Table 4-1-2 Fields and Priority Subjects Under the Strategy to Promote Environmental Research and Environmental Technology Development

Field	Priority subject
Common to all fields	1. Research related to an ideal society (sustainable society) under the long-term state vision.
2. Research related to the shift to a sustainable society.
3. Responding to international issues including those in the Asia region.
Cross-sectional through different fields	4. Win-win research development that contributes to multiple fields at once.
5. Research development to eliminate trade-offs between fields.
6. Social impacts and adaption for environmental reasons.
Individual field: (1) Reversing global warming society	7. Formulating low-carbon scenarios that flexibly respond to climate change.
8. Promoting low-carbon technology in fields with high energy demands.
9. Promoting low-carbon technology for the energy supply system.
10. Clarifying the global warming phenomenon and measures to adapt to the situation.
Individual field: (2) Sound material-cycle society	11. Thorough implementation of the 3Rs (Reduce, Reuse, and Recycle), and optimal disposal.
12. Improving heat recovery efficiency.
13. Collecting rare metals and establishing recycling systems.
Individual field: (3) Society in Harmony with Nature	14. Protecting biodiversity.
15. Sustainably securing and using national land, water, and other natural resources.
Individual field: (4) Safe and Secure Society	16. Risk evaluation and management that takes account of previously unidentified risks (such as chemical substances and vulnerability).
17. Healthy circulation of water and air.

Reference: Ministry of the Environment

Table 4-1-3 Categories of Financial Support

General description	Major entities
Loan	Loaning funds by establishing an agreement to return the money with interest in the future allows the money to be treated as a debt on the balance sheet for accounting purposes.	Commercial banks, credit unions, etc.
Project financing	A type of loan that limits the source of repayment to cash flow produced by the project alone, focusing on management know-how and technical capabilities, instead of excessively depending on creditworthiness and the hypothetical value of the corporation. In general, loans are provided to a newly-established special purpose company (SPC) exclusively for the project.	City banks, community banks, development Bank of Japan, etc.
Investment (share acquisition)	This means a person becomes an owner of the company (shareholder) by providing capital funds (acquiring shares). There is no need to repay capital funds or pay the interest; however, the shareholders are given beneficiary rights (the right to enjoy economic benefits, profit sharing, etc.) and common benefit rights (the right to participate in management, propose resolutions at general meetings of shareholders).	Venture capital corporations, banks, credit unions, life insurance companies, etc.
Investment funds	An investor invests money in an investment partnership formed based on the Limited Partnership Act for Investment. An operator invests the money in shares, real estate, or a particular business to distribute the interest obtained by the turnover to investors.	Limited liability partnerships (turnover is entrusted to venture capitals, etc)

Source: Ministry of the Environment based on the Kanto Bureau of Economy, Trade and Industry report

Table 4-1-4 Principles for Financial Action towards a Sustainable Society (Principles for Financial Action for the 21^{st} Century)
Principle 1. Recognize your roles and responsibilities and promote optimal issues to create a sustainable society with projects based on a preventative approach.
Principle 2. Help create a sustainable global society through the development and supply of financial commodities and services that can contribute to the development of industry that builds a sustainable society and competitiveness.
Principle 3. Support the environmental considerations of small and medium-sized enterprises, raise environmental awareness among citizens, increase disaster preparedness, and build community activities from the perspective of promoting local communities and improving sustainability.
Principle 4. Realize the importance of collaboration between diverse stakeholders to create a sustainable society, and make efforts to an active role as well as in these initiatives.
Principle 5. Get actively involved in initiatives to mitigate environmental impacts and make efforts to encourage suppliers rather than simply complying with environment-related laws and ordinances.
Principle 6. Realize that activities to improve social sustainability are a management issue and make an effort to disclose information related to these initiatives.
Principle 7. Provide awareness training for management and general-level employees on environmental and social issues as a way of actively carrying out the above initiatives in daily operations.
Reference: Principles for Financial Action towards a Sustainable Society (Principles for Financial Action for the 21^{st} Century)

funds on the scale of more than ten trillion to several hundred trillion yen will be needed in the next decade, for purposes such as anti-global warming measures. These include zero-emission homes and buildings (with improved insulation effectiveness and high-efficiency water heaters, energy-saving home appliances, and so on) and renewable sources of energy (e.g., solar and wind power generation). Providing funds effectively to environmental conservation activities, such as global warming measures, is anticipated to be a significant role of financing (Table 4-1-3).

The other role is investment and lending to facilitate efforts to incorporate environmental considerations into business activities by evaluating and supporting economic entities. Providing funds to corporations responding to social needs such as environmental issues is a critical part of Corporate Social Responsibility (CSR). At the same time, the prevalence of such efforts can be an incentive for corporations to make further efforts, since the “environmental strength” of a corporation can become an

aspect of its competitiveness.

In October 2011, as part of voluntary efforts to promote environmental financing, around 30 financial institutions in Japan jointly formulated Principles for Financial Action towards a Sustainable Society (Principles for Financial Action for the 21st Century) to spread efforts to advance environmental financing. They indicate seven actions for a sustainable society as well as three guidelines for taking specific action: guidelines for deposit, lending, and leasing.

## 3 Green Innovation and Green Markets

To promote green innovation, it is imperative to facilitate the rapid spread and adoption of environmental technologies and products through comprehensive policy packages. In light of this, the greening of the market can bring benefits effectively and efficiently to a number of entities.

In 2011, the Ministry of the Environment studied the feasibility of further promoting greening of the market (i.e., Green Market+). A report entitled Toward Further Greening of the Market, published in January 2012, defines "greening of the market" as follows: By creating a market by boldly incorporating environmental conservation into socioeconomic activities to boost demand for the

businesses; guidelines for operations, securities, and investment bank businesses; and guidelines for insurance businesses (Table 4-1-4). The principles have been signed by 175 financial institutions as at the end of April 2012. In March 2012, the first general assembly was held, where participating financial institutions were able to engage in dialogue, share good practices, and engage in other joint activities.

development and supply of environmentally friendly products and services, business operators can boost their reputation for environmentally friendly actions, thereby obtaining greater market profits (Figure 4-1-1). Four issues for achieving a green market should be pointed out: (1) insufficient scope of the market (greening has not been fully achieved for the market as a whole); (2) ambiguous environmental criteria (a significant number of policies, initiatives, or environmental labels are not fully recognized, or excessively diverse environmental labels cause confusion in consumers); (3) insufficient explanations given to customers (insufficient information blocks customers from purchasing environmentally friendly products and services, or creates difficulty for business operators trying to provide information to consumers); (4) little motivation among business operators (market evaluation has not been fully established, so corporations are not fully motivated to supply environmentally friendly products and services and do not fully recognize the significance of continuing these efforts in the future). To respond to these issues, the report proposes four approaches: (1) new business development for target products and services (expanding the scope of environmentally friendly products and services); (2) defining innovative criteria (setting up multi-step criteria to evaluate novelty); (3) spreading information in a way that reaches customers (information that triggers action is critical, as is trying to understand customers and develop bonds of familiarity); and (4) linkages and synergies among policies (implementing effective and efficient policies through total optimization is critical).