SECOND PARTY
OPINION (SPO)
Sustainability Quality of the Issuer and Sustainability Bond
Framework
Development Bank of Japan Inc.
12 April 2024

VERIFICATION PARAMETERS
Type(s) of
instruments
contemplated▪

Green, Social and Sustainability Bond▪

Green Bond Principles (GBP), as administered by theInternational Capital Market Association (ICMA) (as ofJune 2021 with June 2022 Appendix 1)▪

Social Bond Principles (SBP), as administered by theInternational Capital Market Association (ICMA) (as ofJune 2023)▪

Sustainability Bond Guidelines (SBG), as administered by
the International Capital Market Association (ICMA) (asof June 2021)▪

Development Bank of Japan Inc. Sustainability Bond
Framework (as of April 12, 2024)

Relevant standards

Scope of verificationwww.iss-corporate.com© 2024 | Institutional Shareholder Services and/or its affiliates

SECOND PARTY OPINION
Sustainability Quality of the Issuer
and Sustainability Bond Framework

Lifecycle
Validitywww.iss-corporate.com▪

Pre-issuance verification▪

Valid as long as the cited Framework remains
unchanged

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and Sustainability Bond Framework

CONTENTSSCOPE OF WORK...................................................................................................................................................... 4
DEVELOPMENT BANK OF JAPAN INC. OVERVIEW ...................................................................................... 5
ASSESSMENT SUMMARY ...................................................................................................................................... 6
SPO ASSESSMENT.................................................................................................................................................... 9PART I: ALIGNMENT WITH ICMA’S GREEN BOND PRINCIPLES, SOCIAL BOND PRINCIPLES,AND SUSTAINABILITY BOND GUIDELINES ..................................................................................................... 9PART II: SUSTAINABILITY QUALITY OF THE ELIGIBILITY CRITERIA ..................................................... 12
A. CONTRIBUTION OF THE GREEN, SOCIAL AND SUSTAINABILITY BOND TO THE UN
SDGs.................................................................................................................................................................. 12
B. MANAGEMENT OF ENVIRONMENTAL & SOCIAL RISKS ASSOCIATED WITH THE
FINANCIAL INSTITUTION AND THE ELIGIBILITY CRITERIA ........................................................... 19
PART III: CONSISTENCY OF SUSTAINABILITY BOND WITH DEVELOPMENT BANK OF JAPANINC’S SUSTAINABILITY STRATEGY .................................................................................................................. 24
ANNEX 1: METHODOLOGY ............................................................................................................................... 29
ANNEX 2: QUALITY MANAGEMENT PROCESSES...................................................................................... 30
About this SPO ....................................................................................................................................................... 31

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Sustainability Quality of the Issuer
and Sustainability Bond Framework

SCOPE OF WORK
Development Bank of Japan Inc. (“the Issuer”, “the Bank”, or “DBJ”) commissioned ISS
Corporate Solutions (ISS-Corporate) to assist with its Green, Social and Sustainability Bond byassessing three core elements to determine the sustainability quality of the instruments:
1. DBJ’s Sustainability Bond Framework (as of April 12, 2024) – benchmarked against theInternational Capital Market Association's (ICMA) Green Bond Principles, Social Bond
Principles, and Sustainability Bond Guidelines.
2. The Eligibility Criteria – whether the project categories contribute positively to theUnited Nations Sustainable Development Goals (UN SDGs) and how they performagainst proprietary issuance-specific key performance indicators (KPIs) (See Annex 1).
3. Consistency of Green, Social and Sustainability Bond with DBJ’s Sustainability Strategy– drawing on the key sustainability objectives and priorities defined by the Issuer.

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and Sustainability Bond Framework

DEVELOPMENT BANK OF JAPAN INC. OVERVIEW
Development Bank of Japan, Inc. offers financing, investing, and advisory services. It provides
loans, equity investments, debt guarantees, and bonds. The company was founded in 1951
and is headquartered in Tokyo, Japan.

ESG risks associated with the Issuer’s Industry
Development Bank of Japan Inc. is classified in the Development Banks industry, as per ISS
ESG’s sector classification. Key sustainability issues faced by companies1 in this industry are:Sustainability Standards for financial products and services, Goal-oriented promotion ofsustainability issues, Climate change and related risks, Labor standards and working
conditions.
This report focuses on the sustainability credentials of the issuance. Part III. of this reportassesses the consistency between the issuance and the Issuer’s overall sustainability strategy.

Please note, that this is not a company specific assessment but areas that are of particular relevance for companies within thatindustry.
1

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ASSESSMENT SUMMARYSPO SECTION

SUMMARYEVALUATION2The Issuer has defined a formal concept for its
Sustainability Bond regarding use of proceeds,
processes for project evaluation and selection,
management of proceeds and reporting. This
concept is in line with the ICMA’S Green Bond
Principles, Social Bond Principles, and Sustainability
Bond Guidelines.

Part I:
Alignment with
GBP/SBP/SBG* Certain criteria of Green Buildings 3 is assessed asproviding no clear environmental and/or social benefits
according to our methodology (cf. part II of this report).
However, as there are currently several national andinternational initiatives and that the definition of green
and/or social might vary depending on sector andgeography, it is recognized that this category might beconsidered as eligible green or social categories byinvestors.

Aligned withexceptions** The project categories identified by DBJ are aligned with
the Principles, except for Categories Energy Efficiency - DBJ
Environmentally Rated Loan Program/Socioeconomic
advancement and empowerment - DBJ BCM Rated Loan
Program/Socioeconomic advancement and empowerment- DBJ Employee’s Health Management Rated Loan
Program, which are assessed as providing no clear
environmental and/or social benefits according to our
methodology (cf. Part II of this report).

