Japanese lenders’ plans to step up support for the government’s climate goals expose them to greater credit risks, as such funding could put them in uncharted territory.
This dilemma was highlighted when Mizuho Financial Group Inc. announced April 3 that it would boost its planned climate change-related investments and loans over the next decade to ¥50 trillion, four times its previous target of ¥12 trillion. With its new commitment, Mizuho Financial leads Japanese megabanks Mitsubishi UFJ Financial Group Inc. (MUFG) and Sumitomo Mitsui Financial Group Inc. (SMFG) in decarbonization financing.
“Financing net-zero projects could result in bad debt because those would be a daunting task to pursue, and you can’t figure out risk [of a failure] from them,” said Yoshihiro Fujii, an executive at the Research Institute for Environment Finance.
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