一般社団法人 東京国際金融機構(FinCity.Tokyo)

FY2021 Monthly Market Report vol.2 – September 2021

TMG’s “Tokyo Green Finance Initiative” (TGFI)
Toward the expansion of green finance in Tokyo, in February 2021, the Tokyo
Metropolitan Government (TMG) launched a committee for the realization of
the “Tokyo Green Finance Market”. With several discussions, the committee
introduced “Tokyo Green Finance Initiative (TGFI) : Proposals for Developing
Green Finance” in June 2021. This report summarises the main points of theCommittee’s proposals and identifies areas which may create opportunities foroutside organizations to be involved.
（Table of Contents）
1. The state of green finance1-a. The state of green finance in Japan
1-b. Issues for the development of green finance2. The purpose and ideal state of the TGFI
2-a. The purpose of the TGFI
2-b. The ideal state of the TGFI
3. Policy direction of the TGFI
4. How to proceed with the TGFI
5. Potential areas for involvement by outsideorganizations

1. The state of green finance1-a. The state of green finance in Japan
ESG bonds in Japan:
The issuance of ESG bonds in Japan hasbeen on an upward trend in recent years,
driven by growing interest in ESG investment
and the national government’s initiatives.

Looking at ESG bonds as a whole, the issuanceamount increased about 47 times and thenumber of issues increased about 49 times
between 2016 and 2020, with major growth in
the issuance amount of not only green bonds
but also social bonds and sustainability bonds.
However, the issuance amount of green bonds
was 775.4 billion yen in 2020, which is still low
compared to the global issuance amount of290 billion USD (about 30 trillion yen) in thesame year.

The movement toward decarbonization isaccelerating, and demand for green finance is
expected to increase significantly in Japan.
ESG finance is becoming a major trend inglobal finance, and further development is
expected in the future. Amidst this, in order tocatch up with Europe and the U.S., Japanneeds to majorly develop green finance undercooperation among the government, private
businesses, and others.

Growth in the amount and number of ESG bond issues in Japan (2016-2020)

Copyright: The Organization of Global Financial City Tokyo (FinCity.Tokyo)

September 28th 2021

一般社団法人 東京国際金融機構(FinCity.Tokyo)

FY2021 Monthly Market Report vol.2 – September 2021

TMG’s “Tokyo Green Finance Initiative” (TGFI)Japan’s position in global ESG
investment and green finance :1-b. Issues for the development ofgreen finance

The amount of green bond issuance and thescale of ESG investment are rapidly
increasing in Japan. However, as shown in
the figures below, compared to Europe, theU.S., China, and others, Japan’s green
finance and ESG investment are still not
sufficiently advanced, and there is major
room for growth.

TGFI has been designed for the developmentof a green society. However, there are still
many issues in developing green finance.
The term “green finance” encompasses awide range of stakeholders. It goes without
saying that there are companies, local
governments, individuals, institutional
investors, and other end-investors who raise
funds. The following is a list ofrepresentative issues for the development ofgreen finance.

Green bond issuance amount by country(2020)

Issues surrounding information
disclosure and evaluation:
At present, there is no uniform, rulesbased disclosure standard for ESG-related
information like there is for financial
information, nor is there a uniform
disclosure medium or platform.
Costs of green finance:

Initiatives by the government andothers:
In implementing measures that willcontribute to the development of green
finance, the national government, private
sector entities, and the TMG need to closely
coordinate, cooperate, and collaborate.
It is also important to clarify the role of theTGFI as much as possible, while fully taking
into account the responsibilities andmandate (delegated authority) of eachentity.
Source:Climate Bonds Initiative, Sustainable Debt: Global State of
the Market 2020, Uploaded on April, 2021
https://www.climatebonds.net/files/reports/cbi_sd_sotm_2020_0
4d.pdfCompared to conventional finance, green
finance requires additional costs, such as
for disclosure of information through thepreparation of reports and otherdocuments and obtaining reviews fromexternal organizations
Intensifying international inter-market
competition:
Competition has intensified for thedevelopment of various platforms, theattraction of fundraisers, managers, andrelated players, the acquisition of humanresources, and other such matters.
Narrow range of the corporate bondmarket and restrictions on financing
methods:
The scale of the Japanese corporate bondmarket is small compared to other major
markets, and issuers are limited to a few
large corporations. In addition, thesecondary market is not very deep.

Copyright: The Organization of Global Financial City Tokyo (FinCity.Tokyo)

September 28th 2021

一般社団法人 東京国際金融機構(FinCity.Tokyo)

FY2021 Monthly Market Report vol.2 – September 2021

TMG’s “Tokyo Green Finance Initiative” (TGFI)Structure of deposits and savings in thefinancial assets of Japanese households:
Japan has about 1.9 quadrillion yen inpersonal financial assets, of which morethan one quadrillion yen is held in cash
and deposits.
Lack of human resources:
Japan does not yet have sufficient humanresources to handle a variety of tasks
related to ESG and green finance,
including information disclosure andproject evaluation.

