Bank of Japan: (Research Paper) Results of the First Market Operation Survey Regarding Climate Change


August 5, 2022
Financial Markets Department
Bank of Japan


As efforts to combat climate change gain momentum globally in recent years, financial markets are expected to play a greater role in terms of financial intermediation. Specifically, financial markets should support industries’ efforts to combat climate change by reflecting the risks and opportunities arising from climate change (climate-related risks and opportunities) in the prices of financial instruments such as stocks and bonds. companies, providing a more conducive environment for the issuance of ESG climate change bonds (hereafter “ESG bonds”), thus facilitating financing and investments.

The Bank of Japan launched the Climate Change Market Functioning Survey to assess the functioning of Japanese financial markets in the fight against climate change and understand the challenges for improvement. Since climate change is a long-term issue involving various economic actors, the survey will collect opinions from a wide range of market actors each year. The first survey was distributed to 663 entities, including issuers, investors, financial institutions and rating agencies, and more than 40% of them responded.

In the survey, respondents indicated that climate-related risks and opportunities are reflected to some extent in the pricing of equity and corporate bond markets in Japan, although there is room for further reflection on the two markets. In order for climate-related risks and opportunities to be better reflected in prices, many respondents raised questions regarding the availability of information as well as methodologies for assessing climate-related risks and opportunities. The first included “improving and/or standardizing information disclosure” and “reducing gaps in climate-related data”, and the second included “improving transparency in ESG assessment” and “further development of analytical methodologies”. These issues were also raised by many respondents as challenges to increasing the size of the ESG bond market in Japan.

Looking at supply and demand in the ESG bond market, the survey revealed robust demand for ESG bonds. As for the motivation behind issuing ESG bonds, respondents emphasized the strategic benefit to their companies and investor relations (e.g. improving their reputation, diversifying the investor base) rather than only on favorable issue conditions for ESG bonds. On the investor side, making social and environmental contributions was the main reason for investing in ESG bonds. These results suggest that the Japanese ESG bond market would further develop with a broader base of issuers and investors by raising awareness of these benefits and reducing the issuance cost as well as investing in ESG bonds with a more improved and standardized disclosure of information.

Market players have already made efforts to overcome the issues identified in the first survey, such as availability of information and methodologies for assessing climate-related risks and opportunities, to further develop the market. The Bank will provide information on the state of market functioning regarding climate change and challenges for the future by continuously conducting this survey while improving its content. The Bank also intends to help advance financial markets by monitoring efforts outside of Japan, conducting additional research and analysis on the workings of financial markets in relation to climate change, and communicating and coordinating with relevant stakeholders to develop market infrastructure.

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Market Coordination and Analysis Division and Market Infrastructure Division
Financial Markets Department



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