Tokyo Green Finance Initiative (TGFI)～Proposals for Developing Green Finance～

June 2021
Committee for the realization of the Tokyo Green Finance Market(tentative name)Introduction(Global warming and sustainability: Significance for Tokyo)
The sustainability of the global environment has become an issue shared by all people.
With the global increase in natural disasters such as heavy rains and typhoons, the global
environment is reaching a major turning point, intensifying our sense of urgency that we areapproaching a “point of no return” where stability and resilience will be irreversibly lost. The
Intergovernmental Panel on Climate Change (IPCC)’s1 special report “Global Warming of 1.5°C,”
published in 2018, states that limiting temperature rise to a less risky 1.5°C would requireachieving net-zero CO2 emissions globally by around 2050.
Under these circumstances, the world is making efforts on a grand scale to urgently reducing
emissions of CO2 and other greenhouse gases. In addition to Europe, which is leading the way ofthis movement, the United States under the Biden administration is shifting in the direction ofemphasizing sustainability. The Government of Japan has formulated the “Green Growth Strategy
Through Achieving Carbon Neutrality in 2050” and set forth its stance on working toward
decarbonization.
As one of the world’s largest cities, it is extremely important for Tokyo to proactively respond to
this issue from the perspective of maintaining and improving the lives of the approximately 14
million residents who live here.
(A “game changer” for economy and industry: Making Tokyo a “place that will be chosen”)
As progress is made toward achieving the Sustainable Development Goals (SDGs), ESG,
comprising environmental (E), social (S), and governance (G) issues, may significantly change
the shape of the global economy, society, and industry in the future.
Consumers around the world are increasingly interested in transforming their own consumption
so that it is consistent with environmental and social sustainability, and companies that produce
goods and services are expected to increasingly choose “places” where they can create added value.
The Tokyo Metropolitan Government (TMG) needs to accelerate its efforts to ensure that Tokyo
continues to be selected as a place for diverse economic activities and creation of added value.
The SDGs and ESG will also provide many new investment opportunities, such as industrial
structural transformation and technological development. From the perspective of realizing
sustainable growth in the post-COVID-19 era, Tokyo and Japan need to take proactive measures
to use climate change countermeasures and other measures as seeds for new growth.

Intergovernmental Panel on Climate Change (IPCC): An intergovernmental organization established in 1988 by the United Nations Environment
Programme (UNEP) and the World Meteorological Organization (WMO). It provides policy makers with a comprehensive assessment of global
warming from scientific, technological, and socioeconomic perspectives.
1

1

In this context, the TMG is promoting “Sustainable Recovery,” which aims for sustainableeconomic and social recovery with an eye toward the post-COVID-19 era, and has positioned
climate change countermeasures as one of the key measures to achieve this. Considering
environmental efforts as an investment in growth rather than a cost, the TMG has embarked on
actions to achieve “Carbon Half” by 2030 and the “Zero Emission Tokyo” strategy by 2050.
Through these actions, it is expected that Tokyo will evolve into a cutting-edge green city that canbe chosen by the world as a place for creating added value, and that there will be achievement ofboth an improvement in the quality of life of Tokyo residents and sustainable growth of Tokyo’s
economy.
(The importance of green finance and the significance of TGFI)
Finance plays a key role in promoting the above efforts.
As the world begins making major moves toward achieving the SDGs, a large amount of funds
will be needed to accelerate ESG initiatives, including decarbonization, and finance will play animportant role in providing private funds to these areas alongside public funds. In particular, inthe world of global finance, there is a growing movement by investors and others to demand
climate change countermeasures, and there is an urgent need to develop ESG finance,2 especiallygreen finance aimed at the “E” in ESG that contributes to solving environmental problems.
Furthermore, the participation of a wide range of parties, including small and medium-sizedenterprises (SMEs), is indispensable for promoting efforts to achieve zero emissions in Tokyo. It
is also necessary to maintain an environment that enables a wide range of parties to secure thenecessary funds in an appropriate manner.
Moreover, it is necessary to link the abundant personal financial assets in Japan with needs for
ESG funds, including those for decarbonization. In addition to its significance in facilitating the
procurement of funds for environmental measures, green finance also has major significance forproviding promising investment options to individuals and investors, and can serve as anopportunity to encourage shifts from “savings to investment,” a long-standing issue in Japan.
Furthermore, it will be important to attract funds not only from within Japan, but also fromoverseas to Japan.
As ESG finance, especially green finance, is becoming a global trend, Tokyo, as one of the world’s
financial centers, needs to play a role as a major ESG finance center to meet finance demands inJapan and of the world. The enhancement of Tokyo’s presence as an international financial city
through these efforts will also contribute to the improvement of the lives of Tokyo residents andthe development of the economy. In light of this, the TMG needs to take immediate and proactive
action in the field of green finance.
Toward the expansion of green finance in Tokyo, in February 2021, the TMG launched acommittee for the realization of the “Tokyo Green Finance Market (tentative name)” made up of
ESG finance: Investment and financing that takes into account non-financial information such as the environment, social factors, and corporate
governance.
22experts, where considerations have progressed. The “Tokyo Green Finance Initiative (TGFI):
Proposals for Developing Green Finance” is based on discussions by the “professional staff”
comprising academics and finance industry professionals, and provides a summary following thecommittee’s discussions of the necessary environment for the development of green finance inTokyo, measures that are considered to be meaningful, and medium- to long-term issues to beconsidered. The wide-ranging content including not only measures that the TMG can adopt on its
own, but also those that can be realized through dialogue and cooperation with the private sector
and the national government, and those intended to serve as a guidepost for a wide range of parties.
TGFI will cover financing needs centered on green fields, and provide industries with newopportunities for creating added value and seeds for growth, while offering investors a wide
range of options. The TGFI is a strategic initiative to develop Tokyo’s green financeecosystem, aiming to improve the lives of Tokyo residents and achieve sustainable economic
development by creating a virtuous cycle involving the environment and the economy from
Tokyo and simultaneously promoting the greenifying of Tokyo’s “urban system” and“financial system.”
Based on these proposals, we strongly urge the TMG to swiftly implement concrete initiatives incooperation with a wide range of related parties and stakeholders, including the national
government and private businesses.

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Table of Contents
Ⅰ

The state of green finance around the world ........................................................................................ 5
１ Green finance developing around the world ..................................................................................... 5
２ Initiatives by various countries to develop green finance ............................................................... 6
３ The state of green finance in Japan ................................................................................................... 8（１）State of issuance of ESG bonds in Japan .................................................................................. 8（２）State of initiatives by the government and others ................................................................. 11（３）Japan’s position in global ESG investment and green finance ............................................... 12
４ Issues for the development of green finance .......................................................................... 13

Ⅱ The purpose and ideal state of the TGFI .............................................................................................. 15
１ The purpose of the TGFI: The significance of the TMG’s work on the TGFI ............................... 15
２ The ideal state of the TGFI ............................................................................................................. 18（１）Positioning of the “Global Financial City: Tokyo” project in the “Future Tokyo: Tokyo’s LongTerm Strategy” .................................................................................................................................... 18（２）Ideal state ................................................................................................................................ 18（３）Consideration of KPIs ............................................................................................................. 18
Ⅲ

Policy direction of the TGFI ............................................................................................................. 19
１ Accelerate the development of Tokyo’s green finance market . ..................................................... 19（１）Development of an information platform on ESG-related corporate initiatives, etc. ............. 19（２）Support for green bond issuers ............................................................................................. 19（３）Leading the market as an anchor issuer and investor.............................................................. 20
２ Attract market players and support business development ............................................................. 23（１）Attracting and fostering green finance-related asset managers, etc. ....................................... 23（２）Encouraging green finance among SMEs ............................................................................... 23（３）Attracting individual investors ................................................................................................ 24
３ Share information and nurture ESG expertise ................................................................................ 24（１）Promotion of Tokyo's advanced environmental policies and dissemination of the projects .. 24（２）Dissemination of information on companies with superior environmental technologies andpromotion of technology development ............................................................................................... 27（３）Attracting and nurturing highly-skilled human resources who will be responsible for ESG
finance................................................................................................................................................. 27

