ALB SEPTEMBER 2023 (ASIA EDITION)

36 ASIAN LEGAL BUSINESS – SEPTEMBER 2023 WWW.LEGALBUSINESSONLINE.COM ESG Environmental, social and governance (ESG) considerations are essential to businesses for the opportunities they bring, and for the reputational and economic risks that arise from making the wrong decisions. In light of the growing interest and scrutiny in ESG matters from within Japan and abroad, the Japanese government has been pushing a range of measures to implement ESG initiatives. BY ASIAN LEGAL BUSINESS One of the world’s most developed economies, Japan has stayed ahead of the curve in terms of environmental, social and governance (ESG) regulations. Earlier this year, on Feb. 10, the Japanese government approved a Green Transformation (GX) policy to lay out the country’s strategy to achieve its target of achieving net-zero carbon emissions by 2050. The ultimate aim of the policy is to create a shift in the country’s industrial structure, which is currently heavily dependent on fossil fuels and create one powered by green energy. The GX policy covers a wide range of measures for the development of some 22 industrial sectors over the next decade, from the use of nuclear power to expanding renewable energy sources, along with implementing a carbon-pricing mechanism to facilitate the country’s transition to clean energy. The policy also includes efforts to replace decommissioned nuclear reactors with next-generation ones. Over time, the GX policy will span five key initiatives, including putting in place growth-oriented carbon pricing, integrated regulatory and assistance promotion measures, new methods of financing, an international development strategy that would include the creation of an Asia Zero Emissions Community and the development of a GX league that would include companies, the government and academia. “On the ‘E’ pillar, while immediate decarbonisation would be ideal, ‘transition’ has been strongly sought in Japan. The goal to reduce greenhouse gas emissions is the same as other countries, but the approach to it might be slightly different locally,” Akihiko Takamatsu, a Tokyo-based partner at Norton Rose Fulbright, tells ALB. Even before the latest Green Transformation policy was adopted, Japanese authorities issued a range of measures to push ESG forward, including finalising a code of conduct for providers of ESG data and evaluation, proposing new guidelines that define the scope for ESG Public Funds and introducing mandatory ESG disclosures for public companies. More recently, the issuance of the country’s first guidelines on impact investing also signals market interest in the space. The Japanese legal landscape in regards to ESG measures has changed rapidly. “Like other countries, ESG is essential to all sorts of businesses, both positively and negatively in Japan,” says Takamatsu. “On the positive side, they will bring new opportunities, but on the flip side, they may potentially cause reputational, economic and even regulatory

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