The Sustainability Bond will (re)finance eligible asset
categories which include:
Part II:
Sustainability
quality of the
Eligibility
Criteria

Green categories: Green Buildings, Renewable
Energy, Clean Transportation;

Moderate

Social categories: Employment generation, andprograms designed to prevent and/or alleviate
unemployment stemming from socioeconomic
crises, Affordable Basic Infrastructure – Power Cable

The evaluation is based on the Development Bank of Japan’s Sustainability Bond Framework (March 2024 version), on theanalysed Asset Pool/Eligibility Criteria as received on April 12, 2024.
3
Funds to finance or refinance companies, buildings, real estate properties or REITs that have a ‘Green Star’ rating under the
Global Real Estate Sustainability Benchmark (“GRESB”) evaluation framework.
2

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and Sustainability Bond Frameworkand Grid Upgrade, Affordable housing, Access toessential services – healthcare.
Product-related use of proceeds categories 4
individually contribute to one or more of thefollowing SDGs:

Process-related use of proceeds categories 5
individually improve (i) the Issuer’s operational
impacts and (ii) mitigate potential negative
externalities of the Issuer’s/Borrower’s sector on one
or more of the following SDGs

For certain criteria of Green Buildings6 there is noevidence of an environmental/social contribution orof an improvement on the issuer/borrower and/or
end users’ potential negative externalities.
For Categories Energy Efficiency - DBJ
Environmentally
Rated
Loan
Program/Socioeconomic
advancement
andempowerment - DBJ BCM Rated Loan
Program/Socioeconomic
advancement
andempowerment- DBJ Employee’s HealthManagement Rated Loan Program, are assessed asproviding no clear environmental and social
benefits according to our methodology.

Green Buildings, Renewable Energy, Clean Transportation, Employment generation, and programs designed to prevent and/or
alleviate unemployment stemming from socioeconomic crises, Affordable basic infrastructure – Power cable and grid upgrade(Energy efficiency - Efficient power grid), Affordable housing, Access to essential services – healthcare
5Green Buildings
6
Funds to finance or refinance companies, buildings, real estate properties or REITs that have a ‘Green Star’ rating under the
Global Real Estate Sustainability Benchmark (“GRESB”) evaluation framework4

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The environmental and social risks associated withthose use of proceeds categories are partiallymanaged.

Part III:Consistency ofGreen, SocialandSustainability
Bond with
Development
Bank of Japan
Inc.’sSustainability
Strategy

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The key sustainability objectives and the rationale
for issuing Green, Social and Sustainability Bond areclearly described by the Issuer. The majority of the
project categories considered are in line with thesustainability objectives of the Issuer.
At the date of publication of the report andleveraging ISS ESG Research, no severe
controversies have been identified.

Consistent
with Issuer’s
sustainability
strategy

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and Sustainability Bond Framework

SPO ASSESSMENT
PART I: ALIGNMENT WITH ICMA’S GREEN BOND PRINCIPLES,
SOCIAL BOND PRINCIPLES, AND SUSTAINABILITY BOND
GUIDELINESThis section evaluates the alignment of the DBJ’s Sustainability Bond Framework (as of March
21, 2024) with the ICMA’S Green Bond Principles, Social Bond Principles, and Sustainability
Bond Guidelines.
ICMA’S GBP, SBP
AND SBG

ALIGNMENT

1. Use of Proceeds✓ * with
exceptions

OPINION
The Use of Proceeds description provided by
DBJ’s Sustainability Bond Framework is aligned *with exceptions with the ICMA’s GBP, SBP, andSBG.
The Issuer’s green and social categories alignwith the project categories as proposed by the
ICMA’s GBP, SBP, and SBG. Criteria are defined ina clear and transparent manner. Disclosure of an
allocation period and commitment to report byproject category has been provided andenvironmental and social benefits are described.
The Issuer defines a look-back period of three
years and exclusion criteria for harmful projects
categories, in line with best market practice.
* Certain criteria of Green Buildings 7 is assessed asproviding no clear environmental and/or social benefits
according to our methodology (cf. part II of this report).
However, as there are currently several national andinternational initiatives and that the definition of green
and/or social might vary depending on sector andgeography, it is recognized that this category might beconsidered as eligible green or social categories byinvestors.
* The project categories identified by DBJ are alignedwith the Principles, except for Categories Energy
Efficiency - DBJ Environmentally Rated Loan

Funds to finance or refinance companies, buildings, real estate properties or REITs that have a ‘Green Star’ rating under the
Global Real Estate Sustainability Benchmark (“GRESB”) evaluation framework.
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Program/Socioeconomic
advancement
andempowerment
DBJ
BCM
Rated
Loan
Program/Socioeconomic
advancement
andempowerment - DBJ Employee’s Health Management
Rated Loan Program, which are assessed as providing
no clear environmental and/or social benefits according
to our methodology (cf. Part II of this report).

2. Process for
Project Evaluation✓and Selection

The Process for Project Evaluation and Selection
description provided by DBJ’s Sustainability Bond
Framework is aligned with the ICMA’s GBP, SBP,
and SBG.
The project selection process is defined. ESG risks
associated with the project categories are
identified and managed through an appropriate
process. Moreover, the projects selected showalignment with the sustainability strategy of theIssuer and clearly show the intended benefit to
the relevant population.