Ⅳ

How to proceed with the TGFI ........................................................................................................... 29

１ Scope of the TGFI and how to proceed ............................................................................................ 29
２ Roadmap ........................................................................................................................................... 30

Conclusion .................................................................................................................................... 31
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Ⅰ The state of green finance around the world
１ Green finance developing around the world
For the TGFI’s promotion of green finance, it is necessary to monitor the status of green
finance around the world and identify Tokyo’s issues by comparison before implementing
specific measures. This section confirms the status of “green bonds,” 3 a representative
example of green finance, and the broader concept of “ESG investment.”4The global balance of ESG investment increased by about 2.3 times in the six years from 2012
to 2018, and it is estimated that it will increase to about 4.2 times the size of 2018 by 2030.
In addition, within green finance, the issuance of green bonds, which are issued to fund thefinancing needs of green projects, has increased about 7.9 times in the six years from 2014 to
2020, and by 2035 it is estimated to increase to about 2.1 to 2.5 times the size in 2020. As thegreen bond market expands, issuers and regions are diversifying, and issuance in the AsiaPacific region has been increasing rapidly in recent years.
<Table 1> Trends in ESG investment balance (By region: 2012-2018, estimate: 2030)
Approx. 130,000 (forecast)

Unit: In billions of USD

About 2.3 times
About 4.2 times

Reference: 2018 Global Sustainable Investment Review, Global Sustainable Investment Alliance (Accessed: June 1, 2021)
Climate Change and Corporates: Past the Tipping Point with Customers and Stock Markets, Deutsche Bank

<Table 2> Trends in the annual issuance of green bonds (By region: 2014-2020, estimate 2035)
Approx. 620-720 (forecast)

Unit: In billions of USD

About 7.9 times

About
2.1-2.5 times

Reference: Market Data Platform, Climate Bonds Initiative (Accessed June 1, 2021)
OECD, Analysing Potential Bond Contributions in a Low-Carbon Transition
Green bonds: Bonds issued by companies, local governments, and others to raise funds for green projects in Japan and abroad.
ESG investment: Investment that takes into account not only conventional financial information but also environmental, social, and governancefactors. ESG investments include bonds, stocks, loans, real estate, and other ESG assets. Figure 1 shows the investment balance including these.
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Initiatives by various countries to develop green finance２

Various countries are currently advancing initiatives to develop green finance.
From the perspective of inclusive and sustainable growth, the EU has formulated acomprehensive strategy for the development of sustainable finance 5 and is implementing
various initiatives to encourage investment in sustainable projects, including for climatechange, and to make Europe a center of sustainable finance. Specifically, the European
Commission released the final report of the High-Level Expert Group (HLEG) in January
2018 and the action plan in March 2018. Since then, the EU has been successively conducting
consideration and advancing procedures for the EU taxonomy (classification andrequirements for sustainable activities), the EU green bond standard, benchmark standards
for climate change, and review of corporate information and accounting standards.
Furthermore, the action plan is being revised as part of the European Green Deal, which wasannounced in December 2019 and sets out a goal of zero net greenhouse gas emissions by
2050.
In the UK, the government issued its Green Finance Strategy in July 2019, which aims todevelop the London market by attracting new domestic and international demand in the green
finance field. In addition, in terms of stock exchanges, the London Stock Exchange haslaunched an ESG investment information platform, and the Luxembourg Stock Exchange has
established the Luxembourg Green Exchange (LGX), a disclosure platform for green bonds
and social bonds6 that issuers can use on a voluntary basis. In addition, the Luxembourg
Stock Exchange has established the Luxembourg Green Exchange (LGX), a disclosure
platform for green and social bonds that issuers can use on a voluntary basis.
As described above, European countries initially took the lead in green finance initiatives, but
now initiatives are also rapidly progressing in Asian countries. In 2017, the Monetary
Authority of Singapore introduced the Green Bond Grant Scheme to support the external costsof issuing green bonds, which has since been expanded to include support for social bonds
and sustainability bonds.7 Most recently, in November 2020, the Green and SustainabilityLinked Loans Grant Scheme (GSLS) was announced with a system to subsidize the cost of
third-party evaluation and certification of green loans8 and sustainability loans9 especiallyfor SMEs that have been slow to respond to green finance. Hong Kong Exchanges andClearing Limited has also launched a platform for ESG products called STAGE, which also
provides information on ESG finance, including webinars and research results.
Sustainable finance: A concept that encompasses a wide range of funding methods, including not only ESG investments, but also sustainableloans, bonds, and a variety of other financial services.
6
Social bonds: Bonds that use funds for projects to address social issues
7
Sustainability bonds: Bonds that use funds for projects that contribute to both environmental and social development.
8
Green loans: Loans limited to environmentally friendly businesses.
9
Sustainability loans: Loans limited to initiatives aimed at achieving a sustainable society.
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As interest in green finance grows worldwide, it is necessary to monitor such global trends ina timely and accurate manner when promoting TGFI.

【Column ①】 Luxembourg’s initiatives
In Europe, bonds are usually listed on stock exchanges such as the Luxembourg Stock
Exchange and the London Stock Exchange because being a listed bond is often arequirement for investment by institutional investors. These exchanges have establisheddisclosure platforms for green bonds and social bonds that issuers can use on a voluntarybasis. A representative example is the Luxembourg Green Exchange (LGX) of the
Luxembourg Stock Exchange. If an issuer with bonds listed on the exchange wishes to use
the LGX, it can do so by committing to comply with the Green Bond Principles of theInternational Capital Market Association (ICMA) and posting relevant documents. This
helps minimize the additional burden on issuers without requiring the exchange’s own
standards. As a result, about a third of the green bonds listed on global stock exchanges in2019 were listed on the Luxembourg Stock Exchange.
In Luxembourg, various initiatives have been implemented since around 2012 based on
discussions between the public and private sectors, including the introduction of various
certification labels and the use of public-private partnership funds to secure funding forthe transition to a low-carbon society. The core policies of the initiatives are set out in the
Luxembourg Sustainable Finance Roadmap. The LGX was realized as part of theGovernment of Luxembourg’s efforts to make Luxembourg a sustainable finance hub.
<Number of green bond issues listed (by stock exchange)>*As of January 2021 for Luxembourg, December 2019 for London, August 2017 for Shanghai, and January 2021 for Tokyo
Reference: Prepared based on the materials of the second meeting on the Advisory Panel for “Global Financial City: Tokyo”
Vision on January 29, 2021

<Listed par value of green bonds (by stock exchange)>*Points in time and reference: ibid.

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３

The state of green finance in Japan
Next, we will confirm the current situation in Japan regarding ESG investment and green
finance, taking into account the state of ESG bond issuance in Japan and government
initiatives.

