Has the financial industry’s commitment to environmental issues entered serious mode?

Measures for environmental problems in the financial industry are in full swing.

Sumitomo Mitsui Financial Group has announced that it will reduce its investment in coal-fired power generation business, which emits a large amount of carbon dioxide (CO2), but is accelerating the speed of reduction by further raising the gear.

Looking to the world, investment money is intensifying the trend of decarbonization. Trends in financial institutions and movements in investment money affect the management of companies, so all companies will be aware of this trend and will work on environmental measures and CO2 reduction measures.

Japan’s 3 Mega Bank Decoal Power Generation Initiatives

Not only Sumitomo Mitsui, but also Mitsubishi UFJ Financial Group and Mizuho Financial Group are shifting to “coal-free thermal power generation”.
3Introducing the efforts of the three major mega banks.

Sumitomo Mitsui Accelerates Coal-free Thermal Power Generation

When a bank invests in or lends to a power company that builds a coal-fired power plant, it indirectly helps to increase coal-fired power plants and CO2. Coal-fired power generation is regarded as a “bad guy” in terms of environmental issues, so banks will be stigmatized as it is(*1).

In March 2021, Sumitomo Mitsui began considering quitting investment and financing for a new coal-fired power plant (* 1). The point is that we have clearly turned to “stop”.

Sumitomo Mitsui has long said that it would stop investing in coal-fired power plants in principle. However, since “stopping the principle” can be interpreted as “exceptional”, the efforts for coal-free power generation were not so strong. Therefore, Sumitomo Mitsui began to consider removing the “principles” from the policy.

However, stopping investment in a new coal-fired power plant does not mean stopping investment in an electric power company that has an operating coal-fired power plant.

However, electric power companies are still in trouble if they cannot get a bank loan when they are in trouble with cash flow, so it will be easier for them to move in the direction of “stop building new coal-fired power plants.”

(※1)Coal-fired power reduction, why Japan is criticized on the actual route
(※2)New investment and loan for coal-fired power, Sumitomo Mitsui FG considers suspension

Similar Efforts by Mitsubishi UFJ and Mizuho

Mitsubishi UFJ 2020, the balance of the financing for the coal-fired power plants, has been declared to zero yen to the prospect of the 2040 fiscal year(*3). This is a big decision, as Mitsubishi UFJ’s coal-fired power plant lending balance was approximately $ 3.6 billion at the end of 2019.

Mizuho also refuses to refinance funds in addition to investment and loans for coal-fired power plants(*4). Mizuho says that it will achieve zero loan balance for coal-fired power plants by 2050, but it has shown the possibility of moving forward by 2040(*4、5).

(※3)Zero coal-fired loan balance in FY40 Mitsubishi UFJ aims to have 3 mega loans
(※4)MUFG: Zero coal-fired loan balance in FY40, to clarify outlook-Related parties
(※5)Mizuho, ​​coal-fired power New loan balance to zero by 2050

The act of Shaving

Loans are lending money. Therefore, even if you say the measures for coal-fired power generation of the three major megabanks, you may think that you just don’t lend money.

But for Mega Bank, this decision is huge. Because banks make a profit by lending money and getting them to repay with interest. Moreover, because a large amount of money is required to build a new coal-fired power plant, loans to electric power companies have become a “dollar box” for banks.

In other words, a bank’s efforts to eliminate coal-fired power generation are equivalent to making money but not making money.

For example, Mizuho expects that taking measures against coal-free thermal power generation will cost 120 to 310 billion yen by 2050(*5). It strongly pushes down sales and profits. The measures against coal-free thermal power generation of the three major megabanks are a shaving effort.

How Serious is the CO2 of Coal-fired Power Generation?

It is common knowledge in the international community that coal-fired power generation is a “bad guy.”

Of course, the latest high-efficiency, energy-saving coal-fired power plants are more environmentally friendly than conventional low-efficiency coal-fired power plants. Therefore, the Government of Japan also relies on coal-fired power generation as much as necessary, knowing that the movement to stop coal-fired power generation is becoming more active worldwide(*6).

Coal-fired power generation is a big hit because it emits far more CO2 than other power generation methods.

The amount of CO2 generated when 1kWh of electricity is generated by coal-fired power generation is 864g only for the combustion of generated fuel(*7). The CO2 emissions of oil-fired power generation are 695g, which is 19.6{5f3ac39ba1b9031997b955ac72c92bb5456d725b06fa10f02cdda1ab745591c7} less than that of coal-fired power generation.

Natural gas-fired power generation emits 476 g of CO2, which is 44.9{5f3ac39ba1b9031997b955ac72c92bb5456d725b06fa10f02cdda1ab745591c7} less than coal-fired power generation. In addition, it is 0g for solar power, wind power, and nuclear power. In both cases, it is measured only by the amount of combustion of generated fuel.

(※6)Why is Japan continuing to utilize coal-fired power generation?
(※7) Amount of carbon dioxide generated

What Kind of Mind Do You Take for Environmental Measures?

Why are the three major mega banks working on environmental measures, whether they are shaving or losing big business opportunities? One of the reasons is that it becomes a business.

Mitsubishi UFJ will establish a 100 billion yen fund with the aim of popularizing renewable energy power generation and hydrogen power generation (* 8). We plan to increase it to 1 trillion yen in the future.

Since a fund is a business that invests and earns returns, Mitsubishi UFJ expects that environmental measures have a “business potential” of 1 trillion yen. A person in charge at Bank of Tokyo-Mitsubishi UFJ commented, “It is a global trend for financial institutions to invest funds in this field. I want to firmly grasp the aspect of business opportunities”(*8).

Establishing a 100 billion yen fund to popularize decarbonized electricity Mitsubishi UFJ Bank

Global Investment Money is Slso Decarbonizing

The trend of spending money on decarbonizing (greenhouse gas) businesses is also remarkable in the world.

According to NHK, asset management companies around the world will invest about 2,000 trillion yen in businesses with zero greenhouse gas emissions by 2050(*9). Approximately 2,000 trillion yen is equivalent to 20{5f3ac39ba1b9031997b955ac72c92bb5456d725b06fa10f02cdda1ab745591c7} of the total invested money in the world.

This means that if any company is reluctant to reduce greenhouse gas emissions, it will have a negative impact on management.

(※9)20{5f3ac39ba1b9031997b955ac72c92bb5456d725b06fa10f02cdda1ab745591c7} of global investment money goes to decarbonization Strict selection of investment destinations

Summary – The Seriousness of Financial Institutions is Contagious

Money is the blood of the economy. Just as cells die when blood doesn’t reach, businesses go bankrupt when the money runs out. Therefore, the financial institution that is flowing money is like the heart of the economy.

The financial institution says, “Give money to companies that are enthusiastic about environmental measures” and “Do not give money to companies that are indifferent to environmental measures.” The environmental awareness of the three major mega banks and the world’s investment money should be transmitted to various companies.