2. The purpose and ideal
state of the TGFI
2-a. The purpose of the TGFIThe TGFI will support corporate
investment in decarbonization, thedevelopment of environmentally friendly
technologies, and more. At the same time,
it will provide promising investment
options to individuals and investors.
Through this, it will connect the financial
assets of individuals with investments forenvironmental measures. Furthermore,investment funds will be attracted fromabroad, as well as influential players andhuman resources in ESG finance, todevelop the Tokyo financial market.
Such initiatives will promote thetransformation of Tokyo into a green cityand improve the safety and lives of its
residents. At the same time, the TGFI willcontribute to the sustainable developmentof the post-COVID-19 economy. In thisway, the TGFI will contribute to thegreenifying of both the “urban system”
and the “financial system”. It will strongly
support green strategies, growthstrategies, and the use of technology not
only in Tokyo but also throughout Japan.

2-b. The ideal state of the TGFI
(1) Positioning of the “Global Financial
City: Tokyo” project in the “Future Tokyo:
Tokyo’s Long-Term Strategy”
One of the project’s goals for 2030 is to leadthe world in*1 green finance and achieve a 15%
share of the global ESG investment balance*1.
(2) Ideal state: The TGFI will create thefuture of green finance in Tokyo➢ A digital platform for information on green
finance and other ESG-related corporate
initiatives has been established➢ The number of players participating ingreen finance is increasing, and the scopeof the market is expanding➢ Tokyo’s decarbonization initiatives and theexceptional environmental technologies of
its companies have been communicated to
the world, creating a market that attracts
green finance funds from around the world➢ Individuals and investors are being
provided with profitable investment
opportunities, and the trend of shifting“from savings to investment” isprogressing in a healthy way(3) Consideration of KPIs
For the targets of FY2025, it is desirable to set
indicators that can be measured quantitatively,continuously, and at low cost such as:➢ The amount of issuance of Japanese green
bonds, social bonds, etc., and the issuance
support by the TMG➢ The number of overseas finance companies(asset management companies active in ESG
investment, fintech companies, certification
bodies, etc.) attracted➢ The number of joint events/seminars heldwith the national government and privatesector*1 ESG investment balances include bonds, equities, loans, realestate and other ESG investment assets. Japan's ESG investment
balance includes domestic and foreign equities, bonds, and loans,and the investors are located in Japan.

Copyright: The Organization of Global Financial City Tokyo (FinCity.Tokyo)

September 28th 2021

一般社団法人 東京国際金融機構(FinCity.Tokyo)

FY2021 Monthly Market Report vol.2 – September 2021

TMG’s “Tokyo Green Finance Initiative” (TGFI)
Direction 3. Share information and nurture
ESG expertise

3. Policy direction of the TGFIThe following is a summary of the basic
concepts and policy directions of the TGFI toaddress the current status of Japan’s green
finance market and the issues arising from it.
Direction 1. Accelerate the development ofTokyo’s green finance market• Make open data of ESG-related
information on companies held by theTokyo Metropolitan Government toevaluate companies that are proactively
working on ESG• Take measures to reduce the burden of
external reviews, etc., that are required
when issuing green bonds• Continue the issuance of green bonds by
the Tokyo Metropolitan Government asan anchor issuance and share issuanceknowledge with other local governments
Direction 2. Attract market players andsupport business development• Attract foreign companies working ongreen finance, and support businessdevelopment• Provide information on ESG trends toSMEs and promote green loans incollaboration with regional financial
institutions• Incorporate the ESG index into thereference index of Tsumitate NISA*(Dollar-Cost Averaging NISA) to promote
ESG investment by individual investors*NISA: Nippon (Japan) Individual Savings Account
For Source and View full text of the TGFI:•Develop advanced environmental measuresand projects that generate demand for green
funds and strengthen the communication of
information overseas•

Strengthen information dissemination oncompanies with advanced environmental
technology through exhibitions and trade fairs•

Improve business and living environments inTokyo to attract highly-skilled international
finance human resources and implementhuman resources development programs
together with universities

4.How to proceed with the TGFIThe TGFI urges TMG to promptly put into
practice various measures in the green field,
especially those related to green bonds, toward
resolving environmental problems that threaten
the sustainability of the Earth. And given thewide range of issues that need to be addressed
and the need to respond quickly, the TGFI
proposes TMG to take concrete measures should
be launched immediately in fields where there isalready know-how, and at the same time, otherfields should be addressed in a speedy manner.

5．Potential areas for involvementby outside organizations
As TGFI gathers momentum, we hope to see
more areas for involvement by outside players
including:• supporting audit and disclosure of green/ESG
behaviour by companies• monitoring/simulating/forecasting ofenvironmental impact by companies• communication with investors andstakeholders• development of talent• VC investment in Japanese companies withenvironmental technologies

Office of the Governor for Policy Planning, Tokyo Green Finance Initiative (TGFI)～Proposals for Developing Green Finance～
Updated on June, 2021 https://www.seisakukikaku.metro.tokyo.lg.jp/pgs/2021/08/images/e94bbd86c7dfe12da1a6c232a8fb898c.pdf

Copyright: The Organization of Global Financial City Tokyo (FinCity.Tokyo)

September 28th 2021