What are the "Equator Principles"?

Launch of the "Equator Principles"

Large–scale development projects such as oil/gas development, mining, power plants, dams etc. often include significant adverse impacts on the natural environment and/or local communities.

For example, in 1980s the Sardar Sarovar Project, which involved construction of dam on the Narmada River in mid–western India, was severely criticized worldwide for its adverse environmental and social impacts. Built in order to provide electricity and irrigation water to downstream regions, the construction of this dam resulted in the forced dislocation of more than 200,000 indigenous people living along the upstream districts, without provision of sufficient compensation or means of livelihood restoration. To ensure justice to the people displaced, international NGOs undertook Narmada relief campaign, due to which financial assistance to the project, provided by the World Bank and Official Development Assistance (ODA) of the Japanese government was aborted.

Amidst such growing interests in the environmental and social impacts, by the late 1990s, multilateral development financial organizations such as the World Bank and Export Credit Agencies of OECD member countries came up with their respective environmental and social guidelines to appropriately manage environmental and social risks associated with such large–scale projects. However, only a handful of private financial institutions were implementing environmental and social reviews at that time. Therefore, environmental NGOs started demanding that the private financial institutions independently manage environmental and social risks as more attention was given to CSR in terms of environmental issues.

To address these demands and concerns, in October 2002, ABN AMRO and the International Finance Corporation (IFC) – organization in charge of private projects for the World Bank Group, invited major international financial institutions engaged in project finance activities, to assemble in London with the intention to come up with environmental and social risks management guidelines for private financial institutions. As a result of this meeting, Citigroup, ABN AMRO, Barclays, and West LB in collaboration with IFC, created a framework of managing environmental and social risks. The Equator Principles (EP) were thus formulated in June 2003.

The EP were first revised in July 2006 to align it with the IFC Performance Standards (April 2006). Further revision of IFC Performance Standards in 2012 and the need to strengthen environmental and social risks management, resulted in the launch of third iteration of the EP (EP III) in June 2013.

Most recently, EP4 was launched in November 2019 considering the international trends. EP4 newly apply to a broader range of transactions and requires further environmental and social assessments such as climate change and human rights.

Column: Origin of the name "Equator Principles"

The initial founders of the Equator Principles (EP) wanted the adoption of the EP to be globally applicable (to financial institutions in the northern and southern hemispheres) and the equator seemed to represent that balance perfectly – hence the name, became "Equator Principles".

Summary of the Equator Principles

The Equator Principles (EP) are a set of voluntary guidelines adopted by financial institutions to ensure that large scale development or construction projects appropriately consider the associated potential impacts on the natural environment and the affected communities.

The Equator Principles Financial Institutions (EPFIs) formulate their own environmental and social guidelines to comply with the Equator Principles framework, which in turn confirms compliance with the underlying IFC Performance Standards and World Bank Group EHS Guidelines. EPFIs also establish internal management systems to ensure that clients implement their projects in consideration with the environment and society. Under these management systems, EPFIs will assess the environmental and social impacts of large–scale projects and will incorporate compliance with the EP as a condition of lending.

• EP Summary Table (PDF/92KB)
• The Equator Principles Limited official website

Column: From the Preamble of the Equator Principles (excerpt)

• As financiers and advisors, we work in partnership with our clients to identify, assess and manage environmental and social risks and impacts in a structured way, and on an ongoing basis.
• We, the Equator Principles Financial Institutions (EPFIs), have adopted the Equator Principles in order to ensure that the Projects we finance and advise on are developed in a manner that is socially responsible and reflects sound environmental management practices.
• We will not provide Project Finance, Project–Related Corporate Loans to Projects or Project–Related Refinance and Project–Related Acquisition Finance to Projects which do not comply with the relevant Equator Principles requirements. As Bridge Loans and Project Finance Advisory Services are provided earlier in the Project timeline, we will request that the client communicates its intention to adhere to the requirements of the Equator Principles when subsequently seeking long term financing.

As mentioned above, the Equator Principles (EP) are aimed to direct the "flow of funds" towards environmentally and socially responsible projects. The EP benefit not only the local communities but also the clients and the financial institutions by promoting sustainable development.

For full text of the Equator Principles, refer to The Equator Principles and related documents (English/Japanese).

List of the Equator Principles Financial Institutions

Scope of the Equator Principles

The Equator Principles (EP) apply globally and to all industry sectors.

The EP apply to the following five financial products:

1. Project Finance Advisory Services where total Project capital costs are USD 10 million or more.
2. Project Finance with total Project capital costs of USD 10 million or more.
3. Project–Related Corporate Loans (including Export Finance in the form of Buyer Credit) where all three of the following criteria are met:i. The majority of the loan is related to a Project over which the client has Effective Operational Control (either direct or indirect).
4. ii. The total aggregate loan amount and the EPFI's individual commitment (before syndication or sell down) are each at least USD 50 million.
5. iii. The loan tenor is at least two years.
6. Bridge Loans with a tenor of less than two years that are intended to be refinanced by Project Finance or a Project–Related Corporate Loan that is anticipated to meet the relevant criteria described above.
7. Project-Related Refinance and Project-Related Acquisition Finance, where all of the following three criteria are met:i. The underlying Project was financed in accordance with the Equator Principles framework.
8. ii. There has been no material change in the scale or scope of the Project.
9. iii. Project Completion has not yet occurred at the time of the signing of the facility or loan agreement.

The Equator Principles – applicable environmental and social standards

The Equator Principles Financial Institutions (EPFIs) will confirm that the project, if under the EP scope, complies with all the applicable host country environmental and social laws, as well as the IFC Performance Standards and the World Bank Group EHS Guidelines.

IFC Performance Standards

The IFC Performance Standards (IFC PS), which summarize the standards for pollution prevention, conservation of the natural environment and the protection of the human rights of local inhabitants and workers, consist of the following eight items.

