The government faces a challenge in one of its landmark climate change initiatives, a new type of sovereign debt to raise funds for the country’s decarbonization efforts. The problem is, investors remain unclear over what the money will be used for.

In May, Prime Minister Fumio Kishida proposed establishing a "green transformation economic transition bond,” widely referred to in Japan as a "GX bond,” in an effort to raise as much as ¥20 trillion ($143 billion). But the ambiguous name and a lack of details over what the proceeds would be used for are sparking concerns among investors increasingly wary of greenwashing.

"What investors are not interested in is very loosely defined initiatives with no clear aims and no way to accurately track the impact of these investments,” said Patrick Ghali, a managing partner and co-founder of U.K.-based Sussex Partners, an investment advisory firm. "‘Green transformation’ to me is very broad and could include anything from protection of biospheres to decarbonization.”