Why Sustainable Finance Matters More than Ever

Despite global headwinds, innovative and sustainable investment options are key to building a more resilient future. 

Sustainable finance has become a force to be reckoned with in the global financial landscape. Industry players are pivoting towards assets with a positive social impact, recognising the need to make investments that take environmental, social, and governance (ESG) considerations into account. However, recent developments--such as the conflict in Ukraine and the ensuing energy crisis--have also hampered the growth of sustainable finance. 

To address these challenges, the Tokyo Sustainable Finance Forum will gather thought leaders from across the globe to discuss the future of sustainable finance. The forum, which will be held virtually on 4 October 2022, is a collaboration between policymakers and industry players. It will feature speeches from the following keynote speakers: 

• Mr Junichi Nakajima, Commissioner of Japan's Financial Services Agency; 
• Mr David Atkin, CEO of Principles for Responsible Investment;
• Ms Karen Karniol-Tambour, Co-Chief Investment Officer for Sustainability, Bridgewater Associates; and 
• Ms Andrea Dore, Head of Funding in the Capital Markets and Investments Department at the World Bank Treasury.

The forum is organised by FinCity.Tokyo, Japan's first public-private financial promotion organisation, with support from the Tokyo Metropolitan Government. FinCity.Tokyo is dedicated to raising Tokyo’s profile as a global financial hub, with a focus on building a world-leading ecosystem for asset management and fintech.

“I expect to hear a lot of stimulating and enlightening messages voiced by prominent speakers from within and outside Japan during the Tokyo Sustainable Finance Forum,” said Hiroshi Nakaso, Chairman of FinCity.Tokyo. 

“This will lead to the sharing of meaningful sustainable finance ideas worldwide, including in Asia, where the potential for sustained economic growth remains significant despite challenges that lie ahead. We really hope this will be an opportunity to demonstrate that Tokyo can continue to make a substantial contribution to sustainable finance as an international financial centre,” he added. 

Building a better world

Sustainable finance plays a crucial role in building a more secure and equitable future. The importance of ESG investments cannot be understated, particularly as the world struggles to meet its sustainable development goals (SDGs) and grapples with a rapidly changing climate. Through the Tokyo Sustainable Finance Forum, various stakeholders can jointly rewrite a sustainable finance playbook for a changing world, and create a financial industry that is more responsive and resilient.

The issuance of transition bonds is amongst the key initiatives designed to boost the growth of sustainable finance. Transition bonds are issued by firms to transform their operations into greener businesses, and are an important tool for many Asian companies.

“Tokyo, with its already concentrated financial intermediary functions, should serve as a major market for the issuance of transition bonds not only by Japanese companies but also by companies from the Asia-Pacific region,” Nakaso observed. “To achieve a thriving transition finance market, key industry players in Tokyo can share the principles for transition bonds with their peers in Asia, thereby broadening the issuer base in the region.”

Financial hub of the future

As a leading global financial hub, Tokyo is uniquely placed to drive the growth of sustainable finance in Asia and beyond. Japan hosts Asia's largest stock exchange and has a rapidly growing asset management landscape, with domestic asset owners holding over JP¥2,000t (US$13.9t) in household assets now looking to diversify their investments.

“Tokyo is a unique financial city with diverse financial intermediaries and a strong real economy at the same time, and I believe that it is a city that can contribute to sustainable finance even in a turbulent environment,” Nakaso noted. “Under this turbulent time, it is important to remember that Tokyo is a financial centre supported by a mature democracy and civil society that can continue to offer a safe environment to do business in.”

In its bid to become the financial hub of the future, Tokyo also has various initiatives in place to foster the growth of fintech companies. These initiatives include a fintech accelerator program, various subsidy plans, advisory panels, annual forums, awards, networking events, and partnerships, amongst many others.

“Tokyo and the financial industry players can work together to expand the investment chain. This will open up further opportunities for investment funds, financial institutions, and finance professionals, and form a basis for a virtuous cycle in the financial industry as well as the Tokyo market,” Nakaso said.