On the day of Mizuho’s AGM, we take stock of the progress made so far on coal by the three big Japanese banks, covering also MUFG and SMBC. All three megabanks have updated their coal policy in the past few months, but they are still far from aligned with the climate goals of the Paris Agreement. The exclusion policies only apply to coal project financing (and with too many exceptions) and still allow the three banks to support coal companies and their expansion plans through corporate financing.
Only excluding the direct financing of projects
The three banks have all stopped the financing of new coal plants “in principle”, but with varying degrees of “exceptions”. Although these exceptions diminish with each policy update, Mizuho, MUFG and SMBC still potentially allow the direct financing of new coal plants, refusing to join the 49 banks and insurers that have committed to “no new coal mines and plants” across the world.
Regarding coal power plants:
- In its latest policy update published on May 13th, Mizuho still makes room for new projects “essential to the relevant country’s stable energy supply and [when] replacing an existing power plant.”
- MUFG removed some exceptions but the policy updated on April 26th stresses that carbon capture and storage or mixed combustion “may be considered on an individual basis”.
- SMBC’s policy, updated on May 12th does not include any written exceptions. This would be a promising sign were it not for the fact that the bank has told Japanese NGOs it will apply similar exceptions to MUFG. Not so promising.
On the coal mining front, Mizuho is the first of the three banks to now also exclude direct financing for new coal mines, but allows for caveats when it comes to existing coal mines “that contribute to the stable supply of energy in countries where they have policies aligned with the Paris Agreement.”
Still supporting coal expansion
Even more worryingly, the bulk of the coal issue remains untouched since most of the financing provided by the big Japanese banks to the coal sector goes through indirect general corporate finance to coal companies rather than direct financing to specific coal projects. Since the coal exclusion policies don’t apply to corporate financing, the three banks can still actively support the coal industry and its developers, despite the climate and health emergencies.
Mizuho, MUFG and SMBC ranked respectively second, third and sixth in the latest ranking of commercial banks financing companies on the Global Coal Exit List (GCEL), published last February. With respectively $39bn, $36bn and $32bn provided to dozens of coal companies globally between October 2018 and October 2020, these three big banks play a crucial role in propping up the coal industry worldwide.
In fact, they are enabling further coal developments by supporting companies planning to expand the coal industry around the world. Over the 2016-2018 period tracked in the latest financial data published:
- Mizuho provided $24bn to 37 coal developers including companies such as China Huadian, which is still planning more than 15 GW of new coal power capacity in Asia and Africa;
- MUFG channelled $23bn to 30 coal developers like Power Finance Corporation, still planning 12 GW of new coal capacity in India;
- SMBC provided $27bn to 36 coal developers, among which PLN, a company with 10 GW of coal power plants in the pipeline in Indonesia.
These striking figures stress the urgent need for these global financial players to catch up with many of their European peers, which have adopted robust coal policies that cover both project and corporate financing. We can only urge the Japanese banks to follow the lead of French bank Credit Agricole: the policy excludes all coal developers and companies deriving more than 25% of their revenues from thermal coal. Crédit Agricole has also committed – at the corporate level – to phase out coal in the OECD by 2030 and worldwide by 2040, a mandatory requirement for any coal policy to be aligned with the climate goals of the Paris Agreement. This is much stronger than Mizuho, MUFG and SMBC’s current pledges to phase out their coal power project finance portfolio by 2040, or than the transition risks analysis for fossil fuels that Mizuho mentions in its updated policy.
Under growing pressure to align with the Paris climate agreement
The mobilization targeting the three big Japanese banks is growing on all sides. MUFG is being targeted for the first time this year by a shareholder resolution at its AGM on June 29th requiring it “to adopt and disclose a plan to align its financing and investments with the Paris Climate Agreement.”, with targeted actions by activist groups across the world in the last few days. This follows the first ever climate-related resolution lodged at a financial institution in Japan with Mizuho last year, garnering 34.5% investor support. SMBC has also been targeted publicly recently for its application to become a bank accredited to the Global Climate Fund. And the three banks face an ongoing global petition to end fossil finance.
It is high time for these three banks to stop adopting measures “too little, too late”, and to show some leadership instead by adopting robust coal policies before COP26 in Glasgow if they want to become credible on climate.