Groups want policies to stop funding coal projects in Japan
Mitsubishi UFJ Financial Group (MUFG), the largest banking institution in Japan, on Friday 16 October 2020 released its Sustainability Report, stating its goal of erasing US$3.58 billion loan balances for coal-fired power projects by 2040. This announcement follows those of its Japanese peers, Mizuho Financial Group and Sumitomo Mitsui Financial Group, which set the same goal in April (1) and July this year respectively.
In response to the announcement, the No Coal Japan coalition, formed by several civil society groups, including 350.org, Kiko Network, JACSES, FoE Japan, Mekong Watch, Rainforest Action Network and Greenpeace Japan, said: “While this is a step forward for MUFG, this goal is inadequate given the urgency of the climate crisis, and the impact of coal-fired power plants and other fossil fuels on health amidst the COVID-19 pandemic. There is an urgent need for stricter goal setting and fundamental policy revisions in Japan’s financial sector.”
The standard of Japanese banks’ coal policies including MUFG remains low as compared to overseas financial institutions. MUFG is also one of the signatories of the UN Principles for Responsible Banking (PRB), which stipulates that the signatory banks should align their business strategies with the Paris Agreement and the Sustainable Development Goals (SDGs).
The goal set by MUFG is problematic in both a lengthy timeline and narrow scope. According to the best available science, coal-fired power plants need to be completely shut down by 2030 in developed countries and by 2040 in the rest of the world to limit the warming of the Earth to1.5 degrees, aligning with the Paris Agreement. Given that coal-fired power plants will continue to operate for decades beyond the redemption period, a zero-loan balance needs to be achieved much sooner.
In addition, the goal still leaves room for financing new coal fired power projects. It is scientifically clear that there is no room for the construction of any new coal-fired power plant in the world. However, there are concerns that Japanese banks are considering new loans such as the coal-fired power station Vung Ang 2 in Vietnam.
“Not only is the project inconsistent with the goal of the Paris Agreement, it lacks economic profitability, and will pollute the local environment and violate the basic human rights of the local communities. To align with Paris goals, MUFG should urgently put in place a policy to suspend financing for all the new coal-fired power projects without exception.”
The scope of the goal set by MUFG is limited to project financing and not applied to corporate financing. Corporate financing (2), which covers the entire value chain of coal-fired power including coal mining, should be included along with a phase-out strategy with a timeline consistent with the Paris Agreement. Internationally, there is an accelerating trend where banks ask their customers to submit a transition plan on a timeline consistent with the Paris Agreement, and divest from clients with inadequate transition plans. To effectively facilitate this process, financial institutions must first set a roadmap of strategies and goals that are consistent with the Paris Agreement.
Furthermore, in addition to coal-fired power, policies to stop funding other high carbon emitting sectors such as other fossil fuel sectors and land-use-related sectors (3), and targets to phase-out from those sectors should be put forward.