3. Management ofProceeds✓

The Management of Proceeds provided by DBJ’s
Sustainability Bond Framework is aligned with
the ICMA’s GBP, SBP, and SBG.
The net proceeds collected are equal to theamount allocated to eligible projects, with noexceptions. The net proceeds are tracked in an
appropriate manner. The net proceeds aremanaged per bond (bond-by-bond approach).
Moreover, the Issuer discloses the temporary
investment
instrumentsforunallocatedproceeds.

4. Reporting✓

The allocation and impact reporting provided by
DBJ’s Sustainability Bond Framework is alignedwith the ICMA’s GBP, SBP, and SBG.
The Issuer commits to disclose the allocation ofproceeds transparently and to report in an
appropriate frequency. The reporting will be
publicly available on the Issuer’s website. DBJ
explains that the level of expected reporting will
be at a portfolio level and the type of informationthat will be reported. Moreover, the Issuer

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SECOND PARTY OPINION
Sustainability Quality of the Issuer
and Sustainability Bond Frameworkcommits to report annually, until the proceeds
have been fully allocated.
The Issuer is transparent on the information
reported in the impact reporting, in line with best
market practice.

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PART II: SUSTAINABILITY QUALITY OF THE ELIGIBILITY
CRITERIA
A. CONTRIBUTION OF THE GREEN, SOCIAL AND SUSTAINABILITY BOND TO THE
UN SDGs 8
Companies can contribute to the achievement of the SDGs by providing specificservices/products which help address global sustainability challenges, and by being
responsible corporate actors, working to minimize negative externalities in their operations
along the entire value chain. The aim of this section is to assess the SDG impact of the UoP
categories financed by the Issuer in two different ways, depending on whether the proceeds
are used to (re)finance:▪
▪

specific products/services,
improvements of operational performance.

1. Products and services
The assessment of UoP categories for (re)financing products and services is based on a variety
of internal and external sources, such as the ISS ESG SDG Solutions Assessment (SDGA), a
proprietary methodology designed to assess the impact of an Issuer's products or services on
the UN SDGs, as well as other ESG benchmarks (the EU Taxonomy Climate Delegated Acts, theICMA Green and/or Social Bond Principles and other regional taxonomies, standards andsustainability criteria).
The assessment of UoP categories for (re)financing specific products and services is displayedon a 3-point scale (see Annex 1 for methodology):
ObstructionNo
Net Impact

Contribution

The impact of the UoP categories on UN Sustainable Development Goals is assessed with proprietary methodology and may
therefore differ from the Issuer's description in the framework.
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Each of the Green, Social and Sustainability Bond’s Use of Proceeds categories has beenassessed for its contribution to, or obstruction of, the SDGs:
Green Eligible Categories:

USE OF PROCEEDS(PRODUCTS/SERVICES)CONTRIBUTIONOROBSTRUCTIONSUSTAINABLE
DEVELOPMENT GOALS

Commercial Green Buildings
Funds to finance or refinance buildings
which meet one of the following:▪

DBJ Green Building Certification
Program : 5,4 or 3 stars▪

LEED (Leadership in Energy andEnvironmental Design): Platinum,Gold or Silver▪

BREEAM(BuildingResearch
Establishment
Environmental
Assessment Method): Outstanding,
Excellent or Very good▪

CASBEE(Comprehensive
Assessment System for Built
Environment Efficiency): S, A or B+
Rank▪

BELS (Building-Housing Energyefficiency Labelling System): 5, 4 or
3 stars▪

ZEB, Nearly ZEB, ZEB Ready andZEB Oriented / ZEH, Nearly ZEH,ZEH Ready and ZEH Oriented (all ofwhich represents the same or
higher level of performancecompared to BELS 5 Star)

Contribution

Green Buildings▪

Funds to finance or refinancecompanies, buildings, real estate
properties or REITs that have a ‘GreenStar’ rating under the Global Real
Estate Sustainability Benchmark(“GRESB”) evaluation framework.

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No
Net Impact-

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Green Buildings
Funds to finance or refinance buildings withhigh environmental scores, which meet oneof the following;▪

For commercial real estates,buildings which meet the CBIcriteria set for relevant cities(Tokyo’s criteria would be used forJapan)

Contribution

Green Buildings
Funds to finance or refinance buildings withhigh environmental scores, which meet oneof the following;▪

Contribution

For data centers, buildings withPUE (Power Usage Effectiveness)below 1.5

Renewable Energy
Funds to finance or refinance renewableenergy projects below the threshold of 100g
of CO2 per kWh:
Construction, acquisition, maintenance,
and/or operation of solar, wind (onshore
and offshore), geothermal, run-of-riverhydropower9 and tidal and wave power
assets.

Contribution

Renewable Energy
Funds to finance or refinance renewableenergy projects below the threshold of 100g
of CO2 per kWh:Contribution

Construction, acquisition, maintenance,
and/or operation of biomass power assets
involving wood pellets certified with FSC,
PEF or Sustainable Biomass Program (SBP).

Renewable Energy
Funds to finance or refinance renewableenergy projects below the threshold of 100g
of CO2 per kWh:

9

Contribution

DBJ has an exclusionary criteria which excludes large-scale (over 25MW capacity) hydropower dams.

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Construction, acquisition, maintenance,
and/or operation of biomass power assets
involving palm kernel shell (PKS).

