Japanese banks need to do better by ruling out all coal power, without loopholes.
Japanese banks rank among the lowest of all banks on coal power policy, based on an analysis of the 21 banks which have updated their coal power policies since 2018. While the Japanese banks should at least be credited for having coal power policies, unlike many Chinese commercial banks, no Japanese bank actually scored higher than 4 out of 10. This is a poor result when compared with other Asian banks which score 4s and 5s. Mizuho, the lowest scoring Japanese bank, actually received no points.
Four Japanese banks made this list: Sumitomo Mitsui Financial Group (SMBC Group), Mitsubishi UFJ Financial Group (MUFG), Sumitomo Mitsui Trust Bank (SMTB) and Mizuho Financial Group (Mizuho). While MUFG and SMTB purport to rule out coal power projects, their vaguely worded exceptions mean they could fund coal power, leading them to only score 3 and 4 out of 10 respectively.
SMBC Group scored only a 1 and Mizuho scored the lowest grade of 0 as these banks do not rule out all funding to coal power projects, stating that they will fund ultrasupercritical technology. Even these weak policies have exceptions which would permit them to fund projects in different countries which use subcritical or supercritical coal technology in some circumstances.
In April, these four Japanese banks funded Van Phong 1, a polluting, outdated coal-fired power project in Vietnam – relying on policy loopholes to do so. This project will cause 1,900 premature deaths over the course of its lifetime, and would produce significantly more pollution than new coal power plants in Japan, South Korea or China.
Credit Agricole with its planned phase out of coal with Paris Agreement-compliant deadlines scored the highest, followed by other banks which ruled out new coal power projects and had a partial restriction on lending to corporations who derive revenue from coal power. Singaporean banks which had recently ruled out coal power scored in the middle range, depending on whether their policies had exceptions.
The International Energy Agency, the Intergovernmental Panel on Climate Change and other international experts have stated that there is no room to build any more coal plants anywhere in the world if we are to meet the goals of the Paris Climate Agreement.
The Japanese banks collectively hold 6.8 trillion dollars in assets. Failure to manage climate risk on their part threatens the Japanese and global economy. These weak policies, which allow for significant continued lending to coal, fail to show that these banks are considering the threat of coal power on their business and on the global climate.
Japanese banks need to do better by ruling out all coal power, without loopholes.
Methodology
We reviewed the coal power policies of all commercial banks that had updated their policies from 1 January 2018 to 7 June 2019. There were 21 banks in total, 11 from Europe, 7 from Asia, 2 from Africa, and 1 from North America.
- Bank has an enhanced due diligence policy on financing coal power: + 4 points
- Policy prohibits financing for new coal power projects: +2 points
- Policy has restrictions on corporate finance to companies with coal power expansion plans or coal power operations: +1 point
- Policy prohibits corporate finance to all companies with coal power expansion plans and coal power operations: +1 point
- Policy commits to a time-bound phase out of all financing to companies with coal power operations, tied to metrics and targets: +2 points
- Policy has an exception for “projects committed to”, even when these projects have not reached financial close: -1 point
- Policy has an exception for projects supported by the government of the country in which the bank is domiciled or by multilateral development banks: -1 point
- Policy has exceptions based on country of operation of the coal power plant: -1 point
- Policy has exceptions based on technology of the coal power plant: -1 point