Key facts
- The Bank of Japan has bolstered its support for climate-themed investments, committing ¥7.2tn (US$49bn) in loans.
- The lending is provided through a fund-provisioning measure that has reached nearly US$84bn in total climate-related loans.
- Lending is conditional on disclosure of certain sustainability-related information.
- A UK-based thinktank, Positive Money, warned that the Bank of Japan risks greenwashing due to weak safeguards.
- Participating financiers currently have full autonomy to define what counts as credible climate financing.
- As of January, outstanding climate lending under the facility reached 21.11tr Japanese yen (US$130.2bn).
The Bank of Japan has increased its commitment to climate finance by providing ¥7.2tn (US$49bn) in loans to financial institutions for their climate initiatives. This lending, part of a "fund-provisioning measure" that began in 2021, has now accumulated to nearly US$84bn in total climate-related loans. The conditions for this lending include the disclosure of certain sustainability-related information by the financial institutions.
However, a UK-based thinktank, Positive Money, has raised concerns about potential greenwashing within the BoJ's flagship climate lending facility. In a briefing, the organization warned that the absence of strict regulatory and supervisory standards could lead the BoJ to inadvertently refinance activities that are not genuinely contributing to decarbonization. The thinktank highlighted that participating financial institutions currently have the autonomy to define what constitutes credible climate financing, subject only to disclosure of their criteria.
Positive Money argued that this self-determination creates inconsistent definitions and a risk of weak or unverifiable contributions to decarbonisation. As of January, the outstanding climate lending under this facility reached 21.11 trillion Japanese yen (US$130.2bn), an amount significant enough, according to the thinktank, to warrant the introduction of integrity requirements that could influence standards across Japan's financial system.
Positive Money recommended that the BoJ update the eligibility framework for its lending facility to include clearer lists of eligible activities and minimum disclosure requirements. The thinktank also urged the BoJ to anchor its criteria in existing government frameworks, such as Japan's green transformation (GX) strategy, and to introduce explicit exclusions for certain activities.
Separately, Japan's draft sustainability disclosure standards are reportedly facing criticism for inconsistencies with the International Sustainability Standards Board (ISSB) criteria, particularly regarding reporting periods. Investors and regulators have called for greater alignment with international standards. The Global Reporting Initiative (GRI) is also urging Japan to align its standards with GRI and European Sustainability Reporting Standards, advocating for a double materiality approach, noting that 90% of the top 100 Japanese companies already report against GRI standards.
In other climate finance news, the Bank of England reported a 21% reduction in its carbon footprint and outlined its approach to integrating climate risks. Positive Money commented on the BoE's report, suggesting a greater focus on supporting economy-wide transitions and considering tools like dual interest rates for energy efficiency lending.