PS1 – Assessment and Management of Environmental and Social Risks and Impacts

PS2 – Labor and Working Conditions

PS3 – Resource Efficiency and Pollution Prevention

PS4 – Community Health, Safety and Security

PS5 – Land Acquisition and Involuntary Resettlement

PS6 – Biodiversity Conservation and Sustainable Management of Living Natural Resources

PS7 – Indigenous Peoples

PS8 – Cultural Heritage

• For full text of the IFC Performance Standards, refer to IFC official website.

World Bank Group EHS Guidelines

The World Bank Group EHS Guidelines are Environment, Health and Safety guidelines for projects, designated by the World Bank Group. The Guidelines consist of the General EHS Guidelines, common to all industries, and 62 Industry–specific EHS Guidelines. The pollution control standards presented in these guidelines are utilized as standards not only by the IFC but also by the multilateral financial institutions and the Export Credit Agencies of the OECD member countries.

For full text of the World Bank Group EHS Guidelines, refer to IFC official website.

Launch of the Equator Principles 4 (November 2019)

Formerly only project finance and project finance advisory services were under the Equator Principles (EP) scope. In June 2013, the third iteration of the EP (EP III) was launched, which expanded the scope of the EP to include project–related corporate loans.

Furthermore, the fourth iteration of the EP (EP4) was launched in November 2019. The key points are;

• Expanded scope to include Project–Related Refinance and Acquisition Finance partially.
• Added emphasis on climate change, through Climate Change Risk Assessment requirements.
• Added emphasis on human rights, through additional due diligence requirements on Indigenous Peoples' rights in developed countries.

The Equator Principles Financial Institutions have expanded to more than 100 institutions. One may say that the EP have become the de facto standard for financial institutions.

Application for projects

Application process

Environmental and social risk management process under the Equator Principles

Mizuho Bank recognizes that large scale development projects may have adverse impacts on the environment and local communities. To minimize and/or mitigate the environmental and social risks and impacts associated with such large scale developments, Mizuho Bank works in partnership with our clients to identify, assess and manage such risks and impacts as required under the Equator Principles.

Overview of the environmental and social risk management process

Categorization and requirements

The Equator Principles Financial Institution (EPFI) categorizes the project into one of the following three categories, based on the magnitude of associated environmental and social impacts. The EPFI also ensures that the client undertake appropriate mitigation actions depending on the project category.

Projects with significant adverse impact on the environment and society need to satisfy all the relevant requirements of the Equator Principles. In addition to the Environmental and Social Impact Assessment (ESIA) prepared by the client, a report by an independent environmental and social consultant is also required.

Review by the EPFI

The EPFI reviews (a) the Environmental and Social Impact Assessment (ESIA) and (m) the assessment report by an independent expert and will determine whether the project complies with the requirements of the Equator Principles before deciding whether to provide loan to the project.

Reflection on the financing agreement

The Equator Principles require the client to include the following four covenants in the loan agreement:

a. Compliance with the applicable host country's environmental and social laws, regulations and permits;

b. Compliance with the Environmental and Social Management Plans (ESMPs) and the Equator Principles Action Plan;

c. Preparation of periodic reports regarding the compliance of items (a) and (b); and

d. Decommissioning plan of the facilities (where applicable).

An Action Plan is prepared, as a result of the EPFI's due diligence process, to describe and prioritize the actions needed to address any gaps in the assessment documentation, ESMPs, the Environmental and Social Management System (ESMS), or Stakeholder Engagement process documentation to bring the project in line with applicable standards of the Equator Principles. The Action Plan is typically tabular in form and lists distinct actions, mitigation measures, follow–up studies or plans to complement the assessment.

The impact of environmental and social risks of the project can be reduced and the project can be modified to qualify for financing by including the compliance of the Action Plan as a requirement for financing. Project expense may increase due to the implementation of the Action Plan.

In case of project finance, after the syndicate member banks providing funds to the project are officially determined, the lead arranger will initiate the negotiations between the client and the syndicate toward an accord on the Action Plan and the covenants.

Disclosure of the implementation process and the number of screened projects

Each Equator Principles Financial Institution is required to publicly report its internal Equator Principles implementation process and the number of projects to which the Equator Principles are applied each year by category, by industry and by region, etc.

Mizuho discloses relevant information in accordance with this requirement.

Mizuho and the Equator Principles

Mizuho and the Equator Principles

Mizuho Bank (formerly Mizuho Corporate Bank) recognized early that the Equator Principles would become a new global standard in international financing for environmental and social risk management of large–scale projects and therefore within six months of their inception in June 2003, Mizuho Bank became the first Asian bank to adopt the Equator Principles in October 2003. Since then, Mizuho Bank has been conducting environmental and social risk assessments based on the Equator Principles and has also been proactively undertaking initiatives to promote them and raise awareness regarding environmental and social risk impacts among businesses and other related parties, including the borrowers. Through these activities, Mizuho Bank has contributed to balanced economic development via financing and environmental preservation, and, thus, fulfilled its social responsibility as a financial institution.

Since the adoption of the Equator Principles in October 2003, Mizuho Bank has played a leadership role in the Equator Principles Limited (formerly the Equator Principles Association) as a member of the Steering Committee for many years. Mizuho Bank also led the Equator Principles Limited as its Chair, thus becoming the only Asian bank to chair the association. Mizuho Bank has also held the role of Asia Oceania Regional Representative for four consecutive years.

Chronicle: Initiatives for the Equator Principles

Case studies on the Equator Principles

Case study 1: Tangguh LNG Project

Project summary

Tangguh LNG is a major development project involving construction and operation of a plant capable of supplying 7.6 million tons of LNG a year from gas fields in Bintuni Bay in Papua Barat, Indonesia. The gas fields have proven reserves of 14.4 trillion cubic feet.

The Project, operated by oil major BP, has drawn substantial attention worldwide against a backdrop of mounting demand for LNG in recent years. Japan, the world's largest importer of LNG, has shown considerable interest in the Project with a number of Japanese companies participating as sponsors.

Mizuho Bank (former Mizuho Corporate Bank) provided financing for the Project in collaboration with international financial institutions including the Japan Bank for International Cooperation (JBIC) and Asian Development Bank (ADB). Two rounds of financing were conducted, in August 2006 and November 2007. Also, in June 2016, another financing was executed for construction and operation of Train 3 of the Project.

