Japan ESG Briefing: Export credit agency JBIC ends coal lending

Japan Bank for International Cooperation will refuse to provide loans for new coal projects, Governor Tadashi Maeda said last month, marking a significant U-turn for the export credit agency. Maeda said the government-run firm, which provided $13.4bn in financing for 28 coal projects between 2003 and 2018, will no longer accept loan applications for new coal-fired power stations, during an interview with Japanese business magazine Diamond Online. He explained that assessments of coal investments took too long and could lock countries into energy technology that could be outdated by the time a decision was reached. Sara Ahmed, an energy finance analyst for the US-based Institute for Energy Economics and Financial Analysis, said: “If Japan puts an end to exporting coal power and focuses exclusively on catalysing renewable technology, South Korea and China may be under tremendous pressure to change due to stresses on their balance sheets.”

It comes just weeks after Mizuho tightened its climate policy, pledging to stop financing new coal power projects and end all loans for coal by 2050, following pressure from investors backing Japan’s first climate shareholder resolution ahead of the bank’s AGM next month. A statement from rival Sumitomo Mitsui Banking Corporation, the world’s third largest coal lender, released the following day, failed to tighten the Japanese megabank’s existing coal policy. In a new ESG risk approach, it said it would not finance newly-planned coal plants “in principle”, apart from "projects which use environmentally friendly technologies" such as ultra-supercritical pressure – a move observers say it already made in its coal policy from 2018. The new statement does expand to oil & gas considerations and points out the risk of stranded assets, but only commits to "conducting environmental and social risk assessments" for projects.

Seiji Kawazoe, Senior Stewardship Officer at Sumitomo Mitsui Trust Asset Management, has joined the Climate Action 100+ Steering Committee as investor representative for the Asia Investor Group on Climate Change. He replaces Emily Chew, formerly Global Head of ESG at Manulife Investment Management, who stepped down from the committee earlier this year and has now joined Morgan Stanley Investment Management.

Japan’s Financial Services Agency has published its first research report on impact investing in listed equities in collaboration with Nissay Asset Management. The report’s scope includes the current state of impact investment in equities, impact measurement for listed companies, and the relationship between impact and financial return. The report is available now in Japanese and will soon be translated into English.

Japan will ratchet up its Nationally Determined Contribution (NDC) ahead of COP26, Minister of Environment Shinjiro Koizumi confirmed during the Petersburg Dialogue last week. In March, Japan disappointed many observers when it failed to tighten its 2015 goal of cutting emissions by 26% by 2030. Koizumi has now clarified: “Let me be clear. It’s not our intention to leave the national target as it is. We will aim for aspiring figures in the NDC, reflecting ambitious emissions reduction efforts. The first step will be to review our global warming countermeasures, then we will submit additional information by COP26.”

The Japan TCFD Consortium has issued a call for support for the Green Investment Guidance (GIG), which aim to assist investors and other stakeholders in appropriately evaluating and utilising company TCFD disclosures for their investment decisions. Sign up here.

The Japan Exchange Group and the Tokyo Stock Exchange have published the Practical Handbook for ESG Disclosure for listed companies looking to improve their ESG activities and dialogue with investors. It looks at how to identify the issues that are financially material and how to integrate ESG with corporate strategy, among other areas.

Nippon Life Insurance and Dai-ichi Life Insurance both plan to increase ESG conversations with investee companies in line with Japan’s updated Stewardship Code, the two Japanese firms told national business newspaper Nikkei. Nippon Life’s Managing Director Toshihiro Nakajima said the company would also be applying the investor guidelines, which were updated by the country’s financial regulator the Financial Services Agency last month, to its corporate bond holdings, starting this fiscal year.