The Bank of Japan has published its fifth Market Functioning Survey concerning Climate Change, finding that market participants viewed the incorporation of climate-related risks and opportunities into Japanese stock and corporate bond prices as slightly weaker than in the previous survey. New climate change-related environmental, social and governance bond issuance declined in 2025, reflecting fewer new projects, issuers’ preference for the greater flexibility of non-ESG bonds and the operational burden of labeled issuance. ESG bond supply and demand also shifted slightly toward looser conditions, although outstanding amounts continued to rise. Approximately half of business respondents expected a significant increase in climate-related funding needs through fiscal 2030, and about 40% were considering ESG bonds. Issuers identified policy incentives as the leading need for transition finance, while investors prioritized greater international understanding and stronger disclosure to assess cost-effectiveness and greenwashing risks. Companies already subject to mandatory Sustainability Standards Board of Japan disclosure requirements are establishing frameworks, collecting data and identifying material information, but respondents cited Scope 3 data collection, operational burdens, disclosure comparability and analytical capacity as continuing challenges. The survey received 473 responses from 951 entities, a 50% response rate.
2026-08-17Bank of Japan
Bank of Japan finds weaker climate-risk pricing and declining ESG bond issuance in fifth market survey
The Bank of Japan’s fifth climate market survey found slightly weaker pricing of climate risks and declining new ESG bond issuance, with supply and demand shifting modestly looser. About half of business respondents expect climate-related funding needs to rise significantly through fiscal 2030, while issuers and investors continue to seek policy support, better disclosure and broader understanding of transition finance. Firms preparing for mandatory Sustainability Standards Board of Japan disclosures cited data collection, comparability and operational burdens as key challenges.