SMBC to end mining exposure by 2040

Sumitomo Mitsui Banking Corp (SMBC), the main banking subsidiary of Sumitomo Mitsui Financial Group, has announced plans to phase out its exposure to coal mining and coal-fired power plants in corporate and project finance by 2040. This decision follows the bank’s disclosure to investors last year to halt funding for new mines, expansions of existing mines, and related infrastructure.

According to Rajeev Kannan, SMBC’s Managing Executive Officer and Co-Head of Asia Pacific Division, the bank will end all project and corporate finance exposure to the coal sector by 2040. While some level of trade finance support for coal dealers shipping fuel supplies for power plants may still be available, Kannan stated that it too would be phased out over time.

This move aligns with the trend of global lenders reducing their support for fossil fuel projects, under pressure from Western governments, investors, and environmental activists. However, government and industry officials in some countries view this as discriminatory and detrimental to their ability to provide reliable energy. Kannan responded to this by saying that as a financial institution, SMBC cannot make a moral decision, but must work with the global thought processes.

SMBC is increasingly shifting its focus to new energy funding opportunities in the renewable energy sector and hydrogen, while also progressively reducing its exposure to gas-related transactions. A report from 28 non-governmental organizations in February 2022 showed that SMBC’s competitors, Mizuho and Mitsubishi UFJ Financial Group, were the largest financiers of the global coal industry, which received $373 billion in loans in the three-year period ending November 2021.

In conclusion, SMBC’s focus is on achieving its finance emissions targets and reducing the total quantum of finance emissions over time. Decisions on offering financial support for carbon capture are not straightforward, but Kannan sees ammonia co-firing as a good option provided coal-based utilities are quickly replaced by ammonia.