PRI
Social Bond Principles (SBP) formulated

Climate Awareness Bonds issued by European Investment Bank (EIB)

World Bank Green Bonds issued

Green Bond Guidelines formulated by Ministry of
the Environment

Vaccine Bonds issued by IFFIm for Japanese individual investors
In Japan, increased issuing of and investment insocial and environmental contribution bonds
aimed at retail investors

Increased issuance of green, social, andsustainability bonds in Japan and abroad

Examples of direct or indirect
SRI:
Socially Responsible Investment. Taking social
contribution to the SDGs throughand ethical standpoints into consideration whenfinancial instruments are many andchoosing where to invest
varied. For instance, in the equity
ESG investment:
A method aimed at properly managing risk andmarket, there is an investment method
obtaining sustained, long-term return bycalled ESG integration, whereby
incorporating ESG (Environment, Social, andenvironment, society, and corporate
Governance) elements in investment decisions
governance (ESG) elements areGreen bonds:
Bonds issued by companies or international
systematically incorporated inorganizations to procure funds used for green
investment decisions and funds areprojects, helping to solve global warming andprovided to corporations with highother environmental issues
overall ratings, encouraging companies
Social bonds:
Bonds issued by companies or international
to improve their activities. In the case oforganizations to procure funds used for social
investment trusts (funds), there areprojects, helping to solve issues of society inareas such as health, welfare, and education
funds that invest in companies
conducting business that contributes to
Sustainability bonds: Bonds issued to procure funds used in both green
and social projects
the achievement of the SDGs, as wellas many funds that select where toinvest from the perspective of ESG and the SDGs. These and other examples encourage
environmental and social initiatives by companies and their engagement with the SDGs.

p. 3

What are Social Impact Bonds (SIB)?
How do they differ from social bonds?

Assumed investors

Social Impact Bonds, which originated in the UK in
2010, are a means of addressing social issues by
public-private partnership making use of private sector
funds. Local governments and other administrative
bodies procure funds from private investors tocommission public service projects to privatecompanies or corporate entities, and reward the funds
providers based on the social impacts achieved.
Although they are called “bonds,” they do not have thefeatures of traditional bonds, and are a different kind ofinvestment method than financial instruments such associal bonds.
[General scheme of SIB]

Institutional
investors

Funds provider

Foundation aid
as corporate
CSR

Socialinvestors

Retailinvestors

Philanthropists
InvestDividend

SIB
operator
Funds provision

ServiceproviderLocal administrative
body
Payment of performancebased rewards(amount of cost reduction)

Provision of
feedback

Assessment
agencyService provision

Consumers

Evaluation of relation
between service and social
cost reduction(from the Ministry of Economy, Trade and Industry website)

3-2. SDG Bonds
Among financial instruments contributing to the achievement of the SDGs, the spotlight in recent
years has been on so-called “SDG bonds,” which include green bonds, social bonds, andsustainability bonds.
These SDG bonds, whose proceeds go to projects that contribute to the SDGs, include bonds thathave a positive impact on the environment and society and align with principles generally recognized
as standard (hereinafter, “principles,” for example, the Green Bond Principles, Social Bond Principles,and Sustainability Bond Guidelines of the International Capital Market Association (ICMA)*1), andbonds issued by institutions whose overall activities are thought to contribute to the SDGs*2 and forwhich information disclosure on their impacts is properly*3 carried out.*4*1 In addition to the principles of the ICMA, there are principles formulated by national governments, regions,international organizations, etc. In Japan, the Green Bond Guidelines were announced by the Ministry of theEnvironment in 2017. Generally, bonds issued in accordance with these principles are called green bonds,
social bonds, or sustainability bonds, etc. depending on the principles to which they conform.
*2 Institutions whose activities themselves may contribute to the SDGs are likely to be internationalorganizations; for example, the Asian Development Bank, International Bank for Reconstruction andDevelopment (World Bank), European Bank for Reconstruction and Development, Inter-American
Development Bank, International Finance Corporation, African Development Bank, European Investment
Bank, and Nordic Investment Bank.
*3 A possible example is reporting that conforms to the impact reporting indicated in the ICMA principles andelsewhere. It must be noted with caution, however, that there are cases where the activities of the issuing
institution are considered as contributing to the SDGs, and information disclosure on the impacts is properly
carried out, but the bonds are not issued in accordance with principles.
*4 The term “SDG bonds” is used mainly in Japanese domestic markets and is not necessarily common
parlance outside of Japan.

