ESG Global Vision

Government-led standard

In force

The government, government-related organizations and local governments, corporations.

The main pillars of the National Action Plan on Business and Human Rights (the “National Action Plan”,  put in place to implement the UN Guiding Principles on Business and Human Rights) are labour (including promotion of better working conditions) protection and promotion of children's rights, human rights in the context of the development of new technologies, rights and roles of consumers, equality under the law (including in relation to persons with disabilities, women, sexual orientation and gender identity), acceptance of foreign human resources, and coexistence.

The Government launched the National Action Plan as a measure for implementing various commitments to the international community, including compliance with international human rights treaties Japan has ratified and respect for internationally recognized principles. It has been established for a period of five years. The liaison meeting of relevant ministries and agencies is held every year to ensure implementation. 

Anti-money laundering policy

In force

Specified operators as defined in Article 2 of the Act on Prevention of Transfer of Criminal Proceeds

The Act on Prevention of Transfer of Criminal Proceeds establishes regulations to combat money laundering and the financing of terrorism, including the obligation of financial institutions to confirm transactions, keep transaction records and report suspicious transactions.

Principles on corporate governance

In force

Companies listed on the Main Markets (First Section and Second Section), Mothers Index and JASDAQ on a “comply or explain basis.

The Governance Code provides for a number of ESG principles for listed companies, including but not limited to:

1. the development of a basic ESG and sustainability policy together with disclosures in connection therewith;
2. the enhancement of the quality and quantity of climate related disclosure; and
3. disclosure of policies and voluntary measurable targets in respect of promoting diversity in senior management by appointing females, non-Japanese and mid-career professionals.

In June 2021, the Corporate Governance Code was revised to encourage higher levels of governance in anticipation of the Tokyo Stock Exchange’s market restructuring in April 2022. Recent developments focus on:

1. enhancing Board independence;
2. promoting diversity; and
3. increasing attention to sustainability and ESG factors.

Although the Corporate Governance Code is not legally binding, nor does it contain any punitive provisions, applicable companies/investors who do not comply must fully explain their reasons for non-compliance. 

Principles for institutional investors

In force

Institutional investors who invest in the Japanese stock market.

As of the end of November 2022, 322 domestic and foreign institutional investors have announced their acceptance.

The Stewardship Code provides for a number of ESG principles for institutional investors, including but not limited to:

(i) Instructing institutional investors to consider sustainability (medium to long term sustainability including ESG factors) according to their management strategies in the course of their constructive engagement with investee companies. 

(ii) Requests institutional investors to clearly explain in their stewardship policies how they consider sustainability issues according to their investment management strategies.

Similarly to the Governance Code, The Stewardship Code is not legally binding, nor does it contain any punitive provisions. However, investors who do not comply must be able to fully explain their reasons for non-compliance. 

Government-led standard

In force

Companies listed on the Main Markets (First Section and Second Section), Mothers Index and JASDAQ & institutional investors who invest in the Japanese stock market

The Engagement Guidelines are intended to supplement the Governance Code and the Stewardship Code, summarising the agenda items for engagement that should be the focus of discussions by listed companies and institutional investors in order to promote constructive engagement between both parties.

The Engagement Guidelines were revised in June 2021 to reflect recent developments in the Governance Code and the upcoming restructuring of the Tokyo Stock Exchange. Corresponding to the Governance Code revisions, the revised Engagement Guidelines include provisions that further encourage ESG factors, such as diversity and inclusion.  

Corporate governance policy

In force

All types of business entities

The Act aims to protect whistleblowers by prohibiting dismissal or other disadvantageous treatment on the ground of whistleblowing.

Business entities employing more than 300 employees on a regular basis are required to designate a whistleblower system. Those with 300 or less employees are required to endeavor to designate such a system.

Though not limited thereto, disadvantageous treatment includes, for example, a demotion, reduction of salary, or refusal to pay retirement allowance.

Environmental policy

In force

National government, municipalities and business entities

The Act aims to promote measures to combat global warming and thereby contribute to ensuring the healthy and cultural lifestyles of the present and future generations of the nation and to the welfare of humankind.

The basic principle of the Act is to achieve decarbonization goals, consistent with the Paris Agreement, by  2050 by collaboration of citizens, national government, municipalities business entities., etc.

The national government must establish a Global Warming Countermeasures Plan which includes basic matters concerning measures to be taken by the national government, municipalities, business entities, and citizens to reduce greenhouse gas emissions. Municipalities are required to establish a Municipality Action Plan consistent with the Global Warming Countermeasures Plan.

