Source: Prepared by Ministry of the Environment based on The Equator Principles website (http://www.equator-principles.com/)

the implementation process of the Principles and actual results at least once a year.

Since the adoption in 2003, the number of financial institutions subscribing to the Equator Principles has increased steadily, and stands at 67 as of 2009, including three Japanese financial institutions (Figure 5-3-8).

Because of the adoption and development of the Equator Principles, over 80% of international project financings are being provided by financial institutions that have adopted the Principles. The Equator Principles have brought about significant changes in project financing deals as de facto rules when private financial institutions make investment decisions.

Efforts to encourage environment-friendly investment are also being made by public institutions. In Norway, for example, a new environment investment program is under consideration to direct part of state funds to environment investment. Under the program, about ¥280 billion (2 trillion kroner) is to be invested over five years in projects, such as the supply of environment-friendly energy and improvement of energy efficiency, that can be expected to reduce environmental loads.

The UNEP is reviewing the current form of fiduciary responsibility focusing only on the pursuit of short-term monetary returns. The “Fiduciary Responsibility” released in July 2009 by the UNEP considered the legal and practical aspects of integrating environmental, social and governance issues into institutional investment. As a result of this consideration, the UNEP report, in its summary conclusion, states that “all asset manager and asset owner signatories will be required to embed ESG (environmental, social and governance) issues in their legal contracts” and that “advisors to institutional investors have a duty to proactively raise ESG issues within the advice that they provide.”

Japanese government is also supporting financial institutions in order to promote capital investment in the environment. For example, the Ministry of the Environment created the “interest subsidy scheme for special support for the Kyoto Protocol target achievement” in FY 2009. Under the loan system, businesses that pledge reductions of carbon dioxide

Note 1: Borrower companies entrust financial institutions with all procedures for the delivery of interest subsidies, including proxy application and receipt. 2: Examine monitoring results from financial institutions and implement subsidization appropriately. Source: Ministry of the Environment

emissions by 6% over three years can receive interest subsidies of up to 3% (but no more than no interest) for capital investment in measures to cope with global warming through financial institutions that offer lending on preferential terms by environmental ratings (Figure 5-3-9). Under the second supplementary budget for FY 2009, another new lending scheme, “interest subsidy scheme to support the acceleration of global warming countermeasures,” was created. These loan systems can be expected to encourage capital investment in the environment put off for reasons of interest burdens. As for actual disbursements of loans, under the “no-interest loan system for special support for the Kyoto Protocol target achievement,” which began with a budget of ¥4.5 billion, as of February 2010, environment-friendly loans totaling a little over ¥80 billion were extended. Going forward, loans under this scheme are expected to exceed ¥110 billion.

This scheme is applicable only to lending from financial institutions that offer loans based on environmental ratings. Loans based on environmental ratings are offered by financial institutions on preferential terms based on the results of the screening and evaluation of environment-friendly efforts by borrowing businesses. Since the national government introduced the no-interest loan system, the number of financial institutions that extend loans on environmental ratings substantially increased from just four banks prior to the system's introduction to 31 banks as of February 2010. Thus, it is expected that environment-friendly loans will increase going forward. The national government, through these loan systems, is building a mechanism under which environment-friendly companies are valued highly and the flow of financial assets goes into the direction of the environment.