In financing the Project as an Equator Bank, Mizuho Bank conducted assessments to determine the Project's environmental and social impacts.

Preserving and protecting the natural environment

As part of the bank's environmental assessment, it was confirmed that pollution control conducted at plant site and gas fields is in accordance with local laws and environmental standards established by the International Finance Corporation (IFC).*1 It was also confirmed that appropriate action plans were in place to preserve and protect the local natural environment.

A particular point of emphasis was protecting mangrove forests along the shoreline. Mangroves create an environment that is highly suitable for cultivating shrimp, which is done in nearby coastal waters. So, protection of these mangroves was important not only to protect biodiversity but also to support the local community which relied on shrimp cultivation as a source of income.

BP, the Project operator, established a Biodiversity Action Plan to ensure protection of the environment. Scrupulous protection measures are implemented to protect the natural habitats. For example, in laying the pipeline, connecting offshore gas fields with the LNG plant on land, cutting–edge construction methods were used to minimize the impact on the surrounding environment. Underground tunnels were dug horizontally in both directions, one from the offshore fields and the other from the plant construction site. The pipe was pushed in from the offshore fields and pulled from the plant construction site. This avoided digging ground in the mangrove forests to lay the pipe, thereby preserving the mangroves.

^*1 IFC (International Finance Corporation)： One of members in the World Bank Group that implements investment and lending to private projects, especially in developing countries.

Initiatives for local autonomy

The area around Bintuni Bay is home to a multitude of villages across a wide area populated with ethnic groups with different languages and sets of values. From a social perspective, location of the plant required relocating one whole village (127 households in total*2). Therefore, a major issue was how to ensure harmony between local communities and to share the benefits of the Project.

The assessment found that according to locally held values the benefits reaped by the products from the Bintuni Bay should be shared by all villages in the vicinity of the Bintuni Bay area. Therefore, the operators concluded that it would not only be necessary to compensate a village that had to be relocated to build the planned LNG plant but also support other surrounding villages.

Specifically, Land Acquisition and Resettlement Action Plan (LARAP) was prepared and appropriate compensation was provided for building houses and infrastructure. In accordance with the requirements of IFC standards calling for relocation compensation, the standard of living of residents has been improved above and beyond prior levels. Moreover, a comprehensive social program was established to support sustained social development. This program aims to provide support in generating employment, by providing technical guidance in various fields such as agriculture and food processing. Additional support is also provided in a number of areas such as health, hygiene and education.

^*2 Reference："Land Acquisition and Resettlement Action Plan" July 2006, ADB, p6

Case study 2: Laos' Nam Ngiep 1 Hydropower Project

Project summary

Nam Ngiep 1 Hydropower Project constructs and operates a 289MW Hydropower Plant on the Nam Ngiep River in Laos.

This Project not only aims to contribute to the electricity demand in Laos, but also have a purpose to obtain it's developing finances by selling the electricity to the neighboring country, Thailand. As a result of its large project scale, Asian Development Bank (ADB), Japan Bank for International Corporation (JBIC) and many commercial banks joined in its finance.

Initiatives for local autonomy

As a result of a large project site, the big impact to the local community during construction and operation phase was the top concern.

Based on the findings of prior survey, the Project noticed that they had to acquire the land from approximately 800 households (more than 5,000 people). In addition, there were more than 400 households (approximately 3,000 people) who have to resettle since their house and plowland was in the planned submerging area.

In line with the findings, the Project Company undertook consultations with the identified/affected households to determine the relocation site. Also, they designed their new housing based on their social backgrounds. Furthermore, it was found that 99% of the resettling households belonged to the Mons tribe and, 99% of the accepting communities were from Laos. Therefore, the Project Company hired the specialists and anthropologists who had a good understanding of the Mons culture and traditions, as care persons to manage the resettlement and assimilation process.

After the resettlement, the Project Company provided replacement farmlands which were of either equal or greater value. The affected farmers were also provided working machines and agricultural supports for the households. Furthermore, they constructed some educational facility and medical centers which existing landowners could use. The Project has provided numerous supports for both resettled and existing households to improve and restore their livelihoods.

Reference: "Resettlement and Ethnic Development Plan" June 2014, ADB

Case study 3: Muara Laboh IPP Project

Project summary

The Muara Laboh IPP Project involves construction and operation of an 80MW geothermal power plant in Indonesia. The Project contributes to meet the sharp electricity demand in Sumatra Islands and concurrently helps Indonesia to explore the environmentally friendly geothermal resource. The Project has been under operation since 2019. Mizuho Bank acted as Financial Advisor and financed the project in collaboration with Japan Bank for International Cooperation (JBIC), Nippon Export and Investment Insurance (NEXI) and Asian Development Bank (ADB).

Preserving and protecting the natural environment

As per the environmental and social due diligence of the project, the lender group hired an external environmental consultant and their site survey found some species classified as endangered (IUCN Red List) within the Project site. The relevant stakeholders engaged in the further critical habitat assessment with the consultant and developed a proper Biodiversity Action Plan to mitigate the potential risks based on IFC Performance Standards and ADB Safeguard Policy Statement (SPS) and ADB SPS Requirements.

In addition, the Project Company and the lender group jointly developed and agreed on an Environmental and Social Action Plan (ESAP) including, for example, a Stakeholder Engagement Plan and a Grievance Mechanism in order to preserve the environmental and social circumstance.

Reference: "Indonesia: Muara Laboh Geothermal Power Project" ADB

Glossary for the Equator Principles

– IFC Performance Standards (PS)

IFC Performance Standards (January 2012) summarize the standards for pollution prevention, conservation of the natural environment and the protection of human rights of local inhabitants and workers and consist of the following eight items:

PS1 – Assessment and Management of Environmental and Social Risks and Impacts

PS2 – Labor and Working Conditions

PS3 – Resource Efficiency and Pollution Prevention

PS4 – Community Health, Safety and Security

PS5 – Land Acquisition and Involuntary Resettlement

PS6 – Biodiversity Conservation and Sustainable Management of Living Natural Resources

PS7 – Indigenous Peoples

PS8 – Cultural Heritage

These Standards are published on IFC official website.

