The ministries including METI to discuss proper evaluation of decarbonization projects and promotion of investment to high-emissions companies

On February 1st, the Ministry of Economy, Trade and Industry, Ministry of the Environment and Financial Services Agency held the first session of the working group for discussing the measure to promote investment and lending by financial institutions to companies with high emissions.

Financed emissions, which are greenhouse gas emissions of the companies to be invested in, temporarily increase as financial institutions invest more in companies with high-emissions. If, however, more financial institutions focus only on the emissions of companies to be invested in, decarbonization projects of companies with high emissions may not properly be financed. Taken this issue into consideration, the session discusses a system to appropriately evaluate decarbonization projects and further facilitate investments.

The ministries have launched the non-public “Sub-Working Group on Financed Emissions for Promoting Public-Private Transition Finance”. “The Session for Examining Arrangement of Transition Finance Environment” held by the METI in December 2022, decided the launch of the sub-working group, which financial institutions and finance-related groups attended. In the session, the group proposed a plan to summarize a report identifying issues related to financed emissions in February. Based on the report, public and private sectors will discuss the issues and summarize concrete methods for evaluation and information disclosure of decarbonization projects in spring or later. The working group aims to develop transition finance through establishing a system to properly evaluate decarbonization projects.

The Glasgow Financial Alliance for Net Zero, which consists of more than 500 financial institutions from 45 countries, has also recognized this issue and indicated a plan of evaluating the number or ratio of decarbonizing products that companies with high emissions supply.