Investor update

Japanese Megabanks
shareholder proposals
Improving climate governance andclient transition assessments
Mitsubishi UFJ Financial Group Inc | TYO: 8306
Sumitomo Mitsui Financial Group Inc | TYO: 8316
Mizuho Financial Group Inc | TYO: 8411

APRIL 2024

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Outline
Executive Summary
Megabanks continue to pour billions into fossil fuel expansion, undermining climate
commitments and exacerbating acute and systemic risks
Megabanks must disclose clear criteria and processes to assess high-emitting clients’transition plans
Megabank boards must demonstrate competency to manage and oversee climate-related
financial risks and opportunities
Conclusion: Need for enhanced risk management and transparency
History of engagement
Proposal text
AnnexesExecutive Summary
The Japanese Megabanks are among the world’s top 10 financiers of the fossil fuel industry*
and are failing to adequately manage climate-related financial risk to their companies.
To address these failings, we propose the following policy reform:
Disclosing effective transition plan assessments for clients:
MUFG, SMBC, and Mizuho are contradicting their pledges toglobal net-zero emissions by 2050, funneling $545 billion into
the fossil fuel industry since the Paris Agreement. They persist
in financing firms misaligned with climate objectives. Clear
frameworks for evaluating customer transition plans areimperative to meet the banks’ climate commitments.

Ensuring fit for purpose governance: The current
Megabank boards do not appear to have thecapacity to oversee climate risks and opportunities.
For the boards to effectively assess decarbonisation
pathways or strategy effectiveness, and mitigate
associated financial risk, the boards need to equipwith directors with climate expertise.

The outcome of our proposal will increase the corporate value of Japanese Megabanks by enhancing themanagement of climate-related financial risks and business opportunities.
*In 2022. Source: Banking on Climate Chaos

Megabanks continue to pour billions
into fossil fuel expansion, undermining
climate commitments andexacerbating acute and systemic risks

Cumulatively, the Megabanks are among the top global
fossil fuel financiers since the Paris Agreement
Total financing to fossil fuel sector

2023 lending figures(due out in May 2024)
are expected to place
the Japanese banks
even higher in the
rankings

Source: Banking On Climate Chaos 2023

The world’s top 10 fossil fuel financier in 2022

All Megabanks
fall within the
top 10 banks
financing fossil
fuels in 2022

Source: Banking On Climate Chaos 2023

Megabanks do not have effective decarbonisation
strategies and policies to reduce capital allocation to
misaligned activities
Transition Pathway Initiative scores on decarbonisation strategy (capital allocation
to misaligned activities)
Has committed to end all project financing dedicated to the exploration anddevelopment of new oil and gas fields?
Has committed to end all on- and off-balance sheet activities dedicated to the
exploration and development of new oil and gas fields misaligned with a 1.5°C
pathway?
Does the bank’s oil and gas policy include an exclusion threshold for investees with oil
and gas expansion plans or with operations in unconventional oil and gas?

MUFG
SMBC
MizuhoHSBC

ING

Financing for all fossil fuels (USD)

Megabanks havefailed to phasedown fossil fuelfinancing comparedto peers with better
policies
Data source: Banking On Climate Chaos 2023

CASE STUDY

Megabanks leave room to finance coal in 2024

IEA NZE
requirement

No new fossil fuel supply projects to be developed. No
new thermal or metallurgical coal mines or extensions.

Peer
comparison

Unlike HSBC and JP Morgan, Megabanks’ policies don’trule out financing companies building expanded coalmines (even though most finance to the sector isthrough corporate finance). Also, unlike HSBC andWestpac, the Megabanks’ policies don’t rule out
financing new metallurgical coal mines.

Megabanks canstill finance...

Adaro Energy Indonesia (Adaro) - a thermal coalmining company previously financed by the
Megabanks. Adaro’s Decarbonisation Journey is notcredible or Paris Agreement-aligned and includes
plans to expand coal production. Adaro derived 98% of
its 2022 revenue from coal.

Find out more

CASE STUDY

Megabanks continue to finance oil and gas, including risky
upstream and LNG infrastructure projects
IEA NZE
requirement

No new gas fields. “A global [LNG] supply glut forms inthe mid-2020s and under construction projects are nolonger necessary.” (p. 139)

Peer
comparison

Unlike Commbank and OCBC, Megabanks have nopolicies to rule out financing new and expanded gas
projects and no policies to incentivise client transition.