(１) State of issuance of ESG bonds in Japan
The issuance of ESG bonds10 in Japan has been on an upward trend in recent years, driven
by growing interest in ESG investment and the national government’s initiatives,
including those of the Ministry of the Environment.
Looking at ESG bonds as a whole, the issuance amount 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 of 290 billion USD (about 30
trillion yen) in the same year.
The movement toward decarbonization is accelerating, 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., Japan needs to majorly develop green finance undercooperation among the government, private businesses, and others.
<Table 3>Trends in the amount and number of ESG bonds issued publicly in Japan（20162020）

22,00020,00080

Sustainability (amount ofissues)Social (amount of issues)

74

70

18,00016,00014,00012,000

7,754Green (amount of issues)
Sustainability (number ofissues)Social (number of issues)

47

5,650

Green (number of issues)

26
22

6,000

2,000
0

9,150

1
100

2
3…

2,363
9
6

1,231
2016

2017

660

20

14

10

2,521
2018

30

25

5,119

4,000

50
40

10,000
8,000

47

60

4,435
1,370
2019

10

0
2020

ESG bonds: A term used in this report to refer to bonds that aim to solve ESG-related issues, such as green bonds, social bonds, andsustainability bonds. The content is the same as that of “SDGs bonds,” which is the term used in the domestic market.
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<Table 4> Growth in the amount and number of ESG bond issues in Japan (2016-2020）
Bond type
Green bonds
Social bonds

Item

2016

Amount of issues (100 million yen)
Number of issues (cases)
Amount of issues (100 million yen)
Number of issues (cases)

Sustainability Amount of issues (100 million yen)
bonds

Total

Number of issues (cases)
Amount of issues (100 million yen)
Number of issues (cases)

2020

Growth in 2016-2020

100
1
350
2
―
―

7,754
74
9,150
47
4,435
25

78 times
74 times
26 times
24 times
―
―

450
3

21,339146

47 times
49 times

Reference: Prepared by the TMG from materials prepared by the Japan Securities Dealers Association

Looking at the issuance of green bonds in Japan, the Development Bank of Japan issued thefirst green bond as a domestic issuer in 2014, and since then, the number of green bondissuances by corporations and other entities has been increasing. Looking at issuers by
category, finance, real estate, and energy have a high weighting, and many green bonds areissued by large corporations or real estate investment trusts (REITs).
From the perspective of the development of green finance, in addition to the continuation andexpansion of bond issuance by these existing issuers, it is also important for the TGFI toconsider the development of issuers in unconventional sectors and sizes, the fostering ofinvestors who can respond to these issuers, and attracting market players, including theinvitation and fostering of human resources who are responsible for ESG.

9

<Table 5> Major green bond issuers in Japan
Category
EnergyIssuer
Kurimoto Holdings
JAG Energy
Canadian Solar Group

IssuerFinance, energy
Finance, transportation,
traffic
Finance, FILP agency

RetailTransportation,
traffic

Japan Housing Finance Agency

IssuerMarui GroupNYK
Mitsui O.S.K.Lines
ANA Holdings

Municipalities
Finance, real estate

Japan Retail Fund Investment Corp

Odakyu Electric Railway

JA Solar Japan

Japan Excellent

Seibu Holdings

Ichigo ECO Energy

Nippon Prologis REIT

Nogata Solar Farm

SENKO Group Holdings

Japan Real Estate Investment

Transportation,

Japan Railway Construction,

Corporation

traffic, otherTransport and Technology Agency

Shizen Energy

Invesco Office J-REIT

Tess Engineering

GLP

Local government Tokyo Metropolitan Government
Nagano Prefectural Government

Kenedix Office Investment

Tohoku Electric Power

Kanagawa Prefectural Government

Corporation
United Urban Investment

Looop

Corporation

Manufacturingindustry

Hitachi Zosen

Eurus Energy Holdings

Activia Properties

Daio Paper

GPSS Holdings

Sekisui House Reit

Meidensha

Campo

ORIX JREIT

KanekaAdvance Residence Investment

RenovaDaikenCorporation
Japan Prime Realty Investment

Tokyo Gas

Nidec

Corporation
Japan Hotel REIT Investment

ENEOS Holdings

Eco Research InstituteCorporation

J-POWER
Finance

Sumitomo Mitsui Auto Service

Category

Japan Finance Organization for

Renewable Japan
Konan Ultra Power

IssuerDaiwa Energy & Infrastructure

Nomura Real Estate Master Fund

Daiki Axis

Daiwa House REIT Investment

Development Bank of Japan

Asahi Holdings

Corporation

Sumitomo Mitsui Banking

AEON REIT Investment Corporation

Corporation

Asahi Kasei

ITOCHU Advance Logistics

Mitsubishi UFJ Financial Group

Komatsu

Investment Corporation

Sumitomo Mitsui Financial Group

Aruhi

Seiko Epson

Mizuho Financial Group

LaSalle Logiport REIT

Asahi Group Holdings

Mitsubishi UFJ Lease

Nippon Accommodations Fund

Ricoh Leasing

Comforia Residential Reit

Sumitomo Mitsui Trust Bank

CRE Logistics REIT

industry, energy
Other

Daiwa Office Investment

Tokyo Century

Hankyu Hanshin REIT

Daiwa Securities Group

Hulic Reit
Mori Hills REIT Investment

Aeon Product FinanceCorporation

Materials Corp.

Nomura Research InstituteCentral Nippon Expressway
Company
Other, energy

Okuibuki

Real estate

Mitsubishi Estate

Toda Corporation

Sumitomo Forestry

Orient Corporation

Obayashi Corporation

Tokyo Tatemono

JACCS

Toenec Corporation

Mitsui Fudosan

Toyota FinanceTakasago Thermal Engineering

The Sumitomo Warehouse

The Gunma Bank

Shimizu Corporation

Mori Building Company

The Bank of Nagoya

Kajima Corporation

Tokyu Fudosan Holdings

Orix

Daiwa House Industry

Mitsui-Soko Holdings

Mitsubishi UFJ Trust and Banking

Penta-Ocean Construction

Sumitomo Mitsui Finance andLeasing

Construction

Giga Solar

Airport construction

Corporation

Fuyo General Lease

Hitachi Capital

Mitsubishi Heavy Industries
Manufacturing

Construction, energy

West Holdings

Mitsubishi Electric Credit
NTT Finance
Honda Finance*Company names are listed in the order of when they first issued green bonds
Reference: Compiled by the TMG from examples of major green bond issuances by domestic issuers in the Ministry of the Environment’s
Green Bond Issuance Promotion Platform

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(2) State of initiatives by the government and others
In implementing measures that will contribute to the development of green finance, thenational government, private sector entities (including issuer companies, investors, financial
institutions such as securities companies and asset management companies, and exchanges),and the TMG need to closely coordinate, cooperate, and collaborate. It is also important toclarify the role of the TGFI as much as possible, while fully taking into account the
responsibilities and mandate (delegated authority) of each entity.
<Figure 6: Initiatives by the national government, JPX, and the TMG to develop green
finance>
Initiative content

National government
JPX

Ministry of Economy, Trade and Industry (METI)The Study Group on Environmental Innovation Finance, which includes members from financial
institutions and industries and other experts, discussed plans to promote the provision of funds tocompanies that are actively pursuing innovation initiatives for decarbonization and steady transitions tocombat climate change. Its interim report was compiled in September 2020.
In addition, METI, the Ministry of the Environment, and the Financial Services Agency have co-hosted
the Taskforce on Preparation of the Environment for Transition Finance since January 2021, and are
currently advancing consideration of important issues related to transition finance, including theformulation of basic guidelines.

Ministry of the Environment (MOE)
From FY2018, the MOE began to register and publicize those who support the issuanceof green bonds, etc., and launched the Financial Support Programme for Green Bond
Issuance to provide support for the additional costs of issuance through a subsidy system.
From FY2020, support has been provided aimed at sustainability bonds in which 50% ormore of the funds are allocated for green projects (CO2 reduction within Japan).
Financial Services Agency (FSA)In January 2021, the FSA established the Expert Panel on Sustainable Finance comprising
members from industry, finance, academia, and relevant ministries and agencies. The
panel has begun consideration of themes such as the promotion of sustainable finance byfinancial institutions, the provision of investment opportunities to investors throughfinancial and capital markets, and the enhancement of climate-related disclosure bycompanies. In March 2021, the Dedicated International Financial Center Page waslaunched.
Furthermore, at the meeting of the Expert Panel on Climate Change held on April 19, theconcept of realizing an “international green finance center” was presented, centered on
the FSA. In order to develop the sustainable finance market, where green bonds,
transition bonds, and the like are actively traded, it is expected that the FSA, in
cooperation with the Tokyo Stock Exchange, will establish an information base forcompanies and investors and develop a certification framework for green bonds.
In January 2018, a platform was established for bonds listed on the Tokyo Pro-Bond
Market in the Tokyo Stock Exchange, enabling information on green bonds to be postedon the JPX website.

