Sustainability finance draws global attention. The challenge facing the Development Bank of Japan, which is aiming to achieve both profitability and public character through “Society 5.0” and “Sustainability” in Japan

“Society 5.0” is part of the “Future Investment Strategy 2018” approved by the Cabinet in December 2017. In the future civilization proposed as a new society (Society 5.0) that follows from the information society (Society 4.0), it is assumed that AI will analyze the vast quantities of data accumulated on the cloud thus far, and the digital and physical are effectively connected to people and spaces using appropriate and accurate feedback in a value-added state. As a result, it is said that attention eventually will be paid to fields and information communications in which human capabilities have thus far been limited, such as support for labor and day-to-day activities for not only the public, but also those considered socially vulnerable such as the elderly and the disabled. This requires the transmission of logistics and medical information, correcting inequalities such as medical screenings. To realize such a society, the Development Bank of Japan (DBJ) is adopting a comprehensive approach to corporate and regional community issues, not only from a financial support perspective but also from the social and public perspectives represented in the SDGs. Today—along with asking about the sustainability efforts happening at the same time as those being made toward the implementation of Society 5.0, as well as what needs to change in the existing society—we will speak frankly with Mr. Yoshiki Hiroma, who is sounding alarm bells that falling behind global trends would jeopardize Japan’s position as a developed country.


“Sustainability x Finance”: What is the Development Bank of Japan?
Financial and non-financial investment in social public value
Society 5.0 and the reconstruction of human-oriented systems
An era where the first companies with an agenda will survive

Yoshiki Hiruma
Director, Enterprise Resilience Rated Loan Program, Environmental Initiative & Corporate Social Responsibility Support Department, The Development Bank of Japan
2009 Graduate of the University of Tokyo (Engineering, Civil Infrastructure) (Masters). Joined the Development Bank of Japan in the same year. First worked in the sales and environmental CSR departments before taking up his current position in 2018. His activities cross divergent fields, including participation in internal and external technical committees for disaster prevention, BCP / BCM, crisis management, disaster resilience, and climate change, etc., for the United Nations, World Bank, World Economic Forum, World Disaster Prevention Forum, APEC, the Cabinet Office for Disaster Prevention, the Ministry of Land, Infrastructure, Transport and Tourism, and the Ministry of Economy, Trade and Industry, among others. Moreover, since 2009 he has coached the Japanese national soccer team, “Nobushi Japan,” whose players are homeless, and has served as a volunteer joint representative for the Diversity Soccer Association since 2018. His books include “Responsible Finance” (Kinzai), “The Perseverance of the Homeless World Cup Japan National Team” (PHP Institute), and “Japan’s Worst-Case Scenario” (Shinchosha).

“Sustainability x Finance”: What is the Development Bank of Japan?

Hiruma: The Development Bank of Japan, as the name suggests, is the bank for development in Japan. Its predecessors are the so-called government financial institutions, the Reconstruction Finance Bank, Japan Development Bank, and Hokkaido-Tohoku Development Corporation. If you go to international conferences, you may hear the question, “Isn’t Japan already a developed country? What are you developing after such a long time?” “Development” tends to have the image of handing issues of poverty in developing countries, but I explain that what we are responsible for is the “sustainability development” of the Japanese society and economy. The long-term trends in Japanese society, such as its declining population, have an inverse relationship with the rest of the world. There are also risks due to geophysical factors, such as the Great East Japan Earthquake and this year’s typhoon disaster. It is an organization that, as a member of Japanese society, conducts business utilizing financial technology to be conscious of and create a sustainable society.

Furthermore, to explain the DBJ in detail, we are quite different from banks under the so-called “banking laws” in that we are a special company based on the Development Bank of Japan Law (DBJ law). In addition to distinctive financial services integrating investment and lending, our business covers a wide range of work, including arranging structured finance, providing M&A advisors and knowledge such as industrial research capabilities and environmental / technical evaluations, and conducting risk-response operations and specific investment operations. We also handle co-financing with private banks and providing crisis response in the event of emergencies, such as the Lehman Shock and Great East Japan Earthquake, stabilization of the financial system, and providing support to promote recovery. In other words, it plays a role spanning the supply of risk capital to invest in the creation of new industries to that of an emergency fire-brigade during emergencies.

