Sustainability-Linked Bonds

Japanese SLBs: 2025 update

Written by Jeannette Leong & Rose Choy

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Since its launch in 2020, Japan’s Sustainability-Linked Bond (SLB) and Transition-Linked Bond (TLB) market has expanded steadily and is now entering the SPT observation phase. For the first time, a comprehensive review of issuer performance against Sustainability Performance Targets (SPTs) is possible. 

A total of twenty-five SLBs and TLBs (JPY472 billion) are scheduled for SPT determination between 2023 and September 2026. Six bonds have reached their observation dates to date, resulting in four 'Met' and two 'Missed' outcomes, with missed SPTs leading to donation-based consequences. 

For the nineteen remaining bonds, issuer disclosures indicate nine 'On Track', eight 'Off Track', and two 'Insufficient Data' assessments. These upcoming determinations will offer a broader evidence base on issuer performance, SPT calibration, and how structure design functions in practice. 

Observed outcomes to date are consistent with prevailing SLB structure features, where consequences are commonly based on donations or emission-credit purchases, generally outside coupon cashflows. As the market develops, there may be scope for future structure evolution that balances environmental intent with clearer financial signalling.

About the authors

Jeannette Leong

Jeannette Leong

Research Associate, APAC

Based in Singapore, Jeannette focuses on credit research and analysis across the Asia-Pacific region. She brings 19 years of fixed income investing experience in emerging markets, Asian fixed income and China’s onshore bond market.

Rose Choy

Rose Choy

Research Director, APAC

Based in Singapore, Rose has over 20 years’ experience in capital markets, most recently as a Senior PM at Conning Asia, and her research focuses on credit research and analysis on the energy transition in the Asia-Pacific region.

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