TMG

The initial annual issuance of green bonds, which started in FY2017, was 20 billion yen,and the issuance amount was later increased to 30 billion yen. The issuance amount isplanned to be 40 billion yen in FY2021.
In November 2020, a roundtable of experts was launched to revise the “Global Financial
City: Tokyo” vision that was formulated in November 2017. One of the priority areas tobe addressed in the future is the expansion of the green finance market.

11

(３) Japan’s position in global ESG investment and green finance
As mentioned above, the amount of green bond issuance and the scale of ESG investment are
rapidly increasing in Japan. However, as shown in the figures below, compared to Europe,
the U.S., China, and others, Japan’s green finance and ESG investment are still not
sufficiently advanced, and there is major room for growth.
<Figure 7> Investment balance by country (region)（2018） <Figure 8> Green bond issuance amountby country（2020）
Canada 6%

Oceania 2%

Japan 7%

Europe 46%

United States
39%

Reference: Prepared by the TMG based on the 2018
Global Sustainable Investment Review by the
Global Sustainable Investment Alliance

Reference：Excerpt from Sustainable Debt: Global State of
the Market 2020 by the Climate Bonds Initiative<Figure 9> ESG investment balance by country (region)
Country/region

ESG investment balance in 2016
(Unit: in billions of USD)ESG investment balance in 2018
(Unit: in billions of USD)

EuropeUnited States

12,0408,723

14,075
11,995Japan
CanadaOceania

474
1,086
516

2,180
1,699
734

Total

22,89030,683

Reference: Prepared by the TMG based on the 2018 Global Sustainable Investment Review by the Global Sustainable Investment
Alliance

12Issues for the development of green finance４

Considering the enormous amount of funds needed to become carbon neutral by 2050 andto mitigate and adapt to climate change, the development of green finance to financially
support that is essential for making Tokyo and Japan’s environments as well as the global
environment sustainable, improving the lives of Tokyo residents, and sustainably
developing the post-COVID-19 economy and society. In this context, TGFI has beenworking on the development of a green society. In this context, the TGFI must play animportant role as a strategy for the development of green finance.
However, there are still many issues in developing green finance. The term “green finance”
encompasses a wide range of stakeholders. It goes without saying that there are companies,
local governments, individuals, institutional investors, and other end-investors who raise
funds. In addition, there are the major players in the financial markets, such as banks andsecurities companies, asset management companies that create investment products,
exchanges that provide platforms, information vendors, and evaluation agencies.
Therefore, in-depth discussions were held with the “professional staff” of members fromthese entities and other important players in the promotion of TGFI. A number of issues
for the development of green finance were identified in the discussions. The following is
a list of representative issues raised in the above discussion.
○

Issues surrounding information disclosure and evaluation
At present, there is no uniform, rules-based disclosure standard for ESG-related
information like there is for financial information, nor is there a uniform disclosure
medium or platform. Green bonds are principle-based, and most green bonds are issued incompliance with the ICMA’s Green Bond Principles, so the items of information to bedisclosed are relatively the same. However, the methods of disclosing the use of funds andexternal reviews is still left up to each issuer.
Furthermore, there are a number of organizations, mainly overseas, that evaluate thedisclosure of ESG initiatives of companies as a whole, rather than individual bonds, in theform of ratings. However, there is no widely shared methodology, and actual evaluations
currently vary considerably from one evaluation organization to another.

○

Costs of green finance
Compared to conventional finance, green finance requires additional costs, such as fordisclosure of information through the preparation of reports and other documents to showthat the funds will be used for decarbonization and green initiatives, and obtaining reviews

13from external organizations, in order to prevent greenwashing, 11 as stated in the ICMA’s
Green Bond Principles. In the current eased financial environment with low interest rates,
creditworthy issuers are unlikely to be constrained in their ability to raise funds even if
they do not choose green finance, as long as the conversion to green finance does not leadto a clear decrease in the coupon or increase in the offering price. On the other hand, forinvestors as well, if green finance does not lead to higher real returns and lower risks, it islikely to be a less attractive product, except for factors such as reputation.
○

Intensifying international inter-market competition
During the past few years, based on the recognition that ESG and green finance will
become important pillars of financial securities markets in the future, major overseas
financial markets have all strengthen their efforts on this front. Amidst this, competition
has intensified for the development of various platforms, the attraction of fundraisers,
managers, and related players, the acquisition of human resources, and other such matters.

○

Narrow range of the corporate bond market and restrictions on financing methods
The scale of the Japanese corporate bond market is small compared to other major markets,and issuers are limited to a few large corporations and the like. In addition, the secondary
market is not very deep. Reflecting these factors, the scale of the green bond market in
Japan is also limited at present.
On the other hand, the participation of a wide range of parties including SMEs is important
for the decarbonization of Tokyo and Japan, but it is virtually impossible for SMEs to use
green bonds to raise funds for decarbonization investments due to the additional costs andeffort involved with green bonds.

○

Structure of deposits and savings in the financial assets of Japanese households
Japan has about 1.9 quadrillion yen in personal financial assets, of which more than one
quadrillion yen is held in cash and deposits. Amidst this, the policy theme of “savings toinvestment” has been continuously promoted, but this trend has not yet progressedsufficiently at present. This has led to the fact that the actual resources for ESG financeand green finance are still not large, despite the abundant potential sources of funds.

○

Lack of human resources
Japan does not yet have sufficient human resources to handle a variety of tasks related to
ESG and green finance, including information disclosure and project evaluation. On theother hand, the competition for ESG-related human resources is intensifying worldwide.
This shortage of human resources has also become a constraint on the use of green financeby corporations and ESG investment by investors in Japan.

Greenwashing: Actions that make it appear as if the environment is being taken into consideration, even though there are no environmental
improvement effects.
11

14

Ⅱ The purpose and ideal state of the TGFI１

The purpose of the TGFI: The significance of the TMG’s work on the TGFI(The climate crisis faced by the world)
The sustainability of the global environment is now an issue faced by the world. Tokyo is
one of the largest cities in the world and promotes many values. Today, as there is a strong
need to respond to climate change, questions are being asked about the ideal state of cities
worldwide. Amidst this, there is a strong need for Tokyo to take the lead in addressing
humanity’s shared issues of climate change and decarbonization. As damage caused byweather-related disasters such as typhoons and torrential rains is increasing around the world,
it has become an urgent matter for the TMG to work on decarbonization and ensuring
environmental sustainability in order to protect the lives, health, and property of the peopleof Tokyo. Together with accelerating decarbonization efforts, the TMG needs to work on
making Tokyo a sustainable city by reforming the entire socioeconomic structure of the city,
including the very nature of the city and how people work and live within it.
(Making Tokyo a city chosen as a “place for creating added value”)
As interest in global warming as well as SDGs and ESG issues grows around the world,
consumers in various countries are becoming increasingly interested in whether goods andservices are produced in a way that is consistent with sustainability and ESG values. Amidst
this, companies are also placing greater emphasis on the processes by which their products
are made. Centered on global companies, efforts are accelerating to reduce CO2 emissions
throughout supply chains. In this context, it is expected that consumers and companies
around the world will increasingly choose “places for creating added value.” Thus, it isimportant for Tokyo to take initiatives to evolve into the world’s most advanced green citythat is chosen by consumers and companies around the world as a “place for creating added
value.”(Importance of finance in promoting green initiatives)
Finance is extremely important in promoting such efforts. In order to accelerate
decarbonization and climate change response, massive investments will be required both
domestically and internationally in the long-term. Also, in order to achieve sustainableeconomic development in the post-COVID-19 era, these investments must be used as a newsource of growth and lead to stable economic growth.
On the other hand, a considerable amount of financing will be needed in the future to makesuch investments a reality. No matter how excellent a company’s environmental technologies
may be, without financial backing, it will be difficult to fully utilize these technologies. In
addition, due to the nature of investment, needs for long-term financing are expected toincrease. Furthermore, the participation of a wide range of companies including SMEs, such15

