A far-reaching system to measure greenhouse gas emissions, one which will include small and mid-sized companies, will be launched in Japan. The Japanese government will create a model that enables financial institutions to easily measure emissions of their investment targets. This project is in line with those of other countries that enable financial institutions to know the gas emissions of their investment targets. The project will utilize data collected by financial institutions and encourage small and mid-sized companies, who tend to fall behind in taking decarbonization measures, to start instituting such measures.
The Ministry of the Environment (MOE) and Financial Services Agency (FSA) have launched a call for financial institutions to participate in their project to create a data measurement model. The model envisions calculating how much each industry, such as power and transport, emit greenhouse gases. Next the calculation result is multiplied by the estimate of each company’s energy consumption or amount of goods distributed to obtain an approximate figure. The project will utilize the emissions estimation tool developed by the MOE.
The model will use information from multiple companies in one industry, or companies of similar sizes, so that small and medium-sized companies as well as large companies will be able to calculate their emissions.
Major companies lead efforts to reduce emissions. Small and mid-sized companies tend to be slow to reduce emissions due to lack of knowledge on measuring emissions. Some Japanese companies have instituted “science based targets (SBT) (greenhouse gas reduction targets consistent with science)” based Paris Agreement for global warming countermeasures and have been certified by international organizations. Small and mid-sized companies only comprise about 20% of such Japanese companies.
Financial institutions are increasingly focusing on decarbonization efforts when choosing investment targets. It may become essential for small and medium-sized companies to know and reduce their emission amounts, so that they may raise capital by borrowing under favorable conditions. It is expected that financial institutions may advise businesses to transform their operations and encourage decarbonization at an early stage, if institutions can learn about the emissions of their investment targets.