Investors warned of climate risk from Japanese banks’ financing of coal power

Abstract:
Three Japanese ‘mega-banks’, Mitsubishi UFJ Financial, Mizuho Financial and Sumitomo Mitsui Financial Group, have become some of the globe’s biggest financiers of coal power plants and are exposing their investors to climate risk. These financial institutions have yet to release any plans on decarbonising their portfolios, and the report urges investors to consider the reputational and financial risk of supporting coal power plants, which is incompatible with realising the goals of the Paris Climate Agreement.

In this report, three indicators of coal exposure are highlighted:

• Financing of Top 30 Coal power companies
• Financing of Top 120 coal power developers
• Financing of Japanese ‘high risk’ coal power plants

Key Findings:

• Japanese financial institutions have fallen behind their European peers in exiting coal related assets, instead becoming some of the biggest financiers of coal globally.
• Japanese financial institutions are underwriting bonds of Japanese companies, which are developing 13 domestic ‘high risk’ coal power projects in Japan by as much as almost 30 billion USD.
• Lack of unbundling of assets and transparency at an utility level translates to lack of transparency as to the financial risk of ‘high risk’ coal power projects.
• Coal investments face economic pressures from regulatory, environmental, financial and reputational risks.

Greenpeace recommends investors ask these Japanese financial institutions:

• What steps have your institution taken to assess climate risk generally and fossil fuel exposure specifically?
• When will your institution disclose their climate risk in line with Financial Stability Board’s Task Force on Climate-related Financial Disclosure recommendations?
• When will your institution release a coal phase out policy that matches international best practice by competitors?
• When will your institution publish a company-wide, forward-looking strategy in alignment with the Paris Agreement?
• What risks (including reputational and legal risks) does your institution believe arise from their coal investments globally? How do the companies propose to address such risks?
• Will your institution disclose policy positions related to climate change so as to influence their trade associations to take progressive positions on climate legislation?
• Given Japanese utilities’ opacity for financing direct assets, how does your institution calculate their exposure to stranded assets in the new Japanese coal power?

The briefing paper Swimming against the tide: Japanese banks and climate change is prepared for the investors of Japanese financial institutions and published in April 2018. It is available to download here