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Mizuho Bolsters ESG Data Capabilities as Japan Toughens Regulations

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Japanese financial giant Mizuho Bank has upgraded its ESG data capabilities as the government in Tokyo tightens rules on sustainability reporting and after the bank was implicated in a greenwashing scandal.

The financial services major has put in place a disclosures and data verification framework to help it assess the progress and credibility of net-zero transition plans of companies to whom it provides finance. It has also collaborated with tech giant Fujitsu to help its clients manage their ESG data.

The verification framework was announced at the end of last year to cover disclosures from the electric power sector on its transition strategies. The process begins engagement with the companies and then extends to verifications checks.

On the data it uses, the assessment framework considers “quantitative information on science-based targets consistent with the Paris agreement and progress and outlook for de-carbonisation technology development adoption”, Mizuho told ESG Insight.

It would also take in “qualitative strategic information, including appropriate governance structure for transition strategies and targets setting”, the company added. “We make use of corporate public information and proprietary non-public information as well as information published by international organizations and governments.”

The bank’s financing strategies for borrowers will be assessed through the verification framework, whose standards are built on “strategy and materiality, disclosure, governance structure, science-based targets, and outlook for decarbonisation technology development/adoption,” the company said in a statement.

“When we can confirm that the client’s transition strategy meets the standards of our internal verification process, we will proactively provide financing for their business structure transformation,” the bank said.

While the assessment is confined to the power generation sector, Mizuho said it will “look into expanding the scope of the clients to which we apply it”.

Greenwashing Clampdown

Japanese financial institutions are under increasing pressure from regulators to tighten their ESG reporting competencies amid criticism that the country has been too slow among major economies to clamp down on greenwashing.

The Financial Services Agency (FSA) has announced a number of recent disclosure and labelling rules to ensure investors are not hoodwinked into making poor decisions.

Last week, the FSA amended its sustainability and corporate governance disclosure requirements to force listed companies to make more sustainability and gender-focused data available in their annual reports. The rules, which will come into place at the end of March, elevate the importance of sustainability in governance and risk management processes it expects of companies.

Late last year, the FSA took a global lead when it announced plans to begin overseeing the activities of ESG data and ratings providers. However, a report last week by the Institute for Energy Economics and Financial Analysis criticised the proposed voluntary code of conduct for lacking enforcement powers. It also took aim at the code’s relaxed attitude towards the wide variations in ratings seen between the different providers – a key focus of concern among other regulators worldwide.

The FSA’s flurry of activity reflects a desire by the world’s third-largest economy to clean up its ESG act as greenwashing scandals accumulate in a country that Bloomberg estimates accounts for four-fifths of all Asian ESG exchange-traded funds.

Mizuho was embroiled in one such scandal, when a US$9 billion Mizuho Financial ESG-focused fund was found by the FSA to include insufficient details on its environmental and social impacts.

The company has been swift to react, and last week further added to its ESG data knowhow with the Fujitsu partnership, which will see the bank offer access to its customer networks and information on environmental and energy solutions within the tech giant’s cloud.

The service will enable the bank’s clients to visualise their carbon dioxide emissions profile across supply chains, helping them to better manage their carbon footprints and comply with corporate energy transition reporting regulations.

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