Leaders in responsible investment call for clearer standards in Japan
19 June 2023, Tokyo — Today, the Principles for Responsible Investment (PRI), the United Nations Environment Programme Finance Initiative (UNEP FI) and the Generation Foundation released the Japan Legal Framework for Impact Policy report.
The report outlines how Japanese investment law permits—and in many cases requires—investors to pursue sustainability impacts when those impacts are financially material.
However, this is not well understood by investors due, in part, to the lack of clarity in Japanese regulation.
Japanese investors are unclear on the extent to which they are permitted or required to invest for sustainability impact – that is, use the tools and resources at their disposal (such as asset allocation and stewardship) to intentionally pursue sustainability outcomes.
This lack of clarity and understanding in Japan is hindering climate finance, potentially discouraging investors from taking action.
Updating rules, standards and guidance
The report recommends existing rules, standards and guidance in Japan be updated so that investors can better understand their duties in pursuing sustainability impact goals.
“Japan has seen strong support for sustainable finance from the private sector alongside policy makers and regulators, but many investors are still unclear on how best to leverage opportunities,” said David Atkin, CEO at the Principles for Responsible Investment.
“Japan can assume stronger leadership in the area of responsible investment by providing investors with legal clarity and enabling policies. Doing so can also help empower investors to support national sustainability goals as well as the economic transition required across Asia.
“This report provides a roadmap for immediate policy steps to enable Japanese investors to consider sustainability issues, contribute to positive sustainability impacts, and protect long term returns from the threat of system-level risks.”
Grace Eddy, Director of the Generation Foundation, commented: “Analysis in ‘A Legal Framework for Impact’ shows that mainstream investors generally need to consider the impact of sustainability factors on their financial goals and take action as a result.
“Japanese investors have established themselves as global leaders and innovators in sustainable finance, but many are still unaware of the extent of their duties with regard to impact.
“Today’s report describes how regulators and policymakers in Japan can ensure investors have the clarity and guidance needed to take action and manage systemic sustainability risks to their investments and take advantage of opportunities more effectively.”
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