Nippon Life Insurance Co. will no longer extend loans for, or invest in, coal-fired power plants due to environmental concerns, an official at Japan’s biggest life insurer said, in the first such move by a major domestic institutional investor.
Japanese banks in recent months have tightened lending criteria for coal power, indicating a global divestment of fossil fuel assets that has cut $6 trillion worth of investment has reached the world’s third-biggest economy.
“We have decided to stop new investment and lending to coal-fired power projects at home and overseas,” Yusuke Takaishi, deputy general manager at Nippon Life’s finance and investment planning department, said in an interview.
Exceptions would be where a power station employs technology that captures the carbon dioxide emitted by burning coal and stores it underground, an expensive option used in only a few locations worldwide.
Nippon Life has assets of over ¥74 trillion, so its action may influence other Japanese investors, analysts said.
Burning coal to generate power produces large quantities of carbon dioxide and other so-called greenhouse gases responsible for climate change. An international agreement reached in Paris in 2015 committed signatories to cutting fossil fuel use.
Climate change is the cause of more frequent and severe flooding, droughts, storms and heat waves, as average global temperatures reach record highs, ice melts in the Arctic and sea levels rise.
“There are discussions among institutional investors, mainly those in Europe and the U.S., on how to deal with the issue of climate change and we are part of those discussions,” Takaishi said.
“Our decision on coal power is just one result of our ongoing discussions on climate change and we are not just considering coal,” he said, without elaborating. He declined to disclose how much Nippon Life had invested in coal.
Anti-fossil fuel campaign group 350.org calculates that Nippon Life advanced $82 million in loans to domestic coal plant builders from 2011 through 2016. The 2011 nuclear crisis prompted the closure of all nuclear power plants in Japan and increased emphasis on fossil fuels.
The insurer also has $1.3 billion invested in the bonds and shares of coal plant builders, according to research commissioned by urgewald, a German nonprofit organization that campaigns against environmental destruction. The coal plant builders include utilities such as Tokyo Electric Power Company Holdings Inc. and trading houses such as Marubeni Corp.
Japan is one of the few industrialized countries that heavily promotes coal power both at home and abroad, including technology to reduce carbon dioxide emissions. Its banks are among the biggest financiers of coal-related projects globally.
However, that appears to be changing.
Sumitomo Mitsui Trust Bank Ltd. said it will stop providing project finance for new coal-fired power stations “as a basic rule.” Exceptions will be evaluated “cautiously,” it said.
The bank lent $536 million to coal power plant project finance from 2014 through 2017, according to Thomson Reuters SDC Platinum data.
Sumitomo Mitsui Financial Group Inc., Japan’s third-biggest bank by assets, said in May it will tighten criteria on lending for coal power.
Mitsubishi UFJ Financial Group Inc. also said in May it will make decisions on financing based on the “recognition of both the local and the international circumstances surrounding coal-fired power generation.”