Japan to use foreign reserves for ESG investments

Japanese national flags flutter in front of buildings at Tokyo's business district in Japan, February 22, 2016. Growth in Japan's manufacturing activity slowed sharply in February as new export orders contracted at the fastest pace in three years, a worrying sign that overseas demand is deteriorating rapidly as China's economy slows, a preliminary survey showed on Monday. REUTERS/Toru Hanai/File Photo
  • Japan becomes first among G7 to invest FX reserves in ESG
  • ESG bond investment seen to grow as the market expands
  • Hopes ESG investment to make FX reserves management sustainable

TOKYO, Oct 8 (Reuters) - Japan will start using foreign reserves to buy securities that meet environmental, social and governance (ESG) criteria, Finance Minister Shunichi Suzuki said on Friday, joining a trend among global investors to focus on combating climate change.

"Revitalising new ESG investment will help achieve a greener society and carbon neutrality in 2050," Suzuki said. "As the ESG bond market grows, I believe investment in ESG bonds will increase from now on."

The minister expected Japan to be the first Group of Seven (G7) government to use foreign reserves for ESG investments, and he hoped others would follow.

InJuly, the Bank of Japan said it would start buying green bonds, joining other major central banks that have begun using their institutional heft to help tackle the issue of global warming. read more

Standing at $1.4 trillion, Japan's foreign reserves are second only to China's. The MOF's special account that manages foreign reserves tends to make profits, which often use to fund supplementary budgets.

Japan will deliver a message on the ESG investment plan to other members of the Group of 20 major economies when they meet in Washington next week, he added.

Reporting by Tetsushi Kajimoto; Editing by Mark Potter & Simon Cameron-Moore

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