Clean Transportation
Funds to finance or refinance cleantransportation projects or loans tocompanies exclusively for use for cleantransportation projects:▪

Installation and/or maintenance ofenergy-efficient and/or electrictrains▪

(Re)construction,
extension,
maintenance, and/or upgrade ofrail lines▪

(Re)construction,
maintenance,
operation and/or upgrade ofrailway systems and assets▪

Infrastructure and components
which could help increase thetransport capacity and improve theContribution

efficient movement10

EnergyEfficiency
Environmentally
Rated
Program

DBJ
Loan

Loans to companies that are rated A, B or C
under the DBJ Environmentally Rated Loan
Program11

No
Net Impact-

Social Eligible Categories:

USE OF PROCEEDS(PRODUCTS/SERVICES)CONTRIBUTIONOROBSTRUCTIONSUSTAINABLE
DEVELOPMENT GOALS

DBJ confirms that project categories under Clean transportation only include railway and railway vehicles. The loan andinvestment for the construction of new railway vehicles to improve user convenience are eligible.
11
The DBJ’s rated loan programs (https://www.dbj-sustainability-rating.jp/en/enviro/) are structured around score indicators,
and the DBJ does not require borrowers to commit to any Use of Proceeds (UoP) eligibility criteria. Consequently, the proceeds
may be allocated to general corporate purposes. With that, ISS-Corporate rates such loan programs as having No Net Impact
and not aligning with ICMA principles, given the lack of visibility into the financed assets or projects.
10

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Employment
generation,
andprograms designed to prevent
and/or alleviate unemployment
stemmingfromsocioeconomic
crisesFunds to finance or refinance businesses
negatively impacted by the economic
slowdown from socioeconomic crisis andnatural disasters through DBJ’s respective
socioeconomic crisis financing programs,
such as the Regional Emergency Response
Program12

Contribution

Affordable basic infrastructure –Power cable and grid upgrade(Energy efficiency - Efficient powergrid)13
Funds to finance or refinance electric power
cable and grid extensions and upgrades
mainly for disaster preparation orreconstruction (the extensions and upgrades
may also be included where it contributes tohigher efficiency of the grid, and to facilitate
the connection of renewable energy sources
to the general network)

Socioeconomic advancement andempowerment - DBJ BCM Rated
Loan Program
Loans to companies rated A, B or C under
the DBJ BCM Rated Loan Program14

Contribution

No
Net Impact-

Affordable housing
Funds to finance or refinance housingbusiness serving vulnerable populations,such as affordable housing15

Contribution

DBJ confirms that they make loans only to corporations and not to individuals. The target population of this finance programis domestic companies and/or Japanese people damaged by the crisis. https://www.dbj.jp/en/service/program/emergency/
13
The entire country of Japan is at risk of various disasters, such as earthquakes and tsunamis. The proceeds will be solely
allocated to enhancing disaster resilience for the transmission of electricity.
14
The DBJ’s rated loan programs (https://www.dbj-sustainability-rating.jp/en/bcm/) are structured around score indicators, andthe DBJ does not require borrowers to commit to any Use of Proceeds (UoP) eligibility criteria. Consequently, the proceeds may
be allocated to general corporate purposes. With that, ISS-Corporate rates such loan programs as having No Net Impact andnot aligning with ICMA principles, given the lack of visibility into the financed assets or projects.
15
Affordable housing includes light-cost home for the aged (a facility that aims to provide meals and other necessary daily
conveniences at no charge or at a low cost; Article 20-6 of the Elderly Welfare Law).
12

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Access to essential services healthcare
Funds to finance or refinance loans todomestic healthcare companies, whichmeet one of the following criteria;

Contribution

Financing, acquisition, maintenance andoperation of public hospitals and hospitals
run by a social medical care corporation ora social welfare corporation and nursing
homes

Access to essential services healthcare
Funds to finance or refinance loans todomestic healthcare companies, whichmeet one of the following criteria;
Financing of medical care facilities, medical
equipment and product manufacturers that
contribute to treating and preventing the
spread of infectious diseases and financingof pharmaceutical companies contributing
to testing and R&D toward alleviating
symptoms and preventing the spread of
infectious diseases

Socioeconomic advancement andempowerment - DBJ Employee’s
Health Management Rated Loan
Program
Loans to companies rated A, B or C under
the DBJ Employee’s Health Management
Rated Loan Program16

Contribution

No
Net Impact-

2. Improvements of operational performance (processes)
The below assessment aims at qualifying the direction of change (or “operational impact
improvement”) resulting from the operational performance projects (re)financed by the UoP
categories, as well as related UN SDGs impacted. The assessment displays how the UoP
categories are mitigating the exposure to the negative externalities relevant to the businessmodel and the sector of the Issuer’s clients.
The DBJ’s rated loan programs (https://www.dbj-sustainability-rating.jp/en/health/) are structured around score indicators,
and the DBJ does not require borrowers to commit to any Use of Proceeds (UoP) eligibility criteria. Consequently, the proceeds
may be allocated to general corporate purposes. With that, ISS-Corporate rates such loan programs as having No Net Impact
and not aligning with ICMA principles, given the lack of visibility into the financed assets or projects.
16

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DBJ finances operations/processes in third-party sectors which are not listed in the Issuer’s
Framework. As such, ISS ESG is not in a position to display the exposure to negative
externalities linked to the sector of the operations/processes financed. Negative externalities,
if present, could have an impact on the overall sustainability quality of the issuance.
The table below aims at displaying the direction of change resulting from the operational
performance improvement projects. The outcome displayed does not correspond to an
absolute or net assessment of the operational performance.
USE OF PROCEEDS (PROCESSES)OPERATIONALIMPACT
IMPROVEMENT17SUSTAINABLE
DEVELOPMENTGOALSGreen Building18
Funds to finance or refinance buildings withhigh environmental scores, which meet efollowing:▪

