・Support for feasibility studies, disclosure documents, and interim and post-redemption reports

Green bonds generally refer to bonds issued to finance projects that are expected to improve the environment. Through the issuance of green bonds, both corporate and government issuers such as companies and local governments seek to attract domestic and overseas investors to support socially oriented goals.

In order to issue a bond that will be considered a green bond, certain criteria must be met, and there may be procedures that would not typically exist in a normal bond issue, such as obtaining opinions from external valuation agencies. In addition, it is necessary to regularly report the status of funding allocations and calculations of environmental improvement effects not only at the time of the bond’s issuance but also thereafter.

There has also been a sharp increase in cases of the issuance of social bonds, which use the proceeds to resolve social problems, by non-public sector issuers, as well as sustainability bonds, which have both green and social characteristics. Furthermore, issuers are now able to utilize different kinds of fundraising methods, such as sustainability-linked bonds and transition bonds, which align with the unique characteristics of each issuer.

We have built up a wealth of experience in providing assistance to domestic and overseas corporations, financial institutions, and J-REITs in the issuance of SDG Bonds, and we are able to provide practical advice to clients considering issuing SDG Bonds.

・Support for feasibility studies, structuring, documentation, and contract management

There has been growth in the area of finance for ESG/SDGs initiatives through debt instruments such as green loans, which finance green projects, and sustainability-linked loans, which link corporate loans to the more sophisticated sustainability management of borrowers.

Debt financing in the form of loans enables more flexible structuring and documentation of terms reflecting discussions between lenders and borrowers, and innovative ideas can be accomplished. Small and medium-sized projects can also be easily structured, and there are examples of local companies and financial institutions working together to revitalize regions and resolve region-specific ESG issues.

In ESG finance through green loans, strict management of the use and application of funds is required, and therefore a project finance framework may be used. There are also cases in which project finance for green projects is repackaged using securitization techniques and sold to investors as separate financial instruments.

Leveraging our extensive experience in a variety of financing transactions, we have built up a wealth of experience in the structuring and documentation of ESG/SDGs finance, and we are able to provide advice tailored to the needs of the projects from the perspective of financial institutions and fundraisers.

・ESG finance through Islamic finance

Sharia rules (Islamic law) that underlie Islamic finance are highly compatible with non-financial indicators which ESG investments and financings take into account. Bank Negara Malaysia (the Central Bank of Malaysia) also promotes a financing method that combines Islamic finance and ESG investment and finance under the initiative of “Value-based Intermediation Financing and Investment Impact Assessment Framework.”

Companies that operate in Islamic countries, such as those involved in the halal business, have had a need to procure funds through Islamic finance. In the future, it is expected that these companies will broadly demonstrate their commitment to achieving ESG targets by utilizing an Islamic-ESG finance scheme.

Leveraging our extensive experience in both ESG finance and Islamic finance, we endeavor to deepen the understanding of international guidelines and principles in this area and their practical application to individual transactions. By assisting our clients to achieve their objectives, we will continue our contribution to the further expansion of ESG finance globally.

・Support for the preparation of disclosure documents such as integrated reports and annual securities reports

In its final report released in June 2017, the TCFD (Task Force on Climate-related Financial Disclosure) recommended a framework for disclosing climate-related information to investors, and the number of Japanese companies that make disclosure in line with this recommended framework is increasing every year.

Our firm is one of the few law firms that are members of the TCFD Consortium, which we joined in order to express our support for the TCFD Recommendations and to support appropriate disclosures that connect companies and investors.

Furthermore, the disclosure of certain sustainability information in annual securities reports became mandatory from 2023 onward, and this has become an issue that needs to be addressed by each listed company in Japan. In addition, it is anticipated that the requirements for sustainability information disclosures will continuously change going forward in accordance with the formulation of international disclosure standards and other related circumstances.

As a leading firm in the area of capital markets, we advice clients based on up-to-date information while utilizing our deep insight into and track record of handling corporate disclosure matters.

・Support for preparation of disclosure documents such as integrated reports and annual securities reports

In recent years, biological diversity has become a subject of frequent debate in parallel with the issue of climate change. Under the Kunming-Montreal Global Biodiversity Framework agreed on at the 15th meeting of the Conference of the Parties to the Convention on Biological Diversity (COP15) held at the end of 2022, each country of the parties to the convention, including Japan, must take measures to achieve the agreed upon targets while encouraging responses from domestic companies.