While SDG bonds are issued to raise funds to solve environmental and social issues, in terms of
repayment of principal and interest, the creditworthiness of SDG bonds in general is similar to that ofother ordinary bonds of the issuer. SDG bonds differ from ordinary bonds in that the use of proceeds
is specified to be in service of solving environmental and social issues, and the funds for investmentcollected from multiple investors are supplied directly through financial markets into projects that
contribute to the realization of the SDGs.

p. 4

○ In what kinds of projects are the funds invested in SDG bonds used?
Some examples are given in the non-exhaustive list below.
[Figure: Examples of SDG Bond-Funded Projects]p. 5[Case (1)] DBJ Green Bonds
The Development Bank of Japan (DBJ), on the occasionof pollution control measures in the 1960s, began longterm investment and lending for environmental
remediation programs. Then, in 2014, to provide
opportunities for investing in projects with highenvironmental and social significance, the DBJ became
the first issuer of green bonds in Japan. The proceedsfrom DBJ Green Bonds are provided as loans for theconstruction or purchase of buildings that receive highratings in the DBJ Green Building Certification program,which assesses real estate properties from such
perspectives as environmental features, tenantamenities, crime and disaster prevention, community andlandscape, and partnership with stakeholders.

Collaboration

Securities
firmsGreen bondunderwriting and saleGreen bonds
Investment bypurchasing bonds
Investors

Lending
Construction
or purchaseof property

DBJ

Purchasing
green bonds(funds provision)

Interest,
redemption

Construction or purchase of property earning 3 stars orabove in the DBJ Green Building Certification program

Since 2015, social factors, not just environmental, have
(Examples of applicable projects)
Properties with high aseismic and disaster prevention
been added to the use of proceeds of the aforementioned
performance, equipped with outstanding environmental functions
bonds, and have been issued as DBJ Sustainability(solar panel installation, reuse of rainwater and recycled
wastewater, etc.), contributing to cultural communication such as
Bonds. The newly added category for the use of
by on-premise gallery, and raising the appeal of the community.
proceeds includes financing for corporations receiving
DBJ Environmentally Rated Loans (added in 2015);
financing of real estate earning a Green Star, which is the top rating on GRESB, the annual benchmark of ESG awareness in the realestate sector; and financing in the renewable energy field or clean transportation-related field (both added in 2017). In such ways, the
DBJ is actively supporting a broad range of environmentally and socially conscious initiatives.
-----------------------------------------------------------------------The Japan International Cooperation Agency (JICA) isthe agency in charge of administering Japan’s Official
Development Assistance (ODA), and carries out
international cooperation with developing economies,
etc. In late December 2016, the Japanese Government
issued “The SDGs Implementation Guiding Principles,”where “Strengthening the Means and Frameworks of
the Implementation of the SDGs” was outlined as oneof the eight priority areas, a specific measure for whichis to “Mobilize financial resources owned by the private
sector in Japan for the benefit of developing economies
through the issuance of JICA bonds.” The proceedsfrom JICA bonds go to projects contributing tosustainable economic growth, poverty reduction,
climate policy measures, etc. in developing economies
based on UN and World Bank criteria.

JICA bondunderwriting Securities
firms
and saleCollaboration

JICA bonds
Investment
andlending
Developing
Investors
economies,
JICA
Interest, redemption
etc.
Purchasing
Yen loans and overseas Repayment
JICA bonds
investment in and lending to(funds provision)developing economies, etc.
Investment bypurchasing bonds

Governments ofnine countries---------------------------------------------------------------[Case (3)] Vaccine Bonds
These are bonds issued by the International Finance
Facility for Immunisation (IFFIm). The IFFIm issues
these bonds to systematically raise funds for
inoculation programs conducted by using long-term
pledges from donor governments. All the proceeds areused to inoculate children in developing economies.
One reason vaccination programs have been delayedis said to be the lack of funds to pay for the programs.
Vaccine Bonds were conceived as a way of procuring
large amounts of funds that can be used right away,backed by donations to be provided by governments
into the future.

(Examples) Special economic
zone development(Myanmar) Geothermal power
generation (Kenya) Polio eradication(Pakistan)• Infrastructure
provision• Education• Health• Climate policy
measures[Case (2)] JICA bonds (social bonds)

Pledge long-term
donations to the
IFFIm

Vaccine Bonds
underwriting Securities
firms
and saleCollaboration Donations

Vaccine Bonds
Investment bypurchasing bonds

Investors

Interest, redemption(funds originate from donations
by governments)
Purchasing

Vaccine Bonds(funds provision)

IFFIm
•

e)

Fast provisionof funds
Gavi
Programto the Gavi
Program• Funds management(World Bank serves as financial manager)• Issuance of Vaccine Bonds(Funds procured in advance)p. 6