Based on Tokyo Metropolis Building
Environment plan system, both
Perimeter Annual Load (“PAL”)
reduction rate and Energy Reduction
Ratio (“ERR”) are in the top two levels
for retrofitting existing buildings to be
more energy efficient✓Limited information is available on the scale of the improvement as no threshold is provided. Only the direction of change isdisplayed.
18
The green building projects financed under this framework could improve the energy efficiency of existing buildings.
17

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B. MANAGEMENT OF ENVIRONMENTAL & SOCIAL RISKS ASSOCIATED
WITH THE FINANCIAL INSTITUTION AND THE ELIGIBILITY CRITERIA
The table below evaluates the Eligibility Criteria against issuance-specific KPIs. DBJ confirmsthat vast majority of the assets are and will be located in Japan.
ASSESSMENT AGAINST KPIs
ESG guidelines into financing process
Development Bank of Japan Inc. has an overarching Policy on Sustainability,19 which states
the Bank’s objectives in sustainability. Under the Policy, DBJ has developed the Environmental
and Social Management Policy for Financing and Investment.
The Environmental and Social Management Policy for Financing and Investment20 outlines
the exclusion criteria of the bank when financing projects, as well as policies for specificsectors. The policy also outlines that the bank will conduct additional due diligence forinvestments and loans regardless of sector for businesses that negatively impact the local
communities of indigenous peoples and businesses that expropriate land and force therelocation of residents.
ESG due diligence process for transactions are conducted on a case-by-case basis. Borrowersof DBJ are required to submit necessary information which depends on the nature of the
project and, if necessary, a due diligence report prepared by a qualified third party upon theapplication of loan. In addition to the due diligence report, projects located in Japan thatmeets the definition outline in the Environmental Impact Assessment Law21 are required to
conduct Environmental Impact Assessment. Further, DBJ confirms that local municipalities inJapan have their own additional regulations for Environmental Impact Assessment, which theborrower is required to follow. DBJ then reviews the report and conducts interviews with theborrower. In case there are potential red flags pointed out by the due diligence report, DBJ
requires the borrower to explain the associated risks and mitigation plans. DBJ also checks
for compliances with relevant host country laws, regulation and permits relevant toenvironmental and social issues in the due diligence process. Further, compliance to therelevant laws and regulations are incorporated into the covenants. While there is no
systematic definition of the project size, DBJ confirms that it will take into consideration thesize of the project and the potential risks involved in the project to decide whether to engage
with an external advisor/consultant in the due diligence process. DBJ confirms that in manycases of relatively large-sized project/asset finance, DBJ will engage with and external
advisor/consultant in the due diligence process.

Development Bank of Japan, Policy on Sustainability, https://www.dbj.jp/en/sustainability/management/regular.html
Development Bank of Japan, Our Environmental and Social Management Policy for Financing and Investment Activity,
https://www.dbj.jp/en/sustainability/effort/resolution/investment.html
21
Environmental Impact Assessment Division Environmental Policy Bureau Ministry of the Environment Government of Japan,
Environmental Impact Assessment in Japan, https://www.env.go.jp/en/policy/assess/pamph.pdf
19
20

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In addition to the Environmental and Social Management Policy for Financing and Investment,
DBJ has adopted the Equator Principles.22 DBJ will conduct environmental and social risks
evaluation for transactions that meets the criteria as outlined in the Principles.23 To facilitate
the process, DBJ set up the Environmental & Social Assessment Office. Based on theinformation provided by the borrower, the business units, Structured Finance Department
and the Environmental & Social Assessment Office will conduct an assessment and categorize
the environmental and social risks in line with the Equator Principles categorization (A, B, C).
DBJ confirms that in addition to the forementioned internal departments, for projects that fallunder Equator Principles, third party professionals are involved in the due diligence process.
Specifically for projects that falls under Categories A and B of Equator Principles, DBJ requires
the borrower to make covenants in the financing documentation to ensure compliance ofPrinciple 2 to 10 of Equator Principles. For category A and, as appropriate, B projects, DBJ also
confirms that it requires the borrower to provide reports prepared by external experts or by
the borrower’s inhouse staff.
DBJ confirms that for all assets financed under the Framework, it will not participate in the
project in case the project involves significant adverse environmental and social risks. In casethe project presents a manageable potential negative environmental and social impact, DBJ
may incorporate necessary covenants in the transaction, such as obtaining/maintaining
permits, or providing periodic environmental or social reports. DBJ explains that therequirements of disclosure of the report is different for each case, as borrowers are required
to report on the risks that has been identified in the due diligence report. DBJ confirms thatit rarely conducts audits and relies on monitoring report provided by qualified third party, but
explains that there are cases where external advisors/ consultants are involved in themonitoring phases. In case noncompliance are found, DBJ has the right to call an event ofdefault or require the borrower to take necessary actions. DBJ confirms that majority of theasset financed under this framework do not fall under the criteria set in the Equator Principles.
Labour, Health and Safety
Majority of assets are located in Japan where high labor, health and safety
standards ensured by national legislation, as per ISS-Corporate methodology.

✓

In addition, DBJ is a member of the Equator Principles which apply respective
labor, health and safety standards for in-scope projects. DBJ confirms that vast
majority of the eligible assets are located in Equator Principles DesignatedCountries where high health, safety and labor standards are ensured by therelevant national legislation.

