ITOCHU of Japan has announced it is exiting from developing new coal-fired power plants as well as thermal coal mines to address the impact of climate change, and will continue to divest its existing thermal coal mine investments in Australia and Indonesia.
IEEFA sees this as a major policy pivot for ITOCHU, a company with an equity market capitalisation of US$29 billion, clearly acknowledging the need for urgent action on climate change.
Tim Buckley, Director of Energy Finance Studies with the Institute for Energy Economics and Financial Analysis (IEEFA) says the company is redirecting its capital allocations to thermal coal mining and coal-fired power plants and proposing to instead prioritise investment in low-carbon industries of the future.
“Over the last two decades Itochu has been one of the top 10 investors in the Australian coal industry,” Buckley said.
“This change in policy direction builds on a number of policy developments by corporate and financial institutions announced in Japan since May 2018 including by Dai-ichi Life, Sumitomo Mitsui Trust Bank, Marubeni Corp, Mitsui & Co as well as Mitsubishi Corp.
“Collectively, IEEFA views these announcements as increasingly significant given Japanese financial institutions have been at the top of the list in terms of global financial institutions funding new coal-fired power plant developments globally.”
Japan’s export credit agencies have been the leading providers of state-subsidized capital underwriting coal-fired power plants in most of the major emerging markets like Pakistan, Bangladesh, Vietnam and Indonesia, as well as across Africa.
Japan’s globally significant trading houses have leveraged Japanese public and private financial capital to underwrite new projects, taking equity stakes and using this provision of debt and equity capital to win engineering, procurement and construction (EPC) contracts.
“This latest move by ITOCHU looks like an important endorsement of Japan moving away from coal financing,” Buckley said.
“What happens in Japan is critically important to the global coal industry. And for Australia, given 44% of all Australian thermal coal is exported to Japan alone.
“The string of Japanese coal exit announcements over the last 8 months suggests Japan is belatedly doing a pivot on climate change
“The implications for markets such as Australia who rely on predominately thermal coal exports is very real. With New South Wales number one market being Japan, some 44% of the states’ total thermal coal export volumes, the inference is that global markets expecting to export thermal coal to Japan need to review their business models.
“The momentum away from financing coal is building.”
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