The government will create a framework to invest 80 billion yen into renewable energy firms. The plan will be incorporated in a package of economic measures that will soon be finalized. Green investment is a key growth strategy advocated by the Suga administration. The initiative is aimed at extending financial support to promising firms with limited profitability and attracting private funds to stimulate the renewable energy market.
The government will contribute 20 billion yen to the Development Bank of Japan (DBJ) under the Fiscal Investment and Loan Program (industrial investment), which will be newly added when the FY2020 third supplementary budget is compiled. The DBJ, for its part, will form a “green investment facilitation fund” totaling 80 billion yen by investing its own funds and soliciting investments from the private sector.
It is expected that the fund will cover companies that engage in renewable energy projects, such as offshore wind power generation, and those that leverage fuel-efficient technologies. Currently, there are funds that invest in green bonds and other financial products, but green funds that directly invest in business operators are few and far between.
Many firms in the renewable energy sector do not make stable profits, and they face the challenge of sourcing funds from private financial institutions. Once investments from the government-backed fund and the provision of capital funds, including subordinated loans, help stabilize the operators’ financial foundations, it will be easier for them to attract lending from private financial institutions.
The Suga administration seeks to reduce greenhouse gas emissions to net zero by 2050 under a “carbon neutral” initiative. The economic package will include multiple measures that are aimed at cutting Japan’s reliance on carbon. The green fund will become one of the administration’s hallmark measures.