The FY2021 Tokyo Sustainable Finance Forum was held on Friday October 15, 2021 as part of Tokyo Sustainable Finance Week. The Forum and Week are being held for the second time, continued from FY2020.
In the organizer's address within the opening remarks, Governor Koike commented that the Tokyo Metropolitan Government is developing policies from a "sustainable recovery" viewpoint, which is about overcoming the pandemic and achieving sustainable growth beyond that. She said that finance holds the key to this. She then expressed her commitment to promoting the Tokyo Green Finance Initiative (TGFI) and working with a wide range of stakeholders to facilitate concrete actions; this is also in order to focus on stimulating green finance.
Each participant in this forum discussed the world's situation within and efforts toward accelerating sustainable financing, in light of the efforts by the Tokyo Metropolitan Government. Here is the content of each talk.
You can see the footage of the day by watching the video this link.
Each speaker's materials are available on the Program page.
Role of Finance and Its Opportunities for Sustainable Development Goals（＝SDGs)
Special Envoy of U.N Secretary-General on Innovative Finance and Sustainable Investments
Mr. Hiromichi Mizuno
Mr. Hiromichi Mizuno explained that sustainable finance is a top priority at conferences of international leaders such as the Climate Summit, G7, and G20 and that leaders are now talking more actively about using the power of private finance, among other things, to spur on change.
He said that while the sustainable finance environment is improving in Japan, further growth is needed to achieve the goal of making the Tokyo market the center of sustainable finance, because while the amount of green bonds issued around the world in 2020 was over 120 trillion JPY (150 trillion JPY including sustainable finance bonds, etc.), Japan has just over a trillion.
He pointed out that Tokyo Sustainable Finance Week should be taken as an opportunity: the private sector should request that the national and Tokyo Metropolitan governments and the market develop the necessary environment. At the same time, he noted that it is important that the governments and other players set rules ahead of that. He also shared his hope that Japan and Tokyo will propel the transition and create a virtuous cycle, in which they use the funds they gain to launch sustainable businesses around the world.
The Critical Role of Disclosure in a Net Zero Economy
Head Of The TCFD Secretariat
Vice Chair for Public Policy, Special Advisor to the Founder and Chairman, Bloomberg L.P.
Ms. Mary Schapiro
Ms. Mary Schapiroo explained that the TCFD was established in 2016 to disclose climate-related financial information on companies, and it released recommendations the following year focusing on four thematic key areas: Governance, Strategy, Risk Management, and Metrics and Targets. The recommendations were supported by more than 2,500 organizations in 88 countries and more than 1,000 financial firms, she said. She also said that Japan has been leading the world with more than 400 organizations supporting the TCFD.
She shared that in the fourth TCFD Status Report (just released), disclosure in line with TCFD recommendations was up 9 percentage points—more than double the growth from 2018 to 2019. She also shared that within 2020, more than 1000 new organizations became TCFD supporters and analyzed that this growth was bolstered by key policy announcements and societal trends requiring TCFD-aligned reporting, and that this is a signal of a paradigm shift from voluntary to mandatory corporate disclosures.
She also mentioned that TCFD released new guidance to help companies disclose more consistent metrics and about their plans to transition to a low-carbon economy. She concluded by saying that TCFD-aligned disclosure will help trigger and encourage innovation that is critical for achieving net-zero goals.
JPX’s Strategy on Susainable Finance
Director & Representative Executive Officer, Group CEO
Japan Exchange Group, Inc.
Mr. Akira Kiyota
Mr. Akira Kiyota explained points from the Revised Japan's Corporate Governance Code, implemented by the Japan Exchange Group (JPX) in June 2021. The three points from the code were: (1) exhibiting the board's functions, (2) retaining diversity in core personnel, and (3) increasing climate change-related information disclosures based on TCFD or another similar international framework in the Prime Market.
Next, he introduced JPX's sustainability promotion efforts as a stock market operator. He stated that the two major pillars are supporting ESG-related efforts by listed companies and providing ESG-related products to investors. Then, he gave concrete examples of actual policies related to each.
