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Investors in Japan at risk from country’s energy policy, says report

BlackRock, Vanguard and State Street among investors highlighted

Investors in Japan are at risk of a “loss of competitiveness” because of national climate policies, according to a new report from Climate Analytics and the Renewable Energy Institute of Japan.
The research, outlined this week in a report titled Science Based Coal Phase-Out Timeline for Japan – Implications for Policymakers and Investors, finds that Japan’s current plans for coal-fired power would send the country’s carbon pollution rocketing past its targets under the Paris Agreement, reaching almost triple the 2°C cap by 2050.
“Unlike most developed countries, Japan plans to increase its coal-fired power capacity, and its banks are financing coal developments in other countries, especially in South East Asia, in contradiction of the deep emissions reductions required to curb climate change,” said the pair in a statement.
Japan has 45GW of coal-fired power capacity in operation currently, with a further 18GW planned. Around 13GW of that is not yet under construction. By 2030, coal with have a 26% share of the country’s energy market, while renewables see between 22% and 24%.As insurers like Axa and Allianz commit to pulling out of coal, Japanese investors and companies face financial risks, the report says.
It adds that, although most of the new capacity being built is owned and financed by large Japanese listed firms, this impacts global markets too, because many of those firms are in turn held by international investors. J-Power, for example, is 31% owned by foreign buyers, according to the report, while Chugoku Electric has Venguard, BlackRock and State Street among its top 10 institutional owners. Vanguard and BlackRock are also top holders of Chubu Electric.
The report urges policymakers to revise national policies and introduce measures like carbon pricing.
“Prices of renewables are dropping quickly and will reach parity with coal between 2020 and 2030, and solar photovoltaics will be cheaper than gas in less than five years in Japan, even before considering a carbon price,” said Bill Hare, CEO of Climate Analytics. “A clear policy signal and a structured phase-out plan will benefit Japan and ensure that coal-related businesses, workers, owners and investors make a sound transition to a low-carbon future.”