CEO Takeuchi participated last December in a study tour to the COP28 UN Climate Change Conference in Dubai.  The study tour was organized by Japan Climate Leaders Partnership (JCLP). He spoke at the Japan Stewardship Forum to share his takeaways from the bilateral meetings the JCLP delegates have had with key stakeholders and experts.

‘The Impact of International Agreement on Corporate Behavior’

Key messaging:

• The international agreement (COP28) will influence market conditions, corporate actions and behavior of the stakeholders through various channels.
• The transition to net zero is so to speak, a big structural transformation of the economic system where risks and opportunities both co-exist.
• Companies need to take corporate action for disruptive change based on the in-depth analysis of not just risks but also opportunities from a medium- to long-term perspective.

Policy

• Climate policies to realize net zero have been evolving into economic and industrial policies. The European Union (EU) and the United States have both introduced such policies that enable climate actions going hand in hand with economic viability, where foreseeability is a key to success.
• The two approaches taken differ, yet both help accelerate corporate actions to achieve net zero:  The EU has centered the regulations at its core in promotion of a net zero (such as the EU ETS or CBAM), while the U.S. provides subsidies or tax incentives through the Inflation Reduction Act (IRA), for the companies promoting de-carbonized business.
• In Japan, under the Green Transformation (GX) policy, the first GX Economy Transition Bonds is scheduled to be issued February 2024. It is hoped that the bonds help accelerate climate actions across Japanese companies to promote decarbonized business while ensuring economic viability. In this context, Japan’s commitment to net zero and effectiveness of the GX policy is being tested.

Finance

• Climate change has a significant impact on the financial sector. In quantifying the risk associated with climate change, physical, policy, and transition risks as well as the impact of the entire supply chain must be taken into account. In this respect, companies need to develop a strategy based on the medium- and long-term perspective for the risk.
• On the other hand, it is noted that the investment to early-stage climate tech continues to rise with investors viewing it as an opportunity.

Corporates

• It is important to develop and implement overarching strategies that incorporate both risks and opportunities associated with climate change.
• A transition plan, not only for their own business but also to cover the supply chain, is needed.
• Delays in action to decarbonize businesses would possibly invite a risk of being excluded from the global supply chain.

CAJ monitors and follow up closely with outcome of the international agreements and initiatives, looking at the implications for Japan’s economic and industrial policies and potential impacts on corporate action. We remain committed to promoting the corporate action to the transition to a net-zero with a vision in which Japan exercise strong leadership in combating climate change.