Response to Climate Change
Aozora Carbon Neutral Initiatives
As initiatives towards carbon neutrality accelerate throughout the world, the Aozora Group has clearly set out the role that it should play to realize a decarbonized society by consolidating its initiatives for addressing climate change in a set of new Aozora Carbon Neutral Initiatives.
Coupled with promoting decarbonization efforts as a business entity based on these initiatives, Aozora is also aiming to become carbon-neutral by 2050 while actively supporting our customers’ climate change initiatives and transition towards decarbonization through engagement.
Roadmap to Becoming Carbon-neutral
The Aozora Group has developed a roadmap to becoming carbon-neutral in line with the Paris Climate Agreement and a specific action plan.
Based on Aozora’s Sustainability Targets, the Bank has pledged 1) to execute/originate 1.0 trillion yen in sustainable financing by FY2027, which includes environmental financing of 700.0 billion yen, and 2) to reduce CO₂ emissions and achieve net zero emissions as a business entity (Scope 1 and 2) by FY2030, and 3) to reduce CO₂ emissions in its investment and loan portfolio (Scope 3: Category 15), aiming for net zero CO₂ emissions by FY2050.
We will continuously update our action plan and promote communication with our stakeholders through proper disclosures regarding our progress.
Roadmap to Becoming Carbon-neutral
Initiatives on Environmental Issues through Sustainable Finance
The Aozora Group understands that utilizing our financial intermediary function to provide finance for companies’ initiatives to become carbon-neutral, expanding the use of green energy and technological innovation towards decarbonization is a mission-critical role for financial institutions.
We have set the goal of executing/originating sustainable financing of 1.0 trillion yen (including environmental financing of 700.0 billion yen) by FY2027 (seven years) as part of Aozora’s Sustainability Targets.
We are striving to achieve these targets by continuing to proactively provide environment-related project finance and green building finance with a focus on renewable energy as well as by promoting corporate finance, including green loans and sustainability-linked loans.
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Environment-related renewable energy project finance
- Promotion of the further expansion of green energy finance inside and outside Japan, the transition of existing power-generating facilities, and the exploration of new areas of innovation towards becoming carbon-neutral by leveraging our domestic and overseas knowledge and experience
Financing for green buildings
- Proactive initiatives for both debt and equity finance for certified green buildings inside and outside Japan
Corporate finance
- Origination of green loans, social loans and sustainability-linked loans led by the Bank
- Providing comprehensive solutions, including consultations on decarbonization based on the Aozora ESG Support Framework
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Domestic and Overseas Environment-related Project Finance
The Aozora Group is proactively providing green energy finance such as renewable energy project finance in Japan, mainly for solar and wind power, and contributing to the expansion of green energy and the development of regional economies in Japan by collaborating with regional financial institutions, including through providing syndicated loans.
For the origination of project finance, we flexibly respond to emerging needs, including portfolio transactions with the consolidation of multiple small-sized solar power generation projects as well as secondary transactions, by leveraging our expertise, knowledge and network we have developed with a proven track record in structured finance, both domestically and overseas.
Aozora established the Infrastructure and Environment Finance Division as a group of professionals from diverse backgrounds, to consolidate our domestic and overseas knowledge and expertise, and further promote our environmental business in Japan and overseas.
The Aozora Group is expanding its domestic business to offshore wind, geothermal, and other types of power. It will also promote transition finance in Japan and overseas and take on new challenge areas, including decarbonization innovation finance to support technological innovation by accumulating knowledge through its participation in infrastructure projects in leading countries in environmental finance, such as the U.S. and Europe.
Financing for Green Buildings
In Japan, Aozora provides finance for “A”-class buildings as rated in the CASBEE*1 Certification, a comprehensive building evaluation system largely based on environmental performance and environmental load reduction levels. We also provide financing for projects such as advanced logistics facilities that offer services designed to improve conditions for people working inside and outside the building.
For overseas lending, our investments and loans include finance for high quality projects that are rated as “Platinum” or “Gold” according to the LEED*2 Certification, a system originated in the U.S. that comprehensively evaluates the environmental performance of buildings.
For real estate finance, we will continue to provide our domestic and overseas debt and equity financing in order to contribute to the sustainable growth and development of societies and economies.
- CASBEE (Comprehensive Assessment System for Built Environment Efficiency)
- LEED (Leadership in Energy and Environmental Design)
Corporate Finance
Since the establishment and announcement of Aozora’s Sustainability Targets, the Group has elevated its sustainability finance initiatives for corporate customers (corporate finance certified by a third-party entity). In Japan, these initiatives have been steadily expanding, including the arrangement of green loans, social loans, and sustainability-linked loans.
