(Bloomberg) -- Japanese insurance companies are mulling limits on coal-fired power financing, a small step for a country that hasn’t caught up to global rivals amid growing scrutiny of the planet’s most-polluting major fuel.
While the steps by two of the country’s insurers appear tiny in light of Japan’s role as a global leader in coal project funding, they’ve been highlighted by environmental groups as a milestone in the fight against climate change.
Dai-Ichi Life Insurance Co. won’t provide financing for overseas projects dependent on the fuel, the company said last week. That follows comments in April by an executive at Nippon Life Insurance Co. who said the company is mulling ending new loans and investment in ventures that contribute to climate change.
“As far as we know this is the first time that a Japanese financial institution has announced such a policy,” groups including Greenpeace Japan said in a statement, referring to Dai-Ichi Life Insurance.
Japanese firms have lagged efforts across global finance to align their businesses with climate change goals. HSBC Holdings Plc said last month it will stop financing new coal power plants, joining similar pledges by Societe Generale SA and Deutsche Bank AG. Lenders shrank funding for the industry to $14.9 billion last year, from $22.5 billion in 2015, according to BankTrack.
Despite the broader global move away from fossil fuels, many Japanese institutions remain committed to increasing coal-fired capacity at home and financing developments overseas. Support for foreign projects has been led by the Japan Bank for International Cooperation and Nippon Export & Investment Insurance, according to a report published in March by environmental groups including Rainforest Action Network and BankTrack.
As well, commercial banks Mizuho Financial Group, Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group are among the top five biggest lenders to plant developers globally, according to the report.
“With the Japanese government’s plans for dozens of new coal project domestically, and many more planned by Japanese companies in climate-vulnerable countries, it’s an important milestone to have a Japanese company come forward to say that it will not invest in any of these new projects,” Han Chen of the Natural Resources Defense Council said in an email.
To be sure, Dai-Ichi Life Insurance hasn’t previously loaned money for coal power projects, it said in an email, and the policy doesn’t apply to other companies under its parents, Dai-Ichi Life Holdings Inc.
“Many global institutions already have policies excluding coal financing,” Chen said in her email. “If Japanese companies, banks and other financial institutions really wanted to be financially successful long-term, they wouldn’t be betting on industries in decline like coal-power generation.”
©2018 Bloomberg L.P.