Lee Clements
Alexis R. Rocamora
The GX transition programme, what it means for investors and how sustainability data and transition indices can help to navigate it.
- Japan’s GX (green transformation) strategy is a broad, ambitious and well-financed transition plan that is designed to cut carbon emissions, improve energy efficiency and boost green innovation.
- Under the plan, ¥3.7 trillion of government transition bonds have already been issued and mandatory emissions trading will start in 2026.
- Carbon intensity, transition efforts and green revenues exposure will become key attributes for assessing the economic potential of Japanese companies.
- LSEG can help with comprehensive SI data covering carbon intensity, TPI climate transition metrics and green revenues. FTSE Russell offers multiple Japanese climate transition equity indices utilising these metrics to help investors allocate capital.
As the world faces the concurrent challenges of the energy transition, energy security and slowing economic and productivity growth, Japan’s government has launched an ambitious $1trn transition plan called the GX (green transformation) strategy. The GX strategy aims to cut emissions, improve efficiency and boost green innovation throughout the Japanese economy.
The GX transition programme
The announcement of Japan’s GX Strategy by Prime Minister Kishida in December 2022[Note1] was followed by a series of key policy announcements by successive governments in 2023 and 2024, aiming to guide the strategy’s implementation[Note2].
The GX policy aims to help Japan achieve its 2030 and 2050 climate change targets [Note3] by shifting to clean energy, driving economic growth, and by mobilising ¥150trn ($1 trn) in public-private investments over 10 years. Its implementation relies on two pillars:
- A Green Transformation based on the stable supply of energy: this involves the promotion of energy saving, an increase in renewable energy generation, the use of nuclear power, and support for research and development (R&D) in other technologies, such as the use of hydrogen and ammonia as energy sources and carbon capture and storage (CCS).
- Growth-oriented carbon pricing: this includes the issuance of ¥20trn ($134 bn) of sovereign GX Transition Bonds in 10 years to support upfront investments, the implementation of carbon pricing mechanisms to incentivise GX investments, and enhancements to the financing of support programs for public-private partnerships.
As part of its growth-oriented carbon pricing framework, the GX policy will introduce an emissions trading scheme – called GX-ETS – for carbon intensive sectors[Note4] from financial year 2026, including allowance auctioning for power generation companies from financial year 2033, as well as a carbon levy targeting fossil fuel importers from financial year 2028. These measures will finance the issuance of the GX Transition Bonds, which will serve as a springboard to spur private investments to help meet the promised ¥150trn target [Note5].
In addition, financial support mechanisms—including the Green Innovation Fund, the Economic Security Fund, various tax credits, debt guarantees and supplementary fiscal budgets—are being deployed through public-private partnerships as a way to fund the investments in the technology types shown in the chart below.
Amount of public & private investment targeted under the GX Program by technology type (in ¥trn)[Note6]
Source: Adapted from Ministry of Economy, Trade and Industry (METI, 2024). Past performance is no guarantee of future returns. Please see the end for important legal disclosures.
Unlike most environmental and climate policies in Japan — which are typically initiated by the Ministry of the Environment — GX falls under the purview of the Cabinet Secretariat and the Ministry of Economy, Trade and Industry (METI), reflecting a distinct approach to policy leadership and accountability[Note7]. The GX Acceleration Agency was established in 2024 to support the implementation of the GX policy with regards to financial mechanisms, ETS operations, carbon levy collection and research[Note8]. Furthermore, the program is supported by the GX League, a forum for cooperation between companies, government and academia established in April 2022, including – as of September 2025 – 747 companies, representing over 50% of Japan’s greenhouse gas (GHG) emissions[Note9].
The GX plans are already far beyond the theoretical phase, with ¥3.7trn ($24.7 bn) already raised by sovereign transition bonds[Note10] and Japanese utilities starting to issue transition bonds to fund projects such as the restarting of nuclear reactors. As we look to 2026, transition bond issuance has the potential to accelerate as the emission trading scheme becomes mandatory.
Carbon intensity, transition and green revenues become key attributes of future growth for Japanese corporates
As the GX policies help to reorientate the Japanese economy towards low-carbon growth and greater energy efficiency, climate metrics will become increasingly vital in analysing the risks and opportunities faced by Japanese companies:
- The emissions trading scheme and carbon levy will make understanding a company’s carbon intensity – both absolute and relative to its sector peers – critical in assessing its future carbon-related costs.
- As trillions of yen in transition funding will reward those companies that are actively decarbonising, assessing companies’ transition efforts will become crucial in understanding their eligibility for financial support from the GX policy.
- Finally, with funding also directed to the Green Innovation Fund and rising demand for green products and services, determining a company’s exposure to green revenues will be an important indicator of its growth potential.