While the Act expects most entities to use products in a manner that reduces greenhouse gas emissions as much as possible, those who are specified by the Cabinet Order as emitting a considerable amount must report matters regarding calculated greenhouse gas emissions.

The Japan Green Investment Corp. for Carbon Neutrality ("JICN") is established under the Act to support business activities that reduce greenhouse gas emissions. The national government must constantly hold at least half of the stocks issued by JICN.

Environmental policy

In force

Both individuals and companies

he law has 3 goals: (1) regulation for smoke and soot, as well as dust from factories and business establishments. (2) implementation of countermeasures for hazardous air pollutants. (3) stipulating allowable limit of automobile exhaust gas, and so on.

Environmental policy

in force

Issuers, investors and other market participants

The guidelines aim to provide issuers, investors, and other market participants with examples and interpretations relating to Green Bonds for the Japanese market while being consistent with the Green Bond Principles ("GBP"). Further, the guidelines also seek to prevent greenwashing.

1. The guidelines provide expected elements of Green Bonds and examples of possible approaches that are appropriate to the situation in Japan, mainly from the following aspects: 
2. Use of raised funds (e.g. funds can also be allocated to refinance existing green projects, however, this should be informed to investors);
3. Project evaluation and selection process (e.g. issuers should explain to investors in advance the environmental goals, such as Biodiversity Conservation, they intend to achieve through the Green Bonds);
4. Management of raised funds (e.g. issuers should keep track of raised funds to ensure such funds are allocated to green projects); and
5. Reporting (e.g. issuers should disclose information on the use of funds at least once a year or whenever there has been a major change in circumstances).

The guidelines expect investors to have a high level of insight into sustainable development, accumulate knowledge on green projects, and pay close attention to international trends in the Green Bond market.

Environmental policy

In force

Forest owners, persons who, by title, use or profit from forests and successors of such rightsholders (collectively "Owners")

The Forest Act aims to protect land and develop the national economy by stipulating basic matters concerning forests and promoting the maintenance and cultivation of forests and the enhancement of forest productivity.

The Act requires the Minister of Agriculture, Forestry and Fisheries to make a National Forest Plan at every five years. The prefectural governor is required to make a Regional Forest Plan corresponding to the National Forest Plan every five years. Owners are required to comply with the relevant Regional Forest Plan.

Generally, Owners that intend to conduct development activities in forests subject to the Regional Forest Plan must obtain permission from the prefectural governor.

Environmental policy

In force

All entities in Japan

The Nature Conservation Act promotes conservation of the natural environment, including ensuring biodiversity in areas where this is particularly necessary, thus contributing to securing a healthy and civilized lifestyle for current and future citizens.

The Act allows the Minister of the Environment to designate Wilderness Areas, Nature Conservation Areas and Offshore Seabed Nature Conservation Areas (collectively "Areas"). In these areas, certain activities such as construction, seizure of designated animals and plants, mining, exploration and even entering are regulated.

The Act also allows each prefecture to designate special zones by Prefectural Ordinance and regulate certain activities in these zones in a manner similar to the way the Areas are regulated.

Environmental policy

In force

Entities engaged in handling fluorocarbons

The Act on Rational Use and Appropriate Management of Fluorocarbons aims to reduce the emission into the atmosphere of fluorocarbon, which deplete the ozone layer and have a serious impact on global warming, and to thereby contribute to the healthy and cultural lives of the people, both now and in the future.

The Act requires the relevant minister to establish guidelines for the rational use of fluorocarbons and the appropriate management of fluorocarbons used in specified products, and to prescribe the responsibilities , etc. of manufacturers, etc. of fluorocarbons and products using fluorocarbons and managers of specified products, as well as to take measures, etc. for the rational use of fluorocarbons and the appropriate management of fluorocarbons used in specified products.

Environmental policy

In force

Central government, local governments, corporations and the people

The Basic Environment Law was passed in the 128th session of the Diet unanimously on November 12th 1993, and put into force on 19th of the month. Replacing the previous basic law, the Basic Law forms the basis of the structure of Japanese environmental laws and policies. The Law declares the basic principles of environmental policy, defines the responsibilities of each actor in the society, and prescribes the policy instruments to protect the domestic and global environment.

Environmental policy

In force

The owner, manager or occupier (collectively "Owners") of land used as a site for Specified Facilities as defined in the Water Pollution Prevention Act or land that is susceptible to the risk of soil contamination by specified hazardous substances that will cause harm to human health.

