The FSA is aiming to produce a set of guidelines that are consistent with the internationally recognised International Capital Market Association (ICMA) Social Bond Principles and are also in line with the characteristics of Japan.

The regulator said: “In order to ensure that there is enough financing to address social challenges, it is imperative for Japan to promote the issuance of social bonds in the private sector to drive the necessary capital into the implementation of social projects.”

To date, most of the issuance of social bonds has been by the public sector.

The launch of the draft guidelines follows a Working Group on Social Bonds being set up under the Expert Panel on Sustainable Finance in March this year.

The FSA noted the importance of the credibility of the social characteristics of the social bonds in order to avoid social washing. The regulator compared this with the need to prevent greenwashing in green bond issuances.

Bonds that fall within the scope of the guidelines include sustainability bonds where proceeds would go to both green projects and social projects.

In identifying social issues, the regulator said: “Consideration may be given to international agreements such as the 2030 Agenda for Sustainable Development adopted at the UN Summit in September 2015, as well as the SDGs Action Plan18, etc. in the context of Japan in particular.”

Comments on the draft guidelines can be made until 20 August.