Sustainability Policy ofJapan Finance Organization forMunicipalities

June 2023
Japan Finance Organization for Municipalities

1.

Introduction
This policy sets forth the basic policy on sustainability matters of the Japan Finance Organizationfor Municipalities (“JFM”). All business activities of JFM will be conducted in accordance with thispolicy.
In this policy, JFM’s sustainability matters refer to concepts that include its contribution to thecreation of sustainable local communities, as well as its consideration of environmental, social andgovernance (ESG) factors in its business activities.
2.

Implementation SystemThe Sustainability Committee has been established as a body to deliberate on the overallsustainability initiatives of JFM. The Sustainability Committee is chaired by the president and CEO
and composed of all senior executive directors, a director-general, a chief credit officer, and internalauditors.
In order to identify and review issues related to sustainability, the Sustainability Committee
deliberates on Environmental issues, such as climate change; Social issues, such as diversity, the work
environment, and human rights; and Governance issues, such as ethics and legal compliance.
3.

Basic Policy
Pursuant to its mission and management philosophy, JFM will, throughout its entire businesscovering lending to local governments, funding and support for local governments, give consideration
to ESG factors, not only in terms of the nature of its business but also the manner in which it conducts
its business, and thereby contribute to the sustainable development of local communities.
<JFM’s Mission>
JFM will, as a joint funding organization for local government borrowings that is wholly owned
by all Japanese local governments, provide local governments with long-term, low-interest funding
and fine-tuned support according to their policy needs, pursuant to its mission of "supporting local
economies through finance to create a future for regions," and thereby will contribute to the soundfinancial management of local governments and the welfare of local residents as well as thesustainable development of local communities.
<Management Philosophy>
1

Being Responsive to Local Government Needs

2

Strengthening Confidence from Capital Markets

3

Ensuring Responsible Corporate Governance as a Joint Organization of Local Governments

3.1.

Consideration for the Environment

3.1.1.

Loans to Projects that Contribute to Environmental Improvement

JFM will, based on the Local Government Borrowing Programme prepared by the nationalgovernment, provide funding to local governments for various businesses that serve to improve theenvironment, including sewerage and water service businesses. In providing the funding, JFM willtake advantage of sustainable finance, including green bonds, as a means to procure loan sources, anddirect funds from ESG investors towards environmental improvement initiatives in local communities,
thereby contribute to the creation of a virtuous cycle for solving environmental issues.
3.1.2.

Initiatives at JFM’s Office

JFM will encourage its office to conserve electricity, promote green procurement (purchasing goods
with less environmental burden) and other initiatives that contribute to the reduction of environmental
burden, and thereby show consideration for the environment.
3.2.

Fulfilling Social Responsibility

3.2.1.

Sustainable Development of Local Communities

With the fundamental aim of promoting the welfare of local residents, local governments in Japan
provide a wide range of administrative services that are closely related to the lives of residents. To
ensure that local governments provide administrative services stably and sustainably, the national
government has established a local finance system to guarantee financial resources for local
governments at the macro and micro level (local taxes, local allocation taxes, local government
borrowings, etc.). As a joint funding organization for local government borrowings, JFM plays a rolein the local finance system and is essential for the stable administrative and financial management oflocal governments.
Under such a system, JFM will provide long-term, low-interest funding to local governments basedon the Local Government Borrowing Programme, and thereby contribute to the creation of sustainablelocal communities, including the maintenance and improvement of social welfare, development ofdisaster-resistant communities, and development of environmentally friendly communities, including
in terms of decarbonization.
In addition, JFM will, as a good partner for local governments, carry out necessary investigations,research and support, according to local policy needs, on various issues faced by local governments,
such as ensuring fiscal soundness and financing; support them in solving those issues; and thereby
contribute to the creation of sustainable local communities.
3.2.2.

Contributing to Capital Markets

JFM will, in order to procure necessary funds from the capital markets in a stable manner as a joint
funding organization for local government borrowings, make use of a variety of procurement methods
and take flexible and timely actions in accordance with the needs of the capital markets. Through such

activities, JFM will enhance its presence as a leading public-sector bond issuer and actively contributeto the sound development of capital markets.
3.2.3.

Inclusive and Vibrant Work Environment

In order for JFM to fulfill its mission over the long term and contribute to the creation of sustainablelocal communities, it is important for JFM itself to be a sustainable organization. Therefore, in orderto create a work environment in which all employees can work with vigor and peace of mind, JFM
will respect human rights, prohibit discriminatory behavior and any type of harassment, and promote
initiatives to ensure work-life balance, thereby showing consideration for the maintenance andimprovement of employees’ mental and physical health.
Furthermore, JFM will ensure human resource development that respects the autonomy ofemployees and their willingness to take on new challenges when fostering human resources in orderto build an organizational culture in which everyone can feel a sense of job satisfaction and play anactive role. At the same time, JFM will provide a work environment in which human resources withdiverse backgrounds, irrespective of gender, age, or disability, can mutually share and enhance theirknowledge and experience and maximize their potential.
3.3.

Robust Governance3.3.1.

Organizational Structure

In order to ensure appropriate management as a joint funding organization that is wholly owned by
all Japanese local governments, JFM has set up the Representative Board, which is comprised ofrepresentatives from local governments, etc., as its supreme decision-making body so that the local
governments, i.e., the funders themselves, take responsibility and engage in management
autonomously and independently. In addition, JFM has a robust governance structure with various
checking functions, including external audits and the Supervisory Committee, which consists ofindividuals with significant expertise in appropriate risk management, local government
administration and finance, economics, finance, laws and accounting. With such a system, JFM will
strive to secure the confidence of the capital markets far into the future by maintaining a sound andappropriate financial structure.
3.3.2.

Respect for Human Rights and Legal Compliance

JFM respects human rights and complies with various laws, regulations and ethical standards in all
its business activities. In the unlikely event that a violation is detected, JFM has a system that enables
it to take prompt and appropriate action, such as establishing a compliance committee.
4.

Dialogue and Disclosure4.1.

Dialogue with Local Governments

With the aim of growing sustainably together with local governments as a joint organization of local
governments, JFM will hold dialogues through a variety of channels to appropriately identify andanalyze local governments’ needs, and will carry out business operations accordingly.
4.2.

Dialogue with Investors

As a leading public-sector bond issuer, JFM will hold constructive dialogues with domestic andforeign investors to meet market expectations.
4.3.

Appropriate Disclosure

JFM is able to carry out smooth business operations based on the confidence of external parties,including the capital markets. In order to maintain and strengthen this confidence, JFM will disclose
financial and non-financial information, including sustainability matters, in an active, timely andappropriate manner to ensure transparency.