Overseas, we have also been increasing our initiatives for sustainability-linked loans, especially in North America.
Aozora ESG Support Framework
The Bank established the Aozora ESG Support Framework to further support the Environmental, Social, and Governance (ESG) initiatives of its customers.
The Aozora ESG Support Framework is comprised of Aozora ESG Framework Loans, which are assessed for their suitability as sustainable finance, and consulting services provided in collaboration with external experts to resolve customers’ ESG-related issues.
Under this framework, the Aozora Group supports the problem-solving efforts of its customers, which are primarily SMEs, thereby actively contributing to broadening the foundation for Japan’s sustainable development.
Aozora ESG Support Framework
Aozora ESG Framework Loans
For our Aozora ESG Framework Loans, we have obtained a second opinion from Rating and Investment Information, Inc. (R&I), which has evaluated our green loans, social loans, and sustainability-linked loans and found them to be compliant with international principles*1 and Japan’s internal guidelines.*2
To execute the framework loans, we have established the Sustainable Business Office within the Sustainability Management Division, as an independent department from our business divisions, and staffed it with experts who assess whether loans are appropriate. In the LBO finance area, where Aozora has established a presence as one of the market leaders, we have originated loans as framework loans and conducted sustainability-linked loan evaluation, despite the fact that there are few examples of origination inside Japan.
In June 2023, Aozora received a second opinion from R&I to the effect that its Positive Impact Finance Implementation Framework has been evaluated and found to be in compliance with the Principles for Positive Impact Finance (PIF Principles) of the United Nations Environmental Programme Finance Initiative (UNEP FI), and we started offering a new service called Aozora Positive Impact Finance.
Moreover, as developing human resources who are experts in sustainable finance is an important issue for the finance industry, we have been focusing on this area by proactively holding training and study sessions.
- Green loans are governed by Green Loan Principles (GLPs), social loans by Social Loan Principles (SLPs), and sustainability-linked loans by Sustainability-linked Loan Principles (SLLPs). The principles were formulated by three entities: the Loan Market Association (LMA), the Loan Syndications and Trading Association (LTSA), and the Asia Pacific Loan Market Association (APLMA).
- Green Loan and Sustainability-linked Loan Guidelines (GL SLL Guidelines), Social Bond Guidelines (SB Guidelines)
Supporting Customers’ Initiatives to Decarbonize
For consulting services provided through collaboration with external experts, we focus on supporting customers’ initiatives towards decarbonization as a measure to respond to the issue of climate change.
In 2022, we entered a business alliance with Asuene Inc. to provide corporate customers with consultations for their decarbonization initiatives by introducing “Asuzero,” a cloud-based service provided by Asuene Inc. that is designed to visualize, reduce, and report CO₂ emissions.
In April 2023, we entered a business alliance with BYWILL Inc., which provides support services for creation and purchase of various types of environmental credits. With this alliance, we have a structure in place to provide full support for customers who own assets or businesses with latent environmental value in creating J-Credits, and to support customers with CO₂ emissions reduction needs in decarbonizing, including carbon offsetting using environmental credits.
Issuance of Green Bonds
The Aozora Group recognizes that providing financial support for domestic/overseas corporations addressing environmental issues as well as responding to investors’ needs are part of our social responsibilities as a financial institution. In March 2021, March 2023, and September 2023, we issued green bonds whose proceeds will be used solely to finance projects that contribute to environmental solutions, such as renewable energy projects (e.g. solar/wind power generation) and green buildings.
Green bonds issued by Aozora Bank are part of the Bank’s Green Bond Framework, which was formulated in accordance with the International Capital Market Association (ICMA)’s “Green Bond Principles 2018”*1 as well as the Japanese Ministry of the Environment’s “Green Bond Guidelines 2020”*2. The framework has obtained a Second-Party Opinion from Sustainalytics, an external certification organization.
- A guideline regarding the issuance of Green Bonds which was formulated by the Green Bond Principles Executive Committee, a private organization whose secretarial operations are overseen by the International Capital Market Association (ICMA)
- Designed to be used as a reference for market participants who are considering concrete green bond-related initiatives in order to maintain the consistency of Green Bond principles. The Ministry of the Environment first formulated and announced its Green Bond guidelines in March 2017 and published a revised version in March 2020 with the aim of further popularizing Green Bonds in Japan by providing concrete examples and interpretations based on Japan’s unique characteristics
Green Bond Framework
Use of Proceeds
Proceeds from green bonds are allocated to investments and loans in renewable energy projects and green buildings that meet specific standards (“Eligible Green Projects”).