as for energy conservation in office buildings, will be important in promoting thedecarbonization of Tokyo. Therefore, there can be a wide range of financing entities.
There is a strong need for financial functions that can smoothly meet such financing demands.
In this context, it is also important to look at how the abundant personal financial assets inJapan can be used as an anchor for the development of green finance. Personal financial
assets total about 1.9 quadrillion yen in Japan. More than one quadrillion yen is still held incash or deposits, despite calls over the years for the importance of encouraging people toshift from saving to investing. Green finance, which acts as a bridge between personal
financial assets and investments aimed at decarbonization, will help companies and otherorganizations meet their demand for funds to invest in decarbonization and energy
conservation, while providing individuals and investors with a wide range of investment
options. In this way, green finance can serve as a trigger to encourage a trend of shifting fromsavings to investment in a healthy way.
(Intensifying competition to become a hub city for green finance)
Interest in the SDGs and ESG is growing worldwide, and ESG finance is now becoming amajor trend in global finance. In addition, as huge sums of money are needed for investment
to respond to climate change and for decarbonization, there is an awareness of theimportance of obtaining global funds to promote innovation and investment indecarbonization technologies. Countries are working to make their financial markets into
hubs for green finance, and global competition among financial markets to develop ESG
finance is expected to intensify going forward.
(The purpose and significance of the TGFI)
In light of the above, as it promotes the “Global Financial City: Tokyo” vision, the TMG
must quickly advance the two mutually complementary objectives of making Tokyo a green
city through the promotion of decarbonization and initiatives for the development of green
finance, while maintaining sufficient cooperation with the national government, financial
institutions, industries, universities, and other parties. The TGFI formulated this time isbased on this awareness of the issues. Its content is not limited to measures that the TMG
can adopt on its own, but rather covers a wide range of topics, including measures to berealized through dialogue and cooperation with the private sector and the national
government, and measures that are intended to serve as a guidepost for a wide range ofparties.
Through the development of green finance in Tokyo, the TGFI will support corporate
investment in decarbonization, the development of environmentally friendly technologies,
and more. At the same time, it will provide promising investment options to individuals andinvestors. Through this, it will connect the financial assets of individuals with investments
for environmental measures. Furthermore, investment funds will be attracted from abroad,16

as well as influential players and human resources in ESG finance, to develop the Tokyofinancial market. Such initiatives will promote the transformation of Tokyo into a green cityand improve the safety and lives of its residents. At the same time, the TGFI will contributeto the sustainable development of the post-COVID-19 economy by using investment inclimate change response as a source of growth and realizing a virtuous cycle between theenvironment and the economy. In this way, the TGFI will contribute to the greenifying ofboth the “urban system” and the “financial system.” It will strongly support green strategies,
growth strategies, and the use of technology not only in Tokyo but also throughout Japan.

17

２

Ideal state of the TGFI

(1) Positioning of the “Global Financial City: Tokyo” project in the “Future Tokyo: Tokyo’s
Long-Term Strategy”
In the TMG’s long-term strategy known as the “Future Tokyo: Tokyo’s Long-Term
Strategy” formulated in March 2021, the realization of the “Global Financial City: Tokyo”
vision is positioned as one of the major projects that will lead the creation of “Tokyo’s
future.” One of the project’s goals for 2030 is to lead the world in green finance and achieve
a 15% share12 of the global ESG investment balance.
(2) Ideal state: The TGFI will create the future of green finance in Tokyo A digital platform for information on green finance and other ESG-related corporate
initiatives has been established, and this platform is being used to develop green financeand support the financing of decarbonization investments and other investments,
including those by SMEs.
 The number of players (issuers, investors, external review organizations, etc.)
participating in green finance is increasing, and the scope of the market is expanding.
 Tokyo’s decarbonization initiatives and the exceptional environmental technologies of its
companies have been communicated to the world, creating a market that attracts green
finance funds from around the world. In addition, the environmental technologies ofJapanese companies that have developed as a result of these efforts are contributing to
global warming countermeasures.
 Individuals and investors are being provided with profitable investment opportunities,
and the trend of shifting “from savings to investment” is progressing in a healthy way.
 Human resources with expertise in ESG finance and green finance are gathering in Tokyo,
and the industry is developing.
(3) Consideration of KPIs
In order to realize the goals for 2030 set forth in the Future Tokyo: Tokyo’s Long-Term
Strategy” and achieve the “ideal state” of the TGFI, it is important to clarify intermediate
goals and work toward them. For example, for the intermediate targets of FY2025, it isdesirable 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 managementcompanies active in ESG investment, fintech companies, certification bodies, etc.) attracted,”and “the number of joint events/seminars held with the national government and private
sector.” The established indicators should be reviewed flexibly in response to changes incircumstances.
ESG investment balances include bonds, equities, loans, real estate 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.
1218

Ⅲ Policy direction of the TGFIThe following is a summary of the basic concepts and policy directions of the TGFI to address
the current status of Japan’s green finance market and the issues arising from it.
1

Accelerate the development of Tokyo’s green finance market(1) Development of an information platform on ESG-related corporate initiatives, etc.
<Basic concept>
 As ESG investment spreads around the world, there is an accelerating trend of
institutional investors and asset managers incorporating ESG factors into theirinvestment decisions and engagement, leading to a growing requirement for investee
companies to further disclose ESG information.
 The development of an information platform that is easy for both investors andcompanies to use regarding a variety of corporate information on green finance and ESG
can be an important factor to promote dialogue between issuers and investors and to
attract new issuers and investors to the Tokyo market.
<Policy direction>
 Consideration should be conducted on the ideal form of effective disclosure of ESGrelated information on companies, etc., held by the TMG, while taking into account the
moves by the national government to establish an information infrastructure andcertification framework for green bonds.
 It is necessary to advance exchanges of views with asset managers and external
certification organizations to monitor the information that these entities need in the fieldsof ESG and green finance, and to disclose it in a way that is easy for everyone to use,such as by making it open data, after considering the potential room for cooperation withinformation vendors. In doing so, it will be necessary to disclose information in English
to encourage use by domestic and foreign issuers and investors.
 Since more than 70% of Tokyo’s CO2 emissions come from buildings, along withmeasures to promote green buildings, consideration should be conducted on the ideal
ways to effectively disclose information so that real estate that is superior from theperspective of decarbonization and energy conservation can also be evaluated in termsof finance.

