Principal Terms and Conditions of the Funds-Supplying Operations to Support Financing for Climate Change Responses

September 22, 2021

Revision: March 19, 2024
July 31, 2024

1. Purpose

These terms and conditions prescribe the principles for the Bank of Japan's funds-supplying operations to support financing of the private sector for their efforts on climate change (i.e., open market operations through which the Bank provides loans against eligible collateral within the amount outstanding of investment or loans by eligible counterparties that contribute to Japan's actions to address climate change).

2. Location of Operations

The Bank's Head Office (Operations Department) or its branches.

3. Eligible Counterparties

1. (1) Eligible counterparties shall, pursuant to the Bank's relevant rules, be selected from financial institutions, etc. (prescribed in Article 37, paragraph 1 of the Bank of Japan Act [Act No. 89, 1997]) and the Development Bank of Japan Inc. that satisfy the following requirements.
   1. (a) To have a current account at the Bank.
   2. (b) To be deemed sufficiently creditworthy in light of their capital condition and other relevant information obtained through the Bank's on-site examinations and so forth.
   3. (c) To disclose information on certain matters, which are determined in the Bank's relevant rules, concerning their efforts to address climate change.
2. (2) Eligible counterparties shall be reviewed annually in principle.
3. (3) If the Bank specifically deems it necessary from the perspective of the smooth conduct of the Funds-Supplying Operations to Support Financing for Climate Change Responses (hereinafter referred to as "Climate Response Financing Operations"), it can implement such measures as an exclusion of the institution in question from eligible counterparties.

4. Form of Loans

Loans shall be provided in the form of electronic lending.

5. Duration of Loans

The duration of each loan shall be one year in principle. Loans may be provided successively as the Bank shall disburse new loans on the maturity date of the existing loans.

6. Loan Rates

The interest rate on loans shall be that stipulated in paragraph 4. of the "Principal Terms and Conditions of Complementary Deposit Facility" (Policy Board Decision on January 29, 2016) as of the date of loan disbursement.

7. Counterparties

Counterparties of each loan shall be eligible counterparties that wish to receive loans.

8. Maximum Amount of Loans for Each Counterparty

The maximum amount of loans for each counterparty shall be equivalent to the amount outstanding of investment or loans by counterparties that contribute to Japan's actions to address climate change, with a remaining maturity of 1 year or more at the time determined at each loan disbursement pursuant to the Bank's relevant rules.

9. Investment or Loans that Contribute to Addressing Climate Change

The investment or loans that contribute to addressing climate change shall be those that counterparties themselves determine to satisfy either (1) or (2) below.

1. (1) The investment or loans that are listed from (a) to (e) below and comply with corresponding international standards or the Japanese government's guidelines
   1. (a) Green loans
   2. (b) Green bonds (including sustainability bonds)
   3. (c) Sustainability-linked loans with performance targets related to efforts on climate change
   4. (d) Sustainability-linked bonds with performance targets related to efforts on climate change
   5. (e) Transition finance
2. (2) The investment or loans that are substantially equivalent to those prescribed in (1) above, including those exemplified in the relevant rules of the Bank

10. Disclosure of Information on Investment or Loans by Counterparties

Each counterparty shall, pursuant to the Bank's relevant rules, disclose its criteria used to determine which investment or loans contribute to addressing climate change.

11. Amount of Each Loan

The amount extended to each counterparty for each loan shall be the amount the counterparty wishes to receive within the maximum amount prescribed in 8. However, it shall not exceed the unused value of total standing pool of eligible collateral pledged to the Bank at the time of loan disbursement.

12. Date of Loan Disbursement, etc.

With a view to conducting the Climate Response Financing Operations smoothly, the Bank shall determine the date and other necessary specifics at each loan disbursement.

13. Collateral

1. (1) The Bank shall accept eligible collateral from counterparties in advance.
2. (2) The "Guidelines on Eligible Collateral" (Policy Board Decision on October 13, 2000) and the "Collateral Guidelines on Eligible Foreign Bonds" (Policy Board Decision on May 22, 2009) shall apply to the collateral for the loans.

Supplementary Provision

These terms and conditions shall become effective today and shall be valid through March 31, 2031, unless the smooth conduct of market operations is interfered with. To the loans that are disbursed on or before March 31, 2031, these terms and conditions shall be applied until their maturities.