Report by the Working Group on Financial Institutions’ Efforts towards Decarbonization of the Economy

The „Report by the Working Group on Financial Institutions‘ Efforts towards Decarbonization of the Economy“ serves as a pivotal guide for financial institutions‘ initiatives towards achieving carbon neutrality („net zero“) by 2050. The report acknowledges the accelerating global movement towards decarbonization and the increasing importance of financial institutions‘ involvement in driving the transition towards a sustainable economy.
The report underscores the necessity for financial institutions to actively engage with client companies in promoting decarbonization across the real economy. This involvement requires fostering strong collaborations and partnerships to effectively address the challenges posed by climate change. Additionally, the report emphasizes the critical role of non-financial companies in developing transition plans to align their operations with net-zero goals.
To inform its recommendations, the Working Group conducted extensive discussions on various occasions since October 2022, involving relevant organizations from Japan and overseas. The insights and expertise shared during these discussions provided valuable perspectives on how financial institutions can align their strategies with decarbonization objectives.
In light of the challenges posed by climate change and the urgency to address them, the report highlights the need for financial institutions to transcend traditional frameworks of socially responsible and ESG investments. Instead, these institutions must adopt proactive measures that go beyond conventional approaches and embrace long-term commitments to decarbonization.
Recognizing that climate change is a global issue, the report advocates for cooperation among developed countries to advance ambitious targets and calls for expanding effective efforts to other regions, particularly in Asia. The report acknowledges the unique challenges faced by Asian countries in their decarbonization processes, and Japan’s experience in transition finance could offer valuable insights and guidance to support other Asian nations in their endeavors.
The report highlights the significance of international private-sector alliances and initiatives that have produced standards and guidelines to assess progress towards net zero. These initiatives, such as the Net-zero Banking Alliance and the Partnership for Carbon Accounting Financials, provide valuable frameworks for financial institutions to measure their carbon-related impacts and progress in decarbonization efforts.