Megabanks canstill finance...

US Gulf projects including the expansion of Cameron,
Rio Grande and Freeport LNG export terminals. These
projects, which Megabanks have financed before, areassociated with considerable risk because ofenvironmental harms to local communities andfisheries, and because of the Biden Administration’s
pause on LNG export permits.

Find out more

Enabled by a lack of effective policy, Megabanks arerisking their reputation on Barossa and Darwin LNG…
...projects fiercely opposed by local communities that threaten Indigenous rights, sacredsites, and natural environments.

Indigenous People protest against gas
development project in Australia Tokyo
MX TV’s 8 bit news

Find out more

Tiwis take on Tokyo to tame gas project they say
threatens their island culture Sydney Morning Herald

Indigenous Australians visit Korean
Parliament to demand companies
halt gas project M Economy News

Without effective policy, the Megabanks are also at risk offinancing these carbon intensive expansion projects

CASE STUDY

A carbon bomb in Chattogram, Bangladesh of close to 20GW,
with lifetime emissions of 1.38 billion tonnes of CO2-e,threatening the climate, local ecosystems and communities.

Megabanks canstill finance...

MUFG is reportedly providing Financial Advisory Services (FAS) for
imported LNG-based gas-fired combined cycle power plants with
500 to 600 MW capacity in Chattogram. SMBC is reportedly
providing FAS for 1.4 GW gas-fired power plant in Chattogram.
TOO EXPENSIVE: The Bangladesh government was forced to seek a
US$2.1b loan to afford fuel imports and manage the country’s
ongoing gas crisis. Bangladesh’s LNG deals are “priced higher thanthe prevailing market due to the sovereign guarantees needed and
Bangladesh's lower credit rating”(S&P Global). By 2030, its annual
LNG import cost would be an estimated US$8.4 billion. If LNG prices
remain high, project developers and their investors risk failing torecoup costs if Bangladesh is unable to afford expensive LNG.
Graphic source: https://en.prothomalo.com/bangladesh/yum5wyt1lu

By not having effective decarbonisation strategies,
Megabanks undermine their own climate commitments
and exacerbate systemic financial risks‘Some respondents [from financial authorities]emphasize… that unless an orderly and fast-pacedtransition process is implemented, climate-relatedrisks will end up representing a major source ofsystemic risks in the future, and hence need to bemonitored closely.’ (FSB 2022)‘More precisely, physical risks in hot house world
scenarios (Current Policies or Nationally Determined
Contributions scenarios) will lead to the strongest
negative impacts on GDP with economic costdiverging significantly after 2040. (NGFS 2022)

By failing to meet their own commitments, the Megabanks
also put themselves at risk of greenwashing claims
Decarbonisation
Science says
sector

MUFG

SMBC

MizuhoComments

IEA NZE(p.128): “By 2030, global power sector
emissions are down about… 45% in the NZE Scenario”
and down to net zero by 2045

Megabanks’ intensity targets for 2030
range from a below 2 degrees scenario.

Oil and Gas

IEA NZE: Compared to 2022, emissions from oil andgas fall 26% by 2030 53% by 2035

2030 target ranges set by Mizuho and
SMBC start from just 12% and MUFG from
15%. All of them are limited to upstream
business, excluding significant
midstream and downstream emissions.

Coal mining

IEA NZE(p.143): “In the NZE Scenario, global coalproduction declines by 45% to 2030 and a further 85%
between 2030 and 2050”

Megabanks have targets to reduce
thermal coal mining financed emissions
or loan balance to zero in 2030 for OECD
countries and in 2040 for the rest of theworld.

Coal power

IEA NZE(p.127): “By 2030, with new construction
slowing and efforts to transition away from coal
underway in many countries, the share of unabatedcoal in electricity generation falls below… 15%”

Megabanks only have targets to reducecoal power loan balance to zero by
2040.

Power

Megabanks must disclose clear criteria
and processes to assess high-emittingclients’ transition plansMegabanks current approach lacks clarity for clientsJapanese Megabanks emphasise the importance of engagement with their clients to understandand support clients’ transition strategies, but...
I. Megabanks do not require their clients to havecredible 1.5°C pathway-aligned transition plans
and strategies, undermining the central purpose oftransition finance.