(2) Support for green bond issuers<Basic concept>
 When issuing green bonds, issuers are required or recommended to obtain reviews andcertifications by external organizations in relation to the formulation of evaluation andselection processes for projects to which the raised funds are to be applied, and thecalculation of environmental improvement effects of the projects. 13
13

Reviews by external organizations have various names, such as “second party opinion,” “verification,” “certification,” and “rating.” According19 Obtaining such reviews and certifications by external organizations imposes a burden on
issuers in terms of cost and procedures, which in turn is the main factor for theirreluctance to engage in green finance.
 In addition to issuing green bonds as yen-denominated bonds, issuing green bonds asforeign currency-denominated domestic bonds (origami bonds) will be a promising fieldfrom the perspective of diversifying issuers’ means of raising foreign currency.
<Policy direction>
 In addition to the use of the aforementioned information platform and support in termsof data, consideration should be conducted as necessary on measures to reduce theburden of obtaining external reviews, etc., which are necessary for issuing green bonds.
 When designing the specific system, attention needs to be paid to developing content
that is easy for issuers to use and to avoid giving preferential treatment to specificevaluation organizations, by means such as cooperation with national government
systems.
(3) Leading the market as an anchor issuer and investor<Basic concept>
 The TMG became the first local government in Japan to issue green bonds in FY2017,and has continued to issue green bonds to institutional and individual investors every
year since then, accumulating knowledge and know-how as an issuer. The TMG alsoplans to issue social bonds in FY2021.
 Currently, many local governments are strengthening their efforts to address climatechange issues, and an increasing number of local governments have announced theirintention to achieve net zero CO2 emissions by 2050. It is considered effective to utilize
the green bond structure as one of the means to meet the financial needs of local
governments for promoting decarbonization initiatives and projects.14
 In addition, public pension funds and the like are leading ESG investments overseas. In
order to further expand ESG investment in society as a whole, it is important to further
increase the presence of local governments as investors.
<Policy direction>
 It is important for the TMG to maintain and improve its presence as an anchor issuer bycontinuing to issue green bonds of a certain scale.
 At the same time, the TMG should share its accumulated knowledge and know-how ongreen bond issuance with other local governments and others in order to increase themomentum for green bond issuance by a wide range of parties and accelerate the flow
to the ICMA’s Green Bond Principles, obtaining a review by an external organization is recommended.
14
Cooperation with residents and companies is essential for the implementation of business and projects, and the involvement of residents andcompanies in the environment-related business of local governments, even as investors, through the issuance of green bonds may have a positive
impact on the promotion of environment-related business themselves.

20

of utilization of domestic and foreign funds for environmental policies in Japan.
 From the perspective of improving the efficiency of monitoring the relationship between
green bonds and the use of funds, as well as streamlining the clearing, settlement, andrelated administrative work involved in the issuance and distribution of green bonds, theapplication of blockchain and other distributed ledger technologies to green bonds should
also be studied and researched.
 The TMG also participates in the financial and capital markets as an investor. It should
further consider non-financial factors, including ESG, in its investments, not only fromthe perspective of increasing long-term investment returns on assets under management,
but also from the perspective of accumulating know-how and fostering markets.

21

【Column ②】 Utilization of blockchain and other distributed ledger
technologies advancing around the world
Blockchain and other distributed ledger technologies (DLT), which have emerged as fintech-related
technologies in recent years, enable network participants to share the same ledger data under a distributed
structure. These technologies have the growing potential to build infrastructure that can operate 365 days ayear, 24 hours a day, without being affected by the operating hours of specific computers, and that is resistantto forgery and falsification. In addition, the technologies could also have advantages including improvementof the traceability of transactions and the use of smart contracts (automatic execution of transactions).
Global financial markets are already using these technologies to raise funds. The bond-i issued by the WorldBank in August 2018 is said to be the world’s first example of a global, public bond issuance using blockchain.
According to Yoshiyuki Arima (Japan Representative, Treasury, World Bank), “By sharing investors’ bondholdings on the blockchain, there is no need to go through a central clearing house or paying agent as in theconventional transaction process, making transactions more efficient and shorter.”*
These technologies are expected to have great potential for application in green finance.
The two most important pieces of information in finance have conventionally been risk and return. However,in green finance, in addition to risk and return, information such as the use of funds and impact onsustainability are also important. Blockchain and other DLT can become important technologies to realizesmooth financing based on these factors.
For example, in April 2018, Verbund, a major Austrian power company, raised funds through Grüner
Schuldschein (an ESG-related financial instrument that is a loan under German law, also known as a debt
instrument, where the funds raised are to be used for environmentally friendly projects) utilizing blockchain.
Digitizing the process from issuer to investor improved the fundraising process in terms of communication,transparency, and automation, and is considered to have reduced fundraising-related costs by 15%.
In this way, the application of blockchain and other DLT to green finance is an area that is expected to see
innovative efforts by financial market players around the world, and its future development will be closely
watched. The TMG should also actively consider the potential of application of these new technologies.
Reference material: “The Future of ESG-themed Fundraising Expanded by Blockchain: Grüner Schuldschein by Verbund of Austria,” Nomura
Capital Markets Quarterly summer 2018.
“The World Bank’s ‘Blockchain World Bank Bonds’ and Future Developments,” Nomura Capital Markets Quarterly autumn 2018.
* “The World’s First Bond Issuance Scheme Utilizing Blockchain by the World Bank,” Yoshiyuki Arima, Financial Affairs, December 3, 2018.

22

2 Attract market players and support business development(1) Attracting and fostering green finance-related asset managers, etc.
<Basic concept>
 In order to develop ESG finance and green finance in the Tokyo market, it is important
to attract and foster asset managers with knowhow in this field, a wide range of relatedcompanies including fintech start-ups, and human resources in this field.
 From this perspective, support could be implemented for entering Japan toward
attracting foreign companies, as well as support measures for fostering related companies
in Japan.
<Policy direction>
 In addition to reducing the burden of starting a business in Tokyo on foreign financial
companies engaged in green finance, consideration should be given to support measures
such as business matching with companies in Tokyo and, if necessary, support for
obtaining financial licenses. When implementing support measures, it is necessary toproperly grasp the effects of the policy by calculating the ripple effects of the attracted
companies on the Tokyo economy in as objective a manner as possible.
 Tokyo’s presence in the field of green finance should be elevated by awarding financial
businesses that promote ESG investment through the Tokyo Financial Award (ESG
Investment Category).
 At the same time, the TMG should actively disseminate information on its green financeinitiatives through public conferences, seminars, speeches, publications, websites, etc.,
in order to raise awareness of Tokyo as a center for ESG finance and green finance. In
doing so, the TMG should always be aware of the need to disseminate information in
English.
(2) Encouraging green finance among SMEs
<Basic concept>
 More than 90% of the companies in Tokyo are SMEs. In order to achieve “Carbon Half”
by 2030, it is important to promote SMEs’ decarbonization efforts, such as enhancing
energy efficiency at office buildings.
 Concerns are rising mainly among global companies about the emissions of their entire
supply chain, and decarbonization efforts are expected to become an important factor for
SMEs to continue to win demand for their products and orders from business partners.
 In Japan, the ratio of indirect finance is high, and in particular, many SMEs raise funds
mainly through borrowing and other such means rather than direct finance. Therefore, inorder to develop green finance, it is necessary to promote making bank loans and the likegreen in the field of direct finance.
 In addition, there are some industries and companies for which it is difficult to
immediately achieve decarbonization in a tangible way. It is also important to provide
23financial support to these industries and companies so that they can make a steadytransition to low-carbon operations.
<Policy direction>
 From the perspective of encouraging cooperation and coordination toward
decarbonization, the TMG should provide sufficient information to SMEs throughseminars and workshops on global trends and initiatives related to decarbonization, theSDGs and ESGs, and the financing that supports these initiatives.
 In order to promote the use of green loans for SMEs, cooperation with regional financial
institutions and the like should be considered. In doing so, effective use of data held by
the TMG on corporate ESG initiatives should also be considered. Measures to encourage
SMEs to disclose their ESG-related information should also be considered.
 Measures to support transitions by SMEs should also be considered, taking into accountthe guidelines on transition finance formulated by the national government.
(3) Attracting individual investors<Basic concept>
 In light of the changes in socioeconomic activities caused by COVID-19, individuals are
becoming increasingly interested in social issues, including measures to combat global
warming and climate change. The same is true for decarbonization and contributions to
the SDGs and ESG through finance.
 It is important to seize this opportunity to expand the scope of green finance by offering
ESG investment options not only to institutional investors but also to individual investors,
and by using this opportunity to bridge the gap between the 1.9 quadrillion yen inpersonal financial assets and investments aimed at realizing a decarbonized society.
<Policy direction>
 It is important to develop an environment that facilitates the entry of individuals into
ESG-related investments, such as by requesting the national government to incorporate
the ESG index into the reference index for the Tsumitate NISA (Dollar-Cost Averaging
NISA).
 At the same time, the TMG should provide to Tokyo residents information on global
trends related to the SDGs and ESGs, as well as the TMG’s green finance initiatives, andwork to improve financial literacy in this field.
3 Share information and nurture ESG expertise(1) Promotion of Tokyo's advanced environmental policies and dissemination of the
projects<Basic concept>
 In response to the major crisis of climate change facing the world, it is important to send24

