Japan to promote green finance with common platform and scenario analysis

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A man wearing a protective mask walks past the Bank of Japan headquarters amid the coronavirus disease (COVID-19) outbreak in Tokyo, Japan, May 22, 2020.REUTERS/Kim Kyung-Hoon/File Photo

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  • FSA and BOJ to conduct scenario analysis on banks and insurers
  • FSA to work with Japan Stock Exchange on common green bond platform
  • The measures follow the BOJ’s plan to increase financing for the fight against climate risk

TOKYO, Sept 1 (Reuters) – Japan will step up efforts to promote sustainable finance, including nurturing its green bond market and analyzing the resilience of financial institutions to climate risks, according to the government’s new regulatory guideline.

Together with the central bank, the Financial Services Agency (FSA) will conduct scenario analyzes on Japan’s three megabanks and three major non-life insurers to gauge their resilience to the risks posed by climate change.

The analyzes will be based on common climate risk scenarios and conducted as a pilot exercise until June next year, Japan’s financial regulator FSA said in its fiscal 2021 regulatory guidance released on Tuesday.

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Japan will also set up a green bond certification system and work with Japan Exchange Group – the operator of the Tokyo Stock Exchange – on a common platform that issuers and investors can use to obtain bond information. green, according to the directive.

“It is important to create an environment in which market participants can smoothly and accurately make investment decisions that contribute to decarbonisation,” the FSA said.

The moves follow the Bank of Japan’s decision in June to increase funding for climate change efforts. Read more

“There are areas of finance where the BOJ can play a role in addressing climate change,” BOJ Deputy Governor Masazumi Wakatabe said at a press conference on Wednesday. Read more

“Tax incentives, subsidies and rule-making are areas that fall within the domain of government and regulators,” he said, adding that a “division of labour” was crucial for policymakers to can cope with the growing economic fallout from climate risks.

Japan is one of the most disaster-prone countries in the world and has been hugely affected by climate change, with floods claiming many lives every year.

Last year, Prime Minister Yoshihide Suga set a goal to make the country carbon neutral by 2050, bringing it closer to other countries as global attention to climate change intensifies.

Japan’s green bond market is growing but still small, accounting for about 775 billion yen ($7 billion) in the $300 billion global market for such assets.

($1 = 110.1000 yen)

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Reporting by Leika Kihara; Editing by Christopher Cushing and Hugh Lawson

Our standards: The Thomson Reuters Trust Principles.

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