– Action Plan^*

The Action Plan (defined as "Equator Principles Action Plan" in Exhibit I of The Equator Principles (July 2020)) is prepared, as a result of the EPFI's due diligence process, to describe and prioritize the actions needed to address any gaps in the assessment documentation, ESMPs, the ESMS, or Stakeholder Engagement process documentation to bring the project in line with applicable standards as defined in the Equator Principles. The Action Plan is typically tabular in form and lists distinct actions, mitigation measures, follow–up studies or plans that complement the assessment.

^* Source:The Equator Principles Limited, The Equator Principles (July 2020), Exhibit I.

– Information Memorandum

Materials distributed to potential lenders in syndication. It is prepared by the lead arranger to provide the potential lenders with information on project specifics, such as loan conditions, summary of the project, and significance of the project.

– Environmental and Social Impact Assessment

The Environmental and Social Impact Assessment refers to the procedure of forecasting and assessing the environmental and social impacts of a proposed project in its area of influence through preliminary investigations. Used mainly for large–scale development projects.

– Environmental and social review

To confirm the potential adverse environmental and social impacts of the project.

– Syndicate

A group of financial institutions that finance a project.

– IFC (International Finance Corporation)

One of members in the World Bank Group that implements investment and lending to private projects, especially in developing countries.

– Lead Arranger

Lead financial institution that plays a leading role in arranging the syndication for project finance.

– Syndication

The process by which several different lenders provides various portions of the loan to finance the same project.

– Stakeholders

The stakeholders represent interested parties who have direct or indirect stakes in the interests and actions of corporations, public administration and/or NGOs. As for a large–scale development project, the stakeholders include not only the client and the project–affected communities, which are directly involved in the development project, but also third parties such as citizen–based NGOs because of the potential environmental and/or social impact of the proposed project.

– World Bank

The World Bank is made up of the IBRD (International Bank for Reconstruction and Development) and IDA (International Development Association). Its original purpose was to provide for the reconstruction of countries destroyed by World War II. Its current purpose is to provide for international development. IBRD, IDA, IFC (International Finance Corporation), MIGA (Multilateral Investment Guarantee Agency), and ICSID (International Centre for Settlement of Investment Disputes) collectively make up the World Bank Group.

– World Bank Group EHS (Environmental, Health, and Safety) Guidelines

The EHS Guidelines are technical reference documents that describe the performance levels and measures that are deemed achievable with existing technologies at reasonable costs in managing relevant issues in the environment, health and safety fields. The World Bank Group applies EHS Guidelines to its environmental and social assessments of projects. Industry sector guidelines for 62 sectors, such as offshore oil and gas development, thermal power, mining and more, are designed to be used together with the General EHS Guidelines, which provide guidance on common EHS issues potentially applicable to all industry sectors. These Guidelines are published on IFC official website.

– Documentation

Preparation of the loan agreement.

– Basel II Accord

The Basel II Accord, which defined new rules on capital adequacy requirements for banks, was made public by the Basel Committee on Banking Supervision and came into effect at the end of 2006. Therefore, banks are required to appropriately assess risk–exposed assets, monitor and manage various risks and disclose relevant information. Banks operating internationally need to maintain a capital adequacy ratio of 8% or more.

– Acquisition Finance*

Acquisition Finance is provision of financing for the acquisition of a Project or a Project company which exclusively owns, or has a majority shareholding in a Project, and over which the client has Effective Operational Control.

^* Source: The Equator Principles Limited, The Equator Principles (July 2020), Exhibit I.

– Financial Advisor

Person or company that advises on financial issues including methods of financing.

– Project Finance Advisory Services (FA)

Provision of advice on the potential financing of a development where one of the options may be project finance.

– Bridge Loan^*

An interim loan given to a business until the longer term stage of financing can be obtained.

^* Source:The Equator Principles Limited, The Equator Principles (July 2020), Exhibit I.

– Project Finance (PF)

A method of financing in which cash flows generated by the project are expected to be the source of repayment. Project finance differs from corporate finance, in which financing is made by drawing on the corporate credibility of the borrower. PF is often used for large–scale projects including power plant and oil and gas development. Also, it often involves a loan to a new entity formed specifically to own the project. The Equator Principles are applied to project finance as defined in the Basel II Accord.

Project finance is "a method of funding in which the lender looks primarily to the revenues generated by a single project, both as the source of repayment and as security for the exposure. This type of financing is usually for large, complex and expensive installations that might include, for example, power plants, chemical processing plants, mines, transportation infrastructure, environment, and telecommunications infrastructure. Project finance may take the form of financing of the construction of a new capital installation, or refinancing of an existing installation, with or without improvements. In such transactions, the lender is usually paid solely or almost exclusively out of the money by funds generated by the contracts for the facility's output, such as the electricity sold by a power plant. The borrower is usually an SPE (Special Purpose Entity) that is not permitted to perform any function other than developing, owning, and operating the installation. The consequence is that repayment depends primarily on the project's cash flow and on the collateral value of the project's assets." Source: Basel Committee on Banking Supervision, International Convergence of Capital Measurement and Capital Standards ("Basel II"), November 2005.

– Project–Related Corporate Loans (PRCL)^*

Corporate loans, made to business entities (either privately, publicly, or state–owned or controlled) related to a project, either a new development or expansion (e.g. where there is an expanded footprint), where the Known Use of Proceeds is related to a project in one of the following ways:

1. The lender looks primarily to the revenues generated by the project as the source of repayment (as in Project Finance) and where security exists in the form of a corporate or parent company guarantee;
2. Documentation for the loan indicates that the majority of the proceeds of the total loan are directed to the project. Such documentation may include the term sheet, information memorandum, credit agreement, or other representations provided by the client into its intended use of proceeds for the loan.