Persons who intend to make changes to the form or nature of land whose area is a certain size or larger.

The Soil Contamination Countermeasures Act facilitates the implementation of countermeasures to address the issues of soil contamination by specified hazardous substances and includes measures to prevent harm to human health resulting from that contamination, and protect citizens' health.

The Act protects citizens' health by requiring, where contamination has occurred, the prefectural governor to designate  areas contaminated by a specified hazardous substance requiring measures to remove relevant contamination, prevent the dispersion of relevant contamination, or other measures in order to prevent relevant contamination from causing harm to human health. In such a case, Owners must submit a plan for contamination removal , etc. and implement measures in accordance with the plan.

Furthermore, the Act stipulates regulations regarding removing contaminated soil and requires the prefectural governor to create a registry of soil contamination areas which is generally viewable to anyone.

Environmental policy

In force

Specified Facilities and Designated Facilities as defined in Article 2 of the Water Pollution Prevention Act

The Water Pollution Prevention Act aims to prevent water pollution in public water and groundwater by regulating facilities that discharge polluted water or wastewater ("Specified Facilities") and facilities that manufacture, store, use or process harmful substances ("Designated Facilities").

When installing either facilities, a prior notification to the prefectural governor is generally required.

There is strict liability when a person's life or health has been negatively affected due to the discharge or permeation underground of harmful substances by business operators.

Policy for women

In force

Employers other than the national government and local governments (hereinafter referred to as "general employers") with over 100 regularly employed workers

The Act aims to create an environment in which women can play an active role in society, and sets out a number of rules for women’s employment.

Employers are required to formulate and submit a general employer action plan and to publish information on the activities of female employees. The information to be disclosed includes the percentage of female workers employed, the difference in average length of service between men and women, the status of working hours (including the average number of overtime hours worked per month) and the percentage of female workers in management positions.

General industry rules

In force

Specified digital platform providers as defined in Article 4 of the Act

The Act aims to improve the transparency and fairness of "Specified Digital Platforms" (digital platforms that are larger than the scale specified by Cabinet Order) by taking necessary measures to promote their information disclosure and mutual understanding.

Under the Act, digital platforms users are classified into either "Users Providing Goods, etc." or "General users". "Users Providing Goods, etc." are users that use digital platforms to provide goods, services or rights. "General users" are all other users that are not "Users Providing Goods, etc." 

Specified digital platform providers must disclose matters according to the type of user.

To "Users Providing Goods, etc.", such matters include but are not limited to:

1. The criteria for refusing to provide such specified digital platform, if any;
2. In cases where the specified digital platform provider acquires data on the provision of products the details and conditions of such acquisition; and
3. The method for "Users Providing Goods, etc." to file a complaint or request for consultation.

To "General users", such matters include but are not limited to:

1. In cases where information pertaining to goods. is displayed with a rank attached to it, the main matters used to determine such rank; and
2. In cases where the specified digital platform provider acquires purchase data, the details and conditions of such acquisition.

Social policy

In force

Issuers, investors and other market participants

The guidelines aim to popularize Social Bonds by providing examples and interpretations that are appropriate to the situation in Japan, while being consistent with the ICMA Social Bond Principles.

Like the Green Bond Guidelines, the guidelines provide expected elements of Social Bonds and examples of possible approaches from the following aspects:

1. Use of raised funds (e.g. funds should be allocated to social projects that have clear social benefits on a specific social issue);
2. Project evaluation and selection process (e.g. issuers should explain to investors in advance the social goals, such as Promotion of diversity / women's activities, they intend to achieve through Social Bonds);
3. Management of raised funds (e.g. issuers must avoid failure in allocating funds to social projects without a rational reason); and
4. Reporting (e.g. issuers should disclose information on the use of funds, such as, amount of funds allocated to each social project, via their websites).

The guidelines expect investors to have a high level of insight into sustainable development, accumulate knowledge on social projects, and pay close attention to international trends in the Social Bond market.

Social policy

In force

All entities in Japan

The Waste Management and Public Cleaning Act aims to protect the living environment and improve public health by controlling waste emissions and proper disposal.

The Act stipulates regulations regarding both general waste and industrial waste. Any waste that does not meet the definition of industrial waste is considered to be general waste.

Municipalities are required to make a General Waste Disposal Plan with which persons who intend to engage in collecting or transporting general waste as a business must comply to obtain and retain permission from the mayor of the relevant municipality.

Business operators are responsible for disposing their industrial waste.