TOKYO (Reuters) – Japan’s Nippon Life Insurance on Tuesday announced guidelines for extending transition finance loans to steelmakers and utilities, which it hopes will serve as a benchmark for domestic lenders and businesses.
The move underscores a push by Japan, which aims to achieve carbon-neutrality by 2050, to promote transition finance given its economy’s heavy reliance on high-emitting industries such as shipping, chemicals and steel.
Transition finance aims to offer funds to high-emitting companies to shift towards greener operations. A lack of consensus around the terminology has spurred criticism that it could encourage high-emissions companies to continue as they are.
Under the guidelines, Nippon Life Insurance devised quantitative measurements to assess whether a company or its project meets standards set under the Paris agreement on climate change, and applicable for transition finance loans.
Instead of assessing whether each technology is green or not based on taxonomy, the guidelines focus on the company’s long-term strategy for shifting to greener operations, the insurer said.
“As Japanese utilities and steelmakers operate globally, their transition strategies have come under scrutiny on whether they are green or not,” Yasutoshi Miyamoto, general manager at Nippon Life’s finance and investment planning department, told a news conference.
“We hope the guidelines can serve as a tool for them to explain their approach to investors,” he said.
The guidelines take effect immediately for investment and loans extended by the insurance giant.
The move by Nippon Life Insurance falls in line with government efforts to expand Japan’s transition finance market.
The government plans to issue about 20 trillion yen ($127 billion) worth of climate transition bonds in the coming decade to facilitate private-sector investment in the area.
($1 = 157.3400 yen)
(Reporting by Leika Kihara; editing by David Evans)
