Sumitomo Mitsui Financial Group Inc. said Thursday it would no longer lend to new coal-fired power plants from May 1, a day after peer Mizuho Financial Group Inc. said it would stop financing new power projects involving the fossil fuel.

The policy change comes as the sector faces pressure from activist investors and environmental groups to help mitigate climate change.

SMFG said in a statement that the movement toward decarbonization has been progressing globally since the Paris climate accord and that it “would not provide financial support in principle to new coal-fired power plants.”

Japanese banks are among the few major lenders who have stuck to backing coal projects even as other banks worldwide cut their exposure to the fuel.

The nation’s three major banks, SMFG, Mizuho and Mitsubishi UFJ Financial Group, have been among the world’s top five lenders to the coal power and mining industries over the past five years, according to Refinitiv SDC Platinum data.

Mizuho said Wednesday it would halve its ¥300 billion ($2.8 billion) in loans to coal power projects by 2030 and then to zero by 2050. It will also abolish new investments in and loans to construction projects for coal-fired plants with high carbon dioxide emissions effective June 1.

The move reflects a global rise in momentum toward new measures against global warming.

But Mizuho said it may consider making loans to projects designed to upgrade existing coal-fired plants to facilities with higher efficiency, including that with lower carbon dioxide emissions.

Mizuho has also calculated how credit costs would increase in line with global warming under scenarios provided by the International Energy Agency.

If social structures do not change, such costs will rise ¥310 billion over 30 years because of worsened earnings at business partners, the estimate showed.

Source: japantimes.co.jp – 16^th April 2020

Image by Denny Franzkowiak from Pixabay