Finally, he discussed JPX's policies towards addressing ESG issues as a listed company. In July 2021, JPX announced that it would aim for its entire group to achieve carbon neutrality by 2024, and the Tosho and Daisho Building's power contracts were switched to renewable energy. JPX will also have its own renewable energy generation facility in 2022. By generating renewable energy, he said, the company is responding more aggressively to environmental issues.
ESG Investment by GPIF
President, Government Pension Investment Fund
Mr. Masataka Miyazono
Mr. Masataka Miyazono said that the Government Pension Investment Fund (GPIF) is a universal owner with the global market incorporated into its portfolio, and that it is also an ultra-long-term investor designed to manage public pension funds from a long-term perspective (over a 100-year timeframe) under the public pension system. Given these characteristics, he said, risks associated with ESG may have a negative impact on GPIF's portfolio and for this reason, the company is firmly committed to ESG investing.
GPIF's ESG investments center on passive investment based on ESG indexes. Since starting to invest in 2017, GPIF has been investing by selecting four domestic stock indices and three foreign stock indices. Miyazono noted that the company's investment balance had reached 10.6 trillion JPY total as of March 31, 2021. He said they began investing in two carbon-efficient indices related to climate change in 2018, and that investment balance has reached 4.4 trillion JPY total.
Regarding GPIF's ESG efforts, Miyazono shared that the company's ESG Report is compiled annually, and among items related to climate change, climate-related financial statements are disclosed in line with TCFD recommendations. As for the significance of focusing on TCFD, he stated that actively disclosing information as an asset owner contributes to the entire investment chain's sustainability, which in turn helps to secure long-term profitability for GPIF.
Sustainable Finance by a Large Institutional Investor
Chief Governance and Compliance Officer, NORGES BANK Investment Management
Ms. Carine Smith Ihenacho
Ms. Carine Smith Ihenacho shared that Norges Bank Investment Management (hereinafter NBIM) is a global fund with an asset value of approximately 1.3 trillion USD, holding a share of more than 9,000 companies in 71 countries, which is 1.5 percent of the world's listed companies. Japan is also NBIM's second-largest market, she said; they have approximately 75 billion USD invested there. She then said that the company has clear expectations related to sustainability challenges and opportunities for all 9,000 companies they invest in; this includes expectations on human rights, children's rights, climate risk, and biodiversity.
She explained that NBIM aims to be a good, supportive shareholder by following principles and being transparent. She also shared that her company actively engages with those they have invested in through dialogue and voting and that they voted on more than 120,000 resolutions and attended approximately 3,000 general shareholders' meetings within 2020. Every year, she said, her company also evaluates those it invests in to see if their business is in line with expectations.
She pointed out that many companies have been strongly reporting their efforts to address climate change over the past few years but that information disclosed on other social issues is still scarce. She then stated that ultimately, writing a report is not the major challenge; rather, having an appropriate sustainability strategy incorporated into risk management and governance procedures and followed up with measurement is what is important for companies.
Leading sustainability in Asset Management
Executive Chairman , AXA Investment Managers
Mr. Marco Morelli
After Mr. Marco Morelli explained that his company manages 1 trillion USD in assets and has been an active player in the Japanese market for more than 20 years, he said that sustainability is a concept that should be incorporated into a company's day-to-day business and operating process, and the increase in ESG-related product investment is due to investors' beliefs that ESG has already become a necessity.
He noted that ESG still lacks common standards and unification is necessary. He said that this is a work in progress, and that all asset management companies must carefully monitor which investment partners will be the best players from an ESG perspective and which companies are creating environments that could be benchmarks for further progress.
On the other hand, he pointed out, ESG is a unique opportunity to be at the forefront of social progress in the asset management industry; in order to do so, he said that it is necessary to examine the metrics for measuring, testing, and monitoring everything about ESG faster and in more detail. Finally, he said that the important thing for asset management companies is to make the shared message of sustainability and ESG visible within their own companies and investment products.