II. Megabanks do not have a clear process, timelines,
or metrics to evaluate clients’ progress and to
determine whether to continue financing to clients wholack plans to align with 1.5°C-degree pathways.

As a result, investors cannot be confident if megabanks approaches to support client transition are effective.
Megabanks can face financial risks and reputational risks associated with continued support to companies nottransitioning adequately, and risks associated with the banks not meeting their own net-zero commitments.

Risks of inadequate client transition plan assessments Default risk
Megabanks face financial risk by funding companies expanding sectors incompatible with climate goals, exposing
them to increasing transition risk.
IEA: “The volatility of fossil fuel prices means that revenues could fluctuate from year to year – but the bottom line isthat oil and gas becomes a less profitable and a riskier business as net zero transitions accelerate.” “If all nationalenergy and climate goals are reached, this [oil and gas companies] value is lower by 25%, and by 60% if the world
gets on track to limit global warming to 1.5 °C.”
According to studies on European banks, banks with significant exposure to fossil fuel assets could be at risk of nothaving sufficient equity to cover their losses if global warming is limited to 1.5 °C.
2023 saw a 26% rise in companies defaulting on loans in Japan. Financial experts have recently questioned the
Megabanks’ ability to detect accounting fraud on the part of Japanese companies.
Without proper assessment criteria and procedures in place, Megabanks’ substantial exposures to fossil fuelcompanies leave them at risk.

Risks of inadequate client transition plan assessments Falling short of investor expectations
Megabanks do not meet investor expectations:
TPI: Bank decarbonisation strategies must include ‘financing conditions for high-emitting
sectors linked to a 1.5°C pathway’ and ‘explicit criteria for withdrawal of financing frommisaligned fossil fuel activities’. The three megabanks scored low on this point. (See Slide
8)
SBTi Position Paper: one of the four requirements for net-zero science-based targets forfinancial institutions (FIs) is ‘Transition’, where “FIs shall engage existing fossil fuel company
counterparties to achieve 1.5°C transition [sic] using quantitative and qualitative criteria
and public transition plans.”
This sets the Megabanks behind their peers, risking their reputations in financial markets.

Megabanks’ engagement approach lacks clear
consequences when clients fail to present credible
transition plans
From Megabanks’ disclosure, it is not clear if banks require clients to demonstrate credible
transition plans for banks to continue supporting them. Megabanks also do not stipulate clear
timelines for clients to develop credible transition plans.
Considering investor expectations, credible transition plans include, but are not limited to:
Aligned with a 1.5°C pathway:
Short, medium and long-term Scope 1, 2 and 3 greenhouse gas emissions reduction
targets
Capital expenditure plans
No unreasonable reliance on carbon offsets or negative emissions technology to achieve
emissions reductions.
Megabanks do not meet these requirements and are falling behind competitors. See Annexes(slide 36&37) for detail.

Risks of inadequate client transition plan assessments Legal and regulatory risk
Megabanks’ engagement approaches lack credibility; their criteria for assessing clients'
transition plans are unclear. Additionally, they promote 'transition finance' to continue to support
fossil-fuel based technologies, which seems economically and environmentally questionable.
This exposes the banks to legal and regulatory risk as they can be accused of greenwashing.
Greenwashing claims can have a wide range oflegal and regulatory foundations
Law of misrepresentation/negligent misstatement,
Advertising codes,
Consumer protection law,Market disclosure regulation,
Breach of contractual provisions,Competition law

Risks for investors
Corporate value would decrease and sustainablegrowth is threatened
Reputational damage and loss of social license
Fines and other sanctions by regulators
Liability of board of directors over failure to fulfill
their duty of care

“Greenwashing does not require intentionality”– AIGCC and Client EarthMUFG pushing problematic ‘transition’ financeagenda in Southeast Asia
MUFG has developed “Asia Transition Guidelines” through the Asia Transition
Finance Study Group (ATFSG) which have drawn criticism from investors forreflecting Japanese energy policies and being unsuitable for Southeast Asia.
MUFG spearheaded the development of the NZBA Transition Finance Guide
which blindly follows Japan’s Ministry of Economy, Trade and Industry
technology roadmap as one of the benchmarks for verification, despite
criticisms of its lack of scientific basis.
MUFG’s "Asia Transition White Paper", centering on power sector
decarbonization, reiterates the use of ammonia co-firing and CCUS althoughthese ‘technologies’ would prolong the use of fossil fuels.

