A Green Scenario for Tokyo Becoming a World-Leading "Global Financial City"

The Tokyo Metropolitan Government has announced a plan to return the city to its former status as a "global financial city." What is the purpose of this? And what will the "greening" of Tokyo, a pillar for achieving the plan, bring to the city?

Green Finance Expanding Worldwide

Revitalization of the financial sector, the driving force behind the growth of industry as a whole, is essential to halt the downturn in economic growth caused by the declining birthrate and aging population as well as to promote Tokyo's growth. Based on this understanding, the Tokyo Metropolitan Government has launched the "Global Financial City: Tokyo" vision, aiming to return the city to its position as a financial hub for the world in Asia.

This vision was first announced in November 2017. However, in light of the significant changes in the global environment surrounding international finance over the past few years, including changes to the situations in Europe and Asia, it was revised in November 2021.

A major pillar of the revision is "Developing Tokyo Green Finance." Green finance refers to a means of financing that specializes in areas that have a positive effect on the environment, such as renewable energy and measures to combat global warming.

The sustainability of the global environment is an issue shared by all of humanity. According to the Intergovernmental Panel on Climate Change (IPCC), in order to limit the rise in temperatures after 2021 to 1.5 degrees Celsius, it is said that CO2 emissions must be reduced to net zero worldwide by 2050. As countries move toward decarbonization, the flow of environmentally friendly funds, through such avenues as green finance and ESG investments (investments that consider the environment, society, and governance), is accelerating around the world.

However, the reality is that Japan lags far behind the rest of the world.

According to a report by the GSIA (Global Sustainable Investment Alliance), an international organization promoting sustainable investment that takes into account efforts to protect the environment and address social issues, Japan's share in the composition of ESG investment balances by country/region is just 8% as compared to 34% for Europe and 48% for the United States. The CBI (Climate Bonds Initiative) also reports that Japan ranks only seventh in the world in terms of the amount of green bonds issued by a country.

Creating a "Virtuous Circle of Environment and Economy" out of Tokyo

The participation of industry, academia, government, the private sector, and especially citizens is essential if Tokyo is to revive itself as a global financial city with "Developing Tokyo Green Finance" as one of its pillars.

Japan is the world's third-largest economy in terms of GDP, a fact that could be a major strength in its quest to become a global financial city. To capitalize on this strength and to ensure Tokyo's substantial growth, it is also necessary to encourage the residents of Tokyo to utilize their assets. That is because the majority of the approximately ¥1.9 quadrillion in domestic personal financial assets are cash and deposits, and are said to offer a massive potential supply of funds. Kurosawa Hiroaki, who is in charge of the Global Financial City Vision, has this to say.

"The development of technology has dramatically improved the convenience of finance. One example is how we've reached an era where we can now use smartphone apps to complete tasks that could previously only be done by going to the bank or a brokerage firm. We want to spread the message that financial markets are now more accessible than ever before."

If the people of Tokyo are able to feel closer to financial markets, green finance and ESG investment in Japan will surely be able to develop further.

Moreover, it is not only financial systems that will be greened by the "Global Financial City: Tokyo" vision. The Tokyo Metropolitan Government's aim is to develop Tokyo into a sustainable city by promoting the simultaneous greening of urban systems, which will include decarbonization.

Takagi Yasushi, who is in charge of revising the vision, has this to say about the future of Tokyo: "If Tokyo's attractiveness as a global financial city is enhanced in part by developing green finance, it will attract ample funds from both domestic and foreign investors, creating a virtuous cycle that will further enhance the city's appeal. We believe that this will contribute to sustainable economic growth for Tokyo, which in turn will help realize rich lives for its residents as well as a brighter future for Japan as a whole."

In the process of aiming to become a global financial city, Tokyo's approach to environmental friendliness through various initiatives will permeate throughout the daily lives of its residents and naturally encourage related consumption and investment. Expectations are high for the future of Tokyo as the city and its people work together to steadily move toward a sustainable society.

Right: Kurosawa Hiroaki / Director for Global Financial City, Strategic Projects Department, Office of the Governor for Policy Planning. Began working for the government in 2005. Engaged in city sales and other activities in fields such as tourism, urban diplomacy, and Tokyo Metropolitan Government bonds. Has been in his current position since 2021.
Left: Takagi Yasushi / Director for Global Financial City, Strategic Projects Department, Office of the Governor for Policy Planning. Began working for the government in 2012. Engaged in fields such as industry and finance. Has been in his current position since 2021.
Written by Suzuki Atsuo / Edited by Sakai Rie / Photo by Iwamura Takayuki / Translated by Amitt