Joint Press Release:
Japanese Megabanks’ climate policies fail to align with Paris: NGOs
Mizuho edges ahead of peers MUFG and SMBC
Rainforest Action Network
Tokyo- A comparison of Japan’s three megabanks, Mitsubishi UFJ Financial Group (MUFG), Sumitomo Mitsui Financial Group (SMBC), and Mizuho Financial Group (Mizuho), reveals Mizuho is moving ahead of their peers on climate, but their revised climate-related policies are not yet aligned with Paris.1 The analysis was conducted by 350.org Japan, Kiko Network, and Rainforest Action Network, and comes amidst the banks’ shareholder meetings which started last week. The main points are as follows.
- Banks were evaluated on nine categories: 1) Targets to decarbonize their financing and investment portfolio, 2) Commitment to measure its portfolio-wide financed emissions (Scope 3), 3) Coal power sector policy, 4) Coal mining sector policy, 5) Oil and Gas sector policy, 6) Palm Oil Sector Policy, 7) Other Forest-Risk Commodity Policies, 8) Overarching Human Rights Policies, and 9) Application of the sector policies.
- Among the three banks, Mizuho was evaluated to have the strongest climate-related policy. The points that Mizuho was particularly evaluated as better were a policy to strengthen engagement regarding the transition risk of companies whose main businesses are coal-fired power, coal mining, and oil and gas, and that financing and investments in coal mining projects would be prohibited in principle. In addition, the scope of application of the sector policies by Mizuho is broader than the other banks, and it is applied to investments and financing (credit, bond / stock underwriting, and investment) of all group companies.
- Regarding the targets to decarbonize their financing and investment portfolio, MUFG announced a long-term target to achieve carbon neutrality by 2050, and became the first Japanese bank to participate in the Net Zero Banking Alliance (NZBA). (Since this analysis was undertaken, Mizuho announced that the bank would also aim to achieve carbon neutrality by 2050 during its Annual General Meeting held on June 23.) No banks have announced short- and medium-term targets.
- Only SMBC explicitly committed to measure its portfolio-wide financed emissions (Scope 3).
- All three banks have a 2040 coal phase out target and banned new coal projects, but have loopholes to allow coal power equipped with technologies such as CCUS and mix combustion. Mizuho has stepped up to widen the scope to corporate finance to reduce transition risks. MUFG has expressed an intention to disclose portfolio reduction targets of corporations involved in coal power generation, but unclear when and how.
- Regarding the coal mining sector policy, only Mizuho has banned coal mining in principle and enhanced engagement with corporations highly involved in the mining sector. The other two banks have only prohibited the Mountain Top Removal Method (MTR).
- Under the Oil and Gas Sector Policy, at the project level, SMBC and Mizuho strengthened due diligence (social and environmental risk assessment) for tar sands, shale oil and shale gas, oil and gas mining in the Arctic, and oil and gas pipelines. Meanwhile, MUFG’s due diligence enhancements were limited to tar sands extraction and oil and gas mining in the Arctic. At the corporate level, Mizuho will strengthen its engagement with the revision this spring as mentioned above.
- For palm oil, all banks require certification from its clients, with Mizuho having the strongest requirement. MUFG has the clearest requirement for clients to commit to NDPE, but this policy does not apply to its Indonesian subsidiary Bank Danamon (as explained below) despite Danamon being a conduit for palm oil financing.
- In other forest-risk commodity policies, each bank has strengths and weaknesses in their policies. MUFG’s policy is limited to forestry (timber and pulp & paper), while SMBC and Mizuho’s policy cover forestry and other forest-risk commodities.
- While there is no clear winner in the overarching human rights policies, MUFG’s policy is weaker than that of SMBC and Mizuho because there is no requirement for clients/investees to respect the right to Free, Prior and Informed Consent (FPIC).
- As mentioned above, Mizuho is the strongest in its application of the sector policies. SMBC’s policies apply to all group companies, but the type of financing is not clearly defined. MUFG’s policies apply only to a handful of core subsidiaries (MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings), and are the weakest because they are limited to credit and underwritings of bonds and stocks, and not applied to investment activity.
The policy comparison of the three megabanks is as described above, but none of their policies are aligned with the 1.5 °C goal of the Paris Agreement, and further strengthening of the policies is required to achieve the target.
For the details of the comparative analysis, please see the Appendix.
 The analysis is based on published materials by three megabanks as of June 8, 2021 and dialogues between NGOs and the banks. Since this analysis was conducted, Mizuho announced during its Annual General Meeting on June 23 2021, that the bank would aim to achieve carbon neutrality by 2050. However, this development is not reflected in the analysis.