SMBC claims support for fossil fuel based energy as‘transition finance’
SMBC’s Transition
Finance Playbook listed
examples of transition
activities (left) which
include expansionary
fossil fuel projects
inconsistent with netzero pathways.

Source: SMBC Transition Finance Playbook

Although JERA does not have a credible transition plan,
the banks are pouring money into the company

CASE STUDYIEA NZE
requirement

Electricity sector net-zero emissions by 2035 in advanced economies.
No new fossil fuel supply.
JERA, a company expanding fossil gas and prolonging the life of coal-fired power
plants. JERA is:

Megabanks
can still
finance...

Find out more

1. The largest carbon emitter in Japan (global scope 1: 154 Mt-CO2 in FY2022) with no deadline to phaseout coal and gas. Its emissions reduction target by 2035 is only a 60% reduction compared to 2013.
2. Actively pursuing significant expansion in the LNG sector, including LNG fields such as Barossa andScarborough in Australia, Freeport LNG liquefaction facility in the US, five LNG import terminals and LNG
to power projects with nameplate capacity of 11.6GW in Bangladesh and Vietnam.

With its “Zero CO2 Emissions 2050” roadmap, JERA is planning to combustammonia and hydrogen (including those produced with fossil fuels) – a costly,
uncommercialised technology incompatible with the 1.5C goal, which has “risk ofworsening [Japan’s] long-term energy security”. JERA is now part of Indonesia's
energy transition masterplan project. MUFG, Mizuho and SMBC also supported
JERA’s so-called transition bonds - which have been criticised as failing tocontribute to decarbonisation.

Megabanks need clear policies to incentivise their clientsto decarbonise

Assessment by athird party to ensure
these targets are
science based

Requirements that clients’ short,medium and long-term plans andtargets, including scope 3 emissions,align with a 1.5 degree pathway

Clear consequenceswhere a client does
not meetrequirements

Otherwise, Megabanks face financial risks associated with clients’ failure totransition and the banks’ own failure to meet their net-zero commitments.

Megabank boards must demonstratecompetency to manage and oversee
climate-related financial risks andopportunities

Risks of not having climate-competent directors on board
Climate risk mismanagement - Megabanks recognise climate-related risks as a “Top Risk”(Mizuho TCFD report 2023, p.6 , MUFG Sustainability report 2023, p.126,127, SMBC Group TCFD
report 2023, p.59).
As such, the board must oversee climate risk management to safeguard corporate value.
If the board lacks competency, the bank may be unable to properly manage climaterelated financial risks, including decreased client performance and asset values, alongwith reputational and regulatory/legal risks.
Director liability - “...Arguably directors could be held liable under the Companies Act and theRegulation for Enforcement of the Companies Act for failure to establish a climate risk
management system with sufficient capabilities to perform their responsibilities to oversee
and manage climate-related risks and opportunities.” CCLIGreenwashing - “As one respondent told us, ‘Boards have to learn in depth so as to avoid a
simple tick mark in a checkbox or greenwashing the business.’ Another also warned against‘window dressing.’”Japan’s legal frameworks require board climate
competency
Japanese Corporate Governance Code (CGC):
CGC Principle 4 requires the board to disclose: 1) the policies and procedures for director nomination; 2)
the evaluation of board effectiveness; 3) board training policy, among others.

CGC Principle 4.11.1 sets out ‘The board should establish policies and procedures for nominating directors
and disclose them along with the combination of skills, etc. that each director possesses in an
appropriate form according to the business environment and business characteristics, etc., such as what
is known as a "skills matrix.” When doing so, independent director(s) with management experience inother companies should be included.’

Although megabanks have disclosed skills matrices, there is no description of each director’scompetency with regard to climate change risk management, other than broad description of“sustainability” without any clear criteria used for the assessment (Mizuho, SMBC, MUFG).
Their corporate governance reports do not disclose sufficient information either, only including broad
mentions of “expertise in sustainability” etc. (Mizuho, SMBC, MUFG).

Megabanks fall short of investor expectations on board
climate competencies
Initiatives

Indicators

MUFG

SMBC

TPI

8.2 a: The company discloses evidence of Board or Board
committee oversight of the management of climate changerisks.

