JAPANESE financial institutions are finally responding to calls for higher environmental standards and responsiveness to the need for climate action. More than a week ago, Dai-ichi Life Insurance made a historic decision to stop financing coal-fired power plants overseas, making it the first Japanese financial institution to adopt this policy. At around the same time, the Finance Planning Director of Nippon Life Insurance said in an interview that they are considering not to put in new investments for coal-fired power generation projects. More recently, Takeshi Kunebi, President of the Sumitomo Mitsui Financial Group, announced that they are considering stricter policies on financing coal-fired power plants.

Civil society groups from different countries in Asia are pressing for further action.

“There is only a small window of time left to prevent climate catastrophe. The complete shift to clean and renewable energy systems must be done as quickly as possible, with just transition. Japanese financial institutions should stop funding coal and fossil fuels immediately,” Lidy Nacpil of the Asian Movement for Debt and Development (APMDD) said, The APMDD is a network of more than 50 Asian groups across the region.

Step in the Right Direction but Not Enough

The Sumitomo Group is one of the largest Japanese keiretsu, or business groups, founded around 1615. It has established a comprehensive value chain from upstream to downstream in its coal business; upstream, from mining rights and operations of four Australian coal mines, to midstream by operating the Chubu Coal Center in Japan. Sumitomo Corporation had plans to launch a full value chain for the supply of coal in the emerging economies of Asia. It has been expanding its coal production rights and interests – in Australia with the acquisition of the majority interest in the Clermont mine, and is exploring opportunities in Russia, Mongolia and Indonesia, where coal produced is imported to Japan. At present, the Sumitomo boasts of an annual trading of four million tons of coal.

APMDD coordinator Nacpil said, “For the peoples of Asia who are most vulnerable to the impacts of climate change, the statement by Sumitomo president Takeshi Kunebi is a step in the right direction but it is not enough. We urge the company’s shareholders to make a decision at their meeting on June 29, to immediately stop investing in new coal projects and adopt a clear divestment plan for existing coal investments. The burning of coal for accounts for the largest share of greenhouse gas emissions from energy”.

“There is a global consensus, expressed in the 2015 Paris Climate Agreement, to limit global warming to 1.5 degrees Celsius. This global consensus is backed by scientific research that points to the correlation of fossil fuel use and the warming of the planet. We only have a few years left to prevent massive and irreversible destruction to the ecology and to the environment,” said Sreedhar Ramamurthi of the Environics Trust in India.

Asia’s Dirty Dozen

The Sumitomo Group is one of several Asian corporations targeted by Asian movements in their campaign against coal financing. They have identified twelve Asian private and commercial corporations which play various prominent roles as investors and financiers of coal. “We call them Asia’s Dirty Dozen because they illustrate how Asian finance and investments are part of the major drivers of dirty energy in Asian countries and globally, and they serve as leaders in their categories” explained Nacpil.

“Asia’s Dirty Dozen” includes four large Japanese entities – the Sumitomo Group, the Mitsubishi UFJ Financial Group, the Mizuho Financial Group, and the Marubeni Corporation.

Mizuho is helping to finance the construction of the 2,000-megawatt Batang Project, Southeast Asia's largest coal-fired power plant on the Java Island of Indonesia. The project is encouraging a dangerously misguided rush for coal power which will have devastating social and environmental impacts in the country, while pushing Indonesia down a catastrophic path towards climate change.

Marubeni is the world’s 26th largest coal plant developer. Along with Japan Bank for International Cooperation (JBIC), it is financing the expansion of the 660-megawatt Cirebon power station in West Java, Indonesia. It acquired a loan from JBIC to implement the build-operate-transfer (BOT) scheme for the Nghi Son 2 Thermal Power Plant in Vietnam. It is also currently operating the existing 735-megawatt Pagbilao coal plant in the Philippines, in a joint venture with Tokyo Electric Power Corporation (TEPCO). The company is also part of financiers for the construction of a 2,000-megawatt coal expansion in Burma.

Mitsubishi UFJ Financial Group is lending to various coal companies in Southeast Asia – Adaro, PLN Persero in Indonesia; Petro Vietnam, Vietnam Electricity (EVN), Vinacomin (Vietnam National Coal and Mineral Industries Group) in Vietnam; Aboitiz Power and SMC Global Power Holdings Corporation in the Philippines.

“We call on Asia’s Dirty Dozen corporations to stop their investments in coal mining and in the construction and operation of coal-fired power plants. Local communities hosting coal mines and coal plants are the most vulnerable. Like all other communities, they suffer the consequences of global warming and climate change. In addition, they are directly affected by all the terrible impacts of living in close proximity to coal projects – deteriorating health, severe ecological damage, loss of livelihoods, displacement, etc.,” Titi Soentoro of AKSI Indonesia furthered.

Also included in the “Asia’s Dirty Dozen” list are The Salim Group of Indonesia, TTCL Public Company Limited of Thailand, Korea Electric Power Corporation of South Korea, S. Alam Group of Bangladesh, CITIC Group Corporation Ltd of China, Arif Habib Group of Pakistan, and Meralco from the Philippines.

Coal to become Stranded Assets

The Asian Movement on Debt and Development also challenged Mitsubishi Chief Executive Officer Nobuyuki Hirano for asserting that there is still a demand for coal power and that it is the mission of financial institutions to address such needs.

Nacpil replied, “The so-called need for coal is artificial, it is partly fuelled by investors and financiers who do not seem to care that they are generating profits even at great cost to people’s lives, and the environment.”

The Mitsubishi UFJ Financial Group or MUFG provided an estimated USD$9.57 billion in loans to fossil fuel companies over a 3 year period during 2014-16. MUFG massively increased exposure to coal power by increasing their loans of USD$845 million to coal power companies in 2015 to USD$2.16 billion in 2016, representing a 156% increase in coal lending.

In March 2017, the Bank of Tokyo Mitsubishi UFJ (BTMU) signed a finance agreement for the expansion of Vinh Tan 4 coal fired power plant in Vietnam. In June 2016, BTMU agreed to finance the Batang coal fired power plant and the expansion of Tanjung Jati B coal fired power plant in March 2017 in Indonesia.

“If it is profits that they are interested in, they should see the writing on the wall. Renewable energy is fast becoming financially cheaper than coal and other fossil fuels,” said Nacpil. In June 2017, the Bloomberg New Energy Finance (BNEF) outlook said that estimated solar already rivals the cost of new coal power plants in Germany and the United States. In four years, solar in china will be cheaper than coal. If Japanese banks and investors continue their aggressive coal financing, they would be left holding the bag of billions of worth of stranded assets,” Nacpil emphasized.

Petition to Japanese Banks

The APMDD also supported a petition by Japanese environmental groups voicing their demands to the biggest banks of Japan to stop financing new coal projects. The petition asserts that Mizuho is world’s number one in financing of new coal projects with $11.525 billion; followed by Mitsubishi UFJ at number two with $10.189 billion, and Sumitomo Mitsui at 5th rank with $3.527 billion.

May 18, 2018

[This article is also published on APMDD’s FB page.]