a message about the major policy of envisioning a sustainable city in harmony withnature and strongly promoting the greenifying of the entire city.
 It is important to attract the world’s attention as a city that takes the lead indecarbonization by proactively developing and disseminating globally acclaimed
measures such as the Tokyo Cap-and-Trade Program, which was launched in 2010 aimed
at large-scale businesses (business and industrial sectors) that emit large amounts ofgreenhouse gases.
 Also, in the industrial world, including start-up companies, movements are increasing
toward innovation and social implementation of decarbonization technologies, and many
projects are underway.
 In order to promote decarbonization, cooperation and coordination among a wide rangeof parties is essential. From the perspective of encouraging such cooperation andcoordination, it is important to actively disseminate information on the various efforts ofindustry, government, and academia to achieve the Zero Emission Tokyo Strategy, whichaims to achieve net zero CO2 emissions by 2050.
 The establishment of an ecosystem through such efforts will also contribute to thecreation of an environment in which young people and start-up companies will be
actively involved in these fields.
<Policy direction> The TMG should powerfully set forth the policy of strongly promoting greenifying of
the entire city, and generate demand for green financing by developing a number ofprojects that lead to “Sustainable Recovery,” such as the Tokyo Bay eSG Project
announced in April 2021.
 In addition to the information on finance that has been provided so far, the TMG should
actively disseminate its decarbonization measures and projects to the world throughAccess to Tokyo and the Business Development Center TOKYO which serve as the
TMG’s overseas contact points, as well as through overseas diplomatic missions, and the
expansion of the TMG’s website and materials.
 The TMG should attract the attention of investors and financial companies around theworld by strengthening its overseas promotion in cooperation with FinCity.Tokyo (The
Organization of Global Financial City Tokyo), which disseminates information with theaim of enhancing Tokyo’s attractiveness as a financial market and making it a worldclass international financial city, and through opportunities such as international
conferences and seminars.
 Because it is important to disseminate information to the world, it is desirable that all
disseminated information also be translated into English in principle, while making use
of AI translation and other technologies.
 It is desirable to actively solicit ideas for global warming prevention and decarbonization25

from the residents and companies of Tokyo, to explore the use of excellent ideas, and toraise awareness of these issues.

【Column ③】 Innovation in the emissions trading market
Emissions trading has been attracting attention as a way to utilize the market mechanism
to address global warming. For example, in a typical “cap and trade” scheme, each country
or company is assigned a certain “cap” on the amount of greenhouse gases it emits. If thecountry or company is unable to reduce its emissions to under the cap, it buys allowances
for the excess emissions (emission credits) from companies or countries that can reduce
their emissions to a level lower than the cap. Emissions trading was introduced with crossnational trading under the Kyoto Protocol formulated in 1997, and is now being introduced
at the national level in various regions of the world, including the EU’s intra-regionalemissions trading scheme started in 2005.
If emissions credits are not traded, each entity will only make efforts to reduce greenhousegas emissions up to the cap allocated to them. However, if emissions credits can be traded,
it is expected that countries and companies will work to reduce their emissions as much as
possible, and sell the excess up to the cap as emissions credits. It is hoped that this willlead to further progress in dealing with global warming.
Emissions trading is also important for balancing addressing global warming withsustainable economic development. For example, a Tokyo company could use its
outstanding environmental technologies to reduce greenhouse gas emissions in developing
and emerging countries overseas, acquire the equivalent worth in emissions credits, andthen sell the credits to other companies.
In addition, if emissions credits can be made smaller, it will be possible to divide up a large
lot of emission credits created by a large company, which can then be purchased by many
companies in the quantities they need.
Trading of various types of derivatives could also be used for emissions trading. It isconsidered that there could be future trading of “caps” as in the EU, or derivatives basedon credits expected to be obtained in the future through absorption of greenhouse gases.
Many issues remain to be resolved in order to realize advanced trading of emissions
credits. Today, companies’ supply chains are global, crossing national borders. It isnecessary to properly grasp the amount of greenhouse gas emissions and other factors ineach manufacturing process, and to be able to share this data. Moreover, it is necessary toaccurately link the emission credits to be traded with their sources. The use of digitaltechnology will be the key to achieving this at a reasonable cost and in a highly transparent
manner.

26

(2) Dissemination of information on companies with superior environmental technologies
and promotion of technology development<Basic concept>
 In Japan, there are many companies with excellent environmental technologies, but it
cannot be said that they are necessarily well-known worldwide.
 In addition, Tokyo and Japanese companies can contribute to solving global
environmental problems by utilizing their excellent environmental technologies ordeveloping promising environmental technologies and applying them to climate change
countermeasures not only in Tokyo and Japan but also overseas. Furthermore, emissions
credits and carbon credits could be obtained as compensation.
 In light of the above, it is necessary to provide information on corporate initiatives andtechnologies for decarbonization to investors and external evaluation organizations in a
prompt and appropriate manner. This is also important for attracting foreign investmentin the excellent technologies of Japanese companies. Efforts are also needed for financial
support of the development of excellent environmental technologies by companies.
 In addition, fostering companies with excellent environmental technologies, including
start-up companies with original ideas, is also important as part of Tokyo’s growthstrategy.
<Policy direction>
 Greentech trade fairs and exhibitions should be held both physically and virtually todisseminate information on companies with excellent technologies. The TMG could also
award SMEs with excellent decarbonization technologies. In doing so, it should aim todisseminate information in English.
 In these efforts, there should be consideration on whether there is room to utilize data
held by the TMG, such as on products certified by the TMG and examples of excellent
environmental initiatives by companies. This consideration could be important indetermining the usefulness of so-called impact investment and in preventing“greenwashing.”
 Approaches from the procurement side should also be considered, such as actively
adopting advanced technologies at government sites, and providing start-up companies
with opportunities for demonstration experiments to build their track records and lead toexternal PR.
 In the development of environmental technologies, support should be provided topromote the growth of SMEs and start-ups with excellent technological capabilities andideas, in cooperation with the Startup Ecosystem Tokyo Consortium, which is forming aplatform to create new connections by taking advantage of Tokyo’s concentration of suchcompanies.
(3) Attracting and nurturing highly-skilled human resources who will be responsible for27

ESG finance<Basic concept>
 To stimulate the green finance market, it is necessary to attract and foster foreign
financial companies as well as to accumulate highly-skilled financial professionals inTokyo who will be responsible for green finance. In order to achieve this, efforts must
be made both to attract foreign talent and to train human resources in Tokyo.
<Policy direction>
 In order to attract highly-skilled and experienced financial professionals in the field ofgreen finance to Tokyo and make the most of their capabilities, the TMG should consider
proactive measures to attract them, in addition to improving business and living
environments.
 Measures should be considered to develop highly-skilled financial professionals in thefield of green finance, including the use of the highly-skilled financial professional
training program at the Tokyo Metropolitan University Graduate School of Management.
 For human resources development, efforts should be made to create learning
opportunities that are unique to Tokyo, while also utilizing networking with companies,
universities, financial institutions, and others. Collaboration with overseas humanresource development institutions should also be considered.
 Promoting Tokyo as a metropolis leading creation of green cities that promotes advanced
decarbonization initiatives in not only finance but also in all other policy fields, will leadto the accumulation of human resources with advanced expertise. Taking this into
account, the TMG should further strengthen information dissemination.

