The PRI, UNEP FI and the Generation Foundation’s 2023 ‘A Legal Framework for Impact’ report on Japan finds institutional investors are unsure whether regulations allow them to invest for impact. The report:

  • Outlines where investors are required to consider pursuing sustainability outcomes in their activities
  • Reveals where policy improvements are needed to maximise opportunities to mitigate climate and other sustainability risks, making five recommendations to enhance Japanese investors’ approach to investing for sustainability impact.

19 June 2023, Tokyo — Today, the Principles for Responsible Investment (PRI), the United Nations Environment Programme Finance Initiative (UNEP FI) and the Generation Foundation released the Japan Legal Framework for Impact Policy report.

The report outlines how Japanese investment law permits—and in many cases requires—investors to pursue sustainability impacts when those impacts are financially material.

However, this is not well understood by investors due, in part, to the lack of clarity in Japanese regulation.

Japanese investors are unclear on the extent to which they are permitted or required to invest for sustainability impact – that is, use the tools and resources at their disposal (such as asset allocation and stewardship) to intentionally pursue sustainability outcomes.

This lack of clarity and understanding in Japan is hindering climate finance, potentially discouraging investors from taking action.

Updating rules, standards and guidance

The report recommends existing rules, standards and guidance in Japan be updated so that investors can better understand their duties in pursuing sustainability impact goals.

“Japan has seen strong support for sustainable finance from the private sector alongside policy makers and regulators, but many investors are still unclear on how best to leverage opportunities,” said David Atkin, CEO at the Principles for Responsible Investment.

“Japan can assume stronger leadership in the area of responsible investment by providing investors with legal clarity and enabling policies. Doing so can also help empower investors to support national sustainability goals as well as the economic transition required across Asia.

“This report provides a roadmap for immediate policy steps to enable Japanese investors to consider sustainability issues, contribute to positive sustainability impacts, and protect long term returns from the threat of system-level risks.”

Grace Eddy, Director of the Generation Foundation, commented: “Analysis in ‘A Legal Framework for Impact’ shows that mainstream investors generally need to consider the impact of sustainability factors on their financial goals and take action as a result.

“Japanese investors have established themselves as global leaders and innovators in sustainable finance, but many are still unaware of the extent of their duties with regard to impact.

“Today’s report describes how regulators and policymakers in Japan can ensure investors have the clarity and guidance needed to take action and manage systemic sustainability risks to their investments and take advantage of opportunities more effectively.”

The report makes the following recommendations for Japanese regulators and policymakers:

  1. Clarify the extent to which investors’ duties permit or require them to consider pursuing sustainability impact goals.
  2. Ensure better investor access to corporate sustainability-related information by updating existing rules, standards and guidance.
  3. Clarify when and how investors can use stewardship activities to pursue sustainability impacts, by updating the stewardship code, and through relevant implementation support programmes.
  4. Enhance transparency and market discipline on responsible investment claims by introducing rules and guidance on disclosures, labelling and classification.
  5. Ensure better communication between investment managers and their clients and beneficiaries on sustainability objectives and preferences by introducing relevant guidance.

The report is the latest in a series of policy reports addressing investing for sustainability impact throughout global markets.

The report builds on the 2021 report ‘A Legal Framework for Impact,’ authored by Freshfields Bruckhaus Deringer and commissioned by the PRI, UNEP FI and the Generation Foundation, and on research and expertise from PRI signatories in Japan.

This includes insurance and investment industry leaders, as well as senior representatives of non-governmental organisations and academia with expertise in a broad range of relevant subject areas.

Previous papers for markets including the EU, Australia, UK, the US and Canada are available here.

About the project partners

The Principles for Responsible Investment (PRI) works with its international network of signatories to put the six Principles for Responsible Investment into practice. Its goals are to understand the investment implications of environmental, social and governance (ESG) issues and to support signatories in integrating these issues into investment and ownership decisions. The PRI acts in the long-term interests of its signatories, of the financial markets and economies in which they operate and ultimately of the environment and society as a whole. The six Principles for Responsible Investment are a voluntary and aspirational set of investment principles that offer a menu of possible actions for incorporating ESG issues into investment practice. The Principles were developed by investors, for investors. In implementing them, signatories contribute to developing a more sustainable global financial system. More information:

The Generation Foundation is a UK registered charity and was established alongside Generation Investment Management LLP, the sustainable investment firm founded in 2004. Its vision is an equitable society in which global temperature rises do not exceed 1.5⁰C. In pursuit of this, the Foundation operates a proactive grant-making and research programme that focuses on four priority areas: investor climate action; carbon pricing; gender inclusion and empowerment; and action on economic inequality. For further information, please visit

United Nations Environment Programme Finance Initiative (UNEP FI) is a partnership between UNEP and the global financial sector to mobilise private sector finance for sustainable development. UNEP FI works with more than 400 members – banks, insurers and investors – and over 100 supporting institutions – to help create a financial sector that serves people and the planet while delivering positive impacts. UNEP FI aims to inspire, inform and enable financial institutions to improve people’s quality of life without compromising that of future generations. By leveraging the UN’s role, UNEP FI accelerates sustainable finance.

For further information, please contact: Ashton Consulting: [email protected]