Movements have also emerged in the private sector that are driving efforts to disclose corporate information related to the natural environment and biological diversity, such as work currently in progress to finalize a framework for the disclosure of the nature-related risks in 2023 by the TNFD (Taskforce on Nature-related Financial Disclosures), which was established in June 2021.

In Japan, the government formulated a new national strategy for biological diversity at the end of March 2023 based on the Kunming-Montreal Global Biodiversity Framework. In addition, Japanese companies are paying more attention to biological diversity and natural capital, as demonstrated by actions such as many Japanese companies participating in the TNFD Forum, a gathering of stakeholders who support the taskforce’s discussions.

We support companies that currently are or will be working to build systems and make disclosures related to biological diversity in order to improve their own governance while also taking into account the closely related issue of climate change.

・Feasibility studies, structuring, preparation and review of disclosure documents and contracts, and monitoring

ESG/SDGs is also a key element in the context of real estate and infrastructure financing transactions.

J-REITs have been proactively disclosing environmental (green) certifications and evaluations of portfolio properties provided by professional environmental assessment organizations. Such certifications and evaluations include the DBJ Green Building certification, CASBEE certification, and BELS certification, among others. In addition, J-REITs and listed infrastructure funds are increasingly undergoing GRESB assessments and disclosing the results.

There has been a significant increase in the number of issuances of green bonds by J-REITs over the past few years. When issuing green bonds, green evaluations have been obtained from ESG evaluation organizations and rating agencies for the finance frameworks and the bonds, and these have been disclosed in the relevant disclosure documents. In addition, examples of green equity issuances by listed infrastructure funds and green equity offerings by J-REITs are appearing more frequently.

In terms of borrowings by J-REITs, there are many published cases of green loans, social loans and sustainability loans. From a slightly different viewpoint, there are contracts called green leases, which are building leases with provisions concerning energy saving and the improvement of the environment. It is anticipated that these will become mainstream in the real estate and infrastructure finance markets in the future, whether for listed or unlisted (private) funds.

We rely on our extensive expertise in real estate and infrastructure financing transactions related to ESG/SDGs to assist clients with the preparation and review of disclosure documents and contracts.

・Structure advice, contract drafting and review, regulatory advice, and operational advice

In Japan, there is a growing trend to establish impact investment funds, and we see more announcements regarding domestic impact investment funds recently. Impact investment funds intend to generate social and environmental impacts through financial investment and ensure monetary returns at the same time,. These funds aim to address various social issues, such as poverty, family issues, and the environment, while achieving positive investment returns.

Some impact investment funds are established as investment trusts and others are established in the form of partnerships, such as investment limited partnerships. It is anticipated that various structures will be utilized for impact investment funds in the future.

We are able to utilize our track record of supporting investment fund projects and impact investment projects to provide valuable advice in all phases from project launch to operation, including fund structuring, vehicle selection, documentation of contracts, and advice on relevant laws and regulations such as the Financial Instruments and Exchange Act of Japan.

・Dialogue with shareholders in relation to ESG, responses to ESG-relevant shareholder proposals, and other shareholder activism​

As ESG investment has grown, it has become an important theme in dialogues with investment destinations by investors. In the U.S. and Europe, ESG-based shareholder activism has become prevalent, and activists are gradually expanding from so-called NGO or NPO stockholders to investment funds.

Amid these global trends, shareholder activism that incorporates ESG factors is emerging in Japan as well, and the content of this trend is gradually expanding from “Governance” issues to “Environment” and “Social” issues as well.

We have a proven track record of supporting relations with shareholders including activist funds, and we provide advice for the enhancement of corporate value over the mid- to long- term with an understanding of the motivations and objectives behind the recent rise in ESG investments.

・Support for the establishment of sustainability governance systems, such as advice on preparing agenda items for board of directors’ meetings, assisting in the formation and management of sustainability committees and other organizations, and the formulation of internal regulations, etc. therefor

Amid a global trend that calls for companies to strengthen their initiatives for medium-to long-term sustainability, which includes ESG elements, companies are becoming increasingly aware that taking measures related to sustainability is an important management issue not only for risk management but also for revenue-generating opportunities. In conjunction with sustainability being considered an issue of management strategy, there is also a growing demand for the establishment of corporate governance systems to prescribe rules which allow management to respond appropriately to sustainability issues.

