JBIC’s perspective on current global sustainability issues

Projects that do not consider sustainability no longer exist

“Sustainability” is a term that has come into global use relatively recently.

UN conferences on the environment have been held since the 1970s, but it was the 1992 Earth Summit (Rio Summit) that spread the concept of “sustainable development,” which aims for a balance between the environment and economic growth. And it was after Sustainable Development Goals (SDGs), to be achieved by 2030, were proposed at the UN Sustainable Development Summit 2015, that the word “sustainability” began appearing everywhere.

Today, the concept of sustainability has broadened further and become more comprehensive, focusing on three aspects: environmental, social, and economic.

In the past, sustainability action tended to be government-led measures implemented through international agreements. But this has gradually shifted to a phase in which the private sector needs to be proactive.

The Japan Bank for International Cooperation (JBIC) released its ESG Policy in October 2021, followed by the establishment of the Sustainability Management Department to strengthen its sustainability governance and management systems in June 2022.

“I have come to understand that pursuing and establishing sustainability is an area inextricably interlinked with the core of management,” says HAYASHI Kaori of JBIC’s Sustainability Management Department, reflecting back on her early days in the post and how her thinking has changed. “Sustainability is now a vital issue, and every day I consult with management about this. It is very rewarding work.”

Though JBIC was focused on addressing global-scale issues even before the release of the ESG Policy, ahead of the 26th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP26) held in Glasgow, UK, JBIC released its ESG Policy as a statement of its strong commitment to achieving sustainability, centering on its response to climate change.

“After releasing our ESG Policy, we also accelerated efforts for sustainability management. We were the first among the policy-based financial institutions of OECD member countries to make a disclosure based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), and we also released a human rights policy. We are developing such initiatives with domestic and international needs always in mind,” says HAYASHI.

JBIC’s efforts to bolster its sustainability governance and management systems do not end there. At the same time the Sustainability Management Department was established, the Sustainability Advisory Committee was instituted as an advisory body to the Board of Directors, and the Sustainability Committee was set up under the Executive Committee.

In addition, the Global Investment Enhancement Facility was launched in July 2022. It supports Japanese companies in their efforts to contribute to global environmental protection including decarbonization, enhance supply chain resilience, develop high-quality infrastructure, and create new overseas markets.

HAYASHI says that after these systems were implemented, sustainability-related information was centralized, with both JBIC internal and external information dissemination and discussions within the organization gaining speed.

“The circulation of sustainability-related information within JBIC changed dramatically. Until then, each department had been making its own efforts to contribute to sustainable development, but now we are all able to get a handle on such internal initiatives.”

OKADA Yuno, who works with HAYASHI in the Sustainability Management Department, says, “We are also receiving casual inquiries more often—questions like, ‘Is this related to sustainability?’ This brings home the realization that we are involved in a project’s decision-making.”

HAYASHI adds, “Since the 1980s, JBIC has been offering preferential interest rates for eco-friendly projects, and conducting due diligence according to JBIC Guidelines for Confirmation of Environmental and Social Considerations. JBIC has been making continuous efforts to monitor such considerations and the impacts of these projects on the surrounding natural environment and social environment. I believe such ongoing initiatives also made it easier to get all departments on the same page when strengthening the sustainability governance and management systems.”

Wide-ranging areas of support and addressing issues that are difficult to quantify

About a year and a half have now passed since the launch of the Sustainability Management Department. HAYASHI says that while she sees promising results, she is also keenly aware of the challenges that remain.

“For areas where we have a track record, such as decarbonization, people in charge already have quite a high level of awareness. However, for example, for projects related to biodiversity, natural capital such as water, and the circular economy (economic activities creating new added value while circulating the use of resources), there are cases where the persons in charge fail to recognize that they are sustainability issues. I believe that there is a growing need to raise awareness and provide information on these areas from a sustainability perspective.”

OKADA adds, “Sustainability is a single word that covers a wide range of topics. Since all kinds of projects can fall under its scope, we keep learning constantly. We hope to stay aware of the connection between projects and sustainability, and steadily raise awareness.”

JBIC’s sustainability-related financing can be divided into three major categories:

green finance, which supports efforts to reduce greenhouse gas emissions and popularize green innovation; transition finance, which supports shifts to energy with less environmental impact; and social impact finance, which supports resolving social issues for the realization of sustainable growth.

“Predictably, in the areas of green finance and transition finance, there are a large number of projects related to renewable and next-generation energy, particularly those around offshore wind power and hydrogen utilization,” reports HAYASHI.

Inquiries are also increasing for projects that contribute to natural capital and a circular economy. For example, projects that indirectly support operations contributing to areas such as sustainable fishing and the recovery of biodiversity and ecosystems through partial acquisition of Blue Bonds issued by the Indonesian government (SDG bonds where use of funds is limited to the marine sector, such as protection of marine resources).

“Compared to decarbonization, biodiversity and the circular economy are difficult to quantify through clear numerical data. And unlike global warming, these are areas that are difficult to sense on a day-to-day level. But they are without question globally important challenges,” states OKADA.

In the area of social impact finance, business development that considers the perspective of sustainability to address various social challenges is on the rise.

HAYASHI notes, “There are many countries that have unstable living environments because their medical systems have not been able to keep up with growing needs. For example, we have provided a loan for a business manufacturing and selling medical devices in Vietnam. And in Singapore, we are supporting a Japanese company’s participation in business selling and marketing pharmaceuticals and medical devices in Asia. We are also promoting projects that contribute to improving local health and hygiene standards.”

Toward the realization of a “colorful world” and how to put this into practice

In addition, with the aim of supporting female entrepreneurs in ASEAN and other Asian countries, JBIC is also investing in the Japan ASEAN Women Empowerment Fund (JAWEF), a fund that provides loans and equity to microfinance institutions.

According to OKADA, “The aim is to support the promotion of gender equality. We are participating in this together with Japanese institutional investors who support its goals.”

Of course, positioning sustainability as a management challenge also makes it necessary for JBIC itself to enhance the resilience of its organizational foundation by ensuring that all of its employees can work sustainably. Indeed, one of the goals laid out in the Fourth Medium-term Business Plan (FY2021-FY2023) is to achieve diversity and inclusion.

“JBIC’s efforts to realize a ‘colorful world’ are also being put into practice internally both through a human resource development system that draws out the capabilities and vitality of its diverse range of employees, and the promotion of workstyle reform,” notes OKADA.

The situation has changed significantly from the days when sustainability was considered a charitable activity akin to volunteerism, to a stage where it is taken seriously as a business goal.

HAYASHI also states emphatically, “I believe that commitment to and practice of sustainability will also become an even more important pillar of our new medium-term business plan from FY2024. The expectation on our department’s roles and responsibilities within JBIC will also rise.”

There is still much more that JBIC should do, and that only it can do.

OKADA explains, “I believe our significance as a policy-based financial institution lies in the fact that we can deploy financing to areas that other institutions and companies are not yet tackling. While thinking a little ahead, we wish to realize projects to help solve environmental issues and social challenges.”

Japanese companies have built solid trust in the international networks, centering on Asia, and international expectations are high for hydrogen fuel and other new environment-related technologies from Japan. Based on the JBIC Policy designed to promote sustainability, JBIC will continue to provide support in countries and regions around the world. Using the power of Japan for the future of a sustainable world—the buildup of steady support will take the world another step forward.

---