“ESG financing” is an approach to investment and lending activity with consideration for Environment, Social, and Governance (ESG)-related information to emphasize long-term strategy when the value of a company is analyzed and evaluated. The trend toward ESG-conscious financing is rapidly gaining momentum around the world.
Issues that should be addressed through ESG financing include various environmental and social challenges that exist globally―among them are climate change, biodiversity conservation, and the advent of a circular economy. Looking at climate change in particular, steps toward decarbonization are currently underway in Japan based on the government’s 2050 Carbon Neutral Declaration, which aims to “reduce greenhouse gas emissions in Japan to net zero by 2050.” Additionally, Ministry of the Environment and Ministry of Economy, Trade and Industry prepared a document titled “Disclosure and Engagement Guidance to Accelerate Sustainable Finance for a Circular Economy” and released it to the public on January 19, 2021.
As economic recovery from the COVID-19 pandemic picks up speed throughout the world, a concept called “green recovery” is gaining traction. Rather than prioritizing economic policies over environmental and social policies, this concept aims to use the current opportunity to further promote climate action, achieve a circular economy, and shift toward social and economic models that are more resilient against disasters and infectious diseases. In view of this global trend, it seems certain that the ESG perspective will continue receiving special attention in investment and lending.