June 29, 2026
Seminar discusses increasing green transition finance
As the world faces the challenge of global warming, it is increasingly urgent to reduce carbon dioxide emissions across the board.
At a June 4 seminar in Tokyo on green transformation and transition finance sponsored by the Environment and Law Unit of Kyoto University’s Center for Interdisciplinary Studies of Law and Policy, experts emphasized the importance of investing in clean energy projects and financing hard-to-abate industries to support their shifts to greener operations. Some experts said such financing must be monitored to ensure the funds are used properly to truly support transformation, while also warning that investors and consumers should watch out for possible greenwashing by corporate bond issuers seeking lower interest rates.
“Accelerating the energy transition and green transformation investment is a form of crisis management” at a time when electricity demand is growing rapidly, Green Transformation Acceleration Agency (GXA) Director Hideki Takada told the audience. The agency was established in 2024 to help carry out the government’s green transformation policy of investing in corporate projects to slash carbon emissions and boost renewable energy production and usage.
Since the world’s energy demand is rising sharply with the emergence of generative AI and its need for building more data centers, the supply of oil alone will not be sufficient to fulfill the demand. Takada said it is therefore essential to expand renewable energy, which can be supplied more quickly and at lower cost.
Moreover, the conflict between the United States and Iran overshadows the global energy market. “What is going on in the Middle East is heightening concerns about energy supplies, and the situation is prompting Japan to reaffirm the need for green transformation and an energy transition,” he said. Japan is particularly vulnerable to energy crises because its energy self-sufficiency rate of 15.3% is the lowest among developed nations and it remains heavily dependent on imported fossil fuels, he added.
Takada stressed that achieving carbon neutrality by 2050 does not conflict with Japan’s strategy to promote industrial competitiveness and economic growth. “These goals can be pursued at the same time, and they can also enhance each other. This concept is the foundation of Japan’s GX (green transformation) policy,” he said.
In 2023, the Japanese government pledged to mobilize a total of ¥150 trillion (nearly $1 trillion) in GX-related investment over the next 10 years, out of which ¥20 trillion comes from a national budget for green transformation. The agency will promote ¥130 trillion in investments from the private sector.
To achieve the goal, the government started to issue the world’s first sovereign transition bond in February 2024, which will be financially backed by national income earned by the country’s carbon pricing system.
The agency’s mission is to support green projects by providing debt guarantees and equity investments, operate the national carbon pricing mechanism starting this fiscal year — creating a market for trading corporate emissions — and promote research and information toward a carbon-free society.
In July 2025, the GXA announced its investment in TeraWatt Technology Inc., a California-based startup founded in Japan that provides rechargeable lithium-ion battery cells with high energy density. The amount of the financing has not been disclosed. The agency followed that investment with debt guarantees for steelmaker JFE Holdings Inc., chemical company Resonac Holdings Corp. and the electricity producers Chugoku Electric Power Co. and Hokkaido Electric Power Co.
“Transition finance is growing, but at the same time, it is entering a new phase in which its quality and credibility are under closer scrutiny,” said Yumiko Watanabe, the head of the Japan program of the Climate Bonds Initiative. “What matters most is how to assess the projects and assets being financed, and how that investment can drive corporate transformation.” Climate Bonds Initiative is a London-based international organization founded in 2010 whose mission is to expand credible green transition financing in capital markets, using science-based standards. It also helps build financial infrastructure by connecting policymakers, investors and issuers.
Watanabe said there is further scope for Japanese issuers to improve the quality of the nation’s green bonds. As of the end of 2025, approximately 60% of the $162 billion issued through more than 1,000 green bonds in Japan was found to be aligned with the Climate Bonds Criteria, and around 4% was certified under the International Capital Market Association-aligned Climate Bonds Standard and Sector Criteria. But these figures are lower than those in the global market, where about 80% of the total issuance worth $5.36 trillion matches the criteria and about 8% is certified.
As for transition bonds, Watanabe pointed out that the market is not yet fully developed. The total volume of global transition bond issuances, which had been gradually increasing for several years, jumped to a record high in 2024 due to a single large issuance by the Japanese government. Between July 2017 and March 2025, Japan issued a total of $31.48 billion in transition bonds, accounting for about 60% of the volume worldwide. “These figures show that issuers still remain limited and have yet to become widespread globally,” she said.
She also stressed that every country and sector must follow a clear transformation path to keep the U.N.-backed 1.5-degree goal within reach, and that such actions need to be embedded in economic frameworks and grounded in science.
The next presenter was Shunta Doki, an attorney at law for Oh-Ebashi LPC & Partners, who explained legal aspects of greenwashing in sustainability finance.
Doki warned that companies’ greenwashing can create not only reputational risks but also civil, criminal and regulatory liabilities. For example, inaccurate information or inadequate disclosure of material data to investors could result in damage claims. Misleading consumer information could also lead to administrative fines on companies, while directors may face liability for management decisions.
Doki pointed out that transition finance is prone to greenwashing. “Since ESG (environmental, social and governance) finance can offer lower interest rates, corporate borrowers have an incentive to present their projects as green,” he said. This is especially problematic because it is often hard to assess the quality of a transition plan that is dependent on future goals, and because a company’s targets may depend on technologies that are still under development, such as hydrogen-based systems or carbon dioxide capture and storage, he said.
In the closing remarks, Sophia University professor Yu Umemura said the world is facing an unavoidable paradigm shift. “We are urged to change society in many ways, including in corporate law and in social structures such as the financial system,” he said.
In a question to the other seminar speakers, he asked for their views on criticism of Japan’s approach to transition finance by global nongovernmental organizations arguing that Japan’s investment in ammonia and hydrogen co-firing for coal-fired power generation has limited impact on reducing carbon emissions and merely prolongs the life of fossil fuel-based power generation.
In response, Takada of GXA said he believes Japan must invest in a broad range of technologies to achieve net-zero emissions by 2050, as no single technology has been fully proven to help fossil fuel companies reach net zero or has yet been widely deployed in society. “In that context, we need to keep investing in these technologies while monitoring progress and adjusting strategies as needed,” he said.
