Greenpeace Japan briefing paper
5 June 2020

Japan’s megabanks at the starting line with new coalpolicies
In the past few years, a significant change has taken place in Japanese financial institutions.
Japan’s private megabanks have been criticised globally as the world’s top three biggest
lenders to coal related companies1 and for their financing of new coal power plants2. Now, they
are showing signs of change. With the new policies released this spring, all three financial
institutions have decided to stop lending for new coal power projects in principle. Mitsubishi
UFJ Financial Group (MUFG) led the way for this change with its policy in 2019, and in April
2020, Mizuho Financial Group (Mizuho) and Sumitomo Mitsui Financial Group (SMBC)
decided on similar policies.
In addition to the private banks, Japan’s public finance institutions play a key role in energy
finance, particularly overseas. Among the public institutions, Japan Bank for International
Cooperation’s (JBIC) Governor has recently signalled intentions to refuse all loans for coal
power plants, though its official policy remains to be changed3. Given Japan is among theworld’s biggest public financiers for coal power projects4, many have been calling on theJapanese government to make decisions to stop coal finance5.
All these changes have taken place after
years of criticism from civil society globally
as well as recent calls from the banks’
investors to set stricter fossil fuel policies6.
This year, Mizuho became the first financial
institution in Japan faced with a shareholder
resolution calling for stronger climate policy7.
Given the banks have not ruled out all typesof coal finance yet, we can expect such
movement to continue.

Photo: Greenpeace protesting against Japanese banks’ coal finance at Davos World Economic Forum inJanuary 2020.
1
2​ ttps://www.banktrack.org/article/banks_and_investors_against_the_futureh​http://www.nocoaljapan.org/japan-must-not-support-vung-ang2-vietnam-international-petition/3

https://www.reuters.com/article/us-coal-japan-jbic-climatechange/jbic-muddies-comments-from-chief-on-ending-coal-finance-idUSKBN22D4MG
4​https://endcoal.org/finance-tracker/
5​https://www.ft.com/content/2a3a41e2-8db3-11e9-a1c1-51bf8f989972
6

https://uk.reuters.com/article/coal-japan-mizuho-climatechange/investors-line-up-against-mizuho-support-f
or-coal-idUKL4N2BR2ZY7​https://www.kikonet.org/eng/press-release-en/2020-03-16/mizuho_shareholder_proposal

Below, we evaluate the significance of the new policies, analyse their weak points by comparing them topolicies set by other international banks, and suggest how to strengthen the policies further.

What is the significance of the new policies?
As some of the biggest banks in the world, the Japanese megabanks’ policy decisions have a major
impact on both domestic, regional and global energy trends. In the past decade, they have been involved
in directly financing numerous coal power projects in countries such as Indonesia, Vietnam, and India8.
For example, between 1999 and 2018 the banks were involved in financing 22 coal power plant units(14,280 MW) in Indonesia9.
The new policies by the Japanese banks in 2019 and 2020 commit them to stopping ​coal project
finance ​(with some significant exceptions, explained below). This means the banks will stop giving loans
to financially support specific coal power projects - a major change from their previous activities. Datafrom the World Bank10 11 12 shows that together the private and public banks normally provide 80% of thefunding of such projects, while the remaining 20% comes from the construction company’s own finances.
This means the banks’ decisions to stop such project finance will be a major factor for these kinds ofprojects.

Major weaknesses in all three policies - how the banks’ coal financing can continue
Despite the decision to stop new coal project finance, the banks’ new policies do not mean that all theirfinancial support to the coal industry will end. The banks still have several ways to finance the coalindustry. Generally called ​corporate finance​, this type of financing includes the banks’ lending toindustrial corporations that are engaged in various parts of the coal mining and coal power value chain.
By providing corporate finance, the banks do not support any particular project by the corporation, but
their whole range of activities, which can include coal power production, mining, transportation etc.. The
types of corporate finance may include shareholding, loans, underwriting or bonds. ​Currently, the banks’policies do not set any limitations to this type of funding.
Reports have shown Japanese banks are among theworld's biggest providers of corporate finance to coal
related companies globally - see Graph 1 and Box 1.
This data shows MUFG, Mizuho, and SMBC are still far
from ending all of their coal finance.

Graph 1: Japanese banks ranked as the world’s 1st, 2nd and 3rd biggest lenders to coal related corporations
globally. Source: BankTrack 2019, footnote 1.