Development Bank of Japan, DBJ and the Equator Principles,
https://www.dbj.jp/en/sustainability/collaboration/initiative/equator_principles.html
23
Equator Principles, July 2020, Equator Principles 4
22

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It should be noted, while it only represents a minority of the eligible assets under
this Framework, that DBJ is also involved in transactions across the globe where
national legislations do not necessarily ensure high health, safety and labor
standards.
Biodiversity
DBJ does not have measures in place ensuring that assets financed under thisframework feature the respect of biodiversity as an integral part of the planning
process. There is limited information regarding DBJ’s Environmental standards
for projects out of the scope of Equator Principles. DBJ confirms that majority of
the asset financed under this framework do not meet the financing criteria set
in the Equator Principles. It is unclear whether DBJ has policies to ensure theprotection of critically endangered, endangered, and vulnerable species, andsetting aside of biodiversity areas aside from the exclusion criteria that is publicly
disclosed on its website.

However, it should be noted that DBJ has set exclusion criteria for all its financing
activities to protect biodiversity.24 DBJ confirms that it does not invest or extend
loans to business or projects that have a negative impact on wetlands
designated under the Ramsar Convention, businesses that have a negative
impact on World Heritage Sites designated by UNESCO and businesses that
infringe on the Convention on International Trade in Endangered Species of Wild
Fauna and Flora (Washington Convention).
Additionally, DBJ is a member of the Equator Principles which apply respective
Environmental standards for in-scope projects. DBJ confirms that vast majorityof the eligible assets are located in Equator Principles Designated Countries, assuch high standards with regard to environmental impacts are considered to beensured by Designated Countries’ national legislation should the project fallwithin the scope of Equator Principles.

Community Dialogue

DBJ does not have measures in place ensuring that assets financed under thisframework feature community dialogue as an integral part of the planning
process. There is limited information regarding DBJ’s Social standards for
projects out of the scope of Equator Principles. It is unclear whether DBJ has
policies to provide the sound information of communities, Community advisory
panels and committees, surveys and dialogue platforms, and grievancemechanisms and compensation schemes.

Development Bank of Japan, Our Environmental and Social Management Policy for Financing and Investment Activity,
https://www.dbj.jp/en/sustainability/effort/resolution/investment.html
24

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It should be positively noted that DBJ has publicly stated in its website that it
will not finance projects or businesses that negatively impact the local
communities of indigenous peoples or expropriate land and force the relocationof residents.25
Further, DBJ is a member of the Equator Principles which apply respective social
standards for in-scope projects. DBJ confirms that vast majority of the eligible
assets are located in Equator Principles Designated Countries, as such highstandards with regard to environmental impacts and impacts on thecommunities are considered to be ensured by national legislation should the
project falls within the scope of Equator Principles.
However, DBJ confirms that majority of the asset financed under this framework
do not fall under the criteria set in the Equator Principles.
Inclusion

DBJ does not have policies in place to ensure universal access to the service,especially to vulnerable or disadvantaged populations. There is limited
information on whether DBJ has measures in place to ensure that somevulnerable or disadvantaged populations are excluded due to the costs,
geography of the assets financed under this Framework.

Exclusion criteria
DBJ’s due diligence assessment includes a negative screening of exclusion criteria. The Bank
excludes the following:
▪

▪
▪
▪
▪

Businesses dedicated to the manufacture or retail sale and distribution of weaponsand small arms; or businesses dedicated to the production of products and services
supporting the manufacture or retail sale of weapons and small arms.
Extraction, refining, or transportation of coal.
Ownership or operation of dedicated gambling establishments/activities.
Biomass plants designed primarily to consume food stocks.
Large-scale (over 25MW capacity) hydropower dams.

DBJ will not invest in or extend loans to business or businesspeople that may pose asignificant risk or have a negative impact on the environment or society through theiroperations.
▪

Businesses that have a negative impact on wetlands designated under the Ramsar
Convention.

Development Bank of Japan, Our Environmental and Social Management Policy for Financing and Investment Activity,
https://www.dbj.jp/en/sustainability/effort/resolution/investment.html
25

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▪
▪

Businesses that have a negative impact on World Heritage Sites designated by
UNESCO.
Businesses that infringe on the Convention on International Trade in Endangered
Species of Wild Fauna and Flora (Washington Convention).
Businesses that engage in child labor or forced labor.

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PART III: CONSISTENCY OF SUSTAINABILITY BOND WITH
DEVELOPMENT BANK OF JAPAN INC’S SUSTAINABILITYSTRATEGY
Key sustainability objectives and priorities defined by the Issuer
TOPIC

ISSUER APPROACH

Strategic ESG topics

In May 2017, DBJ established the Policy on
Sustainability, 26 recognizing climate change, natural
capital and biodiversity, circular economy, and humanrights as DBJ’s priority issues for achieving asustainable society. DBJ’s business activities are
premised on respect for human rights, along with theglobal issues of climate change and natural capital andbiodiversity. DBJ also acknowledges the importance ofaddressing the circular economy, where economic
activities are connected to natural capital. DBJ intends
to contribute to the realization of a sustainable society
through solving regional and customer challenges incollaboration with its stakeholders.

ESG goals/targets

DBJ has set targets for achieving net zero in-houseemissions (Scopes 1&2 emissions) by fiscal year 2030.
DBJ intends to pursue net zero emissions by 2050, notonly for Scope 1 (direct emissions) and Scope 2(indirect emissions) but also for Scope 3 (onlyincluding Scope 3 Category 15: emissions frominvestments and loans). The Issuer reports annually on
the progress towards the target for GHG Emissions in
Scopes 1&2 emissions, as well as for Scope 3 Category
15 emissions for the electric power sector, following
the methodology of the Global GHG Accounting andReporting Standard for the Financial Industry, which
was developed by the Partnership for Carbon
Accounting Financials (PCAF).

