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Japanese Megabank MUFG Continues to Bankroll Fossil Fuel Development

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Japanese Megabank MUFG Continues to Bankroll Fossil Fuel Development

Photo: Shutterstock / Poetra.RH

Global financial institutions are still funding fossil fuel projects despite warnings over climate change. Japanese megabanks, for their part, continue to top the list. Mitsubishi UFJ Financial Group (MUFG), Mizuho and Sumitomo Mitsui Financial Group (SMBC Group) ranked among the 10 worst in fossil fuel funding in 2023.

18 June 2024 – by Tim Daiss   Comments (0)

Despite warnings over the fossil fuel industry’s significant role in climate change, new fossil fuel financing in coal, oil and gas by banking giants remains robust. Global financial institutions have bankrolled some USD 6.9 trillion in fossil fuel projects since the Paris Climate Agreement was signed in Dec. 2015, with USD 705 billion in 2023 alone, according to the recently released 15th annual Banking on Climate Chaos (BOCC) report.  

The report takes a deep dive into the world’s top 60 banks’ lending and underwriting of over 4,200 fossil fuel companies and the financing of companies causing environmental issues and environmental degradation in the Amazon and the Arctic.

More startling is that nearly half of the USD 6.9 trillion, some USD 3.3 trillion, invested by these banks between 2016 and 2023 went to fossil fuel expansion.

Who Are the Biggest Fossil Fuel Funders?

Financial giants JP Morgan Chase, Mizuho Bank and Bank of America are the three largest fossil fuel funders. In 2023, JP Morgan Chase’s fossil fuel financing totalled USD 40.8 billion. Mizuho’s funding shot up to second place at USD 37.1 billion, while Bank of America’s funding was USD 33.7 billion.

Japanese Banks

Three Japanese megabanks, Mizuho, Mitsubishi UFJ Financial Group (MUFG) and Sumitomo Mitsui Financial Group (SMBC Group), ranked among the 10 worst in fossil fuel funding last year. They also hold the second, fourth and eighth slots, respectively, post-Paris Agreement. MUFG was listed as the worst Japanese bank for funding fossil fuel projects between 2016 and 2023.

“The rise in rankings by Mizuho and the prominence of the other two Japanese megabanks – MUFG and SMBC – is a notable fossil fuel trend for 2023,” the report said.

All three Japanese banks also ranked among the 10 worst in terms of the amount of funding provided to fossil fuel expansion companies, methane gas, Arctic oil and gas and ultra deep-water oil and gas sectors in 2023.

Four of the world’s top five banks supporting coal expansion are Japanese. MUFG, Mizuho, SMBC Group and Sumitomo Mitsui Trust have provided over USD 66 billion to the 50 biggest companies developing metallurgical coal projects for steel production outside of China.

Mitsubishi UFJ Financial Group (MUFG) Tops the List

MUFG also topped the list of financiers for 64 companies involved in ultra deep-water oil and gas in 2023, providing some USD 512 million. Mizuho and SMBC Group were number two and three, respectively. Financing for the three banks in ultra deep-water oil and gas totalled USD 3.7 billion in 2023, down from 2022.

In the amount of funding provided to the 130 companies that expanded their LNG operations, Mizuho ranked first at USD 10.9 billion and MUFG second at USD 8.4 billion, ahead of Santander (Spain), which ranked third. The two Japanese megabanks were up 90% and 88% from the previous year.

Japanese banks committed USD 108 billion in financing to 252 companies expanding natural gas-fired power in 2023. The top three financiers in this sector were Mizuho, the Industrial and Commercial Bank of China (ICBC) and MUFG.

MUFG Progress Report

Though MUFG has remained the top Japanese funder of fossil fuel projects since 2016, the company said three years ago that it was aiming for net-zero greenhouse gas (GHG) emissions from its financed portfolio by 2050 and net-zero GHG emissions from its own operations by 2030. Considering its massive fossil fuel involvement across numerous sectors, that’s a lofty goal.

In its 2023 Progress Report, MUFG states that for its oil and gas sector operations, it set a 15-28% reduction in absolute GHG emissions by 2030, compared to 2019 results. It added that as of March 2022, it had decreased absolute emissions by some 9% from the base year 2019.

This progress was made, it said, due to loan repayments being on time. It added that it will support customers’ efforts to reduce GHG emissions through engagement to achieve the 2030 target and decarbonisation. However, it doesn’t specify what this engagement is.

MUFG’s overall approach to support decarbonisation across its operations includes making GX Policy recommendations in collaboration with industries and government agencies. However, relying on the GX Policy is problematic.

The Problem with the GX

The Green Transformation (GX) policy is the Japanese government’s flagship USD 1 trillion mix of fiscal and policy measures set out in 2021 to tackle the country’s emissions. It includes a network of at least 550 Japanese companies, accounting for 40% of Japan’s emissions, committed to voluntary emissions reduction with clear targets for 2030 and a roadmap for carbon neutrality by 2050.

However, there are a growing number of GX critics. A study by InfluenceMap found that the GX policy is misaligned with the guidance of the global scientific authority on climate change, the United Nations’ Intergovernmental Panel on Climate Change (IPCC).

The GX also relies heavily on nuclear power and fossil fuels, lacks the determination to accelerate renewable energy and has an inadequate carbon pricing concept.

Masayoshi Iyoda, a Japanese campaigner at the international environmental NGO 350.org, also doubts that the GX will be able to rein in emissions. He maintains that the fossil fuel sector is trying to prolong its life under the GX and is backed by megabanks, such as MUFG, Mizuho ​​and SMBC Group.

Renewables As the Way Forward

“We need to face it and break free from our addiction to fossil fuels. The key to moving away from fossil fuels is renewable energy,” Iyoda explained.

Energy economics also favour renewables over fossil fuels. The International Energy Agency (IEA) estimates that 96% of newly installed utility-scale solar PV and onshore wind capacity has lower generation costs than new coal and natural gas projects.

MUFG, however, has to have the corporate determination and trust that renewable energy projects are the right choice for the Japanese and world energy sectors, particularly the carbon-intensive power sector. Until then, MUFG and other Japanese banks will continue to fund massive fossil fuel projects, claiming that this funding can be included on a path to decarbonisation and net zero.

by Tim Daiss

Tim has been working in energy markets in the Asia-Pacific region for more than ten years. He was trained as an LNG and oil markets analyst and writer then switched to working in sustainable energy, including solar and wind power project financing and due diligence. He’s performed regulatory, geopolitical and market due diligence for energy projects in Vietnam, Thailand and Indonesia. He’s also worked as a consultant/advisor for US, UK and Singapore-based energy consultancies including Wood Mackenzie, Enerdata, S&P Global, KBR, Critical Resource, and others. He is the Chief Marketing Officer (CMO) for US-based lithium-sulfur EV battery start-up Bemp Research Corp.

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