8​ ttp://www.nocoaljapan.org/three-mega-banks-support-japan-deadly-double-standard/h​https://www.greenpeace.org/japan/sustainable/press-release/2018/12/06/6042/
10​https://ppi.worldbank.org/en/snapshots/project/tanjung-jati-b-coal-fired-power-plant-units-5--6-9026
11​https://ppi.worldbank.org/en/snapshots/project/central-java-coal-fired-ipp-8726
12​https://ppi.worldbank.org/en/snapshots/project/cirebon-2-coal--fired-power-plant-9062
9

How do the policies compare internationally?
International comparisons show how Mizuho, MUFG and SMBC’s new coal finance restrictions could still
be significantly strengthened. To date, more than 100 financial institutions have introduced restrictions tothermal coal funding13, and many of them are already restricting all financing to utility companies that areinvolved in coal business.14
In the following table, we compare the new policies of Japanese banks to each other and to someexamples of stronger policies by financial institutions in other countries.

Banks in comparison: Mizuho has taken the lead, SMBC weakest - all three behind global peers
Mizuho (4/2020)15

MUFG (5/2020)16

SMBC (4/2020)17

Examples of stronger
policies by peers

Coal powerprojectsNo new coal project
financeNo new coal project
finance

In principle, no newcoal project finance

Basis forconsidering
exceptions toproject finance

Projects with previous
funding;announcement;
Replacement projects
that are considerednecessary for stablesupply;Development ofinnovative
next-generation
technologies

The energy policiesof the host countries;
International
standards such asOECDrecommendations;
Other available
technologies;
High efficiency power
generation and CCS

Projects that havebeen provided
support before;
Projects using
ultra-super criticalcoal plant technology;
Projects using CCS
or carbon recycling

ING (Netherlands)18:
Since 2015, end of all coal
power project financing, withno exceptions

Outstandingloans

Outstanding projectloans to be halved by
2030, brought to 0 by
2050

No timeline

No timeline

Societe Generale (France)19:
Progressively reduce theexposure to the thermal coalsector to to zero, at the latest
in 2030 for companies withthermal coal assets located in
EU or OECD countries and2040 elsewhere13​ ttps://ieefa.org/finance-exiting-coal/h​https://www.banktrack.org/campaign/list_of_banks_policies_on_coal_utilities15​https://www.mizuho-fg.com/release/20200415release_eng.html
16​https://www.mufg.jp/dam/pressrelease/2020/pdf/news-20200513-002_en.pdf
17​https://www.smbc.co.jp/news_e/e600579_01.html
1418

https://www.ing.com/Newsroom/News/ING-ends-new-coal-financing-continues-to-reduce-coal-portfolio-.ht
m19​https://www.banktrack.org/download/sector_policy_on_thermal_coal/thermalcoalsectorpolicy.pdf

Corporate
finance for
utilities using
coal in energy
production(shareholding,loans, bonds,underwriting)

No restrictions

No restrictions

No restrictions

Credit Mutuel (France)20:​not
allowed for utilities with over
20% of total revenues andshare of electricity produced
from coal, or with more than
5GW of installed coal-fired
capacity, or developing newcoal power plants

Engaging withcoal reliant
corporateclients

Strengthen
engagement withclients regarding theirefforts to address
climate change;
engage with clients incoal mining businesson climate change
related transition risk,
confirm
countermeasures

Not specified; generalmention of assessing
clients’ approach tomanaging
environmental issues

Not specified; general
remark aboutengaging with clients’for contributing to
globally better society

Credit Agricole (France)21:
requires all client companies
involved in the coal industry
to publish a transition plan by
2021, including a plan tophase out coal by 2030 in EUand OECD countries, and by
2040 in the rest of the world)

Divesting fromcoal reliantclients

No policy

No policy

No policy

Credit Mutuel (France)22:
Exclusion of corporations
based on criteria (see above);
Remaining corporate clients
must adopt a plan to close allcoal assets by 2030,
otherwise financial support
will be discontinued; Aim toexit all coal finance exposureby 2030

Coal mining

No financing to coalmining projects using
mountaintop removal(MTR); in other cases
will consider theclients’ impact onenvironment, climate

No financing to coalmining projects using
mountaintop removal(MTR); in other cases
will assess theclient’s consideration

No financing to coalmining projects using
mountaintop removal(MTR); in other cases
will perform
environmental risk
assessment

Royal Bank of Scotland(UK)23: ​No project financing to
new thermal coal mines;
Restrictions for corporations
involved in coal mining

