JAPAN Trends and Developments Contributed by: Reiko Yoshida, City-Yuwa Partners
Transition-Linked Loans in the Japanese Maritime Industry International frameworks for greenhouse gas (GHG) reduction in international shipping Greenhouse gas (GHG) emissions from international shipping consist predominantly of carbon dioxide (CO₂). Against the backdrop of continued global economic growth, demand for maritime transport is expected to increase over the medium to long term, and, correspondingly, CO₂ emissions from interna - tional shipping are also projected to rise. Global efforts to address climate change have been discussed under the framework of the United Nations Framework Convention on Climate Change (UNFC - CC). Within this framework, the Paris Agreement was adopted in 2015, establishing a common long-term global temperature goal and a system under which each party sets its nationally determined contribution to greenhouse gas reduction. By contrast, GHG emissions from international ship - ping cannot readily be allocated on a country-by- country basis, as shipping activities are conducted across borders and cannot easily be attributed to a single flag state. As a result, international shipping does not fit neatly within the country-based mitigation framework of the UNFCCC. Accordingly, responsibil - ity for addressing GHG emissions from international shipping has been entrusted to the International Mari - time Organization (IMO), a specialised agency of the United Nations. In April 2018, the IMO adopted its initial strategy on the reduction of GHG emissions from ships, setting out the following targets: • a reduction of at least 40% in carbon intensity per transport work by 2030; • a reduction of at least 50% in total GHG emissions from international shipping by 2050; and • the phase-out of GHG emissions from international shipping as soon as possible within this century. Furthermore, in 2023, the IMO revised its initial GHG reduction strategy and set new targets, measured against 2008 levels, including:
• a reduction of total GHG emissions by 20% to 30% by 2030; • a reduction of 70% to 80% by 2040; and • the achievement of net-zero GHG emissions from international shipping by around 2050. The revised strategy also sets targets to: • introduce zero-emission fuels and similar energy sources into international shipping at a level of 5% to 10% by 2030; and • reduce CO₂ emissions per transport work by 40%. It further clarifies that emissions assessment should take into account not only direct emissions from ships, but also emissions arising from the production, trans - portation and storage of fuels used by ships, thereby adopting a life cycle-based approach. Discussions are currently ongoing with a view to introducing concrete measures to give effect to these targets, with entry into force envisaged around 2027. Against this international framework and these tar - gets, the government of Japan and Japanese com - panies have undertaken various initiatives aimed at contributing to the reduction of GHG emissions from international shipping. Background to the growing emphasis on GHG reduction targets: regulatory compliance and the enhancement of corporate value The increasing emphasis on achieving GHG reduction targets in international shipping reflects not only the need to respond to strengthening international regu - latory requirements, but also a growing focus on the maintenance and enhancement of corporate value. At present, corporate value assessment has come to encompass, alongside financial information, a broader evaluation of a company’s medium- to long-term sus - tainability based on non-financial information, includ - ing environmental, social and governance (ESG) ini - tiatives. This approach recognises that a company’s environmental and social practices, as well as its governance framework, are closely linked to future earning capacity and risk management, while con - tinuing to acknowledge the importance of financial performance. Against this background, investment
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