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Eligible Green Projects |
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Renewable |
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Investments and loans to finance the construction, acquisition, renovation and operation of renewable energy projects that comply with the Environmental Impact Assessment Act and the local ordinances when verifying the feasibility of power generation facilities (solar/wind/biomass*1)
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Green |
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Investments and loans to finance the construction, acquisition and renovation of green buildings that have obtained the first or second grade*2 under green building certification systems
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Project Evaluation and Selection Process
We select loan/investment transactions for the Eligible Green Projects by verifying their adherence to specific standards using relevant documents. The verification and selection processes are based on our specific validation guideline, which allows us to ensure the conformity to the standards in the selection process. In addition, we confirm if the selection process meets the standards once a year following the selection of the Eligible Green Projects.
Management of Proceeds
We regularly monitor the status of allocating proceeds from green bonds to the Eligible Green Projects as well as the unallocated amount. If the proceeds are not fully used, we retain the remaining portion in cash or cash equivalents.
Reporting
Until green bonds are redeemed, we provide annual reporting on Aozora’s website regarding the number of renewable energy projects receiving an allocation, the number of facilities by type/grade of green bond certification, the status of using the proceeds including a list of allocation amounts, and the effect of environmental solutions including reduced CO₂ emission levels.
For further details about Aozora’s Green Bond Framework, please click on the link below.
(Reporting)
For further details about the allocation and impact reporting related to the green bonds, please click on the link below.
Initiatives to Address Environmental Issues as a Business Entity
Reduction of CO₂ Emissions and Electricity Usage
Aozora’s Head Office is located in the Sophia Tower which has been using only renewable energy-driven electricity since June 2020. In addition, the Head Office is equipped with highly insulated glass, a natural ventilation system and rooftop greenery. With office areas employing LED lighting with automatic dimming controls, the building also minimizes power consumption compared to the level of traditional equipment.
We are also gradually transitioning to green electricity at each branch office, starting with the Nagoya Branch, and continuing with the Nihonbashi Branch from April 2023.
We remain focused on reducing CO₂ emissions at our Fuchu Annex, which also serves as a data center. In FY2022, we applied carbon offsets using J-Credits* for the hot and cold water used in the building. We have also started studying the possibility of adopting and using green energy from an energy creation business for electricity at the building in FY2024.
In addition, Aozora has made progress in replacing company cars used at its Head Office and branch locations with eco-friendly vehicles, which accounted for 93% of our fleet as of May 2023.
Looking ahead, we will continue working towards achieving net zero Scope 1 and Scope 2 emissions by FY2030, which is one of Aozora’s Sustainability Targets. Towards this goal, we will focus on initiatives to reduce environmental load as a business entity by promoting upgrades to energy-saving equipment/devices as well as adopting self-supply sources and responding to vendors.
- J-Credit: A program in which the government certifies the amount of greenhouse gas emissions (such as CO₂) reduced through introduction of energy-saving equipment and the use of renewable energy, or amount removed through appropriate forest management, as “credit.”
Environmentally Friendly Purchasing
Aozora works to reduce paper consumption in offices and promotes the use of eco-friendly paper.
By collaborating with Daio Paper Corporation, one of our customers, we have introduced printing paper and business cards made from FSC (Forest Stewardship Council)* materials to replace those the Bank had used during the course of its business. As a business entity, Aozora intends to contribute to forest preservation as well as the realization of a sustainable society.
In FY2022, the Bank switched to FSC certified paper for many of the standard envelopes used at the Bank.
- FSC® (Forest Stewardship Council®)
A non-profit organization aiming to promote responsible forestry management on a global scale. The FSC label identifies responsibly managed forests and responsibly sourced forest products that are qualified in terms of environmental preservation, social benefits and economic sustainability.
Recycling of Waste Material / Initiatives to Reduce Plastic Waste
Aozora is highly focused on promoting the recycling of waste material, including 100% recycling of all Head Office waste material, except for burnable waste.
In FY2022, we reduced the volume of waste paper further by installing new dedicated collection boxes for confidential documents at each branch and recycling used paper by shredding it.
As another way to actively promote a reduction of environmental load, the Bank introduced eco-friendly materials, such as environment-conscious plastic cups and biodegradable straws, and Rainforest Alliance Certified* coffee beans to its cafeterias at the Head Office and Fuchu Annex.
- Certification verifying that products or raw materials are produced by using an approach that leads to the enhancement of three key sustainability elements (society, economy and environment)