BOJ to finance bank green loans and green bond investments
Lenders will receive zero-interest financing for green and sustainability-linked lending and investment in green and sustainability-linked bonds.
The BOJ (Bank of Japan) has started accepting applications from financial institutions wishing to participate in a new program aimed at providing financial support to the private sector for its climate change efforts.
At its monetary policy review meeting last week, the BOJ unanimously decided to adopt the terms and conditions of the scheme.
“It is widely recognized that due to the existence of so-called externalities, climate change cannot be solved by the market mechanism alone and public sector involvement is essential,” said the governor of the BOJ, Kuroda Haruhiko, Monday September 27.
“I hope the Bank’s new fundraising measure will serve as a catalyst to further encourage climate-related efforts by the private sector,”
As part of the fund provisioning program, the BOJ will provide loans to financial institutions against eligible collateral, up to the total outstanding amount of investments or loans from eligible counterparties to contribute to Japan’s efforts to combat climate change. .
Lenders will receive central bank funding for green loans and bonds, sustainability loans and bonds, and bridging finance – at an interest rate of zero percent per annum.
The first loans issued under the new program will be disbursed at the end of December, after which loans will be offered about twice a year, the BOJ said.
Participating financial institutions will be required to disclose the objectives and actual results on investments and green loans, as well as the actions they take to comply with the proposed disclosure rules aligned with the TCFD recommendations.
In the recently revised corporate governance code, the FSA (Financial Services Agency) introduced TCFD type information, using a “comply or explain” approach.
The BOJ recently said in its regulatory guidance for fiscal year 2021 that it will accelerate efforts to promote sustainable finance in the country, by fostering the green bond market and assessing the resilience of financial institutions to climate risks.
In July, the BOJ presented a new climate strategy that consisted of several measures to fund climate change activities, including a plan to start buying green bonds using its pool of foreign exchange reserves. The new endowment measure was part of the measures announced in the climate strategy.