Japan

Our goal is to accelerate Japan's energy transition by driving the reallocation of capital towards clean energy solutions, ensuring true energy security and competitiveness for Japan in an era of climate change and geopolitical uncertainty. 

With a legal net-zero target and mounting climate impacts, Japan needs to act decisively and accelerate its greenhouse gas emission reductions through domestic measures.

With over 85% of the country’s emissions from the emission from the energy sector, deep decarbonisation of its energy system and accelerated uptake of renewable energy solutions lies at the heart of achieving the net-zero goal. 

As the global economy shifts towards decarbonisation, Japan’s strong potential for renewable energy is drawing increasing investment and commercial interest.

Independent research assessments by reputable entities such as Renewable Energy Institute and Berkeley Lab have shown that, Japan can achieve 80-90% of its electricity supply from domestic renewable sources by 2035 while maintaining a stable and secure power grid.

However, the Seventh Strategic Energy Plan, which was released in 2025, sets a target of 40-50% renewables by 2040 – a goal far short of its potential and ambition needed to meet the 2050 net-zero goal. 

ClientEarth is engaging and partnering with diverse stakeholders, including civil society organisations, regulators, government, and investors to accelerate a Paris-aligned energy transition in Japan. 

Transition finance is funding provided to high-emitting, hard-to-abate sectors - such as steel, cement, and power generation - to support their shift toward net-zero. 

Unlike green finance, which directs capital exclusively to low- or zero-emission activities, transition finance supports hard-to-abate industries that cannot decarbonise immediately but must follow credible, science-based pathways to net zero.

With hard-to-abate sectors responsible for around 30% of global energy-related emissions, and fossil fuels still supplying over 80% of primary energy, credible transition finance is essential to achieving the goals of the Paris Agreement. 

From FY 2023 to FY 2024, the Japanese government issued approximately ¥3.0 trillion (~USD 21 billion) in Climate Transition Bonds (GX Economic Transition Bonds/Japan Climate Transition Bonds) as part of its Green Transformation (GX) strategy to meet international climate commitments, boost industrial competitiveness, and foster economic growth. An additional ~¥1.2 trillion (~USD 8 billion) is planned for issuance in FY 2025. 

However, these bond issuances remain small compared to the total capital required under Japan’s Green Transformation (GX) strategy. The government’s initial GX strategy calls for over ¥150 trillion (~USD 1 trillion) of investment over the next decade to year 2033. 

To make transition finance more attractive to investors and ensure it supports genuine decarbonisation, ClientEarth focuses on enhancing its credibility by engaging with government, the private sector, and civil society. 

Greenwashing occurs when a financial product, investment strategy, or company makes false, deceptive or misleading statements, or representations about its environmental or climate commitments. 

As climate change heightens financial risks, interest in transition finance is growing across the financial industry.

But this also increases the danger of greenwashing, which distorts markets and leads to the misallocation of capital is also increasingly associated with regulatory and legal risks, threatening the rapid transition to a decarbonised society that the GX Strategy aims to achieve. 

To support prevention of the growing issue of greenwashing in the financial sector, we have developed region-specific guides for Asia that track regulatory and policy developments, highlight enforcement actions, and showcase market examples from around the world. 

• Greenwashing and how to avoid it: an introductory guide for Asia's finance industry [English] [Japanese]

ClientEarth continues to work with institutional investors and investor groups on how to avoid greenwashing in the financial sector. 

Robust corporate governance is vital for Japan’s low-carbon, resilient transition. Japanese companies need credible transition plans, grounded in science, to effectively manage climate risks and remain competitive in the low carbon economy. 

These plans must integrate climate into core business strategy and addresses Japan’s net-zero commitments, new regulatory obligations, and investor expectations, while ensuring sufficient transparency to manage greenwashing risks. 

Directors of companies also have legal duties to manage climate-related risks - including physical risks from extreme weather, and transition risks from policy, market, technology, and litigation shifts. The Bank of Japan has acknowledged climate change as a systemic financial risk, underscoring the responsibility of boards to act. 

Company directors have an obligation to seriously consider and address the management of climate-related risks. By incorporating this strategy into their medium-term business plans, companies can demonstrate a clear sustainability orientation and strengthen their climate change response. 

ClientEarth supports boards and companies by developing guidance and resources. In 2024, we launched the Climate Action Guide for Southeast Asian Boards, in collaboration with Climate Governance Malaysia and Earth on Board. 

We also collaborate with partners such as the Commonwealth Climate and Law Initiative (CCLI), which recently published an updated report on the role and obligations of Japanese company directors, and consequences of failing to meet their obligations, to manage climate-related risks under Japanese law. 

In 2025, we plan to publish a Japanese-language guide on climate leadership for corporate directors. 

• Climate Action Guide [English]