Met. Disclosureof discussion
theme (p.70)
at BoD etc.

Met. Disclosureof discussion
theme(p.49) at
BoD etc.

Met. Disclosureof discussion
theme(p.14) at
BoD etc.

TPI

8.2 b: The company has assessed its board competencies
with respect to managing climate risks and discloses theresults of the assessment.

Failed. No
evidence ofassessment

Failed. No
evidence ofassessment

Failed. No
evidence ofassessment

TPI

8.2 c: The company provides details on the criteria it uses toassess its Board's competencies with respect to managing
climate risks and opportunities, and the measures it is taking
to enhance these competencies.

Failed. Criteria
not publicly
disclosed

Failed. Criteria
not publicly
disclosed

Failed. Criteria
not publicly
disclosed“Climate competent” directors, i.e., has the expertise andexperience of climate-related business threats andopportunities including climate science, low carbon transition
across the value chain and public policy.

Failed. No
disclosure ofexpertise andexperience inthis regard in
the MUFG skills
matrix and
CGR

Failed. No
disclosure ofexpertise andexperience inthis regard in
the SMBC skills
matrix and
CGR

Failed. No
disclosure ofexpertise andexperience inthis regard in
the Mizuho
skills matrix
and CGR

IGCC

MizuhoConclusion: Megabanks need enhanced climate risk
management and transparency
Megabanks assessments of clients’ transition plans need more clarity and transparency.
Otherwise investors cannot ensure the effectiveness of megabanks’ decarbonisation
strategies and associated financial risk management.
Megabank boards’ current skills matrices and relevant reports lack vital details, hindering
investors’ scrutiny of directors’ ability to appropriately oversee climate-related risks andopportunities.
Votes for the following shareholder proposals are warranted:
Assessment of client’s credible transition plan
Board ability to ensure banks manage climate related financial risks and opportunities

Engagement timeline
2016 - PRESENT
Market Forces, Kiko
Network and RAN (cofilers) engaged with
MUFG, SMBC and Mizuho
on fossil fuel financing
and associatedclimate-related risk
management

2021 MUFG AGM
Proposal filed at MUFG on
disclosure of Parisaligned businessstrategy with short-,
medium- and long-termtargets received strong
support2020 MIZUHO AGM
Proposal on disclosureof Paris-aligned
business strategy filedat Mizuho received
strong support

2023 AGM
Proposals on disclosureof transition plansaligned with net zero
emissions targets filed to
MUFG, SMBC and Mizuho
received strong support

2022 SMBC AGM
Proposal filed to SMBC on
Paris-aligned businessstrategy received strong
supportNOVEMBER 2023
Discussion and exchange
opinions on the banks
financing policy,
decarbonisation targets, andclient engagement on thehigh emitting sectors. Market
Forces outlined areas to
MUFG and SMBC where
progress is needed

SEPTEMBER 2023**
Discussion on theimplications of the 2023
shareholder proposals on
Japanese Megabanks,
focusing on theenhancement of climaterelated risk management
strategies and thedecarbonization targets, andengagements with clients

MARCH 2024
Discussion and confirmation if
banks have plans to update
their policy and target basedon previous communications
and focus areas

FEBRUARY 2024
Subsequent discussions toreview progress of climaterelated objectives andtargets, and elucidate focus
areas for updates in nearterm by Megabanks. Market
Forces communicated needfor progresses to Mizuho, andprovided further clarification
to MUFG and SMBC**Total online and in-person meetings with banks between September 2023 and April 2024: MUFG (5), SMBC (6), Mizuho (5)APRIL 2024
Discussion andclarification on updates
published by SMBC and
MUFG*Mizuho published the
update post filing for2024 AGM season

Amendment to the articles of incorporation is the only
pathway
The proposal to amend the company’s articles of incorporation in part is the most commonlyused approach to make shareholder proposals in Japan, and the approach taken in this
proposal. The majority of the shareholder proposals filed in 2023 took this form.
Under Japanese corporate law, the sole legal pathway for a shareholder proposal on climatechange is via an amendment to a company’s articles of incorporation.
The legal effect of such shareholder proposals is the same as the “special resolutions” onclimate change filed and passed at UK companies including Barclays, BP, Royal Dutch Shell,
Rio Tinto and Anglo American, which take binding effect as part of the companies’
constitutions.

