Regulatory Framework for Sustainability-linked Derivatives: Japan Analysis

Interest in environmental, social and governance (ESG) issues has grown globally, as countries, companies and investors have focused more on this area. The same trend has occurred in Japan.

Sustainability-linked derivatives (SLDs) are not yet a major product in the Japanese market, but they have emerged as one of the tools available to help firms meet their ESG objectives. As SLDs gain increasing attention around the world, and as some SLDs emerge in Japan, it is necessary for users to understand how these instruments fit into existing regulatory regimes.

This whitepaper analyzes two categories of SLDs in the context of the derivatives regulatory framework in Japan. Specifically, it considers:

  • Whether SLDs would be classified as ‘over-the-counter (OTC) derivatives transactions’ or ‘OTC commodity derivatives transactions’, and how they are regulated; and
  • Compliance issues for market participants to consider when executing SLDs.

Documents (1) for Regulatory Framework for Sustainability-linked Derivatives: Japan Analysis

Recognition of Cross-product Netting is Critical

US regulators are in the process of making important changes to the regulatory capital framework by proposing modifications to the enhanced supplementary leverage ratio, which should help stop it from acting as a non-risk-sensitive constraint on bank capacity – a...

ISDA, GFXD Response to FCA on SI Regime

On September 10, ISDA and the Global Foreign Exchange Division (GFXD) of the Global Financial Markets Association responded to the Financial Conduct Authority's (FCA) consultation paper CP25/20 on the systematic internalizer (SI) regime for derivatives and bonds. ISDA and the...

ISDA Response on Clearing Costs

On September 8, ISDA responded to consultation by the European Securities and Markets Authority (ESMA) on a draft regulatory technical standard on clearing fees and associated costs (article 7c(4) of the European Market Infrastructure Regulation (EMIR)). In the response, ISDA...