JFSA Finalizes Guidelines on Climate Transition Finance

Transition finance, as mentioned in the guidelines, refers to a financing means to promote long-term, strategic greenhouse gas emissions reduction initiatives that are taken by a company considering to tackle climate change for the achievement of a decarbonized society. Japan, with the aim to achieve 2050 carbon-neutral, defines transition finance as a finance for supporting the fundraiser who have set their target consistent with the Paris Agreement and satisfied the elements set forth in these guidelines. The guidelines provide an overview of transition finance, focusing on its position in relation to the existing principles and guidelines; they also describe expectations on raising of funds for transition finance. The guidelines provide examples of responses and interpretations so that they can serve as a reference for the fundraiser, the financier, and other market participants when they consider concrete actions to transition finance, while considering the alignment with the International Capital Markets Association (ICMA) Handbook on Climate Transition Finance, issued in December 2020. At the request of the "Taskforce on Preparation of Environment for Transition Finance," ICMA has provided input into these guidelines while also confirming that it welcomes the proposed alignment with its Handbook.

Keywords: Asia Pacific, Japan, Banking, Securities, Climate Change Risk, Sustainable Finance, Green Bonds, ESG, Transition Risk, ICMA, JFSA