○ To what extent are SDG bonds being issued?
Even before the SDGs were adopted in 2015, bonds with similar benefits as SDG bonds had been
issued, tracing as far back as the Vaccine Bonds issued by the International Finance Facility for
Immunisation (IFFIm) in 2006. Thereafter, interest grew, surging in Europe and elsewhere with thedrafting of the Green Bond Principles in January 2014, so that by 2018 the scale had expanded tomore than USD 200 billion (around 22 trillion yen).
In Japan, after Vaccine Bonds began to be sold to retail investors in 2008, such bonds gained
traction, chiefly those issued by overseas entities or aimed at retail investors. More recently,
awareness has been rising further and their issuance by Japanese corporations and entities has beenon an upward trend.*1
Trend in amounts of green, social, and sustainability bonds issued worldwide(USD 1 billion)

Green bonds
Sustainability bonds
Social bonds(Source: created by JSDA from Bloomberg data)*Note that the above indicates the total amounts of green, social, and sustainability bonds based on Bloomberg’s
standards, and they are not necessarily correspondent with the total amounts of so-called “SDG-bonds”.

Trend in SDG bond issuance by Japanese issuers(1 billion yen)

(Bonds issued)

Issued amount (right axis)
Green bonds (left axis)
Social bonds (left axis)
Sustainability bonds (left axis)(Source: prepared by JSDA from data disclosed by issuers on the Green Bond
Issuance Promotion Platform of the Ministry of the Environment)

1

For specific issuance cases, see the list of issuers on the website of the Green Bond Issuance Promotion Platform
developed by the Ministry of the Environment (http://greenbondplatform.env.go.jp/en/greenbond/list.html).
A green and social bonds platform is also provided by the Japan Exchange Group (JPX), enabling issuers to post
information about green and social bonds from among those listed on the TOKYO PRO-BOND Market(https://www.jpx.co.jp/english/equities/products/tpbm/green-and-social-bonds/index.html).
p. 7

1. What are the Principles of the International Capital Market Association (ICMA)?
These are voluntary guidelines formulated with the International Capital Market Association (ICMA)*
serving as Secretariat, which clarify the definitions and principles to be observed by issuers. In particular,
the Principles refer to the Green Bond Principles（2014）, Social Bond Principles（2017）, and Sustainability
Bond Guidelines（2017）, each of which contain the following four components as their core.
(1) Use of Proceeds
The guidelines state that the proceeds are to be used for green and social projects, which should beappropriately described in the legal documentation for the security. Moreover, all the projects should
provide clear environmental or social benefits, which are to be assessed by the issuer.
(2) Process for Project Evaluation and Selection
Regarding the criteria and process for green or social project selection, the guidelines set out mattersto be communicated to investors (the environmental sustainability objectives, the process by which
the issuer decides the eligibility as green or social projects, and the eligibility criteria).
(3) Management of Proceeds
The guidelines call for managing proceeds in a separate account and ensuring high transparency ofmanagement.
(4) Reporting
The guidelines outline the information to be reported regarding the use of proceeds.
Issuers are urged to provide up-to-date information on the use of proceeds until they are fully allocatedto green or social projects, and in case of material developments thereafter, to make timely updates
on the use of the proceeds.
In measuring the impact of projects, it is recommended that qualitative and, where feasible,
quantitative indicators be measured, and that the methodology or assumptions used in the quantitative
measurements be disclosed.
It is further recommended that the issuers of bonds confirm the alignment of their bond program with theabove four core components by making use of assessment by outside institutions (second-party opinion,
verification, certification, scoring/rating).
(ICMA website: https://www.icmagroup.org/green-social-and-sustainability-bonds)

2. Green Bond Guidelines of the Ministry of the Environment
These guidelines were formulated in March 2017 by a Review Committee formed by the Ministry of theEnvironment, which included market participants and experts on the environment. Their objectives are toensure the credibility of green bond benefits for improvement of the environment, while reducing the costs
and administrative burdens for issuers, thereby spurring green bond issuances and investments in Japan.
The guidelines seek to achieve consistency with the globally recognized Green Bond Principles, and to
define matters expected of green bonds and specific methodologies. To these ends, there are fivecomponents to serve as eligibility indicators: (1) Use of Proceeds, (2) Process for Project Evaluation and
Selection, (3) Management of Proceeds, (4) Reporting, and (5) External Review, which are all organized
into three levels (“should”, “recommend”, and “to be considered”), in consideration of the needs of clericalstaff.
(Green Bond Issuance Promotion Platform of the Ministry of the Environment:
http://greenbondplatform.env.go.jp/en/policy/japan.html)

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