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Japan sweetens insurance coverage phrases for ESG-conscious corporations

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TOKYO — The Japanese government now offers better trade insurance terms for overseas projects where participants disclose information sought by investors adopting environmental, social and governance, or ESG, investment principles.

The incentives are meant to encourage businesses, including overseas projects that involve renewable-energy equipment, to take their expertise abroad.

Starting Wednesday, the government-owned Nippon Export and Investment Insurance covers 97.5% of the value of such exports and investments against bankruptcy or other losses, up from the usual 90% to 95%. Companies wanting to qualify must proactively offer information on their climate change countermeasures, for example.

With global warming an increasingly urgent issue and more investors here and overseas factoring ESG criteria into their decisions, Japan hopes to nudge companies into becoming more environmentally conscious. The government’s infrastructure export policy revised last month calls for creating a type of insurance specifically for renewable-energy-related exports.

The move is intended to support overseas sales of environmentally friendly electricity generation facilities and energy-saving equipment, as well as investment in foreign companies involved in these fields. Eligible areas include solar and wind power along with carbon capture and utilization, hydrogen power, and battery technology.

Businesses looking to take advantage of the increased coverage will be asked to submit documents verifying their support for the recommendations of the international Task Force on Climate-related Financial Disclosures, or TCFD, as well as their disclosure processes.

Both the company actually carrying out the project in question and any financial institutions providing funding need to meet the conditions.

Nearly 800 companies and organizations have expressed support for the TCFD’s recommendations, which include describing climate-related risks and their impact on strategy. More than 150 Japanese institutions on the list recently established a consortium to work out shared disclosure methods.

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