It includes loans to government–owned corporations and other legal entities created by a government to undertake commercial activities on behalf of the government, For all Category A and, as appropriate, Category B Projects, Project–Related Corporate Loans shall include loans to national, regional or local governments, governmental ministries and agencies.

^* Source:The Equator Principles Limited, The Equator Principles (July 2020), Exhibit I.

– Export Credit Agency

A national institution that promotes private international business by investment, financing, guarantees, and insurance. Such an agency is often called an export–and–import bank or an ECA (Export Credit Agency). Well known ECAs include NEXI (Nippon Export and Investment Insurance), JBIC (Japan Bank for International Cooperation), and US–EXIM (Export–Import Bank of the United States).

– Refinance*

Refinance is the process of replacing an existing loan with a new loan, where the new loan will be used to pay out (retire) an existing loan, and that loan is not near or in default.

^* Source: The Equator Principles Limited, The Equator Principles (July 2020), Exhibit I.

The Equator Principles and related documents (English/Japanese)

Environmental and social policies and guidelines with which the Equator Principles comply

The Equator Principles comply with the IFC Performance Standards and the World Bank Group EHS Guidelines.

The Equator Principles

The Equator Principles (July 2020) (original text in English) (PDF/493KB)

The Equator Principles (July 2020) (Japanese translation) (PDF/372KB)

The Equator Principles Limited official website

Environmental and social policies and guidelines with which the Equator Principles comply

IFC official website

IFC Performance Standards

World Bank Group EHS Guidelines

Stewardship responsibilities and ESG investment

Initiatives at Asset Management One

At the same time that Asset Management One, which is the Mizuho group company responsible for asset management, began operations in October 2016, we newly established our Responsible Investing Department (currently Research and Engagement Group) and proceeded with initiatives for active engagement in discussions with our investee companies regarding environmental, social, and corporate governance (ESG) issues and exercise of proxy voting rights.

Asset Management One's corporate message "Creating a sustainable future through the power of investment" clearly states that it will "incorporate sustainability into management" as an asset management company contributing to customers and society. Asset Management One created a materiality map that dynamically captures global environmental and social issues based on two axes (double materiality) of sustainable materiality, which indicates the level of civil society and investor interest, and financial materiality, indicating the economic impact. Management also identified nine core materiality items of climate change, biodiversity, business and human rights, water resources, circular economy, diversity equity and inclusion, sustainable food systems, air, water and land pollution, and health and wellbeing. Of these, business and human rights, diversity and inclusion, and health and wellbeing were set as focus areas, that the company will use to guide its engagement and voting related to its materiality items.

For further information on Asset Management One's policies with respect to Japan's Stewardship Code, please refer to the following link.

Approach to engagement activity

Asset Management One’s Engagement Approach (PDF/54KB)

Actual engagement activities

Engagement Activities with Japanese Companies (PDF/124KB)

Engagement Activities with Overseas Companies (PDF/47KB)

Examples of engagement

Our engagement activity – examples for Japanese equity passive strategies (PDF/293KB)

Engagement Case Study with an Overseas Company (PDF/62KB)

Development of products with a view to ESG

In recent years, institutional investors have been showing greater interest in ESG investment, which considers environmental, social, and corporate governance (ESG) issues, as a type of non–financial information. To continue to be an asset management institution that contributes to the development of our customers and society as a whole, Asset Management One recognizes the importance of ESG information as a foundation for financial information in the medium to long term, and we are working to integrate ESG into our investment strategies.

ESG Japan Equity Strategy

The domestic ESG Focus Fund is an ESG investment product that reflects our vision of sustainable investment products.
Conceptually, it aims to achieve sustainable financial returns and contribute to social returns including in the form of the planet or society passed onto the next generation, by investing in companies serving as drivers of a sustainable society. To that end, we have built an investment strategy integrating the following three features.

①Evaluation of promising industries based on a double materiality approach
Based on our proprietary Materiality Map, we identify and evaluate promising industries with growth potential, and leverage ESG Rating, our proprietary tool for business evaluation, to select companies with business practices capable of rapidly responding to societal demand for sustainability.

②Identification of business opportunities and evaluation of management quality by ESG experts
Building on the industrial evaluation based on the Materiality Map, the ESG Macro-Research and ESG Quantitative Analysis Teams, both composed of specialists in ESG, conduct research to identify "companies involved in business to help solve environmental and social issues" and "companies with high ESG potential" as candidates for investment. Those companies are subsequently assessed for suitability as investment targets in terms of profit sustainability and valuation, among others. Only those companies that are expected to produce substantial returns on capital over the years are retained in the portfolio.

③Engagement with investment targets leveraging our strong presence
Our sector analysts and ESG analysts work together to engage with the target companies in order to ensure that the latter continue to improve their ESG potential.

Strengthening support for sustainable businesses

The social and economic challenges that need to be resolved in order to achieve a sustainable society are becoming increasingly diverse and complex. The needs and actions of stakeholders have changed, and expectations and demands for companies to create value for society are on the rise. Against this backdrop, initiatives to improve sustainability are becoming an ever more critical aspect of business strategy.

Mizuho believes that achieving both the resolution of social issues and economic growth will lead to the growth of our customers and, ultimately, to an increase in Mizuho's corporate value. Mizuho is supporting our clients' SX =realize a sustainable society and enhance corporate value.

Mizuho has established materiality in business as well as long-term goals, which serve as KPIs (monitoring indicators), for sustainable finance, and for environmental and climate change response finance, and has formulated a sustainable business strategy. To capture expanding business opportunities, we are strengthening our promotion framework and promoting sustainable business by providing solutions from both financial and non-financial perspectives.

Mizuho’s strengths and solutions (PDF/4,063KB)

Training and Awareness

Capability building (PDF/4,063KB)

Training sessions on the Equator Principles

Mizuho Bank conducts regular training sessions for its employees on environmental and social risk assessments and Equator Principles requirements involved in large–scale project financing.

