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Finance

Development Bank of Japan to boost ESG funding up to 80% to $50bn

Exclusive: Environment, social and governance to drive 40% of state lender's five-year plan

A hydrogen energy project in Japan's Fukushima Prefecture. (Photo by Keisuke Kurotaki)

TOKYO -- The government-backed Development Bank of Japan plans to increase funding based on environmental, social and corporate governance factors to 5.5 trillion yen ($50.4 billion) over the next five years, Nikkei has learned, aligning with Tokyo's goal of achieving net-zero greenhouse gas emissions by 2050.

The lender, which will announce its next medium-term plan Thursday, intends to commit roughly 40% of its total 13 trillion yen investment and lending to ESG pursuits over the five years to fiscal 2025. This round of ESG investment and financing will mark an increase of 50% to 80% from previous levels.

DBJ will support the spread of hydrogen-based energy, electric vehicles and other emissions-cutting technology through the private sector, according to the plan.

The bank also will back companies that are transforming their business models or organizations in response to societal changes brought by the coronavirus pandemic.

DBJ is the top shareholder of Airdo and Solaseed Air, two pandemic-hit Japanese regional airlines that plan to merge under a joint holding company. The bank is exploring a capital infusion into each carrier through preferred shares.

Separately from ESG funding, DBJ and other state-affiliated financial groups plan to extend up to 3.5 trillion yen in subordinated loans during the current fiscal year through March 2022. Though the total is a step back from the 5 trillion yen extended in the previous financial year, the lenders will maintain a high level of financing to meet the needs of virus-hit businesses struggling to secure traditional bank loans.

The DBJ's last midterm plan was extended to a fourth year through fiscal 2020 from the original three years to accommodate the coronavirus fallout. Expecting a long recovery from the pandemic, DBJ settled on a five-year period for the upcoming midterm plan.

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