Japan’s Private Banks

Despite many private banks around the world recognising the risks associated with climate change, Japan’s big banks such as Mizuho Financial Group (Mizuho), Mitsubishi UFJ Financial Group (MUFG) and Sumitomo Mitsui Financial Group (SMBC Group)are still going against this trend.

Private banks are one of the key actors for coal finance in the world. In particular, Japan’s three mega banks –Mizuho, MUFG, and SMBC  Group – are the 1st, 2nd, and 3rd largest lenders to coal developers globally, providing nearly  USD 39.3 billion over three years. Furthermore, according to the Fossil Fuel Finance Report Card 2019, MUFG is the world’s 6th largest investor for 30 top coal power companies, followed by Mizuho which is the 8th and SMBC which is the 21st largest in the world.

In order for the world to achieve the Paris Agreement goal of limiting global temperature rise to 1.5 degrees celsius, the banking sector must stop funding any new coal plant. Yet Japanese banks are still actively supporting coal, which is the most carbon-polluting fuel.

Small steps have been taken by these banks but more must be done. In 2018, all three banks published policies in coal funding and in 2019, MUFG and Mizuho revised their coal policies again. Nevertheless, these policies are riddled with loopholes and leave the door wide open for continuing to invest in so-called “highly efficient” coal plants which will still wreck the climate.

Banks locking developing
countries into coal

Japanese banks are backing coal power plants in countries such as Indonesia and Vietnam, as well as supporting coal mining in Australia.

Scientists have shown this having deadly consequences. A study conducted by a Harvard University team has estimated approximately 70,000 people in Southeast Asian countries will face premature death annually just from the air pollution from coal expansion by 2030. 

In Indonesia, local people affected by Japanese-funded coal plants have reported issues such as land grabbing, loss of livelihoods, and health impacts. Some are even going to court to challenge and stop projects. The Batang coal power project in Java is funded by Japanese banks among others. The project was originally presented as a so-called model case of Japanese ‘Clean Coal’ technology exports. However, as the project progressed, it was revealed the technology was not up to scratch. The amount of air pollution emitted by the plant would be five times as much as japan’s domestic coal power plant on average.

Similar issues have been documented in several projects funded by Japanese private banks.

What about Japanese private banks’
new coal policies?

MUFG revised its coal policy in May 2019 which declared that it would not provide financing for new coal-fired power projects in principle. However, MUFG states that it may continue to finance new coal power projects depending on host country circumstances, international standards such as the OECD Arrangement on Officially Supported Export Credits (OECD Sector Understanding), and the use of other available technologies.

Mizuho revised its coal policy in May 2019 following after MUFG. Mizuho declared that it would provide financing for new coal-fired power projects in line with the OECD rules, host countries’ climate change measures, and Japan’s energy policy and that its financing would be limited to the ultra-supercritical pressure and higher efficiency projects. Mizuho’s policy is far behind MUFG.

SMBC Group set a coal policy in June 2018 which limits lending to the ultra-supercritical pressure or more advanced technologies. However, SMBC Group states, projects that it has already committed support or where the Japanese government or Multilateral Development Banks support are confirmed may be allowed as exceptions.

Sumitomo Mitsui Trust Bank (SMTH) and Resona Group have set an early standard by ruling out any new project finance for coal power. However, they have exceptions as well. 

Even though Japanese big banks have a restriction for coal finance, all of these banks’ policies are not fully consistent with the goal of the Paris Agreement. In part because of their continued support for coal-fired power projects to which they committed before the enactment of those policies and all have exceptions that will enable these banks to continue to support coal projects. In addition, these banks’ coal policies are only applicable for project finance, which means they are allowed to keep funding in shares and bonds under their current coal policy. 

No Coal Japan calls on Japanese private banks to

  • Immediately end project finance and new corporate finance including loan, stock and bond investment for coal developers and
  • Shift all bank financing in line with the Paris Agreement goals.

Japanese banks are already world leaders in financing renewable energy. Given the reality of climate change, all of the money currently flowing to coal and other fossil fuels needs to go into helping just transition to a 100% renewable energy future both in Japan and around the world.