Understanding corporate risks and opportunities from Japan’s GX policy using LSEG’s climate data solutions
Investors trying to evaluate how Japanese corporates rate linked to GX policies relative to peers can leverage LSEG’s climate data for information:
| GX elements | LSEG data solutions | Coverage & history |
|---|---|---|
| Emissions trading scheme and carbon levy | Carbon intensity data: measured relative to other companies in the same ICB sector, covering Scope 1, 2, and 3 emissions. The data is available as part of LSEG’s Climate Transition Data package, which includes 880+ metrics across Management, Ambition and Performance (MAP) pillars. LSEG Climate Transition Data | Data Analytics |
|
| Public-private funding for transition activities | TPI Management Quality (MQ) scores: Assessing the quality of companies’ climate governance and strategy, measuring companies’ decarbonisation intent[Note11]. LSEG TPI MQ Scores TPI Carbon Performance (CP) scores: Evaluating companies’ decarbonisation targets and transition initiatives. Assessing companies on Carbon Performance | LSEG |
|
| Public-private funding for green products and services | FTSE Russell Green Revenues data: measuring companies’ exposure to revenues from green products and services, based on a proprietary Green Revenues Classification System (GRCS) with three tiers of greenness. FTSE Russell Green Revenues | Data Analytics |
|
86% of Japan All Cap index weight has carbon intensity <100 tons/$mn, however 1% have carbon intensity >1000 tons/$mn
Number & % index weight of Japan All Cap companies by scope 1&2 Carbon Intensity (tons/$mn)
Source: LSEG, 2024 Green Revenues, TPI Management Quality Score & Carbon Intensity, 10/9/25 index weight, 22/9/25 market cap. Past performance is no guarantee of future returns. Please see the end for important legal disclosures.
59% of the Japan All Cap are level 3 and 31% are 4 or 4*
Number & % index weight of Japan All Cap companies by TPI MQ score
Source: LSEG, 2024 Green Revenues, TPI Management Quality Score & Carbon Intensity, 10/9/25 index weight, 22/9/25 market cap. Past performance is no guarantee of future returns. Please see the end for important legal disclosures.
41% of Japan All Cap companies have some degree of green revenues
Number & mkt cap of Japan All Cap companies by Green Revenues bucket
Source: LSEG, 2024 Green Revenues, TPI Management Quality Score & Carbon Intensity, 10/9/25 index weight, 22/9/25 market cap. Past performance is no guarantee of future returns. Please see the end for important legal disclosures.
Sustainable & transition-focused Japanese indices
There are multiple FTSE Russell indices whose methodology incorporates the above metrics (carbon intensity data, TPI MQ and CP scores, green revenues). These indices are designed to support investors in allocating capital in line with the direction of economic change driven by policies like Japan’s GX plan. In general, the indices (see the table) reallocate constituent weightings away from the most carbon-intensive companies and towards those making the greatest transition efforts in carbon-intensive sectors, as well as towards companies producing green products and services.
| FTSE Russell indices – Japan | Index methodology | Launch Date |
|---|---|---|
| Broad sustainability indices | ||
FTSE Blossom Japan FTSE Blossom Japan Sector Relative FTSE Blossom Japan Corporate Bond |
Broad Japanese indices incorporating consideration of ESG scores |
2017 |
| Climate tilted indices | ||
FTSE JPX Net Zero FTSE All World Japan TPI Climate Transition |
Broad Japanese indices tilted on the basis of exposure to the risks and opportunities of the climate transition. Incorporating fossil fuel reserves exposure, carbon intensity, green revenues and TPI management quality and carbon performance scores. |
Net Zero 2022 TPI 2021 |
| Green economy indices | ||
FTSE Environmental Opportunities Japan Index |
Index of Japanese companies with 20% of more exposure to green revenues. |
2008 |
Sources
[1] GX実現に向けた基本方針に対する御意見を募集します （METI/経済産業省） | Back to Note 1
[2] See notably: Basic Policy for the Realization of GX - Roadmap for the Next 10 Years (GX Basic Policy) (February 2023), GX Promotion Act (May 2023), GX Promotion Strategy (July 2023) and GX2040 Vision (May 2024) | Back to Note 2
[3] Japan’s climate targets include a carbon neutrality target (established by Japan’s Green Growth Strategy in December 2020) and an intermediary emissions reduction target of 46% by 2030 (established by Japan’s Strategic Energy Plan in October 2021) | Back to Note 3
[4]Companies emitting >100,000 tons of CO2 per annum, primarily steel, power and chemical | Back to Note 4
[5] r_japan_overview_of_gx_plans_january_2023.pdf | Back to Note 5
[6] NB: The total doesn’t exactly add up to ¥150 trillion as those figures include cross-sectoral measures. | Back to Note 6
[7] InfluenceMap Japan GX (Green Transformation) Basic Policy and Roadmap | Back to Note 7
[8] GX Acceleration Agency | Organization for the Promotion of Decarbonized Growth Economic Structure Transition | Back to Note 8
[9] 参画企業一覧 | GXリーグ公式WEBサイト | Back to Note 9
[10] Between FY2023 and FY2025, Japan has issued or planned to issue a total of ¥3.6671 trillion in GX Economy Transition Bonds, broken down as follows: ¥1.5401 trillion in FY2023, ¥1.4012 trillion in FY2024, and ¥0.7258 trillion in FY2025. Read more in this document from Japan’s Ministry of Finance. | Back to Note 7
[11] Read more on the relationship between TPI MQ scores and decarbonisation here: Measuring transition intent with TPI MQ scores | LSEG and Still tracking: analysing corporate decarbonisation intentions with TPI MQ scores | LSEG | Back to Note 11
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