Training sessions on the Equator Principles

Main initiatives

Finance

Research and consulting

Investment and products: ESG investment

Finance

Transition finance

Financing support for renewable energy projects

Green Loans

Mizuho Eco Finance

Sustainability–linked bonds/loans

Supporting the issuance of SDG bonds

Sustainable finance performance

Sustainability–linked bonds/loans

We are supporting our clients' sustainability strategies by providing sustainability–linked bonds and loans which link preferential terms to the borrower's achievement of sustainability performance targets. Mizuho arranged Japan's first sustainability–linked bond (SLB), and we are also issuing sustainability–linked loans (SLL) both inside and outside Japan.

SME-tailored sustainable finance

Mizuho Bank offers proprietary sustainable finance products for SME clients to support environmental and social actions intended to achieve CO₂ emissions reduction targets or improve the working environment, for example. Mizuho's SME-tailored sustainable finance totaled JPY 64.0 million in FY2024.

Business initiatives based on materiality

Mizuho has identified the following as materiality, and is working to make positive contributions in these areas: Declining birthrate and aging population, plus good health and lengthening lifespans; Industrial development & innovation; Sound economic growth; and Environmental and social considerations.

Declining birthrate and aging population, plus good health and lengthening lifespans

Asset formation support initiatives

With many people now living to 100 years old, post-retirement life is inevitably longer. Given the continued low interest rates, asset formation to prepare for the future will become increasingly important.

We are supporting medium– to long–term asset formation by publicly announcing policies regarding Mizuho's fiduciary duties as they relate to asset management, and implementing measures from a customer-focused perspective.

Policies Regarding Mizuho's Fiduciary Duties (Japanese text only)

Offering services to meet customers' medium– to long–term asset formation needs

At Asset Management One, we make good use of the investment know-how we have cultivated in our pension business, and provide investment trusts that meet the medium- to long-term asset formation needs of our customers. We also seek to enhance our product lines to accommodate the risk tolerance of consumers in light of the development of emerging systems such as NISA and iDeCo.

For example, we offer a passive fund with an attractive expected return for a wide range of investors. We also offer a fund which selectively invests over the medium to long term in companies with a sustainable competitive advantage, benefiting from global economic growth.

Additionally, we offer a wide range of products, including Japanese equity active funds that contribute to the growth and development of domestic companies and create a virtuous cycle in the domestic market.

Also, as part of efforts to broaden the base for investment, throughout "Institute for Creating Sustainable Future," established in October 2023, promotes awareness and dissemination activities in the fields of personal asset formation, financial well-being, and better financial education.

Through continuing these initiatives, we will drive the shift from savings to asset formation and contribute to the realization of Promoting Japan as a Leading Asset Management Center.

Workplace Business to promote the use of NISA4

The Nippon Individual Savings Accounts (NISA) system was introduced as an effective asset formation scheme to stimulate interest among individuals who have little experience in investing, first among the younger generations. Mizuho Bank and Mizuho Securities are offering asset building proposals that include NISAs.

Launched in January 2024, the new NISA system features improvements over the old system including higher annual investment limits and indefinite duration of tax-free holding. We are currently promoting these products in order to boost the number of users. As of the end of March 2025, we have received approximately 800,000 applications for NISA account openings, mainly through our branches and online channels.

As part of our Workplace Business initiative, we provide information for individual customers in client companies through in-person and online seminars, while implementing a financial and economic education program in collaboration with Rakuten Securities, and also offering Workplace NISA as an employee welfare scheme.

Mizuho will continue to help its customers accumulate assets, and contribute to better utilization of domestic financial assets by proactively promoting the use of the NISA system.

Initiatives to expand our customer base for Individual Defined Contribution Pension (iDeCo) accounts

iDeCo accounts are private pension plans that allow individuals to make contributions to their pension assets in addition to contributions made through public pension systems. This pension system is well-suited to individuals interested in medium- to long-term formation of self-managed assets for later in life.

Mizuho Bank, as a DC provider offering and promoting related asset management and administration services, is actively promoting these pension accounts.

Specific strengths of the iDeCo-related services offered by Mizuho Bank include a lineup of investment trusts with low fees. In addition, by using the Smart Folio DC management support service offered by Mizuho Bank, individual customers for these accounts can easily identify and select a portfolio of investments that are in keeping with their risk appetites. To make our services easier to use, even for customers new to investing, we at Mizuho Bank are endeavoring to enhance the convenience of our service offerings.

Going forward, Mizuho will work to expand our base of customers working to build their asset balances through our initiatives in the iDeCo field, and thereby contribute to advancing financial asset flows in Japan.

Industrial development & innovation

Support for business succession

Smooth business succession

In Japan, against the backdrop of the declining birthrate and aging population, as well as the lack of successors for businesses due to changing economic, social, and industrial structures, client needs in the area of business succession are diversifying and becoming more complex. In order to support smooth business succession, we are working to provide enhanced solutions as a unified group.

Our business succession solutions

The business environment that our clients are faced with is shifting significantly as a result of the declining birthrate and aging of society as well as changing economic, social, and industrial structures. Against the backdrop of these issues that are brought about by this business environment, such as the lack of business successors, client needs in the area of business succession are diversifying and becoming more complex. We will leverage our strengths such as our strong client base and approach to business as a unified group to provide enhanced, one–stop solutions spanning banking, trust banking, and securities to ensure smooth business succession for our clients.

Support for the smooth, secure transfer of wealth

Mizuho Trust & Banking uses trust functions to provide customers with peace of mind by supporting the smooth transfer of wealth from one generation to the next. Key trust products and services include the following. With Mizuho Trust & Banking as the trust agent, Mizuho Bank and Mizuho Securities offer several trust products and services in the following as well.

