Sustainable Finance
Sustainable finance refers to financial activities (ESG investment, loans, bond issuance, etc.) aimed at solving environmental and social issues. It has attracted the attention of institutional investors and banks as a means of solving climate change and biodiversity loss, which have become increasingly serious in recent years, and the amount of issuance both domestically and overseas is increasing year by year.
[Sustainable Fund Assets 2010-2021] (World Investment Report 2022 (UNCTAD, 2022)Than)
There are two ways for companies to raise funds: bonds and loans. Bonds are issued by companies to institutional investors and general investors, while loans are loans received from financial institutions. Investments and loans are usually judged based on financial data, but the most important criterion for sustainable finance is how the funds will be used to solve environmental and social issues, and how much of a positive impact they will have.*1Sustainable finance can be categorized into the following issues:
Created based on *1
Among these, the Sustainability Linked Loan (SLL) is characterized by the fact that the borrower (company) sets KPIs (Key Performance Indicators) and SPTs (Sustainability Performance Targets), and the loan conditions change depending on the achievement of those goals. The achievement of KPIs and SPTs is evaluated by an independent external organization, and the results are to be reported to the lender (financial institution) at least once a year.*2.
SPTs must be ambitious, align with the borrower's overall sustainability strategy, deliver substantial improvements in each KPI and, where possible, be comparable to a benchmark or external reference. They should be set at or before the start of the loan and should include deadlines for achieving them.*2.
SLL has some disadvantages for borrowers, such as the time and costs involved in setting SPTs and reporting, and for lenders, the possibility of reputational risk if borrowers fail to achieve their targets. However, it has advantages, such as the ability for both borrowers and lenders to publicize their sustainability efforts, and for borrowers, reduced interest burdens due to the achievement of SPTs.*3.
In recent years, sustainable finance has also begun to be used in the seafood industry.
For example, Thai Union, the world's largest canned tuna manufacturer, issued SLLs for approximately 2021 billion yen in 400. The lenders were Mizuho Bank, Mitsubishi UFJ Bank, and Bank of Ayudhya.
① To be included in the Dow Jones Sustainability Index (DJSI) Emerging Markets and to be ranked in the top 10 of the DJSI Food Products Industry Index
② Reduce greenhouse gas emissions (Scope 1, 2) generated during product manufacturing by 2019% each year from 4 levels
2020) Increase procurement rates of tuna caught by fishing vessels equipped with electronic monitoring systems and/or with onboard observers by 75% each year from a 5 baseline of XNUMX%
The KPI and SPTs are to achieve the above within five years.*4.
In Japan, Maruha Nichiro issued the first blue bond in 2022. Mizuho Securities Co., Ltd. and Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. are planning to lend 50 billion yen.*5,
2) Achieve carbon neutrality across the entire group (establish a roadmap for reducing COXNUMX emissions, implement reductions based on the roadmap, and conduct scenario analysis using TCFD guidelines)
② Achieve 100% confirmation rate for resource status of marine products handled (Group-wide, by 2030) (continue to conduct marine resource surveys and practice environmentally friendly aquaculture)
100) Achieve 2030% agreement with supplier guidelines and improvement rate for important items (entire group, by 100), and 2030% confirmation rate of zero human rights violations in the supply chain (entire group, by 5) (strengthening supply chain management to enable sustainable procurement, eliminating human rights risks in our own business and supply chain) within five years.
is set as the KPI.
*1 Simplifying Sustainable Finance – Explaining Green Bonds, Green Loans, Sustainability-Linked Loans and Bonds and More (Sustainalytics, accessed 2023/4/5)
*2 Sustainability-Linked Loan Principles (APLMA, LMA & LSTA, 2023)
KPIs and SPTs requirements are determined by the Sustainability Linked Loan Principles (SSLP).
*3 The Development and Attention Points of Sustainability Linked Loans Focusing on the Sustainability Performance of Companies, etc. (Akane Enatsu, Nomura Capital Markets Research Institute, Fall 2019 issue)
*4 SUSTAINABLE FINANCE “BLUE FINANCE” (Thai Union, viewed 2023/4/5)
*5 Notice regarding the issuance of Japan's first "Blue Bond" (Maruha Nichiro press release, announced September 2022, 9)