BOJ Strategy on Climate Change
Deputy Director-General at International Department and Monetary Affairs Department,
and Head of Climate Coordination Hub, Bank of Japan
Mr. Koji Nakamura
The Bank of Japan released its comprehensive "Strategy on Climate Change" in July 2021, and Mr. Koji Nakamura noted that the Bank took into account its mandate of achieving price stability and ensuring stability of the financial system. He noted that the comprehensive strategy consisted of measures in five areas: "Monetary Policy," "Financial System," "Research," "International Finance," and "The Bank's Business Operations and External Communication."
He explained, on "Monetary Policy," the Bank has introduced a new fund-provisioning measure that provides funds to financial institutions against the investments and loans they make based on their own decision as part of their efforts in addressing climate change. On "Financial System," the Bank supports financial institutions' efforts in identifying and managing their climate-related financial risks, he said. In relation to the third area, "Research," the Bank will deepen its analysis on how climate change would affect the macroeconomy, financial markets, and the financial system, and make efforts in collecting data and refining analysis tools in order to better conduct surveillance and identify risks, he explained.
Regarding the fourth area, "International Finance," Nakamura expressed the Bank's intention to contribute to climate change initiatives through its participation in international forums. Finally, in the fifth area, "The Bank's Business Operations and External Communication," the Bank will continue its efforts to respond to climate change and enhance its external communication, including making disclosures based on TCFD recommendations, he said.
On Investor’s Engagement
Executive Vice President, COO, Japan Catalyst, Inc., a member of Monex Group
Ms. Emi Onozuka
Ms. Emi Onozuka pointed out that of the many listed companies in Japan with PBR below 1, many of them want to change their business models and portfolios. She also explained that along with having discussions that incite change in invested companies' behaviors, using techniques such as exercising voting rights and proposing shareholder agenda while supporting sustainable management is engagement strategy, which is one form of sustainable investment.
She analyzed that with the corporate governance reform that started under the Abenomics framework, corporate management is now more positive in dialogue with shareholders, and this situation puts a focus on dialogue with management and is a good opportunity for engagement investment—a key component of corporate change. She then said that engagement strategy in Japan and its change to sustainable management are drawing global attention.
As for results from engagement investment, Onozuka reported that the "Monex Activist Fund," which was set at 10,000 JPY on June 25, 2020, had achieved over 30% growth and was at 13,090 JPY on October 7, 2021. She said that her company will continue to work towards realizing personal and social sustainability through a balance between Japan's prosperous future and customers' asset building.
The Tokyo Metropolitan Government's Initiative regarding Sustainable Finance
Director General for Global Financial City Strategy, Office of the Governor for Policy Planning, Tokyo Metropolitan Government
Kodama shared that the Tokyo Metropolitan Government aims to achieve "Zero Emission Tokyo" by 2050—meaning it will contribute to the world having net-zero CO2 emissions—and thus, it announced on January 2021 that by 2030 it aims to achieve "Carbon Half": greenhouse gas emissions reduced by 50% compared to the level in 2000.
He mentioned that in June 2021, the Tokyo Metropolitan Government compiled the "Tokyo Green Finance Initiative (TGFI)," a strategic initiative aimed at developing green finance, and he named the three policy directions of the TGFI: "Accelerate the development of Tokyo's green finance market," "Attract market players and support business development," and "Share information and nurture ESG expertise."
He also explained that the "Global Financial City: Tokyo" Vision (established in 2017) was revised in fall 2021, with "achieving sustainable recovery" and becoming a "world-leading international financial city" as major goals; promoting sustainable finance is a central part of the policy. Its three pillars are the promotion of the TGFI, digitization of finance, and accumulation of diverse financial players, he said.
The panel discussion's content will be in "2021 Tokyo Sustainable Finance Forum: Event Report (2/2)."
Produced by Media Business Division of Jiji Press, Ltd.