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Utilizing financing mechanisms to protect Japanese satoyama biodiversity

The issue

Including biodiversity in financing mechanisms

The Sompo Japan Group, specializing in finance and insurance, has developed a sustainable development strategy throughout the years in response to increasing pressures for a more responsible finance and investment sector. Sompo Japan is now, for example, marketing six different Socially Responsible Investment (SRI) funds, as well as a wide variety of environment-related insurance protection plans.

Biodiversity conservation is becoming a leading concern in Japan, and Sompo Japan is willing to be positioned as a solution provider in this field.

The response

A charity fund to protect satoyama ecosystems

As a first step, Sompo Japan introduced biodiversity conservation into the screening criteria of its “Sompo Japan Green Open”, an SRI fund that has now become the biggest eco fund in Japan.

Going beyond SRI products, Sompo Japan and Sompo Japan Credit Inc. (SJC) started to work in 2008 on a new loan mechanism aimed to foster investments in ecological housing and biological conservation. Named “Green Reform Loan Plan”, the mechanism offers consumers a 0.3% lower interest rate on loans for making ecological improvements on housing that reduce CO2 emissions. These improvement projects can, for example, include installation of solar photovoltaic panels or “Eco- Cute” hot water systems, a heat pump system that raises the temperature of water by using heat from the air. For its biological conservation efforts, Sompo Japan partnered with Ecology Online (EOL), an environmental NGO, to focus on conserving the satoyama, a natural environment intrinsic to Japan. It was decided that 0.3% of the housing improvement project amount would go to a Satoyama Donguri Charity Fund, dedicated to the satoyama areas protection.

Satoyama are areas located between mountains and cities that encompass “secondary” nature maintained by human activities, including rural settlements, wooded areas, farmland, and grassland. The work of people in satoyama areas has served to make these areas rich in biodiversity. However, satoyama areas in Japan are in jeopardy due to modernization that has devastated forests, and also to depopulation in some regions. Revitalizing and conserving these areas is a pillar of Japan’s national biodiversity strategy, which is why Sompo Japan and EOL decided to support this cause.

The Loan Plan mechanism can be schematized as follows:

The results

The Green Reform Loan Plan was launched in January 2009. After 2009, the Satoyama Donguri Charity Fund has donated to six different regional NGOs that provide for programs to education children on the environment and ecology in satoyama areas.

Overall, this 2009 initiative has created the opportunity for Sompo Japan to build relations with a new stakeholder as well as to strengthen its ties with local communities.