The Green Finance Network Japan (GFNJ) was established late last year with the aim to make green finance mainstream in Japan’s financial market. Green finance is a term often used to refer to methods of financing and investing that are more environmentally friendly or sustainable. This has been becoming a global trend since the signing of the Paris agreement back in 2016.
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GFNJ Secretary General and Integrated Resort Promotion (IR), Government of Japan, Counselor, Hideki Takada, came across the idea of green finance when he was assigned to the position of Senior Policy Analyst of Green Finance and Investment at the Organization for Economic Cooperation and Development (OECD) by the Ministry of Finance in Paris. He held this position between 2015 and the summer of 2018.
“Japan was a slow starter in green finance. It has been gaining momentum over the past one or two years. I wanted to maintain and utilize the extensive network I built there, even after I returned to Japan to work in other fields within the government.”GFNJ Secretary General and IR Promotion, Government of Japan, Counselor Hideki Takada
Takada set up GFNJ with two others. The first co-founder was Takejiro Sueyoshi, CEO of Green Finance Organization Japan and Special Advisor to the United Nations Environment Program
—Finance Initiative in the Asia-Pacific region; the second was the President of the Japan Center for International Finance and OECD Former Deputy Secretary-General, Rintaro Tamaki.
GFNJ organizes events and conferences on green finances, gathers and shares information on various green finance activities conducted by both inside members and others outside of the organization, and provides a platform for connecting Japanese and international stakeholders.
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The group includes more than 120 members from 70 organizations. This includes government ministries and agencies, private companies, academic institutions, local municipalities, financial institutions, international organizations, think tanks, media, and nongovernmental organizations. Members vary in age. Takada stated that professionals make up the bulk of the network. He hopes this will drive rapid changes based on common awareness of the issues.
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The finance organization serves as a platform for building long-lasting, person-to-person connections as a starting point to bring about bigger changes across all sectors. This is due to bureaucrats are regularly transferred to different sectors of government. The contents of what they do and who they work with tend to change every few years. This can also be said for many private Japanese companies. This is one of the causes of vertical divisions among different areas. Cross-sector relationships and exchanges do not continue or mature. GFNJ seeks to help stop this.
“The members belong to GFNJ as individuals, instead of representing an organization or company. This allows for open discussions and continuation of relationships across all sectors.”GFNJ Secretary General and IR Promotion, Government of Japan, Counselor Hideki Takada
The finance organization also provides channels between key players in the public and private worlds, as well as financial and academic institutions all over the world. The broad network serves as a gateway for foreign government officials, among other green finance players, who are looking for Japanese counterparts.
“Japan is receiving global attention now due to the size of, and capacity for its green finance market to grow.”GFNJ Secretary General and IR Promotion, Government of Japan, Counselor Hideki Takada
As an example, green bonds are a green finance instrument whose existence has increased dramatically in Japan during the last few years. According to market analysis published in February by major Non-governmental organization Climate Bonds Initiative, the first in the world concerning green bonds, Japan’s green bond market is the twelfth largest in the world and the second largest in the Asia-Pacific region.
In 2017, the Environment Ministry launched Japanese Green Bond Guidelines. This was to ensure transparency and integrity in the fast-growing market. It also introduced the Financial Support Program for Green Bond Issuance in 2018. This was to offer subsidies that partially cover the cost of issuing green bonds.
“From a global perspective, this kind of governmental initiative is quite groundbreaking because green bonds in the rest of the world, especially Europe, have been led mainly by the market and the private sector. Japan tends to make a late start in many fields, but it is often because we want to be fully convinced before we kick-start. We have been through the process of pursuing logic and confirming matters systematically when we actually put something into practice. I think this is Japan’s strength.”GFNJ Secretary General and IR Promotion, Government of Japan, Counselor Hideki Takada
GFNJ aims to facilitate effective learning by looking at various approaches taken by different countries. Another advantage is is that the Japanese tend to hold themselves to adhere to high standards both ethically and morally. While economic and market values may be the most powerful drivers behind green finance in some countries,
“Japan’s national character may see an ethical approach being more effective. There may be social messages that only Japan can transmit to the world.”GFNJ Secretary General and IR Promotion, Government of Japan, Counselor Hideki Takada
This is even reflected in personal investments of the Japanese people.
“The Tokyo Metropolitan Government offered some of its green bonds to individual investors for the first time in 2017, and they were sold out within a day. I think there is latent demand for making greener choices in investment. It is, in a sense, a democratic way of participating in green finance.”GFNJ Secretary General and IR Promotion, Government of Japan, Counselor Hideki Takada
As part of its outreach to individuals, GFNJ organizes and sponsors events to promote and share information on green finance. The first two conferences held in November 2018 and May 2019 featured a diverse group of speakers. There were about 200 participants.
“Our network smooths channels among organizations. We want to help companies succeed and overcome their various hurdles.”GFNJ Secretary General and IR Promotion, Government of Japan, Counselor Hideki Takada
In addition to bonds, green finance covers diverse environmental topics, from climate change and conservation of biodiversity and marine resources, to food loss and circular economies. Both individuals and organizations are becoming interested and concerned.
“I hope that Japan will take initiative in some of the fields where we are ahead of the rest of the world.”GFNJ Secretary General and IR Promotion, Government of Japan, Counselor Hideki Takada
Investments based upon environmental, social, and governmental factors is also becoming increasingly seen. The world’s largest pension fund, the Government Pension Investment Fund, has announced that it will incorporate these factors in all of its investments.
Takada also said that gatherings among the private sector, municipalities, and non-governmental organizations are as equally important as intergovernmental meetings such as the G20 Summit.
“All of the countries share the same awareness of global issues, but it takes time to form consensus on each topic and take action.”GFNJ Secretary General and IR Promotion, Government of Japan, Counselor Hideki Takada
Private companies, financial institutions, local governments, among others, seem to be more flexible and accelerating their efforts and involvement in green finance.
“We expect that notice of their achievements will reach the leaders of the G20, and we want to be part of the force to boost the governments’ efforts in green finance.”GFNJ Secretary General and IR Promotion, Government of Japan, Counselor Hideki Takada