In addition, in light of the fact that the disclosure of sustainability information has become mandatory and that all companies are required to state matters regarding “governance” in their annual securities report, etc. for the fiscal year ended on or after March 31, 2023, each company needs to rethink and review its corporate governance system for sustainability.

Specifically, a company’s board of directors must formulate basic policies regarding the company’s sustainability initiatives and to supervise the execution of management’s duties based on these policies. In addition, an increasing number of companies have established sustainability committees under the board of directors or on the managerial side as a system to examine and promote sustainability-related initiatives on a company-wide basis, and such companies must develop an effective system that is suited to their own actual circumstances.

Based on our wealth of experience related to sustainability governance, we support the establishment and management of sustainability governance systems that suit the actual circumstances and other needs of each company.

・Support for adoption procedures, disclosure, and tax matters regarding directors’ and officers’ remuneration plans that incorporate ESG indicators

Partly impacted by the Corporate Governance Code that came into force in 2015, listed companies in particular are strongly requested to review the current state of directors’ and officers’ remuneration as a sound incentive for sustainable growth, and incentive remuneration, such as mid-to long-term performance-linked compensation and stock compensation, is becoming widespread. Although operating results such as the sales and income listed in financial statements have generally been used as a valuation indicator for calculating directors’ and officers’ remuneration, recently, as an increasing number of companies have been including sustainability-related matters such as ESG and SDGs into their management targets, there has been a trend toward paying remuneration linked to indicators that are related to these matters (ESG indicators).

When conducting management with ESG in mind, it is crucial not only to incorporate ESG elements into management targets, but also to provide management with incentives to promote various measures to achieve those elements over the medium to long term. One effective way to do this is to incorporate ESG indicators into the directors’ and officers’ remuneration system.

Our firm’s lawyers and licensed tax accountants have the latest knowledge and extensive experience in legal and tax affairs related to directors’ and officers’ remuneration and provide optimal advice to companies, on the entire process of developing and operating directors’ and officers’ remuneration systems in accordance with each company’s individual needs and circumstances. This includes advice on designing systems that incorporate ESG indicators, procedures under the Companies Act that are required to be taken in order to introduce such systems (such as resolutions to approve remuneration at general meetings of shareholders, decisions on policies for determining remuneration for individual directors by the board of directors, the establishment of remuneration rules, and procedures for granting stock compensation), disclosure of remuneration in documents such as business reports and annual securities reports, and tax treatment for companies and officers.

・Support for developing human rights policies or other internal rules and drafting contract terms for respecting human rights, support for human rights due diligence, the establishment and operation of grievance mechanisms, and crisis management

For Japanese companies, the need to incorporate the perspectives of “business and human rights” into the management is becoming increasingly important and it is now an urgent management issue for many companies.

With respect to the “business and human rights” initiatives by companies, there has been a rapid increase in stricter regulations resulting from legally binding hard laws mainly in the United States and Europe, and there is an increasing number of legislation that accompanies trade regulations, such as the Uyghur Forced Labor Prevention Act of the U.S. In Japan, while it is a non-legally binding soft law, the government formulated and published the “Guidelines on Respecting Human Rights in Responsible Supply Chains” in September 2022. In response to these developments, Japanese companies have rapidly increased their attention to “business and human rights,” which has become an urgent and important management issue.

We started advising companies on “business and human rights” in the early 2010s, when this area was still not as developed as now and was at an early stage in Japan, and we have contributed to the development of the legal area of “business and human rights” and the practice thereof. Drawing on such expertise and experience, we assist clients with developing their human rights policies and other internal rules, as well as the preparation of various human rights-conscious contracts. In addition, we support the implementation of human rights due diligence for supply chains and group companies as well as the establishment and operation of grievance mechanisms. We also provide support for carrying out investigations and announcements in the event of actual human rights issues, facilitating dialogue and collaboration with stakeholders, and formulating measures to prevent the recurrence of any human rights-related issues.

・Support for decarbonized energy development projects and their financing transactions

Transforming into a decarbonized society as a countermeasure against climate change and the global climate crisis is regarded around the world as an urgent issue. In Japan, efforts to tackle these issues by both the public and private sectors have been made in earnest in accordance with the “GX Basic Policy” decided by the Cabinet on February 10, 2023.