Action plan

The Issuer has formulated various measures that
address its key management issues deemed to bematerial by the Issuer, which coincides with the Issuer's
ESG-related goals. Specific measures include making
investments and loans that contribute to transitions

Development Bank of Japan Inc., 1 June 2017, Policy on Sustainability,
https://www.dbj.jp/en/sustainability/management/regular.html
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while maintaining stable supply in the energy sector,
launching initiatives focused on natural capital,
biodiversity, and circular economy, investing instartups in the climate and deep technology sectors,
deploying safety net functions, etc. The DBJ Group isadvancing green, transition, and innovation initiatives
through its GRIT Strategy, and intends to makeinvestments and loans totaling ¥5.5 trillion over thefive years of the strategy from 2021FY.27
DBJ provides financial support for initiatives that leadto reductions in GHG emissions based on the mediumto long-term transition plans of customers in highemitting industries. DBJ aims to achieve net zero GHG
emissions by 2050 by promoting transitions todecarbonization, including within regions.

Climate Transition Strategy

Top four areas of breaches ofinternational norms and ESG
controversies in the industry28

In an environment where uncertainties such as risingfuel prices and geopolitical risks are increasing, DBJ
confirms to provide financial support to high-emitting
industries for investments in both decarbonization anda sustainable society. DBJ views it as an essential stepin the transition to a decarbonized society, eventhough it may increase the GHG emissions allocated to
DBJ. DBJ therefore intends to proactively support
investments that facilitate transitions by customers,
keeping in mind DBJ’s interim reduction target. In
order to address decarbonization across industries andregions, DBJ intends to solve problems throughfinancing and strengthen their support in terms ofproposals to stakeholders in industries and regions, aswell as offering knowledge. Moreover, DBJ intends toactively support its customers in terms of providing
capital to startups working on innovations, such as
climate tech and new technologies like nuclear fusion.
Failure to mitigate climate change impacts, Failure torespect indigenous rights, Sexual harassment in theworkplace, Failure to respect the right to an adequate
standard of living.

For more details, please visit the Issuer's Integrated Report 2023 athttps://www.dbj.jp/en/pdf/CSR_disclo/2023/DBJIntegratedReport2023.pdf.
28
Based on a review of controversies identified by ISS ESG over a 2-year period, the top three issues that have been reported
against companies within the Development Banks industry are displayed above. Please note that this is not a company specificassessment but areas that can be of particular relevance for companies within that industry.
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Breaches of international norms
and ESG controversies by theIssuerAt the date of publication and leveraging ISS ESG
Research, no controversy in which the Issuer would be
involved has been identified.

Sustainability Reporting

The Issuer reports on its ESG performance andinitiatives on an annual basis. The report is preparedby referencing the International Integrated Reporting
Framework of the International Integrated Reporting
Council (IIRC), Guidance for Integrated Corporate
Disclosure and Company–Investor Dialogue forCollaborative Value Creation; recommendations fromthe Task Force on Climate-related Financial Disclosures(TCFD), and standards from the Sustainability
Accounting Standards Board (SASB).

Industry associations, Collective
commitments

The Issuer/Borrower is a signatory of the UN Principles
of Responsible Investment and Poseidon Principles, aparticipant of the United Nations Global Compact, anda member of the Japan Business Initiative for
Biodiversity and Human Capital Management
Consortium.

Previoussustainable/sustainability-linked
issuances or transactions andpublication of sustainablefinancing framework

The Issuer has issued sustainability bonds every year
since 2015. The Issuer's most recent issuance of asustainability bond was in 2023, with an issue amountof EUR 500 million. For more information regarding theIssuer's
pastissuances,
pleasevisit
https://www.dbj.jp/en/ir/credit/sri/.

Rationale for issuanceThrough the issuance of Sustainability Bonds, DBJ aims to contribute to the realization of asustainable society and environment as a responsible issuer. DBJ Sustainability Bond
Framework aims to help DBJ promote its GRIT strategy and to achieve the goal of net zero
emissions of greenhouse gases by 2050.
Opinion: The key sustainability objectives and the rationale for issuing Green Bonds, Social
Bonds and Sustainability Bonds are clearly described by the Issuer. The majority of the project
categories financed are in line with the sustainability objectives of the Issuer.

