More financial institutions in Asia are likely to end their support for coal power projects after Japan’s two largest institutional banks recently announced that they would stop financing new coal-fired power plants, the Institute for Energy Economics and Financial Analysis (IEEFA) said.
Japan Bank for International Cooperation and Sumitomo Mitsui Financial Group and Mizuho Financial Group have joined Singapore’s United Overseas Bank, DBS Bank, and Overseas Chinese Banking Corp. in halting the financing of new coal power projects.
South Korea, meanwhile, is targeting zero emissions by 2050 as it introduces an effective carbon tax and the phase out of domestic and overseas coal financing by public institutions.
China released a draft policy that focuses on building a low carbon, innovation-driven, safe and efficient domestic clean energy system.
Japanese trading houses, such as Marubeni Corp., Mitsubishi, Mitsubishi Materials, Mitsui and ITOCHU, are also divesting away from coal.
Tim Buckley, in his report titled “Southeast and East Asia Catching Up in Global Race to Exit Coal – Historic Announcements Across Japan, Korea, China, and the Philippines Augur Well,” said a domino effect across other coal lending financiers in Asia is likely.
“Mizuho is the world’s largest private financier of coal developers which means other financial lenders keep a close eye on its activities,” said Buckley, IEEFA’s Director of Energy Finance Studies, Asia Pacific.
“Now that they’ve announced a coal exit which indicates to the market that coal is a very poor investment, we expect other lenders to also announce a policy shift away from coal,” he said.
This decision, added Buckley, will make it “more difficult that it already is” for coal developers to seek financing.
In the Philippines, the power unit of conglomerate Ayala Corp. said last week that it would “transition to a low carbon portfolio and coal divestment by 2030.”
“Ayala Corp.’s recent divestment of two coal-fired power plants and its investment in wind, solar and geothermal is an important indicator for the region; corporations reading the energy transition correctly are also moving away from expensive coal,” Buckley noted.
The report also noted that global banks, insurers and asset managers from Europe, Africa, Australia and the United Kingdom have been announcing coal exclusion policies.
“Realigning policies towards low emission targets in the Paris Agreement is obviously becoming more urgent, particularly as governments nearly everywhere continue to lag,” said Buckley. “When the world’s biggest asset manager BlackRock announces a coal exit policy as they did in January 2020, decision-makers take note.” As coal becomes more unpopular, renewable energy is fast becoming the new choice. “Renewables including wind and solar are now the lowest cost source of energy in the world, and very low emitters. This obviously ticks boxes,” said Buckley.