Market Forces v. SMBC, MUFG and Mizuho - Other

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Market Forces v. SMBC, MUFG and Mizuho - complaint

Filing Year For Action

On September 19, 2018, Market Forces filed a complaint with the Japanese National Contact Point (NCP), based on the OECD Guidelines for Multinational Enterprises, alleging that Mizuho Financial Group, Inc. (Mizuho), Sumitomo Mitsui Banking Corporation (SMBC) and Mitsubishi UFJ Financial Group, Inc. (MUFG) breached the Guidelines with regard to their financing of coal power plants in Vietnam. The complaints allege that SMBC, MUFG and Mizuho are in breach of OECD guidelines because they failed to provide environmental and social impact assessments and consequently failed to urge project sponsors to assess and prevent or minimize environmental damage. They claim that the project’s emissions intensity (estimated at 860-880g CO2/kWh) is of an unacceptably high level by international standards, and would generate twice as much CO2 per unit of power generated as the average electricity generating plant in Vietnam. In addition they allege that banks were made aware about the environmental impacts of the project, but there is no evidence that they took any steps to influence their client to disclose additional environmental information or to implement additional mitigation measures that would reduce the project’s emissions. Further, they failed to adequately consult communities that were affected by the coal-fired power stations. 

On February 21, 2020, the NCP carried out an initial assessment and decided to further examine the issues raised by Market Forces, except for the issues concerning Vung Ang 2 and the Nam Dinh 1 projects, for which no loan agreements by the enterprises Involved were substantiated. Subsequently, the NCP conducted interviews and decided to hold a dialogue through mediation with the consent of both parties. On July 15, 2020, a dialogue was held online. Regarding Nghi Son 2 coal-fired power project and the Van Phong 1 coal-fired power project, issues related to stakeholder engagement, disclosure obligations, environment, and human rights were discussed. Market Forces requested the enterprises to conduct an independent review on human rights and environment, reinvestigate the process towards the loan agreement, and shift their financing policy in Vietnam to exclude coal-fired projects and help to increase the renewable energy capacity. In response, the enterprises said that they were not directly involved with the projects as they were lenders rather than sponsors or shareholders. Further, they claimed that they were encouraging the project sponsors to honor the environmental and social consideration and stakeholder engagement. While the parties mutually recognized the importance of complying with the Equator Principles and conducting appropriate due diligence, they still had a gap in their position concerning disclosure. During the mediation, the parties did not reach an agreement concerning the issues yet decided to proceed with the final statement without holding a second dialogue.

On January 15, 2021, the NCP issued a final statement concluding the process as there was no agreement of the parties to solve issues.

Market Forces v. SMBC, MUFG and Mizuho

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An aim to achieve a quantifiable outcome within a given time-frame, set by an institution such as a national government.

Policy instruments are techniques or tools used by governing authorities to promote certain policies in order to achieve predetermined goals. Put simply, instruments are how a government tries to achieve its goals, with this taxonomy being focused on national policy instruments.

Risk is the potential for adverse consequences resulting from the dynamic interplay between (climate-related) hazards, exposure, and vulnerability of affected human or ecological systems.

Groups  of people who are adversely affected by climate change or the response to it

A set of principles, processes, and practices that build economic and political power to shift from an extractive economy to a regenerative economy.

Renewable energy means all forms of energy produced from renewable sources in a sustainable manner.

Fossil fuel is a generic term for non-renewable energy sources such as coal, fossil gas, and oil (including crude oil, and petroleum products), that can be used for electricity and heat generation. Fossil fuels are hydrocarbons formed from pressurised and heated organic material buried over millions of years.

Molecules in the atmosphere that play a key role in the greenhouse effect by trapping heat radiating from Earth’s surface.

Area of the economy in which actors engage in identical or related activities.

In human systems, the process of adjustment to actual or expected climate change and its effects, in order to moderate harm, increase resilience or exploit beneficial opportunities. In natural systems, the process of adjustment to actual climate change and its effects; human intervention may facilitate adjustment to expected climate change and its effects.

The management and allocation of funds, assets and investments to meet various objectives

A long-lived, colourless gas, chiefly emitted from fossil fuel combustion, deforestation and cement production.

Any compulsory, unrequited payment to the government levied on corporations or individuals. This can be for environmental reasons, such as introducing a Carbon tax to set a price that emitters must pay for the greenhouse gases they emit.

Social and cultural groups that share collective ancestral ties to the lands and natural resources where they live, occupy or from which they have been displaced

Coal is a combustible sedimentary rock formed from carbonised plant matter, rich in carbon and hydrocarbons, and occurring in several main types including hard coal and brown coal.

People with different national or cultural traditions from the dominant population

Either money or something of monetary value is transferred between two or more organisations, people or countries.

This sector includes firms and individuals offering specialised expertise in fields such as law, accounting, consulting, science and engineering.

Activities involving the catching, processing, and selling of fish for food, recreation, and industry.

Climate change impacts our society by disrupting the natural, economic and social systems we depend on. Physical hazards and underlying vulnerabilities can lead to increased resource competition for food and water, which can heighten the risk of conflict.

Activities of businesses and institutions that provide financial services and products to individuals and organisations.

A loan is a policy instrument where funds are provided to a borrower with the expectation of repaying the principal plus interest.

The activities of industries involved in the production, distribution, and sale of energy, including electricity, gas, and renewables.

Work that is productive and delivers a fair income, security in the workplace and social protection for all, better prospects for personal development and social integration, freedom for people to express their concerns, organize and participate in the decisions that affect their lives and equality of opportunity.

An agency providing government-backed financing, guarantees, and insurance to support domestic companies' international exports, that can play a role in financing climate-related projects.

Social inclusion is the process of improving the terms on which individuals and groups take part in society—improving the ability, opportunity, and dignity of those disadvantaged on the basis of their identity.

The processes through which enterprises can identify, prevent, mitigate and account for how they address their actual and potential adverse impacts. Due diligence is the idea that reasonable precautions should be taken to avoid causing harm to people, the environment, or society. It also involves identifying and mitigating risks before they occur.

Market Forces v. SMBC, MUFG and Mizuho - Other

Policy instrument

Risk

Impacted group

Just transition

Renewable energy

Fossil fuel

Greenhouse gas

Economic sector

Finance