SMBC is the first Japanese bank to rethink coal financing policy
Japanese bank SMBC is to reconsider its prolific funding of coal-fired plants, the first of the nation’s major banks to do so.
Speaking on an earnings briefing this week, reported by Bloomberg, the president of Sumitomo Mitsui Financial Group, SMBC’s parent company, said that “we are considering making our financing policy stricter”, citing the fact that “coal-fired power generation is relatively low-cost and has a big impact on climate change”.
While banks from around the world, including Deutsche Bank, Société Générale and ING, have committed to rid their balance sheets of coal-fired plant funding (others such as HSBC have professed an ambition to do so, without giving a concrete timeline), the Japanese banks have been slow to follow.
SMBC is among the lenders on the financing for the Nghi Son 2 coal-fired plant in Vietnam, which closed in April. This is despite claims that it will “generate twice as much CO2 per every unit of power generated” as the average generating plant in Vietnam.
Data from Banking On Climate Change, an annual report into extreme fossil fuel funding compiled by Bank Track, an NGO, shows that SMBC was in the top 10 “biggest backsliders on coal” mining and power from 2016 to 2017 (that is, those banks who increased their total financing for the sector in those years).
SMBC, the research shows, increased its funding by US$217mn over the period. It funded US$385mn of coal power in 2017. Its national counterparts MUFG and Mizuho funded US$3.524bn and US$2.447bn, respectively.
“Japan’s commercial banks, led by Mizuho, MUFG and SMFG, are also joining the rush to build new coal plants and are respectively the first, second, and fifth-biggest lenders to coal plant developers globally,” the report reads.
Asian banks generally perform poorly in such rankings, with much of the funding being deployed within the region. Last year, for instance, a coal-fired plant in Indonesia attracted debt finance of US$3.355bn, from a group of predominantly Japanese lenders.
The Japan Bank for International Co-operation (JBIC, Japan’s export credit agency) lent US$1.678bn from its own book. Approximately the same amount came from a consortium of commercial banks: MUFG, Mizuho Bank, Norinchukin Bank, SMBC, and UOB of Singapore – the only non-Japanese lender in the syndicate.
Chinese banks are the biggest funders of coal power, according to Bank Track, which found that in 2017, two-thirds of all support for coal mining came from the big four Chinese banks.
MUFG and Mizuho, on the other hand, have said they will continue to finance coal projects.
“There is still demand for coal power and it is a mission of a financial institution to address such needs,” said MUFG CEO Nobuyuki Hirano on an earnings call on May 21. Mizuho president Tatsufami Sakai said he would “take measures taking into account what’s important for Japan’s energy policy”.
Greenpeace Japan urged the banks to follow the lead of Dai-ichi Life Insurance Company, which earlier in May became the first Japanese financial institution to restrict its support for coal-fired plants.
“Japanese financial institutions, starting with MUFG, Mizuho, and Sumitomo Mitsui Financial Group, should take heed of actions taken by the Dai-ichi Life Insurance Company and act accordingly by adopting policies that will restrict new lending and investment into both international and domestic coal-fired power plant projects and companies involved in coal development and move toward divestment from the coal sector,” reads a statement on the NGO’s website.take me back