Environmental Finance's Sustainable Debt Awards 2024

Green bond of the year - local authority/municipality: Japanese local governments

A novel approach saw 36 local governments in Japan pool their green projects into a green bond issuance which raised JPY50 billion ($330 million).

The Green Joint Local Government issuance pooled projects from the likes of Hokkaido, Osaka, Kyoto, Nara, and Hiroshima prefectures.

The achievement was noteworthy given that, until 2019, Tokyo was the only municipality in Japan to issue green bonds, followed by Nagano prefecture a year later.

The move to pool projects helped local governments that wanted to fund investment in green activities but did not have enough to reach sufficient scale to justify the expense associated with selling a bond.

The first issuance in November saw 127 investors commit to the funding, which raised money for projects including those related to railways, green buildings, sustainable forests and forestry roads, and sustainable agriculture.

Taken together with a planned follow-up deal this year that aims to raise a similar amount as the November transaction, it is expected that a total of 42 local governments will participate in the green bond market, by taking advantage of the joint issuance scheme.

It comes as local governments have been asked by the central government to assume more responsibility for sustainable economic development and preserving the environment, and as the UN Sustainable Development Goals increasingly gain traction in the world's fourth-largest economy.

One Sustainable Debt Awards judge praised the deal for its "high level of scalability and replicability, effectively demonstrating how the pooling of local government green finance needs can lead to efficient capital-raising to help meet environmental targets".

Another judge said: "Japan's work towards their 2050 targets has involved a lot of public outreach and investor consultation. We have seen their willingness to engage in this topic and be a proactive government on this topic in the region. This should be recognised."

Deal highlights

Issuer: Green Joint Local Government
Size: JPY50 billion ($330 million)
Maturity: November 2033
Coupon: 0.846%
Use of proceeds: Clean transportation; climate change adaptation; energy efficiency; green buildings; pollution prevention and control; renewable energy; sustainable management of living natural resources; sustainable water management; terrestrial and aquatic biodiversity conservation.
External reviewer: Japan Credit Rating Agency; Rating and Investment Information
Lead manager: Daiwa Securities Group; Mizuho Securities; Nomura