Sumitomo Mitsui Signals It May Curb Coal-Fired Power Lending
(Bloomberg) -- Japan’s Sumitomo Mitsui Financial Group Inc. has signaled it may rethink its financing of coal-fired power projects, a small step for the nation’s banking industry, which lags global rivals shifting away from one of the most-polluting fuels.
The Tokyo-based bank indicated this week that it may become the first major Japanese bank to tighten its stance on such funding. “Coal-fired power generation is relatively low cost and has a big impact on climate change, so we are considering to make our financing policy stricter,” President Takeshi Kunibe told reporters during an earnings briefing on Monday.
Japanese firms have lagged efforts across global finance to align their businesses with climate change goals. Sumitomo Mitsui and its two main domestic rivals remain among the world’s biggest funders of coal power projects, according to transparency advocacy group BankTrack, even as a growing number of global lenders move away from the practice. HSBC Holdings Plc said last month it will stop funding new power plants using the fossil fuel, joining similar pledges by Societe Generale SA and Deutsche Bank AG.
“We’re seeing some encouraging preliminary signs that Japanese institutions are considering ending project finance for coal,” Han Chen, an international climate advocate with the U.S.-based Natural Resources Defense Council said in an email. “Sumitomo is taking the lead among Japanese banks to acknowledge the massive risks associated with coal plants.”
Kunibe said the bank’s credit policy already states that it won’t finance projects that carry “the risk of a significant negative impact” on the environment.
Japanese banks have been faulted by groups including 350.org and Kyoto-based Kiko Network for their support for coal-fired power projects, especially ones in developing countries. Sumitomo Mitsui’s main lending unit was ranked fifth among lenders to coal plant developers globally, according to BankTrack. Mizuho Financial Group Inc. was top on the list and Mitsubishi UFJ Financial Group Inc. was second.
MUFG’s main lending and trust banking arms will make decisions on financing “following recognition of both the local and the international circumstances surrounding coal-fired power generation,” Japan’s biggest bank said in a statement Tuesday.
Still, Chief Executive Officer Nobuyuki Hirano said on the same day that coal retains a role in power generation worldwide. “There is still demand for coal power and it is a mission of a financial institution to address such needs,” he said during an earnings briefing.
Mizuho is “aware that environmental issues are becoming more important socially,” President Tatsufumi Sakai said Tuesday. “We will take measures taking into account what’s important for Japan’s energy policy.”
©2018 Bloomberg L.P.