Weekly News | 1st to 13th April 2023

Codo Advisory keeps an eye for you on the latest events and trends in climate finance and corporate sustainability, in the world and in Japan. Here’s what caught our attention last week. 

Japan | Business coalition urges government to take bold action on climate change and demonstrate leadership in G7 

• The Japan Climate Leaders’ Partnership (JCLP), a coalition of 230 companies committed to climate action, released a policy statement calling for the Japanese government to take ambitious climate action and demonstrate leadership during this year’s G7 Ministers’ Meeting and Summit. 
• JCLP notes that this presents an opportunity for Japan to increase its presence in the international community and create business and investment opportunities. 
• JCLP outlines five specific recommendations for the Japanese government to prioritize: decarbonizing the power sector by 2035, giving top priority to the swift expansion of renewable energy, phasing-out of coal-fired power generation, introducing carbon pricing and the achievement of 100% zero-emission vehicles (ZEVs) in new passenger car sales by 2035. 

Read more about this story: Japan Climate Leaders’ Partnership, Foreign Press Center Japan 

Codo’s comment: The recommendations from JCLP are in line with critics coming from an increasing number of observers about the lack of climate leadership of Japan. Another recent illustration is the release by Climate Integrate, a Japanese non-profit, of a paper highlighting the weaknesses of the “Green Transformation” (GX) initiative launched by the Ministry of Economy, Trade and Industry last year. The GX initiative is criticized for a lack of ambition, a support to controversial technologies and a very remote timeline for the introduction of carbon market.  

Japan | Megabanks and power companies to face new wave of climate shareholder resolutions 

• Reuters reports that a coalition of climate groups led by Market Forces (Australia) and Kiko Network (Japan) are planning to file climate shareholder resolutions to be voted on at the annual general meetings of six major Japanese companies this year. 
• The targeted companies are the three megabanks, Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, Mizuho Financial Group, two electric utilities, Tokyo Electric Power and Chubu Electric Power, and trading house Mitsubishi Corporation. 
• Climate activists are critical of these companies transition plans that partly rely on technologies which they say are unproven, such as coal co-firing with ammonia and carbon capture. Banks are also criticized for their financing of fossil fuel projects. 

Read more about this story: Reuters, The Japan Times 

World | ISSB to prioritize climate-related disclosures over other issues 

• The International Sustainability Standards Board (ISSB) has decided to provide transitional relief to companies applying the ISSB’s first two standards, S1 (general requirements) and S2 (climate). The relief will allow companies to focus their initial efforts on providing high-quality information about climate-related risks and opportunities to meet investor needs.  
• During the first year of reporting using the ISSB Standards, companies will not be required to disclose sustainability-related risks and opportunities beyond climate, provide comparative information, disclose Scope 3 greenhouse gas emissions, or use the Green House Gas Protocol to measure emissions. 

Read more about this story: International Financing Reporting Standards, Regulation Asia 

Codo’s comment: The decision of the ISSB to start with climate-related disclosure is reminiscent of the approach of the European Union which, for the implementation of its green taxonomy, started with climate goals, keeping other topics such as water and circularity for the second phase of deployment. However, this does not mean that companies will be able to ignore other environmental responsibilities and challenges indefinitely. In particular, following the adoption of the Kunming-Montreal global biodiversity framework at the end of 2022, biodiversity is expected to take a growing importance in corporate sustainability talks. 

Asia Pacific | Australian heavy industries call government for urgent decarbonization 

• Major Australian companies including BHP, BlueScope, Rio Tinto and Woodside have signed a joint statement calling for urgent action to reduce greenhouse gas emissions. They emphasize the need for Australia to cut emissions in line with its goal of limiting global warming to 1.5°C. The signatory companies also call on federal and state governments to develop policies to support their goals. 
• The Energy Transitions Initiative (ETI) outlined several objectives necessary for heavy industry to achieve net-zero emissions, including the development of integrated net-zero emissions industrial regions and a renewable energy system. 
• This statement demonstrates the willingness of the signatory companies to align with government efforts, as evidenced by the adoption of an emissions reduction bill last month that requires major industrial polluters to cut their emissions by around 30% by 2030, marking a significant shift for the country which has previously resisted reducing its environmental impact. 

Read more about this story: The Guardian, Washington Post 

Europe | UK aims to accelerate green financing through “green day” announcements to achieve net zero 

• Aiming to become the world’s first net-zero aligned financial center, the UK government announced a “green day” package of measures to tackle emissions and energy security. This includes a zero-emission vehicle mandate, net-zero roadmaps, green finance strategy, and sector-based approach to guide nature positive investment by 2024. 
• The package aims to drive multi-billion-pound investment in the UK’s energy revolution and comply with a July 2022 High Court ruling that found its existing net-zero strategy unlawful. It acknowledges that the UK is off-track against its legally-binding sixth carbon budget, especially as it continues to expand fossil fuel production in the North Sea. 
• Yet critics want more action to match the strategy’s intentions as the Bank of England plans to reduce climate change spending due to rising costs. To deliver on net-zero ambition, the UK needs an estimated additional £50-60B capital investment per year, mostly from the private sector. 

Read more about this story: Bloomberg Japan, Carbon Brief 

Codo’s comment: After the US and the EU have engaged in a competition to drive green investments (see our previous editions), the UK seems to be willing to stay visible and keep a leading role built over years. Previous British achievements for corporate decarbonization include the launch of the Glasgow Financial Alliance for Net-Zero at COP26 in 2021, or the spearheading of the TCFD framework by former governor of the Bank of England Mark Carney. Building on this legacy, the government established the Transition Pathway Taskforce (TPT) to establish a global disclosure framework for climate transition plans. Supported by British entities such as the University of Oxford  and non-profit E3G, the TPT was recently highlighted towards a Japan audience in a conference co-organized in Tokyo by the Japan Climate Initiative.