Financial and non-financial investment in social public value

By no means is it easy to develop a complete picture of the DBJ. First, the DBJ itself continues to change in order to provide support for sustainable business. This is also because we are quickly working on topics and phenomena that, today, are only the tip of the iceberg but carry potential social impact. Just as many people currently understand the implication of what Mr.Hiruma says, the “Corporate value should be assessed comprehensively, by also including indicators other than business.”

Hiruma: Companies are also living creatures. As living creatures, companies cannot make judgments of good or bad based solely on money. Without being “The Little Prince,” companies must not only notice visible, tangible assets such as money, but also “intangible” assets. In the past, “policy finance” has been used to assess whether businesses contribute to national policy objectives such as social infrastructure development, industrial development, community development, and environmental pollution controls, as well as to measure their efficacy. So, would that not be called “social impact” today? People have begun to realize the importance and necessity of this kind of thinking, and CSR (Corporate Social Responsibility), ESG (Environmental, Social and Governance), and various uses of the term “social” have been growing over the past few years. However, this is, in fact, a concept that has been present in Japan for a long time. One of the theoretical bases for this in our case is Professor Hirofumi Uzawa’s (1928-2014) idea of social common capital.

I have two main tasks at the DBJ based on this. One is a non-financial assessment of financial business that focuses on non-financial affairs. The UN SDGs were proposed in 2015 but trace back 12 years. In 2003, the United Nations Environment Program Finance Initiative met in Tokyo and discussed the future of finance on behalf of Japanese financial institutions. “Environmentally rated loans” were launched in 2004 as a result. It began with the idea of contributing to achieving a sustainable society by supporting projects investing in climate change countermeasures (preventing climate change, at the time) and creating a recycling-oriented society, as well as supporting the promotion of customers’ environmental business through the main business of financial institutions, investment, and lending. Today, I often hear the concept or phrase, “Sustaining Value: the role played by finance in achieving a sustainable society and value.” However, at the time, the response was, “What is that?”

Next was the phrase, “Disaster prevention and BCM rated financing” (business continuity management), focusing on corporate crisis management. This was a financial product unique to Japan, created following the Great East Japan Earthquake, and there have been many inquiries from the World Economic Forum, the World Bank, and the United Nations, among others. In recent years, we are also handling “health management rated financing.” This is a financial product based on the theme of how businesses and health insurance associations interact with social security combined with Japanese-style management and long-term employment, as well as the health of employees and their families.

We assess (rate) companies from this non-financial aspect and examine comprehensive corporate value, including financial information. In general, environment, disaster prevention / BCM, and health are expense accounts and fall under the name of the corporate departments within the company. Therefore, they are not featured in recruitment materials, nor in corporate IR or PR. In other words, it is no more than a business cost, but we have a big hypothesis that it may be a source of long-term investment and value creation. Today’s capitalist, finance, and market practices are acting based on the major “efficient market hypothesis,” which makes me believe it would be good to cite this daring hypothesis. From these non-financial perspectives, if it is judged that there is corporate value and competitive strength, the company’s creditworthiness is considered high and able to monitor risks accordingly. Therefore, economic terms such as interest rates can be discounted. Companies’ ability to help themselves with sustainability are not only assessed through market competition; they are also confronted by the judgments of financial institutions. In addition, the decisive differences with ESG assessment organizations are dialogue and engagement. Finance is also an information industry, so we have a large stock of non-financial primary information. I would like to use this not only for assessment, but also to give feedback and advice after evaluation and create relationships of mutual engagement as a partner operating on the basis of adding points instead of subtracting them.