Proposal 1: Director competencies for the effective
management of climate-related business risks andopportunities
The following clause shall be added to the Articles of Incorporation:
Chapter X: “Directors and Board of Directors”
Clause Y: Director Nomination (Director competencies for the effective management ofclimate-related business risks and opportunities)
To promote the long-term success of the Company, given the risks and opportunities associatedwith climate change, the Company shall establish and disclose policies and processes fornominating directors and evaluating the board’s effectiveness that ensure the management ofclimate-related business risks and opportunities is embedded in the Company’s coremanagement strategy, noting the appropriate balance and diversity of knowledge, experienceand skills of the board as a whole.

Proposal 2: Assessment of customers’ climate changetransition plans
The following clause shall be added to the Articles of Incorporation:
Chapter Y: “Climate-related risk management”
Clause Z: Transition Plan (Assessment of clients’ climate change transition plans)
Noting the Company’s climate change commitments and climate risk management strategies, theCompany shall disclose: i) How the Company will assess fossil fuel sector clients’ climate changetransition plans for credible alignment with the 1.5°C goal of the Paris Agreement*; and ii)The
consequences of clients not producing credible Paris-aligned transition plans, including the
restriction of new finance**.
*Criteria for determining climate change transition plan credibility include, but are not limited to:
Short-, medium-, and long-term scope 1, 2 and 3 emission reduction targets;
Strategies (including capital expenditure plans) to align with those targets; andNo unreasonable reliance on emissions offsets or negative emissions technology**‘New finance’ defined as the provision of new corporate lending, project finance or trade finance to a client, including the refinancing of existing
credit facilities, and the arranging or underwriting of capital markets transactions to a client.

Annex 1: Examples of peers with better oil and gas policies
Project finance:
Lots of banks including OCBC, UOB, HSBC, BNP Paribas, Credit Agricole, Société Générale, ING, Commonwealth Bank, Westpac haveinstituted a policy to prohibit project financing for new oil and gas.
UOB: No new project financing for upstream oil and gas projects approved for development after 2022.
OCBC: ‘“We will not extend project financing to upstream Oil & Gas projects that obtained approval for development after 2021.”
Corporate finance:
Danske Bank has decided not to offer long-term financing or refinancing to E&P oil and gas companies that intend to expand supply ofoil and gas beyond what was approved for development by 31st of December 2021.
Westpac: Subject to national energy security, it will not provide project finance or bond facilitation for the development of new(greenfield) or expansionary oil and gas fields, including new associated dedicated infrastructure, unless in accordance with the IEA NZE
scenario (2021). It will continue to provide corporate lending and bond facilitation where the customer has a credible transition plan(*) inplace by 30 September 2025(*) A credible transition plan(…)should include Scope 1, 2 and 3 emissions and actions the company will take to achieve GHG reductionsaligned with pathways to net-zero by 2050, or sooner, consistent with 1.5°C warming.

Annex 2: Methodology for megabanks’ client transition planassessments under investor expectations
Criteria for assessing credible alignment with Paris
Frameworks such as the Climate Action 100+ Net Zero Company Benchmark and the Investor Groupon Climate Change Corporate Climate Transition Plans Guide to Investor Expectations, amongst
others, have identified common criteria that are essential to a credible transition plan. These key
criteria are outlined below as part of Market Forces analysis on MUFG, SMBC and Mizuho’s transition
plan frameworks. These include, but are not limited to:
Alignment with a 1.5°C pathway.
Short, medium and long-term Scope 1, 2 and 3 greenhouse gas emissions reductions targets
Capital expenditure allocation/alignment
No unreasonable reliance on carbon offsets or negative emissions technology to achieve emissions reductions.

Another criteria is whether Megabanks will require transition plans from all fossil fuel companies by 1 January 2025.
Another criteria refers to ‘Verification/Frameworks’. This criteria refers to whether a bank has disclosed how it willconduct assessments of its clients transition plans, including whether the bank has used internationally recognised
frameworks in defining requirements, and whether the bank will use an independent third party to verify the credibilityof its client’s transition plans.

Annex 2: Summary of megabanks assessment underinvestor expectations is poor
NO COVERAGE

Transition plan requirements

MUFG

SMBC

Mizuho1.5C aligned

*

*

*

Scope 1-3 targets

**

**

**

***

***

PARTIAL COVERAGE

Better policy example:
Westpac****Capex plans
Short, medium, long term goals
Reliance on offsets, etc.