20

https://www.creditmutuel.fr/partage/fr/CC/telechargements/communiques-de-presse/CM/2020/2020-02-20_Resultats-2019-Credit_Mutuel_Alliance_Federale-en.pdf
21

https://www.credit-agricole.com/assets/ca-com-front/temp/PDF/Politique%20Sectorielle%20Groupe%20%20Centrales%20-%20Mars%202020%20-%20v2%20EN.pdf
22

https://www.creditmutuel.fr/partage/fr/CC/telechargements/communiques-de-presse/CM/2020/2020-02-20_Resultats-2019-Credit_Mutuel_Alliance_Federale-en.pdf
23

https://www.banktrack.org/download/ese_policy_mining_metals_sector/mining_metals_policy_dec_2016_1.pdf

Other fossil
fuels
Oil & gaschange relatedtransition risk, andconfirm
countermeasuresfor environmental
impacts

Examination ofimpacts onenvironment,
engagement withclients to confirm theirmeasures foraddressing transition
risk; no clear
restrictions

Acknowledgement of
their climate impact,
but no clear
restrictions

Conducting
environmental risk
assessment, but noclear restrictions

BNP Paribas (France)24:​Will
not provide financial services
to the greenfield or brownfieldprojects, including explorationand production, major
pipelines or export terminals
for unconventional oil and gas
resources, nor to companies
with significant involvement insuch projects

Greenpeace Japan recommendations for the Japanese banks
As the comparison above shows, Mizuho, MUFG, and SMBC have many things they can and must do tostrengthen their energy finance policies. All three banks have made public commitments to the Paris
Agreement objectives - now, they must align their policies to that commitment. By ending financing tofossil fuels and focusing on supporting decarbonisation measures such as renewable energy and energy
efficiency and saving, they can make a positive contribution to the global efforts against climate change,
as well as to the Green Recovery efforts needed in response to the COVID crisis.
1) Close loopholes for coal project financeAlthough the banks’ policies state that they will not provide financing to new coal-fired power generation
projects, several exceptions related to on-going projects and technology choices significantly weaken thiscommitment. This loophole must be closed by adopting a complete ban on project finance for coalprojects, including all types of coal-fired power plants, coal mines, and other coal infrastructure.
2) Engage with corporate clients & require decarbonisation strategies
In cases where the banks have existing financial ties with companies that are currently involved in thecoal industry, they should engage with the clients and require them to provide a clear strategy showing
how the company will decarbonize its business practices in a timeline that is aligned with the Paris
Agreement objectives. In OECD countries including Japan, this means phasing out coal power plants by2030.
3) Introduce responsible restrictions to corporate financeIn cases where a corporate client is not able or willing to provide a sufficient decarbonisation strategy,
providing further financial services should be restricted and ultimately ended. This can be done by settinga threshold for the maximum percentage of coal based energy generation revenues or energy generation

24

https://group.bnpparibas/uploads/file/csr_sector_policy_unconventional_oil_and_gas_19_12_2017_v_sta
ndardized.pdf

volumes, and lowering this percentage to zero over time. Companies that are currently constructing newcoal power plants should be excluded from further financial services immediately.

Japanese banks’ extensive corporate finance to coal developers globallyBanking on Climate Change 202025
The Japanese banks’ financing for the world’s top 30 largest coal power corporations between
2016-2019, including corporate lending and underwriting transactions, and project finance where data
were available. Finance flows were adjusted to reflect the share of coal in the companies’ energy mix.
- MUFG - US$5.048 billion- Mizuho - US$4.244 billion- SMBC - US$1.114 billion
Banks and Investors Against Future 201926
The Japanese banks financing for the world’s top 258 coal-reliant corporations between 2017-2019.
The numbers represent all the financing the banks provided without adjusting for share of coal in thecompanies’ energy mix.
- Mizuho - US$ 16.8 billion in loans, 14.2 billion in underwriting, 4.5 billion in bonds andshareholding- MUFG - US$ 14.6 billion in loans, 12.6 billion in underwriting, 6.3 billion in bonds andshareholding- SMBC - US$ 7.9 billion in loans, 10.4 billion in underwritingBox 1.

25
26​ ttps://www.ran.org/wp-content/uploads/2020/03/Banking_on_Climate_Change__2020_vF.pdf
h​https://coalexit.org/sites/default/files/download_public/COP25_PR_Logos.pdf