Major Japanese life insurance companies are finally starting to recognize that investments in new coal-fired power generation projects are both financially and environmentally irresponsible. Dai-ichi Life Insurance recently decided not to finance coal-fired power plants overseas—becoming the first Japanese institution to do so. Similarly, Nippon Life Insurance is considering restricting financing for coal plants.
These institutions maintain and invest huge amounts of assets into various types of projects. Their shift away from the financing of coal plants is a major step forward for Japan.
Japan’s Private Banks—Still Behind the Curve
Unfortunately, Japan’s major private banks are far behind the curve on ending financing for coal. According to a recent report from RAN, Japanese banks are among the worst offenders globally when it comes to financing coal projects overseas. For example, Mitsubishi UFJ Financial Group (FG) provided $ 4.4 billion, Mizuho FG provided $ 3.3 billion and Mitsui Sumitomo FG provided $ 900 million for coal projects in the last three years.
It’s time for Japan’s financial institutions to revise their standards so that they are not lagging so far behind top-tier financial institutions when it comes to policies on coal finance. Leading financial institutions that are prepared for the global low-carbon transition are planning for the long term by reviewing their investments and loans to coal-fired power plants, especially in Europe. For example, HSBC in the UK has announced a “withdrawal from the coal fired power sector” -- (though HSBC included a few egregious loopholes in its policy that still need to be corrected). ING in the Netherlands, France BNP Paribas, Deutsche Bank, and many others have revised their policies on financing coal plants as well.
The Japanese Government’s Continued Financing and Insurance for Coal
It’s not only Japanese private investors and private banks that are behind the curve. Japan is the only country among the major developed economies in the G7 with an active pipeline for financing overseas coal projects with public money. How? The Japanese government uses taxpayer money through the Japan Bank for International Cooperation (JBIC) and the Japan International Cooperation Agency (JICA) to subsidize Japanese companies’ construction of highly polluting and controversial coal plants in some of the countries most vulnerable to climate change such as Vietnam and Bangladesh. These projects are insured by Nippon Export Investment and Insurance (NEXI).
NEXI should be following the example of private insurers such as the German insurance giant Allianz. Just last week, Allianz announced that it will no longer provide insurance coverage for the construction and operation of coal mines and coal-fired power plants and will also not renew existing contracts for such projects. Allianz will also improve its divestment threshold and divest from developers with more than 500MW of new coal capacity. Allianz also announced that it is developing a company-wide plan to completely phase-out all coal-related business models from its investment and insurance portfolios. Since 2017, AXA, Zurich, and SCOR have stopped insuring some or all new coal projects, and Swiss Re plans to adopt such a policy soon.
Ending Support for Coal
Japan’s policymakers are running out of excuses for why it cannot end financing for coal. With Japan’s leading insurance companies acknowledging the risks of financing coal, it’s time for Japan’s private banks and for the Abe government to reverse course. Increasing the profitability of coal plant developers and equipment manufacturers like Mitsubishi Corporation, Toshiba, Mitsui, Sumitomo Corporation at the expense of the health and livelihoods of people at risk in Vietnam, Indonesia, Bangladesh or elsewhere is irresponsible. So is ignoring the gargantuan impact of building new coal plants in terms of increased CO2 emissions. All parties involved should immediately consider ending investments in these coal projects.
Japan’s Public Financing for Coal in Asia (2013-2017)
* This blog was updated to include references to loopholes that still need to be closed in HSBC's coal lending restrictions.