• Consent to Undertake the Execution of Wills Service: Services covering everything from consulting for will preparation to will execution.
• Will Safe–Keeping Service: Safe, reliable will custody services.
• Inheritance Arrangement Services: Representation in the performance of necessary procedures following will execution.
• Internet–based inheritance administration services: These services include conducting various related procedures that are required after inheritance proceedings begin and may be provided using the internet without requiring the presence of the business owners and their successors.
• (Choice of Features for Peace of Mind): Functions and services of choice that give customers peace of mind at the time in their lives when they are necessary.
• Dementia Support Trust: Customers can designate funds to be used for things such as living and medical expenses in case they suffer from dementia later in life.
• Asset Inheritance Trust: Custom planning for the future transfer of wealth (monetary).
• Educational Funding Donation Trusts: Careful management of educational funds to be donated to grandchildren, etc.
• Marriage and Childrearing Support Trust ("Gift of Hope"): Administration of funds to be given to children and grandchildren for marrying and raising children.
• Business Succession Trusts: These trust arrangements provide assistance for SME owners in passing their businesses to the next owners.
• Life Insurance Trust: The death benefit from a life insurance policy is provided to family members in periodic installments.

Mizuho Trust & Banking conducts seminars on estates and wills to promote wider understanding of these topics.

Creating resilient social infrastructure

Establishing a safe, sustainable, and resilient infrastructure serves as a base for economic and social development. We are working to make use of our sophisticated professional capabilities in the fields of project finance and public–private partnership (PPP) ¹ and private finance initiative (PFI) ² arrangements and are collaborating with local governments and agencies to actively supply funding and consulting services.

1. A public–private partnership (PPP) is a cooperative arrangement between the public and private sectors to provide public services and infrastructure.

2. A private finance initiative (PFI) is a common type of PPP in which the private sector takes a leading role in providing public services, private funding, and expertise are used in the maintenance and operation of public facilities.

Finance

Project finance making use of PPP/PFI schemes

Mizuho Bank makes use of PPP/PFI schemes for infrastructure–related project finance both inside and outside Japan.

Project financing for the Nacala Corridor railway and port project in the Republic of Mozambique (PDF/15KB)

Supporting sustainable finance

Mizuho Securities established a Sustainable Finance Office in 2019 to reinforce its structure for supporting clients in sustainable finance. By offering diverse client services for sustainable finance, including underwriting of sustainable bonds for infrastructure projects, we provide comprehensive support for client initiatives that contribute to society through structuring.

Support for issuance of sustainable bonds

Mizuho's initiatives related to sustainable finance

Fund formation and management

Leveraging the knowledge we have accumulated thus far from investing in global infrastructure assets, we are supporting the development and construction of infrastructure projects that are essential for the sustainable development of society.

Regarding the Establishment of a Fund & Management Company specialized for Equity Investment in Overseas Infrastructure Assets

Advisory services

At Mizuho, we utilize our experience bridging the public and private sectors as well as our industry and finance expertise to provide advisory services in the infrastructure field.

PPP/PFI advisory services

As a pioneer in the PFI business in Japan, Mizuho Research & Technologies has a track record of completing more than 800 research and advisory projects for the public sector (i.e., for national and regional public entities).

Mizuho Research & Technologies has been providing advisory services to both the public and private sectors as a bridge between them, advancing PPP/PFI projects in accordance with the nature of the operation and expanding the infrastructure PPP market, centered on projects for airports, seaports, roads, waterworks infrastructure and energy, as well as for stadiums, arenas, museums, hospitals and other facilities.

Collaboration with national and local governments

We are engaged in collaboration with governments inside and outside Japan on both the national and local levels.

Appointment as "social impact loan" arranger for the East Nippon Expressway Company

Mizuho Bank received a mandate to be the arranger on a syndicated social impact loan for East Nippon Expressway Co., Ltd., marking the first time we have been appointed as an arranger on a social impact loan. The purpose of a social impact loan is to raise capital for businesses which are seeking solutions to social issues. In the expressway industry, East Nippon Expressway has been proactively contributing to society from the perspective of local community revitalization, disaster preparedness, promotion of traffic safety, and environmental conservation. Mizuho Bank is arranging the social impact loan to support the company's business addressing social issues through social infrastructure development.

As a financial services group, we will continue applying our expertise to provide capital raising support and a variety of solutions for endeavors aimed at solving social issues.

Mizuho enters into an agreement on a syndicated “social loan” for Keisei Electric Railway, Co., Ltd.

Mizuho receives mandate as arranger of a social impact loan for East Nippon Expressway

Collaboration with Tokyo to seismically reinforce emergency transportation roadways and roadside structures

The maintenance of arterial roadways (emergency transportation roadways), the main arteries that are vital to evacuations and first responders in a natural disaster, is key to ensuring that cities continue to function. Within this context, a variety of measures are under way to seismically reinforce 100% of the emergency transportation roadways and roadside structures in Tokyo.

In January 2013, Mizuho Bank and Mizuho Trust & Banking became the first financial institution signatories to the Tokyo Metropolitan Government's agreement to seismically reinforce emergency transportation roadways and roadside structures. The objective of this agreement is to improve Tokyo's resilience in the face of disasters, and we are focusing the combined strengths of the Mizuho group to address customers' various concerns by providing consulting services for earthquake–proofing measures.

Major initiatives outside Japan

Mizuho Bank and KOKO Networks establish strategic partnership in the field of carbon credits

Memorandum of Understanding for Business Cooperation with the National Development Agency of Mongolia

Mizuho signs MoU with Israel Export and International Cooperation Institute

Support measures responding to changes in industry structure

In Japan, as a result of the trend toward concentration of businesses and other economic activity solely in Tokyo, rural populations are expected to decline and regional economies are expected to shrink in the future. As a nation, Japan must look for ways to revitalize regional areas through a virtuous cycle in which jobs draw people back to local areas and population growth creates more jobs. Utilizing our office network in Japan, we are striving to promote the revitalization of regional economies by providing our clients with funding, supporting the operations of local businesses, and collaborating with regional governments.

Revitalizing regional economies through integrated banking, trust banking, and securities functions

We are integrating our banking, trust banking, and securities capabilities to provide customers with fully integrated financial services. Mizuho is offering the comprehensive services in each region to work with the relevant stakeholders to overcome local issues and to grow together with the local economies and society.

By building cooperative relationships with cities, towns, and villages, regional banks, and local chambers of commerce, Mizuho will be able to take active initiatives in counteracting the decline in local regions caused by aging and shrinking populations and the rise in welfare and medical needs, and thereby contribute to regional economies and societies.