Another duty is our bank’s sustainability management. The DBJ’s value creation model was raised three years ago. In response to customer, industry, and regional issues, we envisage not simply a single relationship between the business and customers, but forming a circle with relevant parties to solve problems. For a long time, the DBJ had the idea of “balancing profitability and public character.” It is important for any business to make a return, or money. However, we not only aim to make money but for the sum of its positive and negative externalities (= positive impact, negative impact) to be positive. While related to the ratings finance mentioned earlier, we are attempting to create substantive company and industry value that cannot be quantified or visualized by financial capital alone. We are aiming not only to create a system in which money creates money but also creates value that accumulates social common capital as advocated by Professor Uzawa, such as human capital, related capital, social capital, natural capital, etc. Thinking in this way, the time axis of the activity must necessarily be mid- to long-term. I would like to imagine the mid-term, 2030, 2050 and the long-term, 2100, 3000, time axes and focus on them.

Society 5.0 and the reconstruction of human-oriented systems

The “Society 5.0” proposed by the Japanese government and the “Sustainable Development Goals (SDGs)” established internationally are like two wheels on a bicycle. In light of international investment trends that not only aim for economic growth but also sustainable societies, what points should financial institutions pay attention to in the future?

Hiruma: This year I had the opportunity to attend a number of international conferences. For example, the UN General Assembly in September, the Sustainability Impact Summit at the World Economic Forum held at the same time, and the G20 hosted in Japan. All of these were meetings and committees related to climate change and sustainability. As already reported in the media, both direct and indirect investment actions related to ESG and sustainability have been changing rapidly these past few years. I also have some regrets, and I personally think that Japanese financial institutions are in a position 3-5 laps behind. The Western countries, particularly the European countries, are still innovators.

In short, investment and lending prioritizing the needs of society, the next generation, and the Earth’s systems will become more of a responsibility than a role played by financial institutions. Rather than the cookie-cutter, convoy-like financial activities of the past, it will be necessary to individually ask, “WHY?,” and that judgment will be required. Why throw money at this? Accountability is also required.

While unfortunately, you don’t hear the term “Society 5.0” overseas, what everyone talks about in relation to the Fourth Industrial Revolution, responding to climate change, and decarbonization is the financial behavior associated with them, such as ESG investment, impact investing, and divestment. Although it may be an unfamiliar term, this aims for “investment withdrawal” as opposed to “investment.” It was previously mentioned that in the event of an emergency, private companies may be forced to withdraw capital to protect its receivables; that action is performed in peacetime. Conversely, viewed from the perspective of human rights and environmental issues, there are unacceptable projects and companies.

Currently, companies and industries that use coal resources are the targets of active divestment. Under the international “Powering Past Coal” coalition established at the COP23 held in Bonn, Germany in November 2017, it was proposed that it be required that OECD countries cease to use coal power by 2030 and other countries do so by 2050. The purpose is to limit the rise in global temperatures due to coal combustion and eliminate the current situation in which 800,000 people die annually due to climate change.

Hiruma: As you can imagine, Japan is being pushed into a rather difficult situation. Having experienced the Great East Japan Earthquake, I think everyone knows about the energy situation in Japan. However, no matter how much the Japanese situation is explained—because it has not taken a rule-making or agenda-setting position—we now have no choice but to consider how to respond and adapt in this new game. We are actively investing in renewable energy and solar power, but the momentum and sense of speed are completely different to the rest of the world. To say more, this is the difference in the perception of crisis in response to global risks, such as climate change, and the mindset to challenge and overcome them. I feel that there are big differences between these views and those in places such as international conferences.

Do you know what kind of message was delivered to Japan at this UN General Assembly and peripheral international conferences? It was “WHY Japan?” As the world moves toward a “decarbonized society,” Japan seems to be going backwards by building coal-fired power stations and actively exporting them to developing countries. Global criticism of Japan’s position is increasing. Japan once served as the head of the COP, which adopted the Kyoto Protocol, has experienced overcoming two oil shocks and become the top runner in environmental fields such as low-energy technology, electric cars, and hydrogen power. Despite this: “Why?” I could hear these disappointed voices directed toward Japan.

Considering this context, even if you use terms like “Society 5.0” and “super cities,” we are unable to have in-depth conversations on the challenges regarding “what specifically does it change and how? What society do we want?” that give form to these catchphrases and slogans. In that sense, we should form policies aligned with the truth and learn a sense of urgency for places that enable human discussion and needs.