28

Ⅳ How to proceed with the TGFI
1 Scope of the TGFI and how to proceed
In the ESG finance field, there are many forms of products in the bond market, stock market, andindirect finance, including green bonds which have already achieved a certain level of success. In
particular, a global trend can be seen of development of not only green bonds but also sustainability
bonds and social bonds, as well as loans, equity, and a wide range of other financial instruments.
Amidst this, from the perspective of stimulating ESG finance in Tokyo, it is desirable to keep inmind a wide range of financing options, without limiting the scope of products such as bonds andloans, or target areas such as green and social finance (respectively the “E” and “S” in ESG).
At the same time, addressing climate change is an urgent issue on a global scale, and the world isentering an era of great competition for decarbonization. It is important for the TMG to speedilytake concrete measures for decarbonization and the development of finance to support it.
Therefore, for the TGFI, the TMG should promptly put into practice various measures in the green
field, especially those related to green bonds, toward resolving environmental problems thatthreaten the sustainability of the Earth. As for green bonds, which the TMG issued ahead of otherlocal governments in Japan and has already built up a track record as an issuer, it is desirable toquickly take concrete steps, including supporting the issuance of green bonds by entities other than
the TMG. Starting from the dissemination of know-how on issuing green bonds, it is necessary tobalance both speed and scale by advancing expansion to other forms of finance, including green
loans.
To achieve this, a realistic response would be to expand efforts into other fields, such as social
finance (the “S” in ESG which aims to solve social issues), in order to develop ESG finance as awhole. Of course, this does not mean that it is fine to spend time considering and implementing
measures in areas other than green bonds and green finance. Given the wide range of issues thatneed to be addressed and the need to respond quickly, concrete measures should be launched
immediately in fields where there is already know-how, and at the same time, other fields should
be addressed in a speedy manner.

29

2 Roadmap

30

Conclusion
Green finance is a global trend, and new developments toward decarbonization are arising one
after another even as we consider these proposals. While accurately grasping the ever-changing
global situation as well as strengthening and reviewing the TGFI initiatives, it is important todeepen analysis and consideration and have this lead to concrete initiatives while continuing toutilize the “professional staff” meeting framework in regard to issues that could not be exploredin depth in a short period of time.
Directly confronting the challenges of decarbonization and taking effective measures in a timely
manner will be extremely important for Tokyo to achieve sustainable growth and emerge
victorious in competition among cities. We cannot stop even for a moment.
Under this recognition, these proposals are not limited to the financial sector, but also refer toinitiatives that will lead to the transformation of the very nature of the city itself in order to realize“Sustainable Recovery.”
The TGFI should ultimately be perceived as a starting point for Tokyo’s efforts to develop green
finance. Decarbonization is not just a matter of technological and financial innovation, but also
calls for major transformation of the allocation of resources in the economy and society, and is
expected to continue to be a major global agenda for decades to come. In this context, global
efforts for green finance are accelerating and changing every moment. In light of this situation, allparties concerned must work to implement concrete measures in a speedy manner, and continue
to conduct consideration and take proactive action in areas that are not necessarily covered bythese proposals.
By working hand in hand with a variety of stakeholders, including the national government,
financial institutions, market players, universities, the industrial world, and others, and bypromoting the TGFI initiatives outlined in these proposals, we hope that Tokyo will elevate its
presence in green finance and achieve sustainable growth as a city.

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Members of the Committee for the realization of the Tokyo Green Finance Market (tentative name)ISHII Naoko Executive Vice President, The University of Tokyo
Professor at Institute for Future Initiatives
Director, Center for Global Commons
KIYOTA Akira Director and Representative Executive Officer, Group CEO
Japan Exchange Group, Inc.
MIZUGUCHI Takeshi President, Takasaki City University of Economics
SASADA Tamao Country Executive for Japan, Bank of America
President and Representative Director
BofA Securities Japan Co., Ltd
SATO Yasuhiro Chairman, Member of the Board of Directors
Mizuho Financial Group, Inc.
SUZUKI Shigeharu Chairman and CEO, Japan Securities Dealers Association
Honorary Adviser, Daiwa Securities Group Inc.
TACHIBANA FUKUSHIMA Sakie President and Representative Director
G&S Global Advisors Inc.
◎YAMAOKA Hiromi

Board Director, Future Corporation
Special Advisor for International Finance, Tokyo Metropolitan Government
Member, Round-Table Meeting of Experts on the “Global Financial City:
Tokyo” Vision

YOSHITAKA Mari Principal Sustainability Strategist
Deputy General Manager of Corporate Planning Dept.
Mitsubishi UFJ Research and Consulting Co., Ltd.
Part-time lecturer of Graduate School of Media and Governance
Keio University[As of June 8, 2021, names in alphabetical order, titles omitted, ◎ symbol indicates chairperson]

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Professional staff related to realizing the Tokyo Green Finance Market (tentative name)
FUJIMAGARI Yohei

Deputy General Manager(Through May 14, 2021)

Public Team No.3
Social Infrastructure Industry Department No.1
Mizuho Bank, Co., Ltd.

HAYASHI Atsushi

General Manager(Through May 14, 2021)

Social Infrastructure Industry Department No.2
Mizuho Bank, Co., Ltd.

Ii SachieHead of Sustainable Strategy Development OfficeSustainable Strategy Development OfficeSustainability Promotion Department
Mizuho Securities Co., Ltd.

KATSUKI Yasunobu

Director
Sustainable Strategy Development OfficeSustainability Promotion Department
Mizuho Securities Co., Ltd.

MATSUO Takumi Senior Officer
Corporate Strategy
Japan Exchange Group, Inc.
MORII Atsuki Vice President
Sustainable Business Office
Solution Products Division
MUFG Bank, Ltd.
MORISAWA Yuma

Director
SDGs Finance
Debt Capital Markets Department III
Daiwa Securities Co. Ltd

OGATA Yuichi Team Head of Sustainable Business OfficeSustainable Business Office
Solution Products Division
MUFG Bank, Ltd.

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OKAMOTO Manabu

Deputy General Manager
Municipal Team No.1
Social Infrastructure Industry Department No.1
Mizuho Bank, Co., Ltd.

OSHIMA Teruaki

General Manager
Capital Markets Department
Mizuho Bank Co., Ltd.

SHIMAMURA Masayuki Executive Director and Chief Officer for Policy Making Headquarters,
Japan Securities Dealers Association
SHIMIZU Kazushi Head of SDGs Finance
Debt Capital Markets Department III
Daiwa Securities Co. Ltd
SUTANI Yusuke

Director
Japan Debt Capital Markets
Japan Global Capital Markets
BofA Securities Japan Co., Ltd

TANI Junya COO, Senior Researcher
Center for Global CommonsThe University of Tokyo Institute for Future Initiatives
TONOOKA Kentaro Deputy General Manager
Planning Division
Policy Making Headquarters
Japan Securities Dealers Association
WATANABE Nobuyuki

Manager
Corporate Banking Team
Capital Markets Department
Mizuho Bank Co., Ltd.

[As of June 8, 2021, names in alphabetical order, titles omitted]

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