Collaboration with local communities

We are implementing initiatives to revitalize regional economies and industries through collaboration with local governments and agencies.

Working towards solutions for social issues

Comprehensive Collaboration Agreement with Hachijo Town to Promote Sustainability and Digital Transformation

In August 2022, Mizuho Bank and Mizuho Research & Technologies signed a Comprehensive Collaboration Agreement with Hachijo Town, Tokyo Prefecture, to Promote Sustainability and Digital Transformation. Mizuho will promote sustainability and DX to help transform Hachijo into a smart and sustainable island with the goal of "creating a sustainable community that makes the most of Hachijo's unique attractions." Mizuho and Mizuho Research & Technologies will go beyond the conventional boundaries of finance and apply their expertise in digital technology and sustainability to help solve social issues faced by local communities and governments. Through open collaboration with Mizuho business partners, steps will be taken to introduce optimal solutions and services based on local conditions. The sustainability and DX initiatives on Hachijo island will enable the Mizuho Group to deepen its expertise in those areas. This will contribute to the creation of projects that become leading examples in other communities and help local governments nationwide address local social issues.

Overview of the Comprehensive Collaboration Agreement with Hachijo Town to Promote Sustainability and Digital Transformation

Mizuho concludes agreement with Mitaka City to implement a premium gift certificate project for fiscal 2020

In August 2020, Mizuho Bank entered into an agreement with Mitaka City, Mitaka Chamber of Commerce, Machizukuri Mitaka, and the nonprofit Mitaka Network University Promotion Organization to implement a premium gift certificate project in Mitaka City during fiscal 2020. The agreement brings the five entities together in specific roles to implement a project offering digital and paper gift certificates, with the aims of providing economic support to the citizens of Mitaka and promoting consumption to stimulate business activity at local businesses that have been impacted by the COVID-19 pandemic. Mizuho Bank will help revitalize local economies and promote the spread of cashless payments through electronic issuing of regional development tickets and merchandise coupons.

Collaborating with Kitakyushu to achieve the SDGs

In January 2020, Mizuho Bank and 15 other financial institutions with locations in Kitakyushu City concluded an agreement with the city regarding collaboration on efforts to achieve the UN Sustainable Development Goals (SDGs). Under this agreement, the signatory financial institutions and the city will exchange information through close communication and make other efforts, working together towards achieving the SDGs. Our goal is to promote awareness of the SDGs within the local community and contribute to the development of SMEs and society in the local area. This is the first agreement of its kind in Japan involving a municipal government and multiple financial institutions.

Examples of other initiatives:

• Mizuho has concluded a Shibuya Social Action Partner Agreement with Shibuya–ku (a ward within Tokyo)
• Mizuho has concluded a comprehensive collaboration agreement with Setagaya–ku (a ward within Tokyo)

Disaster recovery efforts

Supporting Kumamoto following the 2016 earthquake

In August 2016, Mizuho Bank concluded an agreement with Kumamoto Prefecture regarding support for disaster recovery. Based on this agreement, we are collaborating with Kumamoto Prefecture, drawing on our broad knowledge of finance, including industry insight and experience in private–public sector collaboration, to act as a financial intermediary and consultant, working toward recovery in the disaster–stricken areas.

Supporting Fukushima following the 2011 earthquake and tsunami

In March 2016, Mizuho Financial Group and Fukushima Prefecture signed a collaborative agreement. Under this agreement, as a Gold Banking Partner^* for the Tokyo 2020 Olympic and Paralympic Games, Mizuho will work with Fukushima Prefecture to uplift the local community with the objective of hastening Fukushima's recovery from the Great East Japan Earthquake. Following the 2011 disaster, Mizuho and Fukushima have collaborated in many ways on recovery efforts, and will work to step up these activities, including sponsoring sporting events jointly in Fukushima.

^* Mizuho is a Tokyo 2020 Gold Banking Partner.

Going forward, Mizuho will continue to actively promote disaster recovery and regional development.

Collaboration with others

Mizuho is moving ahead with initiatives aimed at regional revitalization, working together with a range of organizations that have specialized knowledge and capabilities.

Alliances with Blue Lab and Airbnb

In July 2017, Mizuho Bank entered alliances with Blue Lab and Airbnb with the objective of assisting these companies with the further development and expansion of their residential accommodation businesses and the promotion of tourism.

Under this alliance, with the provision of Airbnb's knowledge of the residential accommodation business and travel services as well as the support of Blue Lab's business creation functions, Mizuho will draw on our broad customer base and aim to help revitalize regional economies through expansion of tourism, by supplying accommodation, developing new travel experiences, and creating peripheral businesses, including casualty insurance.

• Conclusion of a business alliance agreement to promote residential accommodation businesses and tourism demand

Examples of other initiatives

Launch of a premium point business with "Aizu coin," a digital community currency (PDF/532KB)

Expansion of J-Coin Pay affiliated merchant network: Agreement to link with Air Pay

Implementation of a regional business collaboration agreement with Shizuoka Bank, Limited

Sound economic growth

As a financial services group, Mizuho will contribute to sound economic growth through initiatives that promote the shift to a cashless society and the strengthening of capital markets functions, in order to support the sustainable development and prosperity of the economy, industry and society around the world.

Strengthening capital markets functions

By enhancing constructive engagement with investee companies, and focusing on ESG integration, we aim to maximize returns by increasing the corporate value of investee companies.

Stewardship activities that contribute to the increased corporate value of our clients

Mizuho Trust & Banking and Asset Management One (AM–One) are advancing initiatives which focus on the execution of their stewardship responsibilities and promote ESG investment.

Please click here for more information about the stewardship responsibilities and ESG investment initiatives at the group’s investment management unit, Asset Management One.

Stewardship responsibilities and ESG investment

Responsible investment and financing (Investment)

Address changes in the Japanese and global business environment / regulations, and the need to ensure economic security

Making environmental, social, and technological policy recommendations, and supporting the drafting and promotion of policy through appeals to government and economic organizations.

Collaboration with all stakeholders

Consulting and policy support for environmental, energy, and natural resource matters