When thinking of an “ideal society,” “society” is far too vague and becomes an obscure topic. We must subdivide into the multiple communities that comprise society and clarify the required attitude from the standpoint of micro perspectives that follow the respective characteristics of each region and town. Furthermore, in the future, the boundary lines of cities and countries that have been decided by countries will gradually disappear. It has been said for a long time that “this is an era in which competition is moving from countries to cities,” but what kind of survival strategies should we create in the future for each insubstantial “parcel of land?”

Hiruma: In these times of intensifying competition between cities, “Tokyo” does not refer to Shinjuku or Shibuya but probably the center of Japanese business and finance, “Daimaruyu” (Otemachi, Maranouchi, Yurakucho). There is also Tokyo Station. Cities are also facing the era of diversity. Friends and acquaintances in Japan and overseas are changing where they live and work with great ease. This is in response to stages in life and business careers. When raising children, it’s Finland and Holland; when elevating one’s business career, it’s New York, Singapore, or London. When thinking of innovation and new business, go to Silicon Valley or Israel and assume the challenge of a second career focusing on Africa. Similarly, I’m in Japan. (laughs)

I think cities should also create unique characters like Pokémon. Do you go for finance, real estate, or culture? Anything is fine. First of all, let us set themes for each area and region. I speak of “Society 5.0,” but looking around Japan, this is not an era in which regional societies will meet similar futures. The Showa Era period of comprehensive nationwide development has ended. Isn’t it time to rebuild city planning, starting with the people and information gathered in Daimaruyu and their fusion with digital?

An era where companies that are first to have an agenda will survive

Responding to this series of trends, players engaged in existing businesses should consider which points to note. Going beyond the position of financial institutions, we asked Mr. Hiruma to face the topic of sustainability x society.

Hiruma: In short, if it is an extension of the past, wouldn’t it be better for businesses and government to stop things that continue because of inertia? In a business environment with so many new technologies, we ought to carefully consider whether that work is really something that should be done by humans and rapidly shift to digital. Japan is favorable for employment in a way that could be considered excessive. It is also true that this creates factors that do not create benefit. We win by using digital. Then, we should move on to think about where to invest next using the surplus resources. If we do not have this organization, the younger generation will not want to become team members at all. In the next five years, I think there will be many companies that begin facing difficulties in recruitment due to delays in their digital transition. This can be rephrased as a matter of business leadership—whether you can abandon the current situation and decide to “stop.” It’s entirely my own view, but I think sustainability does not mean maintaining the status quo and continuing a certain steady state; it’s executing active transformation. This encompasses both actively stopping and actively beginning.

Mr. Hiruma concluded with the following about transformation based on the “theory of evolution” that we adhere to for living things.

Hiruma: It is often said in Darwin ’s Theory of Evolution that “those who adapt are strong,” but that is interpreted as a result of “reactively” adapting to changes in the environment. What is more important is that this should be the “proactive” creation of environments. There is an explanation in the Theory of Evolution that evolution is the result of a struggle for existence. In the first half, I talked about rulemaking, but it is important to turn to the side that raises issues and sets agendas before anyone else. At that time, however, there were almost no supporters. I would like to hear opinions from various places regarding rated financing and sustainability management, but that’s alright; everything is unprecedented. Since there is no precedent, you can simply go ahead and make it. It may be said that we live in the era of a 100-year lifespan, but we only live once.


・The Development Bank of Japan implements sustainability and finance through policy finance and is also responsible for supplying risk capital and serving as the fire brigade to the financial industry.
・Companies are living things. We should view value comprehensively, including not only financial information, but also “intangible” assets.
・New standards for investment and financing with both philosophy and aspiration. “Divestment” is being carried out worldwide. However, this is not something that can just be seen in black and white.
・To promote “Society 5.0,” it will in the future be necessary to establish detailed and specific representations based on cities’ characters.
・Stop business that continues through inertia and make forward-looking transitions.

Planning:Yohei Azakami
Writing:Yuria Koizumi
Photography:Nobuhiro Toya