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DISCLAIMER
1. Validity of the Second Party Opinion (“SPO”): Valid as long as the cited Framework remains
unchanged.
2. ISS Corporate Solutions, Inc. (“ISS-Corporate”), a wholly-owned subsidiary of Institutional
Shareholder Services Inc. (“ISS”), sells, prepares, and issues External Reviews, on the basisof ISS-Corporate’s proprietary methodology. In doing so, ISS-Corporate adheres tostandardized procedures designed to ensure consistent quality.
3. Second Party Opinions are based on data provided by the party to whom the Second Party
Opinion is provided (“Recipient”). ISS-Corporate does not warrant that the information
presented in this Second Party Opinion is complete, accurate or up to date ISS-Corporate
will not have any liability in connection with the use of these Second Party Opinions, or
any information provided therein.
4. Statements of opinion and value judgments given by ISS-Corporate are not investment
recommendations and do not in any way constitute a recommendation for the purchaseor sale of any financial instrument or asset. In particular, the Second Party Opinion is not
an assessment of the economic profitability and creditworthiness of a financial instrument,
but refers exclusively to the social and environmental criteria mentioned above.
Statements of opinion and other judgments given by ISS-Corporate are based on theinformation provided by the Recipient during the preparation of the Second Party Opinion
and may change in the future, depending on the development of market benchmarks,even if ISS-Corporate is requested by the Recipient to provide another Second Party
Opinion on the same scope of work.
5. This Second Party Opinion, certain images, text, and graphics contained therein, and thelayout and company logo of ISS-Corporate, are the property of ISS-Corporate (or its
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shall be deemed to refer in particular to the copying or duplication of the Second Party
Opinion wholly or in part, the distribution of the Second Party Opinion, either free ofcharge or against payment, or the exploitation of this Second Party Opinion in any otherconceivable manner.
The Recipient that commissioned this Second Party Opinion may have purchased selfassessment tools and publications from ISS-Corporate or ISS-Corporate may have provided
advisory or analytical services to the Recipient. If you are an institutional client of ISS, you may
inquire about any Recipient’s use of products and services from ISS-Corporate by emailingdisclosure@issgovernance.com.
This Second Party Opinion has not been submitted to, nor received approval from, the UnitedStates Securities and Exchange Commission or any other regulatory body. While ISS-Corporate
exercised due care in compiling this Second Party Opinion, it makes no warranty, express or
implied, regarding the accuracy, completeness or usefulness of this information and assumes
no liability with respect to the consequences of relying on this information for investment orother purposes. In particular, the research and scores provided are not intended to constitutean offer, solicitation or advice to buy or sell securities nor are they intended to solicit votes orproxies.
The parent company of Institutional Shareholder Services (“ISS”), ISS HoldCo Inc., has since
February 2021 been principally owned by Deutsche Börse AG (“DB”) with the remainder owned
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to combine ISS with Qontigo, another entity controlled by DB, with General Atlantic to become

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the sole minority shareholder of the combined entity. The combination is expected to becompleted in the third quarter of 2023. In July 2023, the stakes of Genstar and ISS managementin ISS HoldCo Inc. were acquired by DB. The non-interference and similar policies implemented
by ISS related to Genstar are no longer applicable and disclosures regarding Genstar and ISS
management’s ownership of ISS are withdrawn.
© 2024 | Institutional Shareholder Services Inc. and/or its affiliates

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ANNEX 1: METHODOLOGYThe ISS-Corporate SPO provides an assessment of labelled transactions against international
standards using ISS-Corporate proprietary methodology.

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ANNEX 2: QUALITY MANAGEMENT PROCESSESSCOPEDevelopment Bank of Japan Inc. commissioned ISS-Corporate to compile a Green, Social andSustainability Bond SPO. The Second Party Opinion process includes verifying whether the
Sustainability Bond Framework aligns with the ICMA’S Green Bond Principles, Social Bond
Principles, and Sustainability Bond Guidelines and to assess the sustainability credentials of its
Green, Social and Sustainability Bond, as well as the Issuer’s sustainability strategy.

CRITERIA
Relevant Standards for this Second Party Opinion:▪

ICMA’s Green Bond Principles▪

ICMA’s Social Bond Principles▪

ICMA’s Sustainability Bond Guidelines

ISSUER’S RESPONSIBILITY
Development Bank of Japan Inc.’s responsibility was to provide information anddocumentation on:▪

Framework▪

Eligibility Criteria▪

Documentation of ESG risks management at the framework level

ISS-CORPORATE’S VERIFICATION PROCESS
Since 2014, ISS Group, of which ISS-Corporate is a part of, has built up a reputation as a highlyreputed thought leader in the green and social bond market and has become one of the first
CBI approved verifiers.
This independent Second Party Opinion of the Green, Social and Sustainability Bond to beissued by Development Bank of Japan Inc. has been conducted based on a proprietary
methodology and in line with the ICMA’S Green Bond Principles, Social Bond Principles, andSustainability Bond Guidelines.
The engagement with Development Bank of Japan Inc. took place from January to April
2024.

ISS-CORPORATE’S BUSINESS PRACTICES
ISS-Corporate has conducted this verification in strict compliance with the ISS Group Code of
Ethics, which lays out detailed requirements in integrity, transparency, professional
competence and due care, professional behavior and objectivity for the ISS business and teammembers. It is designed to ensure that the verification is conducted independently and without
any conflicts of interest with other parts of the ISS Group.

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About this SPO
Companies turn to ISS-Corporate for expertise in designing and managing governance,compensation, sustainability and cyber risk programs that align with company goals, reducerisk, and manage the needs of a diverse shareholder base by delivering best-in-class data,
tools, and advisory services.
We assess alignment with external principles (e.g. the ICMA Green / Social Bond Principles),analyse the sustainability quality of the assets and review the sustainability performance of theIssuer themselves. Following these three steps, we draw up an independent SPO so thatinvestors are as well informed as possible about the quality of the bond / loan from asustainability perspective.

Learn more: https://www.iss-corporate.com/solutions/sustainable-finance/bond-issuers/

For more information on SPO services, please contact: SPOsales@iss-corporate.com

Project teamProject lead

Project support

Project support

Project supervision

Masaki Kadowaki
Associate
Sustainable FinanceResearch

Jason Yu
Associate
Sustainable FinanceResearch

Adams Wong
Associate Vice
President
Sustainable FinanceResearch

Marie-Bénédicte
Beaudoin
Associate Director
Head of Sustainable
Finance Research

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