We provide a variety of legal services for the development and financing of power generation projects aimed at expanding the use of renewable energy, including structuring, support in the preparation of power purchase agreements (PPAs) under the Feed in Tariff / Feed in Premium mechanisms, and documentation of project and financing agreements. In light of our experience and insight gained from being involved in projects for the development of large-scale thermal power plants, in recent years we have been providing advice and legal support for the latest efforts toward GX, including the construction of hydrogen and ammonia supply chains and the support systems therefor, the development of laws related to CCS projects, and legal and systematic issues related to the battery storage business.

・Advice on carbon credits including on emissions trading and the Joint Crediting Mechanism (JCM)

Since the first half of the 2000s, we have contributed to the domestic legislation of the Kyoto Protocol, the design of the Joint Crediting Mechanism (JCM), and other legislation which can be regarded as the prototype of the current transaction mechanism for carbon credits, all while taking into account the requests of our clients. As voluntary emissions trading through the GX League has begun to take place in earnest and concrete structures for carbon pricing have been developed in recent years, we have been providing various legal services for more specific transactions, such as giving regulatory advice on voluntary carbon credits and the establishment of and documentation for investment funds relating to carbon credits, as well as offering advice and support for the formulation of private JCM.

・Support for the formulation of intellectual property strategies, the establishment of intellectual property management systems, and the utilization of and other measures for intellectual property and support for the disclosure of related information

In order to enhance corporate value, it is important for modern companies to promote operational and business reforms through DX while creating and utilizing intellectual property and intangible assets, and effective supervision of these activities is essential for a company’s sustainable growth.

In light of these circumstances, the Corporate Governance Code (revised in June 2021) also included requirements for the disclosure of intellectual property investment strategies and the supervision of these strategies by a company’s board of directors. In January 2022, the Japanese government also formulated the Guidelines on Disclosure and Governance of Strategies for Investment and Utilization of IP and Intangible Assets Ver. 1.0 as the guidelines to serve as a reference for when companies engage in dialogue with investors and financial institutions on these issues. Subsequently, as part of an effort to actively promote investment in intellectual property research and development, in March 2023 the government published Ver. 2.0 of the Guidelines, which additionally sets out a communication framework for such dialogue between companies and investors and for information disclosure to investors.

We have many lawyers who have extensive experience in intellectual property and DX matters, and we assist companies from a legal standpoint based on the specific details of their business with matters such as formulating intellectual property and DX strategies, establishing systems for the management of intellectual property, and the utilization of and other measures for intellectual property, and also support those companies in any related information disclosures.

・Provision of legal advice on environmental litigation and disputes and other support, including representing clients in these cases

While it is of course important for companies to comply with the various regulations related to environment, they are increasingly becoming named as parties in environmental litigation and disputes. Points that become issues in such litigation and disputes cover a wide range of areas, including soil contamination, air pollution, water pollution, issues concerning sunlight and natural scenery, and asbestos.

In some cases, environmental litigation and disputes may affect the survival of companies involved or may lead to legal claims that have a material impact on the company’s business and financial status such as demands for business injunctions or for enormous amounts of damages. In addition, filing of administrative litigation or the like may be necessary depending on the content of a disposition ordered against a company by central or local governments under the relevant regulations.

We provide clients with a wide range of support through our experts who are familiar and have extensive experience with regulations and liabilities related to environmental issues and environmental laws, including by providing appropriate legal advice on environmental litigation and disputes and other support such as representing clients in these cases.

・Providing legal support for addressing environment-related regulations and policies across different jurisdictions

Many of the world’s leading nations are committed to the “2050 Carbon Neutrality” goal and are taking various measures to achieve that goal.

Those measures include regulations (e.g. emission regulations), technical standards for goods critical to achieving a decarbonized society (e.g. batteries), methods for assessing lifecycle environmental impact of a product, measures aimed at protecting and promoting domestic industries (e.g. subsidies and local content requirements), and carbon border adjustment mechanisms (CBAMs).

It is essential for companies to address those regulations and policies in order to survive international competition, expand their business globally, and realize a sustainable society.

We have a number of lawyers with experience in handling environment-related cross-border regulatory and policy issues in cooperation with overseas law firms. The team also has top-notch expertise in international trade law and other international rules, and many lawyers are familiar with industrial policies and rulemaking as a result of their experience at government ministries and international organizations.