Fair Finance Japan launches 11th policy assessment
Fair Finance Guide Japan (FFGJ) released its 11th policy assessment assessing ESG policies of Japanese financial institutions. Among six Japanese major banks (*1), Mizuho scored the highest with 39/100, followed by Norinchukin Bank which scored 35. MUFG is in the third position scoring 34. European banks scored an average of 65 using the same methodology, therefore, Japanese banks are falling behind in the race significantly.
This latest assessment highlights that all six banks disclosed their financed emissions in the power sector, as well as interim targets for 2030 as part of their overall goals to achieve net zero greenhouse gas (GHG) emissions by 2050.
While Mizuho, SMBC and MUFG contributed large amounts of GHG, Resona has emitted only 139 gCO2e/kWh, which is most closely aligned with the 1.5 degree scenario. Furthermore, Resona has set the most advanced goal for 2030. According to the International Energy Agency (IEA), a GHG emissions level in 2030 aligned with the 1.5 degree scenario is 138gCO2e/kWh.
However, the picture of financed emissions is very incomplete, because the only sector that all six banks disclose is the power sector, and it is necessary for banks to facilitate the disclosure of other high emitting sectors, such as fossil fuels production, transport, and steel so that meaningful comparisons can be made. Moreover, emissions from biomass power plants are not included in the calculation of power sector emissions, which is a loophole. It is necessary that financed emissions from biomass plants are included in financed emissions from the power sector.
This policy assessment also highlights other improvements in the financing policies of banks assessed. Five banks, except Resona, clearly require their financed projects to comply with “no deforestation, no peat and no exploitation (NDPE)”. Five banks, except Resona, specify in their policies that they do not finance new coal mine projects, and they also have set target years to phase out from investments in coal-fired power projects. FFGJ expects Resona, which is leading in terms of the actual amount of GHG emissions in the portfolio and reduction target, to further policy improvements.
The Fair Finance International (FFI) Methodology aims to promote a race-to-the-top in the ESG efforts of financial institutions by benchmarking their investment and lending policies according to international norms and standards and publicly launching the results. NGOs from the Netherlands started this initiative in 2009 and Japan has been conducting bank policy assessments since 2014. Currently, FFI policy assessments are being conducted in 13 countries across Asia, Europe and Africa. (*2).
Japan Center for a Sustainable Environment and Society (JACSES)
*1: Fair Finance Guide Japan covers 6 banks with the largest amounts of corporate loans. Although seven banks including Japan Post Bank had been targets of scoring until last year, Japan Post Bank was excluded from this assessment due to significantly small amounts of corporate loans.