IHI Concludes Positive Impact Finance Loan Agreement Linked to Efforts to Fulfill ESG and SDGs
IHI announces today that it recently concluded a loan agreement with Sumitomo Mitsui Banking Corporation (SMBC) that is in line with the Principles for Positive Impact Finance of the United Nations (see note 1).
This financial instrument employs unique assessment standards that SMBC formulated with the Japan Research Institute, Limited, to assess corporate ESG initiatives and disclosure and contributions to reaching the Sustainable Development Goals (SDGs) of the United Nations. It benefits society by analyzing the suitability of those initiatives and disclosure, future issues, and examples of initiatives to tackle those challenges.
DNV Business Assurance Japan K.K. (see note 2), a third-party certification body, provided SMBC with a second opinion confirming that this loan product conforms with the Principles for Positive Impact Finance and Model Framework (financial products for companies that do not specify fund uses), which aim to comprehensively assess the positive and negative environmental, social, and economic impacts of operations and provide ongoing support to do business sustainably.
In the course of providing this loan, SMBC and the Japan Research Institute concluded that IHI’s management undertakes excellent ESG and SDG initiatives and disclosure and is determined to help materialize SDGs in the course of business.
Under IHI Group’s ESG Management, which it announced in November 2021, the company committed itself to helping resolve social issues and contribute to a sustainable economy through business.
In June this year, IHI issued a transition bond (see note 3) in keeping with management’s recognition that finance is integral to business. The Ministry of Economy, Trade and Industry selected IHI’s offering as one of its 2021 Climate Transition Finance Model Projects. The ministry also chose this issuance for a case study for its Asia Transition Finance guidelines.
IHI will continue to generate new value by tackling social and customers issues in materializing ESG management.
Notes
- Principles for Positive Impact Finance
The United Nations Environment Programme Finance Initiative developed this set of principles in January 2017 to enable financial institutions to fund activities to materialize SDGs. The principles define financing approaches so funded entities can reduce negative impacts and realistically and credibly increase positive impacts for recipient companies. The four principles are Definition, Frameworks, Transparency, and Assessment.
- DNV Business Assurance Japan K.K. website (in Japanese only):
https://webmagazine.dnv.co.jp/sus_finance_list.html
- Transition bonds
Companies exploring and implementing measures to tackle climate change issue these bonds to fund greenhouse gas reduction initiatives as part of long-term strategies to help decarbonize economies.
Priority Action Items and Assessment Indicators for Loan
| Priority Action Items | Assessment Indicators | Related SDGs | |
| Help materialize a carbon dioxide-free and sustainable circular econom | Develop and provide carbon solutions |
Reduce greenhouse gas emissions by developing and commercializing methanation technologies and equipment
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| Expand rollouts of eco-friendly technologies | Reduce greenhouse gas emissions by developing and commercializing methanation technologies and equipment
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| Co-create new value | Build growth businesses to help create a world where nature and technology work in unity
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| Build a diverse and inclusive workforce | Foster diversity | Build a corporate culture that fosters creativity and innovation by empowering women
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| Lower environmental impact | Reduce environmental impacts of factories, offices, and other facilities |
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| Combat climate change | Reduce carbon dioxide emissions from business activities |
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Japan Research Institute’s loan assessment
We assessed the following points with respect to due consideration for ESG, efforts to help achieve SDGs, and disclosure.
| Environmental | We appreciated IHI disclosing numerical targets and progress toward achieving them, not just with respect to carbon dioxide emissions but also water withdrawals and waste emissions. A Task Force on Climate-Related Financial Disclosures scenario analysis presents risks, opportunities, and countermeasures for key businesses that climate change particularly affects. These are the Energy, Bridge and Watergate, Vehicle Turbocharger, and Civil Aero Engine businesses. We particularly commend the clear disclosure of the scenario analysis process and results. |
| Social | We commend IHI for disclosing its rules and policies regarding fair business dealings and for clearly presenting its stance on its social responsibilities. We also commend IHI for disclosing employee-related indicators and numbers on its social contribution activities, complete with specific examples. We look for the company to step up efforts to measure and disclose the social impacts of its business activities. |
| Governance | As well as disclosing nomination and remuneration rules and policies for directors and officers, IHI extensively discloses information on ESG management initiatives through its website, integrated report, data book, and other channels. It draws on case studies in disclosing its stakeholder communications clearly. We look for the company to step up disclosure of specific approaches and results from human rights due diligence endeavors that it is focusing on. |
| SDGs | IHI disclosed its specific policies in its drive to help achieve SDGs. We look for the company to visualize the input, output, outcome, and impact (the long-term and broad impacts of outcomes) flow and more clearly disclose its roadmap to achieving SDGs. |
Related news releases
March 28, 2022 – Ministry of Economy, Trade and Industry of Japan Chooses Upcoming IHI Transition Bond Issue as One of its 2021 Climate Transition Finance Model Projects
https://www.ihi.co.jp/en/all_news/2021/other/1197721_3370.html
May 31, 2022 – IHI Transition Bond Terms and Conditions Determined
https://www.ihi.co.jp/en/all_news/2022/other/1197930_3498.html