In October, Jefferies and SMBC co-hosted a forum for senior executives from leading Japanese corporations and investment firms. The event, titled “How to Commercialize the Japanese Energy Transition,” examined how companies can monetize opportunities tied to the global transition and Japan’s Green Transformation (GX) Plan, a $1 trillion initiative to reduce emissions over the next decade.
One session, “Insights from Japanese Companies: Allocating to the Energy Transition,” featured Shuichiro Kawamura, President of Energy & Environment Investments (EEI); Wataru Sato, General Manager at Sumitomo Corporation; Takuto Saito, Head of Investment Team at Sumitomo Matsui Investment Bank; and Jeff Tang, Managing Director of Energy Transition Investment Banking at Jefferies.
This group of corporate leaders, bankers, and transition investors compared notes on what is required — financially, operationally, and narratively — for Japanese companies to attract capital for the energy transition.
What “Transition” Means Inside a Japanese Conglomerate
Mr. Sato described Sumitomo Corporation’s transition work around two lanes: decarbonizing its own footprint and scaling solutions with partners.
The company established an Energy Innovation Initiative in 2023 to advance new energy (hydrogen, SAF/biofuels), expand power businesses including renewables and distributed systems, and build a carbon management portfolio through forestry, carbon capture and storage (CCS), and carbon dioxide removal (CDR).
The CCS/CDR challenge, he noted, is “high durability” paired with “very high cost.”
A Cross-Border Strategy for CCS and CDR
On Sumitomo’s CCS team, leaders are grappling with the limits of domestic storage. Japan’s geography pushes the need for cross-border CCS: liquefying CO₂ in Japan and storing it abroad.
Mr. Sato referenced ongoing work in Australia, the UK, and Alaska, where Sumitomo is securing offshore storage and participating in pipeline and transport projects. On CDR, he pointed to rising corporate demand from technology and financial firms, but noted that costs, standards, and durability remain constraints.
Lessons From a Longtime Transition Investor
Mr. Kawamura, who leads Japan’s longest-running climate and energy venture investment platform, offered his view from 20 years of investing cycles: “there’s at the end of the day no such thing as [a reliable] green premium.”
His funds operate on 10-year horizons with 4–7-year exits, so his team prioritizes business models that have already gained traction in the U.S. or Europe. Usually, he observes a two- to three-year lag before adoption in Japan.
Mr. Kawamura spoke to the details of execution: site control, access to energy data, speed, and bankable financing pathways. He described scaling a solar/storage business by starting with energy-efficiency data across thousands of rooftops, and building a domestic carbon-accounting platform before expanding overseas.
Going forward, he expects consolidation among “behind-the-meter” solution providers and urged corporates to avoid hype cycles and prepare for integration.
Global Trends in the Transition — and What Japan Can Learn
Mr. Tang highlighted three global patterns that shape how capital is moving:
- U.S. energy companies tend to invest in adjacent capabilities, like biofuels, CCS, and advanced geothermal.
- European firms pursue broader diversification into utility-scale renewables and energy services.
- Korean conglomerates frequently spread minority stakes across many technologies.
The lesson for Japan: control, governance, and scalability matter. Minority stakes can trap capital. Mature platforms that lack capital often generate better investor outcomes. And in the U.S., unprecedented electric-load growth — from data centers, electrification, and on-shoring — makes anything that links new generation to new load increasingly valuable.
What Global Investors Want to Hear From Japanese Companies
Across the panel, one theme stood out: investors reward clarity in how companies sequence their transition stories. Companies that demonstrate short-term resilience (LNG, flexible thermal, near-term reliability) and then articulate medium- and long-term growth plans (renewables, ammonia co-firing, CCS/CDR) earn more confidence. This is especially true when risk-sharing structures and capex caps are explicit.
Investors needn’t worry much, the speakers said, when governance is clear and capital discipline is visible.
What Japan Needs From Policymakers and Finance
Speakers emphasized durable policy, scalable frameworks, and financial structures that match 15–20-year asset lives — particularly in CCS and CDR, where UK- and Norway-style models have accelerated early projects.
They also underscored the need for transition pathways that reflect local realities in Asia. This includes different power mixes, grid constraints, levels of industrialization, and GDP per capita. One-size-fits-all screening won’t work; companies must design regionally feasible solutions.
Follow along for more insights from Jefferies’ Sustainability and Transition Team on the Japan GX Plan and other important climate investing themes in the weeks ahead.