FULL COVERAGE

Verifications and frameworks
Transition plan by 1 Jan 2025
*MUFG mentions 1.5 aligned target and SMBC and Mizuho mention Paris-aligned targets in client transition plan assessments but they lack definitions. See MUFG
Climate Report 2024 (JA p.58), SMBC TCFD report 2023 (EN p.68 ) and Mizuho TCFD report 2023 (EN p. 63 ).
** SMBC, Mizuho and MUFG all have portfolio reduction targets for scope 1, 2 and 3 in carbon intensive sectors, including oil and gas, coal etc, but do not clearly requireclients to have such targets.
*** SMBC and Mizuho do not consider offsets when calculating portfolio GHG emissions. SMBC TCFD report EN p.94, Mizuho TCFD report EN p.83. Again there is no clear
requirement that megabank clients’ transition plans do not unreasonably rely on offsets etc.
**** According to 2023 policy update. Please refer to assessment by Market Forces for details.

Annex 2: Megabanks client transition plan assessments lackclarityIn April 2024, MUFG disclosed a framework
to evaluate client transitions including items
related to targets (including “science-based
1.5C aligned interim targets”), governance,and emissions reduction status.
However, there is no clarity on criteria used
to assess clients’ short, medium and longterm Scope 1, 2 and 3 GHG emissions
reductions targets against science-based
1.5C pathways.
Source: MUFG Climate Report 2024 p.53

Annex 2: Megabanks client transition plan assessments lackclarityMoreover, there is no clear
consequences disclosed if clients fail todemonstrate credible transition
strategies.
MUFG’s “escalation process” only
indicates MUFG considers reviewing
the terms and policies for clients where
no concrete plan or direction toward
transition can be identified after acertain engagement period.
Source: MUFG Climate Report 2024 p.52

Annex 2: Megabanks client transition plan assessments lackclarity
It is not clear what criteria MUFG uses to assess if clients have science-based Paris-aligned interim
targets and the progress is made toward net-zero (category 2 in the chart). Moreover, since disclosing‘pilot framework’ for client transition engagement, MUFG provided USD 80 million in finance as part of
USD 1475 syndicated loan to JERA Global Market, a subsidiary company of JERA, with plans todevelop new LNG projects and expand LNG trading.

Source: MUFG Climate Report 2024 p.54

Annex 2: Megabanks client transition plan assessments lackclarityMizuho disclosed some criteria relating to clients’ transition strategy progress. However, no explanation
is given on what it means by “set targets aligned with the Paris Agreement” or “is implementing specificinitiatives based on those targets”, which Mizuho claims 83% of its power sector clients has done
(exposure base).

Source: Mizuho, TCFD report 2023 p. 63–65

Annex 2: Megabanks client transition plan assessments lackclarityMizuho does not include Short, medium
and long-term Scope 1, 2 and 3
greenhouse gas reduction target as
key aspect of credible transition plans.
It is just one of the dialogue topics.
Since disclosing these transition planassessment details, Mizuho provided
USD 80 Million in finance as part of
USD 1475 million syndicate loan to
JERA Global Market, a subsidiarycompany of JERA, with plans todevelop new LNG projects and expand
LNG trading.

Oil and gas sector engagement

Source: Mizuho, TCFD report 2023 p. 41

Annex 2: Megabanks client transition plan assessments lackclarity
SMBC claims its pilot framework to verify
clients’ transition strategies assessed:“if clients has set goals in alignment
with the Paris Agreement”“their governance structure”“their initiatives towards achieving
these goals”
There is no clarity on what criteria it usesin this assessment.

Source: SMBC, TCFD report 2023 p. 64

Annex 2: Megabanks client transition plan assessments
lack clarity
SMBC does not require short, medium andlong-term Scope 1, 2 and 3 greenhouse gas
reduction targets as key aspects of credible
transition plans.
It only “recognises the gap between SMBC's
GHG reductions targets and the customers' net
zero strategies and share concepts of solutions
to be considered" as part of its engagement
process.
Since disclosing these transition planassessment details, JPY 9 billion in bondunderwriting for JERA with plans to develop
new LNG projects and expand LNG